WARNER-LAMBERT COMPANY
EXECUTIVE SEVERANCE PLAN
As Amended To March 25, 1997
WARNER-LAMBERT COMPANY
EXECUTIVE SEVERANCE PLAN
Section 1. Establishment of Plan. Warner-Lambert
Company (the "Company") hereby establishes this Executive
Severance Plan (the "Plan"). The Plan shall become
effective as of February 17, 1988 (the "Effective Date").
Section 2. Purposes of Plan. In recognition of the
establishment of the Enhanced Severance Plan which is not
applicable to Participants (as hereinafter defined) in this
Plan, and in further recognition of the several different
concerns of Executives encompassed hereby, the purposes of
the Plan are to: (a) fulfill the Company's commitment under
the Warner-Lambert Creed of attracting and retaining capable
people as a means of both addressing the health and well-
being of people throughout the world and providing a fair
and attractive economic return to the Company's
shareholders; (b) address the concerns of the Company's
Executives regarding job security; and (c) help ensure that
the Executives receive the benefits which they legitimately
expect in the normal course of their employment.
Section 3. Definition of Executives; Eligibility.
3.1. Definition of Executives. For purposes of this
Plan, the term "Executives" shall mean (a) all employees of
the Company who are subject to the reporting requirements of
Section 16(a) of the Act (as hereinafter defined)
("Corporate Officers") on the Effective Date; (b) all
persons who become Corporate Officers after the Effective
Date and (c) all employees of the Company who are designated
by the Board of Directors of the Company (the "Board") or by
the Executive Committee of the Company (as such bodies are
constituted prior to the occurrence of a Change in Control
(as hereinafter defined)) as eligible for participation in
this Plan ("Designated Employees"). For purposes of this
Plan, the term "Act" shall mean the Securities Exchange Act
of 1934, as amended.
3.2. Eligibility. All Executives shall participate in
the Plan (the "Participants"); provided, however, that (i)
except as provided in clauses (iii) and (iv) of this
subsection, an Executive shall cease to be a Participant at
the time such Executive ceases to be a Corporate Officer;
(ii) no person who is not an Executive at the time of the
occurrence of a Change in Control shall become a Participant
thereafter; (iii) except as provided in clause (iv) of this
subsection, the participation of a Designated Employee shall
cease at the time that such employee ceases to be a
corporate officer appointed to such position by the Board of
Directors, unless such employee continues to be a Corporate
Officer; and (iv) no Executives who are Participants at the
time of the occurrence of a Change in Control shall cease
participation without their written consent.
Section 4. Definition of Change in Control; Activation
Event.
4.1. Change In Control. For purposes of this Plan, a
"Change in Control" of the Company shall be deemed to have
occurred if (i) any person (as such term is used in Sections
13(d) and 14(d)(2) of the Act) is or becomes the beneficial
owner (as defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Company representing 20% or
more of the combined voting power of the Company's then
outstanding securities, (ii) the stockholders of the Company
approve a merger, consolidation, sale or disposition of all
or substantially all of the Company's assets or plan of
liquidation or (iii) the composition of the Board at any
time during any consecutive twenty-four (24) month period
changes such that the Continuity Directors (as hereinafter
defined) cease for any reason to constitute at least fifty-
one percent (51%) of the Board. For purposes of the
foregoing clause (iii), "Continuity Directors" means those
members of the Board who either (a) were directors at the
beginning of such consecutive twenty-four (24) month period,
or (b)(1) filled a vacancy during such twenty-four (24)
month period created by reason of (x) death, (y) a medically
determinable physical or mental impairment which renders the
director substantially unable to function as a director or
(z) retirement at the last mandatory retirement age in
effect for at least two (2) years, and (2) were elected,
nominated or voted for by at least fifty-one percent (51%)
of the current directors who were also directors at the
commencement of such twenty-four (24) month period.
4.2. Activation Event. For purposes of this Plan, the
term "Activation Event" shall mean a termination of
employment with the Company (whether voluntary or
involuntary) within three (3) years after a Change in
Control for any reason other than death or Termination for
Just Cause (as hereinafter defined).
Section 5. Severance Benefits. Upon the occurrence of
an Activation Event with respect to a Participant, the
following shall apply to such Participant: (a) the benefits
specified in Severance Policy #163, as such policy is in
effect immediately prior to the occurrence of the Change in
Control (including amounts due by reason of such event) (the
"Severance Policy"), shall be paid to the Participant, in
accordance with the coverage provisions thereof, even though
the termination would not otherwise give rise to severance
payments, provided, however, that the Severance Pay Duration
Period (as defined in the Severance Policy) of Participants
shall be thirty-six (36) months; (b) severance benefits
shall be determined on the basis of base pay plus Bonus
Amount (as hereinafter defined), extrapolated for the entire
Severance Pay Duration Period, as determined in accordance
with paragraph (a) hereof (for example severance benefits
shall include payment of, and benefits continuance shall in
part be based upon, three (3) times the Participant's Bonus
Amount); (c) severance payments and continued eligibility
for other benefits shall not terminate upon other
employment, retirement or death; (d) severance payments
(including amounts paid in respect of the Participant's
Bonus Amount) shall, at the election of the Participant, be
made monthly or in a lump sum (regardless of eligibility
therefor under the Severance Policy) and the receipt of a
lump sum payment shall not terminate coverage under other
benefit arrangements which are otherwise continued during
the Severance Pay Duration Period under the Severance
Policy; and (e) the Company shall provide third party
outplacement assistance consistent with the Company's prior
practices. For purposes hereof, the term "Bonus Amount"
shall mean the target award for such Participant's job grade
as set forth in Exhibit 5 hereto, as such schedule may be
revised from time to time; provided, however, that upon the
occurrence of a Change in Control, the target awards may not
be reduced.
Section 6. Retirement Plans. Upon the occurrence of a
Change in Control, the vesting requirement applicable to
Participants shall become five (5) Years of Service (as
defined in the Warner-Lambert Retirement Plan (the
"Retirement Plan")) and upon the occurrence of an Activation
Event with respect to a Participant, such Participant shall
receive credit for all purposes of the Retirement Plan for
the Severance Pay Duration Period (including the extension
thereto provided under Section 5) and the payments received
in respect of such Period to the extent permissible under
the Internal Revenue Code of 1986, as amended (the "Code"),
with the balance of such credit, if any, being given under
the Warner-Lambert Supplemental Pension Income Plan (the
"Supplemental Pension Plan"). In addition, upon the
occurrence of an Activation Event with respect to a
Participant, eligibility for Supplemental Pension Income
under the Supplemental Pension Plan shall become attainment
of salary grade 17 prior to the Change in Control. To
implement the aforementioned, the Retirement Plan is hereby
amended by (i) deleting the second parenthetical in the
first sentence of Section 7 of Article XIII thereof, and
(ii) revising the third sentence of Section 7 of Section
XIII thereof, to read in its entirety as provided in Exhibit
6(a) hereto. Further, the Supplemental Pension Plan is
hereby amended by (i) adding the phrase "and the Warner-
Lambert Executive Severance Plan" after the fifteenth word
of Section 13.3 of Article XIII thereof and revising Section
13.1(a) to read in its entirety as provided in Exhibit 6(b)
hereto.
Section 7. Savings Plan. Upon the occurrence of an
Activation Event with respect to a Participant, such
Participant shall receive credit for all purposes of the
Warner-Lambert Savings and Stock Plan (the "Savings Plan")
for the Severance Pay Duration Period (including the
extension thereto provided under Section 5) and the payments
received in respect of such Period (exclusive of Bonus
Amounts) to the extent permissible under the Code, with the
balance of such credit, if any, being given under the
Warner-Lambert Supplemental Savings Plan (the "Supplemental
Savings Plan"). To implement the aforementioned, the
Savings Plan is hereby amended by (i) deleting the second
parenthetical in the first sentence of Section 7.6 thereof,
(ii) revising the third sentence of Section 7.6 thereof, to
read in its entirety as provided in Exhibit 7 hereto and
(iii) the Supplemental Savings Plan is hereby amended by
adding the phrase "and the Warner-Lambert Executive
Severance Plan" after the fifteenth word of the last
paragraph of Section 11.1 of Article 11 thereof.
Section 8. Incentive Compensation Plan. Upon the
occurrence of a Change in Control, (i) the formula for
determining the rate for adjustments to Deferred Bonus
Accounts (as defined in the Warner-Lambert Company Incentive
Compensation Plan (the "Incentive Compensation Plan")) may
not be lower for succeeding periods than the formula in
effect at the occurrence of the Change in Control (for
example, if the formula in effect at the Change in Control
is the average prime rate plus two (2) percent, the formula
for all future years may not be lower than the average prime
rate plus two (2) percent); (ii) the consulting and
forfeiture provisions of the Incentive Compensation Plan
shall no longer apply; (iii) the Company shall promptly
transfer an amount equal to the aggregate of all Deferred
Bonus Accounts to a trustee under an irrevocable trust
commonly known as a "Rabbi Trust"; (iv) if the Participant
had a Deferred Bonus Account on September 27, 1994, and he
or she did not consent in writing to the provisions
described in the following clause (v) prior to November 1,
1994, then upon the Participant's termination of
employment with the Company, he or she shall promptly
receive the balance in the Deferred Bonus Account in a lump
sum distribution; and (v) upon a Participant's termination
of employment with the Company within 3 years after a
change in Control, he or she may, within 30 days thereafter,
designate a distribution schedule for their Deferred Bonus
Account which schedule may provide for a lump sum payment
or installment payments over a period of up to 15 years,
provided, however, that no payment shall be made until
the end of the severance period (for example, if the
Participant is entitled to 3 years' severance pay,
deferred bonus payments may not begin until 3 years after
termination even if such Participant receives the severance
pay in a lump sum at termination). To implement the afore-
mentioned, the Incentive Compensation Plan is hereby amended
by (i) deleting the second parenthetical in the third
sentence of Section 5.2 thereof and (ii) deleting the
parenthetical in the first sentence of Sections 6.3 and
7.1(d) thereof.
Section 9. Stock Option Plans. Upon the occurrence of
a Change in Control, all Options (as such term is defined in
the Stock Option Plans (as hereinafter defined)) then
outstanding under the Warner-Lambert Company 1974 Stock
Option and Alternate Stock Plan, the Warner-Lambert Company
1983 Stock Option Plan and the Warner-Lambert Company 1987
Stock Option Plan (collectively, the "Stock Option Plans")
and held by Participants shall become immediately
exercisable by the optionee. Effective as of the Effective
Date of the Plan, limited stock appreciation rights
("LSAR's") are hereby granted to all Participants, at such
Effective Date, in connection with all outstanding options
held by such Participants which are not Reference Options
(as defined in the Stock Option Plans). Such LSAR's shall
only be exercisable for a thirty (30) day period beginning
on the date of the occurrence of a Change in Control unless
(i) the optionee is subject to the reporting requirements of
Section 16(a) of the Act at the time of the occurrence of
the Change in Control and (ii) such event occurs within six
(6) months of the date of grant of the LSAR's, in which case
the LSAR's shall only be exercisable during the thirty (30)
day period beginning six (6) months after the grant of the
LSAR's. Such LSAR's shall remain exercisable (during the
thirty (30) day period beginning on the date of the
occurrence of the Change in Control or during the thirty
(30) day period beginning six (6) months after the grant of
the LSAR's, as the case may be), notwithstanding the
termination of the optionee's employment with the Company.
Upon the occurrence of the Change in Control within six (6)
months of the date of grant of the LSAR's, the Company shall
promptly transfer to a trustee under an irrevocable trust
commonly known as a "Rabbi Trust" for the benefit of the
Participants the maximum amount of cash estimated to be
necessary to satisfy the Company's obligations upon exercise
of all such LSAR's. Upon exercise of an LSAR, a Participant
shall be entitled to receive a cash payment equal to the
excess of the Fair Market Value (as hereinafter defined) on
the date of exercise of a share of Warner-Lambert Common
Stock over the grant price of the Option to which the LSAR
relates multiplied by the number of shares with respect to
which the LSAR is being exercised. For purposes hereof, the
term "Fair Market Value" shall have the same definition
currently applicable to the exercise of a Right (as defined
in the Stock Option Plans) during the thirty (30) day period
following a Change in Control. In addition, upon the
occurrence of a Change in Control, all Rights then
outstanding under the Stock Option Plans and held by
Participants shall become immediately exercisable by the
grantee; provided, however, that such Rights which have been
held by the grantee for less than six (6) months shall
become fully exercisable only during the thirty (30) day
period beginning six (6) months after the date of grant,
notwithstanding the termination of the grantee's employment
with the Company. Upon the occurrence of a Change in
Control, the Company shall promptly transfer to a trustee
under a Rabbi Trust for the benefit of Participants the
maximum amount of cash estimated to be necessary to satisfy
the Company's obligations upon exercise of all outstanding
Rights then held by Participants for less than six (6)
months. To implement the aforementioned, (i) Article 7 of
the Stock Option Plans is hereby amended by deleting
paragraph (i) of Section 7(b) thereof in its entirety and
substituting a new Paragraph (i) therefor, to read in its
entirety as provided in Exhibit 9(a) hereto; (ii) Article 8
of the Stock Option Plans is hereby amended by deleting
Paragraph (b) thereof in its entirety and substituting a new
Paragraph (b) therefor, to read in its entirety as provided
in Exhibit 9(b) hereto; and (iii) Article 8 of the Stock
Option Plans is hereby amended by adding a new Paragraph (f)
thereto, to read in its entirety as provided in Exhibit 9(c)
hereto. In addition, all Options and Rights presently
outstanding are hereby amended by deleting the last
paragraph of Paragraph 1 thereof in its entirety and
substituting therefor the language as provided in Exhibit
9(d) hereto. In addition, the Stock Option Plans and the
Warner-Lambert Company 1989 Stock Plan, the Warner-Lambert
Company 1992 Stock Plan and the Warner-Lambert Company 1996
Stock Plan (collectively, the "Stock Plans") are hereby
amended as set forth in Exhibit 9(e) hereof with respect to
a "Merger of Equals" (as therein defined).
Section 10. Medical Benefits. Upon the occurrence of
an Activation Event with respect to a Participant, such
Participant's coverage under the Warner-Lambert Medical Plan
and the Warner-Lambert Dental Plan (or HMO, as the case may
be) shall continue for the duration of the Severance Pay
Duration Period (including the extensions thereto provided
under Section 5), whether or not the Participant receives
the severance payments in a lump sum or in monthly payments.
In addition, for purposes of determining eligibility for
medical and dental coverage after retirement, a
Participant's Severance Pay Duration Period (including the
extensions thereto provided under Section 5) shall count as
a period of employment with the Company, whether or not the
Participant elects to receive severance payments in a lump
sum or in monthly payments. Further, upon the occurrence of
a Change in Control, the Company's retiree medical plan may
not be terminated or amended in a manner that is not also
applicable to active employees.
Section 11. Termination of Plan. This Plan may not be
terminated with respect to any Participant without the
written consent of such Participant.
Section 12. Amendment of Plan. This Plan may not be
amended in any manner which has a significant adverse effect
on any Participant and his rights hereunder without the
written consent of such Participant. Notwithstanding the
foregoing, upon the occurrence of a Change in Control, this
Plan may not be amended in any respect without the written
consent of each Participant affected by such proposed
amendment. Notwithstanding any other provision hereof, the
Plan may be amended in order to obtain or maintain the
status of (i) the Retirement Plan and Savings Plan as
qualified plans under Section 401(a) of the Code and (ii)
the Stock Option Plans as qualified under Rule 16b-3
promulgated pursuant to the Act.
Section 13. Administration. The Chief Executive
Officer of the Company shall appoint a committee (the
"Committee") consisting of three (3) Participants, one of
whom shall be the Corporate Vice President, Human Resources,
who shall act as chairman, to administer the Plan. The
Committee shall have the authority to interpret the Plan and
to adopt rules for the implementation thereof.
Section 14. Termination for Just Cause. For purposes
of this Plan, the term "Termination for Just Cause" shall
mean termination for the commission of a wrongful action
such as theft of Company property or alcohol or drug abuse.
The Company intends that Termination for Just Cause shall be
limited to actions which are comparable to theft or
substance abuse. The determination of whether alleged
grounds for termination qualify as a Termination for Just
Cause shall be made by an Arbitration Panel (as hereinafter
defined).
Section 15. Contract Right of Participants. The Board
of Directors of the Company intends this Plan to constitute
an enforceable contract between the Company and each
Participant and intends this Plan to vest rights in such
Participants as third party beneficiaries.
Section 16. Compensation. For all purposes hereof,
except Section 3 and except to the extent provided in
Section 5 with respect to the determination of a
Participant's Bonus Amount, a Participant's compensation,
rate of base earnings, job grade, target award or similar
amounts or status shall be the higher of such amount, grade
or status (as the case may be) at the time of (i) the
occurrence of a Change in Control, or (ii) the termination
of the Participant's employment.
Section 17. Construction. Wherever any words are used
herein in the masculine gender they shall be construed as
though they were also used in the feminine gender in all
cases where they would so apply, and wherever any words are
used herein in the singular form they shall be construed as
though they were also used in the plural form in all cases
where they would so apply.
Section 18. Governing Law. This Plan shall be
governed by the law of the State of New Jersey (regardless
of the law that might otherwise govern under applicable New
Jersey principles of conflict of laws).
Section 19. Successors and Assigns. The Plan shall be
binding upon the Company and upon any assignee or successor
in interest to the Company.
Section 20. Excise Tax Reimbursement Agreements. As
soon as practicable after the Effective Date, all
Participants shall enter into excise tax reimbursement
agreements substantially in the form provided in Exhibit 20
hereto. The objective of these agreements is to reimburse
the Participants, on an after-tax basis, for any federal
excise tax or similar state or local taxes (whether or not
such taxes are in existence on the date hereof) that would
be imposed as a result of a change in control of the
Company.
Section 21. Arbitration Panel. For purposes of this
Plan, the term "Arbitration Panel" shall mean three (3)
independent arbitrators, one of whom shall be selected by
the Company, one by the Participant and the third shall be
selected by the two other arbitrators. In the event that
agreement cannot be reached on the selection of the third
arbitrator, such arbitrator shall be selected by the
American Arbitration Association. All arbitrators shall be
selected from a list provided by the American Arbitration
Association. All matters presented to the Arbitration Panel
shall be decided by majority vote. All costs of the
arbitration, including the Participant's attorneys' fees, if
any, shall be paid by the Company.
Section 22. Uniform Definition of Change in Control.
The definitions of change in control in the Retirement Plan,
Savings Plan, Warner-Lambert Company Supplemental Pension
Income Plan, Severance Policy, Warner-Lambert Supplemental
Savings Plan, Stock Option Plans, Warner-Lambert Company
1989 Stock Plan, Restricted Stock Plan for Directors of
Warner-Lambert Company, Deferred Compensation Plan for
Directors of Warner-Lambert Company and Warner-Lambert
Company Directors' Retirement Plan shall be amended to
incorporate the definition of "Change in Control" contained
in Section 4 of this Plan. To implement the foregoing, such
plans are hereby amended as provided in Exhibit 22 hereto.
Section 23. Notice of Termination. During the three
(3) year period after the occurrence of a Change in Control,
the employment of a Participant may not be terminated,
except in the event of Termination for Just Cause, unless
the Participant has received six (6) months' advance notice
of the termination in a letter written to such Participant,
which letter shall specify (i) the date of termination,
which date shall not be sooner than six (6) months after
receipt of such letter by the Participant, (ii) the reason
for termination, and (iii) a commitment to honor this Plan,
including, without limitation, the Severance Policy, and to
pay to the Participant all amounts to which the Participant
is entitled thereunder. In addition, the expiration of such
three (3) year period shall not extinguish the rights of any
Participant who has received notice of termination during
such three (3) year period (i) to a full six (6) month
notice period (even if such notice period thereby extends
beyond the three (3) year period), and (ii) to a payment of
such Participant's severance and other benefits in
accordance with the provisions of this Plan.
Section 24. Maintenance of Status Quo. Upon the
occurrence of a Change in Control, no Participant's salary,
bonus or benefits may be reduced for a period of three (3)
years provided that such Participant's performance is
acceptable. For purposes of this Section, a Participant's
performance shall be considered "acceptable" unless the
Participant receives a written performance appraisal
indicating (a) that such Participant's overall performance
(i) is not acceptable and (ii) has not been acceptable
during a performance review period extending at least six
(6) months and (b) the specific reasons the Participant's
performance is not acceptable. Further, such performance
appraisal must have been (a) reviewed and concurred in by
the Participant's supervisor, the supervisor's supervisor
(unless the Participant's supervisor is the Chief Executive
Officer of the Company) and the Participant's Human
Resources representative and (b) preceded by a written
warning given to such Participant which shall have provided
a reasonable opportunity for the Participant to improve his
or her performance.
WARNER-LAMBERT COMPANY
EXHIBIT 5
Target Annual Incentive Award
Target Percentage
Grade of Grade Midpoint
23 70%
22 65
21 58
20 55
19 52
18 49
17 39
16 37
15 34
14 31
13 28
12 24
11 20
10 16
9 8
8 5
EXHIBIT 6(a)
Retirement Plan
"The term "Activation Event" shall also include a
termination of employment with the Company (whether
voluntary or involuntary) within two (2) years after a
Change in Control for any reason other than death or
Termination for Just Cause (i) with respect to Participants
who are covered by the Executive Severance Plan at the time
of occurrence of the Change in Control, and (ii) with
respect to all other Participants (x) if the Change in
Control occurs otherwise than through a transaction approved
and authorized or consented to by the Board of Directors of
the Company, as constituted prior to such transaction, or
(y) in such other circumstance as the Board of Directors
shall deem appropriate."
EXHIBIT 6(b)
Supplemental Pension Plan
(a) an Employee shall be eligible to receive a
Supplemental Pension Income in an amount determined in
accordance with Article VI hereof if he was at salary grade
17 or higher prior to such Change in Control of the Company
and an "Activation Event" (as defined in the Executive
Severance Plan) shall have occurred with respect to such
Employee;
EXHIBIT 7
Savings Plan
"The term "Activation Event" shall also include a
termination of employment with the Company (whether
voluntary or involuntary) within two (2) years after a
Change in Control (as hereinafter defined) for any reason
other than death or Termination for Just Cause (i) with
respect to Participants who are covered by the Executive
Severance Plan at the time of occurrence of the Change in
Control, and (ii) with respect to all other Participants (x)
if the Change in Control occurs otherwise than through a
transaction approved and authorized or consented to by the
Board of Directors of the Company, as constituted prior to
such transaction, or (y) in such other circumstance as the
Board of Directors shall deem appropriate."
EXHIBIT 9(a)
Stock Option Plans
"(i) Notwithstanding any other provision contained in
this Plan, no part of an Option may be exercised unless the
Optionee remains in the continuous employ of the Company for
one year from the date the Option is granted except that
upon the occurrence of a Change in Control of Warner-Lambert
Company (as hereinafter defined) all Options may be
exercised without giving effect to the one year limitation
and the limitations, if any, which may have been imposed by
the Committee pursuant to paragraph (b)(ii) of this Article
7 with respect to the percent of the total number of shares
to which the Option relates which may be purchased from time
to time during the Option Period."
EXHIBIT 9(b)
Stock Option Plans
"(b) Exercise of Right. A Right shall become
exercisable at such time, and in respect of such number of
shares of Common Stock, as the Reference Option is then
exercisable and such Right shall terminate upon termination
of the Reference Option, provided, however, that no Right
shall be exercisable unless the Grantee shall have remained
in the continuous employ of the Company for one year from
the date the Right was granted except that upon the
occurrence of a Change in Control of Warner-Lambert Company,
all Rights may be exercised without giving effect to the one
year limitation and the limitations, if any, which may have
been imposed by the Committee pursuant to paragraph (b)(ii)
of Article 7 with respect to the percent of the total number
of shares to which the Right relates which may be purchased
from time to time during the Option Period; provided,
however, that Rights which have been held for less than six
months on the date of the occurrence of a Change in Control
by Grantees who at the time of the occurrence of the Change
in Control are subject to the reporting requirements of
Section 16(a) of the Act may be exercised only during the
thirty (30) day period beginning six months after the date
of grant of the Right, notwithstanding the termination of
the Grantee's employment with the Company, and without
giving effect to the one year limitation and the
limitations, if any, which may have been imposed by the
Committee pursuant to paragraph (b)(ii) of Article 7 with
respect to the percent of the total number of shares to
which the Right relates which may be purchased from time to
time during the Option Period. Except as provided in this
paragraph (b) and in paragraphs (d) and (e) of this Article
8, no Right shall be exercisable unless at the time of such
exercise the Grantee shall be in the employ of the Company.
The date on which the exercise of a Right is effective shall
hereinafter be referred to as the Valuation Date."
EXHIBIT 9(c)
Stock Option Plans
"(f) Notwithstanding anything herein to the contrary,
Limited Rights may be granted hereunder by the Compensation
Committee with respect to the Options granted under the Plan
(which are not Reference Options), which shall be
exercisable only upon the occurrence of a Change in Control.
Such Limited Rights may only be exercised by Optionees
during the thirty (30) day period beginning on the date of
the occurrence of a Change in Control unless (i) at the time
of the occurrence of the Change in Control such Optionee is
subject to the reporting requirements of Section 16(a) of
the Act and (ii) such event occurs within six (6) months of
the date of grant, in which case such Limited Rights may
only be exercised during the thirty (30) day period
beginning six (6) months after the grant of the Limited
Rights. During the period specified in the preceding
sentence, such Limited Rights may be exercised notwith-
standing the termination of the Optionee's employment with
the Company. Upon the exercise of a Limited Right, the
Optionee shall be entitled to receive a cash payment equal
to the excess of the Fair Market Value of a share of Common
Stock on the Valuation Date over the Option Price of the
related Option multiplied by the number of shares with
respect to which the Limited Right is being exercised (in
such case the method of determining the Fair Market Value in
the third sentence of Section 6(i) shall apply). Limited
Rights shall expire on the first to occur of the date of
exercise or expiration of the right of exercise of the
Limited Right or of the related Option. Further, upon
exercise of a Limited Right, the related Option shall be
cancelled. The Board of Directors reserves the right to
cancel all outstanding Limited Rights in accordance with
Sections 11 and 12 of the Executive Severance Plan. Except
as otherwise provided herein, the provisions of the Plan
relating to Rights shall also apply to Limited Rights."
EXHIBIT 9(d)
Stock Option Plans
"Notwithstanding anything herein to the contrary, this
Option may be exercised in full as of the date on which
there occurs a "Change in Control of Warner-Lambert Company"
(as defined in the Plan).
Further, you are hereby granted Limited Rights (as
defined in the Plan) with respect to those Options presently
held by you which were not granted in tandem with Rights.
These Limited Rights may only be exercised by you during the
thirty (30) day period beginning on the date of the
occurrence of a "Change in Control" (as hereinafter defined)
unless (i) you are subject to the reporting requirements of
Section 16(a) of the Securities Exchange Act of 1934, as
amended (the "Act"), at the time of the occurrence of the
Change in Control (a "Reporting Person") and (ii) such
Change in Control occurs within six (6) months of the date
of grant of the Limited Rights, in which case these Limited
Rights may only be exercised during the thirty (30) day
period beginning six (6) months after the date of grant of
the Limited Rights. Lastly, upon exercise of a Limited
Right, you shall be entitled to receive a cash payment equal
to the excess of the "Fair Market Value" (as defined in the
Plan) of a share of Common Stock on the date of exercise
over the Option Price multiplied by the number of shares
with respect to the Limited Right is being exercised.
Notwithstanding the foregoing, the Company reserves the
right to cancel all outstanding Limited Rights in the event
that the Board of Directors of the Company cancels the
Executive Severance Plan. Except as otherwise provided
herein, the provisions of the Plan relating to Rights shall
also apply to Limited Rights.
In addition, notwithstanding anything herein to the
contrary, Rights which are outstanding on the date of the
occurrence of a Change in Control may be exercised in full;
provided, however, that if you are a Reporting Person and
the Change in Control occurs within six (6) months after the
date of grant of the Right, the Right may only be exercised
during the thirty (30) day period beginning six (6) months
after the date of grant of the Right.
For purposes hereof, a Change in Control shall be
deemed to have occurred if (i) any person (as such term is
used in Sections 13(d) and 14(d)(2) of the Act) is or
becomes the beneficial owner (as defined in Rule 13d-3 under
the Act), directly or indirectly, of securities of the
Company representing 20% or more of the combined voting
power of the Company's then outstanding securities, (ii) the
stockholders of the Company approve a merger, consolidation,
sale or disposition of all or substantially all of the
Company's assets or plan of liquidation or (iii) the
composition of the Board of Directors of the Company at any
time during any consecutive twenty-four (24) month period
changes such that the Continuity Directors (as hereinafter
defined) cease for any reason to constitute at least fifty-
one percent (51%) of the Board. For purposes of the
foregoing clause (iii), "Continuity Directors" means those
members of the Board who either (a) were directors at the
beginning of such consecutive twenty-four (24) month period,
or (b)(1) filled a vacancy during such twenty-four (24)
month period created by reason of (x) death, (y) a medically
determinable physical or mental impairment which renders the
director substantially unable to function as a director or
(z) retirement at the last mandatory retirement age in
effect for at least two (2) years, and (2) were elected,
nominated or voted for by at least fifty-one percent (51%)
of the current directors who were also directors at the
commencement of such twenty-four (24) month period."
EXHIBIT 9(e)
Stock Plans
1. Section 4.6 of the Warner-Lambert Company 1989
Stock Plan, the Warner-Lambert Company 1992 Stock Plan and
the Warner-Lambert Company 1996 Stock Plan shall be amended
by adding "(a)" before the first sentence thereof and by
adding the following as (b) at the end thereof and Section
6(h) of the Warner-Lambert Company 1983 Stock Option Plan
and the Warner-Lambert Company 1987 Stock Option Plan shall
be amended by adding "(I)" before the first sentence thereof
and by adding the following as (II) at the end thereof:
"As used in the Plan, a "Merger of Equals" shall mean
either: (a) a Change in Control of Warner-Lambert Company,
pursuant to the terms of which the stockholders of Warner-
Lambert Company receive consideration, including securities,
with an Aggregate Value (as defined below) not greater than
115 percent of the average closing price of the Common Stock
of Warner-Lambert Company on the Composite Tape for New York
Stock Exchange issues for the twenty business days
immediately preceding the earlier of the execution of the
definitive agreement pertaining to the transaction or the
public announcement of the transaction; or (b) any other
Change in Control of Warner-Lambert Company which the Board
of Directors, in its sole discretion, determines to be a
"Merger of Equals" for the purposes of this provision. For
purposes of this section, "Aggregate Value" shall mean the
consideration to be received by the stockholders of Warner-
Lambert Company equal to the sum of (A) cash, (B) the value
of any securities and (C) the value of any other non-cash
consideration. The value of securities received shall equal
the average closing price of the security on the principal
security exchange on which such security is listed for the
twenty business days immediately preceding the earlier of
the execution of the definitive agreement pertaining to the
transaction or the public announcement of the transaction.
For securities not traded on a security exchange, and for
any other non-cash consideration that is received, the value
of such security or such non-cash consideration shall be
determined by the Board of Directors."
2. The Warner-Lambert Company 1989 Stock Plan, the Warner-
Lambert Company 1992 Stock Plan and the Warner-Lambert
Company 1996 Stock Plan shall be amended by adding the
following as new Section 5.9 and the Warner-Lambert Company
1983 Stock Option Plan and the Warner-Lambert Company 1987
Stock Option Plan shall be amended by adding the following
as new Section 7(h):
"Rollover Option. Notwithstanding anything herein to
the contrary, in the event of a Merger of Equals all Options
granted hereunder shall become immediately exercisable by
the Optionee and the Options shall be converted into options
to purchase the stock of the company which other
shareholders of Warner-Lambert Company receive in the
transaction (the "Rollover Options"). The Rollover Options
shall be subject to the same terms and conditions as those
applicable to the Options held prior to the Merger of
Equals, including, but not limited to, exercisability and
Option Period, except as hereinafter provided. If the
Aggregate Value consists only of shares of a publicly traded
security ("New Security"), each Rollover Option shall
entitle the holder to purchase the number of shares of New
Security which is equal to the product of (a) the Exchange
Ratio (as hereinafter defined) and (b) the number of shares
of Common Stock subject to the Option immediately prior to
the effective date of the Merger of Equals (rounded to the
nearest full number of shares). The exercise price for each
Rollover Option shall be the exercise price per share of
each Option divided by the Exchange Ratio (rounded to the
nearest full cent). For purposes hereof, "Exchange Ratio"
shall mean the ratio for exchanging Common Stock held by the
stockholders of Warner-Lambert Company for shares of New
Security which is set forth in the definitive agreement
pertaining to the transaction. If the Aggregate Value
consists of consideration other than New Securities, the
Board shall make appropriate adjustments to the number of
Rollover Options and the exercise price thereof. In
addition, with respect to Options granted after March 25,
1997, if an optionee who is not 55 years old is terminated
within three (3) years following the Merger of Equals (for a
reason other than "Termination for Just Cause," as defined
in the Warner-Lambert Company Enhanced Severance Plan), such
optionee's Options shall remain exercisable notwithstanding
such termination of employment by the Company or any
successor or its affiliates and such Options shall be
exercisable until two years following the termination of
employment, but in no event after the expiration of the
Option Period."
EXHIBIT 20
This AGREEMENT, made and entered into as of June __,
1990 (this "Agreement"), between Warner-Lambert Company, a
Delaware corporation (the "Company"), and ________________
_________________________ (the "Executive").
WHEREAS, the Executive is a highly valued employee of
the Company; and
WHEREAS, the Company has awarded the Executive, in the
ordinary course of business and during the Executive's
employment with the Company, certain employee benefits,
including, but not limited to, employee stock options, that
are designed to compensate the Executive for his services to
the Company and to give him incentive to expend every effort
to produce the best results for the benefit of the Company's
shareholders; and
WHEREAS, in light of the economic climate and in an
effort to foster a sense of job security for the Executive,
the Company and the Executive have entered into certain
arrangements (the "Executive Compensation Arrangements")
regarding the Executive's employee benefits, including, but
not limited to, arrangements regarding the accelerated
vesting of employee stock options and the payment of
severance, that are designed to preserve the Executive's
benefits in the event of a change in control of the Company;
and
WHEREAS, there exists uncertainty in the tax law
whether, and/or to what extent, the Executive Compensation
Arrangements will subject the Executive to the tax imposed
by Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), or any similar state or local taxes,
(all such taxes, whether or not in existence on the date
hereof, being collectively referred to herein as the "Excise
Tax") thereby diminishing the value of the employee benefits
to which the Executive is entitled;
NOW, THEREFORE, in consideration of the mutual premises
and covenants contained herein, the Company and the
Executive do hereby covenant and agree as follows:
1. Special Payments. In the event that the Executive
becomes entitled to any payments and such payments, or any
part thereof, will be subject to the Excise Tax, the Company
shall pay to the Executive, in accordance with the
provisions set forth below, an additional amount (a "Special
Payment") that may be necessary to reimburse the Executive,
on an after-tax basis, for any Excise Tax that may be
imposed by reason of such payments, or any portion thereof,
and for any federal, state and local income tax and Excise
Tax that may be imposed by reason of the Special Payment.
2. Calculation of Excise Tax and Special Payment. The
Special Payment shall be paid to the Executive as promptly
as practicable following a change in control of the Company
once Price Waterhouse has calculated the estimated Excise
Tax to be imposed on the Executive, except as otherwise
provided in paragraph 3. For purposes of determining
whether any payments will be subject to Excise Tax and the
amount of such Excise Tax, all amounts in any manner
connected with a change in control, whether received by the
Executive at such time or not and including amounts which
the Executive has the right to receive in the future as a
result of the change in control (i) shall be treated as
"parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute payments"
within the meaning of Section 280G(b)(1) of the Code shall
be treated as subject to the Excise Tax, and (ii) the value
of any non-cash benefits or any deferred payment or benefit
shall be determined by Price Waterhouse in accordance with
the principles of Section 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of any Special
Payment, the Executive shall be deemed to pay state and
local income taxes at the highest marginal rate of taxation
imposed by the state and locality in which the Executive
resides or is employed (or both) in the calendar year in
which the Special Payment is to be made, and federal income
taxes at the highest marginal rate of taxation in the
calendar year in which the Special Payment is to be made,
net of the maximum reduction in federal income taxes which
could be obtained from deduction of such state and local
taxes. At no additional cost to the Executive, Price
Waterhouse shall be responsible for completing and filing
appropriate tax returns for the Executive in connection with
the Special Payment hereunder, consistent with Price
Waterhouse's calculation of such Special Payment.
3. Subsequent Special Payment. In the event that
Price Waterhouse shall determine that payments may be
subject to the Excise Tax if made but that it is uncertain
whether such payments will in fact be made, for example,
payments of severance that will only be made if the
Executive terminates his employment, or in the event that
Price Waterhouse shall determine that payments are not
subject to the Excise Tax but that there is a possibility of
such payments being so treated, Price Waterhouse shall
provide the Company and the Executive with an estimate of
the maximum amount of the Special Payment that might be
required to be paid pursuant to this Agreement. Thereupon
the Company shall promptly transfer to a trustee of an
irrevocable trust commonly known as a "Rabbi Trust" the
maximum additional amount of cash estimated to be necessary
to satisfy the Company's obligations under this Agreement
after taking into consideration any Special Payments
previously made to the Executive. The existence of such
trust shall not discharge the Company's obligations
hereunder and the Company shall continue to have the
obligation to make such payments except to the extent that
payments are actually made to the Executive from such fund.
Additional Special Payments shall be made to the Executive
upon a determination by Price Waterhouse that subsequent
payments received by the Executive, for example, payments of
severance following termination of employment, will result
in additional Excise Tax.
4. Adjustment of Special Payments. (a) In the event
that subsequently enacted or decided statutes, regulations,
administrative rulings or case law indicate, in the view of
Price Waterhouse, that the calculation of the Excise Tax
previously made by Price Waterhouse overstates the
Executive's liability for such Excise Tax, the Company may
direct the Executive, at the Company's sole expense, to file
for a refund of such Excise Tax or take such other actions
as Price Waterhouse reasonably may request in order to
reduce the Executive's liability for Excise Tax and to
ensure that the payments and any Special Payments made to
the Executive pursuant to this Agreement are not determined
to be "parachute payments" within the meaning of Section
280G(b)(2) of the Code, provided that the Company shall have
taken consistent positions on its tax returns and the
Company has issued similar directives to all similarly
situated executives or former executives of the Company who
have received Excise Tax reimbursement payments. The
Executive shall cooperate in good faith in assisting the
Company and Price Waterhouse in their actions pursuant to
this paragraph 4(a).
(b) If it shall be determined, following the
payment to the Executive of the Special Payment, in a final
judicial determination or a final administrative settlement
to which the Executive is a party that the calculation of
the Excise Tax and/or the Special Payment is in error, then
Price Waterhouse will determine the amount (the "Adjustment
Amount"), if any, which the Executive must pay to the
Company or the Company must pay to the Executive, as the
case may be, in order to put the Executive in the same
position, after taking account of any and all taxes
(including penalties and interest) paid by or for the
Executive or refunded to or for the benefit of the Executive
and of the value to the Executive of any and all tax
deductions allowed or disallowed with respect to any
adjustment made in such determination or settlement or
pursuant to this clause, as he would have been in had he
received the Special Payment using the calculations set
forth in such determination or settlement; provided,
however, that as soon as practicable after the Adjustment
Amount has been so determined, the Company shall pay the
Adjustment Amount to the Executive, or the Executive shall
pay the Adjustment Amount to the Company, as the case may
be. In the event that the amount of the estimated Special
Payment exceeds the amount subsequently determined to have
been due, such excess shall constitute a loan by the Company
to the Executive payable on the fifth day after demand by
the Company (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code).
(c) The Executive will promptly notify the Company
in writing whenever he receives notice of the institution of
a judicial or administrative proceeding, formal or informal,
in which the federal tax treatment of any amount paid or
payable under this Agreement is being reviewed or is in
dispute. The Company agrees that, in the event it desires
the claim to be contested, it shall request promptly (but in
no event later than 30 days after notice from the Executive
or such earlier period as the Internal Revenue Service may
specify for responding to such claim) that the Executive
contest the claim. Unless required by law, the Executive
agrees not to make any payment of any tax which is the
subject of the claim before he has given the notice or
during the 30-day period thereafter unless he receives
written instruction from the Company to make such payment,
in which case the Executive will act promptly in accordance
with such instructions. If the Company requests that the
Executive contest the claim and provides the Executive with
an opinion of its counsel, at the Company's sole expense,
setting forth the facts and legal analysis on which it is
based, to the effect that there exists a substantial
likelihood of success in contesting the claim, the Executive
will contest the claim by pursuing administrative remedies,
suing for a refund in the appropriate court or contesting
the claim in the United States Tax Court, all at the
Company's sole expense. If requested by the Company in
writing, the Executive will, at the sole expense of the
Company, take all reasonably necessary actions not adverse
to the Executive to compromise or settle the claim, but in
no event will the Executive compromise or settle the claim
or cease to contest the claim without the written consent of
the Company, which consent shall not be unreasonably
withheld. The Executive agrees, at the sole expense of the
Company, to take appropriate appeals of any judgment or
decision that would require the Company to make a Special
Payment under paragraph 1 if requested by the Company and if
the Executive is provided with an opinion of the Company's
counsel, at the Company's sole expense, setting forth the
facts and legal analysis on which it is based, to the effect
that there exists a substantial likelihood of success on
appeal.
(d) The Company shall pay or reimburse the
Executive from time to time, within five business days after
presentation of reasonable documentation therefor, for all
costs and expenses, including reasonable attorney's fees
incurred as a result of contesting a claim or seeking a
refund with respect to Excise Taxes.
(e) Should the Company fail to provide direction
to the Executive in accordance with the provisions of this
Paragraph 4, the Executive, promptly following the
Executive's written request for such direction, shall take
whatever action he deems appropriate (the Company having no
right to later challenge that decision) and it shall be
deemed that the Company requested him to take that action.
5. State or Local Taxes. All issues surrounding the
application of any Excise Tax which is a state or local tax
shall be resolved by Price Waterhouse based upon the
principles underlying the purpose of this Agreement and by
reference to the methodology, to the extent relevant,
established in Paragraphs 2, 3, and 4 hereof.
6. Amendment; Waiver. This Agreement may not be
modified, amended, waived or terminated in any manner except
by an instrument in writing signed by both parties hereto.
At any time prior to a change in control, the Board of
Directors of the Company may substitute another firm of
certified public accountants. The waiver by either party of
compliance with any provision of this Agreement by the other
party shall not operate or be construed as a waiver of any
other provision of this Agreement, or of any subsequent
breach by such party of a provision of this Agreement.
7. Governing Law. All matters affecting this
Agreement, including the validity thereof, are to be
governed by, interpreted and construed in accordance with
the laws of the State of New Jersey, except provisions
relating to conflict of laws.
8. Notices. Any notice hereunder by either party to
the other shall be given in writing by personal delivery or
certified mail, return receipt requested. If addressed to
the Executive, the notice shall be delivered or mailed to
the Executive at the address specified under the Executive's
signature hereto, or if addressed to the Company, the notice
shall be delivered or mailed to the Company at its executive
offices to the attention of Vice President and General
Counsel. A notice shall be deemed given, if by personal
delivery, on the date of such delivery or, if by certified
mail, on the date shown on the applicable return receipt.
9. Counterparts. This Agreement may be executed by
either of the parties hereto in counterpart, each of which
shall be deemed to be an original, but all such counterparts
shall together constitute one and the same instrument.
10. Headings. The headings of paragraphs herein are
included solely for convenience of reference and shall not
control the meaning or interpretation of any of the
provisions of this Agreement.
IN WITNESS WHEREOF, the Company has caused the
Agreement to be signed by its officer pursuant to the
authority of its Board of Directors, and the Executive has
executed this Agreement, as of the day and year first
written above.
WARNER-LAMBERT COMPANY
By __________________________
Name:
Title:
[NAME]
______________________________
Address:
EXHIBIT 22
1. The third sentence of the second paragraph of
Section 1 of Article XXI of the Retirement Plan, the second
sentence of the second paragraph of Section 14.1 of Article
14 of the Savings Plan, Section 13.2 of Article XIII of the
Supplemental Pension Income Plan, the second sentence of the
second paragraph of Section 11.1 of Article 11 of the
Supplemental Savings Plan, Article 6(h) of the Stock Option
Plans and the first sentence of Section 4.6 of the Warner-
Lambert Company 1989 Stock Plan, are hereby amended by
deleting the phrase "(with respect to persons who are not
participants in the Warner-Lambert Executive Severance
Plan)".
2. Section 11.2 of Article XI of the Warner-Lambert
Company Directors' Retirement Plan, the last sentence of
Section 4.6 of Article IV of the Deferred Compensation Plan
for Directors of Warner-Lambert Company and Section 4.5(b)
of the Restricted Stock Plan for Directors of Warner-Lambert
Company are hereby amended by adding the following provision
at the end thereof:
"or (iii) the composition of the Board at any time
during any consecutive twenty-four (24) month period
changes such that the Continuity Directors (as
hereinafter defined) cease for any reason to constitute
at least fifty-one percent (51%) of the Board. For
purposes of the foregoing clause (iii), "Continuity
Directors" means those members of the Board who either
(a) were directors at the beginning of such consecutive
twenty-four (24) month period, or (b)(1) filled a
vacancy during such twenty-four (24) month period
created by reason of (x) death, (y) a medically
determinable physical or mental impairment which
renders the director substantially unable to function
as a director or (z) retirement at the last mandatory
retirement age in effect for at least two (2) years,
and (2) were elected, nominated or voted for by at
least fifty-one percent (51%) of the current directors
who were also directors at the commencement of such
twenty-four (24) month period."