<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY , 2000
REGISTRATION NO. 333-90975
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PFIZER INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 2834 13-5315170
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
235 EAST 42ND STREET
NEW YORK, NEW YORK 10017
(212) 573-2323
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MARGARET M. FORAN, ESQ.
PFIZER INC.
235 EAST 42ND STREET
NEW YORK, NEW YORK 10017
(212) 573-2323
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C> <C> <C>
DENNIS J. BLOCK, ESQ. GREGORY L. JOHNSON, ESQ. LOU R. KLING, ESQ. STEVEN A. COHEN, ESQ.
CADWALADER, WICKERSHAM & TAFT WARNER-LAMBERT COMPANY EILEEN T. NUGENT, ESQ. WACHTELL, LIPTON, ROSEN & KATZ
100 MAIDEN LANE 201 TABOR ROAD SKADDEN, ARPS, SLATE, 51 WEST 52ND STREET
NEW YORK, NEW YORK 10038 MORRIS PLAINS, NEW JERSEY MEAGHER & FLOM LLP NEW YORK, NEW YORK 10019
(212) 504-6000 07950 4 TIMES SQUARE PLAZA (212) 403-2000
(973) 385-2000 NEW YORK, NEW YORK 10036
(212) 735-3000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effectiveness of this Registration Statement and the
effective time of the merger of a wholly-owned subsidiary of the Registrant with
and into Warner-Lambert Company as described in the Agreement and Plan of Merger
dated as of February 6, 2000.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
- ---------------
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ---------------
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE PER UNIT AGGREGATE OFFERING PRICE REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, with par value of
$0.05 per share(1)............. 2,350,489,845(2) N/A $75,001,994,145.00(3) $20,850,554.37(4)
214,940,380 6,946,482,264.75 1,833,871.32
- ---------------------------------------------------------------------------------------------------------------------------------
Total............................ 2,565,430,225 81,948,476,409.75 22,684,425.69
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes Pfizer Preferred Stock purchase rights which, until events
specified in Pfizer's Rights Agreement occur, will not be exercisable or
evidenced separately from the Common Stock.
(2) The maximum number of shares of Pfizer common stock, par value $0.05 per
share, issuable in the merger in exchange for shares of Warner-Lambert
common stock, based on (i) the number of shares of Warner-Lambert common
stock outstanding on December 31, 1999 plus the number of shares of
Warner-Lambert common stock that may be issuable prior to the completion of
the merger (932,883,718 shares in the aggregate) and (ii) the exchange ratio
(2.75 shares of Pfizer common stock for each share of Warner-Lambert common
stock).
(3) Estimated to calculate the registration fee under Rule 457(f)(1) and Rule
457(c) of the Securities Act, based on (i) the market value of
Warner-Lambert shares to be received by Pfizer in the merger, set by the
average of the high and low sales prices of Warner-Lambert common stock on
February 18, 2000 on the New York Stock Exchange consolidated tape, which
was $88.875, times (ii) 78,160,138 shares of Warner-Lambert common stock on
a fully diluted basis.
(4) This fee has been calculated under Section 6(b) of the Securities Act, as
.0264 of one percent of $6,946,482,264.75. A fee of $20,850,554.37 was paid
on November 15, 1999 in connection with the initial filing of this Form S-4
Registration Statement. Under Rule 457(b) under the Securities Act, the
registration fee has been reduced by $20,850,554.37, the amount previously
paid. Accordingly, the amount in excess of this amount ($1,833,871.32) has
been paid.
------------------------
THE REGISTRANT AMENDS THIS REGISTRATION STATEMENT ON THE DATE OR DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT FILES A
FURTHER AMENDMENT WHICH STATES THAT THIS REGISTRATION STATEMENT WILL BECOME
EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL
THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON THE DATE THAT THE
COMMISSION, ACTING UNDER SECTION 8(a), DETERMINES.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
[PRELIMINARY DRAFT DATED FEBRUARY , 2000 -- SUBJECT TO COMPLETION]
[PFIZER LOGO] [WARNER-LAMBERT LOGO]
MERGER PROPOSAL--YOUR VOTE IS VERY IMPORTANT
The boards of directors of Pfizer Inc. and Warner-Lambert Company have
unanimously approved a merger designed to create the world's fastest-growing
major pharmaceutical and consumer health care company. We believe the combined
company will be able to create substantially more shareholder value than could
be achieved by either company individually. The combined company will be named
Pfizer Inc. and will be headquartered in New York, New York.
If the merger is completed, Warner-Lambert shareholders will receive 2.75
shares of Pfizer common stock for each share of Warner-Lambert common stock plus
cash for fractional shares. Pfizer shareholders will continue to own their
existing Pfizer shares. We estimate that Pfizer will issue approximately
shares to Warner-Lambert shareholders as a result of the merger. Upon completion
of the merger, Pfizer's shareholders will own approximately 60% of the combined
company on a fully diluted basis, and Warner-Lambert shareholders will own
approximately 40% of the combined company.
We are asking the Pfizer shareholders to approve the issuance of the shares
of Pfizer common stock to be issued in the merger. We are asking the
Warner-Lambert shareholders to approve the merger and adopt the merger agreement
and the merger.
In addition, Pfizer is asking its shareholders, in connection with its
annual meeting, to vote in favor of the election of certain Pfizer directors, to
approve an amendment to Pfizer's certificate of incorporation which will
increase the maximum size of Pfizer's board of directors, to approve KPMG LLP as
Pfizer's independent auditors for the 2000 fiscal year and to vote on two
shareholder proposals which Pfizer does not support.
We cannot complete the merger unless the shareholders of Warner-Lambert
approve the merger and adopt the merger agreement and the shareholders of Pfizer
approve the issuance of common stock in connection with the merger. Approval of
the amendment of Pfizer's certificate of incorporation and other Pfizer annual
meeting matters is not a condition of the merger.
We have each scheduled a meeting of our respective shareholders to vote on
these important matters.
The dates, times and places of the meetings are:
For PFIZER shareholders:
April 27, 2000
10:00 a.m.
Grand Hyatt Hotel
Empire State Ballroom
42nd Street and Lexington Avenue
New York, NY
For WARNER-LAMBERT shareholders:
May , 2000
[TIME]
[PLACE]
This document gives you detailed information about the proposed merger. It
also contains information about our companies from documents that we have filed
with the Securities and Exchange Commission. We encourage you to read this
document carefully and in its entirety. IN PARTICULAR, YOU SHOULD READ THE "RISK
FACTORS" SECTION FOR A DESCRIPTION OF THE VARIOUS RISKS YOU SHOULD CONSIDER IN
EVALUATING THE PROPOSED TRANSACTION.
We are very enthusiastic about this merger and the strength and
capabilities we expect from the combined company.
Very truly yours,
<TABLE>
<S> <C>
WILLIAM C. STEERE, JR. LODEWIJK J.R. DE VINK
Chairman and Chairman, President and
Chief Executive Officer Chief Executive Officer
Pfizer Inc. Warner-Lambert Company
</TABLE>
Neither the SEC nor any state securities commission has approved or
disapproved the securities to be issued under this document or determined if
this document is accurate or adequate. Any representation to the contrary is a
criminal offense.
THIS JOINT PROXY STATEMENT/PROSPECTUS IS DATED , 2000, AND IS
FIRST BEING MAILED TO THE SHAREHOLDERS OF PFIZER ON OR ABOUT MARCH 15, 2000 AND
TO THE SHAREHOLDERS OF WARNER-LAMBERT ON OR ABOUT , 2000.
<PAGE> 3
[PFIZER LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS OF PFIZER INC.
NOTICE IS HEREBY GIVEN that Pfizer Inc. will hold an annual meeting of its
shareholders on April 27, 2000 at 10:00 a.m., local time, at the Grand Hyatt
Hotel, Empire State Ballroom, 42nd Street and Lexington Avenue, New York, New
York, for the following purposes:
1. To consider and vote on a proposal to approve the issuance of shares of
Pfizer common stock under an Agreement and Plan of Merger, dated as of
February 6, 2000, among Pfizer, a wholly-owned subsidiary of Pfizer, and
Warner-Lambert Company. A copy of the merger agreement is attached as
Annex A to the joint proxy statement/prospectus accompanying this
notice;
2. To consider and vote upon a proposal to amend Pfizer's certificate of
incorporation to increase the maximum number of Pfizer directors from 18
to 24;
3. To elect five members of Pfizer's board of directors for three-year
terms;
4. To approve KPMG LLP as our independent auditors for the 2000 fiscal
year;
5. To consider a shareholder proposal relating to charitable contributions;
6. To consider a shareholder proposal relating to price restraints; and
7. To transact such other business as may properly come before the meeting
and any adjournment or postponement.
Holders of record of Pfizer common stock at the close of business on
February 29, 2000, are entitled to receive this notice and to vote their shares
at the annual meeting or any adjournment or postponement of that meeting. As of
that date, there were [ ] shares of common stock outstanding. Each share
of common stock is entitled to one vote on each matter properly brought before
the meeting.
A list of shareholders entitled to vote at the Pfizer annual meeting will
be available at the annual meeting and for ten days prior to the meeting,
between the hours of 8:45 a.m. and 4:30 p.m., at our offices at 235 East 42nd
Street, New York, New York. You should contact the Secretary of Pfizer if you
wish to review this list of shareholders.
The Empire State Ballroom is accessible to disabled persons and, upon
request, we will provide wireless headsets for hearing amplification. Sign
interpretation will also be offered upon request. Please call us in advance at
212-573-2265 if you require either of these services or other special
accommodations.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE TO APPROVE
EACH OF THE COMPANY'S PROPOSALS LISTED ABOVE AND VOTE AGAINST EACH OF THE
SHAREHOLDER PROPOSALS, ALL OF WHICH ARE DESCRIBED IN DETAIL IN THE ACCOMPANYING
JOINT PROXY STATEMENT/PROSPECTUS.
By Order of the Board of Directors
C.L. CLEMENTE
Secretary
March 15, 2000
Pfizer Inc.
235 East 42nd Street
New York, NY 10017
IMPORTANT
Your vote is important. Please mark, sign, date and return the enclosed
proxy card as promptly as possible in the enclosed postage-paid envelope; use
the toll-free telephone number shown on the proxy card (this call is free in the
U.S.); or visit the web site noted on your proxy card to vote on the Internet.
In this way, if you are unable to attend in person, your shares can still be
voted at the Pfizer annual meeting. Remember, your vote is important, so please
act today!
<PAGE> 4
[WARNER-LAMBERT LOGO]
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF
WARNER-LAMBERT
NOTICE IS HEREBY GIVEN that Warner-Lambert Company will hold a special
meeting of its shareholders, on May , 2000 at a.m., local time, at
, for the following purposes:
1. To consider and vote on a proposal to approve and adopt the Agreement
and Plan of Merger, dated as of February 6, 2000, among Pfizer, a
wholly-owned subsidiary of Pfizer, and Warner-Lambert, and the merger
contemplated by that agreement. A copy of the merger agreement is
attached as Annex A to the joint proxy statement/prospectus accompanying
this notice; and
2. To transact such other business as may properly come before the special
meeting and any adjournment or postponement.
Holders of record of Warner-Lambert common stock at the close of business
on , 2000 are entitled to receive this notice and to vote their
shares at the Warner-Lambert special meeting or any adjournment or postponement
of that meeting. As of that date, there were [ ] shares of
Warner-Lambert common stock outstanding. Each share of Warner-Lambert common
stock is entitled to one vote on each matter properly brought before the
Warner-Lambert special meeting.
A list of the shareholders entitled to vote at the Warner-Lambert special
meeting will be available at the Warner-Lambert special meeting and for ten days
prior to the meeting, between the hours of 8:45 a.m. and 4:30 p.m. at the
offices of [ ] at [ ]. You should contact the Secretary
of Warner-Lambert if you wish to review the list of shareholders.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE TO APPROVE AND ADOPT THE
MERGER AGREEMENT AND THE MERGER, BOTH OF WHICH ARE DESCRIBED IN DETAIL IN THE
ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS.
By Order of the Board of Directors
RAE G. PALTIEL
Secretary
, 2000
Warner-Lambert Company
201 Tabor Road
Morris Plains, NJ 07950
IMPORTANT
Your vote is important. Please mark, sign, date and return the enclosed
proxy card as promptly as possible in the enclosed postage-paid envelope. In
this way, if you are unable to attend in person, your shares can still be voted
at the Warner-Lambert special meeting. Remember, your vote is important, so
please act today!
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
CHAPTER ONE
THE MERGER
QUESTIONS AND ANSWERS ABOUT THE
MERGER........................... I-1
SUMMARY............................ I-4
The Companies.................... I-4
Our Recommendations to
Shareholders.................. I-4
Shareholder Votes Required....... I-4
The Merger....................... I-5
What Warner-Lambert Shareholders
Will Receive.................. I-5
Ownership of Pfizer After the
Merger........................ I-5
Conditions to the Completion of
the Merger.................... I-5
Termination of Merger
Agreement..................... I-6
Arrangements with Respect to
Lipitor(R).................... I-10
Board of Directors of Pfizer
After the Merger.............. I-11
Regulatory Approvals............. I-11
Material Federal Income Tax
Consequences of the Merger.... I-11
Listing of Pfizer Common Stock... I-11
Appraisal Rights................. I-11
Interests of Officers and
Directors in the Merger....... I-11
Accounting Treatment of the
Merger........................ I-12
Opinions of Financial Advisors... I-12
Other Pfizer Annual Meeting
Matters....................... I-12
Selected Historical Financial
Information................... I-13
Pfizer Historical Financial
Information................... I-13
Warner-Lambert Historical
Financial Information......... I-13
Unaudited Pro Forma Combined
Selected Financial
Information................... I-14
Comparative Per Share
Information................... I-15
Comparative Per Share Market
Price and Dividend
Information................... I-17
RISK FACTORS....................... I-19
FORWARD-LOOKING STATEMENTS......... I-22
</TABLE>
<TABLE>
<CAPTION>
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<S> <C>
THE PROPOSED MERGER................ I-24
Pfizer Proposals................. I-24
Warner-Lambert Proposal.......... I-24
Background of the Merger......... I-24
Our Reasons for the Merger....... I-37
Factors Considered by, and
Recommendation of, the Board
of Directors of Pfizer........ I-41
Factors Considered by, and
Recommendation of, the Board
of Directors of
Warner-Lambert................ I-45
Accounting Treatment............. I-45
Material Federal Income Tax
Consequences of the Merger.... I-50
Regulatory Matters Relating to
the Merger.................... I-52
No Appraisal Rights.............. I-53
Certain Litigation............... I-53
Federal Securities Laws
Consequences; Stock Transfer
Restriction Agreements........ I-54
THE COMPANIES...................... I-55
Pfizer........................... I-55
Warner-Lambert................... I-55
OPINIONS OF FINANCIAL ADVISORS..... I-56
Opinions of Pfizer's Financial
Advisors...................... I-56
Opinion of Lazard Freres......... I-56
Opinion of Merrill Lynch, Pierce,
Fenner & Smith Incorporated... I-65
Opinions of Warner-Lambert's
Financial Advisors............ I-72
Opinion of Bear Stearns.......... I-73
Opinion of Goldman Sachs......... I-83
INTERESTS OF CERTAIN PERSONS IN THE
MERGER........................... I-89
Warner-Lambert's Arrangements
With Executive Officers....... I-89
Board Of Directors............... I-90
Management Positions in the
Combined Company.............. I-91
Ownership Of Common Stock; Stock
Options....................... I-91
</TABLE>
i
<PAGE> 6
<TABLE>
<CAPTION>
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<S> <C>
Indemnification; Directors And
Officer's Insurance........... I-91
THE MERGER AGREEMENT............... I-92
General.......................... I-92
Closing Matters.................. I-92
Consideration to be Received in
the Merger; Treatment of Stock
Options....................... I-92
Exchange of Certificates in the
Merger........................ I-93
Fractional Shares................ I-94
Listing of Pfizer Stock.......... I-94
Board of Directors; Executive
Officers; Company
Headquarters.................. I-94
Covenants........................ I-95
Other Covenants and Agreements... I-99
Representations and Warranties... I-100
Conditions....................... I-101
Termination of Merger
Agreement..................... I-102
Arrangements with Respect to
Lipitor(R).................... I-108
Amendments, Extensions and
Waivers....................... I-109
BOARD OF DIRECTORS AND MANAGEMENT
OF PFIZER FOLLOWING THE MERGER... I-110
Directors........................ I-110
Committees of the Board of
Directors..................... I-110
Compensation For Pfizer's Non-
Employee Directors............ I-111
Officers......................... I-113
Chief Executive Officer and
Chairman...................... I-113
Other Senior Management.......... I-113
Executive Compensation........... I-114
CHAPTER TWO
SELECTED FINANCIAL DATA
CONSOLIDATED SELECTED FINANCIAL
DATA OF PFIZER INC. AND
SUBSIDIARIES -- Historical....... II-2
</TABLE>
<TABLE>
<CAPTION>
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<S> <C>
CONSOLIDATED SELECTED FINANCIAL
DATA OF WARNER-LAMBERT
COMPANY -- Historical(1)......... II-3
UNAUDITED PRO FORMA COMBINED
SELECTED FINANCIAL DATA OF PFIZER
AND WARNER-LAMBERT............... II-4
COMPARATIVE PER SHARE DATA OF
PFIZER AND WARNER-LAMBERT........ II-5
UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS.... II-6
UNAUDITED PRO FORMA CONDENSED
COMBINED BALANCE SHEET --
December 31, 1999................ II-7
UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENT OF INCOME --
December 31, 1999................ II-8
UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENT OF INCOME --
December 31, 1998................ II-9
UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENT OF INCOME --
December 31, 1997................ II-10
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL
STATEMENTS....................... II-11
UNAUDITED FINANCIAL PROJECTIONS.... II-14
</TABLE>
ii
<PAGE> 7
<TABLE>
<CAPTION>
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<S> <C>
CHAPTER THREE
INFORMATION ABOUT THE MEETINGS
AND VOTING
Matters Relating to the
Meetings...................... III-1
Vote Necessary to Approve Pfizer
and Warner-Lambert
Proposals..................... III-3
Proxies.......................... III-4
How to Vote by Proxy............. III-5
Proxies for Participants in
Pfizer Inc. Savings and
Investment Plan............... III-6
Proxies for Participants in
Warner-Lambert Savings and
Stock Plans................... III-6
Other Business; Adjournments..... III-8
Multiple Copies of Pfizer Annual
Report to Shareholders........ III-8
Electronic Access to Pfizer Proxy
Materials and Annual Report... III-9
CHAPTER FOUR
CERTAIN LEGAL INFORMATION
COMPARISON OF PFIZER/
WARNER-LAMBERT SHAREHOLDER
RIGHTS........................... IV-1
Summary of Material Differences
Between Current Rights of
Warner-Lambert Shareholders
and Rights Those Shareholders
Will Have as Pfizer
Shareholders Following the
Merger........................ IV-1
DESCRIPTION OF PFIZER CAPITAL
STOCK............................ IV-3
Authorized Capital Stock......... IV-3
Pfizer Common Stock.............. IV-3
Pfizer Preferred Stock........... IV-4
Transfer Agent and Registrar..... IV-4
Stock Exchange Listing; Delisting
and Deregistration of
Warner-Lambert Common Stock... IV-4
LEGAL MATTERS...................... IV-4
EXPERTS............................ IV-4
CHAPTER FIVE
OTHER PFIZER ANNUAL MEETING
PROPOSALS
GOVERNANCE OF THE COMPANY.......... V-1
</TABLE>
<TABLE>
<CAPTION>
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<S> <C>
OUR CORPORATE GOVERNANCE
PRINCIPLES....................... V-1
Role and Composition of the Board
Of Directors.................. V-1
Functioning of the Board of
Directors..................... V-2
Functioning of Committees........ V-3
Periodic Review.................. V-3
Board of Directors and Committee
Membership.................... V-3
The Audit Committee.............. V-4
The Corporate Governance
Committee..................... V-5
The Executive Compensation
Committee..................... V-6
The Executive Committee.......... V-6
Compensation of Non-Employee
Directors..................... V-6
Fees and Benefit Plans for Non-
Employee Directors............ V-7
Related Transactions............. V-8
Indemnification.................. V-8
Security Ownership of Directors
and Officers.................. V-9
ITEM 1 -- ELECTION OF DIRECTORS.... V-10
ITEM 2 -- APPROVAL OF AUDITORS..... V-14
ITEM 3 -- SHAREHOLDER PROPOSAL
RELATING TO CHARITABLE
CONTRIBUTIONS.................... V-14
ITEM 4 -- SHAREHOLDER PROPOSAL
RELATING TO PRICE RESTRAINTS..... V-16
EXECUTIVE COMPENSATION............. V-22
Total Options Exercised in 1999
and Year-End Values........... V-23
Option Grants in 1999............ V-23
Long-Term Incentive Plan Awards
in 1999....................... V-24
Executive Compensation Committee
Report........................ V-24
Overview of Compensation
Philosophy and Program........ V-24
</TABLE>
iii
<PAGE> 8
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Evaluation of Executive
Performance................... V-25
Total Compensation............... V-26
Salaries......................... V-27
Executive Annual Incentive
Awards........................ V-27
Long-Term Incentive
Compensation.................. V-27
Stock Options.................... V-27
Performance-Contingent Share
Awards........................ V-28
Restricted Stock Awards.......... V-29
Tax Policy on Deductibility of
Compensation.................. V-29
Stock Ownership Program.......... V-29
Glossary......................... V-30
The Executive Compensation
Committee..................... V-30
Performance Graph................ V-30
EMPLOYEE BENEFIT AND LONG-TERM
COMPENSATION PLANS............... V-31
Retirement Annuity Plan.......... V-31
Pension Plan Table............... V-33
Performance-Contingent Share
Award Program................. V-34
Executive Annual Incentive
Plan.......................... V-34
Savings and Investment Plan...... V-34
Stock and Incentive Plan......... V-35
Severance Agreements............. V-35
</TABLE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Section 16(a) Beneficial
Ownership Reporting
Compliance.................... V-36
CHAPTER SIX
ADDITIONAL INFORMATION FOR
SHAREHOLDERS
FUTURE SHAREHOLDER PROPOSALS....... VI-1
Pfizer........................... VI-1
Warner-Lambert................... VI-2
WHERE YOU CAN FIND MORE
INFORMATION...................... VI-2
</TABLE>
<TABLE>
<S> <C>
ANNEXES
Annex A Agreement and Plan of Merger
Annex B Opinion of Lazard Freres &
Co. LLC
Annex C Opinion of Merrill Lynch,
Pierce, Fenner & Smith
Incorporated
Annex D Opinion of Bear, Stearns &
Co. Inc.
Annex E Opinion of Goldman, Sachs &
Co.
</TABLE>
iv
<PAGE> 9
CHAPTER ONE -- THE MERGER
CHAPTER ONE
THE MERGER
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHY ARE THE TWO COMPANIES PROPOSING TO MERGE?
A: The boards of directors of Pfizer and Warner-Lambert believe that this merger
will create the world's fastest-growing major pharmaceutical and consumer
health care company, with the scientific depth, global marketing strength and
financial resources to take greater advantage of new opportunities and to
bring innovative new products to market faster.
Q: WHAT WILL BE THE STRENGTHS OF THE COMBINED COMPANY?
A: We expect the combined company to benefit from:
- a diversified pipeline;
- leading products in various therapeutic areas;
- complementary technologies and research and development capabilities;
- a strong management team; and
- significant cost savings.
Q: WHAT WILL BE THE NAME OF THE COMBINED COMPANY?
A: The combined company will be named Pfizer Inc.
Q: WILL THE WARNER-LAMBERT NAME BE ELIMINATED?
A: No. It will continue as an important divisional name preserved and
perpetuated by the combined company.
Q: WHAT WILL WARNER-LAMBERT SHAREHOLDERS RECEIVE FOR THEIR WARNER-LAMBERT
SHARES?
A: Warner-Lambert shareholders will receive 2.75 shares of Pfizer common stock
for each of their shares of Warner-Lambert common stock. Pfizer will not
issue fractional shares in the merger. As a result, the total number of
shares of Pfizer common stock that each Warner-Lambert shareholder will
receive in the merger will be rounded down to the nearest whole number, and
each Warner-Lambert shareholder will receive a cash payment for the value of
the remaining fraction of a share of Pfizer common stock that he or she would
otherwise receive, if any.
EXAMPLE: IF YOU CURRENTLY OWN 150 SHARES OF WARNER-LAMBERT COMMON STOCK, THEN
AFTER THE MERGER YOU WILL BE ENTITLED TO RECEIVE 412 SHARES OF PFIZER COMMON
STOCK AND A CHECK FOR THE MARKET VALUE OF ONE-HALF OF A SHARE OF PFIZER
COMMON STOCK.
Q: WILL PFIZER SHAREHOLDERS RECEIVE ANY SHARES AS A RESULT OF THE MERGER?
A: No. Pfizer shareholders will continue to hold the Pfizer shares they
currently own.
Q: WHO WILL MANAGE THE COMBINED COMPANY?
A: William C. Steere, Jr., currently Chairman and Chief Executive Officer of
Pfizer, will be Chairman and Chief Executive Officer of the combined company.
Dr. Henry McKinnell, currently President and Chief Operating Officer of
Pfizer, will be President and Chief Operating Officer of the combined
company. Dr. Peter B. Corr, Mr. S. Morgan Morton and ,
currently executive officers of Warner- Lambert, will have senior vice
president positions in the combined company and will be invited to join
Pfizer's Corporate Management Committee. Eight independent directors
currently serving on Warner-Lambert's board of directors will be invited to
join Pfizer's board of directors if Pfizer's shareholders approve an
amendment to Pfizer's certificate of incorporation to increase the maximum
size of the Pfizer board of direc-
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CHAPTER ONE -- THE MERGER
tors. If the Pfizer shareholders do not approve the amendment to Pfizer's
certificate of incorporation, the Pfizer board of directors will be expanded
to 18 members, and the Pfizer board of directors will appoint three current
outside directors on the Warner-Lambert board of directors to fill those
newly-created vacancies. As further vacancies occur on Pfizer's board of
directors, the Pfizer board of directors will use its best efforts to appoint
individuals who are currently outside directors of Warner-Lambert to fill the
next three vacancies on Pfizer's board of directors. The employees of the
combined company will work together to create a single new business entity.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working to complete the merger by the end of the second quarter of
2000. However, it is possible that factors outside the control of the parties
could require us to complete the merger at a later time. We hope to complete
the merger as soon as reasonably practicable.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO SHAREHOLDERS?
A: Warner-Lambert shareholders who exchange their shares of Warner-Lambert
common stock for shares of Pfizer common stock pursuant to the merger will
not recognize any gain or loss on the exchange for United States federal
income tax purposes, except with respect to the cash, if any, received in
lieu of fractional shares of Pfizer common stock. The merger will not have
any tax consequences for Pfizer shareholders. To review the tax consequences
to shareholders in greater detail, see "Material Federal Income Tax
Consequences of the Merger".
Q: WHAT WILL WARNER-LAMBERT SHAREHOLDERS' TAX BASIS BE IN THE PFIZER COMMON
STOCK THEY RECEIVE IN THE MERGER?
A: Each Warner-Lambert shareholder's tax basis in his or her shares of Pfizer
common stock received in the merger will equal the shareholder's current tax
basis in his or her Warner-Lambert common stock reduced by the amount of
basis allocable to fractional shares for which the shareholder receives a
cash payment, if any.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY PROXY CARD?
A: Yes. You can change your vote at any time before your proxy is voted at your
company's shareholder meeting. You can do this in one of three ways:
- timely delivery of a valid, later-dated proxy, including in the case of
Pfizer shareholders, a proxy given by telephone or Internet;
- written notice to your company's Secretary before the meeting that you have
revoked your proxy; or
- voting by ballot at either the Pfizer annual meeting or the Warner-Lambert
special meeting.
If you have instructed a broker to vote your shares, you must follow
directions from your broker to change those instructions.
Q: WHEN AND WHERE ARE THE SHAREHOLDER MEETINGS?
A: The Pfizer shareholder meeting will take place on April 27, 2000 at the Grand
Hyatt Hotel, Empire State Ballroom, 42nd Street and Lexington Avenue, New
York, New York at 10:00 a.m. The Warner-Lambert special meeting will take
place on [May ], 2000 in [ , ] at [ ] a.m.
Q: WHAT DO I NEED TO DO NOW?
A: After you carefully read this document, mail your signed proxy card in the
enclosed return envelope, or Pfizer shareholders may vote by telephone or the
Internet, as soon as possible, so that your shares may be represented at your
meeting. In order to assure that your vote is obtained, please vote your
proxy as instructed on your proxy card even
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CHAPTER ONE -- THE MERGER
if you currently plan to attend your meeting in person.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: No. If you do not provide your broker with instructions on how to vote your
"street name" shares, your broker will not be permitted to vote them on
either the approval of the merger by Warner-Lambert shareholders or approval
of the share issuance by Pfizer shareholders. If you are a Pfizer shareholder
and do not give voting instructions to your broker, your broker may not vote
your shares on the share issuance proposal without instructions from you, and
you will not be counted as voting for purposes of the Pfizer share issuance
proposal unless you appear in person at the Pfizer meeting with a legal,
valid proxy from the record holder. If you are a Warner-Lambert shareholder
and do not give voting instructions to your broker, you will, in effect, be
voting against the merger unless you appear at the meeting to vote in person.
You should therefore be sure to provide your broker with instructions on how
to vote your shares. Please check the voting form used by your broker to see
if it offers telephone or Internet voting.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger is completed, we will send Warner-Lambert shareholders
written instructions for exchanging their stock certificates. Pfizer
shareholders will keep their existing stock certificates.
Q: WHAT HAPPENS TO MY FUTURE DIVIDENDS?
A: Although dividends are subject to future approval and declaration by Pfizer's
and Warner-Lambert's respective boards of directors, each of Pfizer and
Warner-Lambert currently plan to continue to pay regular quarterly dividends
on their common stock until completion of the merger. The dividend policy of
the combined company will be determined by its board of directors following
the merger.
Q: WHO DO I CALL IF I HAVE QUESTIONS ABOUT THE MEETINGS OR THE MERGER?
A: Pfizer shareholders may call 1-800-[ ]-[ ].
Warner-Lambert shareholders may call 1-800-[ ]-[ ].
Q: WHAT HAPPENED TO THE PROPOSED WARNER-LAMBERT MERGER WITH AMERICAN HOME
PRODUCTS CORPORATION?
A: The merger agreement between American Home Products Corporation and Warner-
Lambert was terminated in accordance with its terms. Upon receiving notice
from Warner-Lambert that the Warner-Lambert board of directors had effected a
change in its recommendation with respect to the merger with AHP, AHP
terminated the merger agreement with Warner-Lambert. In accordance with the
terms of such merger agreement, the only consideration paid to AHP by
Warner-Lambert was a $1.8 billion cash termination fee provided by their
merger agreement.
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CHAPTER ONE -- THE MERGER
SUMMARY
This summary highlights selected information from this joint proxy
statement/prospectus and may not contain all of the information that is
important to you. To understand the merger fully and for a more complete
description of the legal terms of the merger agreement, you should carefully
read this entire document and the documents to which we refer you. See "Where
You Can Find More Information."
THE COMPANIES
Pfizer Inc.
235 East 42nd Street
New York, New York 10017
(212) 573-2323
Internet address: www.pfizer.com
Pfizer is a research-based global pharmaceutical company that discovers,
develops, manufactures and markets innovative medicines for humans and animals.
The company reported revenues of $16.2 billion for 1999 and revenues of $13.5
billion for 1998. The company's Norvasc(R), Zoloft(R), Zithromax(R), Viagra(R)
and Diflucan(R) products, as well as the co-promoted, co-marketed and licensed
products Lipitor(R) and Celebrex(R), each had worldwide third-party sales
exceeding $1 billion in 1999. Pfizer employs approximately 51,000 people
worldwide, and spent $2.8 billion on research and development in 1999.
Warner-Lambert Company
201 Tabor Road
Morris Plains, New Jersey 07950
(973) 385-2000
Internet address: www.warnerlambert.com
Warner-Lambert develops, manufactures and markets a diversified line of
health care and consumer products. Its principal industry segments are:
pharmaceutical products, consisting principally of pharmaceuticals, biologicals
and empty hard-gelatin capsules; consumer health care products, consisting
principally of over-the-counter health care, shaving and pet care products; and
confectionery products, consisting principally of chewing gums and breath mints.
Warner-Lambert markets its pharmaceutical products throughout most of the world
under the Parke-Davis name. Warner-Lambert reported revenues of $12.9 billion
for 1999 and revenues of $10.7 billion for 1998. The company's Lipitor(R),
Neurontin(R), and Accupril(R) products had worldwide sales of $3.7 billion, $913
million and $514 million, respectively, in 1999. Warner-Lambert employs
approximately 44,000 people worldwide and spent approximately $1.3 billion on
research and development in 1999.
OUR RECOMMENDATIONS TO SHAREHOLDERS
TO PFIZER SHAREHOLDERS:
Pfizer's board of directors believes the merger is advisable, fair to you
and in your best interests and recommends that you vote FOR the share issuance
proposal in connection with the merger.
Pfizer's board of directors also recommends that you vote FOR the Pfizer
certificate of incorporation amendment to increase the maximum size of the board
of directors from 18 to 24, the election of five directors and the proposal to
approve KPMG LLP as our independent auditors, and AGAINST the two shareholder
proposals.
TO WARNER-LAMBERT SHAREHOLDERS:
Warner-Lambert's board of directors believes the merger is advisable, fair
to you and in your best interests and recommends that you vote FOR the proposal
to approve and adopt the merger agreement and the merger.
SHAREHOLDER VOTES REQUIRED
FOR PFIZER SHAREHOLDERS:
Approval of the share issuance proposal requires the affirmative vote of at
least a majority of the votes cast by the holders of Pfizer common stock,
provided that the total votes cast represents a majority of the
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CHAPTER ONE -- THE MERGER
outstanding shares of Pfizer common stock.
Approval of the amendment to Pfizer's certificate of incorporation requires the
affirmative vote of at least 80% of the outstanding shares of Pfizer common
stock. A plurality of votes cast is required to elect directors. Approval of
KPMG LLP as independent auditors and the two shareholder proposals require the
affirmative vote of a majority of the shares present or represented by proxy at
the annual meeting.
NONE OF THE PFIZER PROPOSALS ARE CONDITIONED ON APPROVAL OF ANY OTHER PFIZER
PROPOSAL.
FOR WARNER-LAMBERT SHAREHOLDERS:
Approval and adoption of the merger agreement and the merger requires the
affirmative vote of at least a majority of the outstanding shares of
Warner-Lambert common stock.
THE MERGER
Under the terms of the proposed merger, a wholly-owned subsidiary of Pfizer
formed for the purpose of the merger will merge with and into Warner-Lambert. As
a result, Warner-Lambert will become a wholly-owned subsidiary of Pfizer.
The merger agreement is attached as Annex A to this joint proxy statement/
prospectus. We encourage you to read the merger agreement carefully and fully as
it is the legal document that governs the merger. For a summary of the merger
agreement, see "The Merger Agreement."
WHAT WARNER-LAMBERT SHAREHOLDERS WILL RECEIVE
As a result of the merger, Warner-Lambert shareholders will be entitled to
receive 2.75 shares of Pfizer common stock for each share of Warner-Lambert
common stock. Pfizer will not issue any fractional shares in the merger. As a
result, the total number of shares of Pfizer common stock that each
Warner-Lambert shareholder will receive in the merger will be rounded down to
the nearest whole number, and each Warner-Lambert shareholder will receive a
cash payment for the remaining fraction of a share of Pfizer common stock that
he or she would otherwise receive, if any. See "The Merger Agreement -- Exchange
of Certificates in the Merger."
OWNERSHIP OF PFIZER AFTER THE MERGER
Pfizer will issue approximately shares of Pfizer common stock to
Warner-Lambert shareholders in the merger. The shares of Pfizer common stock to
be issued to Warner-Lambert shareholders in the merger will represent
approximately 40% of the outstanding Pfizer common stock after the merger. This
information is based on the number of Pfizer and Warner-Lambert shares
outstanding on , 2000 and does not take into account stock options or
other equity-based awards.
CONDITIONS TO THE COMPLETION OF THE MERGER
The completion of the merger depends upon a number of conditions, including
the following:
- approval and adoption of the merger agreement and the merger by the
Warner-Lambert shareholders and approval of the share issuance by the
Pfizer shareholders;
- expiration or termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
approval of the merger by the European Commission and receipt of other
material regulatory approvals;
- absence of any law or court order prohibiting the merger;
- receipt of opinions of counsel to Pfizer and Warner-Lambert that the
merger will qualify as a tax-free reorganization;
- material accuracy, as of closing, of the representations and warranties
made by the other party;
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CHAPTER ONE -- THE MERGER
- receipt of letters from the independent public accountants of Pfizer,
dated approximately as of the effective date of this joint proxy
statement/prospectus and as of the closing date of the merger, that
accounting for the merger as a pooling-of-interests is appropriate;
receipt of letters from the independent public accountants of
Warner-Lambert, dated approximately as of the effective date of this
joint proxy statement/prospectus and the closing date of the merger that
no condition exists that would preclude Warner-Lambert's ability to be a
party in a business combination to be accounted for as a
pooling-of-interests; and
- no event or circumstance having occurred relating to any governmental
review or inquiry concerning certain products or business practices which
is likely to have a material adverse effect on Warner-Lambert.
TERMINATION OF MERGER AGREEMENT
Right to Terminate. Pfizer and Warner-Lambert can mutually agree to
terminate the merger agreement without completing the merger, and either party
can terminate the merger agreement if any of the following occurs:
- the merger has not been completed by December 31, 2000 for reasons other
than relating to regulatory approval, and, in such event, no later than
March 31, 2001;
- a governmental authority or a court order permanently prohibits the
completion of the merger;
- either Pfizer's or Warner-Lambert's shareholders do not give the required
approvals necessary to complete the merger; or
- this joint proxy statement/prospectus is not mailed to shareholders on or
before September 30, 2000.
Pfizer may terminate the merger agreement if any of the following occurs:
- Warner-Lambert's board of directors either fails to recommend the merger
to its shareholders, changes its recommendation, or fails to call the
Warner-Lambert special meeting to vote on the merger;
- Pfizer's board of directors authorizes Pfizer to accept a superior
proposal, which Warner-Lambert was given an opportunity to match; or
- Warner-Lambert breaches any of its representations, warranties or
covenants contained in the merger agreement, resulting in its failure to
satisfy one of the closing conditions to the merger, and, if curable,
that breach remains uncured for 30 days.
Warner-Lambert may terminate the merger agreement if any of the following
occurs:
- Pfizer's board of directors either fails to recommend to its shareholders
the share issuance proposal or the amendment to Pfizer's certificate of
incorporation, changes its recommendation, or fails to call the Pfizer
shareholders' meeting to vote on the share issuance proposal and the
amendment to Pfizer's certificate of incorporation;
- Warner-Lambert's board of directors authorizes Warner-Lambert to accept a
superior proposal, which Pfizer was given an opportunity to match; or
- Pfizer breaches any of its representations, warranties or covenants
contained in the merger agreement, resulting in its failure to satisfy
one of the closing conditions to the merger, and, if curable, that breach
remains uncured for 30 days.
Termination Fees Payable by Warner-Lambert. Warner-Lambert has agreed to
pay Pfizer a termination fee of $500 million if a superior proposal is
outstanding with respect to Warner-Lambert and the merger agreement is
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CHAPTER ONE -- THE MERGER
terminated under one of the following circumstances:
(1) either Pfizer or Warner-Lambert terminates the merger agreement because
Warner-Lambert's shareholders have failed to approve and adopt the merger
agreement and the merger, unless:
- at the time of the vote, a material adverse effect with respect to Pfizer
has occurred;
- at the time of the vote, the board of directors of Pfizer has changed its
recommendation of the share issuance proposal or the amendment to
Pfizer's certificate of incorporation following the making of a business
combination proposal with respect to Pfizer;
- Pfizer's shareholders have failed to approve the share issuance at the
Pfizer annual meeting; or
- at the time of termination, Pfizer is in breach of any of its
representations, warranties, covenants or obligations under the merger
agreement and such breach would otherwise permit Warner-Lambert to
terminate the merger agreement for failure by Pfizer to satisfy a closing
condition relating to Pfizer's representations, warranties or covenants;
(2) Pfizer terminates the merger agreement because Warner-Lambert's board of
directors has changed its recommendation of the merger agreement and the
merger by reason of a superior proposal, unless:
- at the time of the change in recommendation, a material adverse effect
with respect to Pfizer has occurred;
- at the time of the change in recommendation, the board of directors of
Pfizer has changed its recommendation of the share issuance proposal or
the amendment to Pfizer's certificate of incorporation following the
making of a business combination proposal with respect to Pfizer;
- Pfizer's shareholders have failed to approve the share issuance at the
Pfizer annual meeting; or
- at the time of termination, Pfizer is in breach of any of its
representations, warranties, covenants or obligations under the merger
agreement and such breach would otherwise permit Warner-Lambert to
terminate the merger agreement for failure by Pfizer to satisfy a closing
condition relating to Pfizer's representations, warranties or covenants;
(3) Warner-Lambert terminates the merger agreement because Warner-Lambert's
board of directors has authorized Warner-Lambert to enter into a written
agreement for a superior proposal and the five business day period after
Warner-Lambert provided notice to Pfizer of such proposal has expired,
unless at the time of termination:
- Pfizer is in breach of any of its representations, warranties, covenants
or obligations under the merger agreement and such breach would otherwise
permit Warner-Lambert to terminate the merger agreement for failure by
Pfizer to satisfy a closing condition relating to Pfizer's
representations, warranties or covenants.
Repayment of Termination Fees by Pfizer. If Pfizer receives the $500
million termination fee from Warner-Lambert under the circumstances described
above and within twelve months after the termination of the merger agreement
enters into an agreement with a third party for a business combination, Pfizer
must repay Warner-Lambert the termination fee, unless:
(1) Warner-Lambert terminated the merger agreement because its board of
directors authorized Warner-Lambert to enter into a written agreement for a
superior proposal, and the five business day period after Warner-Lambert
provided notice to Pfizer of such proposal has expired;
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CHAPTER ONE -- THE MERGER
(2) Pfizer terminated the merger agreement because the Warner-Lambert board of
directors failed to recommend, or changed its recommendation of, the merger
agreement and the merger following the making of a business combination
proposal with respect to Warner-Lambert that was outstanding at the time of
the failure to make the recommendation or the change in the recommendation;
(3) either Warner-Lambert or Pfizer terminated the merger agreement because
Warner-Lambert's shareholders failed to approve the merger agreement and the
merger, and at the time of the Warner-Lambert shareholder vote there was
outstanding a business combination proposal with respect to Warner-Lambert;
or
(4) at the time of termination, Warner-Lambert was in breach of its
representations, warranties, covenants or obligations under the merger
agreement, and such breach resulted in the failure of a closing condition to
the merger relating to Warner-Lambert's representations, warranties or
covenants being satisfied.
Termination Fees Payable by Pfizer. Pfizer has agreed to pay Warner-Lambert
a termination fee of $1.8 billion if the merger agreement is terminated under
one of the following circumstances:
(1) either Pfizer or Warner-Lambert terminates the merger agreement because the
merger has not been consummated by December 31, 2000 due to Pfizer's failure
to satisfy a closing condition concerning the accuracy of its
representations and warranties, or the performance of its covenants and
obligations;
(2) either Warner-Lambert or Pfizer terminates the merger agreement because
Pfizer's shareholders fail to approve the share issuance proposal, unless:
- at the time of the shareholder vote, a material adverse effect with
respect to Warner-Lambert has occurred;
- at the time of the shareholder vote, the board of directors of
Warner-Lambert has changed its recommendation of the merger agreement
following the making of a business combination proposal for
Warner-Lambert;
- Warner-Lambert's shareholders have failed to approve the merger agreement
and the merger at the Warner-Lambert special meeting; or
- at the time of termination, Warner-Lambert is in breach of its
representations, warranties, covenants or obligations under the merger
agreement and such breach would otherwise permit Pfizer to terminate the
merger agreement for failure by Warner-Lambert to satisfy a closing
condition relating to Warner-Lambert's representations, warranties or
covenants.
(3) Warner-Lambert terminates the merger agreement because Pfizer's board of
directors has changed its recommendation of the share issuance proposal or
the amendment to Pfizer's certificate of incorporation by reason of a
superior proposal, unless:
- at the time of the change of the recommendation, a material adverse
effect with respect to Warner-Lambert has occurred;
- at the time of the change of the recommendation, the board of directors
of Warner-Lambert has changed its recommendation of the merger agreement
following the making of a business combination proposal for Warner-
Lambert;
- Warner-Lambert's shareholders have failed to approve the merger agreement
and the merger at the Warner-Lambert special meeting; or
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CHAPTER ONE -- THE MERGER
- at the time of termination, Warner-Lambert is in breach of its
representations, warranties, covenants or obligations under the merger
agreement and such breach would otherwise permit Pfizer to terminate the
merger agreement for failure by Warner-Lambert to satisfy a closing
condition relating to Warner-Lambert's representations, warranties or
covenants.
(4) Warner-Lambert terminates the merger agreement because Pfizer was in breach
of its representations, warranties, covenants or obligations under the
merger agreement, and such breach resulted in the failure of a closing
condition to the merger being satisfied relating to Pfizer's
representations, warranties or covenants;
(5) Pfizer terminates the merger agreement because Pfizer's board of directors
has authorized Pfizer to enter into a written agreement for a superior
proposal, and the five business day period after Pfizer provided notice to
Warner-Lambert of such proposal has expired;
(6) the merger agreement is terminated because the merger cannot be accounted
for as a pooling-of-interests; or
(7) the merger agreement is terminated under any of the circumstances described
above under "Termination of Merger Agreement -- Right to Terminate" other
than:
- those circumstances which would result in Warner-Lambert paying to Pfizer
the termination fee of $500 million;
- the merger has not been completed by December 31, 2000 and at the time of
the termination Warner-Lambert is in breach of its representations,
warranties, covenants or obligations under the merger agreement or a
governmental review or inquiry concerning certain products or business
practices of Warner-Lambert that is likely to have a material adverse
effect has occurred; and
- if Pfizer terminated the merger agreement because Warner-Lambert is in
breach of its representations, warranties, covenants or obligations under
the merger agreement and such breach would result in the failure of a
closing condition to the merger relating to Warner-Lambert's
representations, warranties or covenants being satisfied.
Repayment of Termination Fees by Warner-Lambert. If Warner-Lambert
receives the $1.8 billion termination fee from Pfizer under the circumstances
described above and within twelve months after the termination of the merger
agreement enters into an agreement with a third party for a business
combination, Warner-Lambert must repay Pfizer the termination fee, unless:
(1) Pfizer terminated the merger agreement because its board of directors
authorized Pfizer to enter into a written agreement for a superior proposal,
and the five business day period after Pfizer provided notice to
Warner-Lambert of such proposal has expired;
(2) Warner-Lambert terminated the merger agreement because the Pfizer board of
directors failed to recommend, or changed its recommendation of, the share
issuance proposal or the amendment to Pfizer's certificate of incorporation
following the making of a business combination proposal with respect to
Pfizer that was outstanding at the time of the failure to make the
recommendation or the change in the recommendation;
(3) either Pfizer or Warner-Lambert terminated the merger agreement because
Pfizer's shareholders failed to approve the share issuance proposal, and at
the time of the Pfizer shareholder vote there was outstanding a business
combination proposal with respect to Pfizer; or
(4) at the time of termination, Pfizer was in breach of its representations,
warranties, covenants or obligations under the merger agreement, and such
breach resulted in the
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CHAPTER ONE -- THE MERGER
failure of a closing condition to the merger relating to Pfizer's
representations, warranties or covenants being satisfied.
ARRANGEMENTS WITH RESPECT TO LIPITOR(R)
In addition to the termination fees described above, in the event the
merger agreement is terminated under certain circumstances, the parties have
made special arrangements with respect to their co-promotion and co-marketing of
Warner-Lambert's cholesterol-lowering drug Lipitor(R).
- If Pfizer does not breach its representations, warranties, covenants or
obligations under the merger agreement and the merger agreement is
terminated under one of the following circumstances:
(1) either Pfizer or Warner-Lambert terminates the merger agreement because the
merger has not been completed by December 31, 2000 due to Warner-Lambert's
failure to satisfy a closing condition concerning the accuracy and
performance of its representations, warranties and covenants under the
merger agreement, or a governmental inquiry concerning certain products
having a material adverse effect but all other conditions to the merger have
been satisfied;
(2) Pfizer terminates the merger agreement because Warner-Lambert was in breach
of its representations, warranties, covenants or obligations under the
merger agreement, and such breach resulted in the failure of a closing
condition to the merger being satisfied relating to Warner-Lambert's
representations, warranties or covenants;
(3) either Pfizer or Warner-Lambert terminates the merger agreement because
Warner-Lambert's shareholders fail to approve and adopt the merger agreement
and the merger, or Pfizer terminates the merger agreement because Warner-
Lambert's board has changed its recommendation of the merger agreement by
reason of a superior proposal, unless at the time of the shareholder vote or
the change in the recommendation, as applicable:
- a material adverse effect with respect to Pfizer has occurred;
- the board of directors of Pfizer has changed its recommendation of the
share issuance proposal or the amendment to Pfizer's certificate of
incorporation following the making of a business combination proposal
with respect to Pfizer; or
- Pfizer's shareholders have failed to approve the share issuance at the
Pfizer annual meeting; or
(4) Warner-Lambert terminates the merger agreement because Warner-Lambert's
board of directors has authorized Warner-Lambert to enter into a written
agreement for a superior proposal, and the five business day period after
Warner-Lambert provided notice to Pfizer of such proposal has expired;
then Warner-Lambert will be required to amend the agreements between Pfizer and
Warner-Lambert with respect to their co-promotion, co-marketing and licensing of
Lipitor(R) in order to eliminate Warner-Lambert's right to terminate those
agreements in the year 2002, or following a change of control. In those
circumstances, Warner-Lambert and Pfizer will also enter into a letter agreement
relating to the co-development, co-promotion and co-marketing agreement of a
Lipitor(R)/Norvasc(R) combination drug.
- - If the merger agreement is terminated under any of the circumstances described
in items (1) through (5) above under the heading "-- Termination of Merger
Agreement -- Termination Fees Payable by Pfizer", then Warner-Lambert will not
be obligated to amend the Lipitor(R) agreements or enter into a
co-development, co-promotion and co-marketing agreement with respect to a
Lipitor(R)/Norvasc(R) combination drug.
- - If the merger agreement is terminated under any of the circumstances described
in
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CHAPTER ONE -- THE MERGER
items (6) or (7) above under the heading "-- Termination of Merger Agreement --
Termination Fees Payable by Pfizer", then Pfizer shall have the option to cause
the Lipitor(R) amendments and the Lipitor(R)/ Norvasc(R) agreement to become
effective by payment to Warner-Lambert of $1.333 billion.
BOARD OF DIRECTORS OF PFIZER AFTER THE MERGER
If Pfizer's shareholders approve the amendment to Pfizer's certificate of
incorporation, which would increase the maximum size of Pfizer's board of
directors from 18 to 24, immediately following the completion of the merger,
Pfizer's board of directors will consist of up to 23 members, up to eight of
whom now serve as outside directors on the Warner-Lambert board of directors
(provided that each Warner-Lambert director invited to join the Pfizer board of
directors in fact joins) and 15 of whom now serve on Pfizer's board of
directors.
If Pfizer's shareholders do not approve the amendment to the certificate of
incorporation, Pfizer's board of directors will consist of 18 members, 15 of
whom are currently serving on Pfizer's board of directors and three of whom will
be selected by Pfizer from the outside directors on Warner-Lambert's board of
directors. As vacancies occur on Pfizer's board of directors, Pfizer will use
its best efforts to appoint individuals who are now outside directors on
Warner-Lambert's board of directors to fill the next three vacancies on Pfizer's
board of directors. In addition, as the first committee chair becomes available
on Pfizer's board of directors after the completion of the merger, Pfizer's
board of directors will appoint an individual who currently serves on Warner-
Lambert's board of directors to fill the vacancy.
REGULATORY APPROVALS
Completion of the merger will not occur until receipt of certain regulatory
approvals required for the transaction. The Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, provides that certain materials and
information must be furnished to and reviewed by the Antitrust Division of the
Justice Department or the Federal Trade Commission. Pfizer and Warner-Lambert
will each file shortly the required notification and report forms with the
Antitrust Division and the Federal Trade Commission.
Pfizer and Warner-Lambert each conduct business in members of the European
Union, and the merger therefore also requires the review of the European
Commission. Pfizer and Warner-Lambert intend to formally notify the European
Commission of the merger shortly.
See "The Proposed Merger -- Regulatory Matters Relating to the Merger."
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
A Warner-Lambert shareholder's receipt of Pfizer common stock in the merger
generally will be tax-free for United States federal income tax purposes, except
for taxes which may result from any receipt of cash instead of fractional shares
of Pfizer common stock.
LISTING OF PFIZER COMMON STOCK
The shares of Pfizer common stock to be issued in the merger will be listed
on the New York Stock Exchange under the ticker symbol "PFE."
APPRAISAL RIGHTS
The holders of Pfizer and Warner-Lambert common stock do not have any
dissenters' appraisal rights under Delaware law in connection with the merger.
INTERESTS OF OFFICERS AND DIRECTORS IN THE MERGER
When Warner-Lambert shareholders consider their board of directors'
recommendation that they vote in favor of the approval and adoption of the
merger agreement and the merger, Warner-Lambert shareholders should be aware
that a number of Warner-Lambert
I-11
<PAGE> 20
CHAPTER ONE -- THE MERGER
officers and directors may have interests in the merger that may be different
from, or in addition to, their interests.
ACCOUNTING TREATMENT OF THE MERGER
Pfizer and Warner-Lambert expect the merger to qualify as a
pooling-of-interests for accounting and financial reporting purposes. This means
that Pfizer and Warner-Lambert will be treated for accounting and financial
reporting purposes as if they had always been combined.
OPINIONS OF FINANCIAL ADVISORS
In connection with the merger, the Pfizer board of directors received the
opinions of Lazard Freres & Co. LLC and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Pfizer's financial advisors, and the Warner-Lambert board of
directors received the opinions of Bear, Stearns & Co. Inc. and Goldman, Sachs &
Co., Warner-Lambert's financial advisors. The Pfizer board of directors received
written opinions from each of Lazard Freres and Merrill Lynch as to the
fairness, from a financial point of view, to Pfizer of the exchange ratio as of
February 6, 2000, and the Warner-Lambert board of directors received a written
opinion from each of Bear Stearns and Goldman Sachs that, as of February 6,
2000, the exchange ratio was fair to Warner-Lambert shareholders from a
financial point of view. These opinions, which are attached as Annex B, Annex C,
Annex D and Annex E, set forth assumptions made, matters considered and
limitations on the review undertaken in connection with the opinions. We
encourage you to read these opinions in their entirety. THESE OPINIONS ARE
DIRECTED TO THE BOARD OF DIRECTORS OF THE RESPECTIVE COMPANIES AND ARE NOT
RECOMMENDATIONS TO SHAREHOLDERS WITH RESPECT TO ANY MATTER RELATING TO THE
MERGER. THE OPINIONS SPEAK ONLY AS OF THEIR RESPECTIVE DATES AND THE FINANCIAL
ADVISORS OF PFIZER AND WARNER-LAMBERT ARE UNDER NO OBLIGATION TO CONFIRM THEIR
OPINIONS AS OF A LATER DATE. FURTHER, THE PFIZER AND WARNER-LAMBERT BOARDS OF
DIRECTORS MAY NOT NECESSARILY REQUEST THAT THEIR FINANCIAL ADVISORS CONFIRM
THEIR OPINIONS AS OF A LATER DATE.
OTHER PFIZER ANNUAL MEETING MATTERS
At the Pfizer annual meeting, Pfizer is also asking its shareholders to:
- amend Pfizer's certificate of incorporation to increase the size of
Pfizer's board of directors from 18 to 24;
- elect directors to the Pfizer board of directors;
- ratify the appointment of Pfizer's independent accountants;
- vote on two Pfizer shareholder proposals, which Pfizer's board of
directors recommends shareholders vote AGAINST; and
- conduct other business if properly presented.
Approval by Pfizer shareholders of these other annual meeting proposals is
not a condition to completion of the merger. Approval of the share issuance for
the merger is not a condition to approval of these annual meeting proposals.
The Pfizer board of directors recommends that you vote FOR the amendment to
Pfizer's certificate of incorporation, the election of directors and the
ratification of the appointment of Pfizer's independent accountants, and that
you vote AGAINST the Pfizer shareholder proposals.
I-12
<PAGE> 21
CHAPTER ONE -- THE MERGER
SELECTED HISTORICAL FINANCIAL INFORMATION
We are providing the following financial information to assist you in your
analysis of the financial aspects of the merger. We derived the Pfizer
information from audited financial statements of Pfizer as of and for the years
ended December 31, 1995 through 1999. We derived the Warner-Lambert information
from the audited statements of income for the years ended December 31, 1996
through 1999, audited balance sheets as of December 31, 1999, 1998 and 1997, and
unaudited financial statements as of and for all other periods presented, all of
which were restated to reflect the consummation of the acquisition of Agouron
Pharmaceuticals, Inc. in May 1999, which was accounted for under the
pooling-of-interests method of accounting. The information is only a summary and
should be read in conjunction with the historical financial statements of Pfizer
and Warner-Lambert and related notes contained in the annual reports and other
information that has been filed with the SEC. See "Where You Can Find More
Information" for information on where you can obtain copies of this other
information.
PFIZER HISTORICAL FINANCIAL INFORMATION(1)
<TABLE>
<CAPTION>
AS OF AND FOR THE
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1999 1998 1997 1996 1995
------- ------ ------ ------ ------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Total revenues........................... $16,204 13,544 11,055 9,864 8,684
Net income............................... 3,179 3,351 2,213 1,929 1,573
Basic earnings per share................. 0.84 0.88 0.59 0.52 0.43
Diluted earnings per share............... 0.82 0.85 0.57 0.50 0.42
Total assets............................. 20,574 18,302 14,991 14,251 12,339
Long-term debt........................... 525 527 725 681 828
Shareholders' equity..................... 8,887 8,810 7,933 6,954 5,506
</TABLE>
WARNER-LAMBERT HISTORICAL FINANCIAL INFORMATION(2)(3)
<TABLE>
<CAPTION>
AS OF AND FOR THE
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1999 1998 1997 1996 1995
------- ------ ------ ------ ------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net sales................................ $12,929 10,744 8,408 7,231 7,040
Net income............................... 1,733 1,273 862 747 724
Basic earnings per share................. 2.03 1.50 1.03 0.89 0.88
Diluted earnings per share............... 1.96 1.45 0.99 0.88 0.87
Total assets............................. 11,442 9,520 8,352 7,339 6,216
Long-term debt........................... 1,250 1,267 1,836 1,721 635
Shareholders' equity..................... 5,098 3,880 3,051 2,709 2,332
</TABLE>
- -------------------------
(1) Pfizer's per share data reflect the 3-for-1 stock split which occurred in
June 1999.
(2) Warner-Lambert's financial statements have been restated for the acquisition
of Agouron Pharmaceuticals, Inc. in May 1999, which was accounted for as a
pooling-of-interests. All restated amounts in 1995 and the balance sheet
amounts in 1996 have been derived from unaudited financial statements.
(3) Warner-Lambert's per share data reflect the 3-for-1 stock split which
occurred in May 1998.
I-13
<PAGE> 22
CHAPTER ONE -- THE MERGER
UNAUDITED PRO FORMA COMBINED SELECTED FINANCIAL INFORMATION
We intend that the merger will be accounted for under the
pooling-of-interests method of accounting, which means that for accounting and
financial reporting purposes we will treat our companies as if they had always
been combined. For a more detailed description of pooling-of-interests
accounting, see "The Proposed Merger -- Accounting Treatment".
The following unaudited pro forma combined selected financial information
has been derived from, and should be read in conjunction with, the Unaudited Pro
Forma Condensed Combined Financial Statements and related notes included in
Chapter Two.
We have presented below unaudited pro forma selected combined financial
information that reflects the pooling-of-interests method of accounting and that
is intended to provide you with a better picture of what our businesses might
have looked like had they always been combined, i.e., giving effect to the
merger between Pfizer and Warner-Lambert as if it had occurred on January 1,
1997, for the income statements, as of the first day of the first period for
which financial information is presented here and as of December 31, 1999 for
the balance sheet. The companies may have performed differently if they had been
combined. As a result of various factors including any synergies which may have
resulted, you should not rely on the unaudited pro forma selected combined
financial information as being indicative of the historical results that would
have occurred or the future results that will result after the merger.
<TABLE>
<CAPTION>
AS OF AND FOR THE
YEAR ENDED DECEMBER 31,
-------------------------------
1999 1998 1997
------- ------ ------
(IN MILLIONS, EXCEPT
PER SHARE DATE)
<S> <C> <C> <C>
Total revenues.......................................... $27,601 23,414 19,125
Income from continuing operations....................... 4,959 3,221 2,880
Income from continuing operations per common share:
Basic................................................. 0.81 0.53 0.47
Diluted............................................... 0.79 0.51 0.46
Cash dividends per common share(1)
Shareholder's equity per common share................... 1.98
Total assets............................................ 31,379
Long-term debt.......................................... 3,575
</TABLE>
- ---------------
(1) Pfizer's current quarterly dividend is $0.09 ($0.36 per share annualized)
and is subject to future approval and declaration by Pfizer's board of
directors. Warner-Lambert's current quarterly dividend is $0.24 ($0.96 per
share annualized) and is subject to future approval and declaration by
Warner-Lambert's board of directors. The dividend policy of the combined
company after the merger will be determined by its board of directors
following the merger.
I-14
<PAGE> 23
CHAPTER ONE -- THE MERGER
COMPARATIVE PER SHARE INFORMATION
The following table sets forth selected historical per share information of
Pfizer and Warner-Lambert and unaudited combined per share information after
giving effect to the merger between Pfizer and Warner-Lambert as if it had
occurred on January 1, 1997, for the income statements and as of December 31,
1999 for the balance sheet under the pooling-of-interests method of accounting,
assuming that 2.75 shares of Pfizer common stock had been issued in exchange for
each outstanding share of Warner-Lambert common stock. You should read this
information in conjunction with the selected historical audited and unaudited
financial information, included elsewhere in this document, and the historical
audited financial statements of Pfizer and Warner-Lambert and related notes that
are incorporated in this document by reference. The pro forma per share
information combining Pfizer and Warner-Lambert is derived from, and should be
read in conjunction with, the unaudited pro forma condensed combined financial
statements and related notes included elsewhere in this document. Unaudited Pro
Forma Warner-Lambert Per Share Equivalents are calculated by multiplying the
Unaudited Pro Forma Combined per share amounts by 2.75. The historical per share
information is derived from audited financial statements as of and for each of
the years in the three-year period ended December 31, 1999. Warner-Lambert
financial information has been restated to reflect the consummation of the
acquisition by Warner-Lambert of Agouron Pharmaceuticals, Inc., in May 1999.
The unaudited pro forma combined comparative per share information does not
purport to represent what the actual financial position or results of operations
of Pfizer and Warner-Lambert would have been had the merger occurred on January
1, 1997 or to project Pfizer's and Warner-Lambert's financial position or
results of operations for any future date or period.
I-15
<PAGE> 24
CHAPTER ONE -- THE MERGER
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------
1999 1998 1997
----- ----- -----
<S> <C> <C> <C> <C>
UNAUDITED PRO FORMA COMBINED
Per common share data:
Income from continuing operations:
Basic................................................ $0.81 0.53 0.47
Diluted.............................................. 0.79 0.51 0.46
Cash dividends(1)
Shareholders' equity.................................... 1.98
PFIZER -- HISTORICAL(2)
Per common share data:
Income from continuing operations:
Basic................................................ 0.85 0.51 0.55
Diluted.............................................. 0.82 0.49 0.53
Cash dividends.......................................... 0.30 2/3 0.25 1/3 0.22 2/3
Shareholders' equity.................................... 2.36 2.33 2.10
WARNER-LAMBERT -- HISTORICAL(3)
Basic earnings per share................................ 2.03 1.50 1.03
Diluted earnings per share.............................. 1.96 1.45 0.99
Cash dividends per share................................ 0.80 0.64 0.50 2/3
Shareholders' equity per share.......................... 5.91 4.57 3.61
UNAUDITED PRO FORMA WARNER-LAMBERT PER SHARE
EQUIVALENTS(4)
Per common share data:
Income from continuing operations:
Basic................................................ 2.23 1.46 1.29
Diluted.............................................. 2.17 1.40 1.27
Cash dividends(1)
Shareholders' equity.................................... 5.45
</TABLE>
- -------------------------
(1) Pfizer's current quarterly dividend is $0.09 ($0.36 per share annualized)
and is subject to future approval and declaration by Pfizer's board of
directors. Warner-Lambert's current quarterly dividend is $0.24 ($0.96 per
share annualized) and is subject to future approval and declaration by
Warner-Lambert's board of directors. The dividend policy of the combined
company after the merger will be determined by its board of directors
following the merger.
(2) Amounts reflect Pfizer's 3-for-1 stock split in June 1999.
(3) Amounts reflect Warner-Lambert's 3-for-1 stock split in May 1998.
(4) Amounts are calculated by multiplying the unaudited pro forma combined per
share amounts by the exchange ratio for voting common shares in the merger
(2.75 shares of Pfizer voting common stock for each share of Warner-Lambert
voting common stock).
I-16
<PAGE> 25
CHAPTER ONE -- THE MERGER
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
Pfizer common stock and Warner-Lambert common stock are each listed on the
New York Stock Exchange. Pfizer's and Warner-Lambert's ticker symbols are "PFE"
and "WLA," respectively. The following table shows, for the calendar quarters
indicated, based on published financial sources: (1) the high and low closing
prices per share of Pfizer and Warner-Lambert common stock as reported on the
New York Stock Exchange Composite Transaction Tape and (2) the cash dividends
per share of Pfizer and Warner-Lambert common stock.
<TABLE>
<CAPTION>
WARNER-LAMBERT
PFIZER COMMON STOCK* COMMON STOCK**
------------------------------------- -------------------------------------
HIGH LOW DIVIDEND HIGH LOW DIVIDEND
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
1997
First Quarter..................... $16 1/2 $13 7/16 $0.05 2/3 $ 31 5/64 $23 11/64 $0.12 2/3
Second Quarter.................... $20 33/64 $13 53/64 $0.05 2/3 $ 41 53/64 $27 7/8 $0.12 2/3
Third Quarter..................... $21 37/64 $17 1/64 $0.05 2/3 $ 49 5/64 $41 7/16 $0.12 2/3
Fourth Quarter.................... $26 43/64 $19 13/16 $0.05 2/3 $ 50 7/8 $36 11/64 $0.12 2/3
1998
First Quarter..................... $32 1/2 $23 11/16 $0.06 1/3 $ 56 7/8 $39 3/8 $0.16
Second Quarter.................... $40 37/64 $32 1/8 $0.06 1/3 $ 71 9/16 $55 $0.16
Third Quarter..................... $40 13/64 $30 43/64 $0.06 1/3 $ 85 15/16 $64 3/4 $0.16
Fourth Quarter.................... $42 63/64 $28 43/64 $0.06 1/3 $ 82 $60 1/8 $0.16
1999
First Quarter..................... $48 11/64 $36 33/64 $0.07 1/3 $ 77 $63 1/2 $0.20
Second Quarter.................... $50 3/64 $31 35/64 $0.07 1/3 $ 72 5/8 $61 $0.20
Third Quarter..................... $40 11/16 $32 $0.08 $ 73 1/2 $60 13/16 $0.20
Fourth Quarter.................... $42 1/4 $32 3/16 $0.08 $ 93 15/16 $66 1/2 $0.20
2000
First Quarter (through February
18, 2000)...................... $37 15/16 $30 $0.09*** $100 3/16 $78 1/2 $0.24***
</TABLE>
- -------------------------
* Adjusted for a 3-for-l stock split in June 1999.
** Adjusted for a 3-for-1 stock split in May 1998.
*** Declared but not yet paid.
On November 3, 1999, the last full trading day before Pfizer publicly
announced its initial merger proposal to Warner-Lambert, the last reported
closing prices per share of Pfizer and Warner-Lambert stock were $38.5625 and
$83.8125, respectively. On February 4, 2000, the last full trading day before
Pfizer and Warner-Lambert publicly announced the execution of the merger
agreement, Pfizer common stock closed at $35.75 and Warner-Lambert common stock
closed at $94.5625. On March , 2000, the most recent practicable date prior to
the mailing of this joint proxy statement/ prospectus, Pfizer common stock
closed at $ and Warner-Lambert common stock closed at $ .
Shareholders are urged to obtain current market quotations prior to making any
decision with respect to the merger.
I-17
<PAGE> 26
CHAPTER ONE -- THE MERGER
Although dividends are subject to future approval and declaration by
Pfizer's and Warner-Lambert's respective boards of directors, Pfizer and
Warner-Lambert each currently plan to continue to pay regular quarterly
dividends on their common stock until closing of the merger. The dividend policy
of the combined company will be determined by its board of directors following
the merger.
I-18
<PAGE> 27
CHAPTER ONE -- THE MERGER
RISK FACTORS
PFIZER AND WARNER-LAMBERT SHAREHOLDERS SHOULD CAREFULLY CONSIDER THE
FOLLOWING FACTORS, IN ADDITION TO THOSE FACTORS DISCUSSED IN THE DOCUMENTS THAT
WE HAVE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WHICH WE HAVE
INCORPORATED INTO THIS DOCUMENT AND THE OTHER INFORMATION IN THIS JOINT PROXY
STATEMENT/PROSPECTUS, BEFORE VOTING ON THE MERGER PROPOSALS.
THE VALUE OF PFIZER SHARES RECEIVED WILL FLUCTUATE
The number of shares of Pfizer common stock issued in the merger for each
share of Warner-Lambert common stock is fixed. However, the market prices of
Pfizer common stock and Warner-Lambert common stock when the merger is completed
may vary from their market prices at the date of this document and at the date
of the shareholder meetings of Pfizer and Warner-Lambert. For example, during
the 12 month period ending on March , 2000, the most recent date prior to the
mailing of this joint proxy statement/prospectus, the closing price of Pfizer
common stock varied from a low of $ to a high of $ and ended that period at
$ , and the closing price of Warner-Lambert common stock varied from a low of
$ to a high of $ and ended that period at $ . See "Comparative Per Share
Market Price and Dividend Information" for more detailed share price
information.
These variations may be the result of various factors including:
- changes in the business, operations or prospects of Pfizer,
Warner-Lambert or the combined company;
- governmental and/or litigation developments and/or regulatory
considerations;
- market assessments as to whether and when the merger will be consummated;
- the timing of the merger;
- governmental action affecting the pharmaceutical industry generally; and
- general market and economic conditions.
The merger may not be completed until a significant period of time has
passed after the Pfizer and Warner-Lambert shareholder meetings. At the time of
their respective shareholder meetings, Pfizer and Warner-Lambert shareholders
will not know the exact value of the Pfizer common stock that will be issued in
connection with the merger.
Shareholders of Pfizer and Warner-Lambert are urged to obtain current
market quotations for Pfizer and Warner-Lambert common stock.
WE MAY BE UNABLE TO SUCCESSFULLY INTEGRATE OUR OPERATIONS AND REALIZE THE FULL
COST SAVINGS WE ANTICIPATE
The merger involves the integration of two companies that have previously
operated independently. The difficulties of combining the companies' operations
include:
- the necessity of coordinating geographically separated organizations; and
- integrating personnel with diverse business backgrounds.
I-19
<PAGE> 28
CHAPTER ONE -- THE MERGER
The process of integrating operations could cause an interruption of, or
loss of momentum in, the activities of one or more of the combined company's
businesses and the loss of key personnel. The diversion of management's
attention and any delays or difficulties encountered in connection with the
merger and the integration of the two companies' operations could have an
adverse effect on the business, results of operations, financial condition or
prospects of the combined company after the merger.
Among the factors considered by the Pfizer and the Warner-Lambert boards of
directors in connection with their respective approvals of the merger agreement
were the opportunities for economies of scale, as well as operating efficiencies
that could result from the merger. We cannot give any assurance that these
savings will be realized within the time periods contemplated or even if they
will be realized at all.
WE WILL INCUR SIGNIFICANT EXPENSES AND RESTRUCTURING CHARGES IN CONNECTION WITH
THE MERGER TRANSACTION
In addition to the $1.8 billion termination fee paid by Warner-Lambert to
AHP pursuant to the terms of the merger agreement with AHP, Pfizer and
Warner-Lambert expect to incur pre-tax charges to operations, currently
estimated to be between $1.7 and $2.2 billion, to reflect costs associated with
combining the operations of the two companies, transaction fees and other costs
related to the merger. The majority of these costs will be recorded after the
consummation of the merger. This estimate includes anticipated one-time pre-tax
charges of approximately $200 million for transaction and merger-related costs
and between $1.5 and $2.0 billion of restructuring charges and other related
costs. These amounts are preliminary estimates and subject to change. Additional
unanticipated costs may be incurred in the integration of the businesses of
Pfizer and Warner-Lambert. Although Pfizer and Warner-Lambert expect that the
elimination of duplicative costs, as well as the realization of other
efficiencies related to the integration of the businesses, may offset additional
expenses over time, we cannot give any assurance that this net benefit will be
achieved in the near term, or at all. See the Unaudited Pro Forma Condensed
Combined Financial Statements for more detail on the charges we expect to incur
in connection with the merger.
THE MERGER MAY CAUSE DILUTION TO HISTORICAL PFIZER EARNINGS
The merger and the transactions contemplated by the merger agreement may
have a dilutive effect on historical earnings per share of Pfizer due to the
additional Pfizer shares that will be issued in the merger. On a historical
basis for Pfizer, diluted earnings per share were $0.82 for the year ended
December 31, 1999, as compared to $0.79 on a pro forma basis for the combined
company. The pro forma figure does not include costs associated with or benefits
anticipated from the merger; such as synergies and related cost savings,
transaction costs, merger-related costs, restructuring charges or the $1.8
billion payment by Warner-Lambert to AHP. See the Unaudited Pro Forma Condensed
Combined Financial Statements for additional pro forma financial information for
the combined company after the merger.
OBTAINING REQUIRED APPROVALS AND SATISFYING CLOSING CONDITIONS MAY DELAY OR
PREVENT COMPLETION OF THE MERGER
Completion of the merger is conditioned upon the receipt of all material
governmental authorizations, consents, orders and approvals, including the
expiration or termination of
I-20
<PAGE> 29
CHAPTER ONE -- THE MERGER
the applicable waiting periods, and any extension of the waiting periods, under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
approval by the European Commission. Pfizer and Warner-Lambert intend to
vigorously pursue all required approvals. The requirement for these approvals
could delay the completion of the merger for a significant period of time after
Pfizer and Warner-Lambert shareholders have approved the proposals relating to
the merger at their respective shareholder meetings. See "The Merger
Agreement -- Conditions" for a discussion of the conditions to the completion of
the merger and "The Proposed Merger -- Regulatory Matters Relating to the
Merger" for a description of the regulatory approvals necessary in connection
with the merger. No assurance can be given, however, that these approvals will
be obtained or that the required conditions to closing will be satisfied, and,
if all such approvals are obtained and the conditions are satisfied, no
assurance can be given as to the terms, conditions and timing thereof.
I-21
<PAGE> 30
CHAPTER ONE -- THE MERGER
FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this document, and in documents
that are incorporated in this document, that are subject to risks and
uncertainties. These statements are based on the beliefs and assumptions of each
company's management. Generally, forward-looking statements include information
concerning possible or assumed future actions, events or results of operations
of Pfizer, Warner-Lambert and the combined company. Forward-looking statements
include the information in this document, specifically, regarding:
- projections
- efficiencies/cost avoidance
- cost savings
- revenue synergies
- income and margins
- earnings per share
- growth
- economies of scale
- combined operations
- the economy
- future economic performance
- conditions to, and the timetable for, completing the merger
- future acquisitions
- management's plans
- business portfolios
- merger and integration-related expenses
- product launches
These statements may be preceded by, followed by or include the words
"believes," "expects," "anticipates," "intends," "plans," "estimates" or similar
expressions.
We claim the protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995 for all
forward-looking statements.
Forward-looking statements are not guarantees of performance. You should
understand that the following important factors, in addition to those discussed
in "Risk Factors" above and elsewhere in this document, and in the documents
which are incorporated by reference in this document, could affect the future
results of Pfizer and Warner-Lambert, and of the combined company after the
completion of the merger, and could cause those results or other outcomes to
differ materially from those expressed or implied in our forward-looking
statements:
COMPETITIVE FACTORS
- the impact of competitive products, including generic competition;
- the timing of the introduction of new products;
- the financial resources of competitors;
- the ability to respond to price pressures imposed by managed care groups,
institutions and government agencies;
- the ability to respond to technological advances attained by competitors
and patents granted to competitors; and
- the ability to manufacture products competitively and cost effectively.
I-22
<PAGE> 31
CHAPTER ONE -- THE MERGER
OPERATING FACTORS
- changes in the market reaction to Pfizer's and Warner-Lambert's
significant pharmaceutical products;
- the ability to identify new viable chemical compounds and technologies
and commercialize innovative and competitive products worldwide;
- the ability to successfully complete clinical trials and obtain and
maintain regulatory approval for new products in the United States and
other countries;
- the effect of other regulatory developments;
- the ability to gain consumer acceptance for our new products and
technologies;
- the ability to secure and defend intellectual property rights and, when
appropriate, license required technology;
- the ability to generate cash flows or obtain financing to fund growth;
- the ability to complete and integrate appropriate acquisitions, strategic
alliances and joint ventures; and
- the ability to respond to unexpected safety or efficacy concerns arising
with respect to marketed products, whether or not scientifically
justified, leading to product recalls, litigation, withdrawals or
declining sales.
ECONOMIC AND INDUSTRY CONDITIONS
- the effect of economic conditions, inflation and interest rates;
- the effect of changes in currency exchange rates and political and
economic conditions worldwide; and
- the effect of changes in laws and regulations, including changes in
accounting standards, trade, tax, price controls and other regulatory
matters.
I-23
<PAGE> 32
CHAPTER ONE -- THE MERGER
THE PROPOSED MERGER
GENERAL
Pfizer's board of directors is using this joint proxy statement/prospectus
to solicit proxies from the holders of Pfizer common stock for use at the Pfizer
annual meeting. Warner-Lambert's board of directors is also using this document
to solicit proxies from the holders of Warner-Lambert common stock for use at
the Warner-Lambert special meeting.
PFIZER PROPOSALS
At the Pfizer annual meeting, holders of Pfizer common stock are being
asked to vote on:
- the approval of the issuance of Pfizer common stock in connection with
the merger;
- an amendment to Pfizer's certificate of incorporation which would
increase the size of Pfizer's board of directors to a maximum of 24
persons;
- the election of five directors to the Pfizer board of directors;
- the approval of KPMG LLP as the company's independent auditor for the
2000 fiscal year; and
- two shareholder proposals which Pfizer does not support.
THE MERGER WILL NOT BE COMPLETED UNLESS PFIZER'S SHAREHOLDERS APPROVE THE
ISSUANCE OF SHARES OF PFIZER COMMON STOCK IN THE MERGER. HOWEVER, APPROVAL OF
ANY OTHER MATTER TO BE VOTED UPON AT THE PFIZER ANNUAL MEETING IS NOT A
CONDITION TO COMPLETION OF THE MERGER.
WARNER-LAMBERT PROPOSAL
At the Warner-Lambert special meeting, holders of Warner-Lambert common
stock will be asked to vote upon approval and adoption of the merger agreement
and the merger.
THE MERGER WILL NOT BE COMPLETED UNLESS WARNER-LAMBERT'S SHAREHOLDERS
APPROVE AND ADOPT THE MERGER AGREEMENT AND THE MERGER.
BACKGROUND OF THE MERGER
In 1996, Pfizer and Warner-Lambert entered into a series of agreements to
co-promote, co-market and license the cholesterol-reducing drug Lipitor(R),
which was discovered and developed by Warner-Lambert. Under the terms of the
Lipitor(R) marketing agreements, Pfizer was granted the right to promote and
market Lipitor(R) in collaboration with Warner-Lambert in the United States and
certain foreign countries and to license the product exclusively or
semi-exclusively in certain other foreign countries in exchange for one-time
payments and other considerations. In countries where Pfizer and Warner-Lambert
co-promote Lipitor(R), Pfizer receives a payment based on a percentage of sales
and shares in the promotional and marketing costs. In countries where Pfizer
licenses the product, Pfizer purchases the product from Warner-Lambert. This
combined Lipitor(R) marketing effort has been extremely successful as worldwide
sales for this drug were approximately $3.7 billion in 1999.
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Prior to entering into the Lipitor(R) marketing agreements, Pfizer and
Warner-Lambert entered into a confidentiality agreement with a standstill
provision, which, among other things, limited Pfizer's ability to make a merger
proposal to Warner-Lambert.
In June 1998, Warner-Lambert's management, with the assistance of McKinsey
& Company, began reviewing the growth possibilities available to Warner-Lambert
to assist the Warner-Lambert board of directors in deciding on Warner-Lambert's
strategic path for future growth.
In November 1998, the Warner-Lambert board, with the assistance of
management and outside advisors, began a review of Warner-Lambert's growth
possibilities. This review grew out of the Warner-Lambert board's belief that it
needed to maintain an ongoing proactive effort to address future value
enhancement for the benefit of Warner-Lambert's shareholders. Following the
November 1998 Warner-Lambert board meeting, Warner-Lambert management, with
McKinsey & Company's assistance, continued to evaluate Warner-Lambert's
long-term position in the pharmaceutical and consumer health care industries in
order to develop the company's strategic plan. This process resulted in the
decisions reached at the June 27, 1999 board meeting described below.
Prior to the June 1999 Warner-Lambert board meeting, John R. Stafford,
Chairman of the Board, President and Chief Executive Officer of AHP, telephoned
Lodewijk J.R. de Vink, Chairman of the Board, President and Chief Executive
Officer of Warner-Lambert. During the course of the telephone conversation, Mr.
Stafford expressed his interest in exploring the possibility of a business
combination between the two companies. Mr. de Vink deferred any discussions
until after the June board meeting.
On June 27, 1999, the Warner-Lambert board of directors met to review and
discuss, among other things, Warner-Lambert's strategic path. The Warner-Lambert
board concluded that the company's strong capabilities and growth prospects
could be better enhanced for shareholders if Warner-Lambert engaged in a
strategic merger with a company with complementary products and pipeline.
As part of that June board meeting, the Warner-Lambert board of directors
considered an analysis of industry participants. Based on a comparative
assessment of a number of criteria, the board determined that AHP was the best
choice to implement the company's strategy. The Warner-Lambert board concluded
that a transaction with AHP would enhance Warner-Lambert's growth potential
based on Warner-Lambert's successful growth strategy and would insure that
Warner-Lambert stockholders would have a large participation in that value
creation. The Warner-Lambert board discussed the contacts from Mr. Stafford and
the possibility of exploring a transaction with AHP. At the conclusion of the
meeting, the Warner-Lambert board authorized Mr. de Vink to explore with AHP
whether a business combination could be developed involving the two companies.
Messrs. de Vink and Stafford met on several occasions between July 7th and
July 21st to discuss the concept of a strategic business combination of
Warner-Lambert and AHP. In connection with these discussions, Warner-Lambert and
AHP signed a mutual confidentiality and standstill agreement on July 27, 1999
restricting the disclosure of confidential information and the purchase of the
other company's common stock.
Messrs. de Vink and Stafford met again on July 28, 1999 to further discuss
a number of aspects of a possible business combination of Warner-Lambert and
AHP, including the strategic benefits of such a transaction, the potential areas
for cost savings and senior
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CHAPTER ONE -- THE MERGER
management positions in a combined company. During these July discussions, Mr.
Stafford discussed with Mr. de Vink that any such transaction should include
both termination fees and stock option agreements. On July 29, 1999, the
Warner-Lambert board of directors met and Mr. de Vink reported on his
conversations with Mr. Stafford. At the conclusion of the meeting, the
Warner-Lambert board of directors authorized Mr. de Vink to pursue further
discussions with AHP. These discussions continued throughout August 1999.
On August 16, 1999, Mr. de Vink reported to the Warner-Lambert board of
directors on the status of discussions with AHP, recent events affecting AHP and
its stock price and his plans to meet with Mr. Stafford later that evening to
discuss further developing a proposal for a merger of equals of Warner-Lambert
and AHP. On the evening of August 16, 1999, Messrs. de Vink and Stafford met
again to talk about a possible transaction, at which time they discussed, among
other things, a recent Texas jury verdict against AHP relating to certain diet
drugs AHP had produced in the past, the effect of recent events on AHP's stock
price and other matters relating to a potential business combination.
Because of the uncertainties surrounding AHP's stock price, the parties
were not able to reach agreement on the basis for proceeding further.
Accordingly, on August 31, 1999, Messrs. de Vink and Stafford agreed that they
would suspend discussions of a merger between the two companies for 30 days
while AHP pursued a settlement of the diet drug litigation and that during this
period neither party would talk to other potential merger candidates.
On September 3, 1999, and again on September 28, 1999, the Warner-Lambert
board of directors discussed the status of discussions with AHP and of the AHP
diet drug litigation. The Warner-Lambert board of directors reviewed the
strategic benefits of a business combination of Warner-Lambert and AHP and
discussed the impact of recent events on discussions with AHP and the potential
for accomplishing a business combination with AHP.
On October 7, 1999, AHP announced that it had entered into a memorandum of
understanding regarding a comprehensive national settlement relating to its diet
drug litigation. Following this announcement, strategic business combination
discussions between Warner-Lambert and AHP were revived.
On the evening of October 11, 1999, Messrs. de Vink and Stafford met again
to discuss the potential merger of Warner-Lambert and AHP. At this time, they
reviewed the recent memorandum of understanding to settle AHP's diet drug class
action litigation, including its potential effect on AHP, and the strategic
benefits and synergies that could result from combining the two companies. At
the meeting, Messrs. de Vink and Stafford also discussed the potential basis for
establishing an acceptable exchange ratio and management and employee issues
concerning the combined company.
On October 12, 1999, members of senior management of Warner-Lambert and AHP
met to discuss possible transaction structures, further due diligence that
Warner-Lambert and AHP expected to conduct, potential terms of a merger
transaction and a possible timetable for the transaction. Warner-Lambert's
special outside counsel and AHP's special outside counsel were also present at
the meeting. At the meeting, counsel to AHP indicated that as had been
previously stated by Mr. Stafford and in light of the fact that AHP had had two
prior potential transactions not close, AHP was unwilling to engage in a
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CHAPTER ONE -- THE MERGER
transaction without the reciprocal termination fee provisions and stock option
agreements which were being discussed by the parties.
At a meeting of the board of directors of Warner-Lambert held on October
14, 1999, Mr. de Vink informed the board of directors of the recent
conversations with AHP and indicated that meetings with AHP's management were to
be held later in the week. Mr. de Vink informed the Warner-Lambert board of
directors that management intended, subject to the board of directors'
concurrence, to continue negotiations with AHP and, assuming these negotiations
were successful, to reconvene a meeting of the board of directors in the near
future.
From mid-October through November 3, 1999, representatives of
Warner-Lambert and AHP and their counsel and other advisors continued to conduct
reciprocal legal, business, accounting and financial due diligence and engaged
in discussions and negotiations regarding the proposed merger agreement and
related documents.
In October 1999, Pfizer became aware of rumors concerning a possible
business combination involving Warner-Lambert and an unknown entity. Given
Pfizer's existing strategic relationship with Warner-Lambert, and Pfizer's
interest in expanding its relationship with Warner-Lambert, Pfizer inquired into
these rumors. On October 25, 1999, William C. Steere, Jr., Chairman of the Board
and Chief Executive Officer of Pfizer, sent a letter to Mr. de Vink, expressing
Pfizer's interest in a potential business combination between Pfizer and
Warner-Lambert. Mr. Steere's October 25th letter did not elaborate on what was
intended by a business combination and did not include any economic terms.
After receiving the letter from Pfizer, Mr. de Vink called a Warner-Lambert
board of directors meeting for the morning of October 27, 1999. The
Warner-Lambert board of directors discussed the October 25th letter from Pfizer
and its implications for the proposed transaction with AHP. Mr. de Vink
recommended, and the Warner-Lambert board of directors concurred, that he should
meet with Mr. Steere and also advise Mr. Stafford of the letter and the proposed
meeting. Mr. de Vink telephoned Mr. Steere that day, discussed the letter and
the two agreed to meet at Pfizer's offices in New York.
At the meeting, Messrs. de Vink and Steere discussed the October 25, 1999
letter and certain other matters each of the two participants considered
relevant to Pfizer's letter.
On the morning of October 28, 1999, the Warner-Lambert board of directors
met to discuss Pfizer's October 25th letter, the subsequent meeting between
Messrs. de Vink and Steere and the implications for the proposed AHP
transaction. The Warner-Lambert board of directors also discussed the terms of
the proposed merger with AHP, and the strategic rationale for the merger. For a
number of reasons, including in the Warner-Lambert board's view the lack of
specificity from Pfizer with respect to any potential transaction, the
Warner-Lambert board of directors concluded that it would not be in the best
interests of Warner-Lambert's shareholders to pursue a transaction with Pfizer.
Following the meeting, Mr. de Vink called Mr. Steere during which conversation
Mr. de Vink informed Mr. Steere of the Warner-Lambert board's conclusion that it
did not wish to abandon Warner-Lambert's strategic path to pursue a course
involving an acquisition of Warner-Lambert by Pfizer.
On October 30, 1999, Messrs. de Vink and Stafford met, together with
Messrs. Larini and Blount, Warner-Lambert's and AHP's chief financial officers,
and Messrs. Johnson and Hoynes, Warner-Lambert's and AHP's general counsels, to
discuss a number of the remaining issues between Warner-Lambert and AHP.
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CHAPTER ONE -- THE MERGER
On October 31, 1999, the Warner-Lambert board of directors met to consider
the proposed business combination with AHP and to review the terms and
conditions of the proposed merger agreement and related issues, including the
status of the AHP diet drug litigation. Mr. de Vink reported on his October 28th
conversation with Mr. Steere. Warner-Lambert management once again reviewed in
detail the objectives and strategic benefits of a merger with AHP and reported
on the business, financial and legal due diligence they had conducted on AHP.
Skadden, Arps, Slate, Meagher & Flom LLP, special outside counsel to
Warner-Lambert reviewed the fiduciary duties of the Warner-Lambert directors, as
well as the principal terms and conditions of the proposed merger agreement and
related documents, including the circumstances relating to the payment of
termination fees, the ability to provide information to, and negotiate with,
third parties concerning competing proposals; provisions relating to AHP's diet
drug litigation and liabilities and the stock option agreements. Special outside
counsel retained by Warner-Lambert for the purposes of conducting a due
diligence examination of AHP's diet drug litigation and the terms of its
proposed settlement also made a detailed presentation as to such matters. At the
meeting, detailed discussion was held concerning, among other things, the
foregoing matters as well as the effect the proposed stock options might have on
the use of pooling-of-interests accounting for third parties. The Warner-Lambert
board concluded that the merger of equals with AHP was a highly desirable
business opportunity for Warner-Lambert and instructed management to finalize
merger negotiations with AHP and complete the necessary transaction documents,
with a view to having a board meeting or meetings later during the week to
review the results of additional due diligence and consider and vote on a
definitive transaction.
On November 1, 1999, Messrs. Stafford and de Vink agreed in principle on an
exchange ratio of 1.4919 AHP shares for each Warner-Lambert share, subject to
approval by the boards of directors of AHP and Warner-Lambert. From November 1
through November 3, 1999, AHP, Warner-Lambert and their counsel continued to
negotiate and finalize the terms of the merger agreement and related documents.
During this period, Mr. Stafford and counsel to AHP reiterated on several
occasions the position that AHP was unwilling to engage in the transaction with
Warner-Lambert without the reciprocal termination fee provisions and stock
option agreements which had been discussed by the parties since July of 1999.
On Tuesday, November 2, 1999, Dr. Anthony H. Wild, the President of Warner-
Lambert's pharmaceutical sector, met with Dr. Henry A. McKinnell, Pfizer's
President and Chief Operating Officer to discuss the existing marketing
agreement involving Lipitor(R) and that each company wished to expand the
strategic relationship into other areas. During this meeting, Dr. McKinnell and
Dr. Wild also had a conversation concerning the market rumors surrounding
Warner-Lambert and a potential business combination.
During the evening of November 2, reporters from The Wall Street Journal
contacted both AHP and Warner-Lambert to inquire about a potential business
combination of the two companies. As a result, the two companies decided to
accelerate final consideration of the proposed AHP/Warner-Lambert merger, and
meetings of the Warner-Lambert and AHP boards of directors were scheduled for
the evening of November 3.
On the morning of November 3, 1999, an article appeared in The Wall Street
Journal and stories appeared in other media sources discussing a potential
merger of AHP and Warner-Lambert.
Following the November 3, 1999 article in The Wall Street Journal that
reported that Warner-Lambert was about to enter into a merger agreement with
AHP, Mr. Steere again wrote to Mr. de Vink. Mr. Steere expressed his
disappointment that Warner-Lambert had
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CHAPTER ONE -- THE MERGER
apparently chosen to enter into a merger with AHP, reiterated Pfizer's view of
the advantages of a transaction between Pfizer and Warner-Lambert and invited
and encouraged Warner-Lambert to discuss such a proposal.
Also on November 3, 1999, two Pfizer directors, M. Anthony Burns and Dana
G. Mead, separately approached two Warner-Lambert directors, William R. Howell
and Robert N. Burt, to discuss the strategic plans of Warner-Lambert. Both Mr.
Burns and Mr. Mead expressed Pfizer's interests in exploring a business
combination between Pfizer and Warner-Lambert.
Later in the day on November 3, 1999, a special meeting of the board of
directors of Warner-Lambert was held, at which all of Warner-Lambert's directors
were present in person or by phone. At this meeting, Warner-Lambert's legal
advisors updated the Warner-Lambert board of directors on the final terms of the
merger and stock option agreements and again reviewed with the board its
fiduciary duties. Bear Stearns, Warner-Lambert's financial advisor, delivered
its fairness opinion. At the November 3rd meeting, the Warner-Lambert board
again focused on Pfizer's expressions of interest (including the conversations
that had occurred with Messrs. Burns and Mead) and Mr. Steere's letters. The
Warner-Lambert board discussed that AHP had stated it would not continue
discussions with Warner-Lambert or remain willing to agree to a business
combination with Warner-Lambert if Warner-Lambert commenced negotiations with
Pfizer. Accordingly, the Warner-Lambert board determined that it would be
putting the AHP transaction at risk if it were to pursue what it believed to be
an indefinite expression of interest from Pfizer. The board also focused on the
fact that AHP had not changed its position -- which it had taken since the
outset of discussions in July -- that its willingness to enter into a
transaction with Warner-Lambert was conditioned on including in the terms of the
transaction the termination fee and execution of mutual stock option agreements,
and the board's belief that such provisions were not unusual in transactions of
this type. The board considered the potential accounting impact that the mutual
stock option agreements might have on third parties if the stock option
agreements were to become exercisable. The board also considered the fact that
all of the provisions in the proposed transaction documents with AHP which
placed some constraint on third party interest were mutual -- that is, for
example, AHP had granted Warner-Lambert a reciprocal stock option agreement on
AHP shares and had itself agreed to a termination fee. Following these
presentations and further discussion, the Warner-Lambert board of directors
unanimously approved the merger and related agreements and decided to recommend
that the Warner-Lambert shareholders approve and adopt the merger and the merger
agreement with AHP.
On November 3, 1999, following the approvals of AHP's and Warner-Lambert's
respective boards of directors, the parties executed the merger agreement and
the related documents. Prior to the commencement of trading on November 4, 1999,
Warner-Lambert and AHP issued a joint press release announcing the execution of
the merger agreement. Following such announcement, Warner-Lambert common stock
traded as high as $83.69 and AHP stock traded as high as $58.00 before trading
was halted pending the announcement referred to below by Pfizer.
Upon the announcement on November 4, 1999, of the merger agreement between
AHP and Warner-Lambert, Pfizer concluded that the standstill agreement had been
terminated. Mr. Steere immediately sent a letter to Mr. de Vink including a
merger proposal between Pfizer and Warner-Lambert and encouraging Warner-Lambert
to immediately consider the proposal. Pfizer offered Warner-Lambert shareholders
2.5 shares of Pfizer common stock for each share of Warner-Lambert common stock
in a tax-free
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CHAPTER ONE -- THE MERGER
transaction. Pfizer's offer was conditioned on the elimination of the
termination fee provision and cancellation of the stock option agreement granted
to AHP, which had been reported in the press as being part of the overall merger
agreement between Warner-Lambert and AHP. In addition, Mr. Steere highlighted
many of what Pfizer considered the financial and operational advantages of a
combination between Pfizer and Warner-Lambert.
In addition, on November 4, 1999, Pfizer announced that it had commenced a
legal action in the Delaware Court of Chancery against Warner-Lambert,
Warner-Lambert's directors and AHP seeking to enjoin payment of the termination
fee and invalidate the stock option agreement granted to AHP. The lawsuit
claimed, among other things, that the termination fee, reciprocal stock option
agreements and a provision prohibiting Warner-Lambert's directors from amending
or redeeming the Warner-Lambert shareholder rights plan for any transaction
other than the AHP merger were invalid and that Warner-Lambert's directors
breached their fiduciary duties to their shareholders by entering into the
merger agreement with AHP, which contained these provisions. The legal action
also alleged that AHP aided and abetted that breach of fiduciary duties.
On November 4, 1999, the Warner-Lambert board of directors met to consider
Pfizer's proposal and the litigation commenced by Pfizer. Under the merger
agreement between AHP and Warner-Lambert, each party retained the right to deal
with acquisition proposals made to it by third parties if its board, in good
faith, believed such proposal was, or was reasonably likely to result in, a
"superior proposal" -- that is, a proposal that (1) was better for its
stockholders from a financial point of view than the Warner-Lambert/AHP
combination and (2) was reasonably capable of being completed -- then such party
was permitted to enter into discussions and negotiations with respect to such
proposal. Because Pfizer had conditioned its proposal on the elimination of
contractual provisions in Warner-Lambert's agreement with AHP, Warner-Lambert's
board determined that it was unable to conclude that Pfizer's conditional
proposal was reasonably likely to be completed. Accordingly, based on the facts
then existing, the Warner-Lambert board concluded on November 4, 1999 that the
Pfizer proposal did not meet the capability of completion test discussed above,
and that it was not in a position at that time to take any action with respect
to the Pfizer proposal.
On November 5, 1999, Warner-Lambert issued a press-release to that effect
and reaffirmed its commitment to its announced business combination with AHP. On
November 9, 1999, Mr. de Vink sent a letter to Pfizer's board of directors
stating that Warner-Lambert remained committed to the AHP transaction. On
November 12, 1999, Mr. Steere sent a letter, in response to Mr. de Vink's
November 9th letter, to Mr. de Vink and the Warner-Lambert board of directors,
stating that it was still Pfizer's view that a strategic combination of Pfizer
and Warner-Lambert was a unique opportunity to merge the two fastest-growing
companies in the pharmaceutical industry and that Pfizer was committed to
completing a merger with Warner-Lambert.
In early November, Warner-Lambert, with the assistance of McKinsey &
Company and its financial and legal advisors, once again began to review the
strategic alternatives available to Warner-Lambert in light of the unsolicited
proposal by Pfizer.
On November 15, 1999, Pfizer filed a Registration Statement on Form S-4
with the SEC to register the shares of Pfizer common stock to be issued to
Warner-Lambert shareholders in the proposed Pfizer merger. On that same day,
Warner-Lambert issued a press release announcing that it was reviewing all of
its strategic options concerning its
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CHAPTER ONE -- THE MERGER
relationship with Pfizer and the status of the Lipitor(R) marketing agreements
and that it was seeking to make public the terms of the Lipitor(R) marketing
agreements between Warner-Lambert and Pfizer. Pfizer agreed with
Warner-Lambert's request to make public the terms of the Lipitor(R) marketing
agreements, and, on the following day, Warner-Lambert made public all of those
agreements.
On November 23, 1999, Pfizer filed a second lawsuit in the Delaware Court
of Chancery against Warner-Lambert and AHP, alleging that certain actions taken
by Warner-Lambert in entering into the merger agreement with AHP constituted a
breach of the standstill provision in the 1996 confidentiality agreement and
that the merger agreement with AHP should be voided. On November 29, 1999,
Warner-Lambert filed an answer and counterclaim to Pfizer's complaint filed on
November 23, 1999, in which Warner-Lambert claimed that Pfizer breached the
standstill provision in the 1996 confidentiality agreement and that Pfizer used
confidential information in breach of the confidentiality agreement in making
its bid for Warner-Lambert and accordingly sought a declaratory judgment that
Warner-Lambert was entitled to terminate the Lipitor(R) agreements.
On November 30, in response to Warner-Lambert's filing of its counterclaim
against Pfizer, AHP informed Warner-Lambert that it was "prepared to work with
Warner-Lambert to provide a mechanism, consistent with the AHP/Warner-Lambert
merger agreement, for fairly allocating to Warner-Lambert's shareholders
additional value ultimately created by the recovery of the marketing rights to
Lipitor(R)."
On December 2, 1999, the board of directors of Warner-Lambert sent a letter
to its shareholders detailing the events and deliberations that led to
Warner-Lambert's execution of the merger agreement with AHP. The board
reiterated its commitment to maximizing shareholder value and expressed, in
detail, the reasons for its belief that Pfizer's proposal was not a superior
proposal as described above.
On December 16, 1999, Pfizer filed preliminary materials with the SEC for a
consent solicitation of Warner-Lambert's shareholders to remove Warner-Lambert's
board of directors and replace it with seven independent nominees. Also on that
same day, Pfizer delivered to Warner-Lambert a draft of a merger agreement for
Pfizer's proposed transaction with Warner-Lambert, accompanied by a letter from
Mr. Steere to Mr. de Vink which reiterated Pfizer's belief that the competitive
advantage of combining Pfizer and Warner-Lambert was compelling and highlighted
the difference in the market valuation of Pfizer's proposal as compared with the
AHP transaction.
On December 17, 1999, Warner-Lambert filed a motion in Delaware Court of
Chancery for a preliminary injunction to bar Pfizer from proceeding with its
consent solicitation until the decision on Warner-Lambert's counterclaims
concerning Lipitor(R). Warner-Lambert claimed that Pfizer's consent solicitation
was prohibited by the standstill provisions of the 1996 confidentiality
agreement. The objective of the preliminary injunction was to ensure that Pfizer
did not solicit or use consents for the Warner-Lambert shareholders until the
outcome of Warner-Lambert's Lipitor(R) claims were known. At the time the motion
was made, the trial of the Lipitor(R) claims was scheduled to start on April 10,
2000. On December 20, 1999, Pfizer filed a reply to the Warner-Lambert's answer
and counterclaim filed on November 29, 1999 in the suits related to the
Lipitor(R) marketing agreements.
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CHAPTER ONE -- THE MERGER
On December 20, 1999, Warner-Lambert and AHP filed with the SEC a joint
proxy statement/prospectus on Form S-4 with respect to the proposed merger
between Warner-Lambert and AHP. On December 21, 1999, Warner-Lambert filed
preliminary consent solicitation revocation materials with the SEC in opposition
to Pfizer's intended consent solicitation of Warner-Lambert's shareholders.
Warner-Lambert planned to solicit the revocations of any consents Pfizer may
have received in connection with Pfizer's attempt to replace Warner-Lambert's
board of directors.
On December 21, 1999, a jury awarded $150 million to five persons in
diet-drug related litigation brought against AHP in Mississippi. Later that
evening, AHP announced that it had reached a settlement of that claim and of
substantially all of the other diet drug cases pending in Mississippi for an
undisclosed amount. On December 22, 1999, the first full trading day following
the announcement of the Mississippi settlement, AHP's stock price traded as low
as $39.8125 on The New York Stock Exchange.
On December 22, 1999, the Delaware Court of Chancery modified the
litigation schedule between Warner-Lambert, AHP and Pfizer. The court scheduled
a hearing for January 10, 2000, on Warner-Lambert's motion for a preliminary
injunction against Pfizer's consent solicitation based on the standstill
provision. The court scheduled a one-week trial to commence on February 14, 2000
on Warner-Lambert's claims that Pfizer had violated the Lipitor(R) agreements,
and Pfizer's claims against Warner-Lambert under those agreements. As part of
its ruling, the court rescheduled its hearing on Pfizer's challenges to the
Warner-Lambert/AHP merger agreement to March 15 from the previously scheduled
January 31, 2000 date.
On December 23, 1999, Pfizer sent a letter to the Delaware Court of
Chancery stating that Pfizer would take no action on its preliminary consent
solicitation to remove the Warner-Lambert board of directors until the
Lipitor(R) issues were resolved at trial. On December 29, 1999, Warner-Lambert
advised the Delaware Court of Chancery that since Pfizer had voluntarily agreed
to postpone its consent solicitation until after the Lipitor(R) trial, there was
no reason to hold the January 10, 2000 hearing.
Throughout December 1999, Warner-Lambert's management, with the assistance
of its outside advisors, continued to explore strategic options for
Warner-Lambert. Among the alternatives discussed were: continuing to pursue the
negotiated transaction with AHP; pursuing a modified transaction with AHP;
pursuing a transaction with AHP and a third party; disengaging itself from AHP
and seeking an alternative transaction with Pfizer or another third party; and
pursuing a series of small acquisitions during the pendency of the AHP
transaction, with AHP's permission.
In late December 1999, Warner-Lambert's financial advisors learned that
Procter & Gamble Company had expressed an interest in exploring a business
combination transaction involving both Warner-Lambert and AHP. Accordingly, on
January 5, 2000, Messrs. de Vink and Stafford met with Mr. Durk Jager, Chairman,
President and Chief Executive Officer of Procter & Gamble, and other members of
Procter & Gamble's top management to discuss a potential business combination
among the three companies. Mr. Jager expressed interest in such a transaction,
but stated that his financial personnel and outside advisors would need to
further study such a business combination to determine whether it might be a
feasible strategy for Procter & Gamble and its shareholders. Shortly thereafter
the parties executed mutual confidentiality agreements governing the exchange of
confidential information to take place in connection with their discussions.
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CHAPTER ONE -- THE MERGER
On January 6, 2000, in discussions between Warner-Lambert and AHP, AHP
indicated a willingness to consider amending its merger agreement with
Warner-Lambert to increase the exchange ratio, conditioned on Pfizer withdrawing
its proposal in return for Warner-Lambert not pursuing its Lipitor(R) agreements
claims against Pfizer. The proposed exchange ratio would be designed to deliver
for each share of Warner-Lambert common stock AHP common stock with a value of
$74.925, based on an average trading price of AHP common stock over a specified
period, but in no event would such exchange ratio be greater than 1.8739 or
lower than 1.6. On that date, the Warner-Lambert board of directors met to
consider, among other things, the proposed merger with AHP (including its
proposal on that day) and Pfizer's proposal; recent developments in the
company's litigation with Pfizer relating to the AHP transaction and to the
Lipitor(R) agreements; and management's ongoing analysis of the strategic paths
available to Warner-Lambert. On January 5, 2000, Warner-Lambert shares had
closed at $80.5625 per share, Pfizer's at $31.1875 per share, and AHP's at
$41.625 per share. The Warner-Lambert board determined not to pursue that AHP
proposal under the existing circumstances. The board authorized management to
continue to assess Warner-Lambert's situation and explore alternative
transactions and partners within the terms of its agreement with AHP. Mr. de
Vink also informed the board of directors that he and Mr. Stafford had met with
Mr. Jager and other members of Procter & Gamble's top management and that
Procter & Gamble had expressed interest in exploring a business combination
transaction involving both Warner-Lambert and AHP. The board authorized Mr. de
Vink to further pursue this opportunity with Mr. Stafford in compliance with the
terms of the merger agreement that Warner-Lambert had signed with AHP.
Over the course of the next three weeks, representatives of Procter &
Gamble and their advisors participated in numerous telephone calls and meetings
with representatives of Warner-Lambert and AHP and their respective advisors to
conduct legal, business, accounting and financial due diligence on the companies
in contemplation of the proposed business combination transaction among the
three parties. Inside and outside legal counsel for the three companies also
discussed on several occasions possible transaction structures and the
non-financial terms of a possible acquisition agreement.
During the time period from the execution of the Warner-Lambert/AHP merger
agreement through January 12, 2000, AHP common stock had traded on the New York
Stock Exchange at a low of $36.50 on December 27, 1999, compared to its trading
high of $58.00 on November 4, 1999 following announcement of the execution of
the merger agreement between Warner-Lambert and AHP. On January 12, 2000, the
closing price for AHP common stock on the NYSE was $42.1875, and the closing
price for Pfizer common stock was $35.1250.
On January 13, 2000, the board of directors of Warner-Lambert met to
discuss the status of the proposed merger with AHP, the ongoing Pfizer
situation, and reports from management concerning its exploration of alternative
strategies for Warner-Lambert. The board again considered the outstanding
proposal from Pfizer in light of the then-current circumstances, including the
significant disparity in value that the financial markets had placed on 2.5
shares of Pfizer common stock compared to 1.4919 shares of AHP common stock, and
whether those circumstances might allow the board to conclude that there was a
reasonable likelihood that Pfizer's proposal could result in a "superior
proposal" within the terms of the AHP merger agreement -- that is, could result
in a proposal that was both financially superior to the AHP transaction and
reasonably capable of being completed. Warner-Lambert's financial advisors gave
a presentation on the financial aspects of Pfizer's
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CHAPTER ONE -- THE MERGER
proposal. The board also carefully considered whether recent events might cause
the board to reach a different conclusion than it had previously reached, and to
determine that there was a reasonable likelihood that Pfizer's proposal could
result in a financially superior transaction reasonably capable of completion.
At its January 13th board meeting, the board, after lengthy discussions,
concluded that circumstances -- including the increasing market value spread
between the AHP and Pfizer transactions, the approaching trial dates on the
validity of the termination fee and the stock option agreements, the pending
trial relating to the Lipitor(R) agreements, and certain statements which the
press reported Pfizer having made at various times with respect to the necessity
for pooling-of-interests accounting had changed since the board had made its
earlier determinations. The board also noted that, as a result of the
significant value disparity between the two transactions, it was becoming
increasingly less likely that the Warner-Lambert shareholders would vote to
approve the AHP transaction. In light of the foregoing factors, the board
considered the following: its view of the likelihood of AHP agreeing with
Warner-Lambert to mutually cancel the reciprocal stock option agreements for no
consideration, thereby permitting Pfizer to pursue a pooling-of-interests
transaction with Warner-Lambert; the possibility of the Delaware court declaring
the stock option agreements, and possibly the termination fees, unenforceable;
and its view of the possibility of Pfizer waiving one or both of the conditions
to its proposal.
Accordingly, after much deliberation, the board concluded that there was a
reasonable likelihood that the Pfizer proposal could result in a transaction,
reasonably capable of being completed, that was better financially for
Warner-Lambert shareholders than the AHP transaction -- and therefore could lead
to a "superior proposal" within the framework of Warner-Lambert's merger
agreement with AHP. At the conclusion of the January 13th board meeting, the
board of directors authorized Warner-Lambert representatives to enter into
discussions with Pfizer to explore a potential business combination.
On January 13, 2000, Warner-Lambert issued a press release to the effect
that it was exploring its strategic alternatives including meeting with Pfizer
and stating that in light of changing circumstances its board of directors had
authorized management to enter into discussions with Pfizer to explore a
potential business combination. On that same day, Warner-Lambert and Pfizer
reached a threshold discussions agreement to preserve their respective rights in
the pending litigation between the parties as they discussed a business
combination. Thereafter, representatives of Pfizer and Warner-Lambert began
discussions.
Between January 13 and 17, Messrs. de Vink and Steere met on three
occasions to discuss a potential business combination between Pfizer and
Warner-Lambert. During those meetings, although Messrs. Steere and de Vink found
that they did not disagree on many of the governance and related issues in
connection with the integration of the companies, they did not agree upon
valuation and certain other matters related to a transaction.
On January 17, 2000, Mr. Steere sent letters to Mr. de Vink and the
Warner-Lambert board of directors outlining Pfizer's position in the
negotiations and urged Warner-Lambert to accept Pfizer's offer on the terms
outlined in the letter, which included an increase in Pfizer's exchange ratio to
2.525 Pfizer shares for each Warner-Lambert share. Mr. Steere also stated that
any eventual transaction between Pfizer and Warner-Lambert must be accounted for
as pooling-of-interests to benefit the shareholders of both companies.
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On January 18, 2000, Mr. de Vink sent Mr. Steere a letter expressing, among
other things, concern that Pfizer's revised offer was not in the best interests
of Warner-Lambert and its shareholders. Also on January 18, Mr. Steere sent a
reply letter to Mr. de Vink expressing his views on the concerns conveyed by Mr.
de Vink in his correspondence.
On January 19, 2000, the Warner-Lambert board of directors met to discuss
the ongoing events surrounding Warner-Lambert and to receive an update on the
status of the discussions with Procter & Gamble. The board directed
Warner-Lambert management to continue to pursue such discussions while
continuing to engage in discussions with Pfizer.
On January 19, 2000, news reports concerning a possible business
combination among Procter & Gamble, Warner-Lambert and AHP began to surface. On
January 21, 2000, news reports stated that Procter & Gamble's board had met to
discuss a possible business combination with Warner-Lambert and AHP.
Representatives from Procter & Gamble did not comment on the rumors.
As the discussions between Pfizer and Warner-Lambert continued, on January
23, 2000, Mr. Steere sent a letter to Mr. de Vink to express his concern that
there was still no progress on one of the main issues in the
discussions -- Pfizer's potential difficulty accounting for the potential merger
with Warner-Lambert as a pooling-of-interests unless the stock option
agreements, exchanged with AHP as part of the Warner-Lambert/AHP transaction,
were cancelled.
On January 24, 2000, Mr. de Vink sent a letter to Mr. Steere, emphasizing
that Warner-Lambert was continuing to examine the strategic alternatives that
would provide the best value alternative for its shareholders, and stating that
Warner-Lambert was unable to control the actions of AHP with respect to the
stock option agreements which Warner-Lambert had exchanged as part of their
merger agreement.
On January 24, 2000, Procter & Gamble issued a press release announcing
that it had terminated merger talks with both Warner-Lambert and AHP. Following
the announcement by Procter & Gamble, on January 24, 2000, Warner-Lambert issued
a press release stating that it was continuing to explore strategic
alternatives, including discussions with Pfizer, in order to achieve the
greatest value for its shareholders. Also on January 24, 2000, AHP agreed to
waive certain provisions of its merger agreement with Warner-Lambert in order to
permit Warner-Lambert to discuss potential business combinations with third
parties.
Following the waiver by AHP of the applicable provisions contained in the
Warner-Lambert/AHP merger agreement, Warner-Lambert management and outside
advisors contacted a number of proposed strategic partners to determine whether
any such party had an interest in pursuing a business combination transaction
with Warner-Lambert that would be more favorable for Warner-Lambert shareholders
than the transaction proposed by Pfizer. None of the parties contacted expressed
any such interest.
On January 25, 2000, the board of directors of Warner-Lambert met to
discuss, among other things, Warner-Lambert's strategic alternatives in light of
Procter & Gamble's recent announcement and the status of negotiations with
Pfizer.
On January 25, 2000, AHP waived additional provisions of its merger
agreement with Warner-Lambert by permitting Warner-Lambert to exchange
confidential information with Pfizer without Pfizer first being required to
agree to standstill provisions comparable to those contained in a
confidentiality agreement between Warner-Lambert and AHP. Pfizer
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CHAPTER ONE -- THE MERGER
and Warner-Lambert thereafter executed a confidentiality agreement and exchanged
financial, business and legal information about their companies.
Throughout the week of January 24, 2000, representatives of Pfizer met with
representatives of Warner-Lambert to discuss the possibility that the companies
could resolve the issues relating to Pfizer's offer. The discussions focused on
such issues as valuation; regulatory issues; the contribution to the strategic
vision of the combined company by the directors and officers of both companies;
possible governance structures which would afford senior executives of both
companies the opportunity to participate in the realization of this strategic
vision; employee issues; the name and principal office location of the combined
company; non-solicitation; termination provisions and other related agreements.
During the period between January 31 and February 5, Pfizer and
Warner-Lambert continued to discuss a number of matters in connection with the
proposed transaction, including the completion of satisfactory due diligence,
the need to terminate the merger agreement between Warner-Lambert and AHP and
cancel the stock option agreement granted to AHP in a manner that would not
allow the stock option agreement to become exercisable and to enable Pfizer and
Warner-Lambert to account for any transaction as a pooling-of-interests,
outstanding issues concerning employee benefit matters, empowerment of a
transition committee to coordinate the integration of the two companies and a
satisfactory contract concerning provision related to certain products. During
this period, representatives of the parties discussed the exchange ratio, and
Pfizer stated its willingness to agree to a 2.75 per share exchange ratio.
On February 3, 2000, the Warner-Lambert board met again to receive an
update regarding, and to discuss the status of negotiations with, Pfizer. Also
on February 3, Messrs. de Vink, Steere and Stafford met to discuss Pfizer's
continued desire to enter into a merger with Warner-Lambert, AHP's rights under
its merger agreement with Warner-Lambert, and possible resolutions for the
situation.
On February 4, 2000, Mr. Stafford indicated that AHP would be willing to
permit the stock option agreements exchanged in connection with the merger
agreement to be mutually cancelled without consideration. This removed what
Pfizer and Warner-Lambert believed to be the final obstacle to Pfizer's ability
to account for a transaction with Warner-Lambert as a pooling-of-interests
transaction.
At a February 6 special meeting to consider the merger, the Pfizer board of
directors reviewed with senior management, Lazard Freres and Merrill Lynch, its
financial advisors, and Cadwalader, Wickersham & Taft, its legal advisor, the
terms and conditions of the proposed merger. In connection with this review,
both Lazard Freres and Merrill Lynch delivered oral opinions (subsequently
confirmed in writing) as to the fairness, from a financial point of view, of the
exchange ratio to Pfizer. In addition, the Pfizer board of directors considered
the issues presented by management and by the financial and legal advisors,
including the factors discussed under "Our Reasons for the Merger" and "Factors
Considered by, and Recommendation of, the Board of Directors of Pfizer." After
discussion and due consideration, the Pfizer board of directors unanimously
approved the merger agreement between Pfizer and Warner-Lambert and authorized
management to execute and deliver all necessary agreements.
On the evening of February 6, 2000, at a meeting of Warner-Lambert's board
of directors, the Warner-Lambert board of directors, following presentations by
senior
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CHAPTER ONE -- THE MERGER
management, outside counsel and financial advisors, authorized Warner-Lambert to
enter into an agreement providing for the mutual cancellation of the stock
option agreements between Warner-Lambert and AHP in a manner that did not allow
the stock options to be exercisable and with no consideration paid for their
cancellation. Following further discussion between representatives of AHP and
Warner-Lambert, Warner-Lambert and AHP executed and delivered the mutual
cancellation of the stock option agreements.
Thereafter, Warner-Lambert reconvened its board of directors, with all but
one of Warner-Lambert's directors being present. The Warner-Lambert board of
directors then considered and approved a merger transaction with Pfizer. Prior
to such approval, the Warner-Lambert board of directors received fairness
opinions from Bear Stearns and Goldman Sachs in connection with approval of the
merger agreement with Pfizer, and considered the matters described under "Our
Reasons for the Merger" and "Factors Considered by, and Recommendations of, the
Board of Directors of Warner-Lambert." Shortly following conclusion of such
meeting, Warner-Lambert delivered to AHP a notice that the Warner-Lambert board
of directors had concluded that the Pfizer transaction was a "superior proposal"
and had changed its recommendation of the AHP merger. Then, AHP delivered notice
to Warner-Lambert of termination of their merger agreement. Over the next
several hours, Pfizer and Warner-Lambert completed negotiations of a merger
agreement between the parties and then executed and delivered a definitive
merger agreement.
Before the opening of trading on February 7, 2000, Warner-Lambert and
Pfizer issued a joint press release announcing the execution of the merger
agreement and the termination of Warner-Lambert's merger agreement with AHP.
Also on February 7, 2000, Warner-Lambert paid to AHP $1.8 billion pursuant to
the termination provisions of the Warner-Lambert/AHP merger agreement.
OUR REASONS FOR THE MERGER
While each of Pfizer and Warner-Lambert has excellent growth potential and
prospects for its immediate and long-term future as a stand-alone entity, we
both believe that a combination of the two companies will create a leading
global pharmaceutical and consumer healthcare company with greater diversity,
breadth and financial resources that will have the opportunity to enhance
shareholder value in ways that are unlikely to be achieved by Pfizer or
Warner-Lambert alone. Specifically, the combined company would be uniquely
positioned to realize:
- enhanced revenue potential;
- significant cost savings;
- the benefits of combining Pfizer's and Warner-Lambert's complementary
product lines; and
- the benefits of a strong management team drawn from both companies.
Enhanced Revenue Potential. The merger will combine the two
fastest-growing major research-based firms in the pharmaceutical industry, which
will allow for significant growth potential, improved financial returns and
accelerated earnings growth. The combined company would be a substantially
larger enterprise with a broader and more diversified product line than either
Pfizer or Warner-Lambert on a stand-alone basis, with estimated combined
revenues in excess of $31 billion in 2000. The management of both
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CHAPTER ONE -- THE MERGER
companies believes that the financial performance of the combined company will
reflect its industry leadership position with anticipated results on a pro forma
basis giving effect to the substantial anticipated synergies as set forth below:
<TABLE>
<CAPTION>
WARNER-
PFIZER LAMBERT COMBINED
------ ------- --------
<S> <C> <C> <C>
Return on Equity (2000)................... 40% (38%) 47%
Return on Assets (2000)................... 19% 19% 22%
EPS Growth (1999-2002).................... 20% 20% 25%
</TABLE>
Note: These returns exclude the impact of one-time unusual charges such as:
Warner-Lambert's termination fee to American Home Products, both Pfizer's and
Warner-Lambert's transaction fees and merger-related costs and the restructuring
charges for the combined company. The Combined Return on Equity and the Combined
Return on Assets gives full effect to the substantial anticipated synergies of
$1.6 billion (before tax). The Combined EPS Growth assumes the $1.6 billion of
cost savings are phased in over this time period.
As competition intensifies in the industries in which Pfizer and
Warner-Lambert participate, we believe that a combined company will benefit from
an enhanced potential for revenue growth in the following areas and for the
following reasons:
- Pharmaceuticals. The combined company expects to have nearly $24 billion
in prescription pharmaceutical sales in 2000. Together the two companies
had seven products that it owns or co-promotes with sales of more than $1
billion in 1999, namely Lipitor(R), Viagra(R), Celebrex(R), Norvasc(R),
Zoloft(R), Zithromax(R) and Diflucan(R). In addition, in 1999, the two
companies, together, had thirteen products with sales in excess of $500
million each, including Neurontin(R), Rezulin(R) and Accupril(R), and
twelve of those products had an annual growth of 10% or more in 1999,
more than double its closest industry competitor.
We believe that the combined companies enhanced market presence and sales
penetration in key products, coupled with its increased research and development
capabilities which may lead to the development of new pharmaceutical products,
and its enhanced capabilities to successfully bring such products to market,
will lead to enhanced potential for revenue growth. Most of the major products
of both Pfizer and Warner-Lambert will continue to have patent protection well
into this decade. The earnings per share growth of both Pfizer and
Warner-Lambert has been at the top of the major pharmaceutical companies.
Warner-Lambert monitors and evaluates data relating to Rezulin(R) and, together
with the FDA, continues to assess the risk/benefit profile of Rezulin(R). While
Warner-Lambert remains convinced of the favorable risk/benefit profile of the
drug, it cannot predict what action, if any, the FDA may take with respect to
it. Such action may include further labeling changes, additional monitoring,
warnings to patients or limitations in the patient population. The FDA also has
the power to order the removal of Rezulin(R) from the market. Pfizer's and
Warner-Lambert's selling, information and administrative expense ratio is among
the highest for major pharmaceutical companies and provides the opportunity to
support the combined growth of products of both the Pfizer and Warner-Lambert
pipelines of new products, as well as organic and geographic growth of present
products.
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CHAPTER ONE -- THE MERGER
- New Products and Broad and Diversified Product Line. The combination of
Pfizer's pipeline of new products with Warner-Lambert's pipeline of new
products would provide the combined company with the potential for
sustainable revenue growth for the future. On October 1, 1999, the United
States Food and Drug Administration (the "FDA") approved Tikosyn(R),
Pfizer's newest cardiovascular drug for atrial fibrillation, a cardiac
condition. Tikosyn(R) is the first new oral anti-arrhythmic for atrial
fibrillation to be approved in the past ten years. In addition, on
October 27, Pfizer received an approvable letter from the FDA for
Relpax(R), its new serotonin for migraine headaches. Pfizer has also
developed a new treatment for psychotic disorders called Zeldox(R). The
FDA did not approve the original new drug application of Zeldox(R);
however, additional studies have been conducted and the amended new drug
application is planned to be filed with the FDA during the first half of
this year. This drug is effective in treating a broad spectrum of
symptoms of psychosis. Vfend(R) is being developed to complement the
clinical profile of Diflucan(R), the number one selling antifungal agent
on the market. Vfend(R) will provide new treatment options for patients
who suffer from serious fungal infections. This drug will also find
important use in patients who are at high risk as a result of leukemia or
bone marrow transplants. Importantly, Vfend(R) should be safe and
effective for use in children. Valdecoxib(R), the second-generation COX-2
inhibitor that Pfizer is co-developing with G.D. Searle, is being
evaluated in osteoarthritis, rheumatoid arthritis and pain. This drug has
already reached phase III clinical trials. Also in phase III development
is an inhaled insulin drug to treat diabetes which is being co-developed
with Aventis SA. Warner-Lambert is developing pregabalin as the possible
next-generation successor to Warner-Lambert's widely-prescribed
anti-convulsant treatment Neurontin(R). While Neurontin(R) and pregabalin
appear similar in their mechanism of action, studies indicate that
pregabalin may be five to ten times more potent than Neurontin(R) and may
be useful for a wider range of disorders. On a combined basis, there are
currently 138 additional development programs, whose candidates include a
number of especially interesting compounds, which, pending successful
development, could be expected to deliver several new drugs to the market
by 2003-2005.
- Increased Scale. Scale has importance in many areas, including:
- financial strength;
- research and development of new products;
- increased presence in major international markets;
- a reduction in the need to partner with third parties for major
product launches;
- an increased ability to attract better licensing partners;
- improved marketing, sales support penetration and higher market shares
in certain key products; and
- distribution capabilities, as well as enhancement of existing
competencies.
We believe the increased scale of the combined company, and the benefits in
the areas mentioned above, will result in an enhanced potential for revenue
growth.
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CHAPTER ONE -- THE MERGER
While we expect that we will be able to realize enhanced revenues, no
assurance can be given that we will actually be able to do so.
Significant Cost Savings. The combined company is expected to increase its
profitability through cost savings and operating efficiencies resulting from the
elimination of redundant facilities and functions which would exist in the
combined company in the United States, as well as in multiple organizations and
systems in over thirty foreign countries and the benefits of leveraging our
combined annual external purchases of over $10 billion. Pfizer estimates that
savings from reductions in cost of goods sold will be realized by optimization
of global manufacturing, involving over 100 manufacturing sites of the two
companies around the world. Savings from sales, general and administrative
expenses are expected to be realized by the combination of two worldwide
headquarters and multiple staff support functions in over thirty countries. In
addition to the competitive advantage gained by the size of the research and
development budget, the combination of the research and development programs
will permit the combined company to utilize the best science, research, and
procedures of each program. Pfizer's research and development expenditures have
been growing by a compound annual growth rate of 21% over the last 3 years.
Based on our review of and assumptions about the operations and infrastructure
of the two companies, we expect that the combined company will realize annual
cost savings Of approximately $1.6 billion by 2002. We expect to achieve such
cost savings as follows:
- $200 million by 2000 (from an anticipated merger closing at mid-year, to
year-end);
- $1 billion by 2001; and
- $1.6 billion by 2002.
The estimated cost savings reflect the realization of cost reduction
opportunities and efficiencies through the ability to consolidate separate
stand-alone operations into a single entity. While we expect that we will be
able to realize these cost savings, no assurance can be given that we will
actually be able to do so.
Combination of Operational Factors. We expect the merger to provide for
significant opportunities in sales and marketing and in research and
development, including new opportunities for innovation in supporting existing
products and bringing new products to market. With the enhanced marketing and
manufacturing platform provided by the merger, the combined company would be
poised for substantial future growth. The research and development resources of
the combined company are expected to sustain the company into the foreseeable
future with a research and development budget of approximately $4.7 billion in
2000. Warner-Lambert has a leading position in the over-the-counter drug
business with substantial experience in converting prescription products to
over-the-counter products. Pfizer's and Warner-Lambert's over-the-counter
businesses are complementary and are expected to be an excellent platform for
converting prescription products to over-the-counter for the combined company.
While we expect that the combination of our complementary technology platforms
will result in new opportunities for innovation in supporting existing products
and bringing new products to market, no assurance can be given that we will be
able to do so.
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CHAPTER ONE -- THE MERGER
Leadership in Major Therapeutic Categories. The combined company will have
major products in the following major therapeutic categories:
- Cardiovascular, with such products as Norvasc(R), Accupril(R) and
Cardura(R);
- Lipid Lowering, with the product Lipitor(R);
- Diabetes, with such products as Glucotrol XL(R) and Rezulin(R);
- Central Nervous System, with such products as Zoloft(R), Aricept(R),
Neurontin(R) and Dilantin(R);
- Infectious Disease, with such products as Zithromax(R), Diflucan(R),
Viracept(R) and Unasyn(R); and
- Men's and Women's Health, with such products as Viagra(R), Loestrin(R),
Estrostep(R) and femhrt(R).
Strong Management Team. A strong management team drawn from both companies
will manage the combined company. Mr. William C. Steere, Jr., currently Chairman
of the Board and Chief Executive Officer of Pfizer, will be Chairman of the
Board and Chief Executive Officer of the combined company and Dr. Henry A.
McKinnell, currently President and Chief Operating Officer of Pfizer, will be
President and Chief Operating Officer of the combined company. Members of the
remaining senior management of the combined company will include the current
Pfizer management team and three Warner-Lambert senior executives, who will be
invited to join the combined company's Corporate Management Committee. Our
immediate task, beginning prior to the completion of the merger, is to plan the
integration of our businesses and then successfully and quickly complete the
integration.
FACTORS CONSIDERED BY, AND RECOMMENDATION OF, THE BOARD OF DIRECTORS OF PFIZER
At its meeting on February 6, 2000, Pfizer's board of directors
unanimously:
- determined that the merger agreement and the merger are advisable and
fair to, and in the best interests of, Pfizer and its shareholders;
- directed that the proposed transaction be submitted for consideration by
the Pfizer shareholders;
- recommended that the Pfizer shareholders vote FOR the approval of the
share issuance proposal; and
- recommended that the Pfizer shareholders vote FOR the approval of an
amendment of the certificate of incorporation to increase the maximum
size of Pfizer's board of directors to 24 persons.
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CHAPTER ONE -- THE MERGER
In the course of reaching its decision to adopt the merger agreement,
Pfizer's board of directors consulted with Pfizer's management, as well as its
legal counsel and its financial advisors, and considered the following material
factors:
(1) information concerning the financial performance and condition,
results of operations, asset quality, prospects and businesses of each
of Pfizer and Warner-Lambert as separate entities and on a combined
basis, including:
- the revenues of the companies, their complementary businesses and the
potential for cost savings and revenue enhancement;
- the recent and historical stock price performance of Pfizer common
stock and Warner-Lambert common stock; and
- the percentage of the combined company Pfizer's shareholders would own
following the merger.
(2) the importance of market position, significant scale and scope and
financial resources to a company's ability to compete effectively in
the changing environment in the global pharmaceutical market, and the
fact that the strategic combination of Pfizer's and Warner-Lambert's
businesses would create one of the world's largest pharmaceutical and
consumer health care products companies;
(3) the strategic nature of the transaction, which combines Pfizer's and
Warner-Lambert's complementary businesses, and creates a broader
company with enhanced global reach and greater resources, enhanced
future operating flexibility and increased opportunity for growth;
(4) the potential benefits to be derived from a combination of the two
companies as described under "-- Our Reasons for the Merger,"
including potential cost savings and efficiencies that would result
from the merger;
(5) the current industry, economic and market conditions and trends,
including the likelihood of continuing consolidation and increasing
competition in the pharmaceutical and consumer health care industries;
(6) the nature and timing of new products of both companies in their
respective pipelines, the complementary nature of both companies
pipelines and the effect of combining such pipelines on the growth and
results of operations of the combined company;
(7) the nature of existing products to be sold by the combined company and
the fact that the customer base to be served will be broader and more
diverse;
(8) the broader and more diverse product line of the combined company;
(9) the merger will present the opportunity for the shareholders of Pfizer
to participate in a larger company with a more diversified product
line and, as shareholders of the combined company, benefit from future
growth of the combined company;
(10) the exchange ratio will enable Pfizer shareholders to own
approximately 60% of the outstanding stock of the combined company;
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CHAPTER ONE -- THE MERGER
(11) the opinion of Lazard Freres to the effect that, as of the date of the
opinion and subject to the matters set out in its opinion, which is
described below, under "Opinions of Financial Advisors -- Opinion of
Lazard Freres," the exchange ratio was fair from a financial point of
view to Pfizer;
(12) the opinion of Merrill Lynch to the effect that, as of the date of the
opinion and subject to the matters set out in its opinion, which is
described below, under "Opinions of Financial Advisors -- Opinion of
Merrill Lynch, Pierce, Fenner & Smith Incorporated," the exchange
ratio was fair from a financial point of view to Pfizer;
(13) the intended accounting of the merger as a pooling-of-interests which
results in combined financial statements prepared on a basis
consistent with the underlying view that shareholder interests in the
two companies have simply been combined;
(14) the structure of the transaction as a tax-free reorganization for
United States federal income tax purposes;
(15) the name of the combined company will remain "Pfizer Inc.";
(16) the terms of the merger agreement regarding third party proposals,
including the potential payment to Warner-Lambert of a termination
fee, and that the merger is conditioned on the ability of Pfizer and
Warner-Lambert to account for the transaction as a
pooling-of-interests and if the merger agreement is terminated because
the merger cannot be accounted for as a pooling-of-interests, then
Pfizer would owe Warner-Lambert a termination fee under the merger
agreement;
(17) the merger agreement provides that the five-year and change-of-control
termination rights of Warner-Lambert in the Lipitor(R)Agreements are
to be eliminated and for the
Norvasc(R)/Lipitor(R)co-development/co-promotion agreement to be
concluded if the merger agreement is terminated under certain
circumstances;
(18) the headquarters of the combined company will be in New York, New York
and Pfizer shall maintain the headquarters for the Consumer Division
in Morris Plains, New Jersey;
(19) the payment by Warner-Lambert to AHP of a termination fee associated
with the termination of their merger agreement;
(20) the mutual cancellation of the AHP and Warner-Lambert stock option
agreements without the stock options becoming exercisable and without
the payment of any consideration;
(21) the ability to consummate the merger, including the conditions to the
merger requiring receipt of necessary regulatory approvals in
accordance with the terms of the merger agreement;
(22) the importance of future leadership in ensuring achievement of
shareholder value opportunities resulting from the merger and Pfizer's
board of directors' confidence in the abilities of Mr. Steere and
other members of the senior
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CHAPTER ONE -- THE MERGER
management team of Pfizer, based on the board of directors'
familiarity with their record at Pfizer, and the facts that:
- Mr. Steere will be the Chairman of the Board and Chief Executive
Officer of the combined company reporting to the Pfizer board of
directors upon completion of the merger; and
- Dr. McKinnell will be President and Chief Operating Officer of the
combined company.
(23) the terms of the merger agreement, including composition of the board
of directors, the management structure of the combined company, led by
an integrated senior management team, and a transition planning team,
co-chaired by Dr. McKinnell and Dr. Anthony H. Wild, which will report
directly to Mr. Steere;
(24) the highly successful ongoing relationship between Pfizer and
Warner-Lambert in co-marketing, co-promoting and licensing Lipitor(R);
(25) the challenges of combining the businesses of two major corporations
and the risks of diverting management resources for an extended period
of time;
(26) the board of directors continuing belief in the shareholder value
opportunity represented by the strategic path the board had previously
chosen and the unique implementation opportunity presented by the
definitive transaction terms with Warner-Lambert; and
(27) the opportunity for Pfizer shareholders to vote on the proposed merger
with Warner-Lambert.
In view of the variety of factors and the amount of information considered,
Pfizer's board of directors did not find it practicable to and did not quantify,
rank or otherwise assign relative weights to the specific factors it considered
in reaching its decision. The determination was made after consideration of all
of the factors as a whole. In addition, individual members of Pfizer's board of
directors may have given different weights to different factors.
Pfizer's board of directors considered all these factors in reaching the
conclusions and recommendations described above. These factors generally figured
positively, as advantages or opportunities, with the following exceptions:
- the factors described in (16), which figured negatively as a drawback,
but which the Pfizer board of directors felt was outweighed by the other
benefits of the transaction, including the factors discussed in (17); and
- the factor described in (25), which figured negatively as a risk,
although one which the Pfizer board of directors felt could be managed
successfully, particularly in light of the factor described in (22) and
in the management arrangements that had already been agreed to between
the parties.
For additional information concerning the matters discussed, and the
conclusions reached, at various meetings of Pfizer's board of directors held
between November 4, 1999 and February 6, 2000, see "Background of the Merger."
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THE PFIZER BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT, THE MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED AND BELIEVES THAT
THE TERMS OF THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, PFIZER AND
ITS SHAREHOLDERS. THE PFIZER BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL
OF THE STOCK ISSUANCE PROPOSAL AND FOR THE APPROVAL OF THE AMENDMENT OF THE
PFIZER CERTIFICATE OF INCORPORATION.
FACTORS CONSIDERED BY, AND RECOMMENDATION OF, THE BOARD OF DIRECTORS OF
WARNER-LAMBERT
At its meeting on February 6, 2000, the Warner-Lambert board of directors:
- determined that the merger agreement and the merger with Pfizer are
advisable and fair to, and in the best interests of, Warner-Lambert and
its shareholders;
- approved the merger agreement with Pfizer;
- directed that the proposed transaction be submitted for consideration by
the Warner-Lambert shareholders; and
- recommended that the Warner-Lambert shareholders vote FOR approval and
adoption of the merger and the merger agreement.
In the course of reaching its decision to approve the merger agreement, the
Warner-Lambert board of directors consulted with Warner-Lambert's management, as
well as its outside legal counsel and its financial advisors, and considered the
following material factors:
(1) information concerning the financial performance and condition,
results of operations, asset quality, prospects and businesses of each
of Warner-Lambert and Pfizer as separate entities and on a combined
basis, including:
- the revenues of the companies, their complementary businesses and the
potential for cost savings and revenue enhancement;
- the recent and historical stock price performance of Warner-Lambert
common stock and Pfizer common stock; and
- the expectation that the merger would create the fastest-growing major
pharmaceutical company in the world;
(2) the increasing importance of market position, significant scale and
financial resources to a company's ability to compete effectively in
the changing global pharmaceutical market, and the fact that the
strategic combination of Warner-Lambert's and Pfizer's businesses
would create one of the world's largest pharmaceutical and consumer
health care products companies, with complementary technology and a
large research and development budget;
(3) the strategic nature of the transaction, which combines Pfizer's and
Warner-Lambert's complementary businesses, and creates a broader
company with enhanced global reach and greater resources, enhanced
future operating flexibility and increased opportunity for growth;
(4) the potential benefits to be derived from a combination of the two
companies as described under "Our Reasons for the Merger," including
potential cost savings and efficiencies that would result from the
merger;
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CHAPTER ONE -- THE MERGER
(5) the current industry, economic and market conditions and trends,
including the likelihood of continuing consolidation and increasing
competition in the pharmaceutical and consumer health care industries;
(6) the nature and timing of new products of both companies in their
respective pipelines and the effect of combining such pipelines on the
growth and results of operations of the combined company;
(7) the nature of existing products to be sold by the combined company and
the fact that the customer base to be served would be broader and more
diverse;
(8) the enormous success of the existing collaboration between
Warner-Lambert and Pfizer in their co-promotion of Lipitor(R), and the
opportunity presented by the merger to expand that collaboration and
maximize the Lipitor(R) franchise;
(9) the opportunity for the shareholders of Warner-Lambert to participate
in a larger company with a more diversified product line and, as
shareholders of the combined company to benefit from future growth of
the combined company;
(10) the fact that the exchange ratio (based on Pfizer's trading price at
the close of business on February 4, 2000, the last trading day before
the execution of the merger agreement was announced) represented a
premium of:
- 25.3% over Warner-Lambert's closing price on November 2, 1999, the
last trading day before press reports of merger discussions between
Warner-Lambert and AHP first appeared; and
- 17.5% over Warner-Lambert's market price on November 4, 1999,
immediately before trading was halted pending the announcement of
Pfizer's acquisition proposal.
(11) the fact that the exchange ratio would enable Warner-Lambert
shareholders to own approximately 40% of the outstanding stock of the
combined company;
(12) the analyses and presentations prepared by Bear Stearns and Goldman
Sachs, and the written opinions of those firms to the effect that, as
of February 6, 2000, and subject to the matters set out in their
opinions, the exchange ratio was fair from a financial point of view
to Warner-Lambert's shareholders, which are described below, under
"Opinions of Financial Advisors -- Opinion of Bear Stearns" and
"-- Opinion of Goldman Sachs";
(13) the fact that, if the Pfizer shareholders approve the amendment to
Pfizer's certificate of incorporation, eight of Warner-Lambert's
directors would be invited to join the board of the combined company,
and that, even absent such approval, three of Warner-Lambert's
directors would be invited to join the board of the combined company,
with a commitment by Pfizer to use its reasonable best efforts to
appoint three additional Warner-Lambert directors to the board as
vacancies occur;
(14) the intended accounting for the merger as a pooling-of-interests which
results in combined financial statements prepared on a basis
consistent with the underlying view that shareholder interests in the
two companies have simply been combined;
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CHAPTER ONE -- THE MERGER
(15) the ability to complete the merger as a reorganization for United
States federal income tax purposes in which Warner-Lambert
shareholders generally would not recognize any gain or loss, except
for any gain or loss recognized in connection with cash received for
fractional shares of the combined company's common stock;
(16) the ability to consummate the merger, including the conditions to the
merger requiring receipt of necessary regulatory approvals in
accordance with the terms of the merger agreement;
(17) the terms of the merger agreement regarding third party proposals,
including Warner-Lambert's ability to terminate the merger agreement
in order to accept a superior proposal;
(18) the provisions of the merger agreement which provide for a termination
fee of $500 million to be paid to Pfizer under certain circumstances,
that the five year and change of control termination rights of
Warner-Lambert in the Lipitor(R) Agreements are eliminated under
certain circumstances (subject to a $1.333 billion payment by Pfizer
to Warner-Lambert under certain circumstances) and for the
Norvasc(R)/Lipitor(R) co-development/co-promotion agreement to be
concluded;
(19) the $1.8 billion termination fee payable to AHP under the terms of the
Warner-Lambert/AHP merger agreement (which has since been paid), which
became payable upon termination of the AHP merger agreement and
Warner-Lambert's entering into the merger agreement with Pfizer;
(20) the provisions of the merger agreement which provide for termination
fees of $1.8 billion to be paid to Warner-Lambert by Pfizer under
certain circumstances.
(21) the fact that Warner-Lambert was then party to an existing merger
agreement with AHP, providing for a merger-of-equals between the two
companies; and in this regard the board considered the following
factors:
- the fact that the market value of Pfizer's proposal at the close of
business on February 4, 2000, the last trading day before the
announcement of the execution of the merger agreement with Pfizer, was
$98.31 per share, compared to $67.88 per share of common stock, the
value which would have been received by Warner-Lambert shareholders in
the AHP transaction, based on the closing price of AHP common stock on
that same date, and the fact that the value of the Pfizer proposal on
February 4th was also greater than the value of the AHP transaction on
November 4, 1999, before the announcement of the Pfizer proposal;
- the fact that, since the announcement of the Pfizer proposal on
November 4, 1999, the value as of February 4, 2000 to be received by
Warner-Lambert shareholders in a proposed transaction with AHP had
decreased from $83.55 to $67.88 per share; however, the board believed
that such decrease resulted, in part, from the market's perception
that a transaction with AHP would not be consummated;
- the board's belief, based on the factors described immediately above
and on the presentation of Warner-Lambert's financial advisors, that
the Pfizer
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CHAPTER ONE -- THE MERGER
transaction was more favorable to Warner-Lambert's shareholders from a
financial point of view than the AHP merger;
- the board's belief that there was a significant risk that
Warner-Lambert's shareholders would not approve the AHP transaction in
light of the disparity in market prices discussed above;
- the fact that entering into an agreement with Pfizer would require
dismissal of the Lipitor(R) litigation (unless Pfizer materially
breaches the merger agreement), and elimination (unless Pfizer
materially breaches the merger agreement) of the possibility that
Warner-Lambert could recapture significant value for its shareholders
if it were successful in such litigation; however, the board also
considered the fact that there was substantial uncertainty as to the
outcome of such litigation if it were pursued;
- the uncertainty created by the unresolved nature of the competing
transactions with Pfizer and AHP -- including the pending
litigation -- and the potential detrimental effect such uncertainty
might have on Warner-Lambert and its business if it continued
indefinitely;
(22) the fact that, notwithstanding that three months had passed since
Pfizer first announced its proposal to acquire Warner-Lambert, and
that Warner-Lambert had contacted a number of third parties to
determine their interest in engaging in a business combination
transaction with Warner-Lambert, no third party had expressed interest
in pursuing a business combination with Warner-Lambert and that
Procter & Gamble -- which had expressed interest in a three-party
transaction involving both Warner-Lambert and AHP -- eventually
determined not to pursue the transaction;
(23) the ability to successfully integrate the operations of the two
companies, and the risks associated with the integration;
(24) the fact that pursuit of a transaction with Pfizer was a departure
from the board's previously-chosen strategic path for Warner-Lambert,
which did not include Warner-Lambert being acquired by a significantly
larger company, a transaction which would likely result in:
- Warner-Lambert shareholders having a diminished share of
Warner-Lambert's growth potential;
- Warner-Lambert management and employees potentially having a
diminished role in the achievement of the objectives of the combined
company;
(25) the likely impact of the merger with Pfizer on Warner-Lambert's
employees;
(26) the fact that the combined company would be headed by Mr. Steere, as
the chief executive officer and chairman of the board, that Dr.
McKinnell would be the president and chief operating officer of the
combined company, that it was not anticipated that Mr. de Vink would
remain with the combined company and the expectation that Dr. Wild
would probably not hold a position in the combined company comparable
to his current role as the head of the pharmaceutical sector at
Warner-Lambert;
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CHAPTER ONE -- THE MERGER
(27) the fact that three senior management positions at the combined
company would be filled by current members of Warner-Lambert senior
management;
(28) the fact that a transition planning team would be co-chaired by Dr.
McKinnell and Dr. Wild;
(29) the fact that combined company would be named Pfizer Inc.;
(30) the fact that the Warner-Lambert name would be preserved as a
divisional name in the combined company, and the Parke-Davis name will
be preserved as a trade name;
(31) the fact that the headquarters for the consumer division of the
combined company would be in Morris Plains, New Jersey; and
(32) the interests that certain executive officers and directors of
Warner-Lambert may have with respect to the merger in addition to
their interests as shareholders of Warner-Lambert generally. See
"Interests of Certain Persons in the Merger".
In view of the variety of factors and the amount of information considered,
Warner-Lambert's board of directors did not find it practicable to, and did not,
quantify, rank or otherwise assign relative weights to the specific factors it
considered in reaching its decision. The determination was made after
consideration of all of the factors as a whole. In addition, individual members
of Warner-Lambert's board of directors may have given different weights to
different factors.
Warner-Lambert's board of directors considered all these factors in
reaching the conclusions and recommendations described above. These factors
generally figured positively, as advantages or opportunities, with the following
exceptions:
- the factors described in clause (18) and (19) above, which figured
negatively as drawbacks, but ones which the Warner-Lambert board felt
were outweighed by the other benefits of the transaction, including, in
particular, the factor discussed in clause (20) above;
- some of the factors described in clause (21) above, which figured
negatively as a drawback, but which the Warner-Lambert board felt were
outweighed by the benefits of the transaction, particularly by the factor
described in clause (10) above, and by the countervailing considerations
discussed within clause (21);
- the factor described in clause (23) above, which figured negatively as a
risk, although one which the Warner-Lambert board felt could be managed
successfully, particularly in light of the factors described in clauses
(27) and (28) above;
- the factor described in clause (24) above, which figured negatively as a
drawback, but one which the board felt was outweighed by the first four
factors described under clause (21) above and by the other benefits of
the transaction, including the exchange ratio;
- the factor described in clause (25) above, which the board believed would
be negative but not uniformly so, and which the board believed was
outweighed by the other benefits of the transaction, including the
factors discussed in clauses (10) and (11) above, the impact of the
factors discussed in clauses (27) and (28) above,
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CHAPTER ONE -- THE MERGER
and by the severance and other protections which Warner-Lambert has in
place for its employees and by the "best in class" approach favored by
Pfizer;
- the factors described in clauses (26) and (29) above, which figured
negatively as drawbacks, but which the Warner-Lambert board felt were
outweighed by the other benefits of the transaction, including, to some
degree, the factors discussed in clauses (13), (27), (28), (30) and (31)
above; and
- the factor described in clause (32) above, which the Warner-Lambert board
of directors considered to be neutral in its evaluation.
For additional information concerning the matters discussed above, and the
conclusions reached, at various meetings of Warner-Lambert's board held between
June 1998 and November 1999, see "Background of the Merger."
THE WARNER-LAMBERT BOARD OF DIRECTORS HAS APPROVED THE MERGER AGREEMENT,
THE MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED THEREBY AND BELIEVES THAT THE
TERMS OF THE MERGER ARE ADVISABLE, FAIR TO, AND IN THE BEST INTERESTS OF
WARNER-LAMBERT AND ITS SHAREHOLDERS. THE WARNER-LAMBERT BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE
MERGER.
ACCOUNTING TREATMENT
The merger is intended to qualify as a pooling-of-interests. The
pooling-of-interests method of accounting assumes the companies had always been
combined, and the historical financial statements for periods prior to closing
of the merger are restated as though the companies had always been combined as
required under United States generally accepted accounting principles. The
assets and liabilities of Pfizer and Warner-Lambert will be carried forward by
the combined company at their historical recorded amounts. It is a condition to
the merger that:
- Pfizer receive letters from KPMG LLP, New York, New York, independent
accountants for Pfizer, dated approximately as of the date on which this
joint proxy statement/prospectus is declared effective by the SEC and on
the date on which the transactions contemplated by the merger agreement
are closing, stating that Pfizer's accounting for the merger as a
pooling-of-interests is appropriate if the merger is closed and
consummated in accordance with the merger agreement; and
- Warner-Lambert receive letters from PricewaterhouseCoopers LLP, Florham
Park, New Jersey, independent accountants for Warner-Lambert, dated
approximately as of the date on which this joint proxy
statement/prospectus is declared effective by the SEC and the date on
which the transactions contemplated by the merger agreement are closed,
regarding their concurrence with Warner-Lambert's conclusion that no
condition exists that would preclude Warner-Lambert from being a party to
a business combination to be accounted for as a pooling-of-interests.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following discussion is based on the opinions of Cadwalader, Wickersham
& Taft, counsel to Pfizer, and Skadden, Arps, Slate, Meagher & Flom LLP, counsel
to Warner-Lambert, as to the material United States federal income tax
consequences of the merger and is based on the Internal Revenue Code of 1986, as
amended, applicable Treasury regulations, administrative interpretations and
court decisions as in effect as of the date of
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CHAPTER ONE -- THE MERGER
this joint proxy statement/prospectus, all of which are subject to change,
possibly with retroactive effect. This discussion does not address all aspects
of federal income taxation that may be relevant to a shareholder of
Warner-Lambert in light of that shareholder's particular circumstances or to a
shareholder subject to special rules, such as:
- a shareholder that is not a citizen or resident of the United States;
- a financial institution or insurance company;
- a tax-exempt organization;
- a dealer or broker in securities;
- a shareholder that holds its Warner-Lambert common stock as part of a
hedge, appreciated financial position, straddle or conversion
transaction; or
- a shareholder that acquired its Warner-Lambert common stock pursuant to
the exercise of options or otherwise as compensation.
It is a condition to the obligation of each of Pfizer and Warner-Lambert to
complete the merger that each receive an opinion from its counsel, dated as of
the closing date of the merger, that the merger will be treated for federal
income tax purposes as a reorganization within the meaning of Section 368(a) of
the Code and that each of Pfizer, Warner-Lambert and the Pfizer merger
subsidiary will be a party to the reorganization within the meaning of Section
368(b) of the Code.
In rendering these opinions, counsel will rely on representations and
covenants made by Pfizer, Warner-Lambert and others, including those contained
in certificates of officers of Pfizer and Warner-Lambert. These opinions will
also rely on assumptions, including assumptions regarding the absence of changes
in existing facts and the completion of the merger in the manner contemplated by
the merger agreement. If any of those representations, covenants or assumptions
is inaccurate, counsel may not be able to render the required opinions and the
tax consequences of the merger could differ from those discussed here. Opinions
of counsel neither bind the IRS nor preclude the IRS from adopting a contrary
position. Pfizer and Warner-Lambert do not intend to obtain a ruling from the
IRS on the tax consequences of the merger.
For federal income tax purposes:
- A holder of Warner-Lambert common stock will not recognize any gain or
loss upon the exchange of that shareholder's shares of Warner-Lambert
common stock for shares of Pfizer common stock in the merger, except that
gain or loss will be recognized on the receipt of cash instead of a
fractional share of Pfizer common stock;
- To the extent that a holder of Warner-Lambert common stock receives cash
instead of a fractional share of Pfizer common stock, the holder will be
required to recognize gain or loss, measured by the difference between
the amount of cash received and the portion of the tax basis of that
holder's shares of Warner-Lambert common stock allocable to that
fractional share of Pfizer common stock. This gain or loss will be
capital gain or loss and will be long-term capital gain or loss if the
holding period for the share of Warner-Lambert common stock exchanged for
the fractional share of Pfizer common stock was more than one year at the
effective time of the merger;
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- A holder of Warner-Lambert common stock will have a tax basis in the
Pfizer common stock received in the merger equal to (1) the tax basis of
the Warner-Lambert common stock surrendered by that holder in the merger,
less (2) any tax basis of the Warner-Lambert common stock surrendered
that is allocable to a fractional share of Pfizer common stock for which
cash is received;
- The holding period for shares of Pfizer common stock received in exchange
for shares of Warner-Lambert common stock in the merger will include the
holding period for the shares of Warner-Lambert common stock surrendered
in the merger; and
- There will be no federal income tax consequences to a holder of Pfizer
common stock as a result of the merger.
This discussion is intended to provide only a general summary of the
material federal income tax consequences of the merger, and is not a complete
analysis or description of all potential federal income tax consequences of the
merger. This discussion does not address tax consequences that may vary with, or
are contingent on, individual circumstances. In addition, it does not address
any non-income tax or any foreign, state or local tax consequences of the
merger. ACCORDINGLY, WE STRONGLY URGE EACH SHAREHOLDER OF WARNER-LAMBERT TO
CONSULT HIS OR HER TAX ADVISOR TO DETERMINE THE PARTICULAR UNITED STATES
FEDERAL, STATE OR LOCAL OR FOREIGN INCOME OR OTHER TAX CONSEQUENCES TO THAT
SHAREHOLDER OF THE MERGER.
REGULATORY MATTERS RELATING TO THE MERGER
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and its associated rules, the merger may not be consummated until notifications
have been given and certain information and materials have been furnished to and
reviewed by the Antitrust Division of the United States Department of Justice
("DOJ") and the Federal Trade Commission ("FTC") and the required waiting period
has expired or terminated. Pfizer and Warner-Lambert will each file shortly the
required notification and report forms under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, with the FTC and the DOJ. There can be no
assurance that a challenge to the merger on antitrust grounds will not be made
or, if a challenge is made, that it would not be successful. State antitrust
authorities and private parties in certain circumstances may bring legal action
under the antitrust laws seeking to enjoin the merger or seeking conditions.
Both Pfizer and Warner-Lambert conduct business in member states of the
European Union. European Union Council Regulation No. 4064/89 and accompanying
regulations require notification of and approval by the European Commission of
specific mergers or acquisitions involving parties with worldwide sales and
individual European Union sales exceeding specified thresholds before these
merger and acquisitions can be implemented. Pfizer and Warner-Lambert intend to
formally notify the European Commission of the merger shortly. Completing the
review and gaining approval under the European Commission merger regulation is a
condition to completing the merger.
Pfizer and Warner-Lambert each conducts business in foreign countries that
are not members of the European Union. The merger may require the review and
approval of regulatory bodies in some of these countries.
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NO APPRAISAL RIGHTS
Holders of Warner-Lambert common stock do not have dissenters' appraisal
rights under Delaware law that would give them the right to obtain the payment
of cash in exchange for their Warner-Lambert common stock as a result of the
merger. Holders of Pfizer common stock are also not entitled to dissenters'
appraisal rights under Delaware law in connection with the merger.
CERTAIN LITIGATION
On November 4, 1999, Warner-Lambert announced its intention to merge with
AHP pursuant to a merger agreement among Warner-Lambert, AHP and a subsidiary of
AHP. The Warner-Lambert/AHP merger agreement was terminated in accordance with
its terms on February 6, 2000. In connection with the termination provision of
that agreement, the only consideration that Warner-Lambert paid to AHP was a
termination fee of $1.8 billion. See "Background of the Merger" for a more
complete discussion of Warner-Lambert's execution of its merger agreement with
AHP and the events leading to its termination.
On or about November 4, 1999, Pfizer commenced an action in the Court of
Chancery, County of New Castle, State of Delaware, against Warner-Lambert, its
Warner-Lambert's directors and AHP, seeking to enjoin payment of the termination
fee and invalidate the stock option agreement granted to AHP pursuant to the
merger agreement between AHP and Warner-Lambert. The lawsuit claimed, among
other things, that the termination fee, reciprocal stock option agreements and a
provision prohibiting Warner-Lambert's directors from amending or redeeming the
Warner-Lambert shareholder rights plan for any transaction other than the AHP
merger were invalid and that Warner-Lambert's directors breached their fiduciary
duties to their shareholders by entering into the merger agreement with AHP,
which contained these provisions. The legal action also alleged that AHP aided
and abetted that breach of fiduciary duties. Pursuant to a settlement agreement
between Warner-Lambert and Pfizer dated February 6, 2000, Pfizer's claims were
dismissed without prejudice, and Pfizer and Warner-Lambert (including on behalf
of the Warner-Lambert directors) executed releases of each other with respect to
the subject matter of this litigation, and other matters; such releases to
become effective at the time the merger is completed or the merger agreement is
terminated, except if the merger agreement has been materially breached by
Pfizer. Pursuant to a settlement agreement dated February 6, 2000, Pfizer and
AHP released each other with respect to claims arising out of the merger
agreement between AHP and Warner-Lambert, and, pursuant to this settlement
agreement, the Pfizer litigation arising out of the AHP merger was dismissed
with prejudice with respect to AHP shortly after February 6, 2000.
Following the announcement of the proposed Warner-Lambert/AHP merger,
approximately 40 lawsuits purporting to be class or derivative actions were
filed in the Court of Chancery of the State of Delaware; these actions were
subsequently consolidated by order of the Chancery Court. In addition, one
lawsuit purporting to be a class action has been filed in the Superior Court of
New Jersey, Morris County. Two lawsuits, one purporting to be a class action and
the other a derivative action, have been filed in the United States District
Court for the District of New Jersey. The consolidated Delaware action and the
New Jersey actions name as defendants Warner-Lambert, some of its officers and
directors and AHP. Generally, these actions allege that the members of
Warner-Lambert's board of directors breached their fiduciary duties by entering
into the merger agreement with AHP, and in particular, the provisions providing
for termination fees payable to AHP under certain circumstances and for the
reciprocal stock option agreements and the no shop provision of the AHP merger
agreement. The actions seek, as
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relief, among other things, an order requiring Warner-Lambert to enter into
discussions with bona fide bidders for Warner-Lambert and an order invalidating
provisions of the AHP merger agreement. These actions also assert claims against
AHP for aiding and abetting the purported breaches of fiduciary duty by
Warner-Lambert's directors and officers. Warner-Lambert, its officers and board
of directors believe that these actions are without merit and intend to
vigorously defend against them. Following the termination of the AHP merger
agreement, Warner-Lambert has begun to seek disposition of these claims.
On November 23, 1999, Pfizer commenced an action in the Court of Chancery,
New Castle County, State of Delaware, against Warner-Lambert relating to the
contracts between Pfizer and Warner-Lambert relating to the Lipitor(R) marketing
agreements. Pfizer alleged that certain actions taken by Warner-Lambert in
entering into the merger agreement with AHP constituted a breach of the
standstill provision in the 1996 confidentiality agreement and that the merger
agreement with AHP should be voided. Pfizer's action also sought a declaratory
judgement that Pfizer was in compliance with its contractual obligations under
the Lipitor(R) agreements, and specifically that Pfizer's conduct in proposing a
merger with Warner-Lambert had not breached any of Pfizer's standstill
obligations. On November 29, 1999, Warner-Lambert filed a counterclaim against
Pfizer in this action, alleging that Pfizer's conduct had breached its
standstill obligations and that Pfizer had misused confidential information it
obtained from Warner-Lambert in the course of its Lipitor(R) relationship. As
relief, Warner-Lambert sought a declaration that its contractual obligations to
Pfizer with respect to the co-promotion of Lipitor(R) were at an end, and that
Warner-Lambert was entitled to reclaim the future value attributable to the
promotion of Lipitor(R). Pursuant to a settlement agreement between
Warner-Lambert and Pfizer entered into as of February 6, 2000, the
Lipitor(R)-related claims asserted by Pfizer and Warner-Lambert were each
dismissed without prejudice, and Pfizer and Warner-Lambert executed releases of
each other and certain related parties with respect to the subject matter of the
Lipitor(R) litigation, and other matters; such releases to become effective at
the time the merger is completed or the merger agreement is terminated, except
if the merger agreement has been materially breached by Pfizer.
FEDERAL SECURITIES LAWS CONSEQUENCES; STOCK TRANSFER RESTRICTION AGREEMENTS
This joint proxy statement/prospectus does not cover any resales of the
Pfizer common stock to be received by the shareholders of Warner-Lambert upon
completion of the merger, and no person is authorized to make any use of this
joint proxy statement/ prospectus in connection with any such resale.
All shares of Pfizer common stock received by Warner-Lambert shareholders
in the merger will be freely transferable, except that shares of Pfizer common
stock received by persons who are deemed to be "affiliates" of Warner-Lambert
under the Securities Act of 1933, as amended, at the time of the Warner-Lambert
special meeting may be resold by them only in transactions permitted by Rule 145
under the 1933 Act or as otherwise permitted under the 1933 Act. Persons who may
be deemed to be affiliates of Warner-Lambert for such purposes generally include
individuals or entities that control, are controlled by or are under common
control with Warner-Lambert, as the case may be, and include directors and
executive officers of Warner-Lambert. The merger agreement requires that
Warner-Lambert use all reasonable efforts to cause each of such affiliates to
execute a written agreement to the effect that such persons will not offer, sell
or otherwise dispose of any of the shares of Pfizer common stock issued to them
in the merger in violation of the 1933 Act or the related SEC rules.
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THE COMPANIES
PFIZER
Pfizer is a research based, global pharmaceutical company. It discovers,
develops, manufactures and markets innovative medicines for humans and animals.
It operates in two business segments: pharmaceutical and animal health.
Pharmaceutical. The pharmaceutical business segment includes the Pfizer
Pharmaceutical Group and the Consumer Health Care Group. Principal products of
the Pfizer Pharmaceutical Group include cardiovascular products Norvasc(R),
Procardia XL(R) and Cardura(R), the co-promoted lipid-lowering agent Lipitor(R),
infectious disease products Zithromax(R) and Diflucan(R), central nervous system
disorder products, Zoloft(R) and Aricept(R), co-promoted with Eisai Co., Ltd.,
Viagra(R) for erectile dysfunction, Glucotrol XL(R) for diabetes, Zyrtec(R) for
allergies and Celebrex(R) for arthritis symptom relief, co-promoted with G.D.
Searle. Principal products of the Consumer Health Care Group include
non-prescription over-the-counter medications, therapeutic skin care products
and personal care products. These products include Visine(R) for eye care,
BenGay(R) topical analgesics, Cortizone(R) hydrocortisone skin cream, RID(R)
anti-lice products, Unisom(R) sleep aids, Desitin(R) ointments, Plax(R)
pre-brushing dental rinse and Barbasol(R) shave creams and gels.
Animal Health. Pfizer's Animal Health Group develops, manufactures and
sells products for the prevention and treatment of diseases in livestock,
poultry and companion animals. Animal health products include Revolution(R), an
anti-parasitic for cats and dogs, Rimadyl(R), an anti-arthritic for dogs and for
livestock, Decomax(R), an anti-parasitic and RespiSure(R)/Stellamune(R), which
are vaccines.
WARNER-LAMBERT
Warner-Lambert develops, manufactures and markets a widely diversified line
of pharmaceuticals, health care and consumer products. Its principal industry
segments are pharmaceutical products, consumer health care products, and
confectionery products, consisting principally of chewing gums and breath mints.
Pharmaceutical Products. Warner-Lambert markets its pharmaceutical
products throughout most of the world under the Parke-Davis name. Its products
address a broad spectrum of medical needs and include the lipid regulators
Lipitor(R) and Lopid(R); cardiovascular products such as Accupril(R) and
Nitrostat(R); pain relievers such as Valoron-N(R); Neurontin(R), Dilantin(R) and
Cerebyx(R) anticonvulsants; Rezulin(R) for type-2 diabetes; the oral
contraceptives Estrostep(R) and Loestrin(R); and Viracept(R) for HIV infection.
Warner-Lambert's pharmaceutical products segment also includes Capsugel(R),
the world's largest producer of two-piece hard gelatin capsules for use in
prescription and over-the-counter medication.
Consumer Health Care Products. Warner-Lambert's consumer health care
products segment produces and markets over-the-counter health care products,
shaving products and pet care products. Its extensive line of over-the-counter
pharmaceuticals and health care products include Lubriderm(R) dermatological
products; Neosporin(R) and Polysporin(R) topical antibiotic ointments; cold and
sinus preparations such as Sudafed(R), Sinutab(R) and Actifed(R);
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CHAPTER ONE -- THE MERGER
Benadryl(R) cold and allergy products; Benylin(R) cough syrup; Myadec(R)
vitamins; Nix(R) headlice treatments; Listerine(R) mouthwashes and Efferdent(R)
denture cleaning products; Anusol(R) and Tucks(R) hemorrhoidal products. Zantac
75(R) heartburn treatment; Rolaids(R) antacids; Quanterra(R) herbal supplements;
and e.p.t.(R) home pregnancy tests. Zantac 75(R) is a registered trademark of
Glaxo Wellcome plc.
Warner-Lambert markets its shaving products under the Schick(R) and
Wilkinson Sword(R) and other trademarks. The consumer health care products
segment also manufactures and sells products for fish, reptiles and other small
pets under the TETRA(R), Second Nature(R) and Whisper(R) trademarks.
Confectionery Products. Warner-Lambert's confectionery products segment
manufactures, markets and sells chewing gums under such trademarks as
Trident(R), Dentyne(R), Cinn*A*Burst(R), Mint*A*Burst(R), Clorets(R) and
Chiclets(R); bubble gums under the Bubblicious(R) and Bubbaloo(R) trademarks;
breath mints under the Certs(R) and Clorets(R) trademarks; and cough tablets and
throat lozenges under the Halls(R) trademarks.
Recent Acquisition by Warner-Lambert. On May 17, 1999, Warner-Lambert
acquired Agouron Pharmaceuticals, Inc., a California corporation. Under the
terms of that merger agreement, each share of Agouron common stock was converted
into 0.8934 shares of Warner-Lambert common stock. The value of the
Warner-Lambert shares issued at the time of the consummation of the acquisition
was approximately $2.1 billion. The Agouron transaction was accounted for using
the pooling-of-interests method of accounting.
OPINIONS OF FINANCIAL ADVISORS
OPINIONS OF PFIZER'S FINANCIAL ADVISORS
Lazard Freres & Co., LLC and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Pfizer's financial advisors, have rendered separate written
opinions, each dated February 6, 2000, to the Pfizer board of directors as to
the fairness, from a financial point of view, to Pfizer of the exchange ratio in
the merger. The full text of the written opinions of Lazard Freres and Merrill
Lynch are attached to this document as Annexes B and C. We encourage you to read
the opinions carefully in their entirety to understand the procedures followed,
assumptions made, matters considered and limitations on the review undertaken by
each of Lazard Freres and Merrill Lynch in providing their opinions. THE
OPINIONS OF LAZARD FRERES AND MERRILL LYNCH ARE DIRECTED TO THE PFIZER BOARD OF
DIRECTORS AND DO NOT CONSTITUTE RECOMMENDATIONS TO ANY SHAREHOLDER WITH RESPECT
TO ANY MATTER RELATING TO THE MERGER.
OPINION OF LAZARD FRERES
At a meeting of Pfizer's board of directors held on February 6, 2000, at
which the Pfizer board of directors considered the merger and approved the
merger agreement and the merger, Lazard Freres rendered its oral opinion (which
was subsequently confirmed in writing) that, as of such date and based upon and
subject to the matters reviewed with Pfizer's board of directors, the exchange
ratio was fair from a financial point of view to Pfizer.
The full text of the Lazard Freres opinion is attached hereto as Annex B
and is incorporated herein by reference. The description of the Lazard Freres
opinion set forth
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CHAPTER ONE -- THE MERGER
herein is qualified in its entirety by reference to the full text of the Lazard
Freres opinion set forth in Annex B. Pfizer's shareholders are urged to read the
Lazard Freres opinion in its entirety for a description of the procedures
followed, assumptions made, matters considered, and qualifications and
limitations on the review undertaken by Lazard Freres in connection therewith.
The Lazard Freres opinion is necessarily based upon the economic, monetary,
market and other conditions as they were in effect on, and the information made
available as of, the date of the Lazard Freres opinion. The Lazard Freres
opinion is directed to Pfizer's board of directors and addresses only the
fairness from a financial point of view of the exchange ratio to Pfizer. It does
not address the merits of the underlying decision by Pfizer to engage in the
merger and does not constitute a recommendation to any Pfizer shareholder as to
how such shareholder should vote on any matter relating to the merger at any
meeting of Pfizer's shareholders held for the purpose of considering the merger.
In the course of performing its review and analyses for rendering its
opinion. Lazard Freres:
- reviewed the financial terms and conditions of the merger agreement (and
the agreements attached as Exhibits 5.15(a)-(c) thereto);
- analyzed certain historical publicly available business and financial
information relating to Pfizer and Warner-Lambert;
- reviewed various financial forecasts and other data provided to Lazard
Freres by Pfizer and Warner-Lambert relating to their respective
businesses;
- reviewed the synergistic savings and benefits and the timing of their
occurrence as projected by Pfizer to be realized by the combined entities
in connection with the merger;
- reviewed public information with respect to certain other companies in
lines of business Lazard Freres believes to be generally comparable to
those of Pfizer and Warner-Lambert;
- reviewed the financial terms of certain comparable business combinations
involving companies in lines of business Lazard Freres believes to be
generally comparable to the business of Pfizer and Warner-Lambert;
- reviewed the historical trading prices and trading volumes of Pfizer's
common stock and Warner-Lambert's common stock; and
- conducted such other financial studies, analyses and investigations as
Lazard Freres deemed appropriate.
Lazard Freres relied upon the accuracy and completeness of the financial
and other information provided by Pfizer and Warner-Lambert and reviewed by
Lazard Freres for purposes of the Lazard Freres opinion. Lazard Freres did not
assume any responsibility for any independent verification of such information
or any independent valuation or appraisal of any of the assets or liabilities of
Pfizer or Warner-Lambert or concerning the solvency of, or any issues relating
to solvency concerning either of, Pfizer or Warner-Lambert. With respect to
financial forecasts, including the synergistic savings and benefits projected to
be realized following the merger and the timing thereof, Lazard Freres assumed
that they were reasonably prepared on bases reflecting the best currently
available estimates and judgements of management of Pfizer and Warner-Lambert as
to the future financial
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CHAPTER ONE -- THE MERGER
performance of Pfizer and Warner-Lambert, respectively. Lazard Freres assumed no
responsibility for and expressed no view as to such forecasts and projections or
the assumptions on which they were based.
In rendering their opinion, Lazard Freres assumed that the merger will be
completed on the terms described in the merger agreement, without any waiver or
modification of any material terms or conditions by Pfizer, that obtaining the
necessary regulatory approvals for the merger will not have an adverse effect on
Pfizer or Warner-Lambert and that the synergistic savings and benefits of the
merger projected by the management of Pfizer will be substantially realized both
in scope and timing. In addition, Lazard Freres assumed (i) that the merger will
be accounted for as a tax-free pooling-of-interests transaction and that the
number of outstanding shares of common stock of Warner-Lambert on a fully
diluted basis will not be materially different than as represented in the merger
agreement, (ii) that Warner-Lambert will pay a termination fee of $1.8 billion
to AHP pursuant to the terms of a merger agreement by and between Warner-Lambert
and AHP and (iii) that the other representations and warranties of
Warner-Lambert and Pfizer contained in the merger agreement are true and
complete.
In connection with rendering the Lazard Freres opinion, Lazard Freres
performed a variety of financial analyses. The preparation of a fairness opinion
involves various determinations as to the most appropriate and relevant methods
of financial analysis and the application of these methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to a
partial analysis or summary description. Accordingly, notwithstanding the
separate analyses summarized below, Lazard Freres believes that its analyses
must be considered as a whole and that selecting portions of the analyses and
factors considered by it, without considering all such analyses and factors, or
attempting to ascribe relative weights to some or all such analyses and factors,
could create an incomplete view of the evaluation process underlying the Lazard
Freres opinion.
In performing its analyses, Lazard Freres made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Pfizer. The analyses
performed by Lazard Freres are not necessarily indicative of actual values or
actual future results, which may be significantly more or less favorable than
suggested by such analyses. Lazard Freres did not assign any specific weight to
any of the analyses described below and did not draw any specific conclusions
from or with regard to any one method of analysis. With respect to the analysis
of comparable companies and the analysis of selected precedent transactions
summarized below, no public company utilized as a comparison is identical to
Pfizer or Warner-Lambert, and no transaction is identical to the merger.
Accordingly, an analysis of publicly traded comparable companies and comparable
business combinations is not mathematical; rather, it involves complex
considerations and judgments concerning the differences in financial and
operating characteristics of the companies and other factors that could affect
the public trading values or announced merger transaction values, as the case
may be, of Pfizer or Warner-Lambert and the companies to which they were
compared. The analyses do not purport to be appraisals or to reflect the prices
at which any securities may trade at the present time or at any time in the
future. In addition, as described above, the Lazard Freres opinion was just one
of many factors taken into consideration by Pfizer's board of directors.
Consequently, Lazard Freres' analysis should not be viewed as determinative of
the decision of Pfizer's board of directors or Pfizer's management with respect
to the fairness of the exchange ratio set forth in the merger agreement.
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CHAPTER ONE -- THE MERGER
The following is a summary of the material financial analyses used by
Lazard Freres in connection with providing the Lazard Freres opinion to the
Pfizer board of directors:
COMPARABLE PUBLIC COMPANIES ANALYSIS
Lazard Freres performed a comparable public companies analysis to assist
the Pfizer board of directors in valuing Warner-Lambert based on various
financial multiples of selected comparable public companies in the
pharmaceutical industry. In performing this analysis, Lazard Freres reviewed
certain financial information relating to Warner-Lambert and compared such
information to corresponding financial information, ratios and public market
multiples for six other pharmaceutical companies Lazard Freres deemed to be
comparable to Warner-Lambert. The companies included in this analysis were:
- Bristol-Myers Squibb
- Eli Lilly
- Glaxo Wellcome
- Merck
- Schering Plough
- SmithKline Beecham
Using publicly available information, Lazard Freres calculated the
following multiples for the aforementioned comparable companies:
<TABLE>
<CAPTION>
LOW MEAN MEDIAN HIGH
---- ---- ------ ----
<S> <C> <C> <C> <C>
Enterprise Value as a multiple of:
2000E revenues....................... 4.99x 5.95x 6.14x 6.62x
2000E EBITDA......................... 17.1 18.0 17.8 19.8
Equity Value as a multiple of:
2000E net income..................... 24.8 27.2 27.6 28.5
</TABLE>
Using the multiples calculated in the comparable companies analysis, Lazard
Freres derived a range of implied equity values per share of Warner-Lambert
common stock of $67.87 to $83.09.
In addition, Lazard Freres compared the price/earnings ratios for the
comparable companies to each company's growth rate. Expressed as a multiple of
each company's growth rate, the mean and the median ratio for the comparable
companies was approximately 2.0x. Based on this analysis, and using publicly
available estimates of Warner-Lambert's growth rate, Lazard Freres derived a
range of implied equity values per share for Warner-Lambert common stock of
$86.54 to $89.93.
EXCHANGE RATIO ANALYSIS
Lazard Freres examined the historical daily exchange ratios of Pfizer
common stock to Warner-Lambert common stock to assist the Pfizer board of
directors in valuing Warner-Lambert based on the relative historical value of
Pfizer's closing share price to Warner-Lambert's closing share price for the
three year, one year, six month, three month
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CHAPTER ONE -- THE MERGER
and one month periods ended November 3, 1999. This analysis resulted in a range
of exchange ratios of 1.39x to 2.68x with a mean of 1.96x and a median of 1.92x.
Based on this analysis, and using the closing price of Warner-Lambert common
stock on February 3, 2000, Lazard Freres derived a range of implied equity
values per share for Warner-Lambert common stock of $49.54 to $95.57.
SELECTED PRECEDENT TRANSACTIONS ANALYSIS
Lazard Freres performed a selected precedent transactions analysis to
assist the Pfizer board of directors in valuing Warner-Lambert based on
transaction values expressed as multiples of various financial measures in
selected transactions. Using publicly available information, Lazard Freres
reviewed and analyzed certain financial and operating data relating to the
following selected transactions in the pharmaceutical industry:
- Glaxo Wellcome/SmithKline Beecham
- Zeneca Group/Astra
- Sanofi/Synthelabo
Lazard Freres compared, among other things, the transaction value of the
selected precedent transactions as a multiple of LTM EBITDA and equity value as
a multiple of LTM net income:
<TABLE>
<CAPTION>
LOW MEAN MEDIAN HIGH
---- ---- ------ ----
<S> <C> <C> <C> <C>
Transaction Value as a multiple of:
LTM EBITDA........................... 15.5x 21.1x 21.2x 26.5x
Equity Value as a multiple of:
LTM net income....................... 25.8 38.3 37.1 52.0
</TABLE>
This analysis resulted in a range of implied equity values per share for
Warner-Lambert common stock of $48.68 to $101.90.
DISCOUNTED CASH FLOW ANALYSIS
Lazard Freres performed a discounted cash flow analysis to assist the
Pfizer board of directors in valuing Warner-Lambert based on the present value
of expected future cash flows of Warner-Lambert. The discounted cash flow
analysis was based upon a range of terminal multiples of EBITDA of 20.0x to
24.0x and a range of discount rates from 11 percent to 15 percent. In the
analysis, Lazard Freres used forecasts for Warner-Lambert with varying amounts
of synergies:
- forecasts without synergies; and
- forecasts with synergies.
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CHAPTER ONE -- THE MERGER
Using this analysis, Lazard Freres derived a range of implied equity values
per share for Warner-Lambert common stock as follows:
<TABLE>
<CAPTION>
IMPLIED EQUITY VALUE
CASE PER SHARE
- ---- --------------------
<S> <C>
Forecasts without synergies......................... $78.65-$107.07
Forecasts with synergies............................ $90.16-$141.06
</TABLE>
CONTRIBUTION ANALYSIS
Lazard Freres performed a contribution analysis to assist the Pfizer board
of directors in valuing Warner-Lambert based on the relative contribution of
each company to the combined pro forma entity. Lazard Freres calculated the
relative contribution by both Pfizer and Warner-Lambert to the combined company
with respect to equity market value and enterprise value assuming both primary
and fully diluted shares, and projected financial data including revenues,
earnings before interest, taxes, depreciation and amortization (EBITDA),
earnings before interest, taxes and net income (EBIT). In this analysis, Lazard
Freres adjusted the Pfizer revenues to exclude the Lipitor(R) alliance revenues,
and adjusted both enterprise value and net income for Warner-Lambert to account
for the $1.8 billion break-up fee to be paid by Warner-Lambert to AHP. The
relative contribution analysis does not account for projected cost savings
resulting from the combination.
The results of the contribution analysis indicated that Warner-Lambert
would contribute to the combined entity as follows:
- 38.7% and 39.2% of the combined company's equity value based on primary
and fully diluted shares respectively and closing prices for Pfizer and
Warner-Lambert stock as of February 3, 2000; and
- 39.3% and 39.8% of the combined company's enterprise value based on
primary and fully diluted shares respectively and closing prices for
Pfizer and Warner-Lambert stock as of February 3, 2000.
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The following table illustrates the relative contribution of both Pfizer
and Warner-Lambert to the combined company:
<TABLE>
<CAPTION>
YEARS ENDING 12/31
-----------------------
1999E 2000E 2001E
----- ----- -----
<S> <C> <C> <C>
REVENUES
Pfizer....................................... 53.4% 53.1% 54.4%
Warner-Lambert............................... 46.6% 46.9% 45.6%
EBITDA
Pfizer....................................... 64.3% 63.8% 64.6%
Warner-Lambert............................... 35.7% 36.2% 35.4%
EBIT
Pfizer....................................... 64.8% 64.2% 64.9%
Warner-Lambert............................... 35.2% 35.8% 35.1%
NET INCOME
Pfizer....................................... 66.1% 65.4% 65.5%
Warner-Lambert............................... 33.9% 34.6% 34.5%
</TABLE>
PRO FORMA MERGER ANALYSIS
Lazard Freres performed a pro forma merger analysis to assist the Pfizer
board of directors in determining the financial impact of the merger on Pfizer.
Using earnings estimates provided by Pfizer and Warner-Lambert management for
2000, 2001, and 2002, Lazard Freres compared the fully diluted earnings per
share of Pfizer on a stand-alone basis to the fully diluted earnings per share
of the pro forma combined company. Lazard Freres performed this analysis based
on the exchange ratio of 2.75 and assumed that the combination of Pfizer and
Warner-Lambert would yield pre-tax cost savings of $1.6 billion to be phased-in
over three years. This analysis indicated that in 2000, the merger would be
dilutive, and in 2001 and 2002 would be accretive to stand-alone earnings per
share of Pfizer common stock.
PRECEDENT TRANSACTION PREMIUMS ANALYSIS
Lazard Freres performed a precedent transaction premiums analysis to assist
the Pfizer board of directors in valuing Warner-Lambert based upon the premiums
paid in selected transactions. In conducting its analysis, Lazard Freres
analyzed the premiums paid in the following types of transactions:
- selected comparable precedent pharmaceutical transactions;
- precedent transactions over $20 billion;
- selected precedent pharmaceutical transactions over $1 billion; and
- selected precedent hostile/unsolicited transactions over $5 billion.
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Selected Comparable Precedent Pharmaceutical Transactions. Lazard Freres
calculated a range of premiums paid in the following selected transactions in
the pharmaceutical industry:
- Glaxo Wellcome/SmithKline Beecham
- Zeneca Group/Astra
- Sanofi/Synthelabo
The range of premiums over the target's closing stock one week prior to the
announcement of the transaction was 8.4% to 27.5%. Using the closing price for
Warner-Lambert common stock on October 26, 1999, Lazard Freres derived a range
of implied equity values per share for Warner-Lambert common stock of $82.08 to
$96.58.
Precedent Transactions Over $20 Billion. Lazard Freres calculated a range
of premiums paid in the following precedent transactions with transaction values
over $20 billion:
- Mannesmann/Orange
- Clear Channel Communications/AMFM
- AT&T/MediaOne Group
- BP Amoco/ARCO
- Olivetti & Co./Telecom Italia
- Lucent Technologies/Ascend Communications
- Exxon/Mobil
- AT&T/Tele-Communications
- Berkshire Hathaway/General Re
- Daimler-Benz/Chrysler
The range of median and mean premiums paid over the target's closing stock
price one week and one month prior to the announcement of the transaction was
35.5% to 48.8%. Using the closing prices for Warner-Lambert common stock on
October 26, 1999 and October 4, 1999, Lazard Freres derived a range implied
equity values per share for Warner-Lambert common stock of $100.97 to $103.63.
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Selected Precedent Pharmaceutical Transactions Over $1 Billion. Lazard
Freres calculated a range of premiums paid in the following transactions and
proposed transactions in the pharmaceutical industry with transaction values
over $1 billion:
- - Glaxo Wellcome/SmithKline Beecham
- - Monsanto/Pharmacia & Upjohn
- - AHP/Warner-Lambert
- - Shire Pharmaceutical/Roberts Pharmaceuticals
- - Rhone-Poulenc/Hoechst
- - Zeneca Group/Astra
- - Sanofi/Synthelabo
- - Amersham International/Nycomed
- - Hoechst/Roussel Uclaf
- - Sandoz/Ciba-Geigy
- - Pharmacia/Upjohn
- - Hoechst /Marion Merrell Dow
- - Glaxo/Wellcome
- - AHP/American Cyanamid
- - Roche Holdings/Syntex
- - Hoechst Celanese/Copley Pharmaceuticals
- - Rhone-Poulenc/Rorer Group
The range of median and mean premiums paid or offered over the target's
closing stock price one week and one month prior to the announcement of the
transaction or proposed transaction was 33.8% to 45.5%. Using the closing prices
for Warner-Lambert common stock on October 26, 1999 and October 4, 1999, Lazard
Freres derived a range of implied equity values per share for Warner-Lambert
common stock of $96.32 to $105.50.
Selected Precedent Hostile/Unsolicited Transactions Over $5
Billion. Lazard Freres calculated a range of premiums paid or offered in the
following selected precedent hostile or unsolicited transactions and proposed
transactions with transaction values over $5 billion since January 1, 1995:
- - Royal Bank of Scotland Group/ National Westminster Bank
- - Vodafone AirTouch/Mannesmann
- - Bank of Scotland/National Westminster Bank
- - Assicurazioni Generali/INA
- - Alcoa/Reynolds Metals
- - Total/Elf Aquitaine
- - NiSource/Columbia Energy Group
- - AT&T/MediaOne Group
- - BNP/Paribas
- - Olivetti & Co./Telecom Italia
- - Granada Group/Forte
- - Wells Fargo/First Interstate Bankcorp
- - Glaxo/Wellcome
The range of median and mean premiums paid over the target's closing stock
price one week and one month prior to the announcement of the hostile or
unsolicited bid was 33.4% to 35.8%. Using the closing price for Warner-Lambert
common stock on October 26, 1999 and October 4, 1999, Lazard Freres derived a
range of implied equity values per share for Warner-Lambert common stock of
$92.04 to $102.89.
Lazard Freres is an internationally recognized investment banking firm and
is continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements, leveraged
buyouts and valuations for estate, corporate and other purposes. Lazard Freres
was selected to act as financial advisor to the Pfizer board of directors
because of its expertise and its reputation in investment banking and mergers
and acquisitions and its familiarity with Pfizer.
In addition to the financial advisory services referred to above, Lazard
Freres has from time to time provided investment banking and related services to
Pfizer for which Lazard Freres has received customary fees. In the ordinary
course of its business, Lazard Freres or its affiliates may actively trade the
securities of Pfizer or Warner-Lambert for their own
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CHAPTER ONE -- THE MERGER
account and for the accounts of their customers and, accordingly, at any time
may hold a long or short position in such securities.
Pfizer and Lazard Freres have entered into a letter agreement, dated as of
November 4, 1999, relating to the services to be provided by Lazard Freres in
connection with the merger and the transactions related to it, under which
Pfizer has agreed to pay Lazard Freres the following fees in the context of the
merger:
(i) a retainer fee of $2,000,000 payable upon the engagement of Lazard
Freres;
(ii) a fee of $4,500,000 payable upon the execution of the merger
agreement; and
(iii) a fee of $15,500,000 payable upon consummation of the merger.
Pfizer agreed to reimburse Lazard Freres for certain out-of-pocket expenses
incurred in connection with the engagement. In addition, Pfizer agreed to
indemnify Lazard Freres against certain liabilities, including liabilities under
the federal securities law, relating to or arising out of its engagement.
OPINION OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
Pfizer retained Merrill Lynch to act as its financial advisor in connection
with the proposed merger. On February 6, 2000, Merrill Lynch delivered to the
Pfizer board of directors an oral opinion, subsequently confirmed by delivery of
a written opinion dated February 6, 2000, to the effect that, as of that date,
and based upon and subject to the factors and assumptions set forth in the
opinion, the exchange ratio was fair, from a financial point of view, to Pfizer.
The full text of Merrill Lynch's opinion, dated February 6, 2000, which
sets forth the assumptions made, matters considered, and qualifications and
limitations on the review undertaken by Merrill Lynch, is attached as Annex C to
this document and is incorporated into this document by reference. The summary
of Merrill Lynch's opinion set forth below is qualified in its entirety by
reference to the full text of the opinion. Pfizer shareholders are urged to read
the opinion carefully in its entirety.
Merrill Lynch's opinion was delivered to the Pfizer board of directors for
its information and is directed only to the fairness, from a financial point of
view, of the exchange ratio to Pfizer, does not address any other aspect of the
merger, including the merits of the underlying decision by Pfizer to engage in
the merger, and does not constitute a recommendation to any Pfizer shareholder
as to how the shareholder should vote as to any matter relating to the merger.
In preparing its opinion to the Pfizer board of directors, Merrill Lynch
performed a variety of financial and comparative analyses, including those
described below. The summary set forth below does not purport to be a complete
description of the analyses underlying Merrill Lynch's opinion or the
presentation made by Merrill Lynch to the Pfizer board of directors. The
preparation of a fairness opinion is a complex analytic process involving
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of those methods to the particular
circumstances and, therefore, a fairness opinion is not readily susceptible to
partial analysis or summary description. In arriving at its opinion, Merrill
Lynch did not attribute any particular weight to any analysis or factor
considered by it, but rather made qualitative judgments as to the significance
and relevance of each analysis and factor. Accordingly, Merrill Lynch believes
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CHAPTER ONE -- THE MERGER
that its analyses must be considered as a whole and that selecting portions of
its analyses and factors, or focusing on information presented in tabular
format, without considering all of the analyses and factors or the narrative
description of the analyses, would create a misleading or incomplete view of the
process underlying its opinion.
In performing its analyses, Merrill Lynch made numerous assumptions with
respect to industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond the control of
Merrill Lynch, Warner-Lambert or Pfizer. Any estimates contained in the analyses
performed by Merrill Lynch are not necessarily indicative of actual values or
future results, which may be significantly more or less favorable than suggested
by such analyses. Additionally, estimates of the value of businesses or
securities do not purport to be appraisals or to reflect the prices at which
such businesses or securities might actually be sold. Accordingly, such analyses
and estimates are inherently subject to substantial uncertainty. In addition, as
described above, Merrill Lynch's opinion was among several factors taken into
consideration by the Pfizer board of directors in making its determination to
approve the merger agreement and the merger. Consequently, Merrill Lynch's
analyses should not be viewed as determinative of the decision of the Pfizer
board of directors or Pfizer's management with respect to the fairness of the
exchange ratio set forth in the merger agreement.
In arriving at its opinion, Merrill Lynch, among other things, did the
following:
(1) reviewed publicly available business and financial information
relating to Warner-Lambert and Pfizer that Merrill Lynch deemed to be
relevant;
(2) reviewed information, including financial forecasts, relating to the
business, earnings, cash flows, assets, liabilities and prospects of
Warner-Lambert and Pfizer, as well as the amount and timing of
potential cost savings and related expenses anticipated by the
management of Pfizer to result from the merger;
(3) conducted discussions with members of senior management and
representatives of Warner-Lambert and Pfizer concerning the matters
described in clauses (1) and (2) above, as well as their businesses
and prospects both before and after giving effect to the merger and
potential cost savings and related expenses anticipated by the
management of Pfizer to result from the merger;
(4) reviewed the market prices and valuation multiples for
Warner-Lambert's common stock and Pfizer's common stock and compared
them with those of publicly traded companies that Merrill Lynch deemed
to be relevant;
(5) reviewed the results of operations of Warner-Lambert and Pfizer and
compared them with those of publicly traded companies that Merrill
Lynch deemed to be relevant;
(6) compared the proposed financial terms of the merger with the financial
terms of other transactions that Merrill Lynch deemed to be relevant;
(7) participated in discussions and negotiations among representatives of
Warner-Lambert and Pfizer and their respective financial and legal
advisors;
(8) reviewed the potential pro forma impact of the merger;
(9) reviewed the merger agreement; and
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CHAPTER ONE -- THE MERGER
(10) reviewed other financial studies and analyses and took into account
other matters as Merrill Lynch deemed necessary, including Merrill
Lynch's assessment of general economic, market and monetary
conditions.
In preparing its opinion, Merrill Lynch assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to
Merrill Lynch, discussed with or reviewed by or for Merrill Lynch or publicly
available, and has not assumed any responsibility for independently verifying
such information and Merrill Lynch has not undertaken an independent evaluation
or appraisal of any of the assets or liabilities of Warner-Lambert or Pfizer. In
addition, Merrill Lynch did not assume any obligation to conduct, nor did it
conduct, any physical inspection of the properties or facilities of
Warner-Lambert or Pfizer. With respect to the financial forecast information and
the information concerning potential cost savings and related expenses
anticipated by the management of Pfizer to result from the merger furnished to
or discussed with Merrill Lynch by Warner-Lambert or Pfizer, Merrill Lynch
assumed that they have been reasonably prepared and reflect the best currently
available estimates and judgments of the managements of Warner-Lambert or Pfizer
as to the expected future financial performance of Warner-Lambert or Pfizer, as
the case may be, and the potential cost savings and related expenses anticipated
by the management of Pfizer to result from the merger. Merrill Lynch further
assumed that the merger will be accounted for as a pooling-of-interests under
generally accepted accounting principles and that it will qualify as a tax-free
reorganization for United States federal income tax purposes.
Merrill Lynch's opinion is necessarily based upon market, economic and
other conditions as they existed on, and on the information made available to
Merrill Lynch as of, the date of the opinion. Merrill Lynch assumed that in the
course of obtaining the necessary regulatory or other consents or approvals,
contractual or otherwise, for the merger, no restrictions, including any
divestiture requirements or amendments or modifications, will be imposed that
will have a material adverse effect on the contemplated benefits of the merger.
Merrill Lynch did not express any opinion as to the prices at which the Pfizer
common stock will trade subsequent to the merger. Although Merrill Lynch
evaluated the fairness, from a financial point of view, of the exchange ratio,
Merrill Lynch was not requested to, and did not, recommend the specific
consideration payable in the merger, which consideration was determined through
negotiations between Warner-Lambert and Pfizer and approved by the Pfizer board
of directors. No other limitation was imposed on Merrill Lynch with respect to
the investigations made or procedures followed by Merrill Lynch in rendering its
opinion.
FINANCIAL ANALYSIS
The following is a summary of the material analyses performed by Merrill
Lynch in connection with its opinion to the Pfizer board of directors dated
February 6, 2000. SOME OF THE FINANCIAL ANALYSES SUMMARIZED BELOW INCLUDE
INFORMATION PRESENTED IN TABULAR FORMAT. IN ORDER TO UNDERSTAND FULLY MERRILL
LYNCH'S FINANCIAL ANALYSES, THE TABLES MUST BE READ TOGETHER WITH THE TEXT OF
THE SUMMARY. THE TABLES ALONE DO NOT CONSTITUTE A COMPLETE DESCRIPTION OF THE
FINANCIAL ANALYSES. CONSIDERING THE DATA SET FORTH BELOW WITHOUT CONSIDERING THE
FULL NARRATIVE DESCRIPTION OF THE FINANCIAL ANALYSES, INCLUDING THE
METHODOLOGIES AND ASSUMPTIONS UNDERLYING THE ANALYSES, COULD CREATE A MISLEADING
OR INCOMPLETE VIEW OF MERRILL LYNCH'S FINANCIAL ANALYSES.
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CHAPTER ONE -- THE MERGER
Selected Companies Analysis. Merrill Lynch compared financial, operating
and stock market data of Warner-Lambert and Pfizer to corresponding data of the
following publicly traded pharmaceutical companies:
- American Home Products Corporation
- Astra/Zeneca PLC
- Bristol-Myers Squibb Company
- Eli Lilly and Company
- Glaxo Wellcome PLC
- Johnson & Johnson
- Merck & Co., Inc.
- Novartis AG
- Roche Holding Ltd.
- Schering-Plough Corporation
- SmithKline Beecham plc
- Pfizer Inc., in the analysis of Warner-Lambert
- Warner-Lambert Company, in the analysis of Pfizer
Merrill Lynch reviewed, among other things, price per share as a multiple
of estimated earnings per share, commonly referred to as EPS, for calendar year
2000. All multiples were based on closing stock prices on February 3, 2000,
except data for Warner-Lambert, which was based on the closing stock price as of
November 2, 1999, which is the day prior to an article appearing in The Wall
Street Journal and other media sources discussing a potential merger of AHP and
Warner-Lambert. Estimated financial data for the selected companies was based on
publicly available research analysts' estimates and estimated financial data for
Warner-Lambert and Pfizer was based on estimates of the managements of
Warner-Lambert or Pfizer, as the case may be. Merrill Lynch then applied a range
of selected multiples for the selected companies to corresponding data of
Warner-Lambert and Pfizer. This analysis indicated an implied equity reference
range for Warner-Lambert of approximately $74.75 to $90.50 per share and an
implied equity reference range for Pfizer of approximately $34.25 to $41.50 per
share.
None of the selected companies is identical to Warner-Lambert or Pfizer.
Accordingly, an analysis of the results of the Selected Companies Analysis
involves complex considerations of the selected companies and other factors that
could affect the public trading value of Warner-Lambert, Pfizer and the selected
companies.
Discounted Cash Flow Analysis.
Warner-Lambert. Merrill Lynch estimated the present value of the
stand-alone, unlevered, after-tax cash flows that Warner-Lambert could produce
over the calendar years 2000 through 2004. Ranges of terminal values were
derived using multiples of estimated calendar year 2005 net income of 28.0x to
32.0x and multiples of estimated calendar year
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2004 earnings before interest, taxes, depreciation and amortization, commonly
referred to as EBITDA, of 23.0x to 25.0x. The free cash flows and terminal
values were then discounted to present value using discount rates of 12% to 14%.
Using terminal value ranges based upon estimated calendar year 2005 net income,
this analysis indicated an implied equity reference range for Warner-Lambert of
approximately $84.50 to $103.50 per share. Using terminal value ranges based
upon estimated calendar year 2004 EBITDA, this analysis indicated an implied
equity reference range for Warner-Lambert of approximately $87.50 to $102.50 per
share.
Pfizer. Merrill Lynch estimated the present value of the stand-alone,
unlevered, after-tax free cash flows that Pfizer could produce over the calendar
years 2000 through 2004. Ranges of terminal values were derived using multiples
of estimated calendar year 2005 net income of 28.0x to 32.0x and multiples of
estimated calendar year 2004 EBITDA of 22.0x to 26.0x. The free cash flows and
terminal values were then discounted to present value using discount rates of
12% to 14%. Using terminal value ranges based upon estimated calendar year 2005
net income, this analysis indicated an implied equity reference range for Pfizer
of approximately $40.50 to $49.75 per share. Using terminal value ranges based
upon estimated calendar year 2004 EBITDA, this analysis indicated an implied
equity reference range for Pfizer of approximately $40.25 to $51.00 per share.
Relative Discounted Cash Flow Analysis. Merrill Lynch compared the implied
per share equity reference ranges for Warner-Lambert and Pfizer described above
in order to derive an implied exchange ratio reference range for Warner-Lambert
and Pfizer under two scenarios, both before and after taking into account
potential cost savings and related expenses anticipated by the management of
Pfizer to result from the merger. This analysis indicated the following implied
exchange ratio ranges:
<TABLE>
<CAPTION>
IMPLIED EXCHANGE RATIOS
-----------------------------------
NET INCOME EBITDA
---------------- ----------------
<S> <C> <C>
Without cost savings and related
expenses............................ 1.694x to 2.549x 1.718x to 2.551x
With cost savings and related
expenses............................ 2.012x to 2.938x 2.028x to 2.944x
</TABLE>
Selected Merger and Acquisition Analysis.
Warner-Lambert. Using publicly available information, Merrill Lynch
analyzed the premiums to the targets one-week average closing stock price paid
or proposed to be paid in the following transactions:
<TABLE>
<CAPTION>
ACQUIROR TARGET
-------- ------
<S> <C> <C>
- - Aegon N.V.................................... TransAmerica Corporation
- - America Online, Inc. ........................ Time Warner Inc.
- - American International Group, Inc. .......... SunAmerica, Inc.
- - AT&T Corp. .................................. Tele-Communications, Inc.
- - AT&T Corp. .................................. MediaOne Group, Inc.
- - BANK ONE Corporation......................... First Chicago NBD Corporation
- - Banque Nationale de Paris.................... Paribas SA
</TABLE>
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CHAPTER ONE -- THE MERGER
<TABLE>
<CAPTION>
ACQUIROR TARGET
-------- ------
<S> <C> <C>
- - BP Amoco p.l.c. ............................. Atlantic Richfield Company
- - British Petroleum Company.................... Amoco Company
- - Carrefour SA................................. Promodes SA
- - Clear Channel Communications, Inc. .......... AMFM Inc.
- - Daimler-Benz AG.............................. Chrysler Corporation
- - El Paso Energy Corporation................... The Coastal Corporation
- - Exxon Corporation............................ Mobil Corporation
- - Firstar Corporation.......................... Mercantile Bancorporation
Inc.
- - Fleet Financial Group Inc. .................. BankBoston Corporation
- - Fortis AG.................................... Generale de Banque SA
- - Global Crossing Ltd. ........................ Frontier Corporation
- - JDS Uniphase Corporation..................... E-Tek Dynamics, Inc.
- - Lucent Technologies Inc. .................... Ascend Communications, Inc.
- - Mannesmann AG................................ Orange plc
- - MCI Worldcom, Inc. .......................... Sprint Corporation
- - Olivetti S.p.A. ............................. Telecom Italia S.p.A.
- - Repsol SA.................................... YPF SA
- - Sanofi SA.................................... Synthelabo SA
- - Scottish Power plc........................... PacifiCorp
- - The Dow Chemical Company..................... Union Carbide Corporation
- - TOTAL FINA S.A. ............................. Elf Aquitaine
- - Tyco International Ltd. ..................... AMP Incorporated
- - Universal Studios, Inc. ..................... PolyGram N.V.
- - Vodafone AirTouch Plc........................ Mannesmann AG
- - Vodafone Group Plc........................... AirTouch Communications
- - Wal-Mart Stores (UK) Ltd. ................... ASDA Group Ltd.
- - Washington Mutual, Inc. ..................... H.F. Ahmanson & Company
</TABLE>
Merrill Lynch reviewed, among other things, the percentage premium paid or
proposed to be paid by the acquiror relative to the target's average price per
share for the one-week period prior to the public announcement of the proposed
transaction. Merrill Lynch then applied a range of premiums for the selected
transactions of 35% to 50% to the average price per share of Warner-Lambert for
the one-week period ending November 2, 1999. This analysis indicated an implied
equity reference range for Warner-Lambert of approximately $104.75 to $112.50
per share.
No company or transaction used in the Selected Merger and Acquisition
Analysis is identical to Warner-Lambert, Pfizer or the proposed merger.
Accordingly, an analysis of the results of the Selected Merger and Acquisition
Analysis involves complex considerations of the companies involved and the
transactions and other factors that could affect the acquisition value of the
companies and Warner-Lambert.
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CHAPTER ONE -- THE MERGER
Relative Contribution Analysis.
Using estimated financial data for Warner-Lambert and Pfizer, Merrill Lynch
analyzed the relative contributions of Warner-Lambert and Pfizer to the combined
company's projected net income and EBITDA for fiscal years 2000 through 2002,
both before and after taking into account potential cost savings anticipated by
the management of Pfizer to result from the merger. This analysis indicated the
following:
<TABLE>
<CAPTION>
WITHOUT COST SAVINGS WITH COST SAVINGS
- ---------------------------------------------- ---------------------------------------
PFIZER WARNER-LAMBERT PFIZER WARNER-LAMBERT COST SAVINGS
------ -------------- ------ -------------- ------------
<S> <C> <C> <C> <C> <C>
NET INCOME (AFTER-TAX)
2000............... 65.4% 34.6% 63.9% 33.9% 2.3%
2001............... 65.5% 34.5% 59.7% 31.5% 8.9%
2002............... 66.2% 33.8% 58.5% 29.9% 11.6%
EBITDA (PRE-TAX)
2000............... 63.8% 36.2% 62.5% 35.5% 2.0%
2001............... 64.6% 35.4% 59.5% 32.6% 7.9%
2002............... 65.9% 34.1% 58.9% 30.5% 10.5%
</TABLE>
Based on the exchange ratio of 2.750x in the merger, current Pfizer
shareholders would own approximately 60.8% and current shareholders of
Warner-Lambert would own approximately 39.2% of the combined company's equity
value following the merger. The results described above indicated the following
implied exchange ratio ranges for the merger:
<TABLE>
<CAPTION>
IMPLIED EXCHANGE RATIOS
------------------------------------
NET INCOME EBITDA
---------------- ----------------
<S> <C> <C>
Without cost savings................ 2.186x to 2.265x 2.188x to 2.402x
With cost savings................... 2.413x to 3.019x 2.536x to 2.943x
</TABLE>
PRO FORMA MERGER ANALYSIS
Merrill Lynch analyzed the potential pro forma effect of the merger on
Pfizer's estimated earnings per share in fiscal years 2000, 2001 and 2002, based
on estimates of EPS and net income provided by the managements of Warner-Lambert
and Pfizer and publicly available research analysts' estimates. Based on the
exchange ratio of 2.750x in the merger, this analysis indicated that, after
taking into account potential cost savings and related expenses anticipated by
the management of Pfizer to result from the merger, the proposed merger would be
dilutive to Pfizer's earnings per share in fiscal year 2000 and accretive to
Pfizer's earnings per share in fiscal years 2001 and 2002. The actual results
achieved by the combined company may vary from projected results and the
variations may be material.
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CHAPTER ONE -- THE MERGER
OTHER FACTORS
In the course of preparing its opinion, Merrill Lynch also reviewed and
considered other information and data, including the following:
- the trading characteristics of Warner-Lambert and Pfizer;
- historical market prices for Warner-Lambert common stock and Pfizer
common stock;
- the relative exchange ratio of Warner-Lambert and Pfizer over the period
from February 4, 1997 to February 3, 2000; and
- publicly available research analysts' estimates of the twelve-month price
per share targets for Warner-Lambert common stock and Pfizer common
stock, which were then discounted to present value on both a stand-alone
and relative basis.
MISCELLANEOUS
Pursuant to the terms of Merrill Lynch's engagement, Pfizer has agreed to
pay Merrill Lynch for its financial advisory services in connection with the
merger the following fees, payable in cash:
- a fee of $2.0 million payable upon the engagement of Merrill Lynch;
- a fee of $4.5 million payable upon the execution of the merger agreement;
and
- a fee of $15.5 million payable upon the closing of the merger.
Pfizer also has agreed to reimburse Merrill Lynch for reasonable
out-of-pocket expenses incurred by Merrill Lynch in performing its services,
including the fees and expenses for legal counsel, and to indemnify Merrill
Lynch and related persons and entities against liabilities, including
liabilities under the federal securities laws, arising out of Merrill Lynch's
engagement.
Pfizer retained Merrill Lynch based upon Merrill Lynch's experience and
expertise. Merrill Lynch is an internationally recognized investment banking and
advisory firm. Merrill Lynch, as part of its investment banking business, is
regularly engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes.
Merrill Lynch and its affiliates have in the past provided financing
services to Pfizer and Warner-Lambert and may continue to do so and have
received, and may receive, compensation for the rendering of such services. In
the ordinary course of business, Merrill Lynch and its affiliates may actively
trade in the securities of Warner-Lambert and Pfizer for their own accounts and
for the accounts of customers and, accordingly, may at any time hold a long or
short position in such securities.
OPINIONS OF WARNER-LAMBERT'S FINANCIAL ADVISORS
Bear, Stearns & Co. Inc. and Goldman, Sachs & Co., Warner-Lambert's
financial advisors, have rendered separate written opinions, each dated February
6, 2000, to the Warner-Lambert board of directors as to the fairness, from a
financial point of view, to
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CHAPTER ONE -- THE MERGER
holders of Warner-Lambert common stock of the exchange ratio in the merger. The
full text of the written opinions of Bear Stearns and Goldman Sachs are attached
to this document as Annexes D and E. We encourage you to read the opinions
carefully in their entirety to understand the procedures followed, assumptions
made, matters considered and limitations on the review undertaken by each of
Bear Stearns and Goldman Sachs in providing their opinions. THE OPINIONS OF BEAR
STEARNS AND GOLDMAN SACHS ARE DIRECTED TO THE WARNER-LAMBERT BOARD OF DIRECTORS
AND DO NOT CONSTITUTE RECOMMENDATIONS TO ANY SHAREHOLDER WITH RESPECT TO ANY
MATTER RELATING TO THE MERGER.
OPINION OF BEAR STEARNS
Warner-Lambert engaged Bear, Stearns & Co. Inc. as its financial advisor
based on Bear Stearns' experience and expertise in similar transactions. Bear
Stearns is an internationally recognized investment banking firm. Bear Stearns,
as part of its investment banking business, is continuously engaged in the
valuation of businesses and securities in connection with mergers and
acquisitions, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes.
At the February 6, 2000 meeting of the Warner-Lambert Board of Directors,
Bear Stearns delivered its written opinion to the effect that, as of the date
thereof, and subject to the assumptions, qualifications and limitations set
forth in the opinion, the exchange ratio was fair, from a financial point of
view, to the shareholders of Warner-Lambert.
The full text of Bear Stearns' written opinion, which sets forth the
assumptions made, matters considered and qualifications and limitations on the
review undertaken by Bear Stearns, is attached as Annex D to this joint proxy
statement/prospectus and is incorporated herein by reference. The summary of the
Bear Stearns opinion set forth below is qualified in its entirety by reference
to the full text of such opinion. WARNER-LAMBERT SHAREHOLDERS ARE URGED TO READ
THE BEAR STEARNS OPINION IN ITS ENTIRETY. In reading the discussion of the Bear
Stearns opinion set forth below, Warner-Lambert shareholders should be aware
that such opinion:
- was provided to the Warner-Lambert board of directors for its benefit and
use in connection with its consideration as to whether the exchange ratio
was fair, from a financial point of view, to the shareholders of
Warner-Lambert;
- did not constitute a recommendation to the board of directors of
Warner-Lambert in connection with the merger;
- did not constitute a recommendation to any holders of Warner-Lambert
common stock as to how to vote in connection with the merger;
- did not address Warner-Lambert's underlying business decision to pursue
the merger; and
- did not express any opinion as to the price or range of prices at which
the shares of common stock of Warner-Lambert and Pfizer would trade
subsequent to the announcement of the merger or as to the price or range
of prices at which the shares of common stock of Pfizer may trade
subsequent to the consummation of the merger.
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CHAPTER ONE -- THE MERGER
Although Bear Stearns evaluated the fairness, from a financial point of
view, of the exchange ratio to the shareholders of Warner-Lambert, the exchange
ratio itself was determined by Warner-Lambert and Pfizer through arms-length
negotiations. Bear Stearns provided advice to Warner-Lambert during the course
of such negotiations. Warner-Lambert did not provide specific instructions to,
or place any limitations on, Bear Stearns with respect to the procedures to be
followed or factors to be considered by it in performing its analyses or
providing its opinion.
In arriving at its opinion, Bear Stearns, among other things:
- reviewed the merger agreement between Warner-Lambert and Pfizer;
- reviewed each of Warner-Lambert's and Pfizer's Annual Reports to
Shareholders and Annual Reports on Form 10-K for the years ended December
31, 1996 through 1998, and their respective 1999 Quarterly Reports on
Form 10-Q and preliminary financial statements for the period ended
December 31, 1999;
- reviewed certain operating and financial information provided to Bear
Stearns by the senior managements of Warner-Lambert and Pfizer relating
to Warner-Lambert's and Pfizer's respective businesses and prospects,
including financial projections of Warner-Lambert and Pfizer for the
fiscal years ending December 31, 1999 through 2002 and certain other
forward-looking information;
- reviewed certain estimates of cost savings and other combination benefits
expected to result from the merger, jointly prepared and provided to Bear
Stearns by the senior managements of Warner-Lambert and Pfizer;
- met with certain members of the senior managements of Warner-Lambert and
Pfizer and Pfizer's advisors to discuss:
- the current landscape and competitive dynamics related to the markets
in which Warner-Lambert and Pfizer operate;
- each company's operations, historical financial statements, prospects
and financial condition;
- each company's views of the strategic, business, operational and
financial rationale for, and expected strategic benefits and other
implications of, the merger;
- the financial projections of Warner-Lambert and Pfizer, and the
estimated combination benefits; and
- other assumptions and judgments underlying certain estimates which
Bear Stearns deemed relevant to its analysis;
- reviewed the historical prices, valuation parameters and trading volumes
of the common shares of Warner-Lambert and Pfizer;
- reviewed publicly available financial data, stock market performance data
and valuation parameters of companies which Bear Stearns deemed generally
comparable to Warner-Lambert and Pfizer or otherwise relevant to its
analysis, as appropriate;
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CHAPTER ONE -- THE MERGER
- reviewed the terms, to the extent publicly available, of recent merger
and acquisition transactions of companies which Bear Stearns deemed
generally comparable to the merger or otherwise relevant to its analysis;
and
- conducted such other studies, analyses, inquiries and investigations as
Bear Stearns deemed appropriate.
In preparing its opinion, Bear Stearns relied upon and assumed, without
independent verification, the accuracy and completeness of the financial and
other information, including without limitation the financial projections and
estimated combination benefits, provided to Bear Stearns by Warner-Lambert and
Pfizer. With respect to the financial projections and estimated combination
benefits, Bear Stearns assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of the senior
managements of Warner-Lambert and Pfizer as to the expected future performance
of Warner-Lambert and Pfizer, respectively. Bear Stearns did not assume any
responsibility for the independent verification of any such information or of
the financial projections and estimated combination benefits provided to it, and
Bear Stearns further relied upon the assurances of the senior managements of
Warner-Lambert and Pfizer that they are unaware of any facts that would make the
information, financial projections and estimated benefits provided to Bear
Stearns incomplete or misleading.
In arriving at its opinion, Bear Stearns did not perform or obtain any
independent appraisal of the assets or liabilities of Warner-Lambert and Pfizer,
nor was it furnished with any such appraisals. Bear Stearns assumed that the
merger will:
- qualify as a tax-free "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code;
- be accounted for as a pooling-of-interests in accordance with U.S.
generally accepted accounting principles; and
- be consummated without any regulatory limitations, restrictions,
conditions, amendments or modifications that collectively would have a
material effect on Warner-Lambert or Pfizer.
Bear Stearns' opinion is necessarily based on economic, market and other
conditions, and the information made available to Bear Stearns, as of the date
of the opinion.
The following is a brief summary of the material valuation, financial and
comparative analyses considered by Bear Stearns in connection with the rendering
of its opinion. This summary does not purport to be a complete description of
the analyses underlying the Bear Stearns opinion.
In performing its analyses, Bear Stearns made numerous assumptions with
respect to industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond the control of
Bear Stearns, Warner-Lambert and Pfizer. Any estimates contained in the analyses
performed by Bear Stearns are not necessarily indicative of actual values or
future results, which may be significantly more or less favorable than suggested
by such analyses. Additionally, estimates of the value of businesses or
securities do not purport to be appraisals or to reflect the prices at which
such businesses or securities might actually be sold. Accordingly, such analyses
and estimates are inherently subject to substantial uncertainty.
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CHAPTER ONE -- THE MERGER
Pro Forma Merger Analysis. Bear Stearns reviewed and analyzed certain pro
forma financial impacts of the merger on holders of Warner-Lambert and Pfizer
common stock based on the following:
- the exchange ratio;
- the financial projections;
- an assumption for analytic purposes that the combination of
Warner-Lambert and Pfizer would realize estimated pre-tax cost savings of
$200 million, $1 billion and $1.6 billion in 2000, 2001 and 2002,
respectively (tax-effected at a 35% tax rate), an assumption for analytic
purposes that Warner-Lambert would pay a cash fee of $1.8 billion to
American Home Products as part of the termination of the merger agreement
between Warner-Lambert and American Home Products and that this fee would
be funded with debt at an interest rate of 5.5% (tax-effected at 35%) and
an assumption for analytic purposes that there would be no financial
statement impact of potential restructuring costs or other one-time costs
associated with the merger; and
- pooling-of-interests accounting treatment for the merger.
The following table shows the percentage accretion(dilution) to projected
earnings per share ("EPS") for Warner-Lambert and Pfizer, both with and without
factoring in the estimated cost savings:
<TABLE>
<CAPTION>
1999PF 2000E 2001E 2002E
------ ----- ----- -----
<S> <C> <C> <C> <C>
With Estimated Cost Savings:
Warner-Lambert..................... 13.7% 11.4% 20.1% 26.5%
Pfizer.......................... (7.0%) (4.6%) 1.3% 3.0%
Without Estimated Cost Savings:
Warner-Lambert..................... 13.7% 9.1% 10.4% 13.1%
Pfizer.......................... (7.0%) (6.5%) (6.9%) (7.9%)
</TABLE>
Unaffected Warner-Lambert Stock Price Analysis. Because of the public
announcements of the merger between Warner-Lambert and AHP and the subsequent
transaction proposal by Pfizer, Warner-Lambert's stock price at the time the
merger between Warner-Lambert and Pfizer was announced was not deemed to be a
true indication of the level where Warner-Lambert's stock would have traded on a
stand-alone basis. Therefore, Bear Stearns estimated an unaffected
Warner-Lambert stock price to be used in many of the financial analyses
performed. The unaffected stock price was estimated based on Warner-Lambert's
closing stock price on November 2, 1999, the day before press reports of merger
discussions between Warner-Lambert and American Home Products, adjusted for:
- the equally weighted average change in stock price from November 2, 1999
to February 4, 2000 (one trading day before the announcement of the
merger between Warner-Lambert and Pfizer) for an index of U.S.
pharmaceutical companies composed of Abbott Laboratories, Bristol-Myers
Squibb Company, Johnson & Johnson, Eli Lilly and Company, Merck & Co.,
Inc. and Schering-Plough Corporation; and
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CHAPTER ONE -- THE MERGER
- an illustrative stock price increase of $3.75, based on the approximate
$0.15 increase in the consensus Wall Street research estimates for 2000
EPS for Warner-Lambert between November 2, 1999 and February 4, 2000
multiplied by an assumed P/E multiple of 25.0x.
As of February 4, 2000, Warner-Lambert's unaffected stock price was
estimated at $75.42. Bear Stearns used several other analyses to estimate the
unaffected stock price for Warner-Lambert, all of which generally supported such
price.
Illustrative Shareholder Value Analysis. Bear Stearns analyzed various
hypothetical pro forma impacts of the merger on the value of a share of
Warner-Lambert common stock, using a range of potential P/E multiples applied to
the projected 2001 EPS (assuming pre-tax cost savings of $1 billion in 2001
tax-effected at 35%) of the pro forma combined company. Bear Stearns used
illustrative 2001E P/E multiples of 26.0x (the estimated unaffected multiple for
Warner-Lambert as of February 4, 2000), 28.6x (the market multiple for Pfizer as
of February 4, 2000) and 27.7x (the blended market multiple for Warner-Lambert
and Pfizer as of February 4, 2000, calculated as the income-weighted average of
the estimated unaffected stand-alone market multiple of Warner-Lambert and the
stand-alone market multiple of Pfizer). The following table shows the calculated
hypothetical pro forma value of a share of Warner-Lambert common stock across
the range of illustrative P/E multiples and the percentage difference of each
value versus $94.56, the actual closing stock price of Warner-Lambert as of
February 4, 2000 and $75.42, the estimated unaffected closing stock price of
Warner-Lambert as of February 4, 2000:
<TABLE>
<CAPTION>
% CHANGE % CHANGE
ILLUSTRATIVE HYPOTHETICAL VS. 2/4/00 VS. 2/4/00
2001E VALUE PER ACTUAL UNAFFECTED
P/E SHARE PRICE PRICE
------------ ------------ ---------- ----------
<S> <C> <C> <C> <C>
2001E Multiple Used:
Pfizer Stand-Alone....... 28.6x $99.57 5.3% 32.0%
Blended.................. 27.7x $96.42 2.0% 27.8%
Warner-Lambert
Unaffected Stand-Alone..... 26.0x $90.55 (4.2)% 20.1%
</TABLE>
Bear Stearns also analyzed the hypothetical value of a share of
Warner-Lambert common stock by estimating:
- Warner-Lambert's share of the combined stand-alone market value of Pfizer
and Warner-Lambert, on an estimated unaffected basis, given the exchange
ratio for the merger;
- Warner-Lambert's share of the illustrative value of the peak estimated
cost savings of $1.6 billion, tax-effected at 35% and capitalized at an
illustrative P/E multiple of 17.5x; and
- the potential value of the combined company if its P/E multiple expanded
to Pfizer's stand-alone P/E multiple.
Bear Stearns estimated that the implied value per share of Warner-Lambert
common stock would be $101.44, an increase of 34.5% versus the estimated
unaffected price of $75.42.
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In performing its analyses, Bear Stearns was not expressing any opinion as
to the price or range of prices at which the common stock of the combined
company may trade subsequent to the consummation of the merger. The prices at
which the common stock of the combined company ultimately trades in the stock
market will be determined by a variety of quantitative and qualitative
factors -- for example, the P/E multiple at which the common stock of the
combined company is actually valued by potential investors, which may be
significantly more or less favorable than the illustrative range of P/E
multiples used by Bear Stearns for its analytical purposes and the level of
combination benefits ultimately anticipated by the stock market -- none of which
can be predicted with certainty.
Relative Contribution Analysis. Bear Stearns calculated the relative
contribution by each of Warner-Lambert and Pfizer to the combined company with
respect to equity market capitalization, using estimated fully diluted shares
outstanding, and various historical and projected financial performance
statistics including revenues, earnings before interest and taxes and net income
excluding any unusual and non-recurring items for the years 1999 through 2002.
In this analysis, Bear Stearns did not take into account any combination
benefits or the payment of the termination fee to American Home Products.
The results of this analysis indicated that Warner-Lambert would
contribute:
- 37.7% of the combined company's equity market capitalization based on the
closing prices for Warner-Lambert common stock and Pfizer common stock as
of February 4, 2000;
- 37.1% of the combined company's equity market capitalization based on the
respective average of such closing prices for the twenty trading days
ended February 4, 2000; and
- 32.7% of the combined company's equity market capitalization based on the
estimated unaffected closing price for Warner-Lambert common stock as of
February 4, 2000 and the closing price for Pfizer common stock as of
February 4, 2000.
The following table shows the relative contribution of each of
Warner-Lambert and Pfizer to the combined company across various financial
performance statistics:
<TABLE>
<CAPTION>
1999E 2000E 2001E 2002E
----- ----- ----- -----
<S> <C> <C> <C> <C>
Revenues:
Warner-Lambert...................... 44.4% 44.3% 42.9% 41.8%
Pfizer.............................. 55.6% 55.7% 57.1% 58.2%
EBIT:
Warner-Lambert...................... 35.4% 36.0% 35.3% 34.1%
Pfizer.............................. 64.6% 64.0% 64.7% 65.9%
Net Income:
Warner-Lambert...................... 33.9% 35.2% 35.0% 34.2%
Pfizer.............................. 66.1% 64.8% 65.0% 65.8%
</TABLE>
By way of comparison, Bear Stearns observed that the exchange ratio would
result in the shareholders of Warner-Lambert receiving a collective ownership
position in the
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CHAPTER ONE -- THE MERGER
combined company following the merger of 38.9% based on estimated fully diluted
shares outstanding.
Historical Stock Price Performance and Implied Market Exchange
Ratios. Bear Stearns reviewed the historical closing stock prices of
Warner-Lambert common stock and Pfizer common stock and the implied market
exchange ratios determined by dividing the price per share of Warner-Lambert
common stock by the price per share of Pfizer common stock over various periods
of time between November 2, 1996 and November 2, 1999. This time period was
chosen in order to exclude the impact of the announced merger between
Warner-Lambert and American Home Products and the transaction proposal by
Pfizer. The following table shows the market exchange ratio as of November 2,
1999 as well as the average, high, and low market exchange ratios for various
periods leading up to November 2, 1999 (these figures compare to the negotiated
exchange ratio of 2.7500):
<TABLE>
<CAPTION>
MARKET EXCHANGE RATIO
-------------------------
TIME PERIOD AVERAGE HIGH LOW
- ----------- ------- ----- -----
<S> <C> <C> <C>
As of 11/2/99................................. 2.057 NA NA
One Week...................................... 2.011 2.078 1.937
Two Weeks..................................... 1.955 2.078 1.832
Three Weeks................................... 1.927 2.078 1.832
Four Weeks.................................... 1.903 2.078 1.790
Five Weeks.................................... 1.890 2.078 1.790
Six Weeks..................................... 1.876 2.078 1.761
Seven Weeks................................... 1.860 2.078 1.750
Eight Weeks................................... 1.843 2.078 1.705
12 Weeks...................................... 1.830 2.078 1.705
26 Weeks...................................... 1.848 2.078 1.705
One Year...................................... 1.776 2.078 1.391
Two Years..................................... 1.849 2.426 1.391
Three Years................................... 1.902 2.539 1.391
</TABLE>
Bear Stearns noted that during the period from November 4, 1999 (the
announcement of the original transaction proposal by Pfizer which called for an
exchange ratio of 2.5) through February 4, 2000 (the last trading day before the
announcement of the merger), the market exchange ratio was generally within a
range between 2.40 and 2.65.
Illustrative Valuation Analysis of Combination Benefits. Bear Stearns
performed an illustrative valuation of the estimated combination benefits based
on the hypothetical capitalized value of estimated incremental net income
assuming:
- a range of 2001E P/E multiples of 26.0x (the estimated unaffected
multiple for Warner-Lambert as of February 4, 2000), 28.6x (the market
multiple for Pfizer as of February 4, 2000), 27.7x (the blended market
multiple for Warner-Lambert and Pfizer as of February 4, 2000, calculated
as the income-weighted average of the estimated unaffected stand-alone
market multiple of Warner-Lambert and the
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stand-alone market multiple of Pfizer) and 17.5x (an illustrative
estimate of a conservative multiple by which the market could capitalize
the estimated combination benefits);
- annual pre-tax estimated combination benefits of $1.2 billion to $2.0
billion (excluding one-time costs to achieve such combination benefits);
and
- a tax rate of 35%.
The following table shows the calculated hypothetical capitalized values of
the estimated combination benefits resulting from this analysis:
<TABLE>
<CAPTION>
ANNUAL PRE-TAX PROJECTED BENEFITS
--------------------------------------------
$1.2 BILLION $1.6 BILLION $2.0 BILLION
------------ ------------ ------------
<S> <C> <C> <C>
2001E P/E Multiple Used:
Pfizer (28.6x)................... $22.3B $29.7B $37.2B
Blended (27.7x).................. $21.6B $28.8B $36.0B
Warner-Lambert (26.0x)........... $20.3B $27.0B $33.8B
Illustrative (17.5x)............. $13.7B $18.2B $22.8B
</TABLE>
Bear Stearns also analyzed the discounted cash flow valuation of the
estimated cost savings assuming:
- $200 million, $1 billion and $1.6 billion of estimated pre-tax cost
savings in 2000, 2001 and 2002, respectively;
- one-time pre-tax restructuring costs of $1.2 billion to achieve the
estimated cost savings in each of 2000 and 2001;
- a tax rate of 35%;
- a range of illustrative discount rates between 10.5% and 13.0%; and
- an assumption that the estimated cost savings grows at a compounded
annual rate of 3% after 2002.
Based on this analysis, the estimated cost savings were valued within a
range of $7.3 billion to $10.4 billion.
Relative Performance/Valuation Analysis. Bear Stearns compared the
projected financial performance and P/E multiples as of February 4, 2000 of
Warner-Lambert and Pfizer to 14 major publicly-traded pharmaceutical and/or life
science companies which it deemed generally comparable to Warner-Lambert and
Pfizer. Such comparable companies consisted of Abbott Laboratories, American
Home Products Corporation, AstraZeneca Group, Bristol-Myers Squibb Company, Eli
Lilly and Company, Glaxo Wellcome plc, Johnson & Johnson, Merck & Co., Inc.,
Monsanto Company, Novartis AG, Pharmacia & Upjohn, Inc., Roche Holding AG,
Schering-Plough Corporation and SmithKline Beecham plc. Bear Stearns utilized
the revenue and earnings forecasts for the comparable companies from publicly
available data from First Call and selected Wall Street equity research reports.
Bear Stearns noted that the projected revenue and earnings growth rates for
Warner-Lambert and Pfizer generally fell within the high end of the projected
growth rates of the comparable companies. Bear Stearns also noted that both
Warner-Lambert's
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CHAPTER ONE -- THE MERGER
estimated unaffected P/E multiples and Pfizer's market P/E multiples were among
the highest of the P/E multiples of the comparable companies.
Bear Stearns also compared the financial performance of the combined
company (including the estimated cost savings) and its pro forma P/E multiples
(based on the income-weighted average of the estimated unaffected stand-alone
P/E multiples of Warner-Lambert and the stand-alone P/E multiples of Pfizer) to
those of the comparable companies. Bear Stearns noted that the combined company
would have a projected revenue growth rate that fell within the high end of the
revenue growth rates of the comparable companies and an earnings growth rate
that was higher than those of any of the comparable companies. Bear Stearns also
noted that the combined company P/E multiples (based on stock prices as of
February 4, 2000) were among the highest of the P/E multiples of the comparable
companies.
Analysis of Precedent Pharmaceutical Industry Transactions. Bear Stearns
compared the valuation multiples implied by the exchange ratio for the merger to
those of 14 major announced or completed transactions within the pharmaceutical
industry which it deemed generally comparable to the merger. These transactions
included:
- Glaxo Wellcome plc/SmithKline Beecham plc
- Monsanto Company/Pharmacia & Upjohn, Inc.
- Zeneca plc/Astra AB
- Sanofi/Synthelabo
- Rhone-Poulenc SA/Hoechst AG
- Rhone- Poulenc SA/Rhone Poulenc Rorer
- Hoechst AG/Roussel-Uclaf
- Sandoz Ltd./Ciba Geigy Ltd.
- Pharmacia AB/Upjohn Co.
- Rhone-Poulenc Rorer/Fisons plc
- Hoechst AG/Marion Merrell Dow
- Glaxo Holdings plc/Wellcome
- American Home Products Corporation/American Cyanamid Company
- Roche Holdings AG/Syntex Corp.
Bear Stearns noted that all of the transaction multiples analyzed for the
merger of Warner-Lambert and Pfizer were higher than the highest of the
corresponding multiples for precedent transactions.
Bear Stearns noted that none of the precedent transactions were identical
to the merger of Warner-Lambert and Pfizer and that, accordingly, any analysis
of the precedent transactions necessarily involved complex considerations and
judgments concerning differences in industry and individual company dynamics,
stock market valuation parameters, financial and operating characteristics and
various other factors that would
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CHAPTER ONE -- THE MERGER
necessarily affect the transaction multiples in the merger as compared to the
multiples for the precedent transactions.
Discounted Cash Flow Analysis. Bear Stearns performed discounted cash flow
analyses based on the financial projections for Warner-Lambert and Pfizer and
the estimated cost savings in the merger assuming:
- a range of illustrative discount rates between 10.5% and 13.0%; and
- a range of illustrative terminal trailing P/E multiples from 24.0x to
32.0x (which implied perpetual growth rates of unlevered net income of
6.1% to 9.6% across the range of illustrative discount rates used).
Discounted cash flow valuations were calculated for both Warner-Lambert and
Pfizer on a stand-alone basis, the combined company without including any
estimated cost savings and the combined company including estimated cost
savings. The following table shows the range of per share values for each of
these cases:
<TABLE>
<CAPTION>
RANGE
----------------------
LOW HIGH
------ -------
<S> <C> <C> <C>
Warner-Lambert:
Stand-Alone...................................... $65.16 - $ 90.44
Combined Company (Without Estimated Cost
Savings)...................................... $73.41 - $102.69
Combined Company (With Estimated Cost Savings)... $81.50 - $114.14
Pfizer:
Stand-Alone...................................... $28.66 - $ 40.27
Combined Company (Without Estimated Cost
Savings)...................................... $26.69 - $ 37.34
Combined Company (With Estimated Cost Savings)... $29.64 - $ 41.50
</TABLE>
In performing its analyses, Bear Stearns was not expressing any opinion as
to the price or range of prices at which the common stock of the combined
company may trade subsequent to the consummation of the merger. The prices at
which the common stock of the combined company ultimately trades in the stock
market will be determined by a variety of quantitative and qualitative factors
(for example, the range of terminal P/E multiples at which the common stock of
the combined company is actually valued by potential investors, which may be
significantly more or less favorable than those used for the discounted cash
flow analysis performed by Bear Stearns for its analytical purposes and the
level of estimated combination benefits ultimately anticipated by the stock
market), none of which can be predicted with certainty.
Other Analyses. Bear Stearns conducted such other analyses as it deemed
necessary, including reviewing historical and projected financial and operating
data for both Warner-Lambert and Pfizer and pro forma balance sheet data for the
combined company, analyzing selected Wall Street equity research reports on, and
earnings and other estimates for, each of Warner-Lambert and Pfizer and various
of their business segments, reviewing the relative stock price performance of
Warner-Lambert and Pfizer versus various stock market indices, comparing the
coverage universe of the research analysts who monitor each of Warner-Lambert
and Pfizer, reviewing and comparing certain financial data and
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CHAPTER ONE -- THE MERGER
valuation parameters for each of Warner-Lambert and Pfizer and various of their
business segments and reviewing available information regarding the
institutional holdings of Warner-Lambert common stock and Pfizer common stock.
The preparation of a fairness opinion is a complex process and involves
various judgments and determinations as to the most appropriate and relevant
assumptions and financial analyses and the application of these methods to the
particular circumstances involved. Such an opinion is therefore not readily
susceptible to partial analysis or summary description, and taking portions of
the analyses set out above, without considering the analysis as a whole, would,
in the view of Bear Stearns, create an incomplete and misleading picture of the
processes underlying the analyses considered in rendering the Bear Stearns
opinion. Bear Stearns did not form an opinion as to whether any individual
analysis or factor (positive or negative), considered in isolation, supported or
failed to support the Bear Stearns opinion. In arriving at its opinion, Bear
Stearns considered the results of its analyses and did not attribute particular
weight to any one analysis or factor. The analyses performed by Bear Stearns,
particularly those based on estimates and projections, are not necessarily
indicative of actual values or actual future results, which may be significantly
more or less favorable than suggested by such analyses. Such analyses were
prepared solely as part of Bear Stearns' analyses of the fairness, from a
financial point of view, of the exchange ratio to the shareholders of
Warner-Lambert.
Pursuant to the terms of its engagement letter with Bear Stearns,
Warner-Lambert has agreed to pay Bear Stearns a total fee of $38 million. The
balance of the total fee will become payable upon consummation of the merger
between Warner-Lambert and Pfizer. In addition, Warner-Lambert has agreed to
reimburse Bear Stearns for all reasonable out-of-pocket expenses incurred by
Bear Stearns in connection with its engagement, including reasonable fees and
disbursements of its legal counsel. Warner-Lambert has also agreed to indemnify
Bear Stearns against certain liabilities in connection with its engagement,
including certain liabilities under the federal securities laws.
Bear Stearns has been previously engaged by Warner-Lambert to provide
certain investment banking and financial advisory services in connection with
actual and prospective merger, acquisition and divestiture transactions as well
as certain capital raising transactions, for which it received customary
compensation. In the ordinary course of business, Bear Stearns may actively
trade the equity and debt securities of Warner-Lambert and/or Pfizer for its own
account and for the account of its customers and, accordingly, may at any time
hold a long or short position in such securities.
OPINION OF GOLDMAN SACHS
On February 6, 2000, Goldman Sachs & Co. delivered its written opinion to
the Warner-Lambert board of directors that, as of that date, and based upon and
subject to the considerations set forth in the written opinion, the exchange
ratio pursuant to the merger agreement was fair from a financial point of view
to the holders of Warner-Lambert common stock.
The full text of the written opinion of Goldman Sachs, dated February 6,
2000, which sets forth assumptions made, matters considered and limitations on
the review undertaken in connection with the opinion is attached as Annex E to
this document. The following summary describes the material assumptions made and
material matters considered in, and the material limitations on, the review
undertaken by Goldman Sachs in providing its opinion; however, it does not
purport to be a complete description of the opinion.
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CHAPTER ONE -- THE MERGER
Accordingly, the following summary of the opinion is qualified in its entirety
by reference to the full text of the opinion. Warner-Lambert shareholders are
urged to, and should, read the opinion carefully and in its entirety.
In connection with its opinion, Goldman Sachs reviewed and analyzed, among
other things:
- the merger agreement;
- Annual Reports to Shareholders and Annual Reports on Form 10-K of Warner-
Lambert and Pfizer for the five years ended December 31, 1998;
- recent interim reports to shareholders and Quarterly Reports on Form 10-Q
of Warner-Lambert and Pfizer;
- certain other communications from Warner-Lambert and Pfizer to their
respective shareholders;
- internal financial analyses and forecasts for Warner-Lambert and Pfizer
prepared by their respective managements; and
- cost savings and operating synergies projected by the managements of
Warner-Lambert and Pfizer to result from the merger.
Goldman Sachs also held discussions with members of the senior managements
of Warner-Lambert and Pfizer regarding their assessment of the strategic
rationale for, and the potential benefits of, the merger and the past and
current business operations, financial condition and future prospects of their
respective companies. In addition, Goldman Sachs:
- reviewed the reported price and trading activity for Warner-Lambert
common stock and Pfizer common stock;
- compared financial and stock market information deemed by Goldman Sachs
to be relevant for Warner-Lambert and Pfizer with similar information for
other companies deemed by Goldman Sachs to be relevant whose securities
are publicly traded;
- reviewed the financial terms of recent business combinations deemed by
Goldman Sachs to be relevant in the pharmaceutical industry specifically
and in other industries generally; and
- performed such other studies and analyses as it considered appropriate.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial and other information discussed with or reviewed by it and assumed
this accuracy and completeness for purposes of rendering its opinion. In that
regard, Goldman Sachs assumed, with the consent of Warner-Lambert's board of
directors, that the internal financial forecasts prepared by the managements of
Warner-Lambert and Pfizer, including the cost savings and operating synergies
estimated to result from the merger, were reasonably prepared on a basis
reflecting the best currently available estimates and judgments of
Warner-Lambert and Pfizer. Goldman Sachs also assumed that the merger will be
accounted for as a pooling-of-interests under generally accepted accounting
principles. In addition, Goldman Sachs did not make an independent evaluation or
appraisal of the assets and liabilities of Warner-Lambert or Pfizer or any of
their subsidiaries and Goldman Sachs was not furnished with any such evaluation
or appraisal.
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The opinion of Goldman Sachs was provided for the information and assistance of
the Warner-Lambert board of directors in connection with its consideration of
the merger and is not a recommendation as to how any holder of shares of
Warner-Lambert common stock should vote.
The following is a summary of the material financial analyses used by
Goldman Sachs in connection with providing its written opinion to the
Warner-Lambert board of directors on February 6, 2000. Although the summary does
not purport to be a complete description of the analyses performed or factors
considered by Goldman Sachs, it summarizes the material analyses performed and
factors considered by Goldman Sachs in providing its opinion to the
Warner-Lambert board of directors.
Historical Exchange Ratio Analysis. Goldman Sachs calculated the implied
exchange ratios of Pfizer common stock to Warner-Lambert common stock based on
the average daily closing share prices of Pfizer common stock and Warner-Lambert
common stock for the one week, one month, two month, three month, six month and
one year periods ended November 2, 1999 and on November 2, 1999. November 2,
1999 was chosen as a reference date because it was the last trading day prior to
public reports that Warner-Lambert and American Home Products Corporation were
discussing a potential business combination transaction. The analysis indicated:
- that the implied exchange ratio for each of those periods was 2.0159,
1.8937, 1.8396, 1.8377, 1.8461 and 1.7745, respectively, and on November
2, 1999 the implied exchange ratio was 2.0574;
- when compared with the implied exchange ratios for each of these periods,
the 2.75 exchange ratio in the Merger Agreement represented a premium of
36.4%, 45.2%, 49.5%, 49.6%, 49.0% and 55.0%, respectively, and a premium
on November 2, 1999 of 33.7%.
Implied Premium Analysis. Goldman Sachs compared the merger consideration
to be received by Warner-Lambert shareholders based on the exchange ratio of
2.75 and the market price of Pfizer common stock of $35.75 on February 4, 2000,
the last trading day prior to the announcement of the execution of the merger
agreement, to the market price of Warner-Lambert common stock of $78.44 on
November 2, 1999 and to the one-month average market price for Warner-Lambert
common stock prior to November 2, 1999, which was $73.71. The analysis indicated
that the consideration per share of Warner-Lambert common stock to be received
by Warner-Lambert shareholders pursuant to the merger agreement represented a
premium of 25.3% and 33.4%, respectively.
Contribution Analysis. Goldman Sachs analyzed the relative income
statement contribution of Warner-Lambert and Pfizer to the pro forma combined
company resulting from the merger, before taking into account any of the
possible benefits that may be realized following the merger, for years 1999,
2000, 2001 and 2002, taking into account estimates of revenues, earnings before
interest and taxes ("EBIT") and net income. The estimates were based on
Warner-Lambert's management and Pfizer's management projections, respectively.
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CHAPTER ONE -- THE MERGER
The results of these analyses are as follows:
<TABLE>
<CAPTION>
CONTRIBUTION OF WARNER-LAMBERT
TO THE PRO FORMA COMBINED COMPANY
------------------------------------
1999E 2000E 2001E 2002E
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues.............................. 44.3% 44.3% 42.9% 41.8%
EBIT.................................. 35.4% 36.0% 35.3% 34.1%
Net Income............................ 33.9% 35.2% 35.0% 34.2%
</TABLE>
The contribution of Warner-Lambert to the pro forma combined company, based
on market capitalization of Warner-Lambert and Pfizer, using the market prices
of Warner-Lambert and Pfizer on November 2, 1999, was 31.3%.
Goldman Sachs compared all of the above results with the expected
percentage of ownership of Warner-Lambert shareholders in the merged company of
approximately 38.8%.
Selected Companies Analysis. Goldman Sachs reviewed and compared certain
financial information, ratios and public market multiples relating to
Warner-Lambert to corresponding financial information, ratios and public market
multiples for certain U.K., Continental European and American comparable
companies.
The selected companies were chosen because they are publicly traded
companies that for purposes of analysis may be considered similar to
Warner-Lambert.
Goldman Sachs calculated and compared various price/earnings multiples. The
multiples of Warner-Lambert were calculated using a price of $98.31 per share,
the implied price of Warner-Lambert common stock on February 4, 2000 based on
the closing price of Pfizer common stock on that day times the exchange ratio of
2.75. The multiples for each of the selected companies were based on the most
recent publicly available information and using I/B/E/S International Inc.
earnings estimates for calendar years 2000 and 2001.
The results of these analyses are as follows:
<TABLE>
<CAPTION>
WARNER-LAMBERT
(USING IMPLIED
U.S. COMPANIES U.K. AND EUROPEAN COMPANIES MARKET PRICE)
-------------------------- ---------------------------- --------------
2000E RANGE 2001E RANGE 2000E RANGE 2001E RANGE 2000E 2001E
----------- ----------- ------------ ------------ ----- -----
<S> <C> <C> <C> <C> <C> <C>
P/E ratio............ 19.3x-59.8x 17.0x-49.7x 16.2x-36.1x 14.3x-30.0x 40.1x 33.9x
Median............... 25.5x 22.4x 24.5x 21.3x
Mean................. 27.6x 23.9x 24.1x 21.1x
</TABLE>
Goldman Sachs also analyzed the performance of the stock prices of the
following nine publicly-traded companies in the pharmaceutical industry during
the period between November 2, 1999 and February 4, 2000:
- Eli Lilly and Company
- Monsanto Company
- Merck & Co. Inc.
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CHAPTER ONE -- THE MERGER
- American Home Products Corporation
- Pharmacia & Upjohn Inc.
- Johnson & Johnson
- Schering Plough Corporation
- Abbott Laboratories
- Bristol-Myers Squibb Company
Based on this analysis, Goldman Sachs concluded that a market
capitalization weighted composite of these nine companies decreased by 8.7%
during the period from November 2, 1999 to February 4, 2000.
Pro Forma Merger Analysis. Goldman Sachs prepared a pro forma analysis of
the financial impact of the merger. Using earnings estimates provided by
Warner-Lambert and Pfizer management, Goldman Sachs compared the earnings per
share of Warner-Lambert common stock on a stand-alone basis and Pfizer common
stock on a stand-alone basis, to the earnings per share of the common stock of
the pro forma combined company. Goldman Sachs performed this analysis based on
the exchange ratio of 2.75 and the operating synergies projected by the
management of Warner-Lambert and Pfizer to result from the merger.
This analysis indicated that:
- in 2000, the merger would be dilutive by 4.6% -- that is, would represent
a reduction -- to 2000 earnings per share of Pfizer common stock on a
stand-alone basis;
- in 2001, the merger would be accretive by 1.5% -- that is, would
represent an addition -- to 2001 earnings per share of Pfizer common
stock on a stand-alone basis; and
- in 2002, the merger would be accretive by 3.3% to 2002 earnings per share
of Pfizer common stock on a stand-alone basis.
Using the same earnings estimates described above, Goldman Sachs also
compared the present value of the projected future stock price of the pro forma
merged company, using price/earnings multiples ranging from 30.0x to 42.0x and
discount rates of 11%, 13% and 15%, to the present value of the projected future
stock price of Warner-Lambert on a stand-alone basis. In each case, the present
value of the pro forma merged company was greater than that of Warner-Lambert on
a stand-alone basis.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs' opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of all such analyses. No company or
transaction used in the above analyses as a comparison is directly comparable to
Warner-Lambert or Pfizer or the merger. In performing its analysis, Goldman
Sachs made many assumptions with respect to industry performance and general
business and economic conditions, many of which are beyond the control of
Warner-Lambert and Pfizer.
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CHAPTER ONE -- THE MERGER
Goldman Sachs prepared each of the analyses described above solely for
purposes of providing its opinion to the Warner-Lambert board of directors. The
analyses do not purport to be appraisals or necessarily reflect the prices at
which businesses or securities actually may be sold. Analyses based upon
forecasts of future results are not necessarily indicative of actual future
results, which may be significantly more or less favorable than suggested by
these analyses. Because these analyses are inherently subject to uncertainty,
being based upon numerous factors or events beyond the control of the parties or
their respective advisors, none of Warner-Lambert, Pfizer, Goldman Sachs nor any
other person assumes responsibility if future results are materially different
from those forecast.
As described above, Goldman Sachs' opinion to the Warner-Lambert board was
one of many factors taken into consideration by the Warner-Lambert board in
making its determination to approve the merger agreement and the merger.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. Warner-Lambert selected
Goldman Sachs to render its opinion because it is a nationally recognized
investment banking firm that has substantial experience in transactions similar
to the merger. Goldman Sachs is familiar with Warner-Lambert having provided
certain investment banking services to Warner-Lambert from time to time,
including having acted as co-managing underwriter of its public offering of $250
million aggregate principal amount of 5.75% Notes due 2003 and its public
offering of $250 million aggregate principal amount of 6.00% Notes due 2008 in
January 1998, having acted as financial advisor in its acquisition of Agouron
Pharmaceuticals, Inc. announced in January 1999, and having acted as its
financial advisor in connection with, and having participated in some of the
negotiations leading to, the merger. Goldman Sachs may provide certain
investment banking services to Pfizer and its subsidiaries in the future.
Goldman Sachs provides a full range of financial advisory and securities
services and, in the course of its normal trading activities, may from time to
time effect transactions and hold securities, including derivative securities,
of Warner-Lambert or Pfizer for its own account and for the accounts of
customers.
Pursuant to the terms of its engagement letter with Goldman Sachs,
Warner-Lambert has agreed to pay Goldman Sachs a fee of $20 million upon
consummation of the merger. Warner-Lambert has also agreed to reimburse Goldman
Sachs for its reasonable out-of-pocket expenses, including attorney's fees, and
to indemnify Goldman Sachs against various liabilities, including certain
liabilities under the federal securities laws.
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CHAPTER ONE -- THE MERGER
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendations of Warner-Lambert's board of directors
with respect to the merger, shareholders should be aware that some officers of
Warner-Lambert, including some officers who are also directors, have some
interests in the merger that may be different from, or in addition to, the
interests of shareholders of Warner-Lambert. The board of directors of
Warner-Lambert was aware of these interests and considered them, among other
matters, in making their recommendation. See Chapter Five, entitled "Other
Pfizer Annual Meeting Proposals," beginning on page for a discussion of the
compensation, including unvested options, none of which vest upon completion of
the merger, and security ownership of the executive officers and directors of
Pfizer.
WARNER-LAMBERT'S ARRANGEMENTS WITH EXECUTIVE OFFICERS
Executive Severance Plan. Messrs. de Vink, Larini, Wild and other key
executives are participants in Warner-Lambert's Executive Severance Plan, which
provides certain benefits in the event of a change in control of Warner-Lambert.
Shareholder approval of the merger will constitute a "change in control" under
the Executive Severance Plan.
Under the terms of the Executive Severance Plan, if, after a change in
control, an executive's employment terminates for any reason other than death or
for cause by Warner-Lambert during the three-year period following a change in
control, the executive will receive severance benefits of 36 months of 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, if necessary, for any federal excise tax or similar state or
local tax that may be imposed on payments following a change in control.
The approximate value of the cash payments due under the plan to each
executive upon a qualifying termination of employment following a change in
control, not including any payments that may be made with respect to any excise
tax, would be as follows:
<TABLE>
<CAPTION>
WARNER-LAMBERT NAMED OFFICER AMOUNT
- ---------------------------- -----------
<S> <C>
Lodewijk J. R. de Vink.................................... $ 7,709,350
Ernest J. Larini.......................................... $ 3,503,650
Anthony H. Wild........................................... $ 3,462,000
Peter B. Corr............................................. $ 2,855,800
J. Frank Lazo............................................. $ 2,852,650
All other Warner-Lambert executive officers as a group (12
persons)................................................ $23,621,263
</TABLE>
Equity-Based Awards. Pursuant to the terms of Warner-Lambert's
equity-based compensation plans, all unvested options to purchase Warner-Lambert
stock held by Warner-Lambert's executive officers and directors will become
vested and exercisable upon completion of the merger, and restrictions will
lapse on that date with respect to shares of restricted stock issued under those
plans.
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CHAPTER ONE -- THE MERGER
The number of unvested options and shares of restricted stock held by
executive officers and directors of Warner-Lambert that, as of January 31, 2000,
will become vested in this manner is as follows:
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF SHARES OF
UNVESTED WEIGHTED AVG. RESTRICTED
WARNER-LAMBERT NAMED OFFICER OPTIONS EXERCISE PRICE STOCK
- ---------------------------- --------- -------------- ----------
<S> <C> <C> <C>
Lodewijk J. R. de Vink............ 985,725 $63.8926 --
Ernest J. Larini.................. 324,752 $54.7287 --
Anthony H. Wild................... 391,352 $58.9962 --
Peter B. Corr..................... 244,075 $80.3635 20,000
J. Frank Lazo..................... 245,400 $48.7853 --
All other Warner-Lambert executive
officers as a group (12
persons)........................ 1,820,876 $55.2306 17,600
Warner-Lambert outside directors
as a group...................... -- -- 108,000
</TABLE>
Excess Savings Plan. Upon a change in control, each participant in Warner-
Lambert's Excess Savings Plan will become fully vested in such participant's
account and will receive full payment of such account upon termination of
employment. The unvested balance in such plan for each executive officer as of
December 31, 1999 is as follows:
<TABLE>
<CAPTION>
WARNER-LAMBERT NAMED OFFICER UNVESTED BALANCE
- ---------------------------- ----------------
<S> <C>
Peter B. Corr.......................................... $ 6,002
All other Warner-Lambert executive officers as a group
(1 person)........................................... $12,417
</TABLE>
BOARD OF DIRECTORS
Pfizer's board of directors currently has 15 members and the company's
certificate of incorporation currently states that the maximum number of
directors is 18. Pursuant to the merger agreement, Pfizer shall use its best
efforts to amend the certificate of incorporation of Pfizer to increase the
number of Pfizer's board of directors to not less than ten and no more than
twenty-four. If the Pfizer shareholders approve the amendment to the certificate
of incorporation, Pfizer's board of directors, after completion of the merger,
will consist of 23 members, fifteen from the current Pfizer board of directors
and eight individuals appointed by Pfizer who currently serve as outside
directors on the Warner-Lambert board of directors (provided that each such
Warner-Lambert director invited to join the Pfizer board in fact joins). If the
amendment is not approved, Pfizer's board of directors will consist of 18
members, 15 from the current Pfizer board of directors and three who are
currently outside directors on the Warner-Lambert board of directors. However,
as further vacancies occur on the Pfizer board of directors, Pfizer will then
use its best efforts to appoint individuals who are currently outside directors
of Warner-Lambert to fill the next three vacancies on Pfizer's board of
directors. In addition, as the first committee chair becomes available on
Pfizer's board of directors after the completion of the merger, Pfizer will
appoint an individual who currently serves on Warner-Lambert's board of
directors to such a vacancy.
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CHAPTER ONE -- THE MERGER
MANAGEMENT POSITIONS IN THE COMBINED COMPANY
Pfizer has agreed that three senior management positions in the combined
company will be filled by current Warner-Lambert officers, who will also join
the combined company's Corporate Management Committee. S. Morgan Morton,
currently a Senior Vice President of Warner-Lambert and President of its
Consumer Healthcare Sector, will be elected a Senior Vice President of the
combined company and President of the Warner-Lambert Consumer Division. Peter B.
Corr, currently a Vice President of Warner-Lambert and President of
Warner-Lambert/Parke-Davis, Pharmaceutical Research and Development, will be
elected a Senior Vice President of the combined company and assume a senior
management position within its Central Research Division. [ ],
currently [ ] will be elected [ ] of the combined
company and assume a senior management position in [ ]. Messrs.
Morton, Corr and [ ] will each join the Corporate Management
Committee of the combined company.
OWNERSHIP OF COMMON STOCK; STOCK OPTIONS
As of January 31, 2000, directors and executive officers of Pfizer
beneficially owned an aggregate of 18,828,358 shares of Pfizer common stock,
including options to purchase 9,728,765 shares of Pfizer common stock
exercisable within 60 days.
As of January 31, 2000, directors and executive officers of Warner-Lambert
beneficially owned an aggregate of 14,933,373 shares of Warner-Lambert common
stock, including options to purchase 14,231,163 shares of Warner-Lambert common
stock exercisable within 60 days.
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE
Pfizer is obligated, for six years after the merger, to maintain in effect
Warner-Lambert's current directors' and officers' liability insurance covering
acts or omissions occurring prior to the effective time of the merger.
Pfizer is obligated, to the fullest extent permitted by law, to indemnify
and hold harmless, and provide advancement of expenses to, each person who is or
has been an officer or director of Warner-Lambert or any of its subsidiaries
with respect to acts or omissions by them in their capacities as officers,
directors or employees of Warner-Lambert or any of its subsidiaries or taken at
the request of Warner-Lambert or any of its subsidiaries at any time on or prior
to the merger, including for acts and omissions occurring in connection with the
approval of the merger and the merger agreement. Pfizer will also cause the
surviving corporation in the merger to maintain in its certificate of
incorporation or by-laws for a period of six years the current provisions
regarding indemnification of officers, directors and employees.
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CHAPTER ONE -- THE MERGER
THE MERGER AGREEMENT
The following is a summary of the material terms of the merger agreement.
This summary does not purport to describe all the terms of the merger agreement
and is qualified by the complete merger agreement which is attached as Annex A
to this joint proxy statement/prospectus and incorporated by reference. All
shareholders of Pfizer and Warner-Lambert are urged to read the merger agreement
carefully and in its entirety.
GENERAL
Under the merger agreement, a wholly-owned subsidiary of Pfizer will merge
with and into Warner-Lambert, with Warner-Lambert continuing as the surviving
corporation. The combined entity will be named "Pfizer Inc." Following the
merger, Pfizer will be led by an integrated management team drawn from Pfizer
and Warner-Lambert.
CLOSING MATTERS
Closing. Unless the parties agree otherwise, the closing of the merger
will take place on the first business day after all closing conditions have been
satisfied or waived, unless the merger agreement has been terminated or another
time or date is agreed to in writing by the parties. See "-- Conditions" below
for a more complete description of the conditions that must be satisfied prior
to closing.
Effective Time. As soon as practicable after the satisfaction of the
conditions to the merger, Pfizer and Warner-Lambert will file a certificate of
merger with the Delaware Secretary of State in accordance with the relevant
provisions of the Delaware General Corporation Law and make all other required
filings or recordings. The merger will become effective when the certificate of
merger is filed or at such later time as Pfizer and Warner-Lambert agree and
specify in the certificate of merger.
CONSIDERATION TO BE RECEIVED IN THE MERGER; TREATMENT OF STOCK OPTIONS
The merger agreement provides that, at the effective time of the merger:
- each share of Warner-Lambert stock issued and outstanding immediately
prior to the effective time of the merger, together with the associated
rights issued under the Warner-Lambert shareholder rights plan, will be
converted into 2.75 shares of Pfizer common stock and associated rights;
- each outstanding and unexercised option or right to purchase shares of
Warner-Lambert common stock granted under the Warner-Lambert stock plans
will be assumed by Pfizer and converted into an option or a right to
purchase shares of Pfizer common stock under the same terms and
conditions as were applicable to the options as granted under the
Warner-Lambert stock plans, taking into account provisions providing for
full vesting under those stock plans. The number of shares of Pfizer
common stock that the converted options will be exercisable for, and the
exercise price of the option, will be adjusted to reflect the exchange
ratio;
- each restricted share of Warner-Lambert stock granted under the
Warner-Lambert stock plans that are outstanding immediately prior to the
effective time of the merger will become fully vested and free of
restrictions, and will be converted into shares of Pfizer common stock at
the exchange ratio; and
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CHAPTER ONE -- THE MERGER
- all Warner-Lambert stock credits in accounts governed by the
Warner-Lambert 1996 Stock Plan will be converted into a number of Pfizer
stock credits at the exchange ratio, but will otherwise continue to be
subject to the same terms and conditions as were applicable to the stock
credits under the Warner-Lambert 1996 Stock Plan.
In addition, any shares of Warner-Lambert common stock owned by Pfizer,
held by Warner-Lambert as treasury stock or owned by any of their respective
subsidiaries will be automatically canceled, and will not be exchanged for any
shares of Pfizer common stock or other consideration.
Each share of Pfizer common stock will remain outstanding following the
merger and will continue to represent one share of common stock of the combined
entity.
As soon as practicable after the effective time of the merger, Pfizer will
deliver notices to the holders of Warner-Lambert stock options. Those notices
will set forth each holder's rights under the Warner-Lambert stock plans,
including that, in connection with the merger and pursuant to the terms of the
Warner-Lambert stock plans, the agreements evidencing the grants of the
Warner-Lambert stock options will continue in effect on the same terms and
conditions, taking into account provisions providing for full vesting of those
options. To the extent permitted by law, Pfizer will comply with the terms of
the Warner-Lambert stock plans and will take reasonable steps to ensure that the
stock options which qualified as incentive stock options prior to the completion
of the merger continue to qualify as incentive stock options of Pfizer after the
merger.
For a further discussion of the treatment of Warner-Lambert stock options
and other employee benefit plans under the merger agreement, see "-- Covenants
- -- Employee Matters" and "Interests of Certain Persons in the Merger."
EXCHANGE OF CERTIFICATES IN THE MERGER
Before the closing of the merger, Pfizer will appoint an exchange agent to
handle the exchange of Warner-Lambert stock certificates for stock of Pfizer and
the payment of cash for fractional shares. Soon after the closing of the merger,
the exchange agent will send a letter of transmittal, which is to be used to
exchange Warner-Lambert stock certificates for stock of Pfizer, to each former
Warner-Lambert shareholder. The letter of transmittal will contain instructions
explaining the procedure for surrendering Warner-Lambert stock certificates. You
should not return certificates with the enclosed proxy card.
Warner-Lambert shareholders who surrender their stock certificates,
together with a properly completed letter of transmittal, will receive shares of
Pfizer common stock into which the shares of Warner-Lambert common stock were
converted in the merger.
After the merger, each certificate that previously represented shares of
Warner-Lambert stock will only represent the right to receive the shares of
Pfizer common stock into which those shares of Warner-Lambert common stock have
been converted.
Pfizer will not pay dividends to holders of any Warner-Lambert stock
certificates until the Warner-Lambert stock certificates are surrendered to the
exchange agent. However, once those certificates are surrendered, Pfizer will
pay to the holder, without interest, any dividends that have been declared after
the effective date of the merger on the shares into which those Warner Lambert
shares have been converted.
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CHAPTER ONE -- THE MERGER
After the effective time of the merger, Warner-Lambert will not register
any transfers of the shares of Warner-Lambert common stock.
Pfizer shareholders do not need to exchange their stock certificates.
FRACTIONAL SHARES
No fractional shares of Pfizer common stock will be issued in the merger.
Instead, the exchange agent will pay each of those shareholders who would have
otherwise been entitled to a fractional share of Pfizer common stock an amount
in cash determined by multiplying the fractional share interest by the closing
price for a share of Pfizer stock on the NYSE Composite Transaction Tape on the
date of the effective time of the merger or, if such date is not a business day,
on the business day immediately following the date on which the effective time
of the merger occurs.
LISTING OF PFIZER STOCK
Pfizer has agreed to use its reasonable best efforts to cause the shares of
Pfizer common stock to be issued in the merger and the shares of Pfizer common
stock to be reserved for issuance upon exercise of the Warner-Lambert stock
options to be approved for listing on the NYSE, subject to official notice of
issuance, prior to the effective time of the merger. Pfizer's symbol "PFE" will
be used for such shares, assuming the listing application is approved. Approval
for listing on the NYSE of the shares of Pfizer common stock issuable to the
Warner-Lambert shareholders in the merger, subject only to official notice of
issuance, is a condition to the obligations of Pfizer and Warner-Lambert to
complete the merger.
BOARD OF DIRECTORS; EXECUTIVE OFFICERS; COMPANY HEADQUARTERS
Pfizer Board Of Directors. At the effective time of the merger, the board
of directors of Pfizer will consist of either 18 or 23 members as follows:
- If the Pfizer shareholders approve the amendment to Pfizer's certificate
of incorporation to increase the maximum size of the Pfizer board of
directors to 24, the board of directors of Pfizer will be expanded to
consist of 23 members and Pfizer will use its reasonable best efforts to
appoint the eight current outside directors on the Warner-Lambert board
of directors to the newly created vacancies on Pfizer's board of
directors.
- If the Pfizer shareholders do not approve the amendment to Pfizer's
certificate of incorporation, the Pfizer board of directors will be
expanded to 18 members, and Pfizer will appoint three current outside
directors on the Warner-Lambert board of directors to fill those
newly-created vacancies. As further vacancies occur on Pfizer's board of
directors, Pfizer will use its best efforts to appoint individuals who
are currently outside directors of Warner-Lambert to fill the next three
vacancies on Pfizer's board of directors. In addition, as the first
committee chair becomes available on Pfizer's board of directors, the
Pfizer board of directors will appoint a current member of
Warner-Lambert's board of directors to that position.
Executive Officers. William C. Steere, Jr., Pfizer's current Chairman and
Chief Executive Officer, will continue to be Chairman and Chief Executive
Officer of Pfizer after the merger. Henry A. McKinnell, Pfizer's President and
Chief Operating Officer, will
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CHAPTER ONE -- THE MERGER
continue to be President and Chief Operating Officer of Pfizer after the merger.
The parties have separately agreed that three senior management positions at
Pfizer will be filled by current Warner-Lambert officers, who will also be
invited to join the Pfizer Corporate Management Committee.
Pfizer Headquarters. After the completion of the merger, the headquarters
of the combined company will be located in New York, New York, Pfizer's current
headquarters. In addition, Pfizer shall maintain the headquarters of the
Consumer Division and other appropriate functions in Morris Plains, New Jersey,
the current location of Warner-Lambert's headquarters.
COVENANTS
We have each undertaken certain covenants in the merger agreement
concerning the conduct of our respective businesses between the date the merger
agreement was signed and the completion of the merger. The following summarizes
the more significant of these covenants:
No Solicitation. We have each agreed that we, and any of our subsidiaries,
officers or directors, will not, and will use reasonable best efforts to ensure
that our respective employees, agents or representatives do not:
- initiate, solicit, encourage or knowingly facilitate, including by way of
furnishing information, any inquiries or the making of any proposal or
offer with respect to a third party "acquisition proposal" of the type
described below;
- have any discussion with or provide any confidential information or data
to any person relating to an acquisition proposal;
- engage in negotiations concerning an acquisition proposal;
- knowingly facilitate any effort or attempt to make or implement an
acquisition proposal; or
- accept an acquisition proposal.
However, each of us is permitted, as is contemplated under the federal
securities laws, to take and disclose to our shareholders our position with
respect to any acquisition proposal.
In addition, each of Pfizer and Warner-Lambert is permitted to engage in
discussions and negotiations with, and provide information to, any person in
response to an unsolicited acquisition proposal, if:
- its meeting of shareholders to vote on the merger proposals shall not
have occurred;
- its board of directors concludes in good faith that there is a reasonable
likelihood that the acquisition proposal could result in a "superior
proposal" of the type described below;
- prior to providing any information or data to any person in connection
with an acquisition proposal, the proposing party first signs a
confidentiality agreement with terms, at least as stringent as the
confidentiality provisions contained in the merger agreement; and
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CHAPTER ONE -- THE MERGER
- it keeps the other party informed of the status and terms of the
acquisition proposal and any discussions or negotiations relating to the
acquisition proposal.
An "acquisition proposal" for Pfizer or Warner-Lambert, as applicable, is
any proposal or offer with respect to:
- a merger, reorganization, share exchange, consolidation, business
combination, recapitalization, liquidation, dissolution or similar
transaction involving the party;
- any purchase or sale of the consolidated assets of the party and its
subsidiaries, taken as a whole, having an aggregate value equal to 10% or
more of the market capitalization of that party; or
- any purchase or sale of, or tender offer or exchange offer for, 10% or
more of the equity securities of such party.
A "superior proposal" for Pfizer or Warner-Lambert, as applicable, is a
written proposal made by a person other than either such party for:
- a merger, reorganization, consolidation, share exchange, business
combination, recapitalization, liquidation, dissolution or similar
transaction involving Pfizer or Warner-Lambert, as the case may be, as a
result of which either:
- such party's shareholders before the transaction, by virtue of their
ownership of such party's shares, in the aggregate cease to own at
least 60% of the voting securities of the entity surviving or
resulting from such transaction, or the ultimate parent entity of the
surviving entity; or
- the individuals comprising the board of directors of such party before
the transaction do not constitute a majority of the board of directors
of the ultimate parent entity;
- a sale, lease, exchange, transfer or other disposition of at least 40% of
the assets of either Pfizer or Warner-Lambert, as the case may be, and
its subsidiaries, taken as a whole, in a single transaction or a series
of related transactions; or
- the acquisition, directly or indirectly, by a person of beneficial
ownership of 40% or more of the common stock of either Pfizer or
Warner-Lambert, as the case may be, whether by merger, consolidation,
share exchange, business combination, tender or exchange offer or
otherwise, other than a merger, consolidation, share exchange, business
combination, tender or exchange offer or other transaction upon the
completion of which such party's shareholders would in the aggregate
beneficially own greater than 60% of the voting securities of such
person;
which in any case is otherwise on terms which the board of directors of such
party in good faith concludes:
- is reasonably capable of being completed; and
- in the case of a proposal for Warner-Lambert, after consultation with its
financial advisors and outside counsel, and taking into account, among
other things, all legal, financial, regulatory and other aspects of the
proposal and the person making the proposal, that the proposal would, if
consummated, result in a transaction that is more favorable to the
Warner-Lambert shareholders, from a financial point of view than the
merger between Pfizer and Warner-Lambert.
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CHAPTER ONE -- THE MERGER
Board of Directors' Covenant to Recommend. We have agreed that our
respective boards of directors will recommend the approval of the merger to
their respective shareholders. However, each board is permitted not to make or
to withdraw or to modify or to qualify in a manner adverse to the other company
this recommendation, including by endorsing an alternative transaction to the
merger between Pfizer and Warner-Lambert, before its special meeting if either:
- it determines in good faith that a "material adverse effect" has occurred
with respect to the other party, and there would be a substantial
probability that the board would be breaching its fiduciary duties to its
shareholders if it did not change its recommendation; or
- it has received an unsolicited acquisition proposal that its board
concludes in good faith is a superior proposal.
Even if the board of either company changes, withholds or modifies its
recommendation of the merger, that company is still required to present the
merger and related proposals to its shareholders for consideration at its
meeting, unless the merger agreement is otherwise terminated. See
"-- Termination of Merger Agreement" for a discussion of each party's ability to
terminate the merger agreement.
Operations of Pfizer and Warner-Lambert Pending Closing. We have each
undertaken a separate covenant that places restrictions on ourselves and our
respective subsidiaries until either the effective time of the merger or the
termination of the merger agreement. In general, we and our respective
subsidiaries are required to conduct our business in the usual, regular and
ordinary course in all material respects substantially in the same manner as
previously conducted and to use our reasonable efforts to preserve intact our
present lines of business and relationships with third parties. Each of us has
agreed to some specific restrictions that prohibit us and our respective
subsidiaries from:
- entering into any new material lines of business or incurring or
committing to any capital expenditures or obligations or liabilities in
connection with such capital expenditures beyond specified amounts;
- in the case of Warner-Lambert, entering into any licensing agreements
other than those agreed upon between the parties;
- with certain exceptions, in the case of Warner-Lambert, entering into
certain agreements involving Warner-Lambert's consumer healthcare and
pharmaceutical businesses which exceed specified amounts or would involve
commitments of more than one year;
- declaring or paying dividends in excess of specified limits or making
other distributions in respect of our capital stock;
- making changes in our share capital, including, among other things, stock
splits, combinations, or reclassifications;
- repurchasing or redeeming our capital stock (except for repurchases of
Pfizer common stock pursuant to a previously announced repurchase
program, provided this would not prevent or impede the merger from
qualifying as a pooling-of-interests for accounting purposes or a
tax-free reorganization for tax purposes);
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CHAPTER ONE -- THE MERGER
- issuing, delivering or selling any shares of our capital stock or other
equity interests, other than in connection with our benefit plans or in
connection with the exercise of options or other stock awards or stock
option agreements;
- amending our certificate of incorporation (other than the amendment to
increase the size of Pfizer's board of directors), by-laws or other
governing documents;
- making acquisitions of, or investments in, other entities beyond
specified amounts (other than pursuant to the stock option agreements);
- disposing of assets, other than inventory in the ordinary course of
business, beyond specified amounts;
- incurring debt, other than pursuant to arrangements in existence on
February 6, 2000 or in the ordinary course consistent with past practice.
However, Warner-Lambert is allowed to incur indebtedness to finance or
refinance amounts due to AHP in connection with the termination of the
Agreement and Plan of Merger, dated November 3, 1999, among AHP,
Wolverine Sub Corp. and Warner-Lambert;
- making loans, advances, capital contributions or investments in any other
person other than in the ordinary course and consistent with past
practice beyond certain specified amounts or pursuant to a legal
obligation existing on February 6, 2000;
- taking actions that would prevent or impede the merger from qualifying as
a pooling-of-interests for accounting purposes and as a tax-free
reorganization for tax purposes;
- increasing the compensation of directors, executive officers or employees
or increasing employee benefits other than in the ordinary course and
consistent with past practice;
- changing our accounting methods or fiscal year;
- making any material tax election other than in the ordinary course
consistent with past practice; and
- entering into any agreement or arrangement that would limit or restrict
us or the combined company after completion of the merger from competing
in any line of business or geographic area if that resulting restriction
would have a material adverse effect on the combined company after the
merger.
Reasonable Best Efforts Covenant. We have agreed to cooperate with each
other and to use our reasonable best efforts to take all actions and do all
things advisable or necessary under the merger agreement and applicable laws to
complete the merger and the other transactions contemplated by the merger
agreement. This cooperation may include selling, holding separate or disposing
of assets in response to the requirements imposed by antitrust authorities.
Neither of us will be required for any reason to sell, hold separate or
otherwise dispose of assets, or to conduct our business in a specified manner,
if such action is not conditioned on our merger closing or would reasonably be
expected to have a material adverse effect on the combined company.
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Employee Matters. In the merger agreement, we have agreed that, following
the merger, Pfizer will:
- comply with the terms of all Warner-Lambert benefit plans and related
funding arrangements in accordance with their terms including the
Warner-Lambert Executive Severance Plan and the Enhanced Severance Plan.
Except as provided in the preceding sentence, for at least one year
following the completion of the merger, Pfizer will provide compensation
and employee benefits under benefit plans to Warner-Lambert employees
that are substantially comparable in the aggregate to the compensation
and benefits provided under the existing Warner-Lambert plans;
- with certain exceptions, grant to Warner-Lambert employees in the U.S.
who continue employment with Pfizer after the merger full credit for
eligibility, benefit accrual and determination of their level of benefits
for their Warner-Lambert service under the Pfizer benefit plans in which
they participate after the merger, to the extent Warner-Lambert
recognized their service for these purposes before the merger; and
- honor the terms and conditions of any collective bargaining agreements
covering any Warner-Lambert employees.
Payment of Dividends Pending the Merger. We have agreed to coordinate
declaring dividends and the related record dates and payment dates so that
Pfizer and Warner-Lambert shareholders do not receive two dividends, or fail to
receive one dividend, for any single calendar quarter.
OTHER COVENANTS AND AGREEMENTS
Meeting of Shareholders. The merger agreement contains a covenant that we
will each convene a meeting of our shareholders to consider and vote upon the
merger and related transactions as soon as reasonably practicable.
Insurance and Indemnification. Pfizer is obligated, for six years after
the merger, to maintain in effect Warner-Lambert's current directors' and
officers' liability insurance covering acts or omissions occurring prior to the
effective time of the merger.
Pfizer is obligated, to the fullest extent permitted by law, to indemnify
and hold harmless, and provide advancement of expenses to, each person who is or
has been an officer or director of Warner-Lambert or any of its subsidiaries
with respect to acts or omissions by them in their capacities as officers,
directors or employees of Warner-Lambert or any of its subsidiaries or taken at
the request of Warner-Lambert or any of its subsidiaries at any time on or prior
to the effective time of the merger, including for acts and omissions occurring
in connection with the approval of the merger and the merger agreement. Pfizer
will also cause the surviving corporation in the merger to maintain in its
certificate of incorporation or by-laws for a period of six years the current
provisions regarding indemnification of officers, directors and employees.
Expenses. We have each agreed to pay our own costs and expenses incurred
in connection with the merger and the merger agreement. Pfizer, however, will
pay the expenses incurred in connection with the filing with the SEC of this
joint proxy statement/ prospectus and the related registration statement and the
costs associated with the printing and mailing of this joint proxy
statement/prospectus.
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Accountants' Letters. We have each agreed to use our reasonable best
efforts to deliver to each other copies of two comfort letters from our
independent public accountants, one dated approximately as of the date the
registration statement containing this joint proxy statement/prospectus is
declared effective by the SEC and one dated as of the closing date of the
merger, in form reasonably satisfactory to the other party and customary in
scope for comfort letters delivered by independent accountants.
Pfizer has also agreed to use its reasonable best efforts to deliver to
Warner-Lambert a copy of a letter from its independent public accountant, dated
approximately the date the registration statement containing this joint proxy
statement/prospectus is declared effective by the SEC and as of the closing date
of the merger, stating that accounting for the merger as a pooling-of-interests
is appropriate if the merger is closed as contemplated by the merger agreement.
Warner-Lambert has also agreed to use its reasonable best efforts to
deliver to Pfizer and Pfizer's independent public accountants a copy of a letter
from its independent public accountant, dated approximately the date the
registration statement containing this joint proxy statement/prospectus is
declared effective by the SEC and as of the closing date of the merger, stating
that they concur with Warner-Lambert's conclusion that, as of the date of such
letters, no conditions exist which would preclude Warner-Lambert's ability to be
a party to a business combination to be accounted for as a pooling-of-interests.
Other Covenants. The merger agreement contains covenants relating to the
cooperation between Pfizer and Warner-Lambert in the preparation of this joint
proxy statement/prospectus and other governmental filings. The merger agreement
also contains additional agreements relating to, among other things, public
announcements, mutual notice of certain matters and access to information.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains substantially reciprocal representations and
warranties made by each of us to the other. The representations and warranties
relate to:
- corporate existence, qualification to conduct business and corporate
standing and power;
- ownership of subsidiaries;
- capital structure;
- corporate authority to enter into, and carry out the obligations under,
the merger agreement and enforceability of the merger agreement;
- absence of a breach of the certificate of incorporation, by-laws, law or
material agreements as a result of the merger;
- filings with the SEC;
- financial statements;
- information supplied for use in this joint proxy statement/prospectus;
- board of directors approval;
- votes required for approval;
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CHAPTER ONE -- THE MERGER
- litigation;
- compliance with laws;
- absence of certain changes or events;
- environmental matters;
- intellectual property matters;
- payment of fees to finders or brokers in connection with the merger
agreement;
- opinions of financial advisors;
- accounting matters;
- tax matters;
- employee benefit and labor matters; and
- restrictive contracts.
In addition, the parties also represent to one another that their
shareholder rights plans are not applicable to the merger and the merger
agreement.
The merger agreement also contains certain representations and warranties
of Pfizer and its wholly-owned merger subsidiary, including organization,
corporate authorization, non-contravention and no prior business activities.
The representations and warranties contained in the merger agreement do not
survive the effective time of the merger.
CONDITIONS
Our respective obligations to complete the merger are subject to the
satisfaction or, to the extent legally permissible, the waiver of various
conditions which include, in addition to other customary closing conditions:
- the adoption and approval of the merger agreement and the merger by the
Warner-Lambert shareholders, and the approval of the share issuance by
the Pfizer shareholders;
- the absence of any law, order or injunction prohibiting completion of the
merger or which would have a material adverse effect on the combined
company;
- the expiration or termination of the applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended;
- the approval of the merger by the European Commission;
- the approval for listing by the NYSE of the Pfizer stock to be issued in
the merger, subject to official notice of issuance;
- the receipt of all other governmental and regulatory consents, approvals
and authorizations necessary for the merger -- other than consents or
approvals of antitrust authorities (which are specifically discussed
above) -- unless not obtaining
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CHAPTER ONE -- THE MERGER
those consents or approvals would not reasonably be expected to have a
material adverse effect on the combined company, taken as a whole;
- the SEC having declared effective the Pfizer registration statement, of
which this joint proxy statement/prospectus forms a part;
- Pfizer's receipt of letters from the independent public accountants of
Warner-Lambert, one dated approximately as of the date this joint proxy
statement/ prospectus is declared effective by the SEC and one dated as
of the closing date, confirming that they concur with Warner-Lambert's
management that no conditions exist that would preclude Warner-Lambert's
ability to be a party in a business combination accounted for as a
pooling-of-interests; and
- Warner-Lambert's receipt of letters from the independent public
accountants of Pfizer, one dated approximately as of the date this joint
proxy statement/prospectus is declared effective by the SEC and one dated
as of the closing date, stating that accounting for the merger as a
pooling-of-interests is appropriate, if the merger is closed as
contemplated by the merger agreement.
In addition, individually, our respective obligations to effect the merger
are subject to the satisfaction or, to the extent legally permissible, the
waiver of the following additional conditions:
- the representations and warranties of the other company contained in the
merger agreement being true and correct in all material respects on the
closing date of the merger as if they were made on that date, unless they
were by their express provisions made as of another particular date, in
which case the statement must be true and correct in all material
respects as of that date;
- the other party having performed or complied in all material respects
with its obligations and covenants contained in the merger agreement;
- the receipt of an opinion of each company's counsel to the effect that
the merger will qualify as a reorganization under the Internal Revenue
Code and that each of Pfizer, Warner-Lambert and a wholly-owned
subsidiary of Pfizer will be a party to the reorganization; and
- no event having occurred which would trigger a distribution under the
other company's shareholder rights plan.
Additionally, Pfizer's obligation to effect the merger and the other
transactions contemplated by the merger agreement is conditioned upon no event
or circumstance having occurred relating to any governmental review or inquiry
concerning Neurontin(R) or business practices relating thereto which is likely
to have a material adverse effect on Warner-Lambert or its prospects.
TERMINATION OF MERGER AGREEMENT
Right to Terminate. The merger agreement may be terminated at any time
prior to the effective time in any of the following ways:
- by our mutual written consent;
- by either one of us:
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CHAPTER ONE -- THE MERGER
-- if the merger has not been completed by December 31, 2000, except
that a party may not terminate the merger agreement if the cause of
the merger not being completed by that date is that party's failure
to fulfill its obligations under the merger agreement and provided
that, if all conditions to closing, other than those relating to
antitrust or other governmental approvals of the merger, have been
satisfied, this date is automatically extended to March 31, 2001;
-- if a governmental authority or a court order permanently prohibits
the completion of the merger or a governmental authority fails to
grant any necessary approval of the merger, the absence of which
would have a material adverse effect on the combined company, except
that a party may not terminate the merger agreement if the cause of
the prohibition or failure to obtain approval is that party's fault;
-- if either Pfizer's shareholders fail to approve the issuance of
shares of stock in connection with the merger, or Warner-Lambert's
shareholders fail to adopt and approve the merger agreement and the
merger; or
-- if this joint proxy statement/prospectus, which reflects
pooling-of-interests accounting, is not mailed to shareholders on or
before September 30, 2000, except that a party may not terminate the
merger agreement for this reason if that party has not used its
reasonable best efforts to cause the joint proxy statement/prospectus
to be mailed by the above date.
- by Pfizer:
-- if Warner-Lambert's board of directors either fails to recommend the
merger to its shareholders, changes its recommendation, or fails to
call the Warner-Lambert special meeting to vote on the merger;
-- if Pfizer's board of directors authorizes Pfizer to enter into a
written agreement concerning a transaction that Pfizer's board of
directors has determined is a superior proposal, except that Pfizer
cannot terminate the merger agreement for this reason until the
completion of five business days after Pfizer provides Warner-Lambert
with notice of the existence and terms of the superior proposal,
including the identity of the person making the superior proposal,
and a statement as to whether Pfizer intends to enter into a
definitive agreement for a business combination. After delivering
such notice, Pfizer will provide Warner-Lambert a reasonable
opportunity to make adjustments to the terms and conditions of the
merger agreement to enable Pfizer to proceed with the merger on the
adjusted terms; or
-- if Warner-Lambert shall have breached any of its representations,
warranties, covenants or obligations under the merger agreement and
such breach:
- would result in the failure of closing conditions to the merger
being satisfied; and
- is incapable of being cured or remains uncured for 30 days after
Warner-Lambert receives notice of its breach.
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CHAPTER ONE -- THE MERGER
- by Warner-Lambert:
-- if Pfizer's board of directors either fails to recommend to its
shareholders the share issuance proposal or the amendment to Pfizer's
certificate of incorporation, changes its recommendation, or fails to
call the Pfizer annual meeting to vote on the share issuance proposal
or the amendment to Pfizer's certificate of incorporation;
-- if Warner-Lambert's board of directors authorizes Warner-Lambert to
enter into a written agreement concerning a transaction that
Warner-Lambert's board of directors has determined is a superior
proposal, except that Warner-Lambert cannot terminate the merger
agreement for this reason until the completion of five business days
after Warner-Lambert provides Pfizer with notice of the existence and
terms of the superior proposal, including the identity of the person
making the superior proposal and a statement as to whether Warner-
Lambert intends to enter into a definitive agreement for a business
combination. After delivering such notice, Warner-Lambert will
provide Pfizer a reasonable opportunity to make adjustments to the
terms and conditions of the merger agreement to enable Warner-Lambert
to proceed with the merger on the adjusted terms; or
-- if Pfizer shall have breached any of its representations, warranties,
covenants or obligations under the merger agreement and such breach:
- would result in the failure of closing conditions to the merger
being satisfied; and
- is incapable of being cured or remains uncured for 30 days after
Pfizer receives notice of its breach.
Termination Fees Payable by Warner-Lambert. Warner-Lambert has agreed to
pay Pfizer a termination fee of $500 million if a superior proposal is
outstanding with respect to Warner-Lambert and the merger agreement is
terminated under one of the following circumstances:
(1) either Pfizer or Warner-Lambert terminates the merger agreement because
Warner-Lambert's shareholders have failed to approve the merger
agreement and the merger, unless:
- at the time of the vote, a material adverse effect with respect to
Pfizer has occurred;
- at the time of the vote, the board of directors of Pfizer has changed
its recommendation of the share issuance proposal or the amendment to
Pfizer's certificate of incorporation following the making of a
business combination proposal with respect to Pfizer;
- Pfizer's shareholders have failed to approve the share issuance at the
Pfizer shareholders' meeting; or
- at the time of termination, Pfizer is in breach of any of its
representations, warranties, covenants or obligations under the merger
agreement and such breach would otherwise permit Warner-Lambert to
terminate the merger
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CHAPTER ONE -- THE MERGER
agreement for failure by Pfizer to satisfy a closing condition
relating to Pfizer's representations, warranties or covenants.
(2) Pfizer terminates the merger agreement because Warner-Lambert's board
of directors has changed its recommendation of the merger agreement and
the merger by reason of a superior proposal, unless:
- at the time of the change of the recommendation, a material adverse
effect with respect to Pfizer has occurred;
- at the time of the change of the recommendation, the board of
directors of Pfizer has changed its recommendation of the share
issuance proposal or the amendment to Pfizer's certificate of
incorporation following the making of a business combination proposal
with respect to Pfizer; or
- Pfizer's shareholders have failed to approve the share issuance at the
Pfizer shareholders' meeting; or
- at the time of termination, Pfizer is in breach of any of its
representations, warranties, covenants or obligations under the merger
agreement and such breach would otherwise permit Warner-Lambert to
terminate the merger agreement for failure by Pfizer to satisfy a
closing condition relating to Pfizer's representations, warranties or
covenants.
(3) Warner-Lambert terminates the merger agreement because Warner-Lambert's
board of directors has authorized Warner-Lambert to enter into a
written agreement for a superior proposal and the five business day
period after Warner-Lambert provided notice to Pfizer of such proposal
has expired, unless at the time of termination:
- Pfizer is in breach of any of its representations, warranties,
covenants or obligations under the merger agreement and such breach
would otherwise permit Warner-Lambert to terminate the merger
agreement for failure by Pfizer to satisfy a closing condition
relating to Pfizer's representations, warranties or covenants.
Repayment of Termination Fees by Pfizer. If Pfizer receives the $500
million termination fee from Warner-Lambert under the circumstances described
above and within twelve months after the termination of the merger agreement
enters into an agreement with a third party for a business combination, Pfizer
must repay Warner-Lambert the termination fee, unless:
(1) Warner-Lambert terminated the merger agreement because its board of
directors authorized Warner-Lambert to enter into a written agreement
for a superior proposal, and the five business day period after
Warner-Lambert provided notice of such proposal to Pfizer has expired;
(2) Pfizer terminated the merger agreement because the Warner-Lambert board
of directors failed to recommend, or changed its recommendation of, the
merger agreement and the merger following the making of a business
combination proposal with respect to Warner-Lambert that was
outstanding at the time of the failure to make the recommendation or
the change in the recommendation;
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CHAPTER ONE -- THE MERGER
(3) either Warner-Lambert or Pfizer terminated the merger agreement because
Warner-Lambert's shareholders failed to approve the merger agreement
and the merger, and at the time of the Warner-Lambert shareholder vote
there was outstanding a business combination proposal with respect to
Warner-Lambert; or
(4) at the time of termination, Warner-Lambert was in breach of its
representations, warranties, covenants or obligations under the merger
agreement, and such breach resulted in the failure of a closing
condition to the merger being satisfied relating to Warner-Lambert's
representations, warranties or covenants.
Termination Fees Payable by Pfizer. Pfizer has agreed to pay
Warner-Lambert a termination fee of $1.8 billion if the merger agreement is
terminated under one of the following circumstances:
(1) either Pfizer or Warner-Lambert terminates the merger agreement because
the merger has not been consummated by December 31, 2000 due to
Pfizer's failure to satisfy a closing condition concerning the accuracy
of its representations and warranties, and the performance of its
covenants and obligations;
(2) either Warner-Lambert or Pfizer terminates the merger agreement because
Pfizer's shareholders fail to approve the share issuance proposal,
unless:
- at the time of the shareholder vote, a material adverse effect with
respect to Warner-Lambert;
- at the time of the shareholder vote, the board of directors of
Warner-Lambert has changed its recommendation of the merger agreement
and the merger following the making of a business combination proposal
for Warner-Lambert;
- Warner-Lambert's shareholders have failed to approve the merger
agreement and the merger at the Warner-Lambert special meeting; or
- at the time of termination, Warner-Lambert is in breach of its
representations, warranties, covenants or obligations under the merger
agreement and such breach would otherwise permit Pfizer to terminate
the merger agreement for failure by Warner-Lambert to satisfy a
closing condition relating to Warner-Lambert's representations,
warranties or covenants.
(3) Warner-Lambert terminates the merger agreement because Pfizer's board
of directors has changed its recommendation of the share issuance
proposal or the amendment to the certificate of incorporation by reason
of a superior proposal, unless:
- at the time of the change of recommendation, a material adverse effect
with respect to Warner-Lambert has occurred;
- at the time of the change of recommendation, the board of directors of
Warner-Lambert has changed its recommendation of the merger agreement
and the merger following the making of a business combination proposal
for Warner-Lambert;
- Warner-Lambert's shareholders have failed to approve the merger
agreement and the merger at the Warner-Lambert special meeting; or
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CHAPTER ONE -- THE MERGER
- at the time of termination, Warner-Lambert is in breach of its
representations, warranties, covenants or obligations under the merger
agreement and such breach would otherwise permit Pfizer to terminate
the merger agreement for failure by Warner-Lambert to satisfy a
closing condition relating to Warner-Lambert's representations,
warranties or covenants.
(4) Warner-Lambert terminates the merger agreement because Pfizer was in
breach of its representations, warranties, covenants or obligations
under the merger agreement, and such breach resulted in the failure of
a closing condition to the merger relating to Warner-Lambert's
representations, warranties or covenants being satisfied;
(5) Pfizer terminates the merger agreement because Pfizer's board of
directors has authorized Pfizer to enter into a written agreement for a
superior proposal, and the five business day period after Pfizer
provided notice to Warner-Lambert of such proposal has expired;
(6) the merger agreement is terminated because the merger cannot be
accounted for as a pooling-of-interests, for reasons other than failure
by Pfizer or Warner-Lambert to use its reasonable best efforts not to
prevent the merger from being accounted for as such; or
(7) the merger agreement is terminated under any of the circumstances
described above under "Termination of Merger Agreement -- Right to
Terminate" other than:
- under the circumstances set out in paragraphs 1, 2 or 3 of
"Termination Fees Payable by Warner-Lambert";
- if Pfizer terminates the merger agreement because the merger has not
been completed by December 31, 2000 and at the time of the termination
Warner-Lambert is in breach of its representations, warranties,
covenants or obligations under the merger agreement or a governmental
review or inquiry concerning certain products or businesses of
Warner-Lambert that is likely to have a material adverse effect has
occurred; and
- if Pfizer terminates the merger agreement because Warner-Lambert is in
breach of its representations, warranties, covenants or obligations
under the merger agreement and such breach would result in the failure
of a closing condition to the merger being satisfied and is incapable
of being cured or remains uncured for 30 days after Warner-Lambert
receives notice of its breach.
Repayment of Termination Fees by Warner-Lambert. If Warner-Lambert
receives the $1.8 billion termination fee from Pfizer under the circumstances
described above and within twelve months after the termination of the merger
agreement enters into an agreement with a third party for a business
combination, Warner-Lambert must repay Pfizer the termination fee, unless:
(1) Pfizer terminated the merger agreement because its board of directors
authorized Pfizer to enter into a written agreement for a superior
proposal, and the five business day period after Pfizer provided notice
to Warner-Lambert has expired;
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CHAPTER ONE -- THE MERGER
(2) Warner-Lambert terminated the merger agreement because the Pfizer board
of directors failed to recommend, or changed its recommendation of, the
share issuance proposal or the amendment to the certificate of
incorporation following the making of a business combination proposal
with respect to Pfizer that was outstanding at the time of the failure
to make the recommendation or the change in the recommendation;
(3) either Pfizer or Warner-Lambert terminated the merger agreement because
Pfizer's shareholders failed to approve the share issuance, and at the
time of the Pfizer shareholder vote there was outstanding a business
combination proposal with respect to Pfizer; or
(4) at the time of termination Pfizer was in breach of its representations,
warranties, covenants or obligations under the merger agreement, and
such breach resulted in the failure of a closing condition to the
merger relating to Pfizer's representations, warranties or covenants
being satisfied.
ARRANGEMENTS WITH RESPECT TO LIPITOR(R)
In addition to the termination fees described above, in the event of the
termination of the merger agreement under certain circumstances, the parties
have made special arrangements with respect to their co-promotion and
co-marketing of Warner-Lambert's cholesterol-lowering drug Lipitor(R).
If termination of the merger agreement takes place as follows and at the
time of such termination Pfizer shall not be in breach of any of its
representations, warranties, covenants or obligations under the merger agreement
which would otherwise permit Warner-Lambert to terminate the merger agreement
for failure by Pfizer to satisfy a closing condition:
- under the circumstances set out in paragraphs 1, 2 or 3 of "Termination
Fees payable by Warner-Lambert";
- if Pfizer terminates the merger agreement because the merger has not been
consummated by December 31, 2000 due to Warner-Lambert's failure to
satisfy a closing condition concerning the accuracy of its
representations and warranties and the performance of its covenants and
obligations or due to the closing condition concerning the absence of any
event or circumstance relating to any governmental review or inquiry
concerning certain products or business practices of Warner-Lambert not
being satisfied; or
- if Pfizer terminates the merger agreement because Warner Lambert shall
have breached any of its representations, warranties, covenants or
obligations under the merger agreement and such breach would result in
the failure of closing conditions to the merger being satisfied and is
incapable of being cured or remains uncured for 30 days after
Warner-Lambert receives notice of its breach.
then Warner-Lambert will be required to amend the agreements between Pfizer
and Warner-Lambert with respect to their Lipitor(R) marketing arrangements
in order to eliminate Warner-Lambert's right to terminate those agreements
in the year 2002, or following a change of control. In those circumstances,
Warner-Lambert will also enter into a letter agreement with Pfizer relating
to the co-development and co-promotion of a Lipitor(R)/Norvasc(R)
combination drug.
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CHAPTER ONE -- THE MERGER
- If the merger agreement is terminated under any of the circumstances
described in items (1) through (5) above under the heading
"-- Termination of Merger Agreement -- Termination Fees Payable by
Pfizer", then Warner-Lambert will not be obligated to amend the
Lipitor(R) agreements or enter into a co-promotion agreement with respect
to a Lipitor(R)/Norvasc(R) combination drug.
- If the merger agreement is terminated under any of the circumstances
described in items (6) or (7) above under the heading "-- Termination of
Merger Agreement -- Termination Fees Payable by Pfizer", then Pfizer will
have the option to cause the Lipitor(R) amendments and the
Lipitor(R)/Norvasc(R) agreement to become effective by payment to
Warner-Lambert of $1.333 billion.
AMENDMENTS, EXTENSIONS AND WAIVERS
The merger agreement may be amended by the parties at any time prior to the
shareholder meetings. All amendments to the merger agreement must be in a
writing signed by each party.
At any time prior to the effective time of the merger, any party to the
merger agreement may, to the extent legally allowed:
- extend the time for the performance of any of the obligations or other
acts of the other parties to the merger agreement;
- waive any inaccuracies in the representations and warranties of the other
parties contained in the merger agreement; and
- waive compliance by the other parties with any of the agreements or
conditions contained in the merger agreement.
All extensions and waivers must be in writing and signed by the party
against whom the waiver is to be effective.
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CHAPTER ONE -- THE MERGER
BOARD OF DIRECTORS AND MANAGEMENT OF PFIZER
FOLLOWING THE MERGER
DIRECTORS
Pfizer's board of directors currently has 15 members and Pfizer's
certificate of incorporation now states that the number of directors can be
increased to a maximum of 18 members. Under the merger agreement, Pfizer will
use its best efforts to amend its certificate of incorporation to increase the
number of individuals serving on its board of directors to not less than 10 and
no more than 24.
- If Pfizer's shareholders approve the amendment to the certificate of
incorporation, which would permit the size of Pfizer's board of directors
to be increased, immediately following the completion of the merger,
Pfizer's board of directors will be enlarged to consist of 23 members, 8
of whom will be individuals who currently serve as outside directors on
the Warner-Lambert board of directors (provided that each Warner-Lambert
director invited to join the Pfizer's board of directors in fact joins)
and 15 of whom will be individuals currently serving on Pfizer's board of
directors.
- If Pfizer's shareholders do not approve the amendment to the certificate
of incorporation, which would permit the size of Pfizer's board of
directors to be increased, Pfizer's board of directors will be enlarged
to consist of 18 members, 15 of whom will be those individuals currently
serving on Pfizer's board of directors and three of whom will be selected
by Pfizer from among those individuals currently serving as outside
directors on Warner-Lambert's board of directors. However, as further
vacancies occur on Pfizer's board of directors, Pfizer will use its best
efforts to appoint individuals who are currently outside directors on
Warner-Lambert's board of directors to fill the next three vacancies on
Pfizer's board of directors. In addition, as the first committee chair
becomes available on Pfizer's board of directors after the completion of
the merger, the Pfizer board of directors will appoint an individual who
currently serves on the Warner-Lambert board of directors to such a
position.
THE PFIZER BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THE AMENDMENT OF THE
PFIZER CERTIFICATE OF INCORPORATION TO INCREASE THE MAXIMUM SIZE OF THE PFIZER
BOARD OF DIRECTORS.
COMMITTEES OF THE BOARD OF DIRECTORS
The table below provides membership information for each of the committees
of the combined company's board of directors following the merger.
<TABLE>
<CAPTION>
EXECUTIVE CORPORATE
EXECUTIVE AUDIT COMPENSATION GOVERNANCE
NAME** COMMITTEE COMMITTEE COMMITTEE COMMITTEE
- ------ --------- --------- ------------ ----------
<S> <C> <C> <C> <C>
Dr. Brown.................... X
Mr. Burns.................... X X*
Mr. Cornwell................. X
Mr. Harvey................... X*
Ms. Horner................... X X*
Dr. Ikenberry................ X X
</TABLE>
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CHAPTER ONE -- THE MERGER
<TABLE>
<CAPTION>
EXECUTIVE CORPORATE
EXECUTIVE AUDIT COMPENSATION GOVERNANCE
NAME** COMMITTEE COMMITTEE COMMITTEE COMMITTEE
- ------ --------- --------- ------------ ----------
<S> <C> <C> <C> <C>
Mr. Kamen.................... X
Mr. Labrecque................ X
Dr. Mead..................... X
Mr. Raines................... X
Dr. Simmons.................. X
Mr. Steere................... X*
Dr. Valles................... X
</TABLE>
- -------------------------
* Chair
** Representation on the committees of the combined company's board of directors
by individuals who currently serve as directors of Warner-Lambert has not yet
been determined.
COMPENSATION FOR PFIZER'S NON-EMPLOYEE DIRECTORS
Annual Cash Retainer Fees. Non-employee directors receive an annual cash
retainer fee of $26,000 per year. Non-employee directors who serve on one board
of directors committee or more (other than the Executive Committee) receive an
additional annual fee of $4,000. In addition, the chair of a board of directors
committee receives an additional $2,000 per year, per committee.
Meeting Fees. Non-employee directors also receive a fee of $1,500 for
attending each board of directors meeting, committee meeting, the annual meeting
of shareholders, each day of a visit to a plant or office of Pfizer or Pfizer
subsidiaries, and for attending any other business meeting to which the director
is invited as a representative of the company.
Unit Awards. On the day of the 1999 annual meeting of shareholders, all of
Pfizer's non-employee directors who continued as Directors were awarded 3,600
units (adjusted for Pfizer's June 1999 3-for-1 stock split) under the Pfizer
Inc. Nonfunded Deferred Compensation and Unit Award Plan for Non-Employee
Directors (the "Unit Award Plan").
Under the Unit Award Plan, non-employee directors may defer all or a part
of their annual cash retainers and meeting fees until they cease to be
directors. At the director's election, the fees held in the director's account
may be credited either with interest at the rate of return of the Intermediate
Bond Fund of the Pfizer Inc. Savings and Investment Plan, or with units. The
units are calculated by dividing the amount of the fee by the closing price of
Pfizer common stock on the last business day before the date that the fee would
be paid. The units in a director's account are increased by the value of any
distributions on the common stock. When a director ceases to be a Pfizer
director, the amount held in the director's account is paid in cash. The amount
paid is determined by multiplying the number of units in the account by the
closing price of the common stock on the last business day before the payment
date.
Also under the Unit Award Plan, non-employee directors are granted an
initial award of 3,600 units (adjusted for Pfizer's June 1999 3-for-1 stock
split) when they become a
I-111
<PAGE> 120
CHAPTER ONE -- THE MERGER
director. Afterwards, each non-employee director is granted an annual award of
3,600 units ("Annual Unit Award") on the day of Pfizer's annual meeting,
provided the director continues to serve as a director following the meeting.
The awards under the Unit Award Plan are made in addition to the directors'
annual cash retainers and meeting attendance fees. Such units are not payable
until the recipients cease to be directors of Pfizer.
Retainer Unit Awards. On the day of the 1999 annual meeting of
shareholders, all non-employee directors who continued as Directors were also
awarded 549 units (adjusted for Pfizer's June 1999 3-for-1 stock split) under
the Pfizer Inc. Annual Retainer Unit Award Plan. Under this plan, directors
receive the equivalent of their annual retainer fee in similarly restricted
units. These awards are in addition to the Annual Unit Awards, the directors'
annual cash retainers and meeting attendance fees, and are made annually on the
day of Pfizer's annual meeting. The number of units awarded to the non-employee
directors is based upon the five-day average of the closing trading price of our
common stock on the New York Stock Exchange for the first five trading days
after April 1 of each year (rounded up to the nearest unit).
Trusts. In certain circumstances, Pfizer is obligated to fund trusts
established to secure the obligations to make payments to directors under the
above benefit plans, programs or agreements in advance of the time payment is
due.
Indemnification. Pfizer indemnifies its directors and officers to the
fullest extent permitted by law so that they will serve free from undue concern
about personal liability in connection with their service to Pfizer. This is
required under Pfizer's by-laws, and Pfizer has also executed signed agreements
with each of those individuals contractually obligating the company to provide
this indemnification to them.
I-112
<PAGE> 121
CHAPTER ONE -- THE MERGER
OFFICERS
In a letter dated, February 6, 2000, from William C. Steere, Jr., the
Chairman and Chief Executive Officer of Pfizer, to Lodewijk J.R. de Vink, the
Chairman, President and Chief Executive Officer of Warner-Lambert, Pfizer agreed
that three senior management positions in the combined company will be filled by
certain current Warner-Lambert officers who will also serve on Pfizer's
Corporate Management Committee. The senior management team of Pfizer following
the merger will include the following individuals:
CHIEF EXECUTIVE OFFICER AND CHAIRMAN
William C. Steere, Jr. Chief Executive Officer;
Chairman of the Board of Directors;
Chairman of the Corporate Management
Committee
Mr. Steere will continue to serve as Chairman of the Board and Chief
Executive Officer and following completion of the merger and may only be removed
by a vote of a majority of the entire board of directors.
OTHER SENIOR MANAGEMENT
<TABLE>
<CAPTION>
POSITION IN PFIZER UPON
NAME COMPLETION OF THE MERGER PRE-MERGER POSITION
---- ------------------------ -------------------
<S> <C> <C>
Henry A. McKinnell...................... President and Chief Operating President and Chief Operating
Officer; and Member of the Officer; and Member of the
Corporate Management Committee Corporate Management Committee
John F. Niblack......................... Vice Chairman; Member of the Vice Chairman; Member of the
Corporate Management Committee Corporate Management Committee
C. L. Clemente.......................... Executive Vice President, Executive Vice President,
Corporate Affairs; Secretary and Corporate Affairs; Secretary and
Corporate Counsel; Member of the Corporate Counsel; Member of the
Corporate Management Committee Corporate Management Committee
Peter B. Corr........................... Senior Vice President of Pfizer; Vice President of Warner-Lambert;
to assume a senior management President, Warner-Lambert/Parke-
position within the Central Davis, Pharmaceutical Research
Research Division of Pfizer; and Development
Member of the Corporate
Management Committee
Karen L. Katen.......................... Senior Vice President; Executive Senior Vice President; Executive
Vice President -- Pfizer Vice President -- Pfizer
Pharmaceuticals Group and Pharmaceuticals Group and
President -- U.S. President -- U.S.
Pharmaceuticals; Member of the Pharmaceuticals; Member of the
Corporate Management Committee Corporate Management Committee
Paul S. Miller.......................... Executive Vice President; General Executive Vice President; General
Counsel; Member of the Corporate Counsel; Member of the Corporate
Management Committee Management Committee
George M. Milne, Jr. ................... Senior Vice President; President, Senior Vice President; President,
Central Research; Member of the Central Research; Member of the
Corporate Management Committee Corporate Management Committee
</TABLE>
I-113
<PAGE> 122
CHAPTER ONE -- THE MERGER
<TABLE>
<CAPTION>
POSITION IN PFIZER UPON
NAME COMPLETION OF THE MERGER PRE-MERGER POSITION
---- ------------------------ -------------------
<S> <C> <C>
S. Morgan Morton........................ Senior Vice President of Pfizer Senior Vice President of Warner-
and President of the Lambert; President, Consumer
Warner-Lambert Consumer Division; Health Care Sector
Member of the Corporate
Management Committee
William J. Robison...................... Executive Vice President -- Executive Vice President --
Employee Resources; Member of the Employee Resources; Member of the
Corporate Management Committee Corporate Management Committee
David L. Shedlarz....................... Executive Vice President and Executive Vice President and
Chief Financial Officer; Member Chief Financial Officer; Member
of the Corporate Management of the Corporate Management
Committee Committee
</TABLE>
EXECUTIVE COMPENSATION
The executive compensation committee of the Pfizer board of directors will
determine the form and amount of compensation of the Warner-Lambert officers who
become Pfizer's officers. The current officers of Pfizer will continue to
receive the compensation set forth in Chapter Five.
I-114
<PAGE> 123
CHAPTER TWO -- SELECTED FINANCIAL DATA
CHAPTER TWO
SELECTED FINANCIAL DATA
The following tables include financial results actually achieved by Pfizer
and Warner-Lambert ("historical" amounts) as well as results assuming that the
companies had been combined for the periods shown (the "pro forma combined"
amounts) under the pooling-of-interests method of accounting.
The historical information is derived from:
- the audited financial statements of Pfizer as of and for the years ended
December 31, 1995 through 1999; and
- the audited statements of income of Warner-Lambert for the years ended
December 31, 1996 through 1999, audited balance sheets as of December 31,
1999, 1998 and 1997 and unaudited financial statements as of and for all
other periods presented, all of which were restated to reflect the
consummation of the acquisition of Agouron Pharmaceuticals, Inc. in May
1999, which was accounted for under the pooling-of-interests method of
accounting.
The pro forma information is derived from the Unaudited Pro Forma Condensed
Combined Financial Statements, appearing elsewhere herein, which combine the
historical consolidated financial statements of Pfizer and Warner-Lambert and
give effect to the merger as if it had been consummated on December 31, 1999 for
the balance sheet and on January 1, 1997 for the income statements.
You should not assume that Pfizer and Warner-Lambert would have achieved
the combined pro forma results if they had actually been combined during the
periods shown. The selected financial data included in this section should be
read in conjunction with the historical Consolidated Financial Statements of
Pfizer and Warner-Lambert and the Unaudited Pro Forma Condensed Combined
Financial Statements, including the notes thereto, included in this joint proxy
statement/prospectus.
II-1
<PAGE> 124
CHAPTER TWO -- SELECTED FINANCIAL DATA
CONSOLIDATED SELECTED FINANCIAL DATA OF
PFIZER INC. AND SUBSIDIARIES -- HISTORICAL
<TABLE>
<CAPTION>
AS OF AND FOR THE
YEAR ENDED DECEMBER 31,
-------------------------------------------
1999 1998 1997 1996 1995
------- ------ ------ ------ ------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net sales............................... $14,133 12,677 10,739 9,864 8,684
Alliance revenue........................ 2,071 867 316 -- --
------- ------ ------ ------ ------
Total revenues.......................... 16,204 13,544 11,055 9,864 8,684
Research and development................ 2,776 2,279 1,805 1,567 1,340
Other costs and expenses................ 8,980 8,671 6,383 5,769 5,327
------- ------ ------ ------ ------
Income from continuing operations before
taxes and minority interests.......... 4,448 2,594 2,867 2,528 2,017
Provision for taxes on income........... 1,244 642 775 758 609
Minority interests...................... 5 2 10 6 7
------- ------ ------ ------ ------
Income from continuing operations....... 3,199 1,950 2,082 1,764 1,401
Discontinued operations -- net of tax... (20) 1,401 131 165 172
------- ------ ------ ------ ------
Net income.............................. $ 3,179 3,351 2,213 1,929 1,573
======= ====== ====== ====== ======
Depreciation............................ $ 473 420 363 309 277
Property, plant and equipment
additions............................. 1,561 1,198 878 690 635
Cash dividends paid..................... 1,148 976 881 771 659
Working capital......................... 2,006 2,739 2,448 1,914 1,787
Property, plant and equipment -- net.... 5,343 4,415 3,793 3,456 3,113
Total assets............................ 20,574 18,302 14,991 14,251 12,339
Long-term debt.......................... 525 527 725 681 828
Shareholders' equity.................... 8,887 8,810 7,933 6,954 5,506
Per common share data(1):
Basic:
Income from continuing
operations....................... $ 0.85 0.51 0.55 0.47 0.38
Discontinued operations -- net of
tax.............................. (0.01) 0.37 0.04 0.05 0.05
------- ------ ------ ------ ------
Net income......................... $ 0.84 0.88 0.59 0.52 0.43
======= ====== ====== ====== ======
Diluted:
Income from continuing
operations....................... $ 0.82 0.49 0.53 0.46 0.37
Discontinued operations -- net of
tax.............................. -- 0.36 0.04 0.04 0.05
------- ------ ------ ------ ------
Net income......................... $ 0.82 0.85 0.57 0.50 0.42
======= ====== ====== ====== ======
Cash dividends paid per share(1)........ $ 0.30 2/3 0.25 1/3 0.22 2/3 0.20 0.17 1/3
Weighted average shares used to
calculate(1):
Basic earnings per share amounts...... 3,775 3,789 3,771 3,743 3,687
Diluted earnings per share amounts.... 3,884 3,945 3,909 3,864 3,777
Employees of continuing operations
(thousands)(2)........................ 51 46 41 39 37
</TABLE>
- -------------------------
(1) Share and per share data reflect the 3-for-1 stock split which occurred in
June 1999.
(2) Not derived from audited information.
II-2
<PAGE> 125
CHAPTER TWO -- SELECTED FINANCIAL DATA
CONSOLIDATED SELECTED FINANCIAL DATA OF
WARNER-LAMBERT COMPANY -- HISTORICAL(1)
<TABLE>
<CAPTION>
AS OF AND FOR THE
YEAR ENDED DECEMBER 31,
----------------------------------------
1999 1998 1997 1996 1995
------- ------ ----- ----- -----
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net sales.................................. $12,929 10,744 8,408 7,231 7,040
Research and development................... 1,259 1,026 731 599 514
Other costs and expenses................... 9,229 7,927 6,488 5,494 5,392
------- ------ ----- ----- -----
Income before taxes and minority
interests................................ 2,441 1,791 1,189 1,138 1,134
Provision for taxes on income.............. 708 518 327 322 280
Minority interests......................... -- -- -- 69 130
------- ------ ----- ----- -----
Net income................................. $ 1,733 1,273 862 747 724
======= ====== ===== ===== =====
Depreciation............................... $ 300 248 225 202 189
Property, plant and equipment additions.... 932 753 513 395 389
Cash dividends paid........................ 672 525 413 374 351
Working capital............................ 2,001 1,005 885 760 352
Property, plant and equipment -- net....... 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
Shareholders' equity....................... 5,098 3,880 3,051 2,709 2,332
Per common share data(2):
Basic.................................... $ 2.03 1.50 1.03 0.89 0.88
Diluted.................................. 1.96 1.45 0.99 0.88 0.87
Cash dividends paid per share(2)........... 0.80 0.64 0.50 2/3 0.46 0.43 1/3
Weighted average shares used to
calculate(2):
Basic earnings per share amounts......... 855 848 841 835 825
Diluted earnings per share amounts....... 885 879 868 850 834
Employees (thousands)(3)................... 44 42 41 39 37
</TABLE>
- -------------------------
(1) Warner-Lambert's financial statements have been restated for the acquisition
of Agouron Pharmaceuticals, Inc. in May 1999, which was accounted for as a
pooling-of-interests. All restated amounts in 1995 and the balance sheet
amounts in 1996 have been derived from unaudited financial statements.
(2) Share and per share data reflect the 3-for-1 stock split which occurred in
May 1998.
(3) Not derived from audited information.
II-3
<PAGE> 126
CHAPTER TWO -- SELECTED FINANCIAL DATA
UNAUDITED PRO FORMA COMBINED SELECTED FINANCIAL DATA OF PFIZER AND
WARNER-LAMBERT
<TABLE>
<CAPTION>
AS OF AND FOR THE
YEAR ENDED DECEMBER 31,
-------------------------------------
1999 1998 1997
--------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Total revenues............................. $27,601 23,414 19,125
Income from continuing operations.......... 4,959 3,221 2,880
Per common share data:
Income from continuing operations:
Basic................................. 0.81 0.53 0.47
Diluted............................... 0.79 0.51 0.46
Cash dividends(1)........................ 0.30 2/3 0.25 1/3 0.22 2/3
Total assets............................... 31,379
Long-term debt............................. 3,575
</TABLE>
- -------------------------
(1) Amounts reflect Pfizer's historical dividend rate per common share.
II-4
<PAGE> 127
CHAPTER TWO -- SELECTED FINANCIAL DATA
COMPARATIVE PER SHARE DATA OF
PFIZER AND WARNER-LAMBERT
<TABLE>
<CAPTION>
AS OF AND FOR THE
YEAR ENDED DECEMBER 31,
--------------------------
1999 1998 1997
------ ----- -----
<S> <C> <C> <C>
UNAUDITED PRO FORMA COMBINED
Per common share data:
Income from continuing operations:
Basic............................................ $ 0.81 0.53 0.47
Diluted.......................................... 0.79 0.51 0.46
Cash dividends(1)................................... 0.30 2/3 0.25 1/3 0.22 2/3
Shareholders' equity................................ 1.98
Ratio of earnings to fixed charges.................... 14.7x 13.1x 10.9x
PFIZER HISTORICAL
Per common share data(2):
Income from continuing operations:
Basic............................................ $ 0.85 0.51 0.55
Diluted.......................................... 0.82 0.49 0.53
Cash dividends...................................... 0.30 2/3 0.25 1/3 0.22 2/3
Shareholders' equity................................ 2.36 2.33 2.10
Ratio of earnings to fixed charges.................... 16.3x 14.8x 15.9x
WARNER-LAMBERT HISTORICAL
Per common share data(3):
Basic............................................... $ 2.03 1.50 1.03
Diluted............................................. 1.96 1.45 0.99
Cash dividends...................................... 0.80 0.64 0.50 2/3
Shareholders' equity................................ 5.91 4.57 3.61
Ratio of earnings to fixed charges.................... 12.3x 11.2x 6.7x
WARNER-LAMBERT UNAUDITED PRO FORMA EQUIVALENTS
Per common share data(4):
Income from continuing operations:
Basic............................................ $ 2.23 1.46 1.29
Diluted.......................................... 2.17 1.40 1.27
Cash dividends...................................... 0.84 1/3 0.69 2/3 0.62 1/3
Shareholders' equity................................ 5.45
</TABLE>
- -------------------------
(1) Amounts represent Pfizer's historical dividend rate per common share.
(2) Amounts reflect Pfizer's 3-for-1 stock split in June 1999.
(3) Amounts reflect Warner-Lambert's 3-for-1 stock split in May 1998.
(4) Amounts are calculated by multiplying the Unaudited Pro Forma Combined per
share amounts by the exchange ratio for voting common shares in the merger
(2.75 shares of Pfizer voting common stock for each share of Warner-Lambert
voting common stock).
II-5
<PAGE> 128
CHAPTER TWO -- SELECTED FINANCIAL DATA
PFIZER AND WARNER-LAMBERT
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
The Unaudited Pro Forma Condensed Combined Balance Sheet combines the
historical consolidated balance sheet of Pfizer and the historical consolidated
balance sheet of Warner-Lambert, giving effect to the merger as if it had been
consummated on December 31, 1999. The Unaudited Pro Forma Condensed Combined
Statements of Income combine the historical consolidated statements of income of
Pfizer and Warner-Lambert, giving effect to the merger as if it had occurred on
January 1, 1997. The merger is being accounted for as a pooling-of-interests.
This information should be read in conjunction with the:
- Accompanying notes to the Unaudited Pro Forma Condensed Combined
Financial Statements;
- Separate historical financial statements of Pfizer as of and for each of
the years in the three-year period ended December 31, 1999, which are
contained in Pfizer's Current Report on Form 8-K dated February 22, 2000;
and
- Separate historical financial statements of Warner-Lambert as of December
31, 1999 and 1998 and for each of the three years in the period ended
December 31, 1999, which are contained in Warner-Lambert's Current Report
on Form 8-K dated February 22, 2000
The pro forma data is not necessarily indicative of the financial position
and results of operations that would have been achieved had the merger been
consummated on the dates indicated or of future operations of the combined
company.
II-6
<PAGE> 129
CHAPTER TWO -- SELECTED FINANCIAL DATA
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
PRO FORMA
WARNER- ADJUSTMENTS PRO FORMA
PFIZER LAMBERT (SEE NOTE 4) COMBINED
------- ------- ------------ ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents.................. $ 739 1,634 2,373
Short-term investments..................... 3,703 310 4,013
Accounts receivable, less allowance for
doubtful accounts........................ 3,864 1,981 (477)(a) 5,368
Short-term loans........................... 273 -- 273
Inventories................................ 1,654 979 (45)(a) 2,588
Prepaid expenses and taxes................. 958 786 1,744
------- ------ ------ ------
Total current assets............. 11,191 5,690 (522) 16,359
Long-term loans and investments............ 1,721 478 2,199
Property, plant and equipment, less
accumulated depreciation................. 5,343 3,342 8,685
Goodwill, less accumulated amortization.... 763 1,107 1,870
Other assets, deferred taxes and deferred
charges.................................. 1,556 825 (115)(a) 2,266
------- ------ ------ ------
Total assets..................... $20,574 11,442 (637) 31,379
======= ====== ====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term borrowings, including current
portion of long-term debt................ $ 5,001 297 5,298
Accounts payable........................... 951 1,882 2,833
Dividends payable.......................... 349 -- 349
Income taxes payable....................... 869 284 (25)(a) 1,128
Accrued compensation and related items..... 669 236 905
Other current liabilities.................. 1,346 990 (547)(a) 1,789
------- ------ ------ ------
Total current liabilities........ 9,185 3,689 (572) 12,302
Long-term debt............................. 525 1,250 1,800(b) 3,575
Postretirement benefit obligation other
than pension plans....................... 346 159 505
Deferred taxes on income................... 301 172 473
Other noncurrent liabilities............... 1,330 1,074 2,404
------- ------ ------ ------
Total liabilities................ 11,687 6,344 1,228 19,259
------- ------ ------ ------
Shareholders' Equity
Preferred stock............................ -- -- --
Common stock............................... 213 962 (843)(c) 332
Additional paid-in capital................. 5,416 897 (371)(c) 5,942
Retained earnings.......................... 13,396 5,098 (1,865)(a,b) 16,629
Accumulated other comprehensive expense.... (399) (645) (1,044)
Employee benefit trusts.................... (2,888) -- (2,888)
Treasury stock, at cost.................... (6,851) (1,214) 1,214(c) (6,851)
------- ------ ------ ------
Total shareholders' equity....... 8,887 5,098 (1,865) 12,120
------- ------ ------ ------
Total liabilities and
shareholders' equity........... $20,574 11,442 (637) 31,379
======= ====== ====== ======
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements, which are an integral part of these statements.
II-7
<PAGE> 130
CHAPTER TWO -- SELECTED FINANCIAL DATA
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA
PFIZER WARNER-LAMBERT (SEE NOTE 4) COMBINED
------- -------------- ------------ ---------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales........................ $14,133 12,929 (126)(a) 26,936
Alliance revenue................. 2,071 -- (1,406)(a) 665
------- ------ ------ ------
Total revenues................... 16,204 12,929 (1,532)(a) 27,601
Costs and expenses:
Cost of sales.................. 2,528 3,042 (105)(a) 5,465
Selling, informational and
administrative expenses..... 6,351 5,959 (1,481)(a) 10,829
Research and development
expenses.................... 2,776 1,259 4,035
Other deductions -- net........ 101 228 16(a) 345
------- ------ ------ ------
Income from continuing operations
before provision for taxes and
minority interests............. 4,448 2,441 38 6,927
Provision for taxes on income.... 1,244 708 11(a) 1,963
Minority interests............... 5 -- 5
------- ------ ------ ------
Income from continuing
operations..................... $ 3,199 1,733 27 4,959
======= ====== ====== ======
Income from continuing operations
per common share -- basic...... $ 0.85 2.03 0.81
======= ====== ======
Income from continuing operations
per common share -- diluted.... $ 0.82 1.96 0.79
======= ====== ======
Weighted average shares used to
calculate earnings per common
share amounts
Basic.......................... 3,775 855 1,496 6,126
======= ====== ====== ======
Diluted........................ 3,884 885 1,548 6,317
======= ====== ====== ======
Cash dividends per common
share.......................... $ 0.30 2/3 0.80
======= ======
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements, which are an integral part of these statements.
II-8
<PAGE> 131
CHAPTER TWO -- SELECTED FINANCIAL DATA
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA
PFIZER WARNER-LAMBERT (SEE NOTE 4) COMBINED
-------- -------------- ------------ ---------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales....................... $ 12,677 10,744 (76)(a) 23,345
Alliance revenue................ 867 -- (798)(a) 69
-------- ------ ----- ------
Total revenues.................. 13,544 10,744 (874) 23,414
Costs and expenses:
Cost of sales................. 2,094 2,860 (47)(a) 4,907
Selling, informational and
administrative expenses.... 5,568 4,852 (842)(a) 9,578
Research and development
expenses................... 2,279 1,026 3,305
Other deductions -- net....... 1,009 215 18(a) 1,242
-------- ------ ----- ------
Income from continuing
operations before provision
for taxes and minority
interests..................... 2,594 1,791 (3) 4,382
Provision for taxes on income... 642 518 (1)(a) 1,159
Minority interests.............. 2 -- 2
-------- ------ ----- ------
Income from continuing
operations.................... $ 1,950 1,273 (2) 3,221
======== ====== ===== ======
Income from continuing
operations per common
share -- basic................ $ 0.51 1.50 0.53
======== ====== ======
Income from continuing
operations per common
share -- diluted.............. $ 0.49 1.45 0.51
======== ====== ======
Weighted average shares used to
calculate earnings per common
share amounts
Basic......................... 3,789 848 1,483 6,120
======== ====== ===== ======
Diluted....................... 3,945 879 1,538 6,362
======== ====== ===== ======
Cash dividends per common
share......................... $ 0.25 1/3 0.64
======== ======
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements, which are an integral part of these statements.
II-9
<PAGE> 132
CHAPTER TWO -- SELECTED FINANCIAL DATA
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA
PFIZER WARNER-LAMBERT (SEE NOTE 4) COMBINED
------- -------------- ------------ ---------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales........................ $10,739 8,408 (22)(a) 19,125
Alliance revenue................. 316 -- (316)(a) --
------- ----- ----- ------
Total revenues................... 11,055 8,408 (338) 19,125
Costs and expenses:
Cost of sales.................. 1,776 2,503 (19)(a) 4,260
Selling, informational and
administrative expenses..... 4,401 3,726 (351)(a) 7,776
Research and development
expenses.................... 1,805 731 2,536
Other deductions -- net........ 206 259 120(a) 585
------- ----- ----- ------
Income from continuing operations
before provision for taxes and
minority interests............. 2,867 1,189 (88) 3,968
Provision for taxes on income.... 775 327 (24)(a) 1,078
Minority interests............... 10 -- 10
------- ----- ----- ------
Income from continuing
operations..................... $ 2,082 862 (64) 2,880
======= ===== ===== ======
Income from continuing operations
per common share -- basic...... $ 0.55 1.03 0.47
======= ===== ======
Income from continuing operations
per common share -- diluted.... $ 0.53 0.99 0.46
======= ===== ======
Weighted average shares used to
calculate earnings per common
share amounts
Basic.......................... 3,771 841 1,472 6,084
======= ===== ===== ======
Diluted........................ 3,909 868 1,520 6,297
======= ===== ===== ======
Cash dividends per common
share.......................... $ 0.22 2/3 0.50 2/3
======= =====
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements which are an integral part of these statements.
II-10
<PAGE> 133
CHAPTER TWO -- SELECTED FINANCIAL DATA
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
1. DESCRIPTION OF TRANSACTION AND BASIS OF PRESENTATION
The merger agreement provides that each outstanding share of Warner-Lambert
voting common stock will be exchanged for 2.75 shares of Pfizer voting common
stock in a tax-free transaction. The merger is expected to be completed by
mid-year 2000. It is intended to be accounted for under the pooling-of-interests
method and, accordingly, financial statements of the combined company will
include Pfizer's historical consolidated financial statements restated to
include the historical consolidated financial statements of Warner-Lambert. The
merger is subject to customary closing conditions, including regulatory
approvals as well as approval by Pfizer and Warner-Lambert shareholders.
Certain reclassifications have been made to the historical financial
statements of Warner-Lambert to conform with Pfizer's presentation.
2. ACCOUNTING POLICIES AND FINANCIAL STATEMENT CLASSIFICATIONS
Upon consummation of the merger, Pfizer and Warner-Lambert will review
their accounting policies and financial statement classifications. As a result
of that review, it may become necessary to restate the combined entity's
financial statements to conform to those accounting policies and classifications
that are determined to be more appropriate.
3. INTERCOMPANY TRANSACTIONS
Transactions between Pfizer and Warner-Lambert are primarily limited to the
Lipitor(R) marketing agreements. Upon consummation of the merger, transactions
that occured in connection with this arrangement would be considered
intercompany transactions. All significant balances and transactions related to
this arrangement have been eliminated from the unaudited pro forma condensed
combined financial statements.
4. PRO FORMA ADJUSTMENTS
Adjustments included in the column under the heading "Pro Forma
Adjustments" represent the following:
(a) Elimination of all balances and transactions between Pfizer and
Warner-Lambert which, upon consummation of the merger, would be considered
intercompany balances and transactions. The majority of these transactions
occurred under the Lipitor(R) marketing agreements. The entries include:
- The elimination of receivable and payable balances.
- The elimination of profit in inventory.
- The elimination of intangible assets and related amortization
that resulted from milestone payments.
- The elimination of sales, alliance revenue and the corresponding
co-promotion expenses.
II-11
<PAGE> 134
CHAPTER TWO -- SELECTED FINANCIAL DATA
(b) Adjustment to reflect the February 7, 2000 payment by
Warner-Lambert of $1.8 billion to AHP in connection with the termination by
AHP of the AHP merger agreement with Warner-Lambert pursuant to the terms
of such agreement. The payment by Warner-Lambert was funded primarily by
commercial paper, which has been classified as long-term debt due to the
intent and ability of Warner-Lambert to refinance on a long-term basis.
This classification is not necessarily indicative of how this borrowing may
be treated upon consummation of the merger.
(c) Adjustments to common stock, additional paid-in capital and
treasury stock to reflect the retirement of Warner-Lambert treasury shares
and the issuance of Pfizer voting common stock to effect the merger. This
amount has been calculated by multiplying the number of shares of
Warner-Lambert voting common stock outstanding at December 31, 1999
(approximately 862 million shares) by the exchange ratio of 2.75. The
number of shares to be issued at completion of the merger will be based on
the actual number of shares of Warner-Lambert voting common stock
outstanding at that time.
Restructuring charges are expected to be recorded subsequent to the merger
to reflect the costs associated with combining the operations of the two
companies. Such charges, which are estimated to range between $1.5 and $2.0
billion, may include amounts with respect to the elimination of excess
facilities, termination of employees and consolidation of facilities and
information systems. These costs have not been reflected in this unaudited pro
forma condensed combined financial information.
Total transaction costs and merger-related costs to be incurred by Pfizer
and Warner-Lambert in connection with the merger are estimated to be
approximately $200 million. Of this amount, Pfizer has incurred approximately
$27 million through December 31, 1999 and has deferred this amount in its
historical balance sheet. The unaudited pro forma combined balance sheet
reflects only the costs incurred to date. These transaction costs relate to
legal, printing, accounting, financial advisory services and other expenses and
will be expensed in total upon consummation of the merger.
The pro forma combined basic and diluted earnings per share for the
respective periods presented are based on the combined basic and diluted
weighted average shares of Pfizer and Warner-Lambert. The historical basic and
diluted weighted average shares for Warner-Lambert were converted at the
exchange ratio of 2.75 shares of Pfizer voting common stock for each
Warner-Lambert common stock equivalent.
The pro forma condensed combined financial statements do not reflect the
expected realization of annual cost savings of $1.6 billion by 2002. These
savings are expected to result from the reduction of overhead expenses, changes
in corporate infrastructure, the elimination of redundant facilities and the
leveraging of the combined annual external purchases of over $10 billion.
Although management expects that cost savings will result from the merger, there
can be no assurance that these cost savings will be achieved.
II-12
<PAGE> 135
CHAPTER TWO -- SELECTED FINANCIAL DATA
5. FORWARD-LOOKING STATEMENTS
The statements contained in this section may be deemed to be
forward-looking statements within the meaning of Section 27A of the Securities
Act. Forward-looking statements are typically identified by the words "believe,"
"expect," "anticipate," "intend," "estimate" and similar expressions. These
forward-looking statements are based largely on management's expectations and
are subject to a number of uncertainties. Actual results could differ materially
from these forward-looking statements. Neither Pfizer nor Warner-Lambert
undertake any obligation to update publicly or revise any forward-looking
statements. For a more complete discussion of the risks and uncertainties which
may affect such forward-looking statements, please refer to the section entitled
"Forward-Looking Statements" beginning on page .
II-13
<PAGE> 136
CHAPTER TWO -- SELECTED FINANCIAL DATA
UNAUDITED FINANCIAL PROJECTIONS
In connection with the review of the merger, Pfizer and Warner-Lambert
management prepared financial projections for their respective organizations on
a stand-alone, pre-merger basis. These projections were exchanged by Pfizer and
Warner-Lambert and were presented to, and considered by, the members of each
company's board of directors in its recommendation of the Pfizer/Warner-Lambert
transaction.
The financial projections are "forward looking statements" and Pfizer's
and/or Warner-Lambert's actual results may differ materially from those set
forth in the projections. See "Forward Looking Statements" for a discussion of
the risks you should consider in reviewing the projections set forth in this
joint proxy statement/prospectus.
Pfizer.
The material portions of the financial projections prepared by management
of Pfizer follow:
<TABLE>
<CAPTION>
CUMULATIVE
AVERAGE
1999A 2000E 2001E 2002E GROWTH RATE
------- ------- ------- ------- -----------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Total Revenues................... $16,204 $18,600 $21,600 $25,000 16%
Net Income....................... 3,384 4,039 4,855 5,826 20%
Earnings per share (EPS)......... 0.87 1.04 1.25 1.50 20%
EPS Growth Rate................ 20% 20% 20%
Revenue Growth Rate............ 15% 16% 16%
</TABLE>
Note: Net income and Earnings per share for 1999 exclude the impact of a
charge to write off certain Trovan(C) inventories of $205 million, after tax, or
$0.05 per share.
Pfizer's financial projections reflect increased sales of its major in-line
pharmaceutical products (Norvasc(R), Zoloft(R), Zithromax(R), Viagra(R)) and
alliance products (Lipitor(R), Celebrex(R)), as well as the expected
introduction of new products. Expenditures for sales, marketing and research and
development are expected to increase at a slower rate than revenues as the
company leverages past investments in those areas. As a result, earnings are
projected to grow at a faster rate than revenues.
II-14
<PAGE> 137
CHAPTER TWO -- SELECTED FINANCIAL DATA
Warner-Lambert.
The material portions of the financial projections prepared by management
of Warner-Lambert follow:
<TABLE>
<CAPTION>
CUMULATIVE
AVERAGE
1999A 2000E 2001E 2002E GROWTH RATE
------- ------- ------- ------- -----------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Total Sales...................... $12,929 $14,806 $16,218 $17,958 12%
Net Income....................... 1,733 2,191 2,610 3,037 20%
Earnings per share (EPS)......... 1.96 2.45 2.90 3.36 20%
EPS Growth Rate................ 25% 18% 16%
Sales Growth Rate.............. 15% 10% 11%
</TABLE>
Note: Net income and Earnings per share for 2000 exclude the impact of the
payment by Warner-Lambert of $1.8 billion to AHP in connection with the
termination by AHP of the AHP merger agreement with Warner-Lambert pursuant to
the terms of such agreement.
In arriving at the above financial projections, Warner-Lambert has assumed
that its Pharmaceutical Sector will continue to be the primary growth driver for
Warner-Lambert based on the growth of products such as Lipitor(R) and
Accupril(R) and the launch of new products. In addition, the projections reflect
Warner-Lambert's expectation that it will achieve gross margin improvements,
modest infrastructure growth and tax rate improvements during this period.
---------------------------------------------------------
These estimates were not prepared with a view to public disclosure or
compliance with published guidelines established by the SEC or the American
Institute of Certified Public Accountants regarding projections. None of Pfizer,
Warner-Lambert or their respective affiliates or Pfizer's or Warner-Lambert's
independent auditors assume any responsibility for the accuracy of this
information. In addition, because the realization of the underlying assumptions
upon which these estimates are based are to a large extent beyond Pfizer's or
Warner-Lambert's control, there can be no assurances that these estimates will
be realized; actual results may be higher or lower than those estimated. Pfizer
and Warner-Lambert do not generally publish their respective business plans and
strategies or make external disclosures of their respective anticipated
financial position or results of operations. Accordingly, Pfizer and
Warner-Lambert do not intend to, and specifically decline any obligation to,
update or otherwise revise the prospective financial information to reflect
circumstances existing since their preparation or to reflect the occurrence of
unanticipated events, even if any or all the underlying assumptions are shown to
be in error. Also, Pfizer and Warner-Lambert do not intend to, and specifically
decline any obligation to, update or revise the prospective financial
information to reflect changes in general economic or industry conditions.
Neither Pfizer's auditors nor Warner-Lambert's auditors nor any other
independent accountants have compiled, examined or performed any procedures with
respect to these estimates, nor have they expressed any opinion or any other
form of assurance on this information or its achievability, and assume no
responsibility for, and disclaim any association with, this prospective
financial information. The independent public accountant reports incorporated by
reference in this document relate to the historical financial statements of
Pfizer and Warner-Lambert. These reports do not extend to these unaudited
financial projections and should not be read to do so.
II-15
<PAGE> 138
CHAPTER THREE -- INFORMATION ABOUT THE MEETINGS AND VOTING
CHAPTER THREE
INFORMATION ABOUT THE MEETINGS AND VOTING
Pfizer's board of directors is using this joint proxy statement/prospectus
to solicit proxies from the holders of Pfizer common stock for use at the annual
meeting of Pfizer's shareholders. The Warner-Lambert board of directors is also
using this document to solicit proxies from the holders of Warner-Lambert common
stock for use at the Warner-Lambert special meeting. We are first mailing this
joint proxy statement/prospectus and accompanying form of proxy to Pfizer and
Warner-Lambert shareholders on or about March 15, 2000.
MATTERS RELATING TO THE MEETINGS
<TABLE>
<CAPTION>
PFIZER MEETING WARNER-LAMBERT MEETING
<S> <C> <C>
Time and Place: April 27, 2000 at 10:00 a.m. at the [May] , 2000 at a.m. at the
Grand Hyatt Hotel, Empire State [ ].
Ballroom, 42nd Street and Lexington
Avenue, New York, New York.
Admission to An admission ticket, which is required An admission ticket, which is required
Meeting: for entry into the annual meeting, is for entry into the special meeting, can
attached to your proxy card. If you be obtained by marking the appropriate
plan to attend the annual meeting, box provided on the proxy card. Upon
please vote your proxy but keep the receipt of your request, an admittance
admission ticket and bring it to the card will be sent to you. If you do not
annual meeting. wish to send in your proxy, you may
enclose your own request in the
If your shares are held in the name of envelope provided to you, and an
a bank, broker or other holder of admittance card will be sent to you.
record and you plan to attend the
meeting, you can obtain an admission If your shares are held in the name of
ticket in advance by providing proof of a bank, broker or other holder of
ownership, such as a bank or brokerage record and you plan to attend the
account statement, to Pfizer Inc., c/o special meeting, you can obtain an
First Chicago Trust Company, a division admission ticket in advance by
of EquiServe, P.O. Box 8923, Edison, providing proof of ownership, such as a
New Jersey 08818-8923, or by calling bank or brokerage account statement, to
212-573-2265. Warner-Lambert Company, c/o First
Chicago Trust Company, a division of
EquiServe, P.O. Box 8923, Edison, New
(This number should be called ONLY to Jersey 08818-8923, or by calling
obtain an admission ticket for the 2000 [ ].
annual meeting.) If you do not have an
admission ticket, you must show proof
of ownership of Pfizer common stock at (This number should be called ONLY to
the door. obtain an admission ticket for the
Warner-Lambert special meeting). If you
do not have an admission ticket you
must show
</TABLE>
III-1
<PAGE> 139
CHAPTER THREE -- INFORMATION ABOUT THE MEETINGS AND VOTING
<TABLE>
<CAPTION>
PFIZER MEETING WARNER-LAMBERT MEETING
<S> <C> <C>
proof of ownership of Warner-Lambert
common stock at the door.
Purpose of Meeting 1. To authorize the issuance of Pfizer 1. To approve and adopt the merger
is common stock in the merger as agreement and the merger as
to Vote on the described in "Chapter One -- The described in "Chapter One -- The
Following Items: Proposed Merger"; Proposed Merger".
2. To amend the Pfizer certificate of 2. To transact such other business as
incorporation to increase the may properly come before the
maximum number of Pfizer directors Warner-Lambert meeting, and any
from 18 to 24 as described in adjournment or postponement.
"Chapter One -- The Proposed
Merger";
3. To elect five members to the Pfizer
board of directors for three year
terms as described in "Chapter
Five -- Other Pfizer Annual Meeting
Proposals";
4. To approve KPMG LLP as our
independent auditor for the 2000
fiscal year as described in "Chapter
Five -- Other Pfizer Annual Meeting
Proposals";
5. To consider two shareholder
proposals as described in "Chapter
Five -- Other Pfizer Annual Meeting
Proposals"; and
6. To transact such other business as
may properly come before the meeting
and any adjournment or postponement.
Record Date: The record date for shares entitled to The record date for shares entitled to
vote is February 29, 2000. vote is [ ], 2000.
Outstanding As of February 29, 2000, there were As of [ ], 2000, there were
Shares Held approximately shares of approximately shares of
on Record Date: Pfizer common stock outstanding. Warner-Lambert common stock
outstanding.
</TABLE>
III-2
<PAGE> 140
CHAPTER THREE -- INFORMATION ABOUT THE MEETINGS AND VOTING
<TABLE>
<CAPTION>
PFIZER MEETING WARNER-LAMBERT MEETING
<S> <C> <C>
Shares Entitled Shares entitled to vote are the Pfizer Shares entitled to vote are the
to Vote: common stock held at the close of Warner-Lambert common stock held at the
business on the record date, February close of business on the record date,
29, 2000. [ ], 2000.
Each share of Pfizer common stock that Each share of Warner-Lambert common
you own entitles you to one vote. stock that you own entitles you to one
Shares held by Pfizer in its treasury vote. Shares held by Warner-Lambert in
are not vote. its treasury are not voted.
Quorum A quorum of shareholders is necessary A quorum of shareholders is necessary
Requirement: to hold a valid meeting. to hold a valid meeting.
The presence in person or by proxy at The presence in person or by proxy at
the meeting of holders of a majority of the meeting of holders of a majority of
the outstanding shares of Pfizer common the outstanding shares of
stock entitled to vote at the meeting Warner-Lambert common stock entitled to
is a quorum. Abstentions and broker vote at the meeting is a quorum.
"non-votes" count as present for Abstentions and broker "non-votes"
establishing a quorum. Shares held by count as present for establishing a
Pfizer in its treasury do not count quorum. Shares held by Warner-Lambert
toward a quorum. in its treasury do not count toward a
quorum.
A broker non-vote occurs on an item A broker non-vote occurs on an item
when a broker is not permitted to vote when a broker is not permitted to vote
on that item without instruction from on that item without instruction from
the beneficial owner of the shares and the beneficial owner of the shares and
no instruction is given. no instruction is given.
Shares Beneficially [ ] shares of Pfizer common [ ] shares of Warner- Lambert
Owned by Pfizer and stock, including exercisable options. common stock, including exercisable
Warner-Lambert These shares represent in total options. These shares represent in
Directors and approximately [ ]% of the total approximately [ ]% of the
Executive Officers as outstanding shares of Pfizer common outstanding shares of Warner-Lambert
of stock. common stock.
February 29, 2000:
</TABLE>
VOTE NECESSARY TO APPROVE PFIZER AND WARNER-LAMBERT PROPOSALS
<TABLE>
<CAPTION>
COMPANY VOTE NECESSARY
------- --------------
<S> <C>
Pfizer: 1. Approval of the proposal to authorize the issuance of
Pfizer common stock for completion of the merger
requires the affirmative vote of at least a majority
of the votes cast by the holders of Pfizer common
stock if the total votes cast represent a majority of
the outstanding shares of Pfizer common stock.
Abstentions and broker non-votes have the same effect
as a vote against the proposal.
</TABLE>
III-3
<PAGE> 141
CHAPTER THREE -- INFORMATION ABOUT THE MEETINGS AND VOTING
<TABLE>
<CAPTION>
COMPANY VOTE NECESSARY
------- --------------
<S> <C>
2. Approval of the amendment of the certificate of
incorporation to increase the size of Pfizer's board of
directors requires the affirmative vote of the
holders of at least 80% of the outstanding shares of
Pfizer common stock. Abstentions and broker non-votes
have the same effect as a vote against the proposal.
3. A plurality of the vote cast is required for the
election of directors. This means that the director
nominee with the most votes for a particular slot is
elected for that slot.
4. The affirmative vote of a majority of shares is
required to approve the appointment of KPMG LLP as
Pfizer's independent auditors for the 2000 fiscal
year. Abstentions are not counted as votes "for" or
"against" the proposal, but are counted in
determining the number of shares present or
represented on the proposals, so they are effectively
votes against the proposal.
5. The affirmative vote of a majority of shares is
required to approve the two shareholder proposals
Abstentions are not counted as votes "for" or
"against" the proposals, but are counted in
determining the number of shares present or
represented on each of the proposals, so they are
effectively votes against the proposals.
Warner-Lambert: 1. Approval of the merger agreement and the merger
requires the affirmative vote of at least a majority of
the outstanding shares of Warner-Lambert common
stock. Abstentions and broker non-votes have the same
effect as a vote against the proposal.
</TABLE>
- -------------------------
* Under New York Stock Exchange rules, if your broker holds your shares in its
name, your broker is permitted to vote your shares on the proposal for the
amendment of the certificate of incorporation, the election of directors and
the two shareholder proposals even if it does not receive voting instructions
from you. Your broker may not vote your shares on any proposal concerning the
merger transaction, absent instruction from you. Without your voting
instructions on the merger proposal or share issuance proposal, a broker
non-vote will occur on those items and will not be counted as voted or as
present or represented on these proposals.
PROXIES
Voting Your Proxy. You may vote in person at your meeting or by proxy. We
recommend you vote by proxy even if you plan to attend your meeting. You can
always change your vote at the meeting.
Voting instructions are included on your proxy card. If you properly give
your proxy and submit it to us in time to vote, one of the individuals named as
your proxy will vote your shares as you have directed. You may vote for or
against the proposals or abstain from voting.
III-4
<PAGE> 142
CHAPTER THREE -- INFORMATION ABOUT THE MEETINGS AND VOTING
HOW TO VOTE BY PROXY
<TABLE>
<CAPTION>
PFIZER WARNER-LAMBERT
<S> <C> <C>
By Mail: If you choose to vote by mail, simply To vote by mail, simply mark your
mark your proxy, date and sign it, and proxy, date and sign it, and return it
return it to First Chicago in the to First Chicago in the postage-paid
postage-paid envelope provided. If the envelope provided. If the envelope is
envelope is missing, please address missing, please address your completed
your completed proxy card to Pfizer proxy card to Warner- Lambert Company
Inc. c/o First Chicago Trust Company, a c/o First Chicago Trust Company, a
division of EquiServe, P.O. Box 8923, division of EquiServe, P.O. Box 8923,
Edison, New Jersey 08818-8923. If you Edison, New Jersey 08818-8923.
wish to discontinue future duplicate
annual reports, check the box provided
on the card.
By Telephone*: You can vote your shares by telephone
by calling the toll-free telephone
number (at no cost to you) on your
proxy card. Telephone voting is
available 24 hours a day.
Easy-to-follow voice prompts allow you
to vote your shares and confirm that
your instructions have been properly
recorded. Our telephone voting
procedures are designed to authenticate
shareholders by using individual
control numbers. IF YOU VOTE BY
TELEPHONE YOU DO NOT NEED TO RETURN
YOUR PROXY CARD. IF YOU ARE LOCATED
OUTSIDE THE U.S. AND CANADA, SEE YOUR
PROXY CARD FOR ADDITIONAL INSTRUCTIONS.
By Internet*: You can also choose to vote on the
Internet. The web site for Internet
voting is on your proxy card. Internet
voting is available 24 hours a day, AND
WILL BE ACCESSIBLE UNTIL 10:00 A.M. ON
APRIL 25, 2000. As with telephone
voting, you will be given the
opportunity to confirm that your
instructions have been properly
recorded. IF YOU VOTE ON THE INTERNET,
YOU DO NOT NEED TO RETURN YOUR PROXY
CARD.
</TABLE>
- -------------------------
* If you hold shares through a broker or other custodian, please check the
voting form used by that firm to see if it offers telephone or Internet
voting.
III-5
<PAGE> 143
CHAPTER THREE -- INFORMATION ABOUT THE MEETINGS AND VOTING
PROXIES FOR PARTICIPANTS IN PFIZER INC. SAVINGS AND INVESTMENT PLAN OR PFIZER
INC. SHAREHOLDER INVESTMENT PROGRAM
You will receive only one proxy card for all the shares you hold:
- In your own name;
- In the Pfizer Inc. Shareholder Investment Program;
- In the Pfizer Inc. Savings and Investment Plan (the "Plan"), if you are a
Pfizer employee.
Please note that the merging of shares from different accounts is done by
matching Social Security numbers. You will receive a separate proxy card for
shares you own jointly only if the Social Security number on the joint account
differs from the Social Security number on your individual account.
If you are a Pfizer employee who has received stock options, you are
entitled to give voting instructions on the shares underlying your options to
the trustee of the Pfizer Inc. Employee Benefit Trust. Those shares will also be
consolidated into your proxy card, and your voting instructions will be given to
the trustee of the Trust.
If you do not vote your shares or specify voting instructions on your proxy
card, the Plan administrator or the trustee will vote your shares in the same
proportion as the shares for which voting instructions have been received. TO
ALLOW SUFFICIENT TIME FOR VOTING BY THE TRUSTEE OF THE TRUST AND THE
ADMINISTRATOR OF THE PLAN, YOUR VOTING INSTRUCTIONS MUST BE RECEIVED BY APRIL
24, 2000.
If you hold Pfizer shares through any other Pfizer plans, you will receive
voting instructions from that plan's administrator.
PROXIES FOR PARTICIPANTS IN WARNER-LAMBERT SAVINGS AND STOCK PLANS
If you own Warner-Lambert shares as a participant in the Warner-Lambert
Savings and Stock Plan or the Warner-Lambert Savings and Stock Plan for
colleagues in Puerto Rico, you will receive a proxy card covering those shares.
If you also own additional shares of Warner-Lambert common stock outside of
those shares, you will receive two separate proxy cards: one covering the shares
credited to your plan account, and another relating to those shares of common
stock that you own of record. Proxies promptly voted will serve as voting
instructions to T. Rowe Price, the trustee for the plan. Under the terms of this
plan, if you do not submit a proxy for the shares held in custody for you under
the plan, those shares will be voted by the trustee in accordance with the
recommendation of Warner-Lambert's management.
III-6
<PAGE> 144
CHAPTER THREE -- INFORMATION ABOUT THE MEETINGS AND VOTING
If you submit your proxy but do not make specific choices, your proxy will
follow the respective board of director recommendations and vote your shares:
<TABLE>
<CAPTION>
PFIZER WARNER-LAMBERT
------ --------------
<S> <C>
- - "FOR" the share issuance proposal - "FOR" the merger agreement and the
merger
- - "FOR" the amendment of the - "FOR" any proposal by Warner-
certificate of incorporation Lambert's board of directors to
adjourn the Warner-Lambert meeting
- - "FOR" approval of KPMG LLP as - In its discretion as to any other
independent auditors business as may properly come before
the Warner-Lambert meeting
- - "AGAINST" the three shareholder
proposals
- - "FOR" any proposal by Pfizer's board
of directors to adjourn the Pfizer
meeting
- - In its discretion as to any other
business as may properly come before
the Pfizer meeting
</TABLE>
Revoking Your Proxy. You may revoke your proxy at any time before it is
voted by:
- timely delivery of a valid, later-dated proxy, including, in the case of
Pfizer shareholders, a proxy given by telephone or Internet;
- written notice to your company's Secretary before the meeting that you
have revoked your proxy; or
- voting by ballot at either the Pfizer annual meeting or Warner-Lambert
special meeting.
Voting in Person. If you plan to attend a meeting and wish to vote in
person, we will give you a ballot at the meeting. However, if your shares are
held in the name of your broker, bank or other nominee, you must obtain a proxy,
executed in your favor, from the holder of record to be able to vote at the
meeting.
People with Disabilities. We can provide reasonable assistance (including
audio enhancement) to help you participate in the meeting if you tell us about
your disability and your plan to attend. For the Pfizer annual meeting, the
Empire State Ballroom at the Grand Hyatt Hotel is accessible to disabled persons
and, upon request, we will provide wireless headsets for hearing amplification.
Sign interpretation will also be available upon request. Please call Pfizer in
advance at 212-573-2265 if you require either of these services or other special
accommodations. (This number should be called ONLY if you require any of these
special services.) Please call or write the Secretary of Warner-Lambert in
advance at 973-[ ] if you require either of these services or other
special accommodations.
Proxy Solicitation. We will pay our own costs of soliciting proxies.
In addition to this mailing, proxies may be solicited by directors,
officers or employees of Pfizer and Warner-Lambert in person or by telephone or
electronic transmission. Pfizer
III-7
<PAGE> 145
CHAPTER THREE -- INFORMATION ABOUT THE MEETINGS AND VOTING
has hired Morrow & Co. to assist us in the distribution and solicitation of
proxies. Pfizer will pay Morrow & Co. a fee of $25,000, plus reasonable
expenses, for these services. Warner-Lambert has hired Georgeson Shareholder
Communications Inc. to assist in the distribution and solicitation of proxies.
Warner-Lambert will pay Georgeson Shareholder Communications Inc. a fee of
$25,000, plus reasonable expenses, for these services.
The extent to which these proxy soliciting efforts will be necessary
depends entirely upon how promptly proxies are submitted. You should send in
your proxy without delay by mail, or in the case of a Pfizer shareholder by
telephone or the Internet. We also reimburse brokers and other nominees for
their expenses in sending these materials to you and getting your voting
instructions.
Do not send in any stock certificates with your proxy cards. The exchange
agent will mail transmittal forms with instructions for the surrender of stock
certificates for Warner-Lambert common stock to former Warner-Lambert
shareholders as soon as practicable after the completion of the merger.
OTHER BUSINESS; ADJOURNMENTS
We are not currently aware of any other business to be acted upon at either
meeting. If, however, other matters are properly brought before either meeting,
or any adjourned meeting, your proxies will have discretion to vote or act on
those matters according to their best judgment, including to adjourn the
meeting.
Adjournments may be made for the purpose of, among other things, soliciting
additional proxies. Any adjournment may be made from time to time by approval of
the holders of shares representing a majority of the votes present in person or
by proxy at the meeting, whether or not a quorum exists, without further notice
other than by an announcement made at the meeting. Neither of us currently
intends to seek an adjournment of our meeting.
MULTIPLE COPIES OF PFIZER ANNUAL REPORT TO SHAREHOLDERS
The SEC adopted a new rule that allows companies to send a single annual
report to two or more investors sharing the same address, subject to certain
conditions. This new "householding" rule will provide greater convenience for
investors and cost savings for companies by reducing the number of duplicate
documents that investors receive. The SEC is also proposing an amendment to the
new rule to include householding of proxy statements as well. Please note,
however, that each investor in your household will still receive a separate
proxy card.
Pfizer's 1999 annual report has been mailed to Pfizer shareholders. If more
than one copy of the annual report is sent to your address, you may consent to
have Pfizer discontinue the mailing of future reports to the accounts you select
if you mark the designated box on the appropriate proxy card(s), or follow the
prompts when you vote, if you are a Pfizer shareholder of record voting by
telephone or Internet.
At least one account in each household must continue to receive Pfizer's
annual report, unless you elect to view future annual reports over the Internet.
Mailing of dividends, Shareholder Investment Program statements and proxy
materials will not be affected by your election to discontinue future duplicate
mailings of the annual report. If you wish to withdraw your consent to receive
only one copy of Pfizer's annual report for your household, call the Pfizer
Shareholder Services toll free number, 1-800-733-9393.
III-8
<PAGE> 146
CHAPTER THREE -- INFORMATION ABOUT THE MEETINGS AND VOTING
If Pfizer does not receive instructions to remove your account from this
service, your account will continue to be "householded" until we notify you
otherwise.
If you own shares of Pfizer common stock through a bank, broker or other
nominee and receive more than one Pfizer annual report, contact the holder of
record to eliminate duplicate mailings.
ELECTRONIC ACCESS TO PFIZER PROXY MATERIALS AND ANNUAL REPORT
The notice of Pfizer's annual meeting and proxy statement and the 1999
annual report are available on Pfizer's Internet site at www.pfizer.com.
Shareholders can elect to view future proxy statements and annual reports on the
Internet instead of receiving paper copies in the mail.
If you are a Pfizer shareholder of record, you can choose this option and
save Pfizer the cost of producing and mailing these documents. Simply check the
appropriate box on your proxy card or follow the instructions provided if you
vote on the Internet or by telephone. You can also choose between paper
documents and electronic access by calling the Pfizer Shareholder Services toll
free number (800) 733-9393, or signing up on the Internet through
www.econsent.com/pfe.
If your shares of Pfizer common stock are held through a bank, broker or
other holder of record, check the information provided by that entity for
instructions on how to elect to view future proxy statements and annual reports
on the Internet.
If you are a Pfizer shareholder of record and choose to view future proxy
statements and annual reports on the Internet, you will receive a proxy card in
the mail next year with instructions containing the Internet address to access
those documents.
Pfizer shareholders who hold stock through a bank, broker or other holder
of record and who elect electronic access will receive an e-mail next year
containing the Internet address they must access to view Pfizer's proxy
statement and annual report.
PFIZER SHAREHOLDER ACCOUNT MAINTENANCE
Pfizer's transfer agent is First Chicago Trust Company, a division of
EquiServe. All communications concerning accounts of Pfizer shareholders of
record, including address changes, name changes, inquiries as to requirements to
transfer shares of common stock and similar issues can be handled by calling the
Pfizer Shareholder Services toll-free number, 1-800-733-9393, or contacting
First Chicago's web site at www.equiserve.com. For other information about
Pfizer, shareholders can visit Pfizer's web site at www.pfizer.com.
In addition, Pfizer shareholders can access their account through First
Chicago's Internet web site. Pfizer shareholders can view their current balance,
access their account history, sell or request a certificate for shares held in
the Pfizer Shareholder Investment Program and obtain current and historical
stock prices. To access your account on the Internet, visit
gateway.equiserve.com and type in your issue number, account number and
password. These can be found on your account statement or dividend check stub.
III-9
<PAGE> 147
CHAPTER FOUR -- CERTAIN LEGAL INFORMATION
CHAPTER FOUR
CERTAIN LEGAL INFORMATION
COMPARISON OF PFIZER/WARNER-LAMBERT
SHAREHOLDER RIGHTS
The rights of Warner-Lambert shareholders under the Delaware General
Corporation Law, the Warner-Lambert certificate of incorporation and the
Warner-Lambert by-laws prior to the completion of the merger are substantially
the same as the rights that they will have as Pfizer shareholders following the
completion of the merger under the Delaware General Corporation Law, the Pfizer
certificate of incorporation and the Pfizer by-laws. The following is a summary
of the material differences between the current rights of Warner-Lambert
shareholders and the rights those shareholders will have as Pfizer shareholders
following the merger.
Copies of the Warner-Lambert certificate of incorporation, the
Warner-Lambert by-laws, the Pfizer certificate of incorporation and the Pfizer
by-laws are incorporated by reference and will be sent to holders of shares of
Warner-Lambert common stock upon request. See "Where You Can Find More
Information". The summary in the following chart is not complete and it does not
identify all differences that may, under given situations, be material to
shareholders and is subject in all respects, and is qualified by reference to
the Delaware General Corporation Law, the Warner-Lambert certificate of
incorporation, the Warner-Lambert by-laws, the Pfizer certificate of
incorporation and the Pfizer by-laws.
SUMMARY OF MATERIAL DIFFERENCES BETWEEN CURRENT RIGHTS OF WARNER-LAMBERT
SHAREHOLDERS AND RIGHTS THOSE SHAREHOLDERS WILL HAVE AS PFIZER SHAREHOLDERS
FOLLOWING THE MERGER
<TABLE>
<CAPTION>
WARNER-LAMBERT SHAREHOLDER RIGHTS PFIZER SHAREHOLDER RIGHTS
<S> <C> <C>
Corporate Governance: Upon completion of the merger, the Upon completion of the merger, the
rights of Warner-Lambert shareholders rights of Pfizer shareholders will be
who become Pfizer shareholders in the governed by the Delaware General
merger will be governed by the Delaware Corporation Law, Pfizer's certificate
General Corporation Law, Pfizer's of incorporation and Pfizer's by- laws.
certificate of incorporation and The certificate of incorporation and
Pfizer's by-laws. The certificate of by-laws of Pfizer after the merger will
incorporation and by-laws of Pfizer be identical in all respects to those
after the merger will be identical in of Pfizer prior to the merger after
all respects to those of Pfizer prior giving effect to any amendment to
to the merger after giving effect to increase the size of Pfizer's board of
any amendment to increase the size of directors.
the Pfizer's board of directors.
Authorized The authorized capital stock of The authorized capital stock of Pfizer
Capital Stock: Warner-Lambert consists of 1.2 billion is set forth under "Description of
shares of common stock, par value $1.00 Pfizer Capital Stock -- Authorized
per share, and 5 million shares of Capital Stock" below.
preferred stock, par value $1.00 per
share. No shares of preferred stock are
outstanding and the holders of
Warner-Lambert common stock do not have
any preemptive rights.
</TABLE>
IV-1
<PAGE> 148
CHAPTER FOUR -- CERTAIN LEGAL INFORMATION
<TABLE>
<CAPTION>
WARNER-LAMBERT SHAREHOLDER RIGHTS PFIZER SHAREHOLDER RIGHTS
<S> <C> <C>
Number of Warner-Lambert's board of directors Pfizer's board of directors currently
Directors: currently consists of 10 directors. consists of 15 directors.
If Pfizer's shareholders approve the
amendment of Pfizer's certificate of
incorporation, the maximum permitted
size of Pfizer's board of directors
will be increased from 18 to 24.
Classification of Warner-Lambert does not have a Pfizer's board of directors is divided
Board of Directors: classified board. Warner-Lambert's into three classes, with each class
by-laws require that all directors be serving a staggered three-year term.
elected at each annual meeting of
shareholders to serve until the next
annual meeting of shareholders.
Removal of Warner-Lambert's by-laws provide that Pfizer directors may be removed from
Directors: directors may be removed from office, office only for cause and only by the
with or without cause, by the affirmative vote of at least 80% of all
affirmative vote of a majority of the of the outstanding shares of capital
outstanding stock entitled to vote. stock as are entitled to vote in the
election of directors.
Shareholder Warner-Lambert shareholders may act by Pfizer shareholders may not act by
Action by written consent in lieu of a meeting of written consent in lieu of a meeting of
Written Consent: shareholders. shareholders.
Call of Special Warner-Lambert's by-laws provide that a Pfizer's by-laws provide that a special
Meetings of special meeting of shareholders may be meeting of Pfizer's shareholders may be
Shareholders: called for any purpose or purposes only called by the Chairman of the Board and
by (i) the Chairman of the Board, (ii) must be called by the Chairman or the
the President or (iii) a majority of Secretary at the request in writing of
the entire board of directors. a majority of the board of directors.
Amendment of Warner-Lambert's by-laws may be amended Pfizer's by-laws may be amended by a
Certificate of by a vote of a majority of the vote of a majority of the outstanding
Incorporation outstanding shares of Warner- Lambert shares of Pfizer common stock, or by a
and By-laws: common stock, or by a majority of the majority of the board of directors.
entire board of directors.
Warner-Lambert's certificate of Pfizer's certificate of incorporation
incorporation generally may be amended generally may be amended by the
by the affirmative vote of the holders affirmative vote of the majority of the
of at least a majority of the voting outstanding shares, however the
power of the outstanding stock. affirmative vote of 80% of the
outstanding shares is necessary to
amend certain sections of Article
Seventh and the entire Article Eighth.
</TABLE>
IV-2
<PAGE> 149
CHAPTER FOUR -- CERTAIN LEGAL INFORMATION
<TABLE>
<CAPTION>
WARNER-LAMBERT SHAREHOLDER RIGHTS PFIZER SHAREHOLDER RIGHTS
<S> <C> <C>
Shareholder Warner-Lambert entered into a Rights Pfizer entered into a Rights Agreement,
Rights Plan: Agreement, dated as of March 25, 1997, dated as of October 6, 1997, between
between Warner-Lambert and First Pfizer and Chase Mellon Shareholders
Chicago Trust Company of New York, as Services L.L.C., as Rights Agent, as
Rights Agent, as amended, pursuant to amended, pursuant to which Pfizer has
which Warner-Lambert has issued rights, issued rights, exercisable only upon
exercisable only upon the occurrence of the occurrence of certain events, to
certain events, to purchase its Series purchase its Series A Junior Preferred
A Junior Participating Preferred Stock. Stock.
</TABLE>
DESCRIPTION OF PFIZER CAPITAL STOCK
The following summary of the terms of the capital stock of Pfizer before
and after the merger is not meant to be complete and is qualified by reference
to Pfizer's certificate of incorporation and Pfizer's by-laws. Copies of
Pfizer's certificate of incorporation and Pfizer's by-laws are incorporated by
reference and will be sent to shareholders of Pfizer and Warner-Lambert upon
request. See "Where You Can Find More Information".
AUTHORIZED CAPITAL STOCK
Under Pfizer's certificate of incorporation, Pfizer's authorized capital
stock consists of 9 billion shares of Pfizer common stock, $.05 par value, and
12 million shares of preferred stock, without par value.
PFIZER COMMON STOCK
Pfizer Common Stock Outstanding. The outstanding shares of Pfizer common
stock are, and the shares of Pfizer common stock issued under the merger will
be, duly authorized, validly issued, fully paid and nonassessable.
Voting Rights. Each holder of Pfizer common stock is entitled to one vote
for each share of Pfizer common stock held of record on the applicable record
date on all matters submitted to a vote of shareholders.
Dividend Rights; Rights Upon Liquidation. The holders of Pfizer common
stock are entitled to receive, from funds legally available for the payment
thereof, dividends when and as declared by resolution of Pfizer's board of
directors, subject to any preferential dividend rights granted to the holders of
any outstanding Pfizer preferred stock. In the event of liquidation, each share
of Pfizer common stock is entitled to share pro rata in any distribution of
Pfizer's assets after payment or providing for the payment of liabilities and
the liquidation preference of any outstanding Pfizer preferred stock.
Preemptive Rights. Holders of Pfizer common stock have no preemptive
rights to purchase, subscribe for or otherwise acquire any unissued or treasury
shares or other securities.
Preferred Stock Purchase Rights. Each holder of Pfizer common stock is
also the holder of one preferred stock purchase right for each share of common
stock of Pfizer. Each right represents the right to purchase one thousandth of a
share of Series A Junior Preferred Stock of Pfizer at a price of $275 and is
exercisable upon the occurrence of certain specified events.
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CHAPTER FOUR -- CERTAIN LEGAL INFORMATION
PFIZER PREFERRED STOCK
Pfizer Preferred Stock Outstanding. As of the date of this joint proxy
statement/prospectus, no shares of Pfizer preferred stock were issued and
outstanding.
Blank Check Preferred Stock. Under Pfizer's certificate of incorporation,
Pfizer's board of directors has the authority, without shareholder approval, to
create one or more classes or series within a class of preferred stock, to issue
shares of preferred stock in such class or series up to the maximum number of
shares of the relevant class or series of preferred stock authorized, and to
determine the preferences, rights, privileges and restrictions of any such class
or series, including the dividend rights, voting rights, the rights and terms of
redemption, the rights and terms of conversion, liquidation preferences, the
number of shares constituting any such class or series and the designation of
such class or series.
TRANSFER AGENT AND REGISTRAR
First Chicago Trust Company, a division of EquiServe, is the transfer agent
and registrar for the Pfizer common stock.
STOCK EXCHANGE LISTING; DELISTING AND DEREGISTRATION OF WARNER-LAMBERT COMMON
STOCK
It is a condition to the merger that the shares of Pfizer common stock
issuable in the merger be approved for listing on the New York Stock Exchange,
subject to official notice of issuance. If the merger is completed,
Warner-Lambert common stock will cease to be listed on the New York Stock
Exchange.
LEGAL MATTERS
The validity of the Pfizer common stock to be issued to Warner-Lambert
shareholders in the merger will be passed upon by Cadwalader, Wickersham & Taft,
counsel to Pfizer. It is a condition to the completion of the merger that each
of Pfizer and Warner-Lambert receive an opinion from their respective counsel
with respect to the tax treatment of the merger.
EXPERTS
The audited financial statements of Pfizer Inc. and subsidiaries as of
December 31, 1999, 1998, and 1997, and for the years then ended, have been
incorporated in this joint proxy statement/ prospectus by reference to the
Pfizer Inc. Current Report of Form 8-K filed February 22, 2000, in reliance on
the report, dated February 14, 2000, of KPMG LLP, independent certified public
accountants, also incorporated by reference herein, and on the authority of said
firm as experts in accounting and auditing.
The audited financial statements of Warner-Lambert as of December 31, 1999
and 1998 and for each of the three years in the period ended December 31, 1999
incorporated into this joint proxy statement/prospectus by reference to the Form
8-K dated February 22, 2000 have been so incorporated in reliance on the report
of PricewaterhouseCoopers LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
IV-4
<PAGE> 151
CHAPTER FIVE -- OTHER PFIZER ANNUAL MEETING PROPOSALS
CHAPTER FIVE
OTHER PFIZER ANNUAL MEETING PROPOSALS
GOVERNANCE OF THE COMPANY
OUR CORPORATE GOVERNANCE PRINCIPLES
ROLE AND COMPOSITION OF THE BOARD OF DIRECTORS
(1) The Board of Directors, which is elected by the shareholders, is the
ultimate decision-making body of the Company except with respect to those
matters reserved to the shareholders. It selects the senior management team,
which is charged with the conduct of the Company's business. Having selected the
senior management team, the Board acts as an advisor and counselor to senior
management and ultimately monitors its performance.
(2) The Board also plans for succession to the position of Chairman of the
Board and Chief Executive Officer as well as certain other senior management
positions. To assist the Board, the Chairman and CEO annually provides the Board
with an assessment of senior managers and their potential to succeed him/her.
He/she also provides the Board with an assessment of persons considered
potential successors to certain senior management positions.
(3) It is the policy of the Company that the Board consist of a majority of
outside Directors and that the number of Directors not exceed a number that can
function efficiently as a body. The Corporate Governance Committee, in
consultation with the Chairman and CEO, considers and makes recommendations to
the Board concerning the appropriate size and needs of the Board. The Corporate
Governance Committee considers candidates to fill new positions created by
expansion and vacancies that occur by resignation, by retirement or for any
other reason. Candidates are selected for their character, judgment, business
experience and acumen. Scientific expertise, prior government service and
familiarity with national and international issues affecting business are among
the relevant criteria. Final approval of a candidate is determined by the full
Board. The Corporate Governance Committee annually reviews the compensation of
Directors. All Directors are expected to own stock in the Company in an amount
that is appropriate for them.
(4) It is the general policy of the Company that all major decisions be
considered by the Board as a whole. As a consequence, the committee structure of
the Board is limited to those committees considered to be basic to or required
for the operation of a publicly owned company. Currently these committees are
the Executive Committee, Audit Committee, Executive Compensation Committee and
Corporate Governance Committee. The members and chairs of these committees are
recommended to the Board by the Corporate Governance Committee in consultation
with the Chairman and CEO. The Audit Committee, Executive Compensation Committee
and Corporate Governance Committee are made up of only outside Directors. The
membership of these three committees is rotated from time to time.
(5) In furtherance of its policy of having major decisions made by the
Board as a whole, the Company has a full indoctrination process for new Board
members that includes extensive materials, meetings with key management and
visits to Company facilities.
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CHAPTER FIVE -- OTHER PFIZER ANNUAL MEETING PROPOSALS
(6) It is the policy of the Company that the chairs of the Audit, Executive
Compensation and Corporate Governance committees of the Board each act as the
chair at meetings or executive sessions of the outside Directors at which the
principal items to be considered are within the scope of the authority of his or
her committee. Experience has indicated that this practice, which has been in
place on an informal basis, provides for leadership at all of the meetings or
executive sessions of outside Directors without the need to designate a lead
Director.
(7) The Executive Compensation Committee is responsible for setting annual
and long-term performance goals for the Chairman and CEO and for evaluating his
or her performance against such goals. The Committee meets annually with the
Chairman and CEO to receive his or her recommendations concerning such goals.
Both the goals and the evaluation are then submitted for consideration by the
outside Directors of the Board at a meeting or executive session of that group.
The Committee then meets with the Chairman and CEO to evaluate his or her
performance against such goals. The Executive Compensation Committee is also
responsible for setting annual and long-term performance goals and compensation
for the direct reports to the Chairman and CEO. These decisions are approved or
ratified by action of the outside Directors of the Board at a meeting or
executive session of that group.
(8) It is the policy of the Company that the positions of Chairman of the
Board and Chief Executive Officer be held by the same person, except in unusual
circumstances. This combination has served the Company well over a great many
years. The function of the Board in monitoring the performance of the senior
management of the Company is fulfilled by the presence of outside Directors of
stature who have a substantive knowledge of the business.
(9) The Chairman and CEO is responsible for establishing effective
communications with the Company's stakeholder groups, i.e., shareholders,
customers, Company associates, communities, suppliers, creditors, governments
and corporate partners. It is the policy of the Company that management speaks
for the Company. This policy does not preclude outside Directors from meeting
with shareholders, but it is suggested that any such meetings be with management
present.
FUNCTIONING OF THE BOARD
(1) The Chairman of the Board and Chief Executive Officer sets the agenda
for Board meetings with the understanding that certain items pertinent to the
advisory and monitoring functions of the Board be brought to it periodically by
the Chairman and CEO for review and/or decision. For example, the annual
corporate budget is reviewed by the Board. Agenda items that fall within the
scope of responsibilities of a Board committee are reviewed with the chair of
that committee. Any member of the Board may request that an item be included on
the agenda.
(2) Decisions made by the Corporate Management Committee, which is the
Company's senior management committee, are reported to the Board at each meeting
with the understanding that such decisions are subject to change by the Board.
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<PAGE> 153
CHAPTER FIVE -- OTHER PFIZER ANNUAL MEETING PROPOSALS
(3) Board materials related to agenda items are provided to Board members
sufficiently in advance of Board meetings where necessary to allow the Directors
to prepare for discussion of the items at the meeting.
(4) At the invitation of the Board, members of senior management
recommended by the Chairman and CEO attend Board meetings or portions thereof
for the purpose of participating in discussions. Generally, presentations of
matters to be considered by the Board are made by the manager responsible for
that area of the Company's operations. In addition, Board members have free
access to all other members of management and employees of the Company.
(5) Executive sessions or meetings of outside Directors without management
present are held at least once each year to review the report of the outside
auditors, the criteria upon which the performance of the Chairman and CEO and
other senior managers is based, the performance of the Chairman and CEO against
such criteria, and the compensation of the Chairman and CEO and other senior
managers. Additional executive sessions or meetings of outside Directors may be
held from time to time as required. Executive sessions or meetings are held from
time to time with the Chairman and CEO for a general discussion of relevant
subjects.
FUNCTIONING OF COMMITTEES
(1) The Audit, Executive Compensation and Corporate Governance committees
consist of only outside Directors.
(2) The frequency, length and agenda of meetings of each of the committees
are determined by the chair of the committee. Sufficient time to consider the
agenda items is provided. Materials related to agenda items are provided to the
committee members sufficiently in advance of the meeting where necessary to
allow the members to prepare for discussion of the items at the meeting.
(3) The responsibilities of each of the committees are determined by the
Board from time to time.
PERIODIC REVIEW
These principles are reviewed by the Board from time to time.
BOARD OF DIRECTORS AND COMMITTEE MEMBERSHIP
Our business, property and affairs are managed under the direction of our
Board of Directors. Members of our Board are kept informed of our business
through discussions with our Chairman and Chief Executive Officer and other
officers, by reviewing materials provided to them, by visiting our offices and
plants and by participating in meetings of the Board and its committees.
During 1999, the Board of Directors met 15 times and had four ongoing
committees. Those committees consisted of an Audit Committee, a Corporate
Governance Committee, an Executive Compensation Committee, and an Executive
Committee. All of our Directors attended 75 percent or more of the regularly
scheduled and special meetings of the Board and Board committees on which they
served in 1999.
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<PAGE> 154
CHAPTER FIVE -- OTHER PFIZER ANNUAL MEETING PROPOSALS
The table below provides membership and meeting information for each of the
Board committees.
<TABLE>
<CAPTION>
EXECUTIVE
NAME AUDIT CORPORATE GOVERNANCE COMPENSATION EXECUTIVE
- ---- ----- -------------------- ------------ ---------
<S> <C> <C> <C> <C>
Dr. Brown.................. X
Mr. Burns.................. X* X
Mr. Cornwell............... X
Mr. Harvey................. X*
Ms. Horner................. X* X
Dr. Ikenberry.............. X X
Mr. Kamen.................. X
Mr. Labrecque.............. X
Dr. Mead................... X
Mr. Raines................. X
Dr. Simmons................ X
Mr. Steere................. X*
Dr. Valles................. X
-- -- -- --
1999 MEETINGS......... 6 5 6 0
</TABLE>
- -------------------------
* Chair
THE AUDIT COMMITTEE
The Audit Committee meets at least six times a year and is responsible for
recommending the annual appointment of the public accounting firm to be our
outside auditors, subject to approval by the Board and the shareholders. The
Committee:
- reviews with the outside auditors the scope of the audit, the auditors'
fees and related matters;
- receives copies of the annual comments from the outside auditors on
accounting procedures and systems of control;
- reviews with the outside auditors any questions, comments or suggestions
they may have relating to our internal controls, accounting practices or
procedures or those of our subsidiaries;
- reviews with management and the outside auditors our annual and quarterly
financial statements and any material changes in accounting principles or
practices used in preparing the statements prior to the filing of a
report on Form 10-K or 10-Q with the SEC. This review includes the items
required by SAS 61 as in effect at that time in the case of the quarterly
statements;
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<PAGE> 155
CHAPTER FIVE -- OTHER PFIZER ANNUAL MEETING PROPOSALS
- receives from the outside auditors the report required by Independence
Standards Board Standard No. 1 as in effect at that time and discusses it
with the outside auditors;
- reviews the programs of our Internal Audit Department, including
procedures for assuring implementation of recommendations made by the
outside auditors, receives summaries of all audit reports issued by the
Internal Audit Department and reviews the significant matters contained
in these reports;
- reviews periodically the adequacy of the systems of internal controls and
accounting practices of the Company and our subsidiaries regarding
accounting trends and developments;
- reviews compliance with laws, regulations, and internal procedures, and
contingent liabilities and risks that may be material to us; and
- prepares a report each year concerning compliance with its charter for
inclusion in our annual Proxy Statement.
AUDIT COMMITTEE REPORT
[TO COME]
THE CORPORATE GOVERNANCE COMMITTEE
The Corporate Governance Committee is responsible for considering and
making recommendations to the Board concerning the appropriate size, function
and needs of the Board. This responsibility includes:
- considering and recommending candidates to fill new positions on the
Board;
- reviewing candidates recommended by shareholders;
- conducting inquiries into the backgrounds and qualifications of possible
candidates; and
- recommending the Director nominees for approval by the Board and the
shareholders.
The Committee's additional functions are:
- to consider questions of possible conflicts of interest of Board members
and of our senior executives;
- to monitor and recommend the functions of the various committees of the
Board;
- to recommend members of the committees;
- to advise on changes in Board compensation;
- to make recommendations on the structure of Board meetings; and
- to recommend matters for consideration by the Board.
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<PAGE> 156
CHAPTER FIVE -- OTHER PFIZER ANNUAL MEETING PROPOSALS
The Committee also:
- considers and reviews our Corporate Governance Principles;
- reviews, periodically, our Shareholder Rights Plan;
- establishes Director retirement policies;
- reviews the functions of the senior officers and makes recommendations on
changes;
- reviews the job performance of officers and other senior executives with
the Chairman and CEO;
- reviews the outside activities of senior executives; and
- reviews with the Chairman and CEO the succession plans relating to
officer positions.
THE EXECUTIVE COMPENSATION COMMITTEE
The Executive Compensation Committee is responsible for establishing annual
and long-term performance goals for our elected officers. This responsibility
includes establishing the compensation and evaluating the performance of the
Chairman and CEO and other elected officers. In addition, the Committee:
- determines and certifies the shares awarded under the
Performance-Contingent Share Award Program;
- grants options and awards under the Stock and Incentive Plan;
- advises on the setting of compensation for senior executives whose
compensation is not otherwise set by the Committee;
- monitors compliance by officers with our program of required stock
ownership; and
- publishes an annual Executive Compensation Committee Report for the
shareholders.
THE EXECUTIVE COMMITTEE
The Executive Committee performs the duties and exercises the powers
delegated to it by the Board.
COMPENSATION OF NON-EMPLOYEE DIRECTORS
CASH RETAINER AND MEETING FEES
<TABLE>
<CAPTION>
ANNUAL
BOARD/ BOARD AND
COMMITTEE BUSINESS COMMITTEE
DIRECTOR RETAINER MEETING FEES* MEETING FEES TOTAL
- -------- --------- ------------- ------------ -------
<S> <C> <C> <C> <C>
Dr. Brown.................... $30,000 $39,000 $7,500 $76,500
Mr. Burns.................... 32,000 37,500 9,000 78,500
Mr. Cornwell................. 30,000 37,500 9,000 76,500
</TABLE>
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CHAPTER FIVE -- OTHER PFIZER ANNUAL MEETING PROPOSALS
<TABLE>
<CAPTION>
ANNUAL
BOARD/ BOARD AND
COMMITTEE BUSINESS COMMITTEE
DIRECTOR RETAINER MEETING FEES* MEETING FEES TOTAL
- -------- --------- ------------- ------------ -------
<S> <C> <C> <C> <C>
Mr. Harvey................... 32,000 40,500 9,000 81,500
Ms. Horner................... 32,000 40,500 7,500 80,000
Dr. Ikenberry................ 30,000 39,000 7,500 76,500
Mr. Kamen.................... 30,000 34,500 7,500 72,000
Mr. Labrecque................ 30,000 31,500 7,500 69,000
Dr. Mead..................... 30,000 36,000 9,000 75,000
Mr. Raines................... 30,000 24,000 6,000 60,000
Dr. Simmons.................. 30,000 31,500 9,000 70,500
Dr. Valles................... 30,000 36,000 9,000 75,000
</TABLE>
- -------------------------
* Includes fees relating to a trip by the Board to visit our offices and plants
in several European countries
FEES AND BENEFIT PLANS FOR NON-EMPLOYEE DIRECTORS
Annual Cash Retainer Fees. Non-employee Directors receive an annual cash
retainer fee of $26,000 per year. Non-employee Directors who serve on one Board
committee or more (other than the Executive Committee) receive an additional
annual fee of $4,000. In addition, the Chair of a Board committee receives an
additional $2,000 per year, per committee.
Meeting Fees. Non-employee Directors also receive a fee of $1,500 for
attending each Board meeting, committee meeting, the annual meeting of
shareholders, each day of a visit to a plant or office of ours or our
subsidiaries, and for attending any other business meeting to which the Director
is invited as a representative of the Company.
Unit Awards. On the day of the 1999 Annual Meeting of Shareholders, all of
our non-employee Directors who continued as Directors were awarded 3,600 units
(adjusted for our June 1999 3-for-1 stock split) under the Pfizer Inc. Nonfunded
Deferred Compensation and Unit Award Plan for Non-Employee Directors (the "Unit
Award Plan").
Under the Unit Award Plan, non-employee Directors may defer all or a part
of their annual cash retainers and meeting fees until they cease to be
Directors. At the Director's election, the fees held in the Director's account
may be credited either with interest at the rate of return of the Intermediate
Bond Fund of the Pfizer Inc. Savings and Investment Plan, or with units. The
units are calculated by dividing the amount of the fee by the closing price of
our common stock on the last business day before the date that the fee would be
paid. The units in a Director's account are increased by the value of any
distributions on the common stock. When a Director ceases to be a Director, the
amount held in the Director's account is paid in cash. The amount paid is
determined by multiplying the number of units in the account by the closing
price of the common stock on the last business day before the payment date.
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CHAPTER FIVE -- OTHER PFIZER ANNUAL MEETING PROPOSALS
Also under the Unit Award Plan, non-employee Directors are granted an
initial award of 3,600 units (adjusted for our June 1999 3-for-1 stock split)
when they become a Director. Afterwards, each non-employee Director is granted
an annual award of 3,600 units ("Annual Unit Award") on the day of our annual
meeting, provided the Director continues to serve as a Director following the
meeting. The awards under the Unit Award Plan are made in addition to the
Directors' annual cash retainers and meeting attendance fees. Such units are not
payable until the recipients cease to be Directors.
Retainer Unit Awards. On the day of the 1999 Annual Meeting of
Shareholders, all non-employee Directors who continued as Directors were also
awarded 549 units (adjusted for our June 1999 3-for-1 stock split) under the
Pfizer Inc. Annual Retainer Unit Award Plan. Under this Plan, Directors receive
the equivalent of their annual retainer fee in similarly restricted units. These
awards are in addition to the Annual Unit Awards, the Directors' annual cash
retainers and meeting attendance fees, and are made annually on the day of our
annual meeting. The number of units awarded to the non-employee Directors is
based upon the five-day average of the closing trading price of our common stock
on the New York Stock Exchange for the first five trading days after April 1 of
each year (rounded up to the nearest unit).
Trusts. In certain circumstances, we are obligated to fund trusts
established to secure our obligations to make payments to our Directors under
the above benefit plans, programs or agreements in advance of the time payment
is due.
RELATED TRANSACTIONS
From time to time in 1999, we have asked Dr. Brown to provide consulting
services in connection with our business. He received a total of $10,000 for
those services. We anticipate that Dr. Brown will continue to provide similar
services to us in the future as he and we may agree from time to time.
We have business arrangements with organizations with which certain of our
Directors are affiliated. However, none of these arrangements is material to
either us or any of those organizations.
We incurred expenses for the personal use of Company transportation of
$4,809 by Dr. Brown, and $6,133 by Mr. Raines.
INDEMNIFICATION
We indemnify our Directors and officers to the fullest extent permitted by
law so that they will be free from undue concern about personal liability in
connection with their service to the Company. This is required under our
by-laws, and we have also signed agreements with each of those individuals
contractually obligating us to provide this indemnification to them.
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CHAPTER FIVE -- OTHER PFIZER ANNUAL MEETING PROPOSALS
SECURITIES OWNERSHIP OF OFFICERS AND DIRECTORS
The table below shows the number of shares of our common stock beneficially
owned as of February 29, 2000* by each of our Directors and each Named Executive
Officer listed in the Summary Compensation Table, as well as the number of
shares beneficially owned by all of our Directors and executive officers as a
group. Together these individuals beneficially own less than one percent (1%) of
our common stock. The table also includes information about stock options, stock
units and contingent stock awards credited to the accounts of each Director and
executive officer under various compensation and benefit plans.
There are currently no known beneficial owners of five percent (5%) or more
of our common stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES OR UNITS
------------------------------
OPTIONS OPTIONS STOCK-
COMMON EXERCISABLE EXERCISABLE EQUIVALENT TOTAL STOCK
BENEFICIAL OWNERS STOCK WITHIN 60 DAYS AFTER 60 DAYS UNITS INTEREST
- ----------------- --------- -------------- ------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Michael S. Brown..... 1,200 -- -- 17,894(2) 19,094
M. Anthony Burns..... 20,400 -- -- 24,029(2) 44,429
C. L. Clemente....... 578,314(1)(4)(5) 666,556 588,450 99,874(3) 1,933,194
W. Don Cornwell...... 600 -- -- 21,227(2) 21,827
George B. Harvey..... 19,299 -- -- 52,382(2) 71,681
Constance J.
Horner............. 18,741 -- -- 24,029(2) 42,770
Stanley O.
Ikenberry.......... 39,806(4) -- 114,251(2) 154,057
Harry P. Kamen....... 2,520 -- -- 27,397(2) 29,917
Thomas L.
Labrecque.......... 20,400 -- -- 24,029(2) 44,429
Henry A. McKinnell... 499,342(1)(5) 1,288,812 1,086,450 42,002(3) 2,916,606
Dana G. Mead......... 9,000 -- -- 16,277(2) 25,277
Paul S. Miller....... 428,852(1)(4) 579,756 780,450 31,630(3) 1,820,688
John P. Niblack...... 565,039(1)(4) 783,756 972,450 28,622(3) 2,349,867
Franklin D. Raines... 1,500 -- -- 9,767(2) 11,267
Ruth J. Simmons...... 879 -- -- 17,867(2) 18,746
William C. Steere,
Jr. ............... 1,803,722(1) 2,585,352 2,520,450 160,659(3) 7,070,183
Jean-Paul Valles..... 789,180(4) -- -- 64,837(2) 854,017
Directors and all
Executive Officers
as a group......... 8,047,828 9,728,765 10,752,435 1,051,497 29,580,52
</TABLE>
- -------------------------
(1) As of February 29, 2000, this number includes shares credited under the
Savings and Investment Plan, or deferred under the Performance-Contingent
Share Award Program. The Plan and the Program are further described in this
Proxy Statement under the heading "Employee Benefit and Long-Term
Compensation Plans."
(2) As of February 29, 2000, these units are held under the Pfizer Inc.
Nonfunded Deferred Compensation and Unit Award Plan for Non-Employee
Directors and the Pfizer Inc. Annual Retainer Unit Award Plan. The value of
a Director's unit account is measured by the price of the common stock. The
Plans are further described in this Proxy Statement under the heading "Fees
and Benefit Plans for Non-Employee Directors."
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CHAPTER FIVE -- OTHER PFIZER ANNUAL MEETING PROPOSALS
(3) As of February 29, 2000, these units are held under the Supplemental Savings
Plan. The value of these units is measured by the price of the common stock.
This Plan is further described in this Chapter under the sub-heading
"Savings and Investment Plan."
(4) These shares do not include the following number of shares held in the names
of family members as to which beneficial ownership is disclaimed: Mr.
Clemente -- 26,136 shares; Dr. Ikenberry -- 18,000 shares; Mr.
Miller -- 45,000 shares; Dr. Niblack -- 17,508 shares and Dr.
Valles -- 142,320 shares.
(5) As of February 29, 2000, this includes the following number of shares held
in a grantor retained annuity trust: Mr. Clemente -- 30,000 shares and Dr.
McKinnell -- 77,614 shares.
* Numbers are as of 12/31/1999. They will be updated.
ITEM 1 -- ELECTION OF DIRECTORS
The Board of Directors is divided into three classes, with each class
currently consisting of five Directors whose terms expire at successive annual
meetings. Five Directors will be elected at the annual meeting to serve for a
three-year term expiring at our annual meeting in the year 2003.
The persons named in the enclosed proxy intend to vote the proxy for the
election of each of the five nominees, unless you indicate on the proxy card
that your vote should be withheld from any or all such nominees. If you are
voting by telephone or Internet, you will be told how to withhold your vote from
some or all such nominees. Each nominee elected as a Director will continue in
office until his or her successor has been elected, or until his or her death,
resignation or retirement.
The Board of Directors has proposed the following nominees for election as
Directors with terms expiring in 2003 at the annual meeting:
M. Anthony Burns; George B. Harvey; Stanley O. Ikenberry; Harry P. Kamen
and John F. Niblack.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THESE NOMINEES
AS DIRECTORS.
We expect each nominee for election as a Director to be able to serve if
elected. If any nominee is not able to serve, proxies will be voted in favor of
the remainder of those nominated and may be voted for substitute nominees,
unless the Board chooses to reduce the number of Directors serving on the Board.
The principal occupation and certain other information about the nominees
and other Directors whose terms of office continue after the annual meeting are
set forth on the following pages.
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CHAPTER FIVE -- OTHER PFIZER ANNUAL MEETING PROPOSALS
<TABLE>
<CAPTION>
NAME AND AGE AS OF THE POSITION, PRINCIPAL OCCUPATION,
APRIL 27, 2000, MEETING BUSINESS EXPERIENCE AND DIRECTORSHIPS
- ----------------------- -------------------------------------
<S> <C>
NOMINEES FOR DIRECTORS WHOSE TERMS EXPIRE IN 2003
M. Anthony Burns, 57 Chairman of the Board since 1985, Chief Executive Officer
since 1983, and former President from 1979 to June 1999 of
Ryder System, Inc., a provider of transportation and
logistics services. Director of The Chase Manhattan Bank,
The Chase Manhattan Corporation and J. C. Penney Company,
Inc. Trustee of the University of Miami. Member of the
Business Council, Co-Chairman of the Business Roundtable and
a member of the Business Roundtable's Policy Committee. Our
Director since 1988. Chair of our Executive Compensation
Committee and Member of our Executive Committee.
George B. Harvey, 69 Former Chairman, President and Chief Executive Officer from
1983 through 1996, and Director from 1980 through 1996, of
Pitney Bowes Inc., a provider of mailing and office systems
and management and financial services. Director of
McGraw-Hill, Inc., Merrill Lynch & Co., Inc., and
Massachusetts Mutual Life Insurance Company. Our Director
since 1994. Chair of our Audit Committee.
Stanley O. Ikenberry, 65 President since 1996 of the American Council on Education,
an independent nonprofit association dedicated to ensuring
high-quality education at colleges and universities
throughout the United States. President, from 1979 through
July 1995, of the University of Illinois. Director of
Utilicorp United Inc. Member of the Board of Trustees of the
Carnegie Foundation for the Advancement of Teaching. Member
of the Board of Overseers of Teachers' Insurance & Annuity
Association -- College Retirement Equities Fund (TIAA-CREF).
Director of the National Museum of Natural History,
Smithsonian Institution. Our Director since 1982. Member of
our Corporate Governance and Executive committees.
Harry P. Kamen, 66 Former Chairman of the Board and Chief Executive Officer
from 1993 through June 1998, and President from 1995 through
November 1997, of Metropolitan Life Insurance Company, a
multi-service insurance provider. Director of Bethlehem
Steel Corporation, Metropolitan Life Insurance Company,
Nvest L.P. and Banco Santander (Spain). Member of the Board
of Governors of the National Association of Securities
Dealers, Inc. Our Director since 1996. Member of our
Corporate Governance Committee.
John F. Niblack 61 Vice Chairman since May 1999. Executive Vice President from
1993 to May 1999. Responsible for our Central Research,
Licensing and Development, Corporate Quality Assurance and
Medical Affairs Divisions. Dr. Niblack was elected our Vice
President -- Central Research in 1990. Our Director since
June 1997.
DIRECTORS WHOSE TERMS EXPIRE IN 2002
Michael S. Brown, 59 Distinguished Chair in Biomedical Sciences from 1989 and
Regental Professor from 1985 at the University of Texas
Southwestern Medical Center at Dallas. Co-recipient of the
Nobel Prize in Physiology or Medicine in 1985 and the
National Medal of Science in 1988. Member of the National
Academy of Sciences. Director of Regeneron Pharmaceuticals,
Inc. Our Director since 1996. Member of our Corporate
Governance Committee.
</TABLE>
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CHAPTER FIVE -- OTHER PFIZER ANNUAL MEETING PROPOSALS
<TABLE>
<CAPTION>
NAME AND AGE AS OF THE POSITION, PRINCIPAL OCCUPATION,
APRIL 27, 2000, MEETING BUSINESS EXPERIENCE AND DIRECTORSHIPS
- ----------------------- -------------------------------------
<S> <C>
Constance J. Horner, 58 Guest Scholar since 1993 at The Brookings Institution, an
organization devoted to nonpartisan research, education and
publication in economics, government and foreign policy and
the social sciences. Commissioner of the U.S. Commission on
Civil Rights from 1993 to 1998. Served at the White House as
Assistant to the President and as Director of Presidential
Personnel from August 1991 to January 1993. Deputy
Secretary, U. S. Department of Health and Human Services
from 1989 to 1991. Director of the U.S. Office of Personnel
Management from 1985 to 1989. Director of Foster Wheeler
Corporation, Ingersoll-Rand Company and The Prudential
Insurance Company of America. Our Director since 1993. Chair
of our Corporate Governance Committee and member of our
Executive Committee.
Thomas G. Labrecque, 61 Former President and Director of The Chase Manhattan
Corporation, a bank holding company, and The Chase Manhattan
Bank, from April 1996 to June 1999. Chairman and Chief
Executive Officer of The Chase Manhattan Corporation and The
Chase Manhattan Bank, N.A., from 1990 through 1996. Director
of Delphi Automotive Systems. Member of the Business
Council, the Council on Foreign Relations, the Council on
Competitiveness and the Trilateral Commission. Member and
Past President of The Bankers Roundtable and the
International Monetary Conference. Our Director since 1993.
Member of our Executive Compensation Committee.
Franklin D. Raines, 51 Chairman and Chief Executive Officer of Fannie Mae, a
company that provides a secondary market for residential
mortgages through portfolio purchases, issuance of
mortgage-backed securities, and other services, since
January 1999. Director of the Office of Management and
Budget for the Clinton administration from 1996 to 1998.
Director of America Online Inc. and PepsiCo Inc. A former
Director of Pfizer from 1993 to 1996, Mr. Raines was
re-elected to our Board in October 1998. Member of our Audit
Committee.
Jean-Paul Valles, 63 Chairman of Minerals Technologies Inc. ("MTI"), a resource
and technology-based company that develops, produces and
markets specialty mineral, mineral-based and synthetic
mineral products, since 1989. Chief Executive Officer of MTI
since 1992. Formerly our Vice Chairman from March to October
1992, and served in a number of our executive positions,
including Executive Vice President from 1991 to 1992.
Director of the National Association of Manufacturers. Our
Director since 1980. Member of our Audit Committee.
DIRECTORS WHOSE TERMS EXPIRE IN 2001
W. Don Cornwell, 52 Chairman of the Board and Chief Executive Officer since 1988
of Granite Broadcasting Corporation, a group broadcasting
company. Director of CVS Corporation. Also, a Director of
Hershey Trust Company, Milton Hershey School and the
Telecommunications Development Fund. Trustee of Big
Brothers/Sisters of New York. Our Director since February
1997. Member of our Audit Committee.
</TABLE>
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CHAPTER FIVE -- OTHER PFIZER ANNUAL MEETING PROPOSALS
<TABLE>
<CAPTION>
NAME AND AGE AS OF THE POSITION, PRINCIPAL OCCUPATION,
APRIL 27, 2000, MEETING BUSINESS EXPERIENCE AND DIRECTORSHIPS
- ----------------------- -------------------------------------
<S> <C>
Henry A. McKinnell, 57 President and Chief Operating Officer since May 1999, and
President -- Pfizer Pharmaceuticals Group since January,
1997. Executive Vice President from 1992 to 1999.
Responsible for our Animal Health Group since February 2000,
our Consumer Health Care and Corporate Strategic Planning
and Policy Groups since 1995, and for our former Medical
Technology Group from 1992 to 1995. Our Chief Financial
Officer from 1990 through 1996. Director of Aviall, Inc.,
Dun & Bradstreet Corp., and John Wiley & Sons, Inc. Also a
Director of the Pharmaceutical Research and Manufacturers of
America (PhRMA), the Healthcare Leadership Council, the
Committee for Economic Development and the National
Association of Manufacturers. Member of the Board of
Trustees of the New York Public Library, the New York City
Police Foundation and the Trilateral Commission. Our
Director since June 1997.
Dana G. Mead, 64 Chairman of Tenneco Automotive Inc. and Pactiv Corporation,
global manufacturing companies with operations in automotive
parts and packaging. Former Chairman and Chief Executive
Officer from 1994 to November 1999 of Tenneco Inc. Chief
Operating Officer, President and member of the Board of
Tenneco from 1992 to November 1999. Director of Zurich
Insurance Group, Zurich Allied, the Logistics Management
Institute and the Packaging Corporation of America. Outgoing
Chairman of the Business Roundtable, former Chairman of the
National Association of Manufacturers and a member of the
Business Council. Our Director since January 1998. Member of
our Executive Compensation Committee.
Ruth J. Simmons, 54 President since 1995 of Smith College, a private liberal
arts college for women located in Northampton,
Massachusetts. Vice Provost of Princeton University from
1992 to 1995. Provost of Spelman College from 1990 to 1991.
Director of Metropolitan Life Insurance Company, Texas
Instruments Inc. and The Goldman Sachs Group, Inc. Trustee
of the Carnegie Corporation of New York. Member of The
Conference Board. Fellow of the American Academy of Arts and
Sciences and Member of the Council on Foreign Relations. Our
Director since January 1997. Member of our Audit Committee.
William C. Steere, Jr., Chairman of our Board since 1992. Our Chief Executive
63 Officer since February 1991. Our President from 1991 to
1992. One of our Senior Vice Presidents from 1989 to 1991.
Director of Dow Jones Inc., Texaco Inc., Minerals
Technologies Inc. and Metropolitan Life Insurance Company.
Also a Director of the New York University Medical Center
and the New York Botanical Garden. Member of the board of
overseers of Memorial Sloan-Kettering Cancer Center. Member
of the Business Roundtable and of the Business Roundtable's
Policy Committee and Chair of its Corporate Governance Task
Force. Our Director since 1987. Chair of our Executive
Committee.
NAMED EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Paul S. Miller, 61 Our Executive Vice President since May 1999. General Counsel
since 1992. Senior Vice President from 1992 to May 1999. Mr.
Miller joined us in 1971 and, after serving in a number of
positions of increasing responsibility, was elected our Vice
President; General Counsel in 1986.
</TABLE>
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CHAPTER FIVE -- OTHER PFIZER ANNUAL MEETING PROPOSALS
<TABLE>
<CAPTION>
NAME AND AGE AS OF THE POSITION, PRINCIPAL OCCUPATION,
APRIL 27, 2000, MEETING BUSINESS EXPERIENCE AND DIRECTORSHIPS
- ----------------------- -------------------------------------
<S> <C>
C.L. Clemente, 62 Our Executive Vice President -- Corporate Affairs since May
1999. Secretary and Corporate Counsel since 1992. Senior
Vice President from 1992 to May 1999. Mr. Clemente joined us
in 1964 and, after serving in a number of positions of
increasing responsibility, was our Vice President; General
Counsel and Secretary from 1986 to 1992.
</TABLE>
ITEM 2 -- APPROVAL OF AUDITORS
The Board of Directors, upon the recommendation of its Audit Committee, has
appointed KPMG LLP to serve as our independent auditors for 2000, subject to the
approval of our shareholders.
Representatives of KPMG LLP will be present at the annual meeting to answer
questions. They will also have the opportunity to make a statement if they
desire to do so.
Total audit fees incurred by us for all independent auditors for 1999 were
approximately $4,692,000, of which approximately $4,569,000 was attributable to
KPMG LLP.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF KPMG LLP AS
OUR INDEPENDENT AUDITORS FOR THE YEAR 2000.
ITEM 3 -- SHAREHOLDER PROPOSAL RELATING TO
CHARITABLE CONTRIBUTIONS
Oscar M. Schiff of 2200 S. Gessner Road, Apt. 712, Houston, Texas 77063,
owner of 1,500 shares of Pfizer common stock, has indicated that he will
introduce the following resolution at the annual meeting:
"RESOLVED, the Shareholders request that the Board of Directors implement a
permanent policy limiting charitable contributions and grants to all
non-business related recipients, including, but not limited to, health,
educational and community projects, cultural arts entities, etc., etc., to .001%
( 1/10 of 1%) of Pfizer's Annual Revenues."
PROPONENT'S STATEMENT IN SUPPORT OF THE RESOLUTION
"In 1998, Pfizer created a "special charge" to cover a non-business payment
of $300,000,000 to a charitable organization known as the "Pfizer Foundation."
This contribution equaled 15c per share after taxes, or almost 6% of earnings
per share for full year 1998, was 2.2% of total revenues for 1998, and was in
addition to Pfizer's usual donations and grants for that year, which were not
separately reported in its financial statements.
In its publications, Pfizer states it "supports community organizations,"
"health care," "educational programs," and "contributes to numerous museums,
cultural and performing arts groups." The imaginative phrase "venture
philanthropy" is used to explain and justify its grants and donations. Pfizer
has a "Philanthropy Grant Coordinator," much like a charitable foundation would
have.
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CHAPTER FIVE -- OTHER PFIZER ANNUAL MEETING PROPOSALS
In our free enterprise economic system, a corporation is a legal entity
created to sell products that customers want, and to earn a return for its
investor/owners, who continuously risk their money in Pfizer shares.
Corporations create jobs, give ordinary people the opportunity to share in its
profits and growth, and add to the country's economic growth. It is not really a
kind of "citizen," with some special social obligation to "give back" to the
general community what it has "taken"; its responsibility is to deal honestly
and fairly with its customers, employees, and suppliers, and to fulfill its
fiduciary duty to its shareholders.
Pfizer incurred a provision for taxes on income from continuing operations
of $642 million in 1998. Its shareholders pay taxes on dividends and capital
gains. Much of these proceeds go to health programs, medical research, welfare,
educational and community needs, and even the arts. Pfizer should not be
transferring corporate funds to non-business related foundations, general public
health or educational purposes, or cultural endeavors, etc. -- that's what we
have governments, charitable and religious organizations, and private citizen
giving for!
Many of Pfizer's investors are themselves charitable or non-profit
institutions, i.e., pension funds, foundations, universities, health research
institutes, health insurers, etc., who regard Pfizer as an investment, not as a
charitable organization, or dispenser of grants from corporate funds for
essentially non-business purposes.
Bill Gates has donated $17 billion worth of Microsoft shares to his
Foundation -- but with his own personal shares, not Microsoft Company's shares
or assets.
A Bank cannot transfer some of its depositors' checking, savings or CD
accounts to various charities, or to a "Chase Manhattan or Bank America
Foundation"; why is it acceptable for Pfizer to do so with its shareholders'
assets?
To quote Nobel Economist Milton Friedman: 'There is only one social
responsibility of business -- to engage in activities designed to enhance
profits, in open and free competition, without deception or fraud... only real
people, not artificial "people" like corporations, can have social obligations!'
Pfizer's public image will be maintained and enhanced by tending to its own
business."
YOUR BOARD OF DIRECTORS OPPOSES THIS RESOLUTION
The Board disagrees with the proponent's assertion that corporations have
no responsibility to "give back" to the general community through charitable
contributions. We believe that corporate support of deserving charitable causes
is not only a worthy end in itself, but is also a means of furthering our
business interests. Many other major corporations share this belief. As a Pfizer
shareholder, you know that our Company is committed to increasing shareholder
value. Our charitable contributions are fully in line with this commitment.
In 1999, our senior executive committee, the Corporate Management Committee
proposed, and our Board approved, this tax-deductible endowment of the Pfizer
Foundation after a thorough review of the advantages to Pfizer and its
shareholders. (We do not concur with the proponent's per share valuation of this
endowment.) The Foundation was created in 1953 to benefit society and our
continued support of the Foundation enhances our reputation as a concerned
corporate citizen. Its primary focus is on science education and expanded access
to quality health care -- two issues of critical importance to a research-based
pharmaceutical company like ours. The Foundation's health care donations
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CHAPTER FIVE -- OTHER PFIZER ANNUAL MEETING PROPOSALS
tend to focus on such areas as heart disease, depression and diabetes, which are
of particular importance to the Company.
We also make contributions, including product donations, to worthy
organizations that provide an identified benefit to society.
Corporate philanthropy reflects well on our business and our Company's
image. Our philanthropy improves the communities where we do business, creating
a healthier and stronger business climate. Our record of giving and good
corporate citizenship has generated significant goodwill toward the Company,
adding to shareholder value by improving our standing with our customers, as
well as with regulatory and legislative authorities. We have been supported and
even joined in our philanthropic projects by a wide range of important
constituencies, among them doctors, business partners and government officials
at all levels, including cabinet members, members of Congress, governors and
mayors.
Our employees also appreciate the role of corporate contributions in
strengthening the communities in which they live, and our reputation for social
responsibility is an important factor in attracting and retaining the most
qualified people to carry out our business.
In short, we have found that corporate giving is one of the many ways the
Company builds shareholder value. Placing limits on our ability to make these
contributions would erode, not enhance, the value of the Company to our
shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS RESOLUTION.
ITEM 4 -- SHAREHOLDER PROPOSAL RELATING TO PRICE RESTRAINTS
The Medical Mission Sisters of 338 West Street, Hyde Park, Massachusetts
02136, owners of 5,400 shares of Pfizer common stock; the Benedictine Sisters of
530 Bandera Road, San Antonio, Texas 78228, owners of 40,800 shares of Pfizer
common stock; Catholic Health East of 14 Campus Boulevard, Suite 300, Newtown
Square, Pennsylvania 19073, owners of 28,281 shares of Pfizer common stock;
Catholic Healthcare West of 1700 Montgomery Street, Suite 300, San Francisco,
California 94111, owners of 151,300 shares of Pfizer common stock; Congregation
of the Sisters of Charity of the Incarnate Word of 6510 Lawndale, Houston, Texas
77223, owners of 1,000 shares of Pfizer common stock; Sisters of Charity of St.
Elizabeth of P.O. Box 476, Convent Station, New Jersey 07961, owners of 1,000
shares of Pfizer common stock; Sisters of Mercy of the Americas of 2300 Adeline
Drive, Burlingame, California 94010, owners of 12,600 shares of Pfizer common
stock; Sisters of St. Dominic -- Siena Center of 5635 Erie Street, Racine,
Wisconsin 53402, owners of 61,800 shares of Pfizer common stock; Sisters of St.
Francis of 3390 Windsor Avenue, Dubuque, Iowa 52001, owners of 6,000 shares of
Pfizer common stock; Sisters of St. Joseph of 9701 Germantown Avenue,
Philadelphia, Pennsylvania 19118, owners of 13,500 shares of Pfizer common
stock; and Sisters of St. Joseph La Grange of 1515 West Ogden Avenue, La Grange
Park, Illinois 60526, owners of 2,400 shares of
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CHAPTER FIVE -- OTHER PFIZER ANNUAL MEETING PROPOSALS
Pfizer common stock have indicated that they will introduce the following
resolution at the annual meeting:
"WHEREAS:
Health Care Financing Administration data, based on five years figures
through 1998, shows spending on prescription drugs rising 12% per year, more
than double the 5.1% increase in national health expenditures;
A 1998 house Committee Report found that:
- Older Americans and other individuals (e.g., the uninsured and
the underinsured) who buy prescription drugs in the retail market
pay substantially more for drugs than drug manufacturers'
"favored customers" (federal government agencies and large
HMO's);
- Pharmacies appear to have small mark-ups in prices of
prescription drugs;
These higher prices are also borne by institutional health care facilities.
Drug prices are consistently higher in the U.S. retail market than in other
industrialized countries. Recent studies reveal that eight antidepressants and
anti-psychotic drugs cost, on average, twice as much in the U.S. as in European
and other North American industrialized countries. For example, a 30-day supply
of sertraline, Pfizer brand name Zoloft, costs more than twice as much in the
U.S. as it does in Austria.
Our company has paid $11.7 million as part of a settlement of a class
action law suit that accused several companies of using an unfair two-tiered
system to price wholesale drugs;
RESOLVED: Shareholders request the Board of Directors to:
(1) Create and implement a policy of price restraint on pharmaceutical
products for individual consumers and institutional purchasers, utilizing a
combination of approaches to keep drug prices at reasonable levels.
(2) Report to shareholders by September 2000, on changes in policies and
pricing procedures for pharmaceutical products (withholding any competitive
information, and at reasonable cost)."
PROPONENTS' STATEMENT IN SUPPORT OF THE RESOLUTION
"We suggest that the policy include a restraint on each individual drug and
that it not be based on averages which can mask tremendous disparities; a low
price increase for one compound and a high price for another, one price for a
"favored customer" (usually low) and another for the retail customer (usually
high).
We understand the need for ongoing research and appreciate the role that
our company has played in the development of new medicines. We are also aware
that the cost of research is only one determinant for the final price of a drug.
The manufacturing, selling, marketing and administrative costs often contribute
far more to the price of a drug than research costs. Thus, we believe that price
restraint can be achieved without sacrificing necessary research efforts."
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CHAPTER FIVE -- OTHER PFIZER ANNUAL MEETING PROPOSALS
YOUR BOARD OF DIRECTORS OPPOSES THIS RESOLUTION
The Board does not believe it would be in the best interest of the Company,
its shareholders or its customers to adopt the proposed resolution.
The role of prescription drugs in prolonging lives and fighting disease has
made innovative medicines an indispensable component of health care. They offer
our best hope of reducing the cost of disease. For instance, constant innovation
has produced medicines that allow individuals suffering from conditions that
once would have left them as invalids, or worse, would have ended their lives,
to continue to lead active and productive lives. Death rates in the past 30
years for diseases treated with pharmaceuticals have dropped anywhere from 21
percent (hypertension) to as much as 74 percent (atherosclerosis) and 83 percent
(rheumatic fever and heart disease). Studies have shown that the use of
prescription medications has helped reduce the number of hospital admissions and
has allowed patients who do require hospitalization to return home faster.
Fulfilling our mission as a pharmaceutical and research company to discover
and develop innovative and cost-effective medicines, however, requires immense
resources. The cost of research and development ("R&D") per new drug approved
averages more that $500 million, and the process takes about 14 years. Of all
the compounds screened in laboratories, only one in more than 5,000 actually
reaches the market.
Those few medicines that do receive approval for marketing are real
workhorses, serving three important functions: First, they improve human health;
many save lives. Second, those medicines make money for shareholders, employees
and the communities where we do business. But there is a third and equally
important function served by our successful drug candidates. They fund the
future research that leads to cures for illness. The amount the Company has
spent on R&D in recent years has been approximately equal to our profits for the
year. Our R&D spending totaled $2.8 billion in 1999, the highest level in the
worldwide pharmaceutical industry. We will continue our strong commitment to R&D
in 2000, with budgeted spending of $3.2 billion, again expected to be the
highest in the industry.
This dynamic of profit paying for research is the engine behind innovation.
When that dynamic is interfered with, innovation falters.
The proponents state that drug prices are higher in the U.S. retail market
than in Europe and other North American industrialized countries. Many factors
contribute to international price differences, among them, the impact of
changing currency values over time, the unique role of the American product
liability environment, and government price controls. But price controls really
don't save money. On average, Canadians spend just about the same percentage of
their annual income on pharmaceuticals as do Americans. Italians, also
"benefiting" from a price controlled pharmaceutical market, pay more.
The proponents also express concern about the impact of the cost of drugs
on the ability of the elderly, the uninsured and the underinsured to purchase
them. The Board understands and is sympathetic to this concern. Seniors who need
medicines should be able to obtain them. We believe a variety of free-market
approaches can provide access without stifling innovation. We also have several
programs in place to help provide truly needy individuals with the latest drugs.
Sharing the Care, our largest patient assistance program, recently celebrated
the enrollment of its one-millionth patient. Since the program's inception in
1993, we have provided free of charge more than $180 million worth of our
medicines to low-income, uninsured patients. In addition, over the past
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CHAPTER FIVE -- OTHER PFIZER ANNUAL MEETING PROPOSALS
several years, our price increases for U.S. pharmaceutical products (after
accounting for discounts to Medicaid and federal buyers) have been kept at or
below each year's Blue Chip Consensus forecast of the change in the Consumer
Price Index ("CPI"). In the US market for the year 2000, the Company has
implemented a 3.1% price increase on all products with the exception of Norvasc
(10-mg dose), Pfizerpen and Isoject Permapen. These three products will
experience no price change over 1999. No price increase will exceed this
percentage. Our best estimate is that these price changes, combined with the
impact of discounts to federal buyers and the Medicaid program, will result in
an effective average price increase of 2.5%, which is equal to the December 1999
Blue Chip Consensus forecast of the change in the CPI for the year 2000.
The Board agrees that all individuals should have access to the
prescription medicines that they need. We also believe that price restraints
such as those suggested by the proponents would undermine the innovation that
produces the most effective of these medicines.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS RESOLUTION.
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CHAPTER FIVE -- OTHER PFIZER ANNUAL MEETING PROPOSALS
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------------- ------------------------------------
AWARDS PAYOUTS
----------------------- ----------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND SALARY BONUS(1) COMPENSATION(2) AWARDS(3) OPTIONS(4) PAYOUTS(5) COMPENSATION(6)
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
- ------------------ ---- --------- --------- --------------- ---------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mr. Steere.............. 1999 1,436,300 13,595 900,450 167,828
Chairman/CEO 1998 1,379,700 2,759,400 86,801 0 900,000 13,012,500 157,000
1997 1,316,500 2,545,300 17,968 0 900,000 8,837,500 144,688
Dr. McKinnell........... 1999 869,800 26,998 2,003,125 405,450 76,796
President/COO 1998 835,700 1,050,100 29,536 0 390,000 5,569,350 72,304
1997 787,000 971,900 37,300 0 390,000 3,535,000 63,584
Dr. Niblack............. 1999 799,700 13,849 1,802,813 360,450 66,404
Vice Chairman 1998 768,200 860,400 4,724 0 360,000 4,684,500 62,084
1997 712,600 783,900 4,845 0 360,000 2,969,400 54,324
Mr. Miller.............. 1999 675,800 31,568 65,453 270,450 54,644
Executive V.P./ 1998 649,100 690,300 19,320 31,689 270,000 3,383,250 49,500
General Counsel 1997 619,400 588,400 17,279 0 270,000 2,121,000 43,340
Mr. Clemente............ 1999 625,800 23,693 225,450 49,720
Executive V.P./ 1998 601,100 617,200 17,364 0 225,000 2,914,800 42,972
Corporate Affairs, 1997 573,600 473,200 20,373 0 210,000 1,908,900 38,508
Secretary and
Corporate Counsel
</TABLE>
- -------------------------
(1) The amounts shown in this column constitute the Annual Incentive Awards made
to each officer based on the Board's evaluation of each officer's
performance. These awards are discussed in further detail in the Executive
Compensation Committee Report.
(2) The amounts shown in this column represent tax payments made by us on behalf
of each officer relating to his use of Company transportation and personal
financial counseling. The total for Mr. Steere for 1998 also includes the
aggregate incremental cost to the Company -- $59,684 -- of providing
perquisites and other personal benefits to him. Of this amount, $53,984
represents the incremental cost of his personal use of Company automobiles
and aircraft. Mr. Steere is required by the Company to travel only on its
aircraft for security reasons.
(3) The amounts shown in this column represent the dollar value of the Company's
common stock on the date of grant of the restricted stock. All grants of
restricted stock are made under our Stock and Incentive Plan.
On August 26, 1999, Dr. McKinnell received a grant of 50,000 shares of
common stock. On that same date, Dr. Niblack received a grant of 45,000
shares of common stock. Dr. McKinnell's restricted stock grant vests on
August 24, 2004 and Dr. Niblack's vests on August 26, 2002.
On February 25, 1999, Mr. Miller received a grant of 500 shares of common
stock (subsequently adjusted to 1,500 shares for our June 1999 3-for-1 stock
split). These shares vest on February 25, 2002. On August 27, 1998, Mr.
Miller received a grant of 300 shares of common stock (subsequently adjusted
to 900 shares for our June 1999 3-for-1 stock split). These shares vest on
August 27, 2001.
Dividends are paid during the restricted period on all restricted shares.
As of December 31, 1999, the aggregate number of shares of restricted stock
held by the officers, and the dollar value of such shares was: Dr.
McKinnell, 50,000 shares ($1,621,875); Mr. Miller, 2,400 shares ($77,850);
and Dr. Niblack, 45,000 shares, ($1,459,688). The dollar values are based on
the closing price of our common stock on December 31, 1999.
(4) Adjusted for our June 1999 3-for-1 stock split.
(5) The 1999 payout represents the dollar market value of shares of our common
stock on February 15, 2000 (the payment date) earned under the company's
Performance-Contingent Share Award Program using the closing sales price of
our common stock ($ ) on the New York Stock Exchange on that date.
The number of Performance-Contingent Shares awarded to each Named Executive
Officer was as follows: Mr. Steere, shares; Dr. McKinnell,
shares; Dr. Niblack, shares; Mr. Miller,
shares; Mr. Clemente, shares; and all executive
officers and directors as a group, shares.
(6) The amounts shown in this column represent Company matching funds under our
Savings and Investment Plan (a tax-qualified retirement savings plan) and
related supplemental plan, which are discussed under the heading "Employee
Benefit and Long-Term Compensation Plans."
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CHAPTER FIVE -- OTHER PFIZER ANNUAL MEETING PROPOSALS
TOTAL OPTIONS EXERCISED IN 1999 AND YEAR-END VALUES
This table gives information for options exercised by each of the Named
Executive Officers in 1999 (adjusted for our June 1999 3-for-1 stock split) and
the value (stock price less exercise price) of the remaining options held by
those executive officers at year-end, using the average ($32.4065) of the high
and the low trading price of our common stock on December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS HELD AT 12/31/99 OPTIONS AT 12/31/99
ACQUIRED ON VALUE --------------------------- ---------------------------
EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
- ---- ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Steere.............. 627,048 20,687,845 2,405,352 2,700,450 72,115,870 34,999,020
Dr. McKinnell........... 524,496 18,309,231 1,207,812 1,167,450 36,613,253 14,582,925
Dr. Niblack............. 308,244 10,643,026 711,756 1,044,450 20,732,253 12,832,974
Mr. Miller.............. 217,548 7,795,287 525,756 834,450 15,287,961 11,277,462
Mr. Clemente............ 319,268 11,266,345 621,556 633,450 18,684,162 8,846,975
</TABLE>
OPTION GRANTS IN 1999
This table shows all options to purchase our common stock granted to each
of our Named Executive Officers in 1999 (adjusted for our June 1999 3-for-1
stock split) and the potential value of such grants at stock price appreciation
rates of 0%, 5% and 10%, compounded annually over the maximum ten-year term of
the options. Also shown is the potential gain of all outstanding shares of
common stock held by our shareholders as of December 31, 1999, using the same
base price and appreciation rates and compounded over the same ten-year period.
The 5% and 10% rates of appreciation are required to be disclosed by SEC rules
and are not intended to forecast possible future appreciation, if any, in our
stock price.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS POTENTIAL REALIZABLE VALUE AT ASSUMED
UNDERLYING GRANTED TO ANNUAL RATES OF STOCK PRICE
OPTIONS EMPLOYEES EXERCISE OR APPRECIATION FOR OPTION TERM($)
GRANTED IN FISCAL BASE PRICE EXPIRATION --------------------------------------
NAME (#)(1) YEAR ($/SH)(2) DATE 0% 5% 10%
- ---- ---------- ---------- ----------- ---------- --- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mr. Steere........... 900,450 1.31% 42.07 4/21/09 0 23,823,743 60,374,043
Dr. McKinnell........ 405,450 0.59% 42.07 4/21/09 0 10,727,233 27,184,914
Dr. Niblack.......... 360,450 0.52% 42.07 4/21/09 0 9,536,641 24,167,720
Mr. Miller........... 270,450 0.39% 42.07 4/21/09 0 7,155,457 18,133,333
Mr. Clemente......... 225,450 0.33% 42.07 4/21/09 0 5,964,865 15,116,140
Potential Gain for all shareholders at Assumed Appreciation Rates........ 0 101,763,791,724 257,889,428,318
</TABLE>
- -------------------------
(1) Option grants for Named Executive Officers who received grants in 1999
consisted of a one-time grant of 150 stock options (subsequently adjusted to
450 stock options for our June 1999 3-for-1 stock split) to all employees,
which are exercisable beginning on April 22, 2002, and Key-Employee Grants
that are exercisable one-fifth on each anniversary date beginning on April
22, 2000.
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CHAPTER FIVE -- OTHER PFIZER ANNUAL MEETING PROPOSALS
(2) The exercise price for all stock option grants is the fair market value of
our common stock on the date of the grant.
LONG-TERM INCENTIVE PLAN AWARDS IN 1999
This table gives information concerning the participation of the Named
Executive Officers in a long-term compensation plan called the
Performance-Contingent Share Award Program. Under this plan, they were awarded
the right to earn shares of our common stock ("Performance-Contingent Shares").
Actual payouts of these Performance-Contingent Shares, if any, will be
determined by a non-discretionary formula which measures our performance over a
five-year period using certain performance goals that were determined by our
Executive Compensation Committee and approved by the Board. The formula is
comprised of two performance criteria, total shareholder return (including
reinvestment of dividends) and growth in diluted earnings per share, over the
performance period relative to the industry Peer Group. If our minimum
performance in both measures is below the threshold level relative to the Peer
Group, then no Performance Contingent Shares will be earned. To the extent the
Company's performance on either or both measures exceeds the threshold
performance level relative to the Peer Group, a varying amount of shares of
common stock up to the maximum will be earned. These awards are also discussed
in the Executive Compensation Committee Report.
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
PERFORMANCE PERIOD (OR NON-STOCK PRICE-BASED PLANS
NUMBER OF OTHER PERIOD UNTIL ----------------------------------------
NAME SHARES(1) MATURATION OR PAYMENT) THRESHOLD(2)(#) TARGET(#) MAXIMUM(#)
- ---- --------- ---------------------- --------------- --------- ----------
<S> <C> <C> <C> <C> <C>
Mr. Steere........... * 1/1/00 - 12/31/04 30,000 180,000 300,000
Dr. McKinnell........ * 1/1/00 - 12/31/04 18,000 108,000 180,000
Dr. Niblack.......... * 1/1/00 - 12/31/04 12,600 75,600 126,000
Mr. Miller........... * 1/1/00 - 12/31/04 9,000 54,000 90,000
Mr. Clemente......... * 1/1/00 - 12/31/04 7,500 45,000 75,000
</TABLE>
- -------------------------
(1) The actual number of Performance-Contingent Shares that will be paid out at
the end of the applicable period, if any, cannot be determined because the
shares earned by the Named Executive Officers will be based upon our future
performance compared to the future performance of the Peer Group.
(2) If our minimum performance in both measures is below the threshold level
relative to the Peer Group, then no Performance Contingent Shares will be
earned. To the extent the Company's performance on either or both measures
exceeds the threshold performance level relative to the Peer Group, a
varying amount of shares of common stock up to the maximum will be earned
EXECUTIVE COMPENSATION COMMITTEE REPORT
Please see the glossary at the end of this report for definitions of the
incentive and long-term compensation awards referred to in this discussion.
OVERVIEW OF COMPENSATION PHILOSOPHY AND PROGRAM
The Executive Compensation Committee establishes the salaries and other
compensation of the executive officers of the Company, including its Chairman
and CEO and other executive officers named in the Compensation Table (the "Named
Executive Officers").
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CHAPTER FIVE -- OTHER PFIZER ANNUAL MEETING PROPOSALS
The Committee consists entirely of independent Directors who are not officers or
employees of the Company.
The Company's executive compensation program is designed to:
- retain executive officers by paying them competitively, motivate them to
contribute to the Company's success, and reward them for their
performance;
- link a substantial part of each executive officer's compensation to the
performance of both the Company and the individual executive officer; and
- encourage significant ownership of Company common stock by executive
officers.
As discussed below, the program consists of, and is intended to balance,
three elements:
- Salaries. Salaries are based on the Committee's evaluation of individual
job performance and an assessment of the salaries and total compensation
mix paid by the Company's Peer Group to executive officers holding
equivalent positions. This Peer Group consists of the eleven health care
companies referred to in the Performance Graph that follows this report;
- Executive Annual Incentive Awards. Executive Annual Incentive Awards are
based on an evaluation of both individual and Company performance against
quantitative and qualitative measures; and
- Long-Term Incentive Compensation. Long-term incentive awards, which
consist of stock options and Performance-Contingent Share Awards, are
designed to ensure that incentive compensation is linked to the long-term
performance of the Company and its common stock.
In addition, the Named Executive Officers and other members of senior
management are expected to own a minimum amount of common stock under the
Company's stock ownership program. The program is intended to further tie the
interests of management to the interests of shareholders.
EVALUATION OF EXECUTIVE PERFORMANCE
The Committee does not rely solely on predetermined formulae or a limited
set of criteria when it evaluates the performance of the Chairman and CEO and
the Company's other executive officers. Instead, the Committee considers:
- management's overall accomplishments;
- the accomplishments of the individual executives;
- the Company's financial performance; and
- other criteria discussed below.
In 1999, management continued to effectively implement its long-term
strategies, which included:
- improving operating margins;
- continuing the implementation of reengineering projects and restructuring
programs;
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CHAPTER FIVE -- OTHER PFIZER ANNUAL MEETING PROPOSALS
- maintaining the flow of new product candidates in the Company's research
pipeline; and
- augmenting the Company's research and marketing abilities with key
external collaborations and acquisitions.
The Committee believes that the success of these strategies is evidenced
by:
- the Company's strong financial performance in 1999;
- the Company's operating margins;
- the breadth of the Company's current product portfolio which resulted in
considerable sales growth in 1999;
- the acceptance of the Company's products in the current marketplace; and
- the number of promising product candidates under development by the
Company.
The Committee also considers management's responses to the changes
occurring within the global marketplace for health care products and services.
The unprecedented discovery by the pharmaceutical industry of innovative
medicines that effectively treat chronic as well as acute health problems has
focused attention on the issues of access and adequate third-party coverage for
prescription drugs, particularly for low-income individuals and the elderly. It
is the Committee's opinion that management continues to effectively develop and
implement strategies within the marketplace and at the local and federal levels
of government to address these issues, enabling the Company to remain a leader
in the health care industry. In addition, Mr. Steere and his senior management
team are undertaking significant actions to communicate the Company's position
on health care issues to its shareholders, the public and the government. The
success of these efforts and their benefits to the Company cannot, of course, be
quantifiably measured, but the Committee believes they are vital to the
Company's continuing success.
TOTAL COMPENSATION
To establish target total compensation levels for Company executives, the
Committee considers competitive market total compensation. The total
compensation package for each executive is then broken down into the three basic
components indicated above, and discussed in more detail below. In recent years,
the Committee directed a shift in the mix of the Company's executive
compensation towards incentive compensation, with proportionately lesser
emphasis on salaries. This strategy is intended to increase the performance
orientation of the Company's executive compensation, and the Committee intends
to maintain this emphasis in 2000. Based on available public data and the
analysis of its outside compensation advisors, the total compensation of Mr.
Steere and the other Named Executive Officers generally fell in the upper
quartile of total compensation paid by the Peer Group to their executives
holding equivalent positions, and the Committee believes that position was
consistent with the outstanding performance of the Company compared to the Peer
Group.
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CHAPTER FIVE -- OTHER PFIZER ANNUAL MEETING PROPOSALS
SALARIES
In setting the 1999 salaries of the Chairman and CEO and the other
executive officers, the Committee:
- evaluated each officer's individual job performance;
- assessed the Company's performance; and
- considered salaries paid by the Peer Group to executive officers holding
equivalent positions.
Chairman and CEO. Mr. Steere's salary in 1999 totaled $1,436,300. For
2000, it has been set at $ which represents a % increase from his
1999 salary.
Other Named Executive Officers. The 1999 salaries of the other Named
Executive Officers are shown in the "Salary" column of the Summary Compensation
Table.
EXECUTIVE ANNUAL INCENTIVE AWARDS
In 1997, the Board of Directors adopted and the shareholders approved the
Pfizer Inc. Executive Annual Incentive Plan. Under the terms of this plan a
maximum award of 0.3% of Adjusted Net Income, as defined in the plan, was
established for each employee participating in the plan. This maximum exceeds
the current level of Annual Incentive Awards made by the Committee and the
Committee will continue to base the awards on Company and individual performance
criteria within the established maximum.
For 1999, an Annual Incentive Award of $ for Mr. Steere was
approved by the Committee and confirmed by the Board. The Annual Incentive
Awards for 1999 paid to each of the Named Executive Officers are shown in the
"Bonus" column of the Summary Compensation Table.
LONG-TERM INCENTIVE COMPENSATION
In 1999, Mr. Steere and the other executive officers participated in the
Company's long-term incentive compensation program. As discussed below, the
program consisted of:
- stock option grants made under the Company's Stock and Incentive Plan;
and
- awards made under the Company's Performance-Contingent Share Award
Program.
(A) STOCK OPTIONS
The Committee granted Key-Employee Stock Options to each executive officer
in 1999 under the Company's Stock and Incentive Plan. In selecting the size of
the Key-Employee Stock Option grants, the Committee reviewed:
- competitive data relating to similar grants made by the Peer Group to
executive officers holding comparable positions;
- the individual stock ownership of the Company's executive officers; and
- the interrelationship with the Performance-Contingent Share Awards
established for the 2000-2004 performance period for such officers.
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CHAPTER FIVE -- OTHER PFIZER ANNUAL MEETING PROPOSALS
Chairman and CEO. Based upon this data, Mr. Steere was awarded
Key-Employee Stock Options for 300,000 shares of common stock, which were
subsequently adjusted for the 3-for-1 stock split on June 30, 1999.
Other Named Executive Officers. The other Named Executive Officers were
awarded the number of Key-Employee Stock Options shown in the table headed
"Option Grants in 1999". The Key-Employee Stock Options of the Named Executive
Officers and all other executive officers will vest over a five-year period,
with 20 percent of the options vesting each year.
Key-Employee Stock Options granted to Mr. Steere and the other Named
Executive Officers, when combined with the value of the Performance-Contingent
Shares that these officers may potentially earn, are targeted by the Committee
to fall at the median range of the value of long-term incentives granted by the
Peer Group to executive officers holding comparable positions.
- This targeting assumes that the Company's performance also falls at the
median of the Peer Group's performance.
- If the Company's actual performance exceeds the median performance of the
Peer Group, however, the total value of long-term incentive awards (which
would include Performance-Contingent Share Awards discussed below) will
be higher than the median awards made by the Peer Group.
- Similarly, if the Company's performance falls below the median
performance of the Peer Group, the total value of the long-term incentive
awards would fall below the median awards of the Peer Group.
(B) PERFORMANCE-CONTINGENT SHARE AWARDS
The Committee also established awards for Mr. Steere and other executive
officers, including the Named Executive Officers, for the 2000-2004 performance
period under the Company's Performance-Contingent Share Award Program (the
"Program"). The potential size of each award, including the maximum number of
shares of common stock that may be earned by each executive officer, was
established by the Committee after examining long-term compensation awarded by
the Peer Group to executive officers holding comparable positions. Payments
pursuant to the awards are determined by using a non-discretionary formula
comprised of the following two performance criteria measured over the applicable
performance period relative to the performance of the Peer Group:
- total shareholder return; and
- earnings per share growth.
The performance formula weighs each criterion equally. If our minimum
performance in both measures is below the threshold level relative to the Peer
Group, then no Performance-Contingent Shares will be earned. To the extent that
the Company's performance on either or both measures exceeds the threshold
performance level relative to the Peer Group, a varying amount of shares of
common stock up to the maximum will be earned.
Except for the Program awards established in 1993, which provided for
shorter performance periods, the performance period for all awards made under
the Program is five years. Based on the Company's performance during the
1995-1999 performance period,
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CHAPTER FIVE -- OTHER PFIZER ANNUAL MEETING PROPOSALS
Mr. Steere and the other Named Executive Officers earned
Performance-Contingent Shares under the Program award formula described above.
Chairman and CEO. The total number of such shares earned by Mr. Steere for
the 1995-1999 Program was . The number of Performance-Contingent
Shares that Mr. Steere may earn at the end of the five-year performance period
(1/1/2000-12/31/2004) will range from 0 to 300,000.
Other Named Executive Officers. The total number of shares earned by each
of the Named Executive Officers for the 1995-1999 Program is shown in footnote 5
to the "LTIP Payouts" column of the Summary Compensation Table. The number of
Performance-Contingent Shares that Dr. McKinnell may earn at the end of the
five-year performance period (1/1/2000-12/31/2004) will range from 0 to 180,000,
the number of such shares that Dr. Niblack may earn will range from 0 to
126,000, the number of shares that Mr. Miller may earn will range from 0 to
90,000 and the number of shares Mr. Clemente may earn will range from 0 to
75,000.
The above information is included in the table headed "Long-Term Incentive
Plan Awards in 1999".
(C) RESTRICTED STOCK AWARDS
In order to ensure a smooth transition in the leadership of the Company,
the Board of Directors elected Dr. McKinnell to the position of President and
Chief Operating Officer and Dr. Niblack to the position of Vice Chairman. In
recognition of their new roles, the Committee granted restricted stock awards of
50,000 shares to Dr. McKinnell and 45,000 shares to Dr. Niblack. Additional
details related to these awards are shown in the Summary Compensation Table and
its accompanying footnotes.
TAX POLICY ON DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code limits the tax deduction
available to the Company to $1 million for compensation paid (not including
amounts which by agreement are required to be deferred) to the Company's five
most highly compensated officers, unless certain requirements are met. One
requirement is that the Committee consist entirely of outside Directors. The
Committee meets this requirement. Another requirement is that compensation over
$1 million must be based upon Company attainment of performance goals approved
by the shareholders. The Executive Annual Incentive Plan meets this requirement.
In addition, the Company's Stock and Incentive Plan is "performance-based," so
awards under that plan are eligible for exceptions to the deduction limitation.
The Committee expects that all incentive compensation of the Company's five most
highly compensated officers will qualify as a tax deductible expense when paid.
STOCK OWNERSHIP PROGRAM
Upon this Committee's recommendation, the Board adopted a stock ownership
program in August 1993. The program defines "stock ownership" as stock owned by
the executive officer directly or through the Company's Savings and Investment
Plan or awarded pursuant to the Performance-Contingent Share Award Program and
subsequently deferred. Under the guidelines of the program established by the
Committee, which were increased in 1997, employee directors (currently Mr.
Steere, Dr. McKinnell and
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CHAPTER FIVE -- OTHER PFIZER ANNUAL MEETING PROPOSALS
Dr. Niblack) own Company common stock equal in value to at least five times
their annual salaries. The program also extends to the other Named Executive
Officers and other members of the Corporate Management Committee, who own
Company common stock equal in value to at least four times their annual
salaries. All other executive officers are expected to own Company stock with a
value equivalent to three times their annual salaries, and all other
participants in the Performance-Contingent Share Award Program are expected to
own an amount equal in value to their annual salary. The Committee has
determined that, as of the end of 1999, all officers and Performance-Contingent
Share Award Program participants met the guidelines established by the
Committee.
GLOSSARY
Executive Annual Incentive Awards. These awards are annual cash payments
which may be awarded by the Committee pursuant to the Executive Annual Incentive
Award Plan which sets a maximum award of 0.3% of Adjusted Net Income, as defined
in the plan, to each executive officer on the basis of both Company performance
and individual performance over the prior year. Qualitative and quantitative
performance indicators used to serve as the basis for an assessment of the
performance of the executive officers are established by the Committee (and
approved by the Board in the case of the CEO) at the beginning of the
performance period.
Key-Employee Stock Options. Stock options granted under the Company's
Stock and Incentive Plan to a select group of management employees in the U.S.
and overseas who are considered to have a substantial impact on the Company's
operations.
Performance-Contingent Shares. These are shares of Pfizer Inc. common
stock that may be awarded by the Committee to the Named Executive Officers and
certain other employees of the Company under the Performance-Contingent Share
Award Program. For shares to be issued to any such officer or employee, however,
certain preestablished Company performance criteria must be met over a
preestablished performance period. This program is described in further detail
under the caption "Performance-Contingent Share Award Program".
Stock and Incentive Plan. This refers to the Pfizer Inc. Stock and
Incentive Plan which is described in further detail under the caption "Stock and
Incentive Plan".
THE EXECUTIVE COMPENSATION COMMITTEE
Mr. Burns (Chair)
Mr. Labrecque
Dr. Mead
PERFORMANCE GRAPH
This graph compares our total shareholder returns (assuming reinvestment of
dividends), the Standard & Poor's ("S&P") 500 Composite Stock Index ("S&P 500"),
and an industry peer index compiled by us that consists of several companies
(the "Peer Group").(1) The graph assumes $100 invested at the per share closing
price of the common stock on the New York Stock Exchange Composite Tape on
December 31, 1994, in Pfizer and each of the other indices.
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CHAPTER FIVE -- OTHER PFIZER ANNUAL MEETING PROPOSALS
<TABLE>
<CAPTION>
PFIZER PEER GROUP S&P 500 INDEX
------ ---------- -------------
<S> <C> <C> <C>
1994 100.00 100.00 100.00
1995 166.70 157.30 137.60
1996 223.30 196.20 169.20
1997 406.20 292.80 225.60
1998 686.30 423.90 290.10
1999 538.70 389.00 351.10
</TABLE>
- -------------------------
(1) The following companies comprise the Peer Group: Abbott Laboratories,
American Home Products Corp., Baxter International Inc., Bristol-Myers
Squibb Company, Colgate-Palmolive Co., Johnson & Johnson, Eli Lilly and
Company, Merck and Co., Inc., Pharmacia & Upjohn Inc., Schering-Plough
Corp., and Warner-Lambert Company. The Peer Group consolidation was done on
a weighted average basis (market capitalization basis, adjusted at the
beginning of each year).
EMPLOYEE BENEFIT AND LONG-TERM COMPENSATION PLANS
RETIREMENT ANNUITY PLAN
The Retirement Annuity Plan (the "Retirement Plan") is a funded,
tax-qualified, noncontributory defined benefit pension plan that covers certain
employees, including the Named Executive Officers. Benefits under the Retirement
Plan are based upon the employee's years of service and final average earnings
with us and/or our "Associate Companies" and are payable after retirement in the
form of an annuity or a lump sum. Earnings covered by the Retirement Plan are
base pay, bonus, and long-term incentive compensation, excluding gains on stock
option exercises. The amount of annual earnings that may be considered in
calculating benefits under the Retirement Plan is limited by law. For 2000, the
annual limitation is $170,000.
Benefits under our Retirement Plan are calculated as an annuity equal to
the greater of:
- 1.4 percent of the participant's final average earnings for the five
highest calendar years multiplied by years of service, or
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CHAPTER FIVE -- OTHER PFIZER ANNUAL MEETING PROPOSALS
- 1.75 percent of such earnings less 1.5 percent of Primary Social Security
benefits multiplied by years of service.
Years of service under these formulas cannot exceed 35. Contributions to
the Retirement Plan are made entirely by us and are paid into a trust fund from
which the benefits of participants will be paid.
The Retirement Plan currently limits pensions paid under the Plan to an
annual maximum of $135,000, payable at age 65. We also have an unfunded
supplemental plan that provides out of our general assets an amount
substantially equal to the difference between the amount that would have been
payable under the Retirement Plan, in the absence of legislation limiting
pension benefits and earnings that may be considered in calculating pension
benefits, and the amount actually payable under the Retirement Plan. In certain
circumstances, we are obligated to fund trusts established to secure obligations
to make payments under the supplemental plan.
PENSION PLAN TABLE
The following table shows, for the final compensation and years of service
indicated, the annual pension benefit, payable commencing upon retirement at age
65 under the present benefit formula of the Retirement Plan and its related
supplemental plan. The estimated retirement benefits have been computed on the
assumptions that:
- payments will be made in the form of a 50 percent joint and survivor
annuity (and both the Plan member and spouse are age 65);
- during the period of employment the employee received annual compensation
increases of six percent; and
- the employee retired as of December 31, 1999.
<TABLE>
<CAPTION>
YEARS OF SERVICE
- ------------------------------------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------ ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
$ 100,000 $ 17,338 $ 23,117 $ 28,896 $ 34,675 $ 40,454
500,000 100,397 133,862 167,328 200,793 234,259
1,000,000 204,220 272,294 340,367 408,441 476,514
2,000,000 411,868 549,157 686,446 823,736 961,025
3,000,000 619,515 826,020 1,032,525 1,239,031 1,445,536
4,000,000 827,163 1,102,884 1,378,605 1,654,326 1,930,046
5,000,000 1,034,810 1,379,747 1,724,684 2,069,621 2,414,557
7,000,000 1,450,105 1,933,474 2,416,842 2,900,211 3,383,579
9,500,000 1,969,224 2,625,632 3,282,040 3,938,448 4,594,856
12,500,000 2,592,167 3,456,222 4,320,278 5,184,333 6,048,389
15,500,000 3,215,109 4,286,812 5,358,515 6,430,218 7,501,921
18,500,000 3,838,052 5,117,402 6,396,753 7,676,103 8,955,454
21,500,000 4,460,994 5,947,992 7,434,990 8,921,988 10,408,986
</TABLE>
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CHAPTER FIVE -- OTHER PFIZER ANNUAL MEETING PROPOSALS
As of December 31, 1999, Mr. Steere had 35 years (Plan maximum); Dr.
McKinnell had 29 years; Dr. Niblack had 32 years; Mr. Miller had 29 years; and
Mr. Clemente had 35 years (Plan maximum) under the Retirement Plan and the
supplemental plan. Compensation covered by the Retirement Plan and its related
supplemental plan for the Named Executive Officers equals the amounts set forth
in the 1999 "Salary," "Bonus" and "LTIP Payouts" columns of the Summary
Compensation Table.
PERFORMANCE-CONTINGENT SHARE AWARD PROGRAM
Under the Performance-Contingent Share Award Program, participating
employees may be granted an opportunity by our Executive Compensation Committee
to earn shares of common stock, provided certain performance criteria are met.
The performance formula is nondiscretionary and is comprised of two performance
criteria:
- total shareholder return (including reinvestment of dividends); and
- growth in diluted earnings per share (as reported),
measured point-to-point over the applicable performance period relative to the
performance of the Peer Group. Our 200 most highly compensated employees are
eligible to participate. Except for awards made in 1993, all awards granted
under the Program are based upon a five-year performance period. Awards earned
by the Named Executive Officers under this Program for the performance period
ended December 31, 1999 are shown in the "LTIP Payouts" column of the Summary
Compensation Table. Receipt of shares awarded under this Program may be
deferred.
EXECUTIVE ANNUAL INCENTIVE PLAN
The Named Executive Officers, as well as the other members of our Corporate
Management Committee participate in the Executive Annual Incentive Plan. The
purpose of the Plan is to ensure the tax deductibility of the bonus for the
Company. The maximum individual annual bonus under this plan is 0.3% (three
tenths of one percent) of Adjusted Net Income. The Plan defines "Adjusted Net
Income" to mean income before cumulative effect of accounting changes as shown
on the audited Consolidated Statement of Income of the Company. If income before
cumulative effect of accounting changes is not shown on the Statement, then
Adjusted Net Income will mean net income as shown on the Statement. Receipt of
bonuses paid from this Plan can be deferred until a later date or retirement.
Deferred bonuses may be invested in either a Pfizer unit fund or an interest-
bearing fund.
SAVINGS AND INVESTMENT PLAN
Under the Savings and Investment Plan (the "Savings Plan"), a tax-qualified
retirement savings plan, participating employees may contribute up to 15 percent
of regular earnings into their Savings Plan accounts. A participating employee
may elect to make after-tax contributions, before-tax contributions, or both
after-tax and before-tax contributions. In addition, under the Savings Plan, we
contribute an amount equal to one dollar for each dollar contributed by
participating employees up to the first two percent of their regular earnings
and fifty cents for each additional dollar contributed by employees on the next
four percent of their regular earnings. Our matching contributions are invested
solely in our common stock.
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CHAPTER FIVE -- OTHER PFIZER ANNUAL MEETING PROPOSALS
The Savings Plan currently limits the additions that can be made to a
participating employee's account to $30,000 per year. The term "additions"
includes our matching contributions, before-tax contributions made by us at the
request of the participating employee under Section 401(k) of the Internal
Revenue Code, and employee after-tax contributions.
Of those additions, the current maximum before-tax contribution is limited
to $10,500 per year. In addition, no more than $170,000 of annual compensation
may be taken into account in computing benefits under the Savings Plan. We have
a supplemental plan to pay out of general assets an amount substantially equal
to the difference between the amount that, in the absence of legislation
limiting such additions and the $170,000 limitation on earnings, would have been
allocated to a participating employee's account as employee before-tax
contributions, our matching contributions and the amount actually allocated
under the Savings Plan.
Employees affected by these limitations who make deferrals of income under
this supplemental plan receive credit for such deferrals towards their
retirement benefit under our retirement plans. In certain circumstances, we are
obligated to fund trusts established to secure obligations to make payments
under the supplemental plan.
Amounts deferred, if any, under the Savings Plan and the related
supplemental plan by the Named Executive Officers are included in the "Salary"
and "Bonus" columns of the Summary Compensation Table. Our matching
contributions allocated to the Named Executive Officers under the Savings Plan
and the related Supplemental plan are shown in the "All Other Compensation"
column of the Summary Compensation Table.
STOCK AND INCENTIVE PLAN
Under the Stock and Incentive Plan, our employees may be granted stock
options, stock appreciation rights, stock awards (including restricted stock
awards and performance-based stock awards), or performance unit awards, either
as a result of a general grant or as a result of an award based on having met
certain performance criteria. Where an employee is also an officer, the
performance criteria are determined by the Executive Compensation Committee. Our
non-employee Directors are not eligible to participate in this Plan.
SEVERANCE AGREEMENTS
We have entered into severance agreements with our executive officers,
including each of the Named Executive Officers. The agreements continue through
September 30 of each year, and provide that they are to be automatically
extended in one-year increments unless we give prior notice of termination.
These agreements are intended to provide for continuity of management in
the event of a change in control. The agreements provide that covered executive
officers could be entitled to certain severance benefits following a change in
control of the Company. If, following such a change in control, the executive
officer is terminated for any reason, other than for disability or for cause, or
if such executive officer terminates his or her employment for good reason (as
defined in the agreements), then the executive officer is entitled to a
severance payment that will be 2.99 times the greater of (i) the executive
officer's base amount, as defined in the agreements or (ii) the sum of the
executive officer's (a) base salary in effect at the time of termination and (b)
the higher of the (x) last full-year annual incentive payment or (y) target
annual incentive payment for the
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CHAPTER FIVE -- OTHER PFIZER ANNUAL MEETING PROPOSALS
year in which termination occurs. The severance payment generally would be made
in the form of a lump sum.
In addition, in the event of such a termination following a change in
control, under the agreements each executive officer would receive a payout of
all outstanding Performance-Contingent Share Awards that had been granted prior
to the date of termination at the maximum amounts that could have been earned
pursuant to the awards, along with all shares earned but deferred in accordance
with the deferral feature of the Performance-Contingent Share Award Program. The
executive officer would also receive a benefit payable from our general funds
calculated using the benefit calculation provisions of our Retirement Annuity
Plan and our unfunded Supplemental Retirement Plan with the following additional
features:
- the executive officer would receive credit for an additional three years
of service and compensation for purposes of calculating such benefit;
- the benefit would commence at age 55 (or upon the date of termination, if
the executive officer is then over age 55) and for this purpose, three
years would be added to the executive officer's age;
- such benefit would be further determined without any reduction on account
of its receipt prior to age 65; and
- such benefit would be offset by any amounts otherwise payable under our
Retirement Annuity Plan and unfunded Supplemental Retirement Plan.
The executive officer would also become vested in all other benefits
available to our retirees. All restrictions on restricted stock awarded to such
executive officer would lapse and all unvested options granted to such executive
officer would vest and become exercisable for the remainder of the term of the
option.
If a change in control occurs, the agreements are effective for a period of
four years from the end of the then existing term. Under the severance
agreements, a change in control would include any of the following events:
- any "person", as defined in the Securities Exchange Act of 1934, as
amended, acquires 20 percent or more of our voting securities;
- a majority of our Directors are replaced during a two-year period; or
- shareholders approve certain mergers, or a liquidation or sale of our
assets.
In the event that any payments made in connection with a change in control
would be subjected to the excise tax imposed by Section 4999 of the Code, we
will "gross up" the executive officer's compensation for all federal, state and
local income and excise taxes and any penalties and interest.
In certain circumstances, we are obligated to fund trusts established to
secure our obligations to make payments under the severance agreements in
advance of the time payment is due.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our Directors
and executive officers to file reports of holdings and transactions in Pfizer
shares with the SEC
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<PAGE> 184
CHAPTER FIVE -- OTHER PFIZER ANNUAL MEETING PROPOSALS
and the New York Stock Exchange. Based on our records and other information, we
believe that in 1999 our Directors and executive officers met all applicable SEC
filing requirements, except that the following individuals inadvertently filed
late Form 4s relating to the transactions described below:
- In February 1997, Alan G. Levin, our Treasurer, tendered shares of Pfizer
stock in payment of withholding taxes on a stock award. The award was
properly reported at that time, and the stock tender has been reported on
an amended Form 4 for February 1997;
- In January 1998, George M. Milne, Jr., a Senior Vice President, gifted
shares of Pfizer stock. The gift has been reported on an amended Form 4
for January 1998. In addition, his acquisition of units in a deferred
compensation account from March through December of 1998 was reported on
a Form 5 that Dr. Milne filed for 1999;
- In April 1997, John F. Niblack, our Vice Chairman and a Director, gifted
shares of Pfizer stock. He reported this gift on an amended Form 4 for
December 1997.
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<PAGE> 185
CHAPTER SIX -- ADDITIONAL INFORMATION FOR SHAREHOLDERS
CHAPTER SIX
ADDITIONAL INFORMATION FOR SHAREHOLDERS
FUTURE SHAREHOLDER PROPOSALS
PFIZER
Under the rules of the SEC, if a shareholder wants us to include a proposal
in our proxy statement and form of proxy for presentation at our 2001 annual
meeting of shareholders, the proposal must be received by us, attention: Mr. C.
L. Clemente, Secretary, at our principal executive offices by [November 15,
2000].
Under our by-laws, and as permitted by the rules of the SEC, certain
procedures are provided which a shareholder must follow to nominate persons for
election as Directors or to introduce an item of business at an annual meeting
of shareholders. These procedures provide that nominations for Director nominees
and/or an item of business to be introduced at an annual meeting of shareholders
must be submitted in writing to the Secretary of Pfizer at 235 East 42nd Street,
New York, NY 10017-5755. We must receive the notice of your intention to
introduce a nomination or proposed item of business at our 2001 annual meeting
no later than 60 days in advance of the 2001 Annual Meeting if it is being held
within 30 days preceding the anniversary date (April 27, 2000) of this year's
meeting, or 90 days in advance of such meeting if it is being held on or after
the anniversary date of this year's meeting.
For any other annual or special meeting, the nomination or item of business
must be received by the tenth day following the date of public disclosure of the
date of the meeting.
Our annual meeting of shareholders is generally held on the fourth Thursday
of April. Assuming that our 2001 annual meeting is held on schedule, we must
receive notice of your intention to introduce a nomination or other item of
business at that meeting by February 25, 2001. If we do not receive notice by
that date, or if we meet other requirements of the SEC rules, the persons named
as proxies in the proxy materials relating to that meeting will use their
discretion in voting the proxies when these matters are raised at the meeting.
The nomination must contain the following information about the nominee:
- name;
- age;
- business and residence addresses;
- principal occupation or employment;
- the number of shares of common stock held by the nominee;
- the information that would be required under the rules of the SEC in a
proxy statement soliciting proxies for the election of such nominee as a
Director; and
- a signed consent of the nominee to serve as a Director of Pfizer, if
elected.
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CHAPTER SIX -- ADDITIONAL INFORMATION FOR SHAREHOLDERS
Notice of a proposed item of business must include:
- a brief description of the substance of, and the reasons for, conducting
such business at the annual meeting;
- the shareholder's name and address;
- the number of shares of common stock held by the shareholder (with
supporting documentation where appropriate); and
- any material interest of the shareholder in such business.
The Pfizer Board of Directors is not aware of any matters that are expected
to come before the annual meeting other than those referred to in this joint
proxy statement/ prospectus. If any other matter should come before the annual
meeting, the persons named in the accompanying proxy intend to vote the proxies
in accordance with their best judgment.
The chairman of the meeting may refuse to allow the transaction of any
business not presented beforehand, or to acknowledge the nomination of any
person not made in compliance with the foregoing procedures.
WARNER-LAMBERT
If a Warner-Lambert shareholder intends to present a proposal at the
Warner-Lambert 2000 annual meeting and seeks to have the proposal included in
Warner-Lambert's proxy statement relating to that meeting, pursuant to Rule
14a-8 of the Securities and Exchange Act of 1934, as amended, the proposal must
have been received by Warner-Lambert no later than the close of business on
November 9, 1999. However, if the date of the annual meeting is not held within
30 days of April 27, 2000, then the deadline for such notice becomes a
reasonable time before Warner-Lambert begins to print and mail its proxy
material for the annual meeting. If a Warner-Lambert shareholder wishes to
present a matter at the Warner-Lambert 2000 annual meeting that is outside of
the processes of Rule 14a-8, Warner-Lambert's by-laws state that, subject to
certain exceptions, notice must have been given to Warner-Lambert by December
29, 1999. Such notice must meet certain other requirements set forth in the
Warner-Lambert by-laws. After that date, the proposal will be considered
untimely and Warner-Lambert's proxies will have discretionary voting authority
with respect to such matter. Any proposals, as well as any related questions,
should be directed to the Secretary of Warner-Lambert.
SEC rules set forth standards for the exclusion of some shareholder
proposals from a proxy statement for a shareholder meeting.
WHERE YOU CAN FIND MORE INFORMATION
Pfizer and Warner-Lambert file annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or other information we file at the SEC's public reference
rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call
the SEC at l-800-SEC-0330 for further information on the public reference rooms.
Our SEC filings are also available to the public from commercial document
retrieval services and at the web site maintained by the SEC at "www.sec.gov."
VI-2
<PAGE> 187
CHAPTER SIX -- ADDITIONAL INFORMATION FOR SHAREHOLDERS
Pfizer has filed a registration statement on Form S-4 to register with the
SEC the Pfizer common stock to be issued to Warner-Lambert shareholders upon
completion of the merger. This joint proxy statement/prospectus is a part of
that registration statement and constitutes a prospectus of Pfizer in addition
to being a proxy statement of Pfizer and Warner-Lambert for their respective
meetings. As allowed by SEC rules, this joint proxy statement/prospectus does
not contain all the information you can find in the registration statement or
the exhibits to the registration statement.
The SEC allows us to "incorporate by reference" information into this Joint
proxy statement/prospectus, which means that we can disclose important
information to you by referring you to another document filed separately with
the SEC. The information incorporated by reference is deemed to be part of this
joint proxy statement/prospectus, except for any information superseded by
information in, or incorporated by reference in, this joint proxy
statement/prospectus. This joint proxy statement/prospectus incorporates by
reference the documents set forth below that we have previously filed with the
SEC. These documents contain important information about our companies and their
finances.
<TABLE>
<CAPTION>
PFIZER SEC FILINGS (FILE NO. 001-03619) PERIOD
--------------------------------------- ------
<S> <C>
Annual Report on Form 10-K..................... Fiscal Year ended December 31, 1998
Quarterly Reports on Form l0-Q................. Quarters ended April 4, 1999, July
4, 1999 and October 3, 1999.
Current Reports on Form 8-K.................... Filed on July 21, 1999, November 8,
1999, November 12, 1999, November
16, 1999, December 1, 1999, December
8, 1999, December 14, 1999, December
15, 1999, January 18, 2000, February
18, 2000 and February 22, 2000.
The description of Pfizer common stock set
forth in the Registration Statement on Form
8-A.......................................... Filed on October 6, 1997
</TABLE>
<TABLE>
<CAPTION>
WARNER-LAMBERT SEC FILINGS (FILE NO. 001-03608) PERIOD
- ----------------------------------------------- ------
<S> <C>
Annual Report on Form 10-K/A................... Fiscal Year ended December 31, 1998
Quarterly Reports on Form 10-Q................. Quarters ended March 31, 1999, June
30, 1999 and September 30, 1999.
Current Reports on Form 8-K.................... Filed on January 28, 1999, May 18,
1999, November 8, 1999, November 9,
1999, November 12, 1999, November 16,
1999, November 22, 1999, November 30,
1999, December 2, 1999, December 20,
1999, January 19, 2000, February 18,
2000 and February 22, 2000.
The description of Warner-Lambert common stock
set forth in the Registration Statement on Form
8-A/A, as amended on November 12, 1999 and
February 18, 2000.............................. Filed on March 27, 1997
</TABLE>
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CHAPTER SIX -- ADDITIONAL INFORMATION FOR SHAREHOLDERS
We are also incorporating by reference additional documents that we file
with the SEC between the date of this joint proxy statement/prospectus and the
date of the meetings.
Pfizer has supplied all information contained or incorporated by reference
in this joint proxy statement/prospectus relating to Pfizer, and all information
about Warner-Lambert has been supplied by Warner-Lambert.
If you are a shareholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through us or the SEC.
Documents incorporated by reference are available from us without charge,
excluding all exhibits unless we have specifically incorporated by reference an
exhibit in this joint proxy statement/prospectus. Shareholders may obtain
documents incorporated by reference in this joint proxy statement/prospectus by
requesting them in writing or by telephone from the appropriate party at the
following address:
<TABLE>
<S> <C>
Pfizer Inc. Warner-Lambert Company
245 East 42nd Street 201 Tabor Road
New York, New York 10017 Morris Plains, New Jersey
(212) 573-2323 07950
(973) 385-2000
</TABLE>
You can also get more information by visiting Pfizer's web site at
www.pfizer.com and Warner-Lambert's web site at www.warnerlambert.com. Web site
materials are not part of this joint proxy statement/prospectus.
You should rely only on the information contained or incorporated by
reference in this joint proxy statement/prospectus to vote on the proposals to
Pfizer's and Warner-Lambert's shareholders in connection with the merger, as the
case may be. We have not authorized anyone to provide you with information that
is different from what is contained in this joint proxy statement/prospectus.
This joint proxy statement/prospectus is dated February , 2000. You should not
assume that the information contained in the joint proxy statement/prospectus is
accurate as of any date other than such date, and neither the mailing of this
joint proxy statement/prospectus to shareholders nor the issuance of Pfizer
common stock in the merger shall create any implication to the contrary.
VI-4
<PAGE> 189
CHAPTER SIX -- ADDITIONAL INFORMATION FOR SHAREHOLDERS
ANNEX A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
DATED AS OF FEBRUARY 6, 2000
AMONG
PFIZER INC.,
SEMINOLE ACQUISITION SUB CORP.
AND
WARNER-LAMBERT COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 190
CHAPTER SIX -- ADDITIONAL INFORMATION FOR SHAREHOLDERS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I
THE MERGER; CERTAIN RELATED MATTERS
1.1 The Merger....................................................... A-1
1.2 Closing.......................................................... A-1
1.3 Effective Time................................................... A-2
1.4 Effects of the Merger............................................ A-2
1.5 Certificate of Incorporation..................................... A-2
1.6 Bylaws........................................................... A-2
1.7 Officers and Directors of Surviving Corporation and Pfizer....... A-3
1.8 Effect on Capital Stock.......................................... A-3
1.9 Warner-Lambert Stock Options and Other Equity-Based Awards....... A-3
1.10 Certain Adjustments.............................................. A-5
1.11 Associated Rights................................................ A-5
ARTICLE II
EXCHANGE OF CERTIFICATES
2.1 Exchange Fund.................................................... A-5
2.2 Exchange Procedures.............................................. A-6
2.3 Distributions with Respect to Unexchanged Shares................. A-6
2.4 No Further Ownership Rights in Warner-Lambert Common Stock....... A-7
2.5 No Fractional Shares of Pfizer Common Stock...................... A-7
2.6 Termination of Exchange Fund..................................... A-7
2.7 No Liability..................................................... A-8
2.8 Investment of the Exchange Fund.................................. A-8
2.9 Lost Certificates................................................ A-8
2.10 Withholding Rights............................................... A-8
2.11 Further Assurances............................................... A-8
2.12 Stock Transfer Books............................................. A-8
2.13 Affiliates....................................................... A-9
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Pfizer......................... A-9
3.2 Representations and Warranties of Warner-Lambert................. A-17
3.3 Representations and Warranties of Pfizer and Merger Sub.......... A-25
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CHAPTER SIX -- ADDITIONAL INFORMATION FOR SHAREHOLDERS
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ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 Covenants of Pfizer.............................................. A-26
4.2 Covenants of Warner-Lambert...................................... A-29
4.3 Governmental Filings............................................. A-32
4.4 Control of Other Party's Business................................ A-32
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Preparation of Proxy Statement; Stockholders Meetings............ A-33
5.2 Pfizer Board of Directors; Executive Officers; Headquarters;
Warner-Lambert Name.............................................. A-36
5.3 Access to Information/Employees.................................. A-36
5.4 Reasonable Best Efforts.......................................... A-37
5.5 Acquisition Proposals............................................ A-39
5.6 Employee Benefits Matters........................................ A-40
5.7 Fees and Expenses................................................ A-41
5.8 Directors' and Officers' Indemnification and Insurance........... A-42
5.9 Public Announcements............................................. A-42
5.10 Accountant's Letters............................................. A-42
5.11 Listing of Shares of Pfizer Common Stock......................... A-43
5.12 Dividends........................................................ A-43
5.13 Affiliates....................................................... A-43
5.14 Section 16 Matters............................................... A-44
5.15 Lipitor(R) Arrangements.......................................... A-44
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the Merger....... A-46
6.2 Additional Conditions to Obligations of Pfizer and Merger Sub.... A-47
6.3 Additional Conditions to Obligations of Warner-Lambert........... A-48
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination...................................................... A-49
7.2 Effect of Termination............................................ A-50
7.3 Amendment........................................................ A-52
7.4 Extension; Waiver................................................ A-52
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CHAPTER SIX -- ADDITIONAL INFORMATION FOR SHAREHOLDERS
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ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations, Warranties and Agreements....... A-53
8.2 Notices.......................................................... A-53
8.3 Interpretation................................................... A-54
8.4 Counterparts..................................................... A-54
8.5 Entire Agreement; No Third Party Beneficiaries................... A-54
8.6 Governing Law.................................................... A-54
8.7 Severability..................................................... A-54
8.8 Assignment....................................................... A-55
8.9 Submission to Jurisdiction; Waivers.............................. A-55
8.10 Enforcement...................................................... A-55
8.11 Definitions...................................................... A-55
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AGREEMENT AND PLAN OF MERGER, dated as of February 6, 2000 (this
"Agreement"), among PFIZER INC., a Delaware corporation ("Pfizer"), SEMINOLE
ACQUISITION SUB CORP., a Delaware corporation and a direct wholly-owned
subsidiary of Pfizer ("Merger Sub"), and WARNER-LAMBERT COMPANY, a Delaware
corporation ("Warner-Lambert").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Warner-Lambert and Pfizer deem it
advisable and in the best interests of each corporation and its respective
stockholders that Warner-Lambert and Pfizer engage in a business combination in
order to advance the long-term strategic business interests of Warner-Lambert
and Pfizer;
WHEREAS, the combination of Warner-Lambert and Pfizer shall be effected by
the terms of this Agreement through a merger as outlined below (the "Merger");
WHEREAS, in furtherance thereof, the respective Boards of Directors of
Warner-Lambert and Pfizer have approved the Merger, upon the terms and subject
to the conditions set forth in this Agreement, pursuant to which each share of
common stock, par value $1.00 per share, of Warner-Lambert ("Warner-Lambert
Common Stock") issued and outstanding immediately prior to the Effective Time
(as defined in Section 1.3), other than shares owned or held directly by Pfizer
or directly or indirectly by Warner-Lambert, will be converted into the right to
receive shares of common stock, par value $0.05 per share, of Pfizer ("Pfizer
Common Stock") as set forth in Section 1.8;
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
promulgated thereunder; and
WHEREAS, for accounting purposes, it is intended that the Merger shall be
accounted for as a pooling-of-interests transaction under United States
generally accepted accounting principles ("GAAP").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
THE MERGER; CERTAIN RELATED MATTERS
1.1 THE MERGER. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the Delaware General Corporation Law (the
"DGCL"), Merger Sub shall be merged with and into Warner-Lambert at the
Effective Time. Following the Merger, the separate corporate existence of Merger
Sub shall cease and Warner-Lambert shall continue as the surviving corporation
(the "Surviving Corporation").
1.2 CLOSING. Upon the terms and subject to the conditions set forth in
Article VI and the termination rights set forth in Article VII, the closing of
the Merger (the "Closing") will take place on the first Business Day after the
satisfaction or waiver
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(subject to applicable law) of the conditions (excluding conditions that, by
their nature, cannot be satisfied until the Closing Date) set forth in Article
VI, unless this Agreement has been theretofore terminated pursuant to its terms
or unless another time or date is agreed to in writing by the parties hereto
(the actual time and date of the Closing being referred to herein as the
"Closing Date"). The Closing shall be held at the offices of Cadwalader,
Wickersham & Taft, 100 Maiden Lane, New York, New York, 10038, unless another
place is agreed to in writing by the parties hereto.
1.3 EFFECTIVE TIME. As soon as practicable following the satisfaction or
waiver (subject to applicable law) of the conditions set forth in Article VI, at
the Closing the parties shall (i) file a certificate of merger (the "Certificate
of Merger") in such form as is required by and executed in accordance with the
relevant provisions of the DGCL and (ii) make all other filings or recordings
required under the DGCL. The Merger shall become effective at such time as the
Certificate of Merger is duly filed with the Delaware Secretary of State or at
such subsequent time as Pfizer and Warner-Lambert shall agree and as shall be
specified in the Certificate of Merger (the date and time the Merger becomes
effective being the "Effective Time").
1.4 EFFECTS OF THE MERGER. At and after the Effective Time, the Merger
will have the effects set forth in the DGCL. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time all the property,
rights, privileges, powers and franchises of Warner-Lambert and Merger Sub shall
be vested in the Surviving Corporation, and all debts, liabilities and duties of
Warner-Lambert and Merger Sub shall become the debts, liabilities and duties of
the Surviving Corporation.
1.5 CERTIFICATE OF INCORPORATION. (a) The certificate of incorporation of
Warner-Lambert, as in effect immediately prior to the Effective Time, shall be
the certificate of incorporation of the Surviving Corporation, until thereafter
changed or amended as provided therein or by applicable law.
(b) Pfizer will use its reasonable best efforts to amend the certificate of
incorporation of Pfizer effective as of the Effective Time, as set forth in
Exhibit 1.5(b) hereto, to increase the number of directors on the Pfizer Board
of Directors to not less than ten nor more than twenty-four (the "Board
Amendment"). If the Board Amendment is approved by Pfizer's Stockholders at the
Pfizer Stockholders Meeting, Pfizer shall use its reasonable best efforts to
appoint to the Pfizer Board of Directors effective as of the Effective Time
eight individuals currently serving on the Warner-Lambert Board of Directors,
each such individual to be appointed to the class of the Pfizer Board of
Directors determined by Pfizer after taking into account the advice and
recommendation of the Transition Planning Team referred to in the letter
mentioned in Section 1.7 herein. In the event that the Board Amendment is not
approved by Pfizer's stockholders at the Pfizer Stockholder Meeting, then Pfizer
will take all action to expand its Board of Directors to 18 members effective as
of the Effective Time and appoint three current Warner-Lambert directors to the
Pfizer Board of Directors and use its reasonable best efforts to appoint three
additional current Warner-Lambert directors to the Pfizer Board of Directors as
each new vacancy on the Pfizer Board of Directors occurs following the Effective
Time.
1.6 BYLAWS. (a) The bylaws of Warner-Lambert, as in effect immediately
prior to the Effective Time, shall be the bylaws of the Surviving Corporation
until thereafter changed or amended as provided therein or by applicable law.
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(b) The bylaws of Pfizer shall be amended effective as of the Effective
Time to the effect provided in Exhibit 1.6(b). The amendment to the bylaws of
Pfizer is referred to in this Agreement as the "Pfizer Bylaw Amendment."
1.7 OFFICERS AND DIRECTORS OF SURVIVING CORPORATION AND PFIZER. Upon
consummation of the Merger, the officers and directors of Pfizer shall be as
provided in the letter to the Chairman and the Chief Executive Officer of
Warner-Lambert, dated February 6, 2000, from the Chairman and Chief Executive
Officer of Pfizer.
1.8 EFFECT ON CAPITAL STOCK. (a) At the Effective Time, by virtue of the
Merger and without any action on the part of the holder thereof, each share of
Warner-Lambert Common Stock issued and outstanding immediately prior to the
Effective Time (other than shares of Warner-Lambert Common Stock owned by Pfizer
or Merger Sub or held by Warner-Lambert, all of which shall be canceled as
provided in Section 1.8(c)), together with the associated Warner-Lambert Rights,
shall be converted into 2.75 validly issued, fully paid and non-assessable
shares of Pfizer Common Stock (the "Exchange Ratio") and the associated Pfizer
Rights (together with any cash in lieu of fractional shares of Pfizer Common
Stock to be paid pursuant to Section 2.5, the "Merger Consideration").
(b) As a result of the Merger and without any action on the part of the
holders thereof, at the Effective Time, all shares of Warner-Lambert Common
Stock (together with the associated Warner-Lambert Rights) shall cease to be
outstanding and shall be canceled and retired and shall cease to exist, and each
holder of a certificate which immediately prior to the Effective Time
represented any such shares of Warner-Lambert Common Stock (a "Certificate")
shall thereafter cease to have any rights with respect to such shares of
Warner-Lambert Common Stock, except as provided herein or by law.
(c) Each share of Warner-Lambert Common Stock issued and owned by Pfizer or
Merger Sub or held by Warner-Lambert at the Effective Time shall, by virtue of
the Merger, cease to be outstanding and shall be canceled and retired and no
stock of Pfizer or other consideration shall be delivered in exchange therefor.
(d) At the Effective Time, by virtue of the Merger and without any action
on the part of the holder thereof, each share of common stock, par value $0.01
per share, of Merger Sub issued and outstanding immediately prior to the
Effective Time, shall be converted into one validly issued, fully paid and
non-assessable share of common stock, par value $1.00 per share, of the
Surviving Corporation.
1.9 WARNER-LAMBERT STOCK OPTIONS AND OTHER EQUITY-BASED AWARDS. (a) Each
Warner-Lambert Stock Option (as defined in Section 3.2(b)) that was granted
pursuant to the Warner-Lambert Stock Option Plans (as defined in Section 3.2(b))
prior to the Effective Time and which remains outstanding immediately prior to
the Effective Time shall cease to represent a right to acquire shares of
Warner-Lambert Common Stock and shall be converted, at the Effective Time, into
an option to acquire, on the same terms and conditions as were applicable under
the Warner-Lambert Stock Option (but taking into account any changes thereto,
including the acceleration thereof, provided for in the Warner-Lambert Stock
Option Plans or in such option by reason of this Agreement or the transactions
contemplated hereby), that number of shares of Pfizer Common Stock determined by
multiplying the number of shares of Warner-Lambert Common Stock subject to such
Warner-Lambert Stock Option by the Exchange Ratio, rounded, if necessary, to the
nearest whole share of Pfizer Common Stock, at a price per share (rounded to the
nearest one-hundredth of a cent) equal to the per share exercise price
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specified in such Warner-Lambert Stock Option divided by the Exchange Ratio;
provided, however, that in the case of any Warner-Lambert Stock Option to which
Section 421 of the Code applies by reason of its qualification under Section 422
of the Code, the option price, the number of shares subject to such option and
the terms and conditions of exercise of such option shall be determined in a
manner consistent with the requirements of Section 424(a) of the Code. On or
prior to the Effective Time, Warner-Lambert will take all actions necessary such
that all Warner-Lambert Stock Options outstanding prior to the Effective Time
under the Warner-Lambert Stock Option Plans are treated in accordance with the
immediately preceding sentences, including, but not limited to, precluding the
holder of each Warner-Lambert Stock Option from receiving any cash payments in
respect of such Option in connection with the Merger.
(b) Pursuant to the Warner-Lambert Stock Option Plans, restricted shares of
Warner-Lambert Common Stock granted pursuant thereto which are outstanding
immediately prior to the Effective Time shall become fully vested and free of
restrictions as of the Effective Time in accordance with the terms thereof. Each
such award shall be converted, as of the Effective Time, into a number of shares
of Pfizer Common Stock equal to the product of (1) the number of shares subject
to the award and (2) the Exchange Ratio; and the number of shares of Pfizer
Common Stock as so determined shall be delivered to the holder of each such
award as soon as practicable following the Effective Time. On or prior to the
Effective Time, Warner-Lambert will take all actions necessary such that awards
of restricted shares are treated in accordance with the immediately preceding
sentences, including, but not limited to, precluding each holder from receiving
any cash payments in respect of such awards in connection with the Merger.
(c) All Warner-Lambert stock credits (including any fractions thereof) in
each stock account which is governed by the terms of Warner-Lambert's 1996 Stock
Plan ("Warner-Lambert Stock Credits") shall, as of the Effective Time, be
converted into a number of Pfizer stock credits equal to the product of (1) the
number of Warner-Lambert Stock Credits in such stock account immediately prior
to the Effective Time and (2) the Exchange Ratio, and shall otherwise remain
subject to the terms and conditions applicable to such Warner-Lambert Stock
Credits. On or prior to the Effective Time, Warner-Lambert shall take all
actions necessary to ensure that such Warner-Lambert Stock Credits are converted
in accordance with the immediately preceding sentence, including, but not
limited to, precluding each holder from receiving any cash payments in respect
of such stock account in connection with the Merger.
(d) Prior to the Effective Time and pursuant to the authority reserved by
Warner-Lambert under the Warner-Lambert Stock Option Plans, Warner-Lambert will
take all actions necessary to preclude the holder of any stock appreciation
right or limited stock appreciation right granted separately or in tandem with
the awards described in Section 1.9(a) or (b) hereof from receiving any cash
payments in respect of such awards in connection with the Merger.
(e) As soon as practicable after the Effective Time, Pfizer shall deliver
to the holders of Warner-Lambert Stock Options appropriate notices setting forth
such holders' rights pursuant to the Warner-Lambert Stock Option Plans
(including that, in connection with the Merger and pursuant to the terms of the
Warner-Lambert Stock Option Plans, the Warner-Lambert Stock Options of such
holders have become fully vested and exercisable) and the agreements evidencing
the grants of such Warner-Lambert Stock Options shall continue in effect on the
same terms and conditions (subject to the adjustments required
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by this Section 1.9 after giving effect to the Merger and the terms of the
Warner-Lambert Stock Option Plans). To the extent permitted by law, Pfizer shall
comply with the terms of the Warner-Lambert Stock Option Plans and shall take
such reasonable steps as are necessary or required by, and subject to the
provisions of, such Warner-Lambert Stock Option Plans, to have the
Warner-Lambert Stock Options which qualified as incentive stock options prior to
the Effective Time continue to qualify as incentive stock options of Pfizer
after the Effective Time.
(f) Pfizer shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Pfizer Common Stock for delivery upon
exercise of Warner-Lambert Stock Options or in connection with restricted shares
or in connection with the settlement of stock accounts in accordance with this
Section 1.9. Promptly after the Effective Time, Pfizer shall file a registration
statement on Form S-3 or Form S-8, as the case may be (or any successor or other
appropriate forms), with respect to the shares of Pfizer Common Stock subject to
such options or restricted shares or stock accounts and shall use commercially
reasonable efforts to maintain the effectiveness of such registration statement
or registration statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such options, restricted shares
or stock accounts remain outstanding. With respect to those individuals who
subsequent to the Merger will be subject to the reporting requirements under
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), where applicable, Pfizer shall administer the Warner-Lambert Stock Option
Plans in a manner consistent with the exemptions provided by Rule 16b-3
promulgated under the Exchange Act.
1.10 CERTAIN ADJUSTMENTS. If, between the date of this Agreement and the
Effective Time, the outstanding Pfizer Common Stock or Warner-Lambert Common
Stock shall have been changed into a different number of shares or different
class by reason of any reclassification, recapitalization, stock split,
split-up, combination or exchange of shares or a stock dividend or dividend
payable in any other securities shall be declared with a record date within such
period, or any similar event shall have occurred, the Exchange Ratio shall be
appropriately adjusted to provide to the holders of Warner-Lambert Common Stock
the same economic effect as contemplated by this Agreement prior to such event.
1.11 ASSOCIATED RIGHTS. References in Article I and Article II of this
Agreement to Warner-Lambert Common Stock shall include, unless the context
requires otherwise, the associated Warner-Lambert Rights and references in
Article I and Article II of this Agreement to Pfizer Common Stock shall include,
unless the context requires otherwise, the associated Pfizer Rights.
ARTICLE II
EXCHANGE OF CERTIFICATES
2.1 EXCHANGE FUND. Prior to the Effective Time, Pfizer shall appoint a
commercial bank or trust company reasonably acceptable to Warner-Lambert having
net capital of not less than $300,000,000, or a subsidiary thereof, to act as
exchange agent hereunder for the purpose of exchanging Certificates for the
Merger Consideration (the "Exchange Agent"). At or prior to the Effective Time,
Pfizer shall deposit with the Exchange Agent, in trust for the benefit of
holders of shares of Warner-Lambert Common Stock, certificates representing the
Pfizer Common Stock issuable pursuant to Section 1.8 in exchange for
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outstanding shares of Warner-Lambert Common Stock. Pfizer agrees to make
available to the Exchange Agent from time to time as needed, cash sufficient to
pay cash in lieu of fractional shares pursuant to Section 2.5 and any dividends
and other distributions pursuant to Section 2.3. Any cash and certificates of
Pfizer Common Stock deposited with the Exchange Agent shall hereinafter be
referred to as the "Exchange Fund."
2.2 EXCHANGE PROCEDURES. Promptly after the Effective Time, the Surviving
Corporation shall cause the Exchange Agent to mail to each holder of a
Certificate (i) a letter of transmittal which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon proper delivery of the Certificates to the Exchange Agent, and which letter
shall be in customary form and have such other provisions as Pfizer may
reasonably specify (such letter to be reasonably acceptable to Warner-Lambert
prior to the Effective Time) and (ii) instructions for effecting the surrender
of such Certificates in exchange for the applicable Merger Consideration. Upon
surrender of a Certificate to the Exchange Agent together with such letter of
transmittal, duly executed and completed in accordance with the instructions
thereto, and such other documents as may reasonably be required by the Exchange
Agent, the holder of such Certificate shall be entitled to receive in exchange
therefor (A) one or more shares of Pfizer Common Stock (which shall be in
uncertificated book-entry form unless a physical certificate is requested)
representing, in the aggregate, the whole number of shares that such holder has
the right to receive pursuant to Section 1.8 (after taking into account all
shares of Warner-Lambert Common Stock then held by such holder) and (B) a check
in the amount equal to the cash that such holder has the right to receive
pursuant to the provisions of this Article II, including cash in lieu of any
fractional shares of Pfizer Common Stock pursuant to Section 2.5 and dividends
and other distributions pursuant to Section 2.3. No interest will be paid or
will accrue on any cash payable pursuant to Section 2.3 or Section 2.5. In the
event of a transfer of ownership of Warner-Lambert Common Stock which is not
registered in the transfer records of Warner-Lambert, one or more shares of
Pfizer Common Stock evidencing, in the aggregate, the proper number of shares of
Pfizer Common Stock, a check in the proper amount of cash in lieu of any
fractional shares of Pfizer Common Stock pursuant to Section 2.5 and any
dividends or other distributions to which such holder is entitled pursuant to
Section 2.3, may be issued with respect to such Warner-Lambert Common Stock to
such a transferee if the Certificate representing such shares of Warner-Lambert
Common Stock is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid.
2.3 DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions declared or made with respect to shares of Pfizer Common
Stock with a record date after the Effective Time shall be paid to the holder of
any unsurrendered Certificate with respect to the shares of Pfizer Common Stock
that such holder would be entitled to receive upon surrender of such Certificate
and no cash payment in lieu of fractional shares of Pfizer Common Stock shall be
paid to any such holder pursuant to Section 2.5 until such holder shall
surrender such Certificate in accordance with Section 2.2. Subject to the effect
of applicable laws, following surrender of any such Certificate, there shall be
paid to such holder of shares of Pfizer Common Stock issuable in exchange
therefor, without interest, (a) promptly after the time of such surrender, the
amount of any cash payable in lieu of fractional shares of Pfizer Common Stock
to which such holder is entitled pursuant to Section 2.5 and the amount of
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of Pfizer Common Stock, and
(b) at the appropriate payment date, the
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amount of dividends or other distributions with a record date after the
Effective Time but prior to such surrender and a payment date subsequent to such
surrender payable with respect to such shares of Pfizer Common Stock.
2.4 NO FURTHER OWNERSHIP RIGHTS IN WARNER-LAMBERT COMMON STOCK. All
shares of Pfizer Common Stock issued and cash paid upon conversion of shares of
Warner-Lambert Common Stock in accordance with the terms of Article I and this
Article II (including any cash paid pursuant to Section 2.3 or 2.5) shall be
deemed to have been issued or paid in full satisfaction of all rights pertaining
to the shares of Warner-Lambert Common Stock.
2.5 NO FRACTIONAL SHARES OF PFIZER COMMON STOCK. (a) No certificates or
scrip or shares of Pfizer Common Stock representing fractional shares of Pfizer
Common Stock or book-entry credit of the same shall be issued upon the surrender
for exchange of Certificates and such fractional share interests will not
entitle the owner thereof to vote or to have any rights of a stockholder of
Pfizer or a holder of shares of Pfizer Common Stock.
(b) Notwithstanding any other provision of this Agreement, each holder of
shares of Warner-Lambert Common Stock exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of Pfizer Common
Stock (after taking into account all Certificates delivered by such holder)
shall receive, in lieu thereof, cash (without interest) in an amount equal to
the product of (i) such fractional part of a share of Pfizer Common Stock
multiplied by (ii) the closing price for a share of Pfizer Common Stock on the
New York Stock Exchange, Inc. ("NYSE") Composite Transactions Tape on the date
of the Effective Time or, if such date is not a Business Day, the Business Day
immediately following the date on which the Effective Time occurs.
(c) As promptly as practicable after the determination of the amount of
cash, if any, to be paid to holders of fractional interests, the Exchange Agent
shall so notify Pfizer, and Pfizer shall cause the Surviving Corporation to
deposit such amount with the Exchange Agent and shall cause the Exchange Agent
to forward payments to such holders of fractional interests subject to and in
accordance with the terms hereof.
2.6 TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund which
remains undistributed to the holders of Certificates for six months after the
Effective Time shall be delivered to Pfizer or otherwise on the instruction of
Pfizer, and any holders of the Certificates who have not theretofore complied
with this Article II shall thereafter look only to Pfizer for the Merger
Consideration with respect to the shares of Warner-Lambert Common Stock formerly
represented thereby to which such holders are entitled pursuant to Section 1.8
and Section 2.2, any cash in lieu of fractional shares of Pfizer Common Stock to
which such holders are entitled pursuant to Section 2.5 and any dividends or
distributions with respect to shares of Pfizer Common Stock to which such
holders are entitled pursuant to Section 2.3. Any such portion of the Exchange
Fund remaining unclaimed by holders of shares of Warner-Lambert Common Stock
five years after the Effective Time (or such earlier date immediately prior to
such time as such amounts would otherwise escheat to or become property of any
Governmental Entity (as defined in Section 3.1(c)(iii)) shall, to the extent
permitted by law, become the property of the Surviving Corporation free and
clear of any claims or interest of any Person previously entitled thereto.
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2.7 NO LIABILITY. None of Pfizer, Merger Sub, Warner-Lambert, the
Surviving Corporation or the Exchange Agent shall be liable to any Person in
respect of any Merger Consideration from the Exchange Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
2.8 INVESTMENT OF THE EXCHANGE FUND. The Exchange Agent shall invest any
cash included in the Exchange Fund as directed by Pfizer on a daily basis;
provided, that no such gain or loss thereon shall affect the amounts payable to
Warner-Lambert stockholders pursuant to Article I and the other provisions of
this Article II. Any interest and other income resulting from such investments
shall promptly be paid to Pfizer.
2.9 LOST CERTIFICATES. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such Person of a bond in such reasonable
amount as the Surviving Corporation may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange Agent
will deliver in exchange for such lost, stolen or destroyed Certificate the
applicable Merger Consideration with respect to the shares of Warner-Lambert
Common Stock formerly represented thereby, any cash in lieu of fractional shares
of Pfizer Common Stock, and unpaid dividends and distributions on shares of
Pfizer Common Stock deliverable in respect thereof, pursuant to this Agreement.
2.10 WITHHOLDING RIGHTS. Each of the Surviving Corporation and Pfizer
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Warner-Lambert
Common Stock such amounts as it is required to deduct and withhold with respect
to the making of such payment under the Code and the rules and regulations
promulgated thereunder, or any provision of state, local or foreign tax law. To
the extent that amounts are so withheld by the Surviving Corporation or Pfizer,
as the case may be, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the holder of the shares of Warner-
Lambert Common Stock in respect of which such deduction and withholding was made
by the Surviving Corporation or Pfizer, as the case may be.
2.11 FURTHER ASSURANCES. At and after the Effective Time, the officers
and directors of the Surviving Corporation will be authorized to execute and
deliver, in the name and on behalf of Warner-Lambert or Merger Sub, any deeds,
bills of sale, assignments or assurances and to take and do, in the name and on
behalf of Warner-Lambert or Merger Sub, any other actions and things to vest,
perfect or confirm of record or otherwise in the Surviving Corporation any and
all right, title and interest in, to and under any of the rights, properties or
assets acquired or to be acquired by the Surviving Corporation as a result of,
or in connection with, the Merger.
2.12 STOCK TRANSFER BOOKS. The stock transfer books of Warner-Lambert
shall be closed immediately upon the Effective Time and there shall be no
further registration of transfers of shares of Warner-Lambert Common Stock
thereafter on the records of Warner-Lambert. On or after the Effective Time, any
Certificates presented to the Exchange Agent or Pfizer for any reason shall be
converted into the Merger Consideration with respect to the shares of
Warner-Lambert Common Stock formerly represented thereby (including any cash in
lieu of fractional shares of Pfizer Common Stock to which the holders thereof
are entitled pursuant to Section 2.5) and any dividends or other distributions
to which the holders thereof are entitled pursuant to Section 2.3.
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2.13 AFFILIATES. Notwithstanding anything to the contrary herein, to the
fullest extent permitted by law, no certificates representing shares of Pfizer
Common Stock or cash shall be delivered to a Person who may be deemed an
"affiliate" of Warner-Lambert in accordance with Section 5.13 hereof for
purposes of Rule 145 under the Securities Act of 1933, as amended (the
"Securities Act"), or for purposes of qualifying the Merger for
pooling-of-interests accounting treatment under Opinion 16 of the Accounting
Principles Board and applicable rules and regulations of the Securities and
Exchange Commission (the "SEC") until such Person has executed and delivered an
Affiliate Agreement (as defined in Section 5.13) to Pfizer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF PFIZER. Except as set forth in the
Pfizer disclosure schedule delivered by Pfizer to Warner-Lambert prior to the
execution of this Agreement (the "Pfizer Disclosure Schedule") (each section of
which qualifies the correspondingly numbered representation and warranty or
covenant), Pfizer represents and warrants to Warner-Lambert as follows:
(a) Organization, Standing and Power; Subsidiaries.
(i) Each of Pfizer and each of its Subsidiaries (as defined in
Section 8.11) is duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation or organization, has
the requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted, except
where the failures to be so organized, existing and in good standing or
to have such power and authority, in the aggregate, would not reasonably
be expected to have a Material Adverse Effect on Pfizer, and is duly
qualified and in good standing to do business in each jurisdiction in
which the nature of its business or the ownership or leasing of its
properties makes such qualification necessary other than in such
jurisdictions where the failures so to qualify or to be in good
standing, in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on Pfizer. The copies of the certificate of
incorporation and bylaws of Pfizer which were previously furnished or
made available to Warner-Lambert are true, complete and correct copies
of such documents as in effect on the date of this Agreement.
(ii) Exhibit 21 to Pfizer's Annual Report on Form 10K for the year
ended December 31, 1998 includes all the Subsidiaries of Pfizer which as
of the date of this Agreement are Significant Subsidiaries (as defined
in Rule 1-02 of Regulation S-X of the SEC). All the outstanding shares
of capital stock of, or other equity interests in, each such Significant
Subsidiary have been validly issued and are fully paid and
non-assessable and are, except as set forth in Exhibit 21, owned
directly or indirectly by Pfizer, free and clear of all pledges, claims,
liens, charges, encumbrances and security interests of any kind or
nature whatsoever (collectively "Liens") and free of any other
restriction (including any restriction on the right to vote, sell or
otherwise dispose of such capital stock or other ownership interests),
except for restrictions imposed by applicable securities laws. Except as
set forth in the Pfizer SEC Reports (as defined in Section 3.1(d)) filed
prior to the date hereof, neither Pfizer nor any of its
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Subsidiaries directly or indirectly owns any equity or similar interest
in, or any interest convertible into or exchangeable or exercisable for,
any corporation, partnership, joint venture or other business
association or entity (other than Subsidiaries), that is or would
reasonably be expected to be material to Pfizer and its Subsidiaries
taken as a whole.
(b) Capital Structure.
(i) As of December 31, 1999, the authorized capital stock of Pfizer
consisted of (A) 9,000,000,000 shares of Pfizer Common Stock of which
3,846,907,771 shares were outstanding and 413,166,530 shares were held
in the treasury of Pfizer and (B) 12,000,000 shares of Preferred Stock,
no par value, of which 3,000,000 shares have been designated Series A
Junior Preferred Stock and reserved for issuance upon exercise of the
rights (the "Pfizer Rights") distributed to the holders of Pfizer Common
Stock pursuant to the Rights Agreement, dated as of October 6, 1997
between Pfizer and ChaseMellon Shareholder Services, L.L.C. (the "Pfizer
Rights Agreement"). Since December 31, 1999 to the date of this
Agreement, there have been no issuances of shares of the capital stock
of Pfizer or any other securities of Pfizer other than issuances of
shares pursuant to options or rights outstanding as of December 31, 1999
under the Benefit Plans (as defined in Section 8.11(b)) of Pfizer. All
issued and outstanding shares of the capital stock of Pfizer are, and
when shares of Pfizer Common Stock are issued in the Merger or upon
exercise of stock options converted in the Merger pursuant to Section
1.9, such shares will be, duly authorized, validly issued, fully paid
and non-assessable and free of any preemptive rights. There were
outstanding as of December 31, 1999 no options, warrants or other rights
to acquire capital stock from Pfizer other than (x) the Pfizer Rights
and (y) options, restricted stock and other rights to acquire capital
stock from Pfizer representing in the aggregate the right to purchase
approximately 273,104,687 shares of Pfizer Common Stock (collectively,
the "Pfizer Stock Options") under Pfizer's Stock and Incentive Plan,
Pfizer's Performance-Contingent Share Award Program, Pfizer's Annual
Retainer Unit Award Plan (for non-employee Directors), Pfizer's
Nonfunded Deferred Compensation and Unit Award Plan for Non-Employee
Directors and Pfizer's Restricted Stock Plan for Non-Employee Directors
(collectively, the "Pfizer Stock Option Plans"). Section 3.1(b) of the
Pfizer Disclosure Schedule sets forth a complete and correct list, as of
December 31, 1999, of the number of shares of Pfizer Common Stock
subject to Pfizer Stock Options or other rights to purchase or receive
Pfizer Common Stock granted under the Pfizer Benefit Plans or otherwise,
the dates of grant and the exercise prices thereof. No options or
warrants or other rights to acquire capital stock from Pfizer have been
issued or granted since December 31, 1999 to the date of this Agreement.
(ii) No bonds, debentures, notes or other indebtedness of Pfizer
having the right to vote on any matters on which holders of capital
stock of Pfizer may vote ("Pfizer Voting Debt") are issued or
outstanding.
(iii) Except as otherwise set forth in this Section 3.1(b) and as
contemplated by Section 1.8 and Section 1.9, as of the date of this
Agreement, there are no securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind to
which Pfizer or any of its Subsidiaries is a party or by which any of
them is bound obligating Pfizer or any of its
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Subsidiaries to issue, deliver or sell, or cause to be issued, delivered
or sold, additional shares of capital stock or other voting securities
of Pfizer or any of its Subsidiaries or obligating Pfizer or any of its
Subsidiaries to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or
undertaking. As of the date of this Agreement, there are no outstanding
obligations of Pfizer or any of its Subsidiaries to repurchase, redeem
or otherwise acquire any shares of capital stock of Pfizer or any of its
Subsidiaries.
(c) Authority; No Conflicts.
(i) Pfizer has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated
hereby, subject to obtaining the requisite stockholder approval of the
issuance of the shares of Pfizer Common Stock to be issued in the Merger
(the "Share Issuance") and the Board Amendment (collectively, the
"Pfizer Stockholder Approval"). The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part
of Pfizer, subject to obtaining the Pfizer Stockholder Approval. This
Agreement has been duly executed and delivered by Pfizer and constitutes
a valid and binding agreement of Pfizer, enforceable against it in
accordance with its terms, except as such enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium and similar laws
relating to or affecting creditors generally or by general equity
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(ii) The execution and delivery of this Agreement by Pfizer does
not or will not, as the case may be, and the consummation by Pfizer of
the Merger and the other transactions contemplated hereby will not,
conflict with, or result in any violation of, or constitute a default
(with or without notice or lapse of time, or both) under, or give rise
to a right of, or result by its terms in the, termination, amendment,
cancellation or acceleration of any obligation or the loss of a material
benefit under, or the creation of a lien, pledge, security interest,
charge or other encumbrance on, or the loss of, any assets, including
Intellectual Property (any such conflict, violation, default, right of
termination, amendment, cancellation or acceleration, loss or creation,
a "Violation") pursuant to: (A) any provision of the certificate of
incorporation or bylaws of Pfizer or any material Subsidiary of Pfizer,
or (B) except as, in the aggregate, would not reasonably be expected to
have a Material Adverse Effect (as defined in Section 8.11(g)) on
Pfizer, subject to obtaining or making the consents, approvals, orders,
authorizations, registrations, declarations and filings referred to in
paragraph (iii) below, any loan or credit agreement, note, mortgage,
bond, indenture, lease, benefit plan or other agreement, obligation,
instrument, permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Pfizer
or any Subsidiary of Pfizer or their respective properties or assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any supranational, national,
state, municipal, local or foreign government, any instrumentality,
subdivision, court, administrative agency or commission or other
authority thereof, or any quasi-governmental or private body exercising
any regulatory, taxing, importing or other governmental or quasi-
governmental authority (a "Governmental Entity"), is required by or with
respect
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to Pfizer or any Subsidiary of Pfizer in connection with the execution
and delivery of this Agreement by Pfizer or the consummation of the
Merger and the other transactions contemplated hereby, except for those
required under or in relation to (A) the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (B) state
securities or "blue sky" laws (the "Blue Sky Laws"), (C) the Securities
Act, (D) the Exchange Act, (E) the DGCL with respect to the filing of
the Certificate of Merger, (F) rules and regulations of the NYSE, (G)
antitrust or other competition laws of other jurisdictions, and (H) such
consents, approvals, orders, authorizations, registrations, declarations
and filings the failures of which to make or obtain, in the aggregate,
would not reasonably be expected to have a Material Adverse Effect on
Pfizer. Consents, approvals, orders, authorizations, registrations,
declarations and filings required under or in relation to any of the
foregoing clauses (A) through (G) are hereinafter referred to as
"Necessary Consents."
(d) Reports and Financial Statements.
(i) Pfizer has filed all required registration statements,
prospectuses, reports, schedules, forms, statements and other documents
required to be filed by it with the SEC since January 1, 1998
(collectively, including all exhibits thereto, the "Pfizer SEC
Reports"). No Subsidiary of Pfizer is required to file any form, report,
registration statement, prospectus or other document with the SEC. None
of the Pfizer SEC Reports, as of their respective dates (and, if amended
or superseded by a filing prior to the date of this Agreement or the
Closing Date, then on the date of such filing), contained or will
contain any untrue statement of a material fact or omitted or will omit
to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading. Each of the financial statements
(including the related notes) included in the Pfizer SEC Reports
presents fairly, in all material respects, the consolidated financial
position and consolidated results of operations and cash flows of Pfizer
and its consolidated Subsidiaries as of the respective dates or for the
respective periods set forth therein, all in conformity with GAAP
consistently applied during the periods involved except as otherwise
noted therein, and subject, in the case of the unaudited interim
financial statements, to the absence of notes and normal year-end
adjustments that have not been and are not expected to be material in
amount. All of such Pfizer SEC Reports, as of their respective dates
(and as of the date of any amendment to the respective Pfizer SEC
Report), complied as to form in all material respects with the
applicable requirements of the Securities Act and the Exchange Act and
the rules and regulations promulgated thereunder.
(ii) Except as disclosed in the Pfizer SEC Reports filed prior to
the date hereof, since December 31, 1998, Pfizer and its Subsidiaries
have not incurred any liabilities that are of a nature that would be
required to be disclosed on a balance sheet of Pfizer and its
Subsidiaries or the footnotes thereto prepared in conformity with GAAP,
other than (A) liabilities incurred in the ordinary course of business
or (B) liabilities that, in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on Pfizer.
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(e) Information Supplied.
(i) None of the information supplied or to be supplied by Pfizer
for inclusion or incorporation by reference in (A) the Form S-4 (as
defined in Section 5.1) will, at the time the Form S-4 is filed with the
SEC, at any time it is amended or supplemented or at the time it becomes
effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading and
(B) the Joint Proxy Statement/Prospectus (as defined in Section 5.1)
will, on the date it is first mailed to Warner-Lambert stockholders or
Pfizer stockholders or at the time of the Warner-Lambert Stockholders
Meeting or the Pfizer Stockholders Meeting (each as defined in Section
5.1), contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading. The Form S-4 and the Joint Proxy
Statement/Prospectus will comply as to form in all material respects
with the requirements of the Exchange Act and the Securities Act and the
rules and regulations of the SEC thereunder.
(ii) Notwithstanding the foregoing provisions of this Section
3.1(e), no representation or warranty is made by Pfizer with respect to
statements made or incorporated by reference in the Form S-4 or the
Joint Proxy Statement/ Prospectus based on information supplied by
Warner-Lambert for inclusion or incorporation by reference therein.
(f) Board Approval. The Board of Directors of Pfizer, by resolutions duly
adopted by unanimous vote at a meeting duly called and held and not subsequently
rescinded or modified in any way (the "Pfizer Board Approval"), has duly (i)
determined that this Agreement and the Merger are advisable and are fair to and
in the best interests of Pfizer and its stockholders, (ii) approved this
Agreement, the Merger, the Board Amendment, the Pfizer Bylaw Amendment and the
Share Issuance and (iii) recommended that the stockholders of Pfizer approve the
Share Issuance and adopt the Board Amendment and directed that the Share
Issuance and the Board Amendment be submitted for consideration by Pfizer's
stockholders at the Pfizer Stockholders Meeting. The Pfizer Board Approval
constitutes approval of this Agreement and the Merger for purposes of Section
203 of the DGCL. To the knowledge of Pfizer, except for Section 203 of the DGCL
(which has been rendered inapplicable), no state takeover statute is applicable
to this Agreement, the Merger or the other transactions contemplated hereby.
(g) Vote Required. The affirmative vote of at least a majority of the
votes cast by the holders of Pfizer Common Stock, provided that the total votes
cast represents a majority of the outstanding shares of Pfizer Common Stock, is
the only vote necessary to approve the Share Issuance. The affirmative vote of
the holders of at least 80% of the outstanding shares of Pfizer Common Stock is
necessary to approve the Board Amendment.
(h) Litigation; Compliance with Laws.
(i) Except as disclosed in the Pfizer SEC Reports filed prior to
the date of this Agreement, there are no suits, actions or proceedings
(collectively "Actions") pending or, to the knowledge of Pfizer,
threatened, against or affecting Pfizer or any Subsidiary of Pfizer
which, in the aggregate, would
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reasonably be expected to have a Material Adverse Effect on Pfizer, nor
are there any judgments, decrees, injunctions, rules or orders of any
Governmental Entity or arbitrator outstanding against Pfizer or any
Subsidiary of Pfizer which, in the aggregate, would reasonably be
expected to have a Material Adverse Effect on Pfizer.
(ii) Except as disclosed in the Pfizer SEC Reports filed prior to
the date of this Agreement and except as, in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on Pfizer,
Pfizer and its Subsidiaries hold all permits, licenses, variances,
exemptions, orders and approvals of all Governmental Entities which are
necessary for the operation of the businesses of Pfizer and its
Subsidiaries, taken as a whole (the "Pfizer Permits"). Pfizer and its
Subsidiaries are in compliance with the terms of the Pfizer Permits,
except where the failures to so comply, in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on Pfizer.
Except as disclosed in the Pfizer SEC Reports filed prior to the date of
this Agreement, neither Pfizer nor any of its Subsidiaries is in
violation of, and Pfizer and its Subsidiaries have not received any
notices of violations with respect to, any laws, ordinances or
regulations of any Governmental Entity, except for violations which, in
the aggregate, would not reasonably be expected to have a Material
Adverse Effect on Pfizer.
(i) Absence of Certain Changes or Events. Except for liabilities incurred
in connection with this Agreement or the transactions contemplated hereby,
except as disclosed in the Pfizer SEC Reports filed prior to the date of this
Agreement, and except as permitted by Section 4.1, since September 30, 1999, (i)
Pfizer and its Subsidiaries have conducted their business only in the ordinary
course and (ii) there has not been any action taken by Pfizer or any of its
Subsidiaries during the period from September 30,1999 through the date of this
Agreement that, if taken during the period from the date of this Agreement
through the Effective Time, would constitute a breach of Section 4.1. Except as
disclosed in the Pfizer SEC Reports filed prior to the date of this Agreement,
since December 31, 1998, there have not been any changes, circumstances or
events (including changes, circumstances or events involving, impacting or
related to development stage products of Pfizer) which, in the aggregate, have
had, or would reasonably be expected to have, a Material Adverse Effect on
Pfizer.
(j) Environmental Matters. Except as, in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on Pfizer and except as
disclosed in the Pfizer SEC Reports filed prior to the date of this Agreement
(i) the operations of Pfizer and its Subsidiaries have been and are in
compliance with all Environmental Laws (as defined below), and with all licenses
required by Environmental Laws, (ii) there are no pending or, to the knowledge
of Pfizer, threatened, Actions under or pursuant to Environmental Laws against
Pfizer or its Subsidiaries or involving any real property currently or, to the
knowledge of Pfizer, formerly owned, operated or leased by Pfizer or its
Subsidiaries, (iii) Pfizer and its Subsidiaries are not subject to any
Environmental Liabilities (as defined below), and, to the knowledge of Pfizer,
no facts, circumstances or conditions relating to, arising from, associated with
or attributable to any real property currently or, to the knowledge of Pfizer,
formerly owned, operated or leased by Pfizer or its Subsidiaries or operations
thereon would reasonably be expected to result in Environmental Liabilities,
(iv) all real property owned and, to the knowledge of Pfizer, all real property
operated or leased by Pfizer or its Subsidiaries is free of contamination from
Hazardous Material (as defined below) that would have an adverse effect on human
health or the environment and
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(v) there is not now, nor, to the knowledge of Pfizer, has there been in the
past, on, in or under any real property owned, leased or operated by Pfizer or
any of its predecessors (A) any underground storage tanks regulated pursuant to
40 C.F.R. Part 280 or delegated state programs, dikes or impoundments containing
more than a reportable quantity of Hazardous Materials, (B) any friable
asbestos-containing materials or (C) any polychlorinated biphenyls.
As used in this Agreement, "Environmental Laws" means any and all federal,
state, foreign, interstate, local or municipal laws, rules, orders, regulations,
statutes, ordinances, codes, decisions, injunctions, orders, decrees,
requirements of any Governmental Entity, any and all common law requirements,
rules and bases of liability regulating, relating to or imposing liability or
standards of conduct concerning pollution, Hazardous Materials or protection of
human health, safety or the environment, as currently in effect and includes the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
sections 9601, et seq., the Hazardous Materials Transportation Act, 49 U.S.C.
sections 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
sections 6901, et seq., the Clean Water Act, 33 U.S.C. sections 1251, et seq.,
the Clean Air Act, 33 U.S.C. sections 2601, et seq., the Toxic Substances
Control Act, 15 U.S.C. sections 2601, et seq., the Federal Insecticide,
Fungicide and Rodenticide Act, 7 U.S.C. sections 136, et seq., Occupational
Safety and Health Act 29 U.S.C. sections 651, et seq. and the Oil Pollution Act
of 1990, 33 U.S.C. sections 2701, et seq., as such laws have been amended or
supplemented, and the regulations promulgated pursuant thereto, and all
analogous state or local statutes. As used in this Agreement, "Environmental
Liabilities" with respect to any person means any and all liabilities of or
relating to such person or any of its Subsidiaries (including any entity which
is, in whole or in part, a predecessor of such person or any of such
Subsidiaries), whether vested or unvested, contingent or fixed, actual or
potential, known or unknown, which (i) arise under or relate to matters covered
by Environmental Laws and (ii) relate to actions occurring or conditions
existing on or prior to the Closing Date. As used in this Agreement, "Hazardous
Materials" means any materials or wastes, defined, listed, classified or
regulated as hazardous, toxic, a pollutant, a contaminant or dangerous in or
under any Environmental Laws which includes petroleum, petroleum products,
friable asbestos, urea formaldehyde, radioactive materials and polychlorinated
biphenyls.
(k) Intellectual Property. Except as, in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on Pfizer and except as
disclosed in the Pfizer SEC Reports filed prior to the date of the Agreement:
(i) Pfizer and each of its Subsidiaries owns, or is licensed to use (in each
case, free and clear of any Liens), all Intellectual Property (as defined below)
used in or necessary for the conduct of its business as currently conducted;
(ii) the use of any Intellectual Property by Pfizer and its Subsidiaries does
not infringe on or otherwise violate the rights of any Person and is in
accordance with any applicable license pursuant to which Pfizer or any
Subsidiary acquired the right to use any Intellectual Property; (iii) to the
knowledge of Pfizer, no Person is challenging, infringing on or otherwise
violating any right of Pfizer or any of its Subsidiaries with respect to any
Intellectual Property owned by and/or licensed to Pfizer or its Subsidiaries;
and (iv) neither Pfizer nor any of its Subsidiaries has received any written
notice or otherwise has knowledge of any pending claim, order or proceeding with
respect to any Intellectual Property used by Pfizer and its Subsidiaries and to
its knowledge no Intellectual Property owned and/or licensed by Pfizer or its
Subsidiaries is being used or enforced in a manner that would reasonably be
expected to result in the abandonment, cancellation or unenforceability of such
Intellectual Property. For purposes of this Agreement, "Intellectual Property"
shall mean trademarks, service marks, brand names,
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certification marks, trade dress and other indications of origin, the goodwill
associated with the foregoing and registrations in any jurisdiction of, and
applications in any jurisdiction to register, the foregoing, including any
extension, modification or renewal of any such registration or application;
inventions, discoveries and ideas, whether patentable or not, in any
jurisdiction; patents, applications for patents (including, without limitation,
divisions, continuations, continuations in part and renewal applications), and
any renewals, extensions or reissues thereof, in any jurisdiction; nonpublic
information, trade secrets and confidential information and rights in any
jurisdiction to limit the use or disclosure thereof by any person; writings and
other works, whether copyrightable or not, in any jurisdiction; and
registrations or applications for registration of copyrights in any
jurisdiction, and any renewals or extensions thereof; any similar intellectual
property or proprietary rights.
(l) Brokers or Finders. No agent, broker, investment banker, financial
advisor or other firm or Person is or will be entitled to any broker's or
finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement, based upon arrangements made by
or on behalf of Pfizer, except Lazard Freres & Co. LLC and Merrill Lynch & Co.,
each of whose fees and expenses will be paid by Pfizer in accordance with
Pfizer's agreements with such firms, copies of which have been provided to
Warner-Lambert.
(m) Opinions of Pfizer Financial Advisors. Pfizer has received the
opinions of Lazard Freres & Co. LLC and Merrill Lynch & Co., each dated the date
of this Agreement, to the effect that, as of such date, the Exchange Ratio is
fair to Pfizer, from a financial point of view, copies of which opinions will be
promptly delivered to Warner-Lambert.
(n) Accounting Matters. To the knowledge of Pfizer, neither Pfizer nor any
of its affiliates has taken or agreed to take any action, and no fact or
circumstance is known to Pfizer, that would prevent Pfizer from accounting for
the Merger as a "pooling-of-interests" under Opinion 16 of the Accounting
Principles Board and applicable SEC rules and regulations.
(o) Taxes. Each of Pfizer and its Subsidiaries has accurately filed all
Tax Returns required to have been filed (or extensions have been duly obtained)
and has paid all Taxes required to have been paid by it, except where failure to
accurately file such Tax Returns or pay such Taxes would not, in the aggregate,
reasonably be expected to have a Material Adverse Effect on Pfizer. For purposes
of this Agreement: (i) "Tax" (and, with correlative meaning, "Taxes") means any
federal, state, local or foreign income, gross receipts, property, sales, use,
license, excise, franchise, employment, payroll, withholding, alternative or add
on minimum, ad valorem, transfer or excise tax, or any other tax, custom, duty,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or penalty, imposed by any governmental authority or
any obligation to pay Taxes imposed on any entity for which a party to this
Agreement is liable as a result of any indemnification provision or other
contractual obligation, and (ii) "Tax Return" means any return, report or
similar statement required to be filed with respect to any Tax (including any
attached schedules), including, without limitation, any information return,
claim for refund, amended return or declaration of estimated Tax.
(p) Certain Contracts. As of the date hereof, except as set forth in the
Pfizer SEC Reports filed prior to the date of this Agreement, neither Pfizer nor
any of its Subsidiaries is a party to or bound by (i) any "material contracts"
(as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC) or
(ii) any non-competition agreements
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or any other agreements or arrangements that limit or otherwise restrict Pfizer
or any of its Subsidiaries or any of their respective affiliates or any
successor thereto, or that would, after the Effective Time, to the knowledge of
Pfizer, limit or restrict Pfizer or any of its affiliates (including the
Surviving Corporation) or any successor thereto, from engaging or competing in
any line of business or in any geographic area, which agreements or
arrangements, in the aggregate, would reasonably be expected to have a Material
Adverse Effect on Pfizer and its Subsidiaries (including the Surviving
Corporation and its Subsidiaries), taken together, after giving effect to the
Merger.
(q) Pfizer Stockholder Rights Plan. The Board of Directors of Pfizer has
amended the Pfizer Rights Agreement in accordance with its terms to render it
inapplicable to the transactions contemplated by this Agreement. Pfizer has
delivered to Warner-Lambert a true and correct copy of the Pfizer Rights
Agreement, as amended, in effect as of execution and delivery of this Agreement.
(r) Employee Benefit Plans. Except as disclosed in the Pfizer SEC Reports,
there are no Benefit Plans maintained by Pfizer covering only Pfizer executive
officers. Each Benefit Plan maintained by Pfizer has been operated and
administered in accordance with its terms and applicable law, except where
failure to do so would not reasonably be expected to have a Material Adverse
Effect on Pfizer. The execution of this Agreement and the consummation of the
Merger will not constitute an event under any Benefit Plan maintained by Pfizer
that will or may result in any payment, acceleration, forgiveness of
indebtedness, vesting, distribution, increase in compensation or benefits or
obligation to fund benefits with respect to any Pfizer employee which, in the
aggregate, have had, or would reasonably be expected to have, a Material Adverse
Effect on Pfizer.
(s) Labor Matters. Except where failure to comply would not reasonably be
expected to have a Material Adverse Effect on Pfizer, Pfizer is and has been in
compliance with all applicable laws of the United States, or of any state or
local government or any subdivision thereof or of any foreign government
respecting employment and employment practices, terms and conditions of
employment and wages and hours, including, without limitation, ERISA, the Code,
the Immigration Reform and Control Act, the Worker Adjustment and Retraining
Notification Act (the "WARN Act"), any laws respecting employment
discrimination, sexual harassment, disability rights or benefits, equal
opportunity, plant closure issues, affirmative action, workers' compensation,
employee benefits, severance payments, continuation of health insurance
("COBRA"), labor relations, employee leave issues, wage and hour standards,
occupational safety and health requirements and unemployment insurance and
related matters, and is not engaged in any unfair labor practices.
3.2 REPRESENTATIONS AND WARRANTIES OF WARNER-LAMBERT. Except as set forth
in the Warner-Lambert Disclosure Schedule delivered by Warner-Lambert to Pfizer
prior to the execution of this Agreement (the "Warner-Lambert Disclosure
Schedule") (each section of which qualifies the correspondingly numbered
representation and warranty or covenant), Warner-Lambert represents and warrants
to Pfizer as follows:
(a) Organization, Standing and Power; Subsidiaries.
(i) Each of Warner-Lambert and each of its Subsidiaries is
duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation or organization, has the
requisite power and authority to own, lease and operate its
properties and to carry on its business
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as now being conducted, except where the failures to be so
organized, existing and in good standing or to have such power and
authority, in the aggregate, would not reasonably be expected to
have a Material Adverse Effect on Warner-Lambert, and is duly
qualified and in good standing to do business in each jurisdiction
in which the nature of its business or the ownership or leasing of
its properties makes such qualification necessary other than in
such jurisdictions where the failures so to qualify or to be in
good standing in the aggregate would not reasonably be expected to
have a Material Adverse Effect on Warner-Lambert. The copies of the
certificate of incorporation and bylaws of Warner-Lambert which
were previously furnished or made available to Pfizer are true,
complete and correct copies of such documents as in effect on the
date of this Agreement.
(ii) Exhibit 21 to Warner-Lambert's Annual Report on Form 10K
for the year ended December 31, 1998 includes all the Subsidiaries
of Warner-Lambert which as of the date of this Agreement are
Significant Subsidiaries (as defined in Rule 1-02 of Regulation S-X
of the SEC). All the outstanding shares of capital stock of, or
other equity interests in, each such Significant Subsidiary have
been validly issued and are fully paid and non-assessable and are,
except as set forth in Exhibit 21, owned directly or indirectly by
Warner-Lambert, free and clear of all Liens and free of any other
restriction (including any restriction on the right to vote, sell
or otherwise dispose of such capital stock or other ownership
interests), except for restrictions imposed by applicable
securities laws. Except as set forth in the Warner-Lambert SEC
Reports (as defined in Section 3.2(d)) filed prior to the date
hereof, neither Warner-Lambert nor any of its Subsidiaries directly
or indirectly owns any equity or similar interest in, or any
interest convertible into or exchangeable or exercisable for, any
corporation, partnership, joint venture or other business
association or entity (other than Subsidiaries), that is or would
reasonably be expected to be material to Warner-Lambert and its
Subsidiaries taken as a whole.
(b) Capital Structure.
(i) As of December 31, 1999, the authorized capital stock of
Warner-Lambert consisted of (A) 1,200,000,000 shares of Warner-Lambert
Common Stock, of which 862,047,037 shares were outstanding and
99,934,571 shares were held in the treasury of Warner-Lambert and (B)
5,000,000 shares of Preferred Stock, par value $1.00 per share, none of
which were outstanding and 400,000 shares of which have been designated
Series A Junior Participating Preferred Stock and reserved for issuance
upon exercise of the rights (the "Warner-Lambert Rights") distributed to
the holders of Warner-Lambert Common Stock pursuant to the Rights
Agreement dated as of March 25, 1997, between Warner-Lambert and First
Chicago Trust Company of New York (the "Warner-Lambert Rights
Agreement"). Since December 31, 1999 to the date of this Agreement,
there have been no issuances of shares of the capital stock of
Warner-Lambert or any other securities of Warner-Lambert other than
issuances of shares (and accompanying Warner-Lambert Rights) pursuant to
options or rights outstanding as of December 31, 1999 under the Benefit
Plans of Warner-Lambert. All issued and outstanding shares of the
capital stock of Warner-Lambert are duly authorized, validly issued,
fully paid and non-assessable, and no class of capital
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stock is entitled to preemptive rights. There were outstanding as of
December 31, 1999 no options, warrants or other rights to acquire
capital stock from Warner-Lambert other than (x) the Warner-Lambert
Rights and (y) options and other rights to acquire capital stock of
Warner-Lambert representing in the aggregate the right to purchase
71,520,520 shares of Warner-Lambert Common Stock (collectively, the
"Warner-Lambert Stock Options") under the 1989 Stock Plan, the 1992
Stock Plan, the 1996 Stock Plan and the Restricted Stock Plan for
Directors (collectively, the "Warner-Lambert Stock Option Plans").
Except in connection with pre-employment grants of Warner-Lambert Stock
Options made in a manner consistent with past practice to purchase, in
the aggregate, not more than 5,000 shares of Warner-Lambert Common
Stock, Section 3.2(b) of the Warner-Lambert Disclosure Schedule sets
forth a complete and correct list, as of December 31, 1999, of the
number of shares of Warner-Lambert Common Stock subject to
Warner-Lambert Stock Options or other rights to purchase or receive
Warner-Lambert Common Stock granted under the Warner-Lambert Benefit
Plans or otherwise, the dates of grant and the exercise prices thereof.
Except in connection with pre-employment grants of Warner-Lambert Stock
Options made in a manner consistent with past practice to purchase, in
the aggregate, not more than 10,000 shares of Warner-Lambert Common
Stock, and except as set forth on Schedule 3.2(b)(i) of the
Warner-Lambert Disclosure Schedule, no options or warrants or other
rights to acquire capital stock from Warner-Lambert have been issued or
granted since December 31, 1999 to the date of this Agreement.
(ii) No bonds, debentures, notes or other indebtedness of
Warner-Lambert having the right to vote on any matters on which
stockholders may vote ("Warner-Lambert Voting Debt") are issued or
outstanding.
(iii) Except as otherwise set forth in this Section 3.2(b), as of
the date of this Agreement, there are no securities, options, warrants,
calls, rights, commitments, agreements, arrangements or undertakings of
any kind to which Warner-Lambert or any of its Subsidiaries is a party
or by which any of them is bound obligating Warner-Lambert or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered
or sold, additional shares of capital stock or other voting securities
of Warner-Lambert or any of its Subsidiaries or obligating
Warner-Lambert or any of its Subsidiaries to issue, grant, extend or
enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. As of the date of this Agreement,
there are no outstanding obligations of Warner-Lambert or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of Warner-Lambert or any of its Subsidiaries.
(c) Authority; No Conflicts.
(i) Warner-Lambert has all requisite corporate power and authority
to enter into this Agreement and to consummate the transactions
contemplated hereby, subject in the case of the consummation of the
Merger to the adoption of this Agreement by the Required Warner-Lambert
Vote (as defined in Section 3.2(g)). The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part
of Warner-Lambert, subject in the case of the consummation of the Merger
to the adoption of this Agreement by the Required Warner-Lambert Vote.
This Agreement has been duly executed and
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delivered by Warner-Lambert and constitutes a valid and binding
agreement of Warner-Lambert, enforceable against it in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and similar laws relating to or
affecting creditors generally or by general equity principles
(regardless of whether such enforceability is considered in a proceeding
in equity or at law).
(ii) The execution and delivery of this Agreement by Warner-Lambert
does not or will not, as the case may be, and the consummation by
Warner-Lambert of the Merger and the other transactions contemplated
hereby will not, conflict with, or result in a Violation pursuant to:
(A) any provision of the certificate of incorporation or bylaws of
Warner-Lambert or any material Subsidiary of Warner-Lambert or (B)
except as, in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on Warner-Lambert or, subject to obtaining or
making the consents, approvals, orders, authorizations, registrations,
declarations and filings referred to in paragraph (iii) below, any loan
or credit agreement, note, mortgage, bond, indenture, lease, benefit
plan or other agreement, obligation, instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to Warner-Lambert or any Subsidiary of
Warner-Lambert or their respective properties or assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is
required by or with respect to Warner-Lambert or any Subsidiary of
Warner-Lambert in connection with the execution and delivery of this
Agreement by Warner-Lambert or the consummation of the Merger and the
other transactions contemplated hereby, except the Necessary Consents
and such consents, approvals, orders, authorizations, registrations,
declarations and filings the failure of which to make or obtain, in the
aggregate, would not reasonably be expected to have a Material Adverse
Effect on Warner-Lambert.
(d) Reports and Financial Statements.
(i) Warner-Lambert has filed all required registration statements,
prospectuses, reports, schedules, forms, statements and other documents
required to be filed by it with the SEC since January 1, 1998
(collectively, including all exhibits thereto, the "Warner-Lambert SEC
Reports"). No Subsidiary of Warner-Lambert is required to file any form,
report, registration statement or prospectus or other document with the
SEC. None of the Warner-Lambert SEC Reports, as of their respective
dates (and, if amended or superseded by a filing prior to the date of
this Agreement or the Closing Date, then on the date of such filing),
contained or will contain any untrue statement of a material fact or
omitted or will omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of the
financial statements (including the related notes) included in the
Warner-Lambert SEC Reports presents fairly, in all material respects,
the consolidated financial position and consolidated results of
operations and cash flows of Warner-Lambert and its consolidated
Subsidiaries as of the respective dates or for the respective periods
set forth therein, all in conformity with GAAP consistently applied
during the periods involved except as otherwise noted therein, and
subject, in the case of the unaudited interim
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financial statements, to the absence of notes and normal and recurring
year-end adjustments that have not been and are not expected to be
material in amount. All of such Warner-Lambert SEC Reports, as of their
respective dates (and as of the date of any amendment to the respective
Warner-Lambert SEC Report), complied as to form in all material respects
with the applicable requirements of the Securities Act and the Exchange
Act and the rules and regulations promulgated thereunder.
(ii) Except as disclosed in the Warner-Lambert SEC Reports filed
prior to the date hereof, since December 31, 1998, Warner-Lambert and
its Subsidiaries have not incurred any liabilities that are of a nature
that would be required to be disclosed on a balance sheet of
Warner-Lambert and its Subsidiaries or the footnotes thereto prepared in
conformity with GAAP, other than (A) liabilities incurred in the
ordinary course of business, or (B) liabilities that, in the aggregate,
would not reasonably be expected to have a Material Adverse Effect on
Warner-Lambert.
(e) Information Supplied.
(i) None of the information supplied or to be supplied by
Warner-Lambert for inclusion or incorporation by reference in (A) the
Form S-4 will, at the time the Form S-4 is filed with the SEC, at any
time it is amended or supplemented or at the time it becomes effective
under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and (B) the
Joint Proxy Statement/Prospectus will, on the date it is first mailed to
Warner-Lambert stockholders or Pfizer stockholders or at the time of the
Warner-Lambert Stockholders Meeting or the Pfizer Stockholders Meeting,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading. The Form S-4 and the Joint Proxy
Statement/Prospectus will comply as to form in all material respects
with the requirements of the Exchange Act and the Securities Act and the
rules and regulations of the SEC thereunder.
(ii) Notwithstanding the foregoing provisions of this Section
3.2(e), no representation or warranty is made by Warner-Lambert with
respect to statements made or incorporated by reference in the Form S-4
or the Joint Proxy Statement/Prospectus based on information supplied by
Pfizer or Merger Sub for inclusion or incorporation by reference
therein.
(f) Board Approval. The Board of Directors of Warner-Lambert, by
resolutions duly adopted by unanimous vote of those voting at a meeting duly
called and held and not subsequently rescinded or modified in any way (the
"Warner-Lambert Board Approval"), has duly (i) determined that this Agreement
and the Merger are advisable and are fair to and in the best interests of
Warner-Lambert and its stockholders, (ii) approved this Agreement and the Merger
and (iii) recommended that the stockholders of Warner-Lambert adopt this
Agreement and approve the Merger and directed that this Agreement and the
transactions contemplated hereby be submitted for consideration by Warner-
Lambert's stockholders at the Warner-Lambert Stockholders Meeting. The Warner-
Lambert Board Approval constitutes approval of this Agreement and the Merger for
purposes of Section 203 of the DGCL. To the knowledge of Warner-Lambert, except
for
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Section 203 of the DGCL (which has been rendered inapplicable), no state
takeover statute is applicable to this Agreement, the Merger or the other
transactions contemplated hereby or thereby.
(g) Vote Required. The affirmative vote of the holders of a majority of
the outstanding shares of Warner-Lambert Common Stock to adopt this Agreement
and approve the Merger (the "Required Warner-Lambert Vote") is the only vote of
the holders of any class or series of Warner-Lambert capital stock necessary to
adopt this Agreement and approve the Merger and the other transactions
contemplated hereby.
(h) Litigation; Compliance with Laws.
(i) Except as disclosed in the Warner-Lambert SEC Reports filed
prior to the date of this Agreement, there are no Actions pending or, to
the knowledge of Warner-Lambert, threatened, against or affecting
Warner-Lambert or any Subsidiary of Warner-Lambert which, in the
aggregate, would reasonably be expected to have a Material Adverse
Effect on Warner-Lambert, nor are there any judgments, decrees,
injunctions, rules or orders of any Governmental Entity or arbitrator
outstanding against Warner-Lambert or any Subsidiary of Warner-Lambert
which, in the aggregate, would reasonably be expected to have a Material
Adverse Effect on Warner-Lambert.
(ii) Except as disclosed in the Warner-Lambert SEC Reports filed
prior to the date of the Agreement and except as would, in the
aggregate, not reasonably be expected to have a Material Adverse Effect
on Warner-Lambert, Warner-Lambert and its Subsidiaries hold all permits,
licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary for the operation of the businesses of
Warner-Lambert and its Subsidiaries, taken as a whole (the
"Warner-Lambert Permits"). Warner-Lambert and its Subsidiaries are in
compliance with the terms of the Warner-Lambert Permits, except where
the failures to so comply, in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on Warner-Lambert. Except as
disclosed in the Warner-Lambert SEC Reports filed prior to the date of
this Agreement, neither Warner-Lambert nor its Subsidiaries is in
violation of, and Warner-Lambert and its Subsidiaries have not received
any notices of violations with respect to, any laws, ordinances or
regulations of any Governmental Entity, except for violations which, in
the aggregate, would not reasonably be expected to have a Material
Adverse Effect on Warner-Lambert.
(i) Absence of Certain Changes or Events. Except for liabilities incurred
in connection with this Agreement or the transactions contemplated hereby,
except as disclosed in the Warner-Lambert SEC Reports filed prior to the date of
this Agreement, except as permitted by Section 4.2, since September 30, 1999,
(i) Warner-Lambert and its Subsidiaries have conducted their business only in
the ordinary course and (ii) there has not been any action taken by
Warner-Lambert or any of its Subsidiaries during the period from September 30,
1999 through the date of this Agreement that, if taken during the period from
the date of this Agreement through the Effective Time, would constitute a breach
of Section 4.2. Except as disclosed in the Warner-Lambert SEC Reports filed
prior to the date of this Agreement, since December 31, 1998, there have not
been any changes, circumstances or events (including changes, circumstances or
events involving, impacting or related to development stage products of
Warner-Lambert) which, in the aggregate,
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have had, or would reasonably be expected to have, a Material Adverse Effect on
Warner-Lambert.
(j) Environmental Matters. Except as, in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on Warner-Lambert and
except as disclosed in the Warner-Lambert SEC Reports filed prior to the date of
this Agreement, (i) the operations of Warner-Lambert and its Subsidiaries have
been and are in compliance with all Environmental Laws and with all licenses
required by Environmental Laws, (ii) there are no pending or, to the knowledge
of Warner-Lambert, threatened, Actions under or pursuant to Environmental Laws
against Warner-Lambert or its Subsidiaries or involving any real property
currently or, to the knowledge of Warner-Lambert, formerly owned, operated or
leased by Warner-Lambert or its Subsidiaries, (iii) Warner-Lambert and its
Subsidiaries are not subject to any Environmental Liabilities and, to the
knowledge of Warner-Lambert, no facts, circumstances or conditions relating to,
arising from, associated with or attributable to any real property currently or,
to the knowledge of Warner-Lambert, formerly owned, operated or leased by
Warner-Lambert or its Subsidiaries or operations thereon would reasonably be
expected to result in Environmental Liabilities, (iv) all real property owned
and, to the knowledge of Warner-Lambert, all real property operated or leased by
Warner-Lambert or its Subsidiaries is free of contamination from Hazardous
Material that would have an adverse effect on human health or the environment
and (v) there is not now, nor, to the knowledge of Warner-Lambert, has there
been in the past, on, in or under any real property owned, leased or operated by
Warner-Lambert or any of its predecessors (A) any underground storage tanks,
regulated pursuant to 40 C.F.R. Part 280 or delegated state programs, dikes or
impoundments containing more than a reportable quantity of Hazardous Materials,
(B) any friable asbestos-containing materials or (c) any polychlorinated
biphenyls.
(k) Intellectual Property. Except as, in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on Warner-Lambert and
except as disclosed in the Warner-Lambert SEC Reports filed prior to the date of
this Agreement, (i) Warner-Lambert and each of its Subsidiaries owns, or is
licensed to use (in each case, free and clear of any Liens), all Intellectual
Property used in or necessary for the conduct of its business as currently
conducted; (ii) the use of any Intellectual Property by Warner-Lambert and its
Subsidiaries does not infringe on or otherwise violate the rights of any Person
and is in accordance with any applicable license pursuant to which Warner-
Lambert or any Subsidiary acquired the right to use any Intellectual Property;
(iii) to the knowledge of Warner-Lambert, no Person is challenging, infringing
on or otherwise violating any right of Warner-Lambert or any of its Subsidiaries
with respect to any Intellectual Property owned by and/or licensed to
Warner-Lambert or its Subsidiaries; and (iv) neither Warner-Lambert nor any of
its Subsidiaries has received any written notice or otherwise has knowledge of
any pending claim, order or proceeding with respect to any Intellectual Property
used by Warner-Lambert and its Subsidiaries and to its knowledge no Intellectual
Property owned and/or licensed by Warner-Lambert or its Subsidiaries is being
used or enforced in a manner that would reasonably be expected to result in the
abandonment, cancellation or unenforceability of such Intellectual Property.
(l) Brokers or Finders. No agent, broker, investment banker, financial
advisor or other firm or Person is or will be entitled to any broker's or
finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement, based upon arrangements made by
or on behalf of Warner-Lambert except Bear, Stearns & Co. Inc. and Goldman Sachs
& Co., whose fees and expenses will be paid
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by Warner-Lambert in accordance with Warner-Lambert's agreements with such firm,
copies of which have been provided to Pfizer.
(m) Opinions of Warner-Lambert Financial Advisor. Warner-Lambert has
received the opinions of Bear, Stearns & Co. Inc. and Goldman Sachs & Co., dated
the date of this Agreement, to the effect that, as of such date, the Exchange
Ratio is fair, from a financial point of view, to the holders of Warner-Lambert
Common Stock, copies of which opinions will promptly be provided to Pfizer.
(n) Accounting Matters. To the knowledge of Warner-Lambert, neither
Warner-Lambert nor any of its affiliates has taken or agreed to take any action,
and no fact or circumstance is known to Warner-Lambert, that would prevent
Pfizer from accounting for the Merger as a "pooling-of-interests" under Opinion
16 of the Accounting Principles Board and applicable SEC rules and regulations.
(o) Taxes. Each of Warner-Lambert and its Subsidiaries has accurately
filed all Tax Returns required to have been filed (or extensions have been duly
obtained) and has paid all Taxes required to have been paid by it, except where
failure to accurately file such Tax Returns or pay such Taxes would not, in the
aggregate, reasonably be expected to have a Material Adverse Effect on
Warner-Lambert.
(p) Certain Contracts. As of the date hereof, except as set forth in the
Warner-Lambert SEC Reports filed prior to the date of this Agreement, neither
Warner-Lambert nor any of its Subsidiaries is a party to or bound by (i) any
"material contracts" (as such term is defined in Item 601(b)(10) of Regulation
S-K of the SEC) or (ii) any non-competition agreements or any other agreements
or arrangements that limit or otherwise restrict Warner-Lambert or any of its
Subsidiaries or any of their respective affiliates or any successor thereto or
that would, after the Effective Time, to the knowledge of Warner-Lambert, limit
or restrict Pfizer or any of its affiliates (including the Surviving
Corporation) or any successor thereto, from engaging or competing in any line of
business or in any geographic area, which agreements or arrangements, in the
aggregate, would reasonably be expected to have a Material Adverse Effect on
Pfizer and its Subsidiaries (including the Surviving Corporation and its
Subsidiaries), taken together, after giving effect to the Merger.
(q) Warner-Lambert Stockholder Rights Plan. The Board of Directors of
Warner-Lambert has amended the Warner-Lambert Rights Agreement in accordance
with its terms to render it inapplicable to the transactions contemplated by
this Agreement. Warner-Lambert has delivered to Pfizer a true and correct copy
of the Warner-Lambert Rights Agreement, as amended, in effect as of execution
and delivery of this Agreement.
(r) Employee Benefit Plans. Except as disclosed in the Warner-Lambert SEC
Reports, there are no Benefit Plans maintained by Warner-Lambert covering only
Warner-Lambert executive officers. Each Benefit Plan maintained by
Warner-Lambert has been operated and administered in accordance with its terms
and applicable law, except where failure to do so would not reasonably be
expected to have a Material Adverse Effect on Warner-Lambert. The execution of
this Agreement and the consummation of the Merger will not constitute an event
under any Benefit Plan maintained by Warner-Lambert that will or may result in
any payment, acceleration, forgiveness of indebtedness, vesting, distribution,
increase in compensation or benefits or obligation to fund benefits with respect
to any Warner-Lambert Employee (US), Warner-Lambert Employee (Non-US) or
Warner-Lambert Employee (Collective Bargaining Units) which, in the aggregate,
have
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had, or would reasonably be expected to have, a Material Adverse Effect on
Warner-Lambert. Warner-Lambert's Board of Directors has not declared an "other
circumstance" to have occurred within the meaning of Section 4.2(y) of
Warner-Lambert's Enhanced Severance Plan.
(s) Labor Matters. Except where failure to comply would not reasonably be
expected to have a Material Adverse Effect on Warner-Lambert, Warner-Lambert is
and has been in compliance with all applicable laws of the United States, or of
any state or local government or any subdivision thereof or of any foreign
government respecting employment and employment practices, terms and conditions
of employment and wages and hours, including, without limitation, ERISA, the
Code, the Immigration Reform and Control Act, the WARN Act, any laws respecting
employment discrimination, sexual harassment, disability rights or benefits,
equal opportunity, plant closure issues, affirmative action, workers'
compensation, employee benefits, severance payments, COBRA, labor relations,
employee leave issues, wage and hour standards, occupational safety and health
requirements and unemployment insurance and related matters, and is not engaged
in any unfair labor practices.
3.3 REPRESENTATIONS AND WARRANTIES OF PFIZER AND MERGER SUB. Pfizer and
Merger Sub represent and warrant to Warner-Lambert as follows:
(a) Organization. Merger Sub is a corporation duly incorporated, validly
existing and in good standing under the laws of Delaware. Merger Sub is a direct
wholly-owned subsidiary of Pfizer.
(b) Corporate Authorization. Merger Sub has all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance by Merger Sub of
this Agreement and the consummation by Merger Sub of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Merger Sub. This Agreement has been duly executed and delivered
by Merger Sub and constitutes a valid and binding agreement of Merger Sub,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors generally
or by general equity principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(c) Non-Contravention. The execution, delivery and performance by Merger
Sub of this Agreement and the consummation by Merger Sub of the transactions
contemplated hereby do not and will not contravene or conflict with the
certificate of incorporation or bylaws of Merger Sub.
(d) No Business Activities. Merger Sub has not conducted any activities
other than in connection with the organization of Merger Sub, the negotiation
and execution of this Agreement and the consummation of the transactions
contemplated hereby. Merger Sub has no Subsidiaries.
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ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 COVENANTS OF PFIZER. During the period from the date of this
Agreement and continuing until the Effective Time, Pfizer agrees as to itself
and its Subsidiaries that (except as expressly contemplated or permitted by this
Agreement or the Pfizer Disclosure Schedule or as required by a Governmental
Entity of competent jurisdiction or to the extent that Warner-Lambert shall
otherwise consent in writing, which consent shall not be unreasonably withheld
or delayed):
(a) Ordinary Course.
(i) Pfizer and its Subsidiaries shall carry on their respective
businesses in the usual, regular and ordinary course in all material
respects, in substantially the same manner as heretofore conducted, and
shall use all reasonable efforts to preserve intact their present lines
of business, maintain their rights and franchises and preserve their
relationships with customers, suppliers and others having business
dealings with them to the end that their ongoing businesses shall not be
impaired in any material respect at the Effective Time; provided,
however, that no action by Pfizer or its Subsidiaries with respect to
matters specifically addressed by any other provision of this Section
4.1 shall be deemed a breach of this Section 4.1(a)(i) unless such
action would constitute a breach of one or more of such other
provisions.
(ii) Other than in connection with acquisitions permitted by
Section 4.1(e), Pfizer shall not, and shall not permit any of its
Subsidiaries to, (A) enter into any new material line of business or (B)
incur or commit to any capital expenditures or any obligations or
liabilities in connection therewith other than capital expenditures and
obligations or liabilities in connection therewith incurred or committed
to in the ordinary course of business consistent with past practice and
which, together with all such expenditures incurred or committed since
January 1, 2000, are not in excess of the amounts set forth in Section
4.1(a) of the Pfizer Disclosure Schedule.
(b) Dividends; Changes in Share Capital. Pfizer shall not, and shall not
permit any of its Subsidiaries to, and shall not propose to, (i) declare or pay
any dividends on or make other distributions in respect of any of its capital
stock, except (A) the declaration and payment of regular quarterly cash
dividends not in excess of $0.09 per share of Pfizer Common Stock with usual
record and payment dates for such dividends in accordance with past dividend
practice and (B) for dividends by wholly owned Subsidiaries of Pfizer, (ii)
split, combine or reclassify any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or in
substitution for, shares of its capital stock, except for any such transaction
by a wholly owned Subsidiary of Pfizer which remains a wholly owned Subsidiary
after consummation of such transaction or (iii) repurchase, redeem or otherwise
acquire any shares of its capital stock or any securities convertible into or
exercisable for any shares of its capital stock except for the purchase from
time to time by Pfizer of Pfizer Common Stock (and the associated Pfizer Rights)
in the ordinary course of business consistent with past practice in connection
with the Pfizer Benefit Plans and, subject to the restrictions contained in
Section 4.1(h) herein, except for the redemption or exchange of Pfizer Rights in
accordance with the Pfizer
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Rights Agreement or repurchases of shares of Pfizer Common Stock up to $1.9
billion pursuant to its previously announced repurchase program.
(c) Issuance of Securities. Pfizer shall not, and shall not permit any of
its Subsidiaries to, issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock of any class, any
Pfizer Voting Debt or any securities convertible into or exercisable for, or any
rights, warrants, calls or options to acquire, any such shares or Pfizer Voting
Debt, or enter into any commitment, arrangement, undertaking or agreement with
respect to any of the foregoing, other than (i) the issuance of Pfizer Common
Stock (and the associated Pfizer Rights) upon the exercise of Pfizer Stock
Options or in connection with other stock-based benefit plans outstanding on the
date hereof, in each case in accordance with their present terms or pursuant to
Pfizer Stock Options or other stock based awards granted pursuant to clause (ii)
below, (ii) the granting of Pfizer Stock Options or other stock based awards to
acquire shares of Pfizer Common Stock granted under stock based benefit plans
outstanding on the date hereof in the ordinary course of business consistent
with past practice not in excess of the amounts set forth in Section 4.1(c) of
the Pfizer Disclosure Schedule, (iii) issuances by a wholly owned Subsidiary of
Pfizer of capital stock to such Subsidiary's parent or another wholly owned
Subsidiary of Pfizer, (iv) pursuant to acquisitions set forth on the Pfizer
Disclosure Schedule or the financings therefor or (v) issuances in accordance
with the Pfizer Rights Agreement.
(d) Governing Documents. Except to the extent required to comply with
their respective obligations hereunder or with applicable law, Pfizer and Merger
Sub shall not amend or propose to so amend their respective certificates of
incorporation, bylaws or other governing documents.
(e) No Acquisitions. Other than (i) acquisitions disclosed on the Pfizer
Disclosure Schedule and (ii) acquisitions for cash in existing or related lines
of business of Pfizer the fair market value of the total consideration
(including the value of indebtedness acquired or assumed) for which does not
exceed the amount specified in the aggregate for all such acquisitions in
Section 4.1(e) of the Pfizer Disclosure Schedule and none of which acquisitions
referred to in this clause (ii) presents a material risk of making it more
difficult to obtain any approval or authorization required in connection with
the Merger under Regulatory Laws, Pfizer shall not, and shall not permit any of
its Subsidiaries to, acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial portion
of the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof or
otherwise acquire or agree to acquire any assets (other than the acquisition of
assets used in the operations of the business of Pfizer and its Subsidiaries in
the ordinary course, which assets do not constitute a business unit, division or
all or substantially all of the assets of the transferor); provided, however,
that the foregoing shall not prohibit (x) internal reorganizations or
consolidations involving existing Subsidiaries of Pfizer or (y) the creation of
new Subsidiaries of Pfizer organized to conduct or continue activities otherwise
permitted by this Agreement.
(f) No Dispositions. Other than (i) internal reorganizations or
consolidations involving existing Subsidiaries of Pfizer, (ii) dispositions
referred to in Pfizer SEC Reports filed prior to the date of this Agreement or
(iii) as may be required by or in conformance with law or regulation in order to
permit or facilitate the consummation of the transactions contemplated hereby or
the transactions disclosed in the Pfizer Disclosure Schedule, Pfizer shall not,
and shall not permit any of its Subsidiaries to, sell, lease or otherwise
dispose of,
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or agree to sell, lease or otherwise dispose of, any of its assets (including
capital stock of Subsidiaries of Pfizer but excluding inventory in the ordinary
course of business), if the fair market value of the total consideration
(including the value of the indebtedness acquired or assumed) therefor exceeds
the amount specified in the aggregate for all such dispositions in Section
4.1(f) of the Pfizer Disclosure Schedule.
(g) Investments; Indebtedness. Pfizer shall not, and shall not permit any
of its Subsidiaries to, other than in connection with actions permitted by
Section 4.1(e), (i) make any loans, advances or capital contributions to, or
investments in, any other Person, other than (x) by Pfizer or a Subsidiary of
Pfizer to or in Pfizer or any Subsidiary of Pfizer, (y) pursuant to any contract
or other legal obligation of Pfizer or any of its Subsidiaries existing at the
date of this Agreement or (z) in the ordinary course of business consistent with
past practice in an aggregate amount not in excess of the aggregate amount
specified in Section 4.1(g) of the Pfizer Disclosure Schedule (provided that
none of such transactions referred to in this clause (z) presents a material
risk of making it more difficult to obtain any approval or authorization
required in connection with the Merger under Regulatory Laws) or (ii) create,
incur, assume or suffer to exist any indebtedness, issuances of debt securities,
guarantees, loans or advances not in existence as of the date of this Agreement
except pursuant to the credit facilities, indentures and other arrangements in
existence on the date of this Agreement or in the ordinary course of business
consistent with past practice, in each case as such credit facilities,
indentures and other arrangements may be amended, extended, modified, refunded,
renewed or refinanced after the date of this Agreement.
(h) Pooling; Tax-Free Qualification. Pfizer shall use its reasonable best
efforts not to, and shall use its reasonable best efforts not to permit any of
its Subsidiaries to, take any action (including any action otherwise permitted
by this Section 4.1) that would prevent or impede the Merger from qualifying as
a "pooling of interests" for accounting purposes or as a "reorganization" under
Section 368 of the Code.
(i) Compensation. Other than as contemplated by Section 5.6 or by Section
4.1(c) or 4.1(i) of the Pfizer Disclosure Schedule, Pfizer shall not increase
the amount of compensation of any director, executive officer or employee, make
any increase in or commitment to increase any employee benefits, issue any
additional Pfizer Stock Options, adopt or make any commitment to adopt any
additional employee benefit plan or make any contribution, other than regularly
scheduled contributions, to any Pfizer Benefit Plan and, in the case of any of
the foregoing, except in the ordinary course of business consistent with past
practice or as required by an existing agreement.
(j) Accounting Methods; Income Tax Elections. Except as disclosed in
Pfizer SEC Reports filed prior to the date of this Agreement, or as required by
a Governmental Entity, Pfizer shall not change its methods of accounting in
effect at December 31, 1998, except as required by changes in GAAP as concurred
in by Pfizer's independent public accountants. Pfizer shall not (i) change its
fiscal year or (ii) make any material tax election, other than in the ordinary
course of business consistent with past practice.
(k) Certain Agreements. Pfizer shall not, and shall not permit any of its
Subsidiaries to, enter into any agreements or arrangements that limit or
otherwise restrict Pfizer or any of its Subsidiaries or any of their respective
affiliates or any successor thereto or that could, after the Effective Time,
limit or restrict Pfizer or any of its affiliates (including the Surviving
Corporation) or any successor thereto, from engaging or competing in any line of
business or in any geographic area which agreements or arrangements,
individually or in
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the aggregate, would reasonably be expected to have a Material Adverse Effect on
Pfizer and its Subsidiaries (including the Surviving Corporation and its
Subsidiaries), taken together, after giving effect to the Merger.
(l) No Related Actions. Pfizer will not, and will not permit any of its
Subsidiaries to, agree or commit to do any of the foregoing.
4.2 COVENANTS OF WARNER-LAMBERT. During the period from the date of this
Agreement and continuing until the Effective Time, Warner-Lambert agrees as to
itself and its Subsidiaries that (except as expressly contemplated or permitted
by this Agreement, the Warner-Lambert Disclosure Schedule or as required by a
Governmental Entity of competent jurisdiction or to the extent that Pfizer shall
otherwise consent in writing, which consent shall not be unreasonably withheld
or delayed):
(a) Ordinary Course.
(i) Warner-Lambert and its Subsidiaries shall carry on their
respective businesses in the usual, regular and ordinary course in all
material respects, in substantially the same manner as heretofore
conducted, and shall use all reasonable efforts to preserve intact their
present lines of business, maintain their rights and franchises and
preserve their relationships with customers, suppliers and others having
business dealings with them to the end that their ongoing businesses
shall not be impaired in any material respect at the Effective Time;
provided, however, that no action by Warner-Lambert or its Subsidiaries
with respect to matters specifically addressed by any other provision of
this Section 4.2 shall be deemed a breach of this Section 4.2(a)(i)
unless such action would constitute a breach of one or more of such
other provisions.
(ii) Other than in connection with acquisitions permitted by
Section 4.2(e), Warner-Lambert shall not, and shall not permit any of
its Subsidiaries to, (A) enter into any licensing agreement, except for
those licensing agreements set forth on Section 4.2(a)(ii) of the
Warner-Lambert Disclosure Schedule and any such licensing agreements
related to the Schick, Tetra, Capsugel or Adams divisions of
Warner-Lambert; (B) enter into any new material line of business; (C)
incur or commit to any capital expenditures or any obligations or
liabilities in connection therewith other than Permitted Capital
Expenditures (as defined below) and obligations or liabilities in
connection therewith, or (D) with respect to the pharmaceutical and
consumer healthcare businesses (except Schick, Tetra, and Capsugel),
enter into any contract, agreement or other arrangement for the sale of
inventories or for the furnishing of services by Warner-Lambert or any
of its Subsidiaries which contract, agreement or other arrangement
involves expenditures in excess of $10 million or which may give rise to
commitments which may extend beyond twelve months from the date of such
contract, agreement or arrangement, unless such contract, agreement or
arrangement can be terminated by Warner-Lambert or its Subsidiary, as
the case may be, by giving less than 60 days' notice and without
incurring an obligation to pay any material premium or penalty or
suffering any other material detriment. As used herein, a "Permitted
Capital Expenditure" is a capital expenditure which (i) is set forth on
a Capital Expenditure Schedule to be delivered by Warner-Lambert to
Pfizer on or prior to February 28, 2000 to the extent it is approved by
Pfizer (which approval will not be unreasonably withheld by Pfizer) or
(ii) is (A) less than $10 million in the case of any single expenditure
or related series of
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expenditures and (B) $100 million in the aggregate for all capital
expenditures incurred pursuant to this clause (ii) and not clause (i).
Warner-Lambert will deliver to Pfizer on a quarterly basis a schedule of
actual capital expenditures made.
(b) Dividends; Changes in Share Capital. Warner-Lambert shall not, and
shall not permit any of its Subsidiaries to, and shall not propose to, (i)
declare or pay any dividends on or make other distributions in respect of any of
its capital stock, except (A) the declaration and payment of regular quarterly
cash dividends not in excess of $.24 per share of Warner-Lambert Common Stock
with usual record and payment dates for such dividends in accordance with past
dividend practice and (B) for dividends by wholly owned Subsidiaries of
Warner-Lambert, (ii) split, combine or reclassify any of its capital stock or
issue or authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for, shares of its capital stock, except for
any such transaction by a wholly owned Subsidiary of Warner-Lambert which
remains a wholly owned Subsidiary after consummation of such transaction, or
(iii) repurchase, redeem or otherwise acquire any shares of its capital stock or
any securities convertible into or exercisable for any shares of its capital
stock except for the purchase from time to time by Warner-Lambert of
Warner-Lambert Common Stock (and the associated Warner-Lambert Rights) in the
ordinary course of business consistent with past practice in connection with the
Warner-Lambert Benefit Plans and except for the redemption or exchange of
Warner-Lambert Rights in accordance with the Warner-Lambert Rights Agreement.
(c) Issuance of Securities. Warner-Lambert shall not, and shall not permit
any of its Subsidiaries to, issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock of any class, any
Warner-Lambert Voting Debt or any securities convertible into or exercisable
for, or any rights, warrants, calls or options to acquire, any such shares or
Warner-Lambert Voting Debt, or enter into any commitment, arrangement,
undertaking or agreement with respect to any of the foregoing, other than (i)
the issuance of Warner-Lambert Common Stock (and the associated Warner-Lambert
Rights) upon the exercise of Warner-Lambert Stock Options or in connection with
other stock-based benefits plans outstanding on the date hereof, in each case in
accordance with their present terms or pursuant to Warner-Lambert Stock Options
or other stock based awards granted pursuant to clause (iii) below, (ii)
issuances by a wholly owned Subsidiary of Warner-Lambert of capital stock to
such Subsidiary's parent or another wholly owned subsidiary of Warner-Lambert,
(iii) the granting of Warner-Lambert Stock Options or other stock based awards
to acquire shares of Warner-Lambert Common Stock granted under stock based
benefit plans outstanding on the date hereof in the ordinary course of business
consistent with past practice not in excess of the amounts set forth in Section
4.2(c) of the Warner-Lambert Disclosure Schedule, (iv) pursuant to acquisitions
set forth on the Warner-Lambert Disclosure Schedule or the financings therefor
or (v) issuances in accordance with the Warner-Lambert Rights Agreement.
(d) Governing Documents. Except to the extent required to comply with its
obligations hereunder or with applicable law, Warner-Lambert shall not amend or
propose to so amend its respective certificates of incorporation, bylaws or
other governing documents.
(e) No Acquisitions. Other than (i) acquisitions disclosed on the
Warner-Lambert Disclosure Schedule and (ii) acquisitions for cash in existing or
related lines of business of Warner-Lambert and its Subsidiaries, the fair
market value of the total consideration (including the value of indebtedness
acquired or assumed) for which does not exceed $25
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million for any individual acquisition, or $100 million in the aggregate for all
such acquisitions, and none of which acquisitions referred to in this clause
(ii) presents a material risk of making it more difficult to obtain any approval
or authorization required in connection with the Merger under Regulatory Laws,
Warner-Lambert shall not, and shall not permit any of its Subsidiaries to,
acquire or agree to acquire by merging or consolidating with, or by purchasing a
substantial equity interest in or a substantial portion of the assets of, or by
any other manner, any business (including by acquisition of assets) or any
corporation, partnership, association or other business organization or division
thereof; provided, however, that the foregoing shall not prohibit (x) internal
reorganizations or consolidations involving existing Subsidiaries of
Warner-Lambert or (y) the creation of new Subsidiaries of Warner-Lambert
organized to conduct or continue activities otherwise permitted by this
Agreement.
(f) No Dispositions. Other than (i) internal reorganizations or
consolidations involving existing Subsidiaries of Warner-Lambert, (ii)
dispositions referred to in Warner-Lambert SEC Reports filed prior to the date
of this Agreement or (iii) as may be required by or in conformance with law or
regulation in order to permit or facilitate the consummation of the transactions
contemplated hereby or the transactions disclosed in the Warner-Lambert
Disclosure Schedule, Warner-Lambert shall not, and shall not permit any of its
Subsidiaries to, sell, lease or otherwise dispose of, or agree to sell, lease or
otherwise dispose of, any of its assets (including capital stock of Subsidiaries
of Warner-Lambert but excluding inventory in the ordinary course of business),
if the fair market value of the total consideration (including the value of the
indebtedness acquired or assumed) therefor exceeds $25 million for any
individual disposition, or $100 million in the aggregate for all such
dispositions.
(g) Investments; Indebtedness. Warner-Lambert shall not, and shall not
permit any of its Subsidiaries to, other than in connection with actions
permitted by Section 4.2(e) and except for any indebtedness incurred by
Warner-Lambert or its Subsidiaries to finance or refinance amounts due pursuant
to Article VII of the Agreement and Plan of Merger, dated as of November 3,
1999, among American Home Products Corporation, Wolverine Sub Corp. and
Warner-Lambert (the "AHP Merger Agreement"), (i) make any loans, advances or
capital contributions to, or investments in, any other Person, other than (x) by
Warner-Lambert or a Subsidiary of Warner-Lambert to or in Warner-Lambert or any
Subsidiary of Warner-Lambert, (y) pursuant to any contract or other legal
obligation of Warner-Lambert or any of its Subsidiaries existing at the date of
this Agreement or (z) in the ordinary course of business consistent with past
practice in an aggregate amount not in excess of $250 million in the aggregate
(provided that none of such transactions referred to in this clause (z) presents
a material risk of making it more difficult to obtain any approval or
authorization required in connection with the Merger under Regulatory Laws) or
(ii) create, incur, assume or suffer to exist any indebtedness, issuances of
debt securities, guarantees, loans or advances not in existence as of the date
of this Agreement except pursuant to the credit facilities, indentures and other
arrangements in existence on the date of this Agreement or in the ordinary
course of business consistent with past practice, in each case as such credit
facilities, indentures and other arrangements and other existing indebtedness
may be amended, extended, modified, refunded, renewed or refinanced after the
date of this Agreement.
(h) Pooling; Tax-Free Qualification. Warner-Lambert shall use its
reasonable best efforts not to, and shall use its reasonable best efforts not to
permit any of its Subsidiaries to, take any action (including any action
otherwise permitted by this Section 4.2) that
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would prevent or impede the Merger from qualifying as a "pooling of interests"
for accounting purposes or as a "reorganization" under Section 368 of the Code.
(i) Compensation. Other than as contemplated by Section 5.6 or by Sections
4.2(c) or 4.2(i) of the Warner-Lambert Disclosure Schedule, Warner-Lambert shall
not increase the amount of compensation of any director, executive officer or
employee, make any increase in or commitment to increase any employee benefits,
issue any additional Warner-Lambert Stock Options, adopt or make any commitment
to adopt any additional employee benefit plan or make any contribution, other
than regularly scheduled contributions, to any Warner-Lambert Benefit Plan and,
in the case of any of the foregoing, except in the ordinary course of business
consistent with past practice or as required by an existing agreement.
(j) Accounting Methods; Income Tax Elections. Except as disclosed in
Warner-Lambert SEC Reports filed prior to the date of this Agreement, or as
required by a Governmental Entity, Warner-Lambert shall not change its methods
of accounting in effect at December 31, 1998, except as required by changes in
GAAP as concurred in by Warner-Lambert's independent public accountants.
Warner-Lambert shall not (i) change its fiscal year or (ii) make any material
tax election, other than in the ordinary course of business consistent with past
practice.
(k) Certain Agreements. Warner-Lambert shall not, and shall not permit any
of its Subsidiaries to, enter into any agreements or arrangements that limit or
otherwise restrict Warner-Lambert or any of its Subsidiaries or any of their
respective affiliates or any successor thereto, or that could, after the
Effective Time, limit or restrict Pfizer or any of its affiliates (including the
Surviving Corporation) or any successor thereto, from engaging or competing in
any line of business or in any geographic area which agreements or arrangements,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on Pfizer and its Subsidiaries (including the Surviving
Corporation and its Subsidiaries), taken together, after giving effect to the
Merger.
(l) No Related Actions. Warner-Lambert will not, and will not permit any
of its Subsidiaries to, agree or commit to any of the foregoing.
4.3 GOVERNMENTAL FILINGS. Each party shall (a) confer on a regular and
frequent basis with the other and (b) report to the other (to the extent
permitted by law or regulation or any applicable confidentiality agreement) on
operational matters. Warner-Lambert and Pfizer shall file all reports required
to be filed by each of them with the SEC (and all other Governmental Entities)
between the date of this Agreement and the Effective Time and shall (to the
extent permitted by law or regulation or any applicable confidentiality
agreement) deliver to the other party copies of all such reports, announcements
and publications promptly after the same are filed.
4.4 CONTROL OF OTHER PARTY'S BUSINESS. Nothing contained in this
Agreement shall give Warner-Lambert, directly or indirectly, the right to
control or direct Pfizer's operations prior to the Effective Time. Nothing
contained in this Agreement shall give Pfizer, directly or indirectly, the right
to control or direct Warner-Lambert's operations prior to the Effective Time.
Prior to the Effective Time, each of Warner-Lambert and Pfizer shall exercise,
consistent with the terms and conditions of this Agreement, complete control and
supervision over its respective operations.
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ARTICLE V
ADDITIONAL AGREEMENTS
5.1 PREPARATION OF PROXY STATEMENT; STOCKHOLDERS MEETINGS. (a) As
promptly as reasonably practicable following the date hereof, Pfizer and
Warner-Lambert shall prepare and file with the SEC mutually acceptable proxy
materials which shall constitute the Joint Proxy Statement/Prospectus (such
proxy statement/prospectus, and any amendments or supplements thereto, the
"Joint Proxy Statement/Prospectus") and Pfizer shall prepare and file a
registration statement on Form S-4 with respect to the issuance of Pfizer Common
Stock in the Merger (the "Form S-4"). The Joint Proxy Statement/Prospectus will
be included in and will constitute a part of the Form S-4 as Pfizer's
prospectus. The Form S-4 and the Joint Proxy Statement/Prospectus shall comply
as to form in all material respects with the applicable provisions of the
Securities Act and the Exchange Act and the rules and regulations thereunder.
Each of Pfizer and Warner-Lambert shall use reasonable best efforts to have the
Form S-4 declared effective by the SEC and to keep the Form S-4 effective as
long as is necessary to consummate the Merger and the transactions contemplated
thereby. Pfizer and Warner-Lambert shall, as promptly as practicable after
receipt thereof, provide the other party copies of any written comments and
advise the other party of any oral comments, with respect to the Joint Proxy
Statement/Prospectus received from the SEC. Pfizer will provide Warner-Lambert
with a reasonable opportunity to review and comment on any amendment or
supplement to the Form S-4 prior to filing such with the SEC, and will provide
Warner-Lambert with a copy of all such filings made with the SEC.
Notwithstanding any other provision herein to the contrary, no amendment or
supplement (including by incorporation by reference) to the Joint Proxy
Statement/Prospectus or the Form S-4 shall be made without the approval of both
parties, which approval shall not be unreasonably withheld or delayed; provided,
that with respect to documents filed by a party which are incorporated by
reference in the Form S-4 or Joint Proxy Statement/Prospectus, this right of
approval shall apply only with respect to information relating to the other
party or its business, financial condition or results of operations; and
provided, further, that Pfizer, in connection with a Change in the Pfizer
Recommendation, and Warner-Lambert, in connection with a Change in the
Warner-Lambert Recommendation, may amend or supplement the Joint Proxy
Statement/Prospectus or Form S-4 (including by incorporation by reference)
pursuant to a Qualifying Amendment (as defined below) to effect such a Change,
and in such event, this right of approval shall apply only with respect to
information relating to the other party or its business, financial condition or
results of operations, and shall be subject to the right of each party to have
its Board of Directors' deliberations and conclusions to be accurately
described. A "Qualifying Amendment" means an amendment or supplement to the
Joint Proxy Statement/Prospectus or Form S-4 (including by incorporation by
reference) to the extent it contains (i) a Change in the Pfizer Recommendation
or a Change in the Warner-Lambert Recommendation (as the case may be), (ii) a
statement of the reasons of the Board of Directors of Pfizer or Warner-Lambert
(as the case may be) for making such Change in the Pfizer Recommendation or
Change in the Warner-Lambert Recommendation (as the case may be) and (iii)
additional information reasonably related to the foregoing. Pfizer will use
reasonable best efforts to cause the Joint Proxy Statements/Prospectus to be
mailed to Pfizer stockholders, and Warner-Lambert will use reasonable best
efforts to cause the Joint Proxy Statement/Prospectus to be mailed to
Warner-Lambert's stockholders, in each case after the Form S-4 is declared
effective under the Securities Act. Pfizer shall also take any action (other
than qualifying to do business in any jurisdiction in which it is not now so
qualified or to file a general consent to service of process) required to be
taken under any applicable state securities
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laws in connection with the Share Issuance and Warner-Lambert shall furnish all
information concerning Warner-Lambert and the holders of Warner-Lambert Common
Stock as may be reasonably requested in connection with any such action. Each
party will advise the other party, promptly after it receives notice thereof, of
the time when the Form S-4 has become effective, the issuance of any stop order,
the suspension of the qualification of the Pfizer Common Stock issuable in
connection with the Merger for offering or sale in any jurisdiction, or any
request by the SEC for amendment of the Joint Proxy Statement/Prospectus or the
Form S-4. If at any time prior to the Effective Time any information relating to
Pfizer or Warner-Lambert, or any of their respective affiliates, officers or
directors, should be discovered by Pfizer or Warner-Lambert which should be set
forth in an amendment or supplement to any of the Form S-4 or the Joint Proxy
Statement/Prospectus so that any of such documents would not include any
misstatement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, the party which discovers such information shall promptly
notify the other party hereto and, to the extent required by law, rules or
regulations, an appropriate amendment or supplement describing such information
shall be promptly filed with the SEC and disseminated to the stockholders of
Pfizer and Warner-Lambert.
(b) Warner-Lambert shall duly take (subject to compliance with the
provisions of Section 3.1(e) and Section 3.2(e) (provided that Warner-Lambert
shall have used reasonable best efforts to ensure that such representations are
true and correct)) all lawful action to call, give notice of, convene and hold a
meeting of its stockholders on a date as soon as reasonably practicable (the
"Warner-Lambert Stockholders Meeting") for the purpose of obtaining the Required
Warner-Lambert Vote with respect to the transactions contemplated by this
Agreement and shall take all lawful action to solicit the adoption of this
Agreement by the Required Warner-Lambert Vote; and the Board of Directors of
Warner-Lambert shall recommend adoption of this Agreement by the stockholders of
Warner-Lambert to the effect as set forth in Section 3.2(f) (the "Warner-Lambert
Recommendation"), and shall not withdraw, modify or qualify (or propose to
withdraw, modify or qualify) (a "Change") in any manner adverse to Pfizer such
recommendation or take any action or make any statement in connection with the
Warner-Lambert Stockholders Meeting inconsistent with such recommendation
(collectively, a "Change in the Warner-Lambert Recommendation"); provided the
foregoing shall not prohibit accurate disclosure (and such disclosure shall not
be deemed to be a Change in the Warner-Lambert Recommendation) of factual
information regarding the business, financial condition or results of operations
of Pfizer or Warner-Lambert or the fact that an Acquisition Proposal has been
made, the identity of the party making such proposal or the material terms of
such proposal (provided, that the Board of Directors of Warner-Lambert does not
withdraw, modify or qualify (or propose to withdraw, modify or qualify) in any
manner adverse to Pfizer its recommendation) in the Form S-4 or the Joint Proxy
Statement/Prospectus or otherwise, to the extent such information, facts,
identity or terms is required to be disclosed under applicable law; and,
provided further, that the Board of Directors of Warner-Lambert may make a
Change in the Warner-Lambert Recommendation (x) pursuant to Section 5.5 hereof
or (y) prior to the Warner-Lambert Stockholders Meeting if (i) the Board of
Directors of Warner-Lambert determines in good faith that a Material Adverse
Effect has occurred with respect to Pfizer and (ii) the Board of Directors of
Warner-Lambert determines in good faith that, by reason of its determination in
clause (i) the failure to effect such Change in the Warner-Lambert
Recommendation would create a substantial probability of violating the fiduciary
duties of the Warner-
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Lambert Board of Directors under applicable law. Notwithstanding any Change in
the Warner-Lambert Recommendation, this Agreement shall be submitted to the
stockholders of Warner-Lambert at the Warner-Lambert Stockholders Meeting for
the purpose of adopting the Agreement and approving the Merger; provided that
this Agreement shall not be required to be submitted to the stockholders of
Warner-Lambert at the Warner-Lambert Stockholders Meeting if this Agreement has
been terminated pursuant to Section 7.1 hereof.
(c) Pfizer shall duly take (subject to compliance with the provisions of
Section 3.2(e) and Section 3.1(e) (provided that Pfizer shall have used
reasonable best efforts to ensure that such representation is true and correct))
all lawful action to call, give notice of, convene and hold a meeting of its
stockholders on a date as soon as reasonably practicable (the "Pfizer
Stockholders Meeting") for the purpose of obtaining the Pfizer Stockholder
Approval and shall take all lawful action to solicit the approval of the Share
Issuance and adoption of the Board Amendment and the Board of Directors of
Pfizer shall recommend approval of the Share Issuance and adoption of the Board
Amendment by the stockholders of Pfizer to the effect as set forth in Section
3.1(f) (the "Pfizer Recommendation"), and shall not Change in any manner adverse
to Warner-Lambert such recommendation or take any action or make any statement
in connection with the Pfizer Stockholders Meeting inconsistent with such
recommendation (collectively, a "Change in the Pfizer Recommendation"); provided
the foregoing shall not prohibit accurate disclosure (and such disclosure shall
not be deemed to be a Change in the Pfizer Recommendation) of factual
information regarding the business, financial condition or operations of Pfizer
or Warner-Lambert or the fact that an Acquisition Proposal has been made, the
identity of the party making such proposal or the material terms of such
proposal (provided, that the Board of Directors of Pfizer does not withdraw,
modify or qualify (or propose to withdraw, modify or qualify) in any manner
adverse to Warner-Lambert its recommendation) in the Form S-4 or the Joint Proxy
Statement/Prospectus or otherwise, to the extent such information, facts,
identity or terms is required to be disclosed under applicable law; and,
provided, further, that the Board of Directors of Pfizer may make a Change in
the Pfizer Recommendation (x) pursuant to Section 5.5 hereof or (y) prior to the
Pfizer Stockholders Meeting if (i) the Board of Directors of Pfizer determines
in good faith that a Material Adverse Effect has occurred with respect to
Warner-Lambert and (ii) the Board of Directors of Pfizer determines in good
faith that, by reason of its determination in clause (i) the failure to effect
such Change in the Pfizer Recommendation would create a substantial probability
of violating the fiduciary duties of the Pfizer Board of Directors under
applicable law. Notwithstanding any Change in the Pfizer Recommendation, a
proposal to approve the Share Issuance and the Board Amendment shall be
submitted to the stockholders of Pfizer at the Pfizer Stockholders Meeting for
the purpose of obtaining the Pfizer Stockholder Approval; provided that this
Agreement shall not be required to be submitted to the stockholders of Pfizer at
the Pfizer Stockholders Meeting if this Agreement has been terminated pursuant
to Section 7.1 hereof.
(d) For purposes of this Agreement, a Change in the Warner-Lambert
Recommendation shall be deemed to include, without limitation, a recommendation
by the Warner-Lambert Board of Directors of a third party Acquisition Proposal
with respect to Warner-Lambert and a Change in the Pfizer Recommendation shall
be deemed to include, without limitation, a recommendation by the Pfizer Board
of Directors of a third party Acquisition Proposal with respect to Pfizer.
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5.2 PFIZER BOARD OF DIRECTORS; EXECUTIVE OFFICERS; HEADQUARTERS;
WARNER-LAMBERT NAME. (a) At or prior to the Effective Time, Pfizer will use its
reasonable best efforts to (i) reconstitute the board of directors of Pfizer in
accordance with Section 1.5(b), Section 1.6(b) and Section 1.7, and (ii)
reconstitute the committees of Board of Directors of Pfizer in accordance with
the letter referenced in Section 1.7. The headquarters of Pfizer will remain in
New York, New York and Pfizer will maintain such other offices as provided in
the letter referenced in Section 1.7.
(b) Following the Effective Time, Pfizer shall preserve and perpetuate the
names "Warner-Lambert" and "Parke-Davis" as a divisional name and a trade name,
respectively, in accordance with the letter referenced in Section 1.7.
5.3 ACCESS TO INFORMATION/EMPLOYEES. (a) Upon reasonable notice, each
party shall (and shall cause its Subsidiaries to) afford to the officers,
employees, accountants, counsel, financial advisors and other representatives of
the other party reasonable access during normal business hours, during the
period prior to the Effective Time, to all its properties, books, contracts,
commitments, records, officers and employees and, during such period, such party
shall (and shall cause its Subsidiaries to) furnish promptly to the other party
(a) a copy of each report, schedule, registration statement and other document
filed, published, announced or received by it during such period pursuant to the
requirements of Federal or state securities laws, as applicable (other than
documents which such party is not permitted to disclose under applicable law),
and (b) all other information concerning it and its business, properties and
personnel as such other party may reasonably request (including consultation on
a regular basis with respect to litigation matters); provided, however, that
either party may restrict the foregoing access to the extent that (i) any law,
treaty, rule or regulation of any Governmental Entity applicable to such party
requires such party or its Subsidiaries to restrict or prohibit access to any
such properties or information or (ii) the information is subject to
confidentiality obligations to a third party. Any such information obtained
pursuant to this Section 5.3 ("Confidential Information") will be used solely
for the purpose of consideration or performance of the transactions contemplated
by this Agreement or any other agreement related hereto and will be kept
confidential by the party obtaining such information and all persons obtaining
such information on such party's behalf or who obtain such information from such
party. Confidential Information shall not include information that (A) is or
becomes generally available to the public other than as a result of disclosure
by a party or its Representatives, or (B) is or becomes available to a party
(other than the disclosing party) or its Representatives that is not known by
the non-disclosing party to have any obligation not to disclose such
information. Notwithstanding the foregoing, Confidential Information may be
disclosed by a party (x) to its directors, officers, employees, representatives
(including, without limitation, financial advisors, attorneys and accountants)
or agents (collectively "Representatives") who need to know such information if
the party informs such Representatives of the confidential nature of such
information and directs them to treat such information confidentially and to use
such information for no purpose other than as specifically permitted by the
Agreement and (y) if the party is legally required to make such disclosure as a
result of a court order, subpoena or similar legal duress, provided that prior
to such disclosure, the disclosing party gives to the other party prompt written
notice of its receipt of such order or subpoena or similar document so that the
other party has a reasonable opportunity prior to disclosure to obtain a
protective order (if disclosure of Confidential Information is so required, the
disclosing party shall disclose only that portion of such information that is so
required and shall assist the other party in obtaining protective orders or
undertakings that confidential treatment will be accorded to any such
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information furnished). In the event of termination of this Agreement, each
party will promptly return to the other party all Confidential Information in
its possession (including all written materials prepared or supplied by or on
its behalf containing or reflecting any Confidential Information) and will not
retain any copies, extracts or other reproductions in whole or in part of any
Confidential Information. Any work papers, memoranda or other writings prepared
by a party or its Representatives derived from or incorporating any Confidential
Information shall be destroyed promptly upon termination of this Agreement, with
such destruction confirmed to the other party in writing. Any oral Confidential
Information will continue to be subject to the terms of this Section 5.3. Each
party shall be responsible for the breach of the terms of this Section 5.3 by
its Representative. Any investigation by Pfizer or Warner-Lambert shall not
affect the representation and warranties of Warner-Lambert and Pfizer, as the
case may be.
(b) After the date hereof Pfizer and Warner-Lambert shall establish a
mechanism reasonably acceptable to both parties by which Pfizer will be
permitted, prior to the Effective Time and subject to applicable law, to
communicate directly with Warner-Lambert employees regarding employee related
matters after the Effective Time.
5.4 REASONABLE BEST EFFORTS.
(a) Subject to the terms and conditions of this Agreement, each party will
use its reasonable best efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary, proper or advisable under this
Agreement and applicable laws and regulations to consummate the Merger and the
other transactions contemplated by this Agreement as soon as practicable after
the date hereof, including (i) preparing and filing as promptly as practicable
all documentation to effect all necessary applications, notices, petitions,
filings, tax ruling requests and other documents and to obtain as promptly as
practicable all consents, waivers, licenses, orders, registrations, approvals,
permits, tax rulings and authorizations necessary or advisable to be obtained
from any third party and/or any Governmental Entity in order to consummate the
Merger or any of the other transactions contemplated by this Agreement and (ii)
taking all reasonable steps as may be necessary to obtain all such material
consents, waivers, licenses, registrations, permits, authorizations, tax
rulings, orders and approvals. In furtherance and not in limitation of the
foregoing, each party hereto agrees to make an appropriate filing of a
Notification and Report Form pursuant to the HSR Act and any other Regulatory
Law (as defined below) with respect to the transactions contemplated hereby as
promptly as practicable after the date hereof and to supply as promptly as
practicable any additional information and documentary material that may be
requested pursuant to the HSR Act and any other Regulatory Law and to take all
other actions necessary to cause the expiration or termination of the applicable
waiting periods under the HSR Act as soon as practicable. Nothing in this
Agreement shall require any of Pfizer and its Subsidiaries or Warner-Lambert and
its Subsidiaries to sell, hold separate or otherwise dispose of or conduct their
business in a specified manner, or agree to sell, hold separate or otherwise
dispose of or conduct their business in a specified manner, or permit the sale,
holding separate or other disposition of, any assets of Pfizer, Warner-Lambert
or their respective Subsidiaries or the conduct of their business in a specified
manner, whether as a condition to obtaining any approval from a Governmental
Entity or any other Person or for any other reason, if such sale, holding
separate or other disposition or the conduct of their business in a specified
manner is not conditioned on the Closing or, in the aggregate, would reasonably
be expected to have a Material Adverse Effect on Pfizer and its Subsidiaries
(including the
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Surviving Corporation and its Subsidiaries), taken together, after giving effect
to the Merger.
(b) Each of Pfizer and Warner-Lambert shall, in connection with the efforts
referenced in Section 5.4(a) obtain all requisite material approvals and
authorizations for the transactions contemplated by this Agreement under the HSR
Act or any other Regulatory Law, use its reasonable best efforts to (i)
cooperate in all respects with each other in connection with any filing or
submission and in connection with any investigation or other inquiry, including
any proceeding initiated by a private party, (ii) promptly inform the other
party of any communication received by such party from, or given by such party
to, the Antitrust Division of the Department of Justice (the "DOJ"), the Federal
Trade Commission (the "FTC") or any other Governmental Entity and of any
material communication received or given in connection with any proceeding by a
private party, in each case regarding any of the transactions contemplated
hereby, and (iii) permit the other party to review any communication given by it
to, and consult with each other in advance of any meeting or conference with,
the DOJ, the FTC or any such other Governmental Entity or, in connection with
any proceeding by a private party, with any other Person, and to the extent
appropriate or permitted by the DOJ, the FTC or such other applicable
Governmental Entity or other Person, give the other party the opportunity to
attend and participate in such meetings and conferences. For purposes of this
Agreement, "Regulatory Law" means the Sherman Act, as amended, Council
Regulation No. 4064/89 of the European Community, as amended (the "EC Merger
Regulation") the Clayton Act, as amended, the HSR Act, the Federal Trade
Commission Act, as amended, and all other federal, state and foreign, if any,
statutes, rules, regulations, orders, decrees, administrative and judicial
doctrines and other laws that are designed or intended to prohibit, restrict or
regulate (i) foreign investment or (ii) actions having the purpose or effect of
monopolization or restraint of trade or lessening of competition.
(c) Subject to the terms and conditions of this Agreement, in furtherance
and not in limitation of the covenants of the parties contained in Sections
5.4(a) and 5.4(b), if any administrative or judicial action or proceeding,
including any proceeding by a private party, is instituted (or threatened to be
instituted) challenging any transaction contemplated by this Agreement as
violative of any Regulatory Law, each of Pfizer and Warner-Lambert shall
cooperate in all respects with each other and use its respective reasonable best
efforts, including without limitation, selling, holding separate or otherwise
disposing of or conducting their business in a specified manner, or agreeing to
sell, hold separate or otherwise dispose of or conduct their business in a
specified manner or permitting the sale, holding separate or other disposition
of, any assets of Pfizer, Warner-Lambert or their respective Subsidiaries or the
conducting of their business in a specified manner, in order to contest and
resist any such action or proceeding and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order, whether temporary,
preliminary or permanent, that is in effect and that prohibits, prevents or
restricts consummation of the transactions contemplated by this Agreement.
Notwithstanding the foregoing or any other provision of this Agreement, nothing
in this Section 5.4 shall limit a party's right to terminate this Agreement
pursuant to Article VII; provided that the foregoing is subject in all respects
to the last sentence of Section 5.4(a).
(d) If any objections are asserted with respect to the transactions
contemplated hereby under any Regulatory Law or if any suit is instituted by any
Governmental Entity or any private party challenging any of the transactions
contemplated hereby as violative of any Regulatory Law, each of Pfizer and
Warner-Lambert shall use its reasonable best
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efforts to resolve any such objections or challenge as such Governmental Entity
or private party may have to such transactions under such Regulatory Law so as
to permit consummation of the transactions contemplated by this Agreement.
5.5 ACQUISITION PROPOSALS. Without limitation on any of such party's
other obligations under this Agreement (including under Article IV hereof), each
of Pfizer and Warner-Lambert agrees that neither it nor any of its Subsidiaries
nor any of the officers and directors of it or its Subsidiaries shall, and that
it shall use its reasonable best efforts to cause its and its Subsidiaries'
employees, agents and representatives (including any investment banker, attorney
or accountant retained by it or any of its Subsidiaries) not to, directly or
indirectly, initiate, solicit, encourage or knowingly facilitate (including by
way of furnishing information) any inquiries or the making of any proposal or
offer with respect to a merger, reorganization, share exchange, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving it, or any purchase or sale of the consolidated assets
(including without limitation stock of Subsidiaries) of such party and its
Subsidiaries, taken as a whole, having an aggregate value equal to 10% or more
of the market capitalization of such party, or any purchase or sale of, or
tender or exchange offer for, 10% or more of the equity securities of such party
(any such proposal or offer (other than a proposal or offer made by the other
party or an affiliate thereof) being hereinafter referred to as an "Acquisition
Proposal"). Each of Pfizer and Warner-Lambert further agrees that neither it nor
any of its Subsidiaries nor any of the officers and directors of it or its
Subsidiaries shall, and that it shall use its reasonable best efforts to cause
its and its Subsidiaries' employees, agents and representatives (including any
investment banker, attorney or accountant retained by it or any of its
Subsidiaries) not to, directly or indirectly, have any discussion with or
provide any confidential information or data to any Person relating to an
Acquisition Proposal, or engage in any negotiations concerning an Acquisition
Proposal, or knowingly facilitate any effort or attempt to make or implement an
Acquisition Proposal or accept an Acquisition Proposal. Notwithstanding anything
in this Agreement to the contrary, each of Pfizer and Warner-Lambert or its
respective Board of Directors shall be permitted to (A) to the extent
applicable, comply with Rule 14d-9 and Rule 14e-2 promulgated under the Exchange
Act with regard to an Acquisition Proposal, (B) effect a Change in the Pfizer or
Warner-Lambert Recommendation, as the case may be, or (C) engage in any
discussions or negotiations with, or provide any information to, any Person in
response to an unsolicited bona fide written Acquisition Proposal by any such
Person, if and only to the extent that, in any such case as is referred to in
clause (B) or (C), (i) its Stockholders Meeting shall not have occurred, (ii)
(x) in the case of clause (B) above such change is permitted by clause (y) of
the second proviso of the first sentence of Section 5.1(b) or Section 5.1(c), as
the case may be, or it has received an unsolicited bona fide written Acquisition
Proposal from a third party and its Board of Directors concludes in good faith
that such Acquisition Proposal constitutes a Superior Proposal (as defined in
Section 8.11) and (y) in the case of clause (C) above, its Board of Directors
concludes in good faith that there is a reasonable likelihood that such
Acquisition Proposal could result in a Superior Proposal, (iii) prior to
providing any information or data to any Person in connection with an
Acquisition Proposal by any such Person, its Board of Directors receives from
such Person an executed confidentiality agreement containing terms at least as
stringent as those contained in Section 5.3 and (iv) prior to providing any
information or data to any Person or entering into discussions or negotiations
with any Person, such party notifies the other party promptly of such inquiries,
proposals o r offers received by, any such information requested from, or any
such discussions or negotiations sought to be initiated or continued with, any
of its representatives indicating, in connection with such notice, the name of
such Person and the
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material terms and conditions of any inquiries, proposals or offers. Each of
Pfizer and Warner-Lambert agrees that it will promptly keep the other party
informed of the status and terms of any such proposals or offers and the status
and terms of any such discussions or negotiations. Each of Pfizer and
Warner-Lambert agrees that it will, and will cause its officers, directors and
representatives to, immediately cease and cause to be terminated any activities,
discussions or negotiations existing as of the date of this Agreement with any
parties conducted heretofore with respect to any Acquisition Proposal. Each of
Pfizer and Warner-Lambert agrees that it will use reasonable best efforts to
promptly inform its directors, officers, key employees, agents and
representatives of the obligations undertaken in this Section 5.5. Nothing in
this Section 5.5 shall (x) permit Pfizer or Warner-Lambert to terminate this
Agreement (except as specifically provided in Article VII hereof) or (y) affect
any other obligation of Pfizer or Warner-Lambert under this Agreement.
5.6 EMPLOYEE BENEFITS MATTERS. (a) Warner-Lambert Employees
(US). Following the Effective Time, Pfizer shall comply with the terms of, or
cause the Surviving Corporation to comply with the terms of, all Warner-Lambert
Benefit Plans and related funding arrangements in accordance with their
respective terms. Nothing herein shall require Pfizer to continue any particular
Benefit Plan or prevent the amendment or termination thereof; provided, however,
that Pfizer shall not take any action (by way of amendment, termination or
otherwise) which is in violation of the terms of any Benefit Plan or applicable
law. Subject to the first two sentences of this Section 5.6(a), from and after
the Effective Time until the first anniversary of the Effective Time, Pfizer
shall provide compensation and employee benefits under Benefit Plans (as defined
in Section 8.11) to the employees and former employees of Warner-Lambert and its
Subsidiaries who are employed in the United States (including Puerto Rico) and
employees designated by Warner-Lambert as "foreign service colleagues" (the
"Warner-Lambert Employees (US)") that are substantially comparable in the
aggregate to those provided to such persons pursuant to the Warner-Lambert
Benefit Plans in effect immediately prior to the date hereof. The term
"Warner-Lambert Employees (US)" shall not include Warner-Lambert Employees
(Non-US) or Warner-Lambert Employees (Collective Bargaining Units). With respect
to any Benefit Plans in which any Warner-Lambert Employees (US) first become
eligible to participate, on or after the Effective Time, Pfizer shall: (A) waive
all pre-existing conditions exclusions and waiting periods with respect to
participation and coverage requirements applicable to Warner-Lambert Employees
(US) under any Pfizer plans in which such employees may be eligible to
participate after the Effective Time, except to the extent that such
pre-existing conditions exclusions or waiting periods apply to changes made by
the employee under the terms of the Pfizer plans on the same basis as would
apply to a Pfizer employee making a similar change; (B) provide each
Warner-Lambert Employee (US) with credit for any co-payments and deductibles
paid prior to the Effective Time (to the same extent such credit was given under
the analogous Benefit Plan prior to the Effective Time) in satisfying any
applicable deductible or out-of-pocket requirements under any Pfizer plans in
which such employees may be eligible to participate after the Effective Time;
and (C) recognize all service of the Warner-Lambert Employees (US) with
Warner-Lambert and its Subsidiaries for all purposes (including, without
limitation, purposes of eligibility to participate, vesting credit, entitlement
to benefits, and benefit accrual) in any Pfizer plan in which such employees may
be eligible to participate after the Effective Time, to the extent such service
is taken into account under the applicable Pfizer plan; provided, that the
foregoing shall not apply to the extent it would result in duplication of
benefits under multiple plans or would result in benefit accruals under multiple
defined benefit pension plans with respect to the same period of service without
offset for benefits accrued under a
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predecessor defined benefit pension plan. Warner-Lambert's board of directors
will not declare an "other circumstance" to have occurred within the meaning of
Section 4.2(y) of Warner-Lambert's Enhanced Severance Plan. During the period
from the date of this Agreement and continuing until the Effective Time,
Warner-Lambert agrees as to itself and its Subsidiaries that neither
Warner-Lambert nor any of its Subsidiaries shall take or cause to be taken any
action that would constitute an "Activation Event" (as defined in Section 4.2 of
Warner-Lambert's Enhanced Severance Plan), other than in the ordinary course of
business.
(b) Warner-Lambert Employees (Non-US). From and after the Effective Time
until the first anniversary of the Effective Time, Pfizer shall provide
compensation and employee benefits to the employees and former employees of
Warner-Lambert and its Subsidiaries who are employed outside the United States
(other than any such employee who is a Warner-Lambert Employee (US))
("Warner-Lambert Employees (Non-US)") that are substantially comparable, in the
aggregate, to those provided to such persons immediately prior to the date
hereof, subject to: such modifications as are necessary to comply with
applicable laws of the foreign countries and their political subdivisions; and
applicable labor agreements. Nothing herein shall serve to extend any benefits
under any plans maintained for the benefit of Warner-Lambert Employees (US) to
any person who is not a Warner-Lambert Employee (US). The term Warner-Lambert
Employees (Non-US) shall not include Warner-Lambert Employees (US) or
Warner-Lambert Employees (Collective Bargaining Units).
(c) Warner-Lambert Employees (Collective Bargaining Units). The terms and
conditions of employment of Warner-Lambert employees and former employees who
are covered by the Agreement between Parke-Davis Warner-Lambert Company and the
International Union of Operating Engineers, Local 547-A, B, C, E, H -- AFL-CIO,
dated April 1, 1998 or the Agreement between Warner-Lambert Company and the
Paper, Allied-Industrial, Chemical and Energy Workers International Union,
AFL-CIO and its Local Union No. 2-670, dated May 1, 1999 or any other collective
bargaining agreements between Warner-Lambert or its Subsidiaries and any other
collective bargaining unit ("Warner-Lambert Employees (Collective Bargaining
Units)"), are contained, and shall be as explicitly set forth, in such
agreements. The term Warner-Lambert Employees (Collective Bargaining Units)
shall not include Warner-Lambert Employees (US) or Warner-Lambert Employees
(Non-US).
5.7 FEES AND EXPENSES. Subject to Section 5.15 and Section 7.2, whether
or not the Merger is consummated, all Expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such Expenses, except (a) if the Merger is consummated, the Surviving
Corporation or its relevant Subsidiary shall pay, or cause to be paid, any and
all property or transfer taxes imposed on Warner-Lambert or its Subsidiaries and
(b) Expenses incurred in connection with the filing, printing and mailing of the
Joint Proxy Statement/Prospectus, which shall be paid by Pfizer. As used in this
Agreement, "Expenses" includes all out-of-pocket expenses (including, without
limitation, all fees and expenses of counsel, accountants, investment bankers,
experts and consultants to a party hereto and its affiliates) incurred by a
party or on its behalf in connection with or related to the authorization,
preparation, negotiation, execution and performance of this Agreement and the
transactions contemplated hereby, including the preparation, printing, filing
and mailing of the Joint Proxy Statement/ Prospectus and the solicitation of
stockholder approvals and all other matters related to the transactions
contemplated hereby.
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5.8 DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE. The Surviving
Corporation shall, and Pfizer shall cause the Surviving Corporation to, (i)
indemnify and hold harmless, and provide advancement of expenses to, all past
and present directors, officers and employees of Warner-Lambert and its
Subsidiaries (in all of their capacities) (a) to the same extent such persons
are indemnified or have the right to advancement of expenses as of the date of
this Agreement by Warner-Lambert pursuant to Warner-Lambert's certificate of
incorporation, bylaws and indemnification agreements, if any, in existence on
the date hereof with any directors, officers and employees of Warner-Lambert and
its Subsidiaries and (b) without limitation to clause (a), to the fullest extent
permitted by law, in each case for acts or omissions occurring at or prior to
the Effective Time (including for acts or omissions occurring in connection with
the approval of this Agreement and the consummation of the transactions
contemplated hereby), (ii) include and cause to be maintained in effect in the
Surviving Corporation's (or any successor's) certificate of incorporation and
bylaws for a period of six years after the Effective Time, the current
provisions regarding elimination of liability of directors, indemnification of
officers, directors and employees and advancement of expenses contained in the
certificate of incorporation and bylaws of Warner-Lambert and (iii) cause to be
maintained for a period of six years after the Effective Time the current
policies of directors' and officers' liability insurance and fiduciary liability
insurance maintained by Warner-Lambert (provided that the Surviving Corporation
(or any successor) may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions which are, in the
aggregate, no less advantageous to the insured) with respect to claims arising
from facts or events that occurred on or before the Effective Time. The
obligations of the Surviving Corporation under this Section 5.8 shall not be
terminated or modified in such a manner as to adversely affect any indemnitee to
whom this Section 5.8 applies without the consent of such affected indemnitee
(it being expressly agreed that the indemnitees to whom this Section 5.8 applies
shall be third party beneficiaries of this Section 5.8).
5.9 PUBLIC ANNOUNCEMENTS. Pfizer and Warner-Lambert shall use reasonable
best efforts to develop a joint communications plan and each party shall use
reasonable best efforts (i) to ensure that all press releases and other public
statements with respect to the transactions contemplated hereby shall be
consistent with such joint communications plan, and (ii) unless otherwise
required by applicable law or by obligations pursuant to any listing agreement
with or rules of any securities exchange, to consult with each other before
issuing any press release or, to the extent practical, otherwise making any
public statement with respect to this Agreement or the transactions contemplated
hereby. In addition to the foregoing, except to the extent disclosed in or
consistent with the Joint Proxy Statement/Prospectus in accordance with the
provisions of Section 5.1, neither Pfizer nor Warner-Lambert shall issue any
press release or otherwise make any public statement or disclosure concerning
the other party or the other party's business, financial condition or results of
operations without the consent of the other party, which consent shall not be
unreasonably withheld or delayed.
5.10 ACCOUNTANT'S LETTERS. (a) Pfizer shall use reasonable best efforts
to cause to be delivered to Warner-Lambert two letters from Pfizer's independent
public accountants, one dated approximately the date on which the Form S-4 shall
become effective and one dated the Closing Date, each addressed to Pfizer and
Warner-Lambert, in form reasonably satisfactory to Warner-Lambert and customary
in scope for comfort letters delivered by independent public accountants in
connection with registration statements similar to the Form S-4. Pfizer shall
use reasonable best efforts to cause to be delivered to Warner-Lambert a copy of
a letter from Pfizer's independent accountants, dated approximately the
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date the Form S-4 is declared effective and as of the Closing Date, stating that
accounting for the Merger as a pooling-of-interests under Opinion 16 of the
Accounting Principles Board and applicable SEC rules and regulations is
appropriate if the Merger is closed and consummated as contemplated by this
Agreement.
(b) Warner-Lambert shall use reasonable best efforts to cause to be
delivered to Pfizer two letters from Warner-Lambert's independent public
accountants, one dated approximately the date on which the Form S-4 shall become
effective and one dated the Closing Date, each addressed to Warner-Lambert and
Pfizer, in form reasonably satisfactory to Pfizer and customary in scope for
comfort letters delivered by independent public accountants in connection with
registration statements similar to the Form S-4. Warner-Lambert shall use
reasonable best efforts to cause to be delivered to Pfizer a copy of a letter
from Warner-Lambert's independent public accountants, addressed to Warner-
Lambert, dated approximately the date the Form S-4 is declared effective and as
of the Closing Date, stating that they concur with Warner-Lambert's conclusion
that, as of the date of their report, no conditions exist that would preclude
Warner-Lambert's ability to be a party in a business combination to be accounted
for as a pooling-of-interests.
(c) Following execution of this Agreement, each of Pfizer and
Warner-Lambert shall use reasonable best efforts to cause the transactions
contemplated by this Agreement, including the Merger, to be accounted for as a
pooling-of-interests under Opinion 16 of the Accounting Principles Board and
applicable SEC rules and regulations, and such accounting treatment to be
accepted by the SEC.
5.11 LISTING OF SHARES OF PFIZER COMMON STOCK. Pfizer shall use its
reasonable best efforts to cause the shares of Pfizer Common Stock to be issued
in the Merger and the shares of Pfizer Common Stock to be reserved for issuance
upon exercise of the Warner-Lambert Stock Options to be approved for listing on
the NYSE, subject to official notice of issuance, prior to the Closing Date.
5.12 DIVIDENDS. After the date of this Agreement, each of Pfizer and
Warner-Lambert shall coordinate with the other the payment of dividends with
respect to the Pfizer Common Stock and Warner-Lambert Common Stock and the
record dates and payment dates relating thereto, it being the intention of the
parties hereto that holders of Pfizer Common Stock and Warner-Lambert Common
Stock shall not receive two dividends, or fail to receive one dividend, for any
single calendar quarter with respect to their shares of Pfizer Common Stock
and/or Warner-Lambert Common Stock or any shares of Pfizer Common Stock that any
such holder receives in exchange for such shares of Warner-Lambert Common Stock
in the Merger.
5.13 AFFILIATES. (a) Not less than 45 days prior to the Effective Time,
Warner-Lambert shall deliver to Pfizer a letter identifying all persons who, in
the judgment of Warner-Lambert, may be deemed at the time this Agreement is
submitted for adoption by the stockholders of Warner-Lambert, "affiliates" of
Warner-Lambert for purposes of Rule 145 under the Securities Act or for purposes
of qualifying the Merger for pooling-of-interests accounting treatment under
Opinion 16 of the Accounting Principles Board and applicable SEC rules and
regulations, and such list shall be updated as necessary to reflect changes from
the date thereof. Warner-Lambert shall use reasonable best efforts to cause each
person identified on such list to deliver to Pfizer not less than 30 days prior
to the Effective Time, a written agreement substantially in the form attached as
Exhibit 5.13 hereto (an "Affiliate Agreement" ). Not less than 45 days prior to
the Effective Time, Pfizer shall deliver to Warner-Lambert a letter identifying
all persons who, in the judgment
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of Pfizer, may be deemed "affiliates" of Pfizer for purposes of qualifying the
Merger for pooling-of-interests accounting treatment under Opinion 16 of the
Accounting Principles Board and applicable SEC rules and regulations, and such
list shall be updated as necessary to reflect changes from the date hereof.
Pfizer shall use reasonable best efforts to cause each person identified on such
list to deliver to Warner-Lambert not less than 30 days prior to the Effective
Time, a written agreement including the substance of paragraphs 1(B) and 2 of
Exhibit 5.13 hereto.
(a) Pfizer shall use its reasonable best efforts to publish no later than
90 days after the end of the first month after the Effective Time in which there
are at least 30 days of post-Merger combined operations (which month may be the
month in which the Effective Time occurs), combined sales and net income figures
as contemplated by and in accordance with the terms of SEC Accounting Series
Release No. 135.
5.14 SECTION 16 MATTERS. Prior to the Effective Time, Pfizer and
Warner-Lambert shall take all such steps as may be required to cause any
dispositions of Warner-Lambert Common Stock (including derivative securities
with respect to Warner-Lambert Common Stock) or acquisitions of Pfizer Common
Stock (including derivative securities with respect to Pfizer Common Stock)
resulting from the transactions contemplated by Article I or Article II of this
Agreement by each individual who is subject to the reporting requirements of
Section 16(a) of the Exchange Act with respect to Warner-Lambert, to be exempt
under Rule 16b-3 promulgated under the Exchange Act, such steps to be taken in
accordance with the No-Action Letter dated January 12, 1999, issued by the SEC
to Skadden, Arps, Slate, Meagher & Flom LLP.
5.15 LIPITOR(R) ARRANGEMENTS. (a) In the event that this Agreement is
terminated under circumstances which constitute a Warner-Lambert Termination
Event (as defined in this Section 5.15), then, upon termination of this
Agreement, Pfizer and Warner-Lambert shall, and shall cause their respective
affiliates to, promptly enter into (i) the Third Amendment to the Collaboration
Agreement in the form of Exhibit 5.15(a) hereto, (ii) the Third Amendment to the
International Co-Promotion Agreement in the form of Exhibit 5.15(b) hereto, and
(iii) the Letter Agreement relating to the Norvasc(R)/Lipitor(R) combination
product in the form of Exhibit 5.15(c) hereto (collectively, the "Lipitor(R)
Agreements").
(b) In the event that (i) this Agreement is terminated under circumstances
which constitute a Pfizer Termination Event (as defined in this Section 5.15),
or (ii) the Merger is consummated, then in each case, Pfizer and Warner-Lambert
(and their respective affiliates) shall not enter into the Lipitor(R)
Agreements.
(c) In the event that this Agreement is terminated under circumstances
which constitute a Neutral Termination Event (as defined in this Section 5.15),
then Pfizer shall have the right for ten Business Days following the date of
termination of this Agreement (the "Election Period") to notify Warner-Lambert
in writing (an "Election Notice") that Pfizer will enter into the Lipitor(R)
Agreements in accordance with the following provisions. Promptly following
receipt of such Election Notice by Warner-Lambert, Pfizer and Warner-Lambert
shall, and shall cause their respective affiliates to, enter into the Lipitor(R)
Agreements and, concurrently with the execution and delivery of such Lipitor
Agreements by the parties thereto, Pfizer shall pay Warner-Lambert a cash amount
equal to $1.333 billion, such payment to be made by wire transfer of immediately
available funds. If Warner-Lambert does not receive an Election Notice from
Pfizer during the Election
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Period, then Pfizer's right to enter into the Lipitor(R) Agreements pursuant to
this Section 5.15 shall terminate and be of no further force and effect.
(d) From the date hereof until the earlier of (i) the Effective Time, (ii)
termination of this Agreement in circumstances which constitute a Pfizer
Termination Event or (iii) expiration of the Election Period without
Warner-Lambert receiving an Election Notice from Pfizer following termination of
this Agreement in circumstances which constitute a Neutral Termination Event,
Warner-Lambert agrees not to, and agrees that its affiliates will not (i)
exercise any rights under Section 14.02(a) and Section 14.02(b) of the
Collaboration Agreement to terminate such agreement or (ii) exercise any rights
under Section 14.02(a) and Section 14.02(b) of the International Co-Promotion
Agreement to terminate such agreement.
(e) A "Warner-Lambert Termination Event" shall mean (i) a termination of
this Agreement pursuant to Section 7.1(b) herein if, at the time of termination,
the closing conditions set forth in any of Section 6.2(a), Section 6.2(b) or
Section 6.2(e) herein are not satisfied but all other conditions set forth in
Article VI shall be satisfied at such time, (ii) a termination of this Agreement
pursuant to Section 7.1(d) herein (provided that the basis for termination is
the failure of Warner-Lambert's stockholders to adopt this Agreement and approve
the Merger at a vote duly taken) or, following a Change in the Warner-Lambert
Recommendation by reason of a Superior Proposal with respect to Warner-Lambert,
a termination of this Agreement pursuant to Section 7.1(e), unless, in either
case, (A) at the time of the event giving rise to the right of termination, a
Material Adverse Effect with respect to Pfizer or a Change in the Pfizer
Recommendation following the making of a proposal for a Business Combination
with respect to Pfizer has occurred, or (B) Pfizer's stockholders have failed to
approve the Share Issuance at a vote duly taken, (iii) a termination by Pfizer
of this Agreement pursuant to Section 7.1(g) herein, and (iv) a termination by
Warner-Lambert pursuant to Section 7.1(i) herein; provided that no
Warner-Lambert Termination Event shall be deemed to have occurred pursuant to
any of the preceding clauses if, at the time of termination, Pfizer shall be in
breach of any of its representations, warranties, covenants, obligations or
agreements contained in this Agreement which breach would entitle Warner-Lambert
to terminate this Agreement pursuant to Section 7.1(g).
(f) A "Pfizer Termination Event" shall mean (i) a termination of this
Agreement pursuant to Section 7.1(b) herein if, at the time of termination, the
closing conditions set forth in any of Section 6.3(a) or Section 6.3(b) herein
are not satisfied but all other conditions set forth in Article VI shall be
satisfied at such time, (ii) a termination of this Agreement pursuant to Section
7.1(d) herein (provided that the basis for termination is the failure of
Pfizer's stockholders to approve the Share Issuance at a vote duly taken) or,
following a Change in the Pfizer Recommendation by reason of a Superior Proposal
with respect to Pfizer, a termination of this Agreement pursuant to Section
7.1(f), unless, in either case, (A) at the time of the event giving rise to the
right of termination, a Material Adverse Effect with respect to Warner-Lambert
or a Change in the Warner-Lambert Recommendation following the making of a
proposal for a Business Combination with respect to Warner-Lambert has occurred,
or (B) Warner-Lambert's stockholders have failed to adopt this Agreement and
approve the Merger at a vote duly taken, (iii) a termination by Warner-Lambert
of this Agreement pursuant to Section 7.1(g) herein, and (iv) a termination by
Pfizer pursuant to Section 7.1(j) herein; provided that no Pfizer Termination
Event shall be deemed to have occurred pursuant to any of the preceding clauses
if, at the time of termination, Warner-Lambert shall be in breach of any of its
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representations, warranties, covenants, obligations or agreements contained in
this Agreement which breach would entitle Pfizer to terminate this Agreement
pursuant to Section 7.1(g).
(g) A "Neutral Termination Event" shall mean termination of this Agreement
pursuant to Section 7.1 herein which is neither a Warner-Lambert Termination
Event nor a Pfizer Termination Event. Notwithstanding anything herein to the
contrary, a termination of this Agreement shall be a Neutral Termination Event
if the Merger cannot be accounted for as a pooling-of-interests and there shall
not have been any breach of either Section 4.1(h) or Section 4.2(h) herein.
(h) "Collaboration Agreement" shall mean the Collaboration Agreement,
effective as of June 28, 1996, between Warner-Lambert and Pfizer, as amended
from time to time.
(i) "International Co-Promotion Agreement" shall mean the International
Co-Promotion Agreement, effective as of June 28, 1996, between Warner-Lambert
and Pfizer, as amended from time to time.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of Warner-Lambert, Pfizer and Merger Sub to effect the
Merger are subject to the satisfaction or waiver on or prior to the Closing Date
of the following conditions:
(a) Stockholder Approval. (i) Warner-Lambert shall have obtained the
Required Warner-Lambert Vote in connection with the adoption of this Agreement
by the stockholders of Warner-Lambert and (ii) Pfizer shall have obtained the
stockholder approval of the Share Issuance by the stockholders of Pfizer.
(b) No Injunctions or Restraints, Illegality. No Laws shall have been
adopted or promulgated, and no temporary restraining order, preliminary or
permanent injunction or other order issued by a court or other Governmental
Entity of competent jurisdiction shall be in effect, (i) having the effect of
making the Merger illegal or otherwise prohibiting consummation of the Merger or
(ii) which otherwise, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect on Pfizer and its Subsidiaries
(including the Surviving Corporation and its Subsidiaries), taken together after
giving effect to the Merger.
(c) HSR Act; EC Merger Regulation. The waiting period (and any extension
thereof) applicable to the Merger under the HSR Act shall have been terminated
or shall have expired and approval of the Merger of the European Commission
shall have been obtained pursuant to the EC Merger Regulation.
(d) Governmental and Regulatory Approvals. Other than the filing provided
for under Section 1.3 and filings pursuant to the HSR Act and EC Merger
Regulation (which are addressed in Section 6.1(c)), all consents, approvals and
actions of, filings with and notices to any Governmental Entity required of
Pfizer, Warner-Lambert or any of their Subsidiaries to consummate the Merger,
the Share Issuance and the other transactions contemplated hereby, the failure
of which to be obtained or taken, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect on Pfizer and
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its Subsidiaries (including the Surviving Corporation and its Subsidiaries),
taken together after giving effect to the Merger, shall have been obtained;
provided, however, that the provisions of this Section 6.1(d) shall not be
available to any party whose failure to fulfill its obligations pursuant to
Section 5.4 shall have been the cause of, or shall have resulted in, the failure
to obtain such consent or approval. No consents, approvals, actions, filings or
notices related to any antitrust requirements of any jurisdiction, except as set
forth in Section 6.1(c) hereof, shall be a condition of closing under this
Section 6.1(d).
(e) NYSE Listing. The shares of Pfizer Common Stock to be issued in the
Merger and such other shares to be reserved for issuance in connection with the
Merger shall have been approved for listing on the NYSE, subject to official
notice of issuance.
(f) Effectiveness of the Form S-4. The Form S-4 shall have been declared
effective by the SEC under the Securities Act. No stop order suspending the
effectiveness of the Form S-4 shall have been issued by the SEC and no
proceedings for that purpose shall have been initiated or threatened by the SEC.
(g) Pooling. Warner-Lambert shall have received and delivered to Pfizer
and Pfizer's independent public accountants, two letters from its independent
public accountants, dated approximately the date the Form S-4 is declared
effective and as of the Closing Date, stating that they concur with
Warner-Lambert's conclusions that, as of the date of such letters, no conditions
exist that would preclude Warner-Lambert's ability to be a party in a business
combination to be accounted for as a pooling-of-interests. Pfizer shall have
received and delivered to Warner-Lambert, two letters from its independent
public accountants, dated approximately the date the Form S-4 is declared
effective and as of the Closing Date, stating that accounting for the Merger as
a pooling-of-interests under Opinion 16 of the Accounting Principles Board and
applicable SEC rules and regulations is appropriate if the Merger is closed and
consummated as contemplated by this Agreement.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF PFIZER AND MERGER SUB. The
obligations of Pfizer and Merger Sub to effect the Merger are subject to the
satisfaction of, or waiver by Pfizer, on or prior to the Closing Date of the
following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of Warner-Lambert set forth in this Agreement that is qualified as to
Material Adverse Effect shall be true and correct, and each of the
representations and warranties of Warner-Lambert set forth in this Agreement
that is not so qualified shall be true and correct in all material respects, in
each case as of the date of this Agreement and as of the Closing Date as though
made on and as of the Closing Date (except to the extent in either case that
such representations and warranties speak as of another date), and Pfizer shall
have received a certificate of the chief executive officer and the chief
financial officer of Warner-Lambert to such effect.
(b) Performance of Obligations of Warner-Lambert. Warner-Lambert shall
have performed or complied with all agreements and covenants required to be
performed by it under this Agreement at or prior to the Closing Date that are
qualified as to Material Adverse Effect and shall have performed or complied in
all material respects with all other agreements and covenants required to be
performed by it under this Agreement at or prior to the Closing Date that are
not so qualified, and Pfizer shall have received a certificate of the chief
executive officer and the chief financial officer of Warner-Lambert to such
effect.
(c) Tax Opinion. Pfizer shall have received from Cadwalader, Wickersham &
Taft, counsel to Pfizer, on or before the date the Form S-4 shall become
effective and,
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subsequently, on the Closing Date, a written opinion dated as of such dates
substantially in the form of Exhibit 6.2(c)(1). In rendering such opinion,
counsel to Pfizer shall be entitled to rely upon information, representations
and assumptions provided by Pfizer and Warner-Lambert substantially in the form
of Exhibits 6.2(c)(2) and 6.2(c)(3) (allowing for such amendments to the
representations as counsel to Pfizer deems reasonably necessary).
(d) Warner-Lambert Rights Agreement. No Stock Acquisition Date or
Distribution Date (as such terms are defined in the Warner-Lambert Rights
Agreement) shall have occurred pursuant to the Warner-Lambert Rights Agreement.
(e) Governmental Inquiry. No event or circumstance shall have occurred
relating to any governmental review or inquiry concerning any product or
business practice which is likely to result in a Material Adverse Effect on
Warner-Lambert or its prospects.
6.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF WARNER-LAMBERT. The
obligations of Warner-Lambert to effect the Merger are subject to the
satisfaction of, or waiver by Warner-Lambert, on or prior to the Closing Date of
the following additional conditions:
(a) Representations and Warranties. Each of the representations and
warranties of Pfizer set forth in this Agreement that is qualified as to
Material Adverse Effect shall be true and correct, and each of the
representations and warranties of Pfizer set forth in this Agreement that is not
so qualified shall be true and correct in all material respects, in each case as
of the date of this Agreement and as of the Closing Date as though made on and
as of the Closing Date (except to the extent in either case that such
representations and warranties speak as of another date), and Warner-Lambert
shall have received a certificate of the chief executive officer and the chief
financial officer of Pfizer to such effect.
(b) Performance of Obligations of Pfizer. Pfizer shall have performed or
complied with all agreements and covenants required to be performed by it under
this Agreement at or prior to the Closing Date that are qualified as to Material
Adverse Effect and shall have performed or complied in all material respects
with all other agreements and covenants required to be performed by it under
this Agreement at or prior to the Closing Date that are not so qualified, and
Warner-Lambert shall have received a certificate of the chief executive officer
and the chief financial officer of Pfizer to such effect.
(c) Tax Opinion. Warner-Lambert shall have received from Skadden, Arps,
Slate, Meagher & Flom LLP, counsel to Warner-Lambert, on or before the date the
Form S-4 shall become effective and, subsequently, on the Closing Date, a
written opinion dated as of such dates substantially in the form of Exhibit
6.3(c)(1). In rendering such opinion, counsel to Warner-Lambert shall be
entitled to rely upon information, representations and assumptions provided by
Pfizer and Warner-Lambert substantially in the form of Exhibits 6.2(c)(2) and
6.2(c)(3) (allowing for such amendments to the representations as counsel to
Warner-Lambert deems reasonably necessary).
(d) Pfizer Rights Agreement. No Stock Acquisition Date or Distribution
Date (as such terms are defined in the Pfizer Rights Agreement) shall have
occurred pursuant to the Pfizer Rights Agreement.
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ARTICLE VII
TERMINATION AND AMENDMENT
7.1 TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time, by action taken or authorized by the Board of Directors of
the terminating party or parties, and except as provided below, whether before
or after approval of the matters presented in connection with the Merger by the
stockholders of Warner-Lambert or Pfizer:
(a) By mutual written consent of Pfizer and Warner-Lambert;
(b) By either Warner-Lambert or Pfizer, if the Effective Time shall not
have occurred on or before December 31, 2000 (the "Termination Date"); provided,
however, that the right to terminate this Agreement under this Section 7.1(b)
shall not be available to any party whose failure to fulfill any obligation
under this Agreement (including without limitation such party's obligations set
forth in Section 5.4) has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before the Termination Date and provided further
that if on the Termination Date the conditions to Closing set forth in Sections
6.1(c) or 6.1(d) shall not have been fulfilled but all other conditions to
Closing shall be fulfilled or shall be capable of being fulfilled then the
Termination Date shall be automatically extended to March 31, 2001;
(c) By either Warner-Lambert or Pfizer, if any Governmental Entity (i)
shall have issued an order, decree or ruling or taken any other action (which
the parties shall have used their reasonable best efforts to resist, resolve or
lift, as applicable, in accordance with Section 5.4) permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement, and such order, decree, ruling or other action shall have become
final and nonappealable or (ii) shall have failed to issue an order, decree or
ruling or to take any other action (which order, decree, ruling or other action
the parties shall have used their reasonable best efforts to obtain, in
accordance with Section 5.4), in the case of each of (i) and (ii) which is
necessary to fulfill the conditions set forth in Sections 6.1(c) and (d), as
applicable, and such denial of a request to issue such order, decree, ruling or
take such other action shall have become final and nonappealable; provided,
however, that the right to terminate this Agreement under this Section 7.1(c)
shall not be available to any party whose failure to comply with Section 5.4 has
been the cause of such action or inaction;
(d) By either Warner-Lambert or Pfizer, if the approvals of the
stockholders of either Pfizer or Warner-Lambert contemplated by this Agreement
(other than the Board Amendment) shall not have been obtained by reason of the
failure to obtain the required vote at a duly held meeting of stockholders or of
any adjournment thereof at which the vote was taken;
(e) By Pfizer, if Warner-Lambert shall have failed to make the
Warner-Lambert Recommendation or effected a Change in the Warner-Lambert
Recommendation (or resolved to take any such action), whether or not permitted
by the terms hereof, or shall have materially breached its obligations under
this Agreement by reason of a failure to call the Warner-Lambert Stockholders
Meeting in accordance with Section 5.1(b);
(f) By Warner-Lambert, if Pfizer shall have failed to make the Pfizer
Recommendation or effected a Change in the Pfizer Recommendation (or resolved to
take any such action), whether or not permitted by the terms hereof, or shall
have materially breached
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its obligations under this Agreement by reason of a failure to call the Pfizer
Stockholders Meeting in accordance with Section 5.1(c);
(g) By either Pfizer or Warner-Lambert, if there shall have been a breach
by the other of any of its representations, warranties, covenants or obligations
contained in this Agreement, which breach would result in the failure to satisfy
the conditions set forth in Section 6.2(a) or Section 6.2(b) (in the case of a
breach by Warner-Lambert) or Section 6.3(a) or Section 6.3(b) (in the case of a
breach by Pfizer), and in any such case such breach shall be incapable of being
cured or, if capable of being cured, shall not have been cured within 30 days
after written notice thereof shall have been received by the party alleged to be
in breach;
(h) [Intentionally omitted]
(i) By Warner-Lambert, if the Board of Directors of Warner-Lambert
authorizes Warner-Lambert to enter into a written agreement concerning a
transaction that the Board of Directors of Warner-Lambert has determined is a
Superior Proposal; provided, that Warner-Lambert shall not terminate this
Agreement pursuant to this Section 7.1(i) and enter into a definitive agreement
for a Business Combination until the expiration of five (5) Business Days
following Pfizer's receipt of written notice advising Pfizer that Warner-
Lambert has received a Superior Proposal specifying the material terms and
conditions of such Superior Proposal (and including a copy thereof with all
accompanying documentation, if in writing), identifying the person making such
Superior Proposal and stating whether Warner-Lambert intends to enter into a
definitive agreement for a Business Combination. After providing such notice,
Warner-Lambert shall provide a reasonable opportunity to Pfizer during such
period to make such adjustments in the terms and conditions of this Agreement as
would enable Warner-Lambert to proceed with the Merger on such adjusted terms;
(j) By Pfizer, if the Board of Directors of Pfizer authorizes Pfizer to
enter into a written agreement concerning a transaction that the Board of
Directors of Pfizer has determined is a Superior Proposal; provided, that Pfizer
shall not terminate this Agreement pursuant to this Section 7.1(j) and enter
into a definitive agreement for a Business Combination until the expiration of
five (5) Business Days following Warner-Lambert's receipt of written notice
advising Warner-Lambert that Pfizer has received a Superior Proposal specifying
the material terms and conditions of such Superior Proposal (and including a
copy thereof with all accompanying documentation, if in writing), identifying
the person making such Superior Proposal and stating whether Pfizer intends to
enter into a definitive agreement for a Business Combination. After providing
such notice, Pfizer shall provide a reasonable opportunity to Warner-Lambert
during such period to make such adjustments in the terms and conditions of this
Agreement as would enable Pfizer to proceed with the Merger on such adjusted
terms; or
(k) By either Pfizer or Warner-Lambert, if the Joint Proxy
Statement/Prospectus (reflecting pooling of interests accounting treatment) had
not been mailed to stockholders of Warner-Lambert and Pfizer on or prior to
September 30, 2000, provided that this right of termination is not available to
any party which has not used its reasonable best efforts to cause such Joint
Proxy Statement/Prospectus to be so mailed.
7.2 EFFECT OF TERMINATION. (a) In the event of termination of this
Agreement by either Warner-Lambert or Pfizer as provided in Section 7.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Pfizer or Warner-
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Lambert or their respective officers or directors except with respect to Section
3.1(l), Section 3.2(l), Section 5.3, Section 5.7, Section 5.15, this Section 7.2
and Article VIII, which provisions shall survive such termination, and except
that, notwithstanding anything to the contrary contained in this Agreement,
neither Pfizer nor Warner-Lambert shall be relieved or released from any
liabilities or damages arising out of its willful material breach of this
Agreement.
(b) In the event that this Agreement is terminated pursuant to Section 7.1
herein under circumstances which constitute either a Pfizer Termination Event or
a Neutral Termination Event, then Pfizer shall pay to Warner-Lambert not later
than three Business Days after the date of such termination an amount in cash
equal to $1.8 billion (the "Pfizer Termination Fee"). In the event this
Agreement is terminated pursuant to Section 7.1 herein (a) under circumstances
which constitute a Warner-Lambert Termination Event under clauses (ii) or (iv)
of the definition thereof (including the proviso to Section 5.15(e)) and (b) at
the time of the event giving rise to the right of termination there shall be
pending a Superior Proposal with respect to Warner-Lambert, then Warner-Lambert
shall pay to Pfizer not later than three Business Days after the date of such
termination an amount in cash equal to $500 million (the "Warner-Lambert
Termination Fee").
(c) If Warner-Lambert receives the Pfizer Termination Fee pursuant to
Section 7.2(b) and within twelve months following termination of this Agreement
Warner-Lambert enters into a definitive agreement with a third party with
respect to a Business Combination, then Warner-Lambert shall repay to Pfizer,
without any interest thereon, not later than three Business Days after the date
of entering into such definitive agreement, the Pfizer Termination Fee, provided
that Warner-Lambert shall not be obligated to repay to Pfizer the Pfizer
Termination Fee if (A) Pfizer terminates this Agreement pursuant to Section
7.1(j) herein, (B) (I) Warner-Lambert terminates this Agreement pursuant to
Section 7.1(f) herein and (II) Pfizer's Board of Directors shall have, prior to
termination, effected a Change in the Pfizer Recommendation following the making
of a proposal for a Business Combination with respect to Pfizer that continued
to be pending at the time of the event giving rise to the right of termination,
(C) (I) either Warner-Lambert or Pfizer terminates this Agreement pursuant to
Section 7.1(d) herein (provided the basis for such termination is the failure of
Pfizer's stockholders to approve the Share Issuance) and (II) a proposal for a
Business Combination with respect to Pfizer had been made prior to such vote and
continued to be outstanding at the time of the event giving rise to the right of
termination, or (D) at the time of termination of this Agreement, Pfizer had
breached its representations, warranties, covenants or obligations under this
Agreement which breach entitles Warner-Lambert to terminate this Agreement
pursuant to Section 7.1(g). If Pfizer receives the Warner-Lambert Termination
Fee pursuant to Section 7.2(b) and within twelve months following termination of
this Agreement Pfizer enters into a definitive agreement with a third party with
respect to a Business Combination, then Pfizer shall repay to Warner-Lambert,
without any interest thereon, not later than three Business Days after the date
of entering into such definitive agreement, the Warner-Lambert Termination Fee,
provided that Pfizer shall not be obligated to repay to Warner-Lambert the
Warner-Lambert Termination Fee if (A) Warner-Lambert terminates this Agreement
pursuant to Section 7.1(i) herein, (B) (I) Pfizer terminates this Agreement
pursuant to Section 7.1(e) herein and (II) Warner-Lambert's Board of Directors
shall have, prior to termination, effected a Change in the Warner-Lambert
Recommendation following the making of a proposal for a Business Combination
with respect to Warner-Lambert that continued to be pending at the time of the
event giving rise to the right of termination,
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(C) (I) either Warner-Lambert or Pfizer terminates this Agreement pursuant to
Section 7.1(d) herein (provided the basis for such termination is the failure of
Warner-Lambert's stockholders adopt this Agreement and approve the Merger) and
(II) a proposal for a Business Combination with respect to Warner-Lambert had
been made prior to such vote and continued to be outstanding at the time of the
event giving rise to the right of termination, or (D) at the time of termination
of this Agreement, Warner-Lambert had breached its representations, warranties,
covenants or obligations under this Agreement which breach entitles Pfizer to
terminate this Agreement pursuant to Section 7.1(g).
(d) For the purposes of this Section 7.2, "Business Combination" means with
respect to Warner-Lambert or Pfizer, as the case may be, (i) a merger,
reorganization, consolidation, share exchange, business combination,
recapitalization, liquidation, dissolution or similar transaction involving such
party as a result of which either (A) such party's stockholders prior to such
transaction (by virtue of their ownership of such party's shares) in the
aggregate cease to own at least 60% of the voting securities of the entity
surviving or resulting from such transaction (or the ultimate parent entity
thereof) or, regardless of the percentage of voting securities held by such
stockholders, if any Person shall beneficially own, directly or indirectly, at
least 40% of the voting securities of such ultimate parent entity, or (B) the
individuals comprising the board of directors of such party prior to such
transaction do not constitute a majority of the board of directors of such
ultimate parent entity, (ii) a sale, lease, exchange, transfer or other
disposition of at least 40% of the assets of such party and its Subsidiaries,
taken as a whole, in a single transaction or a series of related transactions,
or (iii) the acquisition, directly or indirectly, by a Person of beneficial
ownership of 40% or more of the common stock of such party whether by merger,
consolidation, share exchange, business combination, tender or exchange offer or
otherwise (other than a merger, reorganization, consolidation, share exchange,
business combination, recapitalization, liquidation, dissolution or similar
transaction upon the consummation of which such party's stockholders would in
the aggregate beneficially own greater than 60% of the voting securities of such
Person).
(e) All payments under this Section 7.2 and Section 5.15 shall be made by
wire transfer of immediately available funds to an account designated by the
party entitled to receive such payment.
7.3 AMENDMENT. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the Merger
by the stockholders of Warner-Lambert and Pfizer, but, after any such approval,
no amendment shall be made which by law or in accordance with the rules of any
relevant stock exchange requires further approval by such stockholders without
such further approval. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
7.4 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party. The failure of
any party to this
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Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of those rights.
ARTICLE VIII
GENERAL PROVISIONS
8.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. None of
the representations, warranties, covenants and other agreements in this
Agreement or in any instrument delivered pursuant to this Agreement, including
any rights arising out of any breach of such representations, warranties,
covenants and other agreements, shall survive the Effective Time, except for
those covenants and agreements contained herein and therein (including Section
5.8) that by their terms apply or are to be performed in whole or in part after
the Effective Time and this Article VIII.
8.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (a) on the date of delivery if delivered
personally, or by telecopy or telefacsimile, upon confirmation of receipt, (b)
on the first Business Day following the date of dispatch if delivered by a
recognized next-day courier service, or (c) on the tenth Business Day following
the date of mailing if delivered by registered or certified mail, return receipt
requested, postage prepaid. All notices hereunder shall be delivered as set
forth below, or pursuant to such other instructions as may be designated in
writing by the party to receive such notice:
(a) if to Pfizer or Merger Sub, to:
Pfizer Inc.
235 East 42nd Street
New York, New York 10017
Fax: (212)
Attention: Paul S. Miller, Esq.
with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Fax: (212) 504-6666
Attention: Dennis J. Block, Esq.
Louis J. Bevilacqua, Esq.
(b) if to Warner-Lambert to:
Warner-Lambert Company
201 Tabor Road
Morris Plains, New Jersey 07950
Fax: (973) 631-7704
Attention: Gregory L. Johnson, Esq.
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
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Fax: (212) 735-2000
Attention: Peter A. Atkins, Esq.
Lou R. Kling, Esq.
Eileen T. Nugent, Esq.
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Fax: (212) 403-2000
Attention: Richard D. Katcher, Esq.
Steven A. Cohen, Esq.
8.3 INTERPRETATION. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation.
8.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that both
parties need not sign the same counterpart.
8.5 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. (a) This Agreement,
the Confidentiality Agreement, the letter referenced in Section 1.7, the letters
between the General Counsels of the parties dated the date hereof and the other
agreements of the parties referred to herein constitute the entire agreement and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof.
(b) This Agreement shall be binding upon and inure solely to the benefit of
each party hereto, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other Person any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement, other than
Section 5.8 (which is intended to be for the benefit of the Persons covered
thereby and may be enforced by such Persons). For purposes of clarity, nothing
in Section 5.6 is intended to confer upon any Warner-Lambert Employee (US),
Warner-Lambert Employee (Non-US) or Warner-Lambert Employee (Collective
Bargaining Units), any benefits under any benefits plan, programs, policies or
other arrangements, including, but not limited to, the right to employment or
continued employment with Pfizer for any period by reason of this Agreement.
8.6 GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware (without giving effect to
choice of law principles thereof).
8.7 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any law or public policy, all
other terms and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate
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in good faith to modify this Agreement so as to effect the original intent of
the parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible.
8.8 ASSIGNMENT. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto, in
whole or in part (whether by operation of law or otherwise), without the prior
written consent of the other party, and any attempt to make any such assignment
without such consent shall be null and void, except that Merger Sub may assign,
in its sole discretion, any or all of its rights, interests and obligations
under this Agreement to any direct wholly owned Subsidiary of Pfizer without the
consent of Warner-Lambert, but no such assignment shall relieve Merger Sub of
any of its obligations under this Agreement. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns.
8.9 SUBMISSION TO JURISDICTION; WAIVERS. Each of Pfizer and
Warner-Lambert irrevocably agrees that any legal action or proceeding with
respect to this Agreement or for recognition and enforcement of any judgment in
respect hereof brought by the other party hereto or its successors or assigns
may be brought and determined in the Chancery or other Courts of the State of
Delaware, and each of Pfizer and Warner-Lambert hereby irrevocably submits with
regard to any such action or proceeding for itself and in respect to its
property, generally and unconditionally, to the nonexclusive jurisdiction of the
aforesaid courts. Each of Pfizer and Warner-Lambert hereby irrevocably waives,
and agrees not to assert, by way of motion, as a defense, counterclaim or
otherwise, in any action or proceeding with respect to this Agreement, (a) any
claim that it is not personally subject to the jurisdiction of the above-named
courts for any reason other than the failure to lawfully serve process (b) that
it or its property is exempt or immune from jurisdiction of any such court or
from any legal process commenced in such courts (whether through service of
notice, attachment prior to judgment, attachment in aid of execution of
judgment, execution of judgment or otherwise), and (c) to the fullest extent
permitted by applicable law, that (i) the suit, action or proceeding in any such
court is brought in an inconvenient forum, (ii) the venue of such suit, action
or proceeding is improper and (iii) this Agreement, or the subject matter
hereof, may not be enforced in or by such courts.
8.10 ENFORCEMENT. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms. It is accordingly agreed that the parties
shall be entitled to specific performance of the terms hereof, this being in
addition to any other remedy to which they are entitled at law or in equity.
8.11 DEFINITIONS. As used in this Agreement:
(a) "beneficial ownership" or "beneficially own" shall have the meaning
under Section 13(d) of the Exchange Act and the rules and regulations
thereunder.
(b) "Benefit Plans" means, with respect to any Person, each employee
benefit plan, program, arrangement and contract (including, without limitation,
any "employee benefit plan," as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") and any bonus,
deferred compensation, stock bonus, stock purchase, restricted stock, stock
option, employment, termination, stay agreement or bonus, change in control and
severance plan, program, arrangement and contract) in effect on the
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date of this Agreement or disclosed on the Warner-Lambert Disclosure Schedule or
the Pfizer Disclosure Schedule, as the case may be, to which such Person or its
Subsidiary is a party, which is maintained or contributed to by such Person, or
with respect to which such Person could incur material liability under Section
4069, 4201 or 4212(c) of ERISA.
(c) "Board of Directors" means the Board of Directors of any specified
Person and any committees thereof.
(d) "Business Day" means any day on which banks are not required or
authorized to close in the City of New York.
(e) "Confidentiality Agreement" means the Mutual Confidentiality Agreement,
dated January 26, 2000, between Pfizer and Warner-Lambert.
(f) "known" or "knowledge" means, with respect to any party, the knowledge
of such party's executive officers after reasonable inquiry.
(g) "Material Adverse Effect" means, with respect to any entity any event,
change, circumstance or effect that is or is reasonably likely to be materially
adverse to (i) the business, financial condition or results of operations of
such entity and its Subsidiaries taken as a whole, other than any event, change,
circumstance or effect relating (x) to the economy or financial markets in
general or (y) in general to the industries in which such entity operates and
not specifically relating to (or having the effect of specifically relating to
or having a materially disproportionate effect (relative to most other industry
participants) on) such entity or (ii) the ability of such entity to consummate
the transactions contemplated by this Agreement. All references to Material
Adverse Effect on Pfizer or its Subsidiaries contained in this Agreement shall
be deemed to refer solely to Pfizer and its Subsidiaries without including its
ownership of Warner-Lambert and its Subsidiaries after the Merger.
(h) "the other party" means, with respect to Warner-Lambert, Pfizer and
means, with respect to Pfizer, Warner-Lambert.
(i) "Person" means an individual, corporation, limited liability company,
partnership, association, trust, unincorporated organization, other entity or
group (as defined in the Exchange Act).
(j) "Subsidiary" when used with respect to any party means any corporation
or other organization, whether incorporated or unincorporated, (i) of which such
party or any other Subsidiary of such party is a general partner (excluding
partnerships, the general partnership interests of which held by such party or
any Subsidiary of such party do not have a majority of the voting interests in
such partnership) or (ii) at least a majority of the securities or other
interests of which having by their terms ordinary voting power to elect a
majority of the Board of Directors or others performing similar functions with
respect to such corporation or other organization is directly or indirectly
owned or controlled by such party or by any one or more of its Subsidiaries, or
by such party and one or more of its Subsidiaries.
(k) "Superior Proposal" means with respect to Pfizer or Warner-Lambert, as
the case may be, a written proposal made by a Person other than either such
party which is for (I)(i) a merger, reorganization, consolidation, share
exchange, business combination, recapitalization, liquidation, dissolution or
similar transaction involving such party as a result of which either (A) such
party's stockholders prior to such transaction (by virtue of their ownership of
such party's shares) in the aggregate cease to own at least 60% of the
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voting securities of the entity surviving or resulting from such transaction (or
the ultimate parent entity thereof) or (B) the individuals comprising the board
of directors of such party prior to such transaction do not constitute a
majority of the board of directors of such ultimate parent entity, (ii) a sale,
lease, exchange, transfer or other disposition of at least 40% of the assets of
such party and its Subsidiaries, taken as a whole, in a single transaction or a
series of related transactions, or (iii) the acquisition, directly or
indirectly, by a Person of beneficial ownership of 40% or more of the common
stock of such party whether by merger, consolidation, share exchange, business
combination, tender or exchange offer or otherwise (other than a merger,
consolidation, share exchange, business combination, tender or exchange offer or
other transaction upon the consummation of which such party's stockholders would
in the aggregate beneficially own greater than 60% of the voting securities of
such Person), and which is (II) otherwise on terms which the Board of Directors
of such party in good faith concludes (after consultation with its financial
advisors and outside counsel), taking into account, among other things, all
legal, financial, regulatory and other aspects of the proposal and the Person
making the proposal, (i) would, if consummated, result in a transaction that is
more favorable to its stockholders (in their capacities as stockholders), from a
financial point of view, than the transactions contemplated by this Agreement
and (ii) is reasonably capable of being completed; provided that clause (II)(i)
of this definition shall not apply with respect to a proposal for Pfizer.
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IN WITNESS WHEREOF, Pfizer, Merger Sub and Warner-Lambert have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
PFIZER INC.
By: /s/ WILLIAM C. STEERE, JR.
-----------------------------------
Name: William C. Steere, Jr.
Title: Chairman and Chief
Executive Officer
SEMINOLE ACQUISITION SUB CORP.
By: /s/ DAVID L. SHEDLARZ
-----------------------------------
Name: David L. Shedlarz
Title: President
WARNER-LAMBERT COMPANY
By: /s/ LODEWIJK J.R. DE VINK
-----------------------------------
Name: Lodewijk J.R. de Vink
Title: Chairman, President and
Chief
Executive Officer
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ANNEX B
[LETTERHEAD OF LAZARD FRERES & CO. LLC]
February 6, 2000
The Board of Directors
Pfizer Inc.
235 East 42nd Street
New York, NY 10017
Dear Members of the Board:
We understand that Pfizer Inc. ("Pfizer") and Warner-Lambert Company (the
"Subject Company") propose to enter into an Agreement dated as of February 6,
2000 (the "Agreement"), pursuant to which Pfizer will acquire the Subject
Company in a transaction (the "Merger") in which (i) each issued and outstanding
share of the Subject Company's common stock will be converted into the right to
receive 2.75 shares of Pfizer's common stock (the "Exchange Ratio") and (ii)
each outstanding option to purchase shares of the Subject Company's common stock
will be converted into an option, whose economic terms reflect the Exchange
Ratio, to purchase shares of Pfizer's common stock. The terms and conditions of
the Merger are more fully set forth in the Agreement.
Pursuant to our engagement letter dated as of November 4, 1999, you have
requested our opinion as to the fairness to Pfizer, from a financial point of
view, of the Exchange Ratio. In connection with this opinion, we have:
(i) Reviewed the financial terms and conditions of the Agreement (and the
agreements attached as Exhibits 5.15(a)-(c) thereto);
(ii) Analyzed certain historical publicly available business and financial
information relating to Pfizer and the Subject Company;
(iii) Reviewed various financial forecasts and other data provided to us
by Pfizer and the Subject Company relating to their respective
businesses;
(iv) Reviewed the synergistic savings and benefits and the timing of their
occurrence as projected by Pfizer to be realized by the combined
entities in connection with the Merger;
(v) Reviewed public information with respect to certain other companies
in lines of businesses we believe to be generally comparable to the
businesses of Pfizer and the Subject Company.
(vi) Reviewed the financial terms of certain significant business
combinations involving companies in lines of businesses we believe to
be generally comparable to those of Pfizer and the Subject Company;
(vii) Reviewed the historical trading prices and trading volumes of
Pfizer's and the Subject Company's common stock; and
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(viii) Conducted such other financial studies, analyses and investigations
as we deemed appropriate.
We have relied upon the accuracy and completeness of the foregoing
information. We have not assumed any responsibility for any independent
verification of such information or any independent valuation or appraisal of
any of the assets or liabilities of Pfizer or the Subject Company, or concerning
the solvency of or issues relating to solvency concerning either of the
foregoing entities. With respect to financial forecasts, including the
synergistic savings and benefits projected to be realized following the Merger,
and the timing thereof, we have assumed that they have been reasonably prepared
on bases reflecting the best currently available estimates and judgments of
management of Pfizer and the Subject Company as to the future financial
performance of Pfizer and of the Subject Company, respectively. We assume no
responsibility for and express no view as to such forecasts or the assumptions
on which they are based.
Further, our opinion is necessarily based on economic, monetary, market and
other conditions as in effect on, and the information made available to us as of
the date hereof.
In rendering our opinion, we have assumed that the Merger will be
consummated on the terms described in the Agreement, without any waiver or
modification of any material terms or conditions by Pfizer, that obtaining the
necessary regulatory approvals for the Merger will not have an adverse effect on
Pfizer or the Subject Company and that the synergistic savings and benefits of
the Merger projected by the management of Pfizer will be substantially realized
both in scope and timing. In addition we have assumed that (i) the Merger will
be accounted for as a tax-free pooling of interests transaction and that the
number of outstanding shares of common stock of the Subject Company on a fully
diluted basis will not be materially different than as represented in the
Agreement, (ii) that the Subject Company will pay a termination fee of $1.8
billion to American Home Products Corporation, Inc. ("AHP") pursuant to the
terms of a merger agreement by and between the Subject Company and AHP and (iii)
that the other representations and warranties of the Subject Company and Pfizer
contained in the Agreement are true and complete.
Lazard Freres & Co. LLC is acting as an investment banker to Pfizer in
connection with the Merger and will receive a fee for our services, a
substantial portion of which is payable upon the closing of the Merger. We have
in the past provided investment banking services to Pfizer for which we have
received customary fees. In addition, in the ordinary course of our business, we
may actively trade shares of Pfizer's, the Subject Company's and AHP's common
stock and other securities of Pfizer, the Subject Company and AHP for our own
account and for the accounts of our customers and, accordingly, may at any time
hold a long or short position in such securities.
Our engagement and the opinion expressed herein are solely for the benefit
of Pfizer's board of directors. Our opinion does not address the merits of the
underlying decision by Pfizer to engage in the Merger and does not constitute a
recommendation to any shareholder of Pfizer as to how such shareholder should
vote on the Merger. It is understood that this letter may not be disclosed or
otherwise referred to without our prior consent, except as may otherwise be
required by law or by a court of competent jurisdiction.
Based on and subject to the foregoing, we are of the opinion that the
Exchange Ratio is fair to Pfizer from a financial point of view.
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Very truly yours,
LAZARD FRERES & CO. LLC
By: /s/ STEVEN J. GOLUB
-----------------------------------
Steven J. Golub
Managing Director
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ANNEX C
[LETTERHEAD OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED]
February 6, 2000
Board of Directors
Pfizer Inc.
235 East 42nd Street
New York, New York 10017
Members of the Board of Directors:
Pfizer Inc. ("Pfizer") and Warner-Lambert Company ("Warner-Lambert")
propose to enter into an Agreement and Plan of Merger (the "Agreement") pursuant
to which Seminole Acquisition Sub Corp., a Delaware corporation and a wholly
owned subsidiary of Pfizer, will be merged with and into Warner-Lambert (the
"Merger") and each outstanding share of the common stock, par value $1.00 per
share, of Warner-Lambert (the "Warner-Lambert Common Stock") will be converted
into the right to receive 2,750 shares (the "Exchange Ratio") of common stock,
par value $0.05 per share, of Pfizer (the "Pfizer Common Stock").
You have asked us whether, in our opinion, the Exchange Ratio is fair from
a financial point of view to Pfizer.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial information
relating to Warner-Lambert and Pfizer that we deemed to be relevant;
(2) Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flows, assets, liabilities and
prospects of Warner-Lambert and Pfizer, as well as the amount and
timing of the cost savings and related expenses expected to result from
the Merger (the "Expected Cost Savings") furnished to us by
Warner-Lambert and Pfizer;
(3) Conducted discussions with members of senior management and
representatives of Warner-Lambert and Pfizer concerning the matters
described in clauses 1 and 2 above, as well as their respective
businesses and prospects before and after giving effect to the Merger
and the Expected Cost Savings;
(4) Reviewed the market prices and valuation multiples for the
Warner-Lambert Common Stock and the Pfizer Common Stock and compared
them with those of certain publicly traded companies that we deemed to
be relevant;
(5) Reviewed the results of operations of Warner-Lambert and Pfizer and
compared them with those of certain publicly traded companies that we
deemed to be relevant;
(6) Compared the proposed financial terms of the Merger with the financial
terms of certain other transactions that we deemed to be relevant;
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(7) Participated in certain discussions and negotiations among
representatives of Warner-Lambert and Pfizer and their respective
financial and legal advisors;
(8) Reviewed the potential pro forma impact of the Merger;
(9) Reviewed a draft of the Agreement, dated February 3, 2000; and
(10) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our
assessment of general economic, market and monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of Warner-Lambert or Pfizer or been furnished with any such
evaluation or appraisal. In addition, we have not assumed any obligation to
conduct, nor have we conducted, any physical inspection of the properties or
facilities of Warner-Lambert or Pfizer. With respect to the financial forecast
information and the Expected Cost Savings furnished to or discussed with us by
Warner-Lambert or Pfizer, we have assumed that they have been reasonably
prepared and reflect the best currently available estimates and judgments of the
respective management's of Warner-Lambert or Pfizer, as to the expected future
financial performance of Warner-Lambert or Pfizer, as the case may be, and the
Expected Cost Savings. We have further assumed that the Merger will be accounted
for as a pooling of interests under generally accepted accounting principles and
that it will qualify as a tax-free reorganization for U.S. federal income tax
purposes. We have also assumed that the final form of the Agreement will be
substantially similar to the last draft reviewed by us.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available to
us as of, the date hereof. We have assumed that in the course of obtaining the
necessary regulatory or other consents or approvals (contractual or otherwise)
for the Merger, no restrictions, including any divestiture requirements or
amendments or modifications, will be imposed that will have a material adverse
effect on the contemplated benefits of the Merger.
We are acting as financial advisor to Pfizer in connection with the Merger
and will receive a fee from Pfizer for our services, a significant portion of
which is contingent upon the consummation of the Merger. In addition, Pfizer has
agreed to indemnify us for certain liabilities arising out of our engagement. We
have, in the past, provided financing services to Pfizer and Warner-Lambert and
may continue to do so and have received, and may receive, compensation for the
rendering of such services. In addition, in the ordinary course of our business,
we may actively trade the Warner-Lambert Common Stock and other securities of
Warner-Lambert, as well as the Pfizer Common Stock and other securities of
Pfizer, for our own account and for the accounts of customers and, accordingly,
may at any time hold a long or short position in such securities.
This opinion is for the use and benefit of the board of directors of Pfizer
in its evaluation of the Merger and may not be used for any other purpose. Our
opinion does not address the merits of the underlying decision by Pfizer in the
Merger and does not constitute a recommendation to any shareholder as to how
such shareholder should vote on the proposed Merger or any matter related
thereto.
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We are not expressing any opinion herein as to the prices at which the
Pfizer Common Stock will trade following the announcement or consummation of the
Merger.
On the basis of and subject to the foregoing, we are of the opinion that,
as of the date hereof, the Exchange Ratio is fair from a financial point of view
to Pfizer.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
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ANNEX D
[LETTERHEAD OF BEAR, STEARNS & CO. INC.]
February 6, 2000
The Board of Directors
Warner-Lambert Company
201 Tabor Road
Morris Plains, NJ 07950
Gentlemen:
We understand that Warner-Lambert Company ("W-L") and Pfizer Inc. ("Pfizer")
propose to enter into an Agreement and Plan of Merger dated February 6, 2000
(the "Agreement") pursuant to which a newly-formed wholly-owned subsidiary of
Pfizer will be merged with and into W-L (the "Merger"). We further understand
that at the effective time of the Merger, (i) each issued and outstanding share
of common stock, par value $1.00 per share, of W-L (together with the associated
right to purchase preferred stock, "W-L Common Stock") will be converted into
2.75 shares (the "Exchange Ratio") of common stock, par value $0.05 per share,
of Pfizer ("Pfizer Common Stock") and (ii) each outstanding option to purchase
shares of W-L Common Stock will be converted into a similar option to purchase
shares of Pfizer Common Stock, adjusted to reflect the Exchange Ratio pursuant
to the terms of the Agreement. You have provided us with a copy of the
Agreement.
You have asked us to render our opinion as to whether the Exchange Ratio is
fair, from a financial point of view, to the shareholders of W-L.
In the course of performing our review and analyses for rendering this opinion,
we have:
- reviewed the Agreement;
- reviewed each of W-L's and Pfizer's Annual Reports to Shareholders and
Annual Reports on Form 10-K for the years ended December 31, 1996 through
1998, and their respective Quarterly Reports on Form 10-Q for the periods
ended March 31, 1999, June 30, 1999 and September 30, 1999 and
preliminary financial statements for the period ended December 31, 1999;
- reviewed certain operating and financial information provided to us by
the senior managements of W-L and Pfizer relating to W-L's and Pfizer's
respective businesses and prospects, including financial projections of
W-L for the fiscal years ending December 31, 1999 through 2002 (the "W-L
Projections") and Pfizer for the fiscal years ending December 31, 1999
though 2002 (the "Pfizer Projections") (the W-L Projections and the
Pfizer Projections collectively referred to herein as the "Projections")
and certain other forward-looking information;
- reviewed certain estimates of cost savings and other combination benefits
(collectively, the "Projected Benefits") expected to result from the
Merger, jointly prepared and provided to us by the senior managements of
W-L and Pfizer;
- met with certain members of the senior managements of W-L and Pfizer and
Pfizer's advisors to discuss (i) the current landscape and competitive
dynamics
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related to the markets in which W-L and Pfizer operate, (ii) each
Company's operations, historical financial statements, prospects and
financial condition, (iii) each company's views of the strategic,
business, operational and financial rationale for, and expected strategic
benefits and other implications of, the Merger, (iv) the W-L Projections,
the Pfizer Projections and the Projected Benefits and (v) certain other
assumptions and judgments underlying certain estimates which we deemed
relevant to our analysis;
- reviewed the historical prices, valuation parameters and trading volumes
of the common shares of W-L and Pfizer;
- reviewed publicly available financial data, stock market performance data
and valuation parameters of companies which we deemed generally
comparable to W-L and Pfizer or otherwise relevant to our analysis, as
appropriate;
- reviewed the terms, to the extent publicly available, of recent merger
and acquisition transactions of companies which we deemed generally
comparable to the Merger or otherwise relevant to our analysis;
- conducted such other studies, analyses, inquiries and investigations as
we deemed appropriate.
We have relied upon and assumed, without independent verification, the accuracy
and completeness of the financial and other information, including without
limitation the Projections and the Projected Benefits, provided to us by W-L and
Pfizer. With respect to the Projections and the Projected Benefits, we have
assumed that they have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the senior managements of W-L and
Pfizer as to the expected future performance of W-L and Pfizer, respectively. We
have not assumed any responsibility for the independent verification of any such
information or of the Projections and Projected Benefits provided to us, and we
have further relied upon the assurances of the senior managements of W-L and
Pfizer that they are unaware of any facts that would make the information,
Projections and Projected Benefits provided to us incomplete or misleading.
In arriving at our opinion, we have not performed or obtained any independent
appraisal of the assets or liabilities of W-L and Pfizer, nor have we been
furnished with any such appraisals. We have assumed that the Merger will (i)
qualify as a tax-free "reorganization" within the meaning of Section 368(a) of
the Internal Revenue Code, (ii) be accounted for as a pooling-of interests in
accordance with U.S. generally accepted accounting principles and (iii) be
consummated without any regulatory limitations, restrictions, conditions,
amendments or modifications that collectively would have a material effect on
W-L or Pfizer. Our opinion is necessarily based on economic, market and other
conditions, and the information made available to us, as of the date hereof.
We do not express any opinion as to the price or range of prices at which the
shares of common stock of W-L and Pfizer may trade subsequent to the
announcement of the Merger or as to the price of range of prices at which the
shares of common stock of Pfizer may trade subsequent to the consummation of the
Merger.
We have acted as a financial advisor to W-L in connection with the Merger and
will receive a fee for such services. Bear Stearns has been previously engaged
by W-L to provide certain investment banking and financial advisory services in
connection with actual and prospective merger, acquisition and divestiture
transactions as well as certain
D-2
<PAGE> 259
capital raising transactions, for which we received customary compensation. In
the ordinary course of business, Bear Stearns may actively trade the equity and
debt securities of W-L and/or Pfizer for our own account and for the account of
our customers and, accordingly, may at any time hold a long or short position in
such securities.
It is understood that this letter is intended for the benefit and use of the
Board of Directors of W-L and does not constitute a recommendation to the Board
of Directors of W-L or any holders of W-L Common Stock as to how to vote in
connection with the Merger. This opinion does not address W-L's underlying
business decision to pursue the Merger. This letter is not to be used for any
other purpose, or reproduced, disseminated, quoted to or referred to at any
time, in whole or in part, without our prior written consent; provided, however,
that this letter may be included in its entirety in any joint proxy
statement/prospectus to be distributed to the holders of W-L Common Stock in
connection with the Merger.
Based on and subject to the foregoing, it is our opinion that, as of the date
hereof, the Exchange Ratio is fair, from a financial point of view, to the
shareholders of W-L.
Very truly yours,
BEAR, STEARNS & CO., INC.
By: /s/ ALAN SCHWARTZ
-----------------------------------
Executive Vice President
D-3
<PAGE> 260
ANNEX E
[LETTERHEAD OF GOLDMAN SACHS & CO.]
February 6, 2000
Board of Directors
Warner-Lambert Company
201 Tabor Road
Morris Plains, NJ 07950
Gentlemen:
You have requested our opinion as to the fairness from a financial point of view
to the holders of the outstanding shares of Common Stock, par value $1.00 per
share (the "Shares"), of Warner-Lambert Company (the "Company") of the exchange
ratio of 2.75 shares of Common Stock, par value $0.05 per share (the "Pfizer
Common Stock"), of Pfizer Inc. ("Pfizer") to be received for each Share (the
"Exchange Ratio") pursuant to the Agreement and Plan of Merger, dated as of
February 6, 2000, among Pfizer, Seminole Acquisition Sub Corp., a direct
wholly-owned subsidiary of Pfizer, and the Company (the "Agreement").
Goldman, Sachs & Co., as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. We are familiar with
the Company having provided certain investment banking services to the Company
from time to time, including having acted as co-managing underwriter of its
public offering of $250 million aggregate principal amount of 5.75% Notes due
2003 and its public offering of $250 million aggregate principal amount of 6.00%
Notes due 2008 in January 1998, having acted as financial advisor in its
acquisition of Agouron Pharmaceuticals, Inc. announced in January 1999 and
having acted as its financial advisor in connection with, and having
participated in certain of the negotiations leading to, the Agreement. Goldman,
Sachs & Co. provides a full range of financial advisory and securities services
and, in the course of its normal trading activities, may from time to time
effect transactions and hold securities, including derivative securities, of the
Company or Pfizer for its own account and for the accounts of customers.
Goldman, Sachs & Co. may provide investment banking services to Pfizer and its
subsidiaries in the future.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of the
Company and Pfizer for the five years ended December 31, 1998; certain interim
reports to shareholders and Quarterly Reports on Form 10-Q of the Company and
Pfizer; certain other communications from the Company and Pfizer to their
respective stockholders; and certain internal financial analyses and forecasts
for the Company and Pfizer prepared by their respective managements, including
certain cost savings and operating synergies projected by the managements of the
Company and Pfizer to result from the transaction contemplated by the Agreement
(the "Synergies"). We also have held discussions with members of the senior
management of the Company and Pfizer regarding their assessment of the strategic
rationale for, and the potential benefits of, the transaction contemplated by
the Agreement and the past and current business operations, financial condition
and future
E-1
<PAGE> 261
prospects of their respective companies. In addition, we have reviewed the
report price and trading activity for the Shares and the Pfizer Common Stock,
compared certain financial and stock market information for the Company and
Pfizer with similar information for certain other companies the securities of
which are publicly traded, reviewed the financial terms of certain recent
business combinations in the pharmaceutical industry specifically and in other
industries generally and performed such other studies and analyses as we
considered appropriate.
We have relied upon the accuracy and completeness of all of the financial and
other information discussed with or reviewed by us and have assumed such
accuracy and completeness for purposes of rendering this opinion. In that
regard, we have assumed with your consent that the internal financial forecasts
prepared by the managements of the Company and Pfizer, including the Synergies,
have been reasonably prepared on a basis reflecting the best currently available
estimates and judgments of the Company and Pfizer. In addition, we have not made
an independent evaluation or appraisal of the assets and liabilities of the
Company or Pfizer or any of their subsidiaries and we have not been furnished
with any such evaluation or appraisal. We also have assumed that the transaction
contemplated by the Agreement will be accounted for as a pooling-of-interests
under generally accepted accounting principles. Our advisory services and the
opinion expressed herein are provided for the information and assistance of the
Board of Directors of the Company in connection with its consideration of the
transaction contemplated by the Agreement and such opinion does not constitute a
recommendation as to how any holder of Shares should vote with respect to such
transaction.
Based upon and subject to the foregoing and based upon such other matters as we
consider relevant, it is our opinion that as of the date hereof the Exchange
Ratio pursuant to the Agreement is fair from a financial point of view to the
holders of the Shares.
Very truly yours,
GOLDMAN, SACHS & Co.
E-2
<PAGE> 262
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Indemnification Under Pfizer's Certificate of Incorporation and By-laws and
Delaware Law. Article Seventh of Pfizer's certificate of incorporation provides
for the indemnification of directors or officers, in accordance with the
by-laws, to the fullest extent permitted by the General Corporation Law of the
State of Delaware. Article V of the by-laws of Pfizer provides that Pfizer shall
indemnify and hold harmless, to the fullest extent permitted by law, any person
made or threatened to be made a party to any legal action by reason of the fact
that such person is or was a director, officer, employee or other corporate
agent of Pfizer or any subsidiary or constituent corporation or served any other
enterprise at the request of Pfizer against expenses, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action. The General Corporation Law of the State of Delaware provides
for the indemnification of directors and officers under certain conditions.
Pfizer D&O Insurance. The directors and officers of Pfizer are insured
under a policy of directors' and officers' liability insurance.
Merger Agreement Provisions Relating To Warner-Lambert and Pfizer Directors
and Officers. The merger agreement provides that for six years after the
closing, Warner-Lambert and Pfizer will maintain the current provisions
regarding indemnification of officers and directors contained in the certificate
of incorporation and by-laws of Warner-Lambert and Pfizer and will continue to
honor any directors, officers or employees indemnification agreements of
Warner-Lambert and Pfizer and their respective subsidiaries. Warner-Lambert and
Pfizer shall also maintain in effect the current policies of directors' and
officers' liability insurance and fiduciary liability insurance maintained by
Warner-Lambert and Pfizer, respectively (except that Pfizer may substitute
policies which are, in the aggregate, no less advantageous to the insureds in
any material respect) with respect to claims arising from facts or events which
occurred on or before the completion of the merger. In addition, Warner-Lambert
and Pfizer shall indemnify the directors and officers of Warner-Lambert and
Pfizer, respectively, to the fullest extent to which Warner-Lambert and Pfizer
are permitted to indemnify such officers and directors under their respective
certificate of incorporations and by-laws and applicable law.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) List of Exhibits
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<C> <S>
2.1 Agreement and Plan of Merger dated as of February 6, 2000
among Warner-Lambert Company, Pfizer Inc. and Seminole
Acquisition Sub Corp., which is attached hereto as Annex A.
3.1 Amended and Restated Certificate of Incorporation of Pfizer
(incorporated herein by reference to Exhibit 3.1(i) in the
Registrant's Form 10-Q filing for the period endedApril 4,
1999).
</TABLE>
S4-II-1
<PAGE> 263
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<C> <S>
3.2 Amended and Restated By-laws of Pfizer (incorporated herein
by reference to Exhibit 3(ii) in the Registrant's Form 10-Q
filing for the period ended June 24, 1999).
4.1 Rights Agreement, dated as of October 6, 1997, between
Pfizer and Chase Mellon Shareholder Services, L.L.C., as
Rights Agent, as amended (incorporated by reference to
Exhibit 4(i) in the Registrant's Form 10-K filing for the
period ended December 31, 1998).
5 Opinion of Cadwalader, Wickersham & Taft regarding the
validity of the securities being registered.*
8.1 Opinion of Cadwalader, Wickersham & Taft regarding material
federal income tax consequences relating to the merger.*
8.2 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
regarding material federal income tax consequences relating
to the merger.*
12 Pfizer Inc. Ratio of Earnings to Fixed Charges.
21 Subsidiaries of the Registrant (incorporated by reference to
Exhibit 21 in the Registrant's Annual Report on Form 10-K
filed on March 26, 1999 for the fiscal year ended December
31, 1998).
23.1 Consent of KPMG LLP.
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of Cadwalader, Wickersham & Taft (included in the
opinions filed as Exhibit 5 and Exhibit 8.1 to this
Registration Statement).*
23.4 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in the opinion filed as Exhibit 8.2 to this
Registration Statement).*
23.5 Consent of Lazard Freres & Co. LLC.
23.6 Consent of Merrill Lynch, Pierce, Fenner & Smith
Incorporated
23.7 Consent of Bear, Stearns & Co. Inc.
23.8 Consent of Goldman, Sachs & Co.
24 Power of Attorney (Included on signature page S4-II-5 of
this Registration Statement filed on November 15, 1999).
99.1 Form of Pfizer Proxy Card.
99.2 Form of Warner-Lambert Proxy Card.
</TABLE>
- ------------------------
* To be filed by Amendment
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
S4-II-2
<PAGE> 264
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(5) That every prospectus (i) that is filed pursuant to paragraph (4)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act of 1933 and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part
of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(6) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
S4-II-3
<PAGE> 265
(7) To respond to requests for information that is incorporated by
reference into the joint proxy statement/prospectus pursuant to Item 4,
10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration
statement through the date of responding to the request.
(8) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
S4-II-4
<PAGE> 266
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Pre-Effective Amendment No. 1 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York, State of New York, on February 22, 2000.
PFIZER INC.
(Registrant)
By: /s/ MARGARET M. FORAN
-----------------------------------
Margaret M. Foran
Vice President -- Corporate
Governance
and Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed below by the following
persons in the capacities indicated on February 22, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
* Chief Executive Officer and Chairman of the
- --------------------------------------------- Board (Principal Executive Officer)
William C. Steere, Jr.
* Executive Vice President and Chief Financial
- --------------------------------------------- Officer (Principal Financial Officer)
David L. Shedlarz
* Vice President -- Controller (Principal
- --------------------------------------------- Accounting Officer)
Loretta V. Cangialosi
* Director
- ---------------------------------------------
Michael S. Brown
* Director
- ---------------------------------------------
M. Anthony Burns
* Director
- ---------------------------------------------
W. Don Cornwell
* Director
- ---------------------------------------------
George B. Harvey
* Director
- ---------------------------------------------
Constance J. Horner
* Director
- ---------------------------------------------
Stanley O. Ikenberry
</TABLE>
S4-II-5
<PAGE> 267
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
* Director
- ---------------------------------------------
Harry P. Kamen
* Director
- ---------------------------------------------
Thomas G. Labrecque
* President, Chief Operating Officer and
- --------------------------------------------- Director
Henry A. McKinnell
* Director
- ---------------------------------------------
Dana G. Mead
* Vice Chairman and Director
- ---------------------------------------------
John F. Niblack
* Director
- ---------------------------------------------
Franklin D. Raines
* Director
- ---------------------------------------------
Ruth J. Simmons
* Director
- ---------------------------------------------
Jean-Paul Valles
- ---------------------------------------------
- ---------------------------------------------
Margaret M. Foran
(Attorney-in-Fact)
</TABLE>
S4-II-6
<PAGE> 268
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<C> <S>
2.1 Agreement and Plan of Merger dated as of February 6, 2000
among Warner-Lambert Company, Pfizer Inc. and Seminole
Acquisition Sub Corp., which is attached hereto as Annex A.
3.1 Amended and Restated Certificate of Incorporation of Pfizer
(incorporated herein by reference to Exhibit 3.1(i) in the
Registrant's Form 10-Q filing for the period ended April 4,
1999).
3.2 Amended and Restated By-laws of Pfizer (incorporated herein
by reference to Exhibit 3(ii) in the Registrant's Form 10-Q
filing for the period ended June 24, 1999).
4.1 Rights Agreement, dated as of October 6, 1997, between
Pfizer and Chase Mellon Shareholder Services, L.L.C., as
Rights Agent, as amended (incorporated by reference to
Exhibit 4(i) in the Registrant's Form 10-K filing for the
period ended December 31, 1998).
5 Opinion of Cadwalader, Wickersham & Taft regarding the
validity of the securities being registered.*
8.1 Opinion of Cadwalader, Wickersham & Taft regarding material
federal income tax consequences relating to the merger.*
8.2 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
regarding material federal income tax consequences relating
to the merger.*
12 Pfizer Inc. Ratio of Earnings to Fixed Charges.
21 Subsidiaries of the Registrant (incorporated by reference to
Exhibit 21 in the Registrant's Annual Report on Form 10-K
filed on March 26, 1999 for the fiscal year ended December
31, 1998).
23.1 Consent of KPMG LLP.
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of Cadwalader, Wickersham & Taft (included in the
opinions filed as Exhibit 5 and Exhibit 8.1 to this
Registration Statement).*
23.4 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in the opinion filed as Exhibit 8.2 to this
Registration Statement).*
23.5 Consent of Lazard Freres & Co. LLC.
23.6 Consent of Merrill Lynch, Pierce, Fenner & Smith
Incorporated
23.7 Consent of Bear, Stearns & Co. Inc.
23.8 Consent of Goldman, Sachs & Co.
24 Power of Attorney (Included on signature page S4-II-5 of
this Registration Statement filed on November 15, 1999).
99.1 Form of Pfizer Proxy Card.
99.2 Form of Warner-Lambert Proxy Card.
</TABLE>
- ------------------------
* To be filed by Amendment
<PAGE> 1
EXHIBIT 12
PFIZER INC. AND SUBSIDIARY COMPANIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------
1999 1998 1997 1996 1995
(millions of dollars, except ratios)
<S> <C> <C> <C> <C> <C>
Determination of Earnings:
Income from continuing operations
before provision for taxes on income
and minority interests $4,448 $2,594 $2,867 $2,528 $2,017
Less:
Minority interests 5 2 10 6 7
------ ------ ------ ------ ------
Adjusted income 4,443 2,592 2,857 2,522 2,010
Fixed charges 276 180 189 198 223
------ ------ ------ ------ ------
Total earnings as defined $4,719 $2,772 $3,046 $2,720 $2,233
====== ====== ====== ====== ======
Fixed charges
Interest expense (a) $ 223 $ 136 $ 147 $ 161 $ 188
Rents (b) 53 44 42 37 35
------ ------ ------ ------ ------
Fixed charges 276 180 189 198 223
Capitalized interest 13 7 2 5 13
------ ------ ------ ------ ------
Total fixed charges $ 289 $ 187 $ 191 $ 203 $ 236
====== ====== ====== ====== ======
Ratio of earnings to fixed charges 16.3 14.8 15.9 13.4 9.5
====== ====== ====== ====== ======
</TABLE>
(a) Interest expense includes amortization of debt discount and expenses.
(b) Rents included in the computation consist of one-third of rental
expense which the Company believes to be a conservative estimate of an
interest factor in its leases, which are not material.
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors of Pfizer Inc.:
We consent to the incorporation by reference in the Registration
Statement on Form S-4 of Pfizer Inc. (No. 333-90975) of our report dated
February 14, 2000 on the consolidated financial statements of Pfizer Inc. and
Subsidiary Companies as of December 31, 1999, 1998 and 1997 and for each of the
years then ended, which is included in the Pfizer Inc. Current Report on Form
8-K filed February 22, 2000, and to the reference to us under the heading
"Experts" in the registration statement.
/s/ KPMG LLP
- ----------------
KPMG LLP
New York, New York
February 22, 2000
<PAGE> 1
Exhibit 23.2
WARNER-LAMBERT COMPANY AND CONSOLIDATED SUBSIDIARIES
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Joint Proxy
Statement/Prospectus constituting part of this Registration Statement on Form
S-4 of Pfizer Inc. of our report dated January 24, 2000, except for Note 6, as
to which the date is February 7, 2000, relating to the financial statements of
Warner-Lambert Company, which appears in the Current Report on Form 8-K of
Warner-Lambert Company dated February 22, 2000. We also consent to the reference
to us under the heading "Experts" in such Prospectus.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
400 Campus Drive
Florham Park, New Jersey
February 22, 2000
<PAGE> 1
EXHIBIT 23.5
[Letterhead of Lazard Freres & Co. LLC]
CONSENT OF LAZARD FRERES & CO. LLC
We hereby consent to the inclusion of our opinion letter dated February 6,
2000 to the board of directors of Pfizer, Inc. as Annex B to this joint proxy
statement/prospectus which forms part of the Registration Statement on Form S-4
relating to the proposed merger of Warner-Lambert Company with Pfizer and to the
references to such opinion in such joint proxy statement/prospectus under the
headings "Chapter One -- The Merger -- Summary -- Opinions of Financial
Advisors," " -- The Proposed Merger -- Background of the Merger," " -- Our
Reasons for the Merger," " -- Factors Considered by, and Recommendation of, the
Boards of Directors of Pfizer," and " -- Opinions of Financial Advisors --
Opinions of Pfizer's Financial Advisors -- Opinion of Lazard Freres." In giving
such consent, we do not admit and we hereby disclaim that we come within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended, or the rules and regulations of the Securities and
Exchange Commission thereunder, nor do we thereby admit that we are experts with
respect to any part of the Registration Statement within the meaning of the
terms "experts" as used in the Securities Act, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder.
Lazard Freres & Co. LLC
By: /s/ Steven J. Golub
------------------------
Name: Steven J. Golub
Title: Managing Director
February 22, 2000
<PAGE> 1
EXHIBIT 23.6
[Letterhead of Merrill Lynch, Pierce, Fenner & Smith Incorporated]
CONSENT OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
We hereby consent to the inclusion of our opinion letter dated February 6, 2000
to the board of directors of Pfizer Inc. as Annex C to the proxy
statement/prospectus relating to the proposed merger of Pfizer Inc. and
Warner-Lambert Company and to the references thereto in such proxy
statement/prospectus under the captions "Chapter One - The Merger - Summary -
Opinions of Financial Advisors," "- The Proposed Merger - Background of the
Merger," "- Our Reasons for the Merger," "- Factors Considered by, and
Recommendation of, the Board of Directors of Pfizer," and "- Opinions of
Financial Advisors - Opinions of Pfizer's Financial Advisors - Opinion of
Merrill Lynch, Pierce, Fenner & Smith Incorporated." In giving this consent, we
do not admit that we come within the category of persons whose consent is
required under, and we do not admit that we are "experts" for purposes of, the
Securities Act of 1933 and the rules and regulations promulgated thereunder.
New York, New York
February 22, 2000
/s/ MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
--------------------------------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
<PAGE> 1
Exhibit 23.7
CONSENT OF BEAR, STEARNS & CO. INC.
February 22, 2000
Board of Directors
Warner-Lambert Company
201 Tabor Road
Morris Plains, New Jersey 07950
Re: Registration Statement of Pfizer Inc. relating to the Agreement and Plan
of Merger, dated as of February 6, 2000, among Warner-Lambert Company,
Pfizer Inc. and Seminole Acquisition Sub Corp.
Ladies and Gentlemen:
We hereby consent to the reference to our opinion letter dated February 6,
2000 to the Board of Directors of Warner-Lambert Company under the captions
"Summary -- Opinions of Financial Advisors", "The Proposed Merger -- Background
of the Merger", "The Proposed Merger -- Factors Considered by, and
Recommendation of, the Board of Directors of Warner-Lambert", "Opinions of
Financial Advisors -- Opinions of Warner-Lambert's Financial Advisors" and
"Opinions of Financial Advisors -- Opinion of Bear Stearns" in, and to the
inclusion of such opinion letter as Exhibit 23.7 to, the joint proxy
statement/prospectus that is part of the above-referenced Registration
Statement, as amended. By giving such consent we do not thereby admit that we
are experts with respect to any part of such Registration Statement within the
meaning of the term "expert" as used in, or that we come within the category of
persons whose consent is required under, the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
Bear, Stearns & Co. Inc.
By: /s/ Richard L. Metrick
----------------------------
Name: Richard L. Metrick
Title: Senior Managing Director
<PAGE> 1
Exhibit 23.8
CONSENT OF GOLDMAN SACHS & COMPANY
February 22, 2000
Board of Directors
Warner-Lambert Company
201 Tabor Road
Morris Plains, NJ 07950
Re: Amendment No. 1 to Registration Statement (File No. 333-90975)
of Pfizer Inc.
Gentlemen:
Reference is made to our opinion letter dated February 6, 2000, with respect to
the fairness from a financial point of view to the holders of the outstanding
shares of Common Stock, par value $1.00 per share (the "Shares"), of
Warner-Lambert Company (the "Company") of the exchange ratio of 2.75 shares of
Common Stock, par value $0.05 per share, of Pfizer Inc. ("Pfizer") to be
received for each Share pursuant to the Agreement and Plan of Merger, dated as
of February 6, 2000, among Pfizer, Seminole Acquisition Sub Corp., a direct
wholly-owned subsidiary of Pfizer, and the Company.
The foregoing opinion letter is provided for the information and assistance of
the Board of Directors of the Company in connection with its consideration of
the transaction contemplated therein and is not to be used, circulated quoted or
otherwise referred to for any other purpose, nor is it to be filed with,
included in or referred to in whole or in part in any registration statement,
proxy statement or any other document, except in accordance with our prior
written consent. We understand that the Company has determined to include our
opinion in the above-referenced Registration Statement.
In that regard, we hereby consent to the reference to the opinion of our Firm
under the captions "Summary -- Opinions of Financial Advisors", "The Proposed
Merger --
<PAGE> 2
Background of the Merger", "The Proposed Merger - Factors Considered by, and
Recommendation of, the Board of Directors of Warner-Lambert", "Opinions of
Financial Advisors - Opinions of Warner-Lambert's Financial Advisors" and
"Opinions of Financial Advisors - Opinion of Goldman Sachs" in, and to the
inclusion of such opinion letter as Exhibit 23.8 in the joint proxy
statement/prospectus included in the above-mentioned Registration Statement, as
amended. Notwithstanding the foregoing, it is understood that our consent is
being delivered solely in connection with the filing of the above-mentioned
version of the Registration Statement and that our opinion is not to be used,
circulated, quoted or otherwise referred to for any other purpose, nor is it to
be filed with, included in or referred to in whole or in part in any
registration statement (including any subsequent amendments to the
above-mentioned Registration Statement), proxy statement or any other document,
except in accordance with our prior written consent. In giving such consent, we
do not thereby admit that we come within the category of persons whose consent
is required under Section 7 of the Securities Act of 1933 or the rules and
regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
Goldman Sachs & Company
/s/ Goldman Sachs & Co.
-------------------------
(Goldman Sachs & Co.)
2
<PAGE> 1
P R O X Y
PFIZER INC.
PROXY
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned appoints William C. Steere, Jr., Henry A. McKinnell, and C. L.
Clemente, and each of them, as proxies, each with full power of substitution,
and authorizes them to represent and to vote, as designated on the reverse side
of this form, all the shares of common stock of Pfizer Inc. held of record by
the undersigned on February 29, 2000, and all of the shares as to which the
undersigned then had the right to give voting instructions to the record holder
under the Pfizer Inc. Shareholder Investment Program, the Pfizer Inc. Savings
and Investment Plan and the Pfizer Inc. Employee Benefit Trust, at the Annual
Meeting of Shareholders to be held on April 27, 2000 at 10:00 a.m. at the Grand
Hyatt Hotel, Empire State Ballroom, New York, New York or any adjournment or
postponement.
IF NO OTHER INDICATION IS MADE ON THE REVERSE SIDE OF THIS FORM, THE PROXIES
WILL VOTE (AND ANY VOTING INSTRUCTIONS TO RECORD HOLDERS WILL BE GIVEN) FOR
ITEMS 1, 2, 3 AND 4, AGAINST ITEMS 5 AND 6 AND, IN THEIR DISCRETION, UPON SUCH
OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
SEE REVERSE
SIDE
- ------------------------------------------------------------------------------
PLEASE FOLD AND DETACH HERE IF YOU ARE NOT VOTING BY INTERNET OR TELEPHONE
If you plan to attend the Annual Meeting, please bring this admission ticket
with you.
ADMISSION TICKET
PFIZER INC.
ANNUAL MEETING OF SHAREHOLDERS
Thursday, April 27, 2000
10:00 a.m.
Grand Hyatt Hotel
Empire State Ballroom
42nd Street and Lexington Avenue
New York, New York
Due to space limitations, we will be serving lighter
refreshments at this year's Annual Meeting.
<PAGE> 2
/X/ Please mark your
votes as in this
example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1, 2, 3 AND 4, AND
"AGAINST" ITEMS 5 AND 6.
1. A proposal to approve the issuance of shares of Pfizer common stock in
connection with the merger
FOR AGAINST ABSTAIN
/ / / / / /
2. A proposal to amend Pfizer's Certificate of Incorporation to increase the
maximum number of Directors.
FOR AGAINST ABSTAIN
/ / / / / /
3. Election of Directors
(Mark ONE box only.)
VOTE
FOR WITHHELD
FROM ALL
NOMINEES
/ / / /
Nominees:
1. M. Anthony Burns
2. George B. Harvey
3. Stanley O. Ikenberry
4. Harry P. Kamen
5. John F. Niblack
FOR all nominees, except vote withheld from the following nominees (if any).
- -------------------------------------------------------------------
4. A proposal to approve the appointment of KPMG LLP as independent auditors
for 2000.
FOR AGAINST ABSTAIN
/ / / / / /
5. A shareholder proposal relating to charitable contributions.
FOR AGAINST ABSTAIN
/ / / / / /
6. A shareholder proposal relating to price constraints.
FOR AGAINST ABSTAIN
/ / / / / /
SPECIAL ACTION
Discontinue Annual Report / / Change of
Mailing for this Account Address / /
IF ACTING AS ATTORNEY, EXECUTOR, TRUSTEE, OR IN OTHER REPRESENTATIVE CAPACITY,
PLEASE SIGN NAME AND TITLE.
- --------------------------------------------------------------
(SIGNATURE IF SHAREHOLDER) DATE
- --------------------------------------------------------------
(SIGNATURE IF HELD JOINTLY) DATE
- -------------------------------------------------------------------------------
- FOLD AND DETACH HERE IF YOU ARE NOT VOTING BY INTERNET OR TELEPHONE -
PFIZER, INC.
Dear Shareholder:
We encourage you to take advantage of the convenient ways to vote your shares:
you can vote your shares electronically through the Internet or the telephone
24 hours a day, seven days a week. This eliminates the need to return the proxy
card.
To vote your shares electronically you must use the control number printed in
the box above, just below the perforation. The series of numbers that appear in
the box above must be used to access the system.
1. To vote over the Internet:
- Log on the Internet and go to web site http://www.vote-by-net.com
2. To vote over the telephone:
- On a touch-tone telephone call 1-800-OK2-VOTE (1-800-652-8683)
- Outside of the U.S. and Canada call 201-324-0377
Your electronic vote authorizes the named proxies in the same manner as if you
marked, signed, dated and returned the proxy card.
If you choose to vote your shares on the Internet or by the telephone, there is
no need for you to mail back your proxy card.
YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.
<PAGE> 1
/X/ Please mark your
votes as in this
example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL (1), THE APPROVAL
AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER.
1. Approval and Adoption of the Agreement and Plan of Merger, dated as of
February 6, 2000, among Pfizer Inc., a wholly-owned subsidiary of Pfizer, and
Warner-Lambert Company and of the merger contemplated thereby.
FOR AGAINST ABSTAIN
/ / / / / /
PLEASE VOTE BY RETURNING THE ATTACHED PROXY CARD
/ / PLEASE SEND AN ADMITTANCE CARD
IF YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, PLEASE CHECK THE BOX
ABOVE, AND AN ADMITTANCE CARD WILL BE MAILED TO YOU.
/ / CHANGE OF ADDRESS ON REVERSE SIDE
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF WARNER-LAMBERT COMPANY.
WHEN PROPERLY EXECUTED IT WILL BE VOTED AS DIRECTED BY THE STOCKHOLDER BUT
UNLESS OTHERWISE SPECIFIED, IT WILL BE VOTED FOR PROPOSAL (1), THE APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT AND THE MERGER.
VOTE, SIGN AND DATE THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
SIGNATURE DATE
-----------------------------------------------------
NOTE: Please sign exactly as name appears hereon, joint owners
should each sign. When signing as attorney or guardian, please
give full title as such.
- -------------------------------------------------------------------------------
+ FOLD AND DETACH HERE +
<PAGE> 2
P R O X Y
FORM OF PROXY CARD
WARNER-LAMBERT COMPANY
PROXY
PROXY FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD AT [TIME] ON [DATE] AT [PLACE]
LODEWIJK J.R. DE VINK, ERNEST J. LARINI and GREGORY L. JOHNSON and each of them,
with full power of substitution, are hereby authorized to represent and to vote
and act with respect to all stock of the undersigned at the Special Meeting of
Stockholders of Warner-Lambert Company on , 2000 and any
adjournment or adjournments thereof, as designated herein upon the proposal set
forth herein, as set forth in the Joint Proxy Statement/Prospectus, and, in
their discretion, upon such other matters as may be properly brought before the
meeting.
(Change of Address/Comments)
----------------------------
----------------------------
----------------------------
----------------------------
(If you have written in the
above space, please mark the
corresponding box on the--
reverse side of this card)
SEE REVERSE SIDE
- ------------------------------------------------------------------------------
-- FOLD AND DETACH HERE --
