-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Krh9LuNNtWp+Xr2PgG5pQO7HF/jdi0/iwJknpSw6hS7nCJaztlY/YFRY6+SSexWW NNmqRSuUBVhaWEGRv9go2Q== 0000005187-02-000005.txt : 20020415 0000005187-02-000005.hdr.sgml : 20020415 ACCESSION NUMBER: 0000005187-02-000005 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WYETH CENTRAL INDEX KEY: 0000005187 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 132526821 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-01225 FILM NUMBER: 02593045 BUSINESS ADDRESS: STREET 1: 5 GIRALDA FARMS CITY: MADISON STATE: NJ ZIP: 07940 BUSINESS PHONE: 9736605000 MAIL ADDRESS: STREET 1: 5 GIRALDA FARMS CITY: MADISON STATE: NJ ZIP: 07940 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN HOME PRODUCTS CORP DATE OF NAME CHANGE: 19920703 10-K405 1 ann10k01.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended Commission file number December 31, 2001 1-1225 ----------------- ------ Wyeth ----- (Exact name of registrant as specified in its charter) Delaware 13-2526821 - ----------------------------------------- ---------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) Number) Five Giralda Farms, Madison, NJ 07940-0874 - ----------------------------------------- ---------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (973) 660-5000 -------------- Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered - ----------------------------------------- ---------------------------------- $2 Convertible Preferred Stock, $2.50 par value New York Stock Exchange - ----------------------------------------- ---------------------------------- Common Stock, $0.33 - 1/3 par value (including Preferred Stock Purchase Rights) New York Stock Exchange - ----------------------------------------- ---------------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] State the aggregate market value of the voting stock held by nonaffiliates of the registrant. The aggregate market value shall be computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within 60 days prior to the date of filing. Aggregate market value at March 1, 2002 $85,846,161,028 Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Outstanding at March 1, 2002 ------------- Common Stock, $0.33 - 1/3 par value 1,323,765,012 Documents incorporated by reference: List hereunder the following documents if incorporated by reference and the Part of the Form 10-K into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statements; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes. (1) 2001 Annual Report to Stockholders - In Parts I, II and IV - -------------------------------------------------------------- (2) Proxy Statement filed on March 20, 2002 - In Part III - --------------------------------------------------------- PART I ------ ITEM 1. BUSINESS -------- General ------- Wyeth, which on March 11, 2002 changed its name from American Home Products Corporation (the "Company"), a Delaware corporation organized in 1926, is currently engaged in the discovery, development, manufacture, distribution and sale of a diversified line of products in two primary businesses: Pharmaceuticals and Consumer Health Care. Pharmaceuticals include branded and generic human ethical pharmaceuticals, biologicals, nutritionals, and animal biologicals and pharmaceuticals. Principal products include women's health care products, neuroscience therapies, cardiovascular products, infant nutritionals, gastroenterology drugs, anti-infectives, vaccines, biopharmaceuticals, oncology therapies, musculoskeletal therapies, hemophilia treatments and immunological products. Principal animal health products include vaccines, pharmaceuticals, endectocides and growth implants. Consumer Health Care products include analgesics, cough/cold/allergy remedies, nutritional supplements, herbal products, and hemorrhoidal, antacid, asthma and other relief items sold over-the-counter. Unless stated to the contrary, or unless the context otherwise requires, references to the Company in this report include Wyeth and its majority-owned subsidiaries. On December 17, 2001, Amgen Inc. and Immunex Corporation ("Immunex") signed a definitive agreement providing for Amgen to acquire Immunex in a merger transaction. Under the terms of the agreement, each share of Immunex common stock will be exchanged for 0.44 shares of Amgen common stock and cash of $4.50. As part of the agreement, Amgen will acquire the 41% ownership in Immunex held by Wyeth at December 31, 2001 for the same consideration per share, providing Wyeth with approximately $1.0 billion in cash and approximately an 8% ownership in Amgen. Wyeth has agreed to vote its shares in favor of the transaction. The transaction is anticipated to close in the second half of 2002, subject to approval by shareholders of both companies, as well as customary regulatory approvals. In October 2000, the Company increased its ownership in Immunex from approximately 53% to approximately 55% by converting a $450 million convertible subordinated note into 15,544,041 newly issued shares of common stock of Immunex. In November 2000, through a public equity offering, the Company sold 60.5 million shares of Immunex common stock. Proceeds to the Company were approximately $2.405 billion resulting in a pre-tax gain on the sale of $2.061 billion. The public equity offering reduced the Company's ownership in Immunex from approximately 55% to approximately 41%, which represented the ownership at December 31, 2000. As a result of the reduction in ownership below 50%, the Company included the financial results of Immunex on an equity basis retroactive to January 1, 2000. On March 20, 2000, the Company signed a definitive agreement with BASF Aktiengesellschaft ("BASF") to sell the Cyanamid Agricultural Products business, which manufactures, distributes, and sells crop protection and pest control products worldwide. On June 30, 2000, the sale was completed and BASF paid the Company $3.8 billion in I-1 cash and assumed certain debt. The Company recorded an after-tax loss on the sale of this business of $1.573 billion and reflected this business as a discontinued operation in the 2000 first quarter. The loss on the sale was due primarily to a difference in the basis of the net assets sold for financial reporting purposes compared with the Company's basis in such net assets for tax purposes. This difference related, for the most part, to goodwill, which is not recognized for tax purposes. As a result, the transaction generated a taxable gain requiring the recording of a tax provision, in addition to a book loss related to a write-off of net assets in excess of the selling price. In July 1998, the Company purchased the vitamin and nutritional supplement products business of Solgar Vitamin and Herb Company Inc. and its related affiliates ("Solgar") for approximately $425 million in cash. In February 1998, the Company sold the Sherwood-Davis & Geck medical devices business for approximately $1.770 billion. This transaction completed the Company's exit from the medical devices business. In December 1997, the Company sold the stock of Storz Instrument Company and affiliated companies ("Storz"), a global manufacturer and marketer of ophthalmic products, and certain assets related to the Storz business for approximately $380 million. In February 1997, the Company purchased the worldwide animal health business of Solvay S.A. for approximately $460 million in cash. Additional information relating to Cyanamid Agricultural Products business disposition is set forth in Note 2 of the Notes to Consolidated Financial Statements in the Company's 2001 Annual Report to Stockholders and is incorporated herein by reference. Also included in Note 2 is additional information relating to the proposed acquisition of Immunex by Amgen and the sale of a portion of the Company's investment in Immunex common stock in 2000. Operating Segments ------------------ Financial information, by operating segment, for the three years ended December 31, 2001 is set forth in Note 13 of the Notes to Consolidated Financial Statements in the Company's 2001 Annual Report to Stockholders and is incorporated herein by reference. The Company has three reportable segments: Pharmaceuticals, Consumer Health Care, and Corporate. The Company's Pharmaceuticals and Consumer Health Care reportable segments are strategic business units that offer different products and services. The reportable segments are managed separately because they manufacture, distribute and sell distinct products and provide services, which require various technologies and marketing strategies. The Company is not dependent on any single customer or major group of customers for its net revenue. The product designations appearing in differentiated type herein are trademarks. I-2 PHARMACEUTICALS SEGMENT The Pharmaceuticals segment manufactures, distributes, and sells branded and generic human ethical pharmaceuticals, biologicals, nutritionals, and animal biologicals and pharmaceuticals. These products are promoted and sold worldwide primarily to wholesalers, pharmacies, hospitals, physicians, retailers, veterinarians, and other human and animal health care institutions. Some of these sales are made to large buying groups representing certain of these customers. Principal product categories for human use and their respective products are: women's health care products including PREMARIN, PREMPRO, PREMPHASE, ALESSE and TRIPHASIL (marketed as TRINORDIOL internationally); neuroscience therapies including ATIVAN, EFFEXOR (marketed as EFEXOR internationally) and EFFEXOR XR; cardiovascular products including CORDARONE and CORDARONE I.V.; infant nutritionals including S26 and 2ND AGE PROMIL (international markets only); gastroenterology drugs including ZOTON (international markets only) and PROTONIX (U.S. market only); anti-infectives including MINOCIN and ZOSYN (marketed as TAZOCIN internationally); vaccines including PREVNAR (marketed as PREVENAR internationally); biopharmaceuticals; oncology therapies; musculoskeletal therapies including ENBREL (which, under an agreement, is co-promoted by Wyeth and Immunex in the United States and Canada with Wyeth having exclusive international rights to the product) and SYNVISC; hemophilia treatments including BENEFIX Coagulation Factor IX (Recombinant), REFACTO albumin-free formulated Factor VIII (Recombinant) and Factor VIII-full length recombinant; and immunological products. Principal animal health product categories include vaccines, pharmaceuticals, endectocides including CYDECTIN, and growth implants. The Company manufactures these products in the United States and Puerto Rico, and in 18 foreign countries. Accounting for more than 10% of consolidated net revenue in 2001, 2000 and 1999, respectively, were sales of women's health care products, in the aggregate, of $2.8 billion, $2.7 billion and $2.6 billion, and sales of the PREMARIN family of products individually, of $2.1 billion, $1.9 billion and $1.8 billion. In addition, sales of the EFFEXOR family of products, in the aggregate, of $1.5 billion accounted for more than 10% of consolidated net revenue in 2001. Except for the products noted above, no other single pharmaceutical product or category of products accounted for more than 10% of consolidated net revenue in 2001, 2000 or 1999. CONSUMER HEALTH CARE SEGMENT The Consumer Health Care segment manufactures, distributes and sells over-the-counter health care products. Principal consumer health care product categories and their respective products are: analgesics including ADVIL; cough/cold/allergy remedies including ROBITUSSIN and DIMETAPP; nutritional supplements including CENTRUM products, CALTRATE and SOLGAR products; herbal products and hemorrhoidal, antacid, asthma and other relief items including CHAP STICK. These products are generally sold to wholesalers and retailers and are promoted primarily to consumers worldwide through advertising. These products are manufactured in the United States and Puerto Rico, and in 11 foreign countries. I-3 No single consumer health care product or category of products accounted for more than 10% of consolidated net revenue in 2001, 2000 or 1999. CORPORATE SEGMENT Corporate is responsible for the treasury, tax and legal operations of the Company's businesses and maintains and/or incurs certain assets, liabilities, expenses, gains and losses related to the overall management of the Company which are not allocated to the other reportable segments. These items include special charges, interest expense and interest income, gains on the sales of investments and other corporate assets, including the sale of Immunex common stock, the termination fee received from the Warner-Lambert Company, certain litigation provisions, including the REDUX and PONDIMIN litigation charges, goodwill impairment and other miscellaneous items. Sources and Availability of Raw Materials ----------------------------------------- Generally, raw materials and packaging supplies are purchased in the open market from various outside vendors. The loss of any one source of supply would not have a material adverse effect on the Company's future results of operations. However, finished dosage forms of ENBREL (which, under an agreement, is co-promoted by Wyeth and Immunex in the United States and Canada with Wyeth having exclusive international rights to the product) and PROTONIX are produced by one third-party manufacturer, and raw materials for certain oral contraceptives, EFFEXOR, EFFEXOR XR and ZOSYN are sourced from sole third-party suppliers. Patents and Trademarks ---------------------- Patent protection is considered to be of material importance in the Company's marketing of pharmaceutical products in the United States and in most major foreign markets. Patents may cover product formulations, processes for or intermediates useful in the manufacture of products, or the uses of products. Protection for individual products extends for varying periods in accordance with the date of grant and the legal life of patents in countries in which patents are granted. The protection afforded, which may also vary from country to country, depends upon the type of patent and its scope of coverage. The Company believes that its patents and licenses are important to its business, but no one patent or license (or group of related patents or licenses) currently is of material importance in relation to its business as a whole. Patent portfolios developed for products introduced by the Company normally provide market exclusivity. Patents are in effect for the following major products in the United States. SYNVISC, a visco supplementation for treatment of osteoarthritis of the knee, will have patent protection until at least 2010. The anti-infective ZOSYN will have patent protection until at least 2007. The tumor necrosis factor receptor (TNFR) ENBREL (which, under an agreement, is co-promoted by Wyeth and Immunex in the United States and Canada with Wyeth having exclusive international rights to the product), will have patent protection until at least 2014. The anti-depressant EFFEXOR has patent protection until at least 2007 and EFFEXOR XR has patent protection until at least 2017. PREMPRO, a combination estrogen and progestin product, will have patent protection until at least 2015. BENEFIX Coagulation Factor IX (Recombinant), a blood I-4 clotting factor for hemophilia B, will have patent protection until 2011. REFACTO, a recombinant factor VIII product without human serum albumin, will have patent protection until 2010. PREVNAR, the Company's seven-valent pneumococcal conjugate vaccine has patent protection until 2004 and patent extension under the Hatch-Waxman Act has been applied for, which would extend exclusivity until 2007. PROTONIX, the Company's product for the short-term treatment of erosive esophagitis, is expected to have patent protection until 2007, based on a pending Hatch-Waxman application. The Company has other patent rights covering additional products that have smaller net revenues. Patents on some of its newest products and late-stage product candidates could become significant to the Company's business in the future. While the expiration of a product patent normally results in a loss of market exclusivity for the covered product, commercial benefits may continue to be derived from: (i) later-granted patents on processes and intermediates related to the most economical method of manufacture of the active ingredient of such product; (ii) patents relating to the use of such product; (iii) patents relating to novel compositions and formulations; and (iv) in the United States, market exclusivity that may be available under federal law. The effect of product patent expiration also depends upon many other factors such as the nature of the market and the position of the product in it, the growth of the market, the complexities and economics of the process for manufacture of the active ingredient of the product and the requirements of new drug provisions of the Federal Food, Drug and Cosmetic Act or similar laws and regulations in other countries. Additions to market exclusivity are sought in the United States and other countries through all relevant laws, including laws increasing patent life. Some of the benefits of increases in patent life have been partially offset by a general increase in the number of, incentives for and use of generic products. In addition, improvements in intellectual property laws are sought in the United States and other countries through reform of patent and other relevant laws and implementation of international treaties. Sales in the consumer health care business are largely supported by the Company's trademarks and brand names. These trademarks and brand names are a significant part of the Company's business and in some countries have a perpetual life as long as they remain in use. In some other countries, trademark protection continues as long as registered. Registration is for fixed term and can be renewed indefinitely. Seasonality ----------- Sales of consumer health care products are affected by seasonal demand for cough/cold products and, as a result, second quarter results for consumer health care products tend to be lower than results in other quarters. I-5 Competition ----------- PHARMACEUTICALS SEGMENT The Company operates in the highly competitive pharmaceutical industry, which includes the human ethical pharmaceutical and animal health businesses. Within these businesses, the Company has many major multinational competitors and numerous smaller domestic and foreign competitors. Based on net revenue, the Company believes it ranks within the top 10 major competitors within the human ethical pharmaceutical industry and ranks within the top five major competitors within the animal health industry. The Company's competitive position is affected by several factors including prices, costs and resources available to develop, enhance and promote products, customer acceptance, product quality and efficiency, patent protection, development of alternative therapies by competitors, scientific and technological advances, the availability of generic substitutes and governmental actions affecting pricing and generic substitutes. In the United States, the growth of managed care organizations, such as health maintenance organizations and pharmaceutical benefit management companies, has resulted in increased competitive pressures. Moreover, the continued growth of generic substitutes is further promoted by legislation, regulation and various incentives enacted and promulgated in both the public and private sectors. PREMARIN, the Company's principal conjugated estrogens product manufactured from pregnant mare's urine, and related products PREMPRO and PREMPHASE (which are single tablet combinations of the conjugated estrogens in PREMARIN and the progestin medroxyprogesterone acetate), are the leaders in their categories and contribute significantly to net revenue and results of operations. PREMARIN's natural composition is not subject to patent protection (although PREMPRO has patent protection). The principal uses of PREMARIN, PREMPRO and PREMPHASE are to manage the symptoms of menopause and to prevent osteoporosis, a condition involving a loss of bone mass in postmenopausal women. Estrogen-containing products manufactured by other companies have been marketed for many years for the treatment of menopausal symptoms, and several of these products also have an approved indication for the prevention of osteoporosis. During the past several years, other manufacturers have introduced products for the treatment and/or prevention of osteoporosis. New products containing different estrogens than those found in PREMPRO and PREMPHASE and having many forms of the same indications have also been introduced. Some companies have attempted to obtain approval for generic versions of PREMARIN. These products, if approved, would be routinely substitutable for PREMARIN and related products under many state laws and third-party insurance payer plans. In May 1997, the U.S. Food and Drug Administration ("FDA") announced that it would not approve certain synthetic estrogen products as generic equivalents of PREMARIN given known compositional differences between the active ingredient of these products and PREMARIN. Although the FDA has not approved any generic equivalent to PREMARIN to date, PREMARIN will continue to be subject to competition from existing and new competing estrogen and other products for its approved indications and may be subject to generic competition from either synthetic or natural conjugated estrogens products in the future. At least one other company has announced that it is in the process of developing a generic version of PREMARIN I-6 from the same natural source, and the Company currently cannot predict the timing or outcome of these or any other efforts. The Company has been experiencing inconsistent results on dissolution testing of certain dosage strengths of PREMARIN and is working with the FDA to resolve this issue. Until this issue is resolved, supply shortages of one or more dosage strengths may occur. Although these shortages may adversely affect PREMARIN sales in one or more accounting periods, the Company believes that, as a result of current adequate inventory levels and the Company's enhanced process controls, testing protocols and an ongoing formulation improvement project, overall PREMARIN family sales will not be significantly impacted. Health care costs will continue to be the subject of attention in both the public and private sectors in the United States. Similarly, health care spending, including pharmaceutical pricing, is subject to increasing governmental review in international markets. While the Company cannot predict the impact future health care initiatives may have on the Company's worldwide results of operations, the Company believes that the pharmaceutical industry will continue to play a very positive role in helping to contain global health care costs through the development of innovative products. CONSUMER HEALTH CARE SEGMENT The consumer health care business has many competitors. Based on net sales, the Company believes it ranks within the top five major competitors within the consumer health care industry. The Company's competitive position is affected by several factors including resources available to develop, enhance and promote products, customer acceptance, product quality, development of alternative therapies by competitors, and scientific and technological advances. The growth of generic and store brands continued to impact some of the Company's consumer health care branded product line categories in 2001 and is expected to continue during 2002. GENERAL In all business segments, advertising and promotional expenditures are significant costs to the Company and are necessary to effectively communicate information concerning the Company's products to health professionals, the trade and consumers. Research and Development ------------------------ Worldwide research and development activities are focused on discovering, developing and bringing to market new products to treat and/or prevent some of the most serious health care problems. Research and development expenditures totaled approximately $1.870 billion in 2001, $1.688 billion in 2000, and $1.588 billion in 1999 with approximately 96%, 96%, and 95% of these expenditures in the pharmaceutical area in 2001, 2000 and 1999, respectively. I-7 The Company currently has 10 New Drug Applications and 25 Supplemental Drug Applications filed with the FDA for review, and 94 active Investigational New Drug Applications and one preliminary market approval application. During 2001, several major collaborative research and development arrangements were initiated or continued with other pharmaceutical and biotechnology companies. Additionally, the animal health business has 58 Veterinary Biologics License Applications awaiting approval by the U.S. Department of Agriculture ("USDA"), and one application for a new product awaiting approval by the U.S. Environmental Protection Agency ("EPA"). Certain approvals outside the United States are also pending. During 2001, FDA approval was granted for PROTONIX I.V. intravenous formulation for short-term treatment of gastroesophageal reflux disease ("GERD") as an alternative to oral therapy in patients who are unable to take PROTONIX tablets, and for the treatment of pathological hypersecretion conditions associated with Zollinger-Ellison Syndrome, which is characterized by chronic peptic ulcers caused by an oversecretion of stomach acid, or other neoplastic conditions. In addition, the FDA approved PROTONIX tablets for such new indications as the maintenance of healing erosive esophagitis and the reduction in relapse rates of heartburn symptoms in patients with GERD. Also during 2001, the FDA approved an expanded indication for EFFEXOR XR for use in preventing the relapse and recurrence of depression. In January 2002, the FDA approved an expanded indication for ENBREL (which, under an agreement, is co-promoted by Wyeth and Immunex in the United States and Canada with Wyeth having exclusive international rights to the product) for the treatment of psoriatic arthritis. In addition, the European Commission approved ENBREL for the treatment of early rheumatoid arthritis in February 2002. Regulatory submissions were filed in 2001 for EFFEXOR XR in the United States for use in social anxiety disorder, ENBREL in Europe for the treatment of psoriatic arthritis, and rhBMP-2, a unique recombinant protein that stimulates bone growth to facilitate the healing of long bone fractures requiring open surgical management. Regulation ---------- The Company's various health care products are subject to regulation by government agencies throughout the world. The primary emphasis of these requirements is to assure the safety and effectiveness of the Company's products. In the United States, the FDA, under the Federal Food, Drug and Cosmetic Act and the Public Health Service Act, regulates many of the Company's health care products, including human and animal pharmaceuticals, vaccines, consumer health care products and dietary supplements. The Federal Trade Commission ("FTC") has the authority to regulate the promotion and advertising of consumer health care products including over-the-counter drugs and dietary supplements. The USDA regulates the Company's domestic animal vaccine products. The FDA's enforcement powers include the imposition of criminal and civil sanctions against companies, including seizures of regulated products, and criminal sanctions against individuals. The FDA's enforcement powers also include its inspection of the numerous facilities operated by the Company. To facilitate compliance, the Company from time to time may institute voluntary compliance actions such as product recalls when it believes it is appropriate to do so. In addition, many states have similar regulatory requirements. Most of the Company's pharmaceutical products, I-8 and an increasing number of its consumer health care products, are regulated under the FDA's new drug approval processes, which mandate pre-market approval of all new drugs. Such processes require extensive time, testing and documentation for approval, resulting in significant costs for new product introductions. The Company's U.S. pharmaceutical business is also affected by the Controlled Substances Act, administered by the Drug Enforcement Administration, which regulates strictly all narcotic and habit-forming drug substances. In addition, in the international countries where the Company does business, it is subject to regulatory and legislative climates that, in many instances, are similar to or more restrictive than that described above. The Company devotes significant resources to dealing with the extensive federal, state and local regulatory requirements applicable to its products in the United States and internationally. Federal law also requires drug manufacturers to pay rebates to state Medicaid programs in order for their products to be eligible for federal matching funds under the Social Security Act. Additionally, a number of states are, or may be, pursuing similar initiatives for rebates and other strategies to contain the cost of pharmaceutical products. The federal Vaccines for Children entitlement program enables states to purchase vaccines at federal vaccine prices and limits federal vaccine price increases in certain respects. Federal and state rebate programs are expected to continue. The FDA Modernization Act, which was passed in 1997, as extended by the Best Pharmaceuticals for Children Act, which was passed in 2002, includes a Pediatric Exclusivity Provision that may provide an additional six months of market exclusivity in the United States for indications of new or currently marketed drugs, if certain agreed upon pediatric studies are completed by the applicant. The Company is considering seeking exclusivity based on pediatric studies for certain of the Company's products. The Company's Wyeth Pharmaceuticals division, a related subsidiary and certain other employees (including an executive officer of the Company) are subject to a consent decree entered into with the FDA in October 2000 following the seizure in June 2000 from the Company's distribution centers in Tennessee and Puerto Rico of a small quantity of certain of the Company's products manufactured at the Company's Marietta, Pennsylvania facility. The seizures were based on FDA allegations that products were not manufactured in accordance with current Good Manufacturing Practices. Prior to the seizure, the Company had ceased production at portions of the Marietta facility in order to implement process and facility improvements. The consent decree, which has been approved by the U.S. District Court for the Eastern District of Tennessee, does not represent an admission by the Company or the employees of any violation of the Federal Food, Drug and Cosmetic Act or its regulations. Under the consent decree, the Company paid $30 million to the U.S. government in 2000. The consent decree allows the continued manufacture of all of the products that the Company intends to manufacture at its Marietta, Pennsylvania facility, as well as the Company's Pearl River, New York facility, subject to review by independent consultants of manufacturing records prior to distribution of individual lots. In addition, as provided in the consent decree, an expert consultant has conducted a comprehensive inspection of the Marietta and Pearl River facilities and the Company has identified various actions to address the consultant's observations. The Company is in the process of obtaining verification of the Company's actions by the expert consultant. The verification process is subject to review by the FDA. I-9 Environmental ------------- Certain of the Company's operations are affected by a variety of federal, state and local environmental protection laws and regulations and the Company has, in a number of instances, been notified of its potential responsibility relating to the generation, storage, treatment and disposal of hazardous waste. In addition, the Company has been advised that it may be a responsible party in several sites on the National Priority List created by the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), commonly known as Superfund (See Item 3. Legal Proceedings). In connection with the spin-off in 1993 by American Cyanamid Company ("Cyanamid") of Cytec Industries Inc. ("Cytec"), Cyanamid's former chemicals business, Cytec assumed the environmental liabilities relating to the chemicals businesses, except for the former chemical business site at Bound Brook, New Jersey, and certain sites for which there is shared responsibility between Cyanamid and Cytec. This assumption is not binding on third parties, and if Cytec were unable to satisfy these liabilities, they would, in the absence of other circumstances, be enforceable against Cyanamid. The Company has no reason to believe that it has any practical exposure to any of the liabilities against which Cytec has agreed to assume and indemnify Cyanamid. Cyanamid was acquired by the Company in 1994. Additional information on environmental matters is set forth in Note 5 of the Notes to Consolidated Financial Statements in the Company's 2001 Annual Report to Stockholders and is incorporated herein by reference. Employees --------- At the end of 2001, the Company had 52,289 employees worldwide, with 29,315 employed in the United States including Puerto Rico. Approximately 18% of worldwide employees are represented by various collective bargaining groups. Relations with most organized labor groups remain relatively stable. Financial Information about the Company's Domestic and International -------------------------------------------------------------------- Operations ---------- Financial information about U.S. and international operations for the three years ended December 31, 2001 is set forth in Note 13 of the Notes to Consolidated Financial Statements in the Company's 2001 Annual Report to Stockholders and is incorporated herein by reference. The Company's operations outside the United States are conducted primarily through subsidiaries. International net revenue in 2001 amounted to 36% of the Company's total worldwide net revenue. The Company's international businesses are subject to risks of currency fluctuations, governmental actions and other governmental proceedings which are inherent in conducting business outside of the United States. The Company does not regard these factors as deterrents to maintaining or expanding its non-U.S. operations. Additional information about international operations is set forth under the caption "Quantitative and Qualitative Disclosures about Market Risk" in Management's Discussion and Analysis of I-10 Financial Condition and Results of Operations in the Company's 2001 Annual Report to Stockholders and is incorporated herein by reference. ITEM 2. PROPERTIES ---------- The Company's corporate headquarters and the headquarters of its domestic and international consumer health care business are located in Madison, New Jersey. The Company's domestic and international human ethical pharmaceutical operations are currently headquartered in leased facilities located in Radnor, Pennsylvania and owned facilities in Collegeville and Great Valley, Pennsylvania. The Radnor pharmaceutical research operations were moved to Collegeville in 2001, and most of the remaining pharmaceutical operations in Radnor are expected to move to Collegeville before the end of 2003. The Company's animal health business is headquartered in Overland Park, Kansas, a leased facility. The Company's international subsidiaries and affiliates, which generally own their properties, have manufacturing facilities in 18 countries outside the United States. The properties listed below are the principal manufacturing plants (M) and research laboratories (R) of the Company as of December 31, 2001, listed in alphabetical order by state or country. All of these properties are owned except certain facilities in Guayama, Puerto Rico, which are under lease. The Company also owns or leases a number of other smaller properties worldwide, which are used for manufacturing, research, warehousing and office space. Pharmaceuticals and Consumer Health Care: United States: Charles City, Iowa (M) Fort Dodge, Iowa (M, R) Andover, Massachusetts (M, R) Cambridge, Massachusetts (R) Cherry Hill, New Jersey (M, R) Princeton, New Jersey (R) Chazy, New York (R) Pearl River, New York (M, R) Rouses Point, New York (M, R) Sanford, North Carolina (M, R) Collegeville, Pennsylvania (R) Marietta, Pennsylvania (M, R) West Chester, Pennsylvania (M) Carolina, Puerto Rico (M) Guayama, Puerto Rico (M) Richmond, Virginia (M, R) International: St. Laurent, Canada (M, R) Suzhou, China (M) Havant, England (M, R) I-11 Ghatkopar, India (M) Askeaton, Ireland (M, R) Newbridge, Ireland (M) Catania, Italy (M, R) Shiki, Japan (M, R) Vallejo, Mexico (M) Cabuyao, Philippines (M) Tuas, Singapore (M) Gerona, Spain (M, R) Hsin-Chu Hsien, Taiwan (M) All of the above facilities are exclusively pharmaceutical facilities, except for Pearl River, New York, Rouses Point, New York, Guayama, Puerto Rico, Richmond, Virginia, St. Laurent, Canada, Suzhou, China, Havant, England, Newbridge, Ireland, Vallejo, Mexico and Hsin-Chu Hsien, Taiwan, which are both pharmaceutical and consumer health care facilities. The Company has pharmaceutical manufacturing facilities under construction in Grange Castle, Ireland. Further, the Company is working to support larger scale manufacturing in Andover, Massachusetts, St. Louis, Missouri and Carolina, Puerto Rico. In addition, the Company had a pharmaceutical manufacturing facility under construction in West Greenwich, Rhode Island at the end of 2001, which was sold to Immunex in early 2002. The Company believes its properties to be adequately maintained and suitable for their intended use. The facilities generally have sufficient capacity for existing needs and expected near-term growth and expansion projects are undertaken as necessary to meet future needs. ITEM 3. LEGAL PROCEEDINGS ----------------- The Company and its subsidiaries are parties to numerous lawsuits and claims arising out of the conduct of its business, including product liability and other tort claims. On October 7, 1999, the Company announced that it had reached a comprehensive, nationwide, class action settlement (the "settlement") to resolve litigation against the Company brought by people who used REDUX (dexfenfluramine hydrochloride capsules) C-IV or PONDIMIN (fenfluramine hydrochloride) tablets C-IV. The Company's Wyeth Pharmaceutical Division had announced a voluntary and immediate withdrawal of these products in September 1997. The Company took this action on the basis of new, preliminary information provided to the Company on September 12, 1997 by the U.S. Food and Drug Administration (FDA) regarding heart valve abnormalities in patients using these medications. The Company estimates that approximately 5.8 million people used these medications in the U.S. The settlement is open to all REDUX or PONDIMIN users in the United States and offers a range of benefits depending on a participant's particular circumstances, including: a refund program for the cost of the drugs; medical screening; additional medical services or cash payments; and compensation in the event of serious heart valve problems. The settlement terms are reflected in a settlement I-12 agreement executed on November 19, 1999. (In Re Diet Drugs Products Liability Litigation, MDL No. 1203; Brown, et al. v. AHPC, No. 99-20593, U.S.D.C., E.D. Pa.). The settlement covers all claims arising out of the use of REDUX or PONDIMIN except for claims of Primary Pulmonary Hypertension (PPH). Payments by Wyeth into the settlement funds will continue for approximately 16 years after final judicial approval if needed to provide settlement benefits to members of the class. In the aggregate, all payments under the settlement cannot exceed $3.75 billion in present value. Future payments will be made only as and if needed. The settlement states that it shall not be construed to be an admission or evidence of any liability or wrongdoing whatsoever by the Company or the truth of any of the claims alleged. Diet drug users choosing to opt out of the settlement class were required to do so by March 30, 2000. The Company has resolved the claims of the majority of these initial opt outs and continues to resolve the claims of the remaining individuals. The settlement agreement also gives class members who participate in the settlement the opportunity to opt out of the settlement at two later stages, although there are restrictions on the nature of claims they can pursue outside of the settlement. Class members who are diagnosed with certain levels of valvular regurgitation within a specified time frame can opt out following their diagnosis and prior to receiving any further benefits under the settlement ("intermediate" opt outs). Class members who are diagnosed with certain levels of regurgitation and who elect to remain in the settlement, but who later develop a more severe valvular condition, may opt out at the time the more serious condition develops ("back-end" opt outs). Under either of these latter two opt out alternatives, class members may not seek or recover punitive damages, may sue only for the condition giving rise to the opt out right, and may not rely on verdicts, judgments or factual findings made in other lawsuits. On November 23, 1999, United States District Judge Louis C. Bechtle, the judge overseeing the federal MDL litigation in Philadelphia, granted preliminary approval of the settlement and directed that notice of the settlement terms be provided to class members. The notice program began in December 1999. In early May 2000, the District Court held a hearing on the fairness of the terms of the settlement, with an additional one-day hearing on August 10, 2000. On August 28, 2000, Judge Bechtle issued an order approving the Company's settlement. Several appeals were taken from that order to the United States Court of Appeals for the Third Circuit. All but one of those appeals was withdrawn during 2001, and, on August 15, 2001, the Third Circuit affirmed the approval of the settlement. When no petitions to the United States Supreme Court for certiorari were filed by January 2, 2002, the settlement was deemed to have received Final Judicial Approval on January 3, 2002. The Company recorded an initial litigation charge of $4.75 billion, net of insurance, in connection with the REDUX and PONDIMIN litigation in 1999, an additional charge of $7.5 billion in 2000, and a third litigation charge of $950 million in the 2001 third quarter. The combination of these three charges represents the estimated total amount required to resolve all diet drug litigation, including anticipated funding requirements for the nationwide class action settlement, anticipated costs to resolve the claims of any members of the settlement class who in the future may exercise an intermediate or back-end opt out right, costs to resolve the claims of PPH claimants and initial opt out claimants, and administrative and litigation expenses. I-13 On April 3, 2001, a jury in Alice, Texas hearing the case of Lopez v. American Home Products Corporation, et al., No. 99-07-37723, 79th Judicial District Court, returned a verdict in favor of the plaintiff for $11.55 million in compensatory damages and $45 million in punitive damages for injuries allegedly sustained by the plaintiff due to her use of PONDIMIN. On July 10, 2001, the District Court entered a final judgment in the Lopez case, applying the Texas statutory cap on punitive damages and granting the plaintiff's request to voluntarily remit certain amounts awarded as compensatory damages. The final judgment included approximately $4.8 million in compensatory damages, $3.4 million in punitive damages and $1.0 million in pre-judgment interest, for a total of $9.2 million. This judgment was subsequently vacated, the case dismissed with prejudice and the matter resolved. The Company has also been named as a defendant in a shareholder lawsuit arising out of the REDUX and PONDIMIN withdrawal. Grill v. Stafford, et al., (No. MRS-L-164-98, N.J. Sup. Ct., Morris Cty.), which was commenced on January 14, 1998, is a shareholder derivative action filed against the Company, certain directors, a former director and officer of the Company, and certain officers which seeks to recover any losses or damages sustained by the Company, as well as profits from the sale of stock by present and former officers and directors, as a result of alleged intentional, reckless or negligent breaches of fiduciary duty by the defendants. The complaint contains allegations that the defendants made material misstatements or omissions regarding alleged adverse events associated with REDUX and/or PONDIMIN (and in particular an alleged association between those two products and valvular heart disease), exposing the Company to liability for personal injury lawsuits and securities claims. The Grill action was stayed during the pendency of Oran, et al. v. Stafford, et al. (No.97-CV-4513 (NHP), U.S.D.C., D.N.J.), another shareholder lawsuit arising out of the REDUX and PONDIMIN withdrawal, which has since been dismissed for failure to state a claim. On August 28, 2001, the New Jersey Superior Court, Chancery Division, granted the Company's motion to dismiss the Grill case on the grounds that the plaintiffs had failed to make a demand on the Company's Board of Directors to pursue the litigation, as required by Delaware law, and dismissed plaintiffs' Amended Complaint without leave to replead. Plaintiffs have filed an appeal to the Appellate Division. The Company is a party to various lawsuits involving alleged injuries as a result of the use of the NORPLANT SYSTEM, the Company's implantable contraceptive containing levonorgestrel. In one of these cases, a motion to certify a statewide class of Louisiana NORPLANT users was granted during 2001. (Davis v. American Home Products Corporation, No. CDC 94-11684, Orleans Parish). The Company is pursuing an appeal of that decision. With the exception of the Louisiana class reported above, only approximately 4,245 of the approximately 50,000 NORPLANT plaintiffs have not settled their claims. The vast majority of the unsettled claimants are believed to be individuals who have abandoned their claims. The Company is a party to various lawsuits involving alleged injuries arising out of DURACT, the Company's non-narcotic analgesic pain reliever which was voluntarily withdrawn from the market. Two putative personal injury class actions are pending. Chimento, et al. v. Wyeth-Ayerst, et al., No. 85-437, Dist. Ct., St. Bernard Parish, LA, seeks the certification of a class of Louisiana residents who were exposed to and who suffered injury I-14 from DURACT. Plaintiffs seek compensatory and punitive damages, the refund of all purchase costs, and the creation of a court-supervised medical monitoring program for the diagnosis and treatment of liver damage and related conditions allegedly caused by DURACT. Walent v. Wyeth-Ayerst Laboratories, a Division of American Home Products Corporation, et al., No. 00CH12660, Circ. Ct., Cook Cty., IL, seeks the certification of a nationwide class of individuals who were allegedly exposed to and suffered injury from DURACT. In addition to the foregoing, a class action seeking recovery of only economic damages had also been filed. Rivera, et al. v. Wyeth-Ayerst Laboratories Company, et al., No. G-00-345, U.S.D.C., S.D. Tex., sought economic damages and a refund of product purchase costs only in a class of individuals who ingested DURACT or paid for its use. No personal injuries were alleged among the Rivera class members. In December 2000, the Rivera case was certified as a class action. On February 15, 2002, the United States Court of Appeals for the Fifth Circuit vacated the class certification and rendered judgment for the Company on the grounds that plaintiffs had not presented a justiciable claim or controversy. There are also a total of 27 lawsuits pending involving former DURACT users alleging myriad injuries, from gastrointestinal upset and distress to liver transplant and death. A statewide class action had been filed in the Pennsylvania Court of Common Pleas, Delaware County, on behalf of a proposed nationwide class consisting of all persons who have been administered and paid for, in whole or in part, the Company's ROTASHIELD vaccine. (Lennon, et al. v. Wyeth-Ayerst, et al., No. 99-13101). The complaint alleged breach of contract, breach of warranty, unjust enrichment and violation of the Pennsylvania Unfair Trade Practices Act and sought minimum damages of $100 per class member plus treble damages and attorneys' fees. During 2000, the Lennon case was dismissed. On June 14, 2001, the Pennsylvania Superior Court affirmed the dismissal of the case, and on December 17, 2001, the Pennsylvania Supreme Court denied plaintiffs' petition for leave to appeal. The Company has been named as a defendant in four lawsuits in which plaintiffs purport to represent a statewide class of health care workers who have been injured by needle and syringe devices manufactured by the Company's former Sherwood-Davis & Geck subsidiary. The complaints have been filed in New York (Benner v. AHPC, et al., 99 Civ. 4785 (WHP), U.S.D.C., S.D.N.Y.), Oklahoma (Palmer v. AHPC, et al., No. CJ-98-685, Dist. Ct., Sequoyah Cty.), Texas (Usrey v. Becton Dickinson, et al., No. 342-173329-98, Dist. Ct., Tarrant Cty.), and South Carolina (Bales v. AHPC et al., No. 98-CP-40-4343, Circ. Ct., Richland Cty.) and all contain virtually identical allegations. Each names the Company, Becton Dickinson and Company, Sherwood's largest competitor, and Tyco International (U.S.) Inc., Sherwood's current corporate owner, as well as several distributors of medical devices. The complaints allege that the needle and syringe devices designed and manufactured by Sherwood are defective in that they expose healthcare workers to the risk of accidental needlesticks and the resultant possibility of acquiring blood-borne diseases. Each named plaintiff seeks to represent a statewide class of healthcare workers who have sustained a "contaminated" needlestick, reported the incident to their employer and have tested negative for a blood-borne disease. The complaints seek recovery for the costs of medical testing and treatment for the needlesticks, although plaintiffs in the New York case also seek emotional distress damages allegedly arising out of the fear of contracting a disease from the incidents. Similar actions brought in Alabama, California, New Jersey, Ohio, Pennsylvania and Florida have each been I-15 dismissed. The Company is being defended and indemnified in each of these cases by Tyco with respect to injuries alleged to have occurred after February 27, 1998, the date of the Company's divestiture of the business of Sherwood. The Company remains responsible for injuries occurring prior to that date and is defending and indemnifying Tyco for those injuries. In January 2000, the trial court in the Usrey matter certified a class of Texas healthcare workers who, during the period January 18, 1997 to January 18, 2000, sustained a contaminated needle stick while using one of the defendants' products, reported the stick and tested negative for any blood-borne disease. In October 2001, the Texas Court of Appeals reversed the class certification order and remanded the case to the District Court for further proceedings. The cases pending in Oklahoma, South Carolina and Alabama remain dormant. No discovery has been undertaken in those matters and no class certification hearing dates have been set. Class certification discovery has taken place in the New York action and a class certification hearing took place on March 8, 2002. A decision on the New York class certification issue is expected later this year. In November 2000, the Company withdrew from the market those formulations of its DIMETAPP and ROBITUSSIN cough/cold products which contained the ingredient phenylpropanolamine ("PPA") at the request of the FDA. The FDA's request followed the reports of a study that raised a possible association between PPA-containing products and the risk of hemorrhagic stroke. The Company has since been named as a defendant in 348 lawsuits concerning the use of PPA in certain cough/cold products. Of these lawsuits, 332 are individual product liability suits and 16 are class actions. Of the class action suits, seven are for personal injuries and the other nine allege economic injury caused by alleged misrepresentations regarding the risks involved with products containing PPA. Plaintiffs in the economic injury cases seek disgorgement or restitution of any moneys acquired by means of the alleged misrepresentation, as well as attorneys' fees. The Company has also received 56 claims of personal injury. All federal cases involving PPA claims have now been transferred to the United States District Court for the Western District of Washington before United States District Judge Barbara Jacobs Rothstein. (In re Phenylpropanolamine (PPA) Products Liability Litigation, MDL No. 1407). The Company expects that additional PPA cases may be filed in the future against it and the other companies that marketed PPA-containing products. The Company has been served with 22 lawsuits, nine of which are putative class actions, alleging that the cumulative effect of thimerosal, a preservative used in certain vaccines manufactured and distributed by the Company as well as by other vaccine manufacturers, causes severe neurological damage, including autism in children. The class actions are Bailey, et al. v. Abbott Laboratories, et al., No. BC257277, Super. Ct., L.A. Cty., CA (nationwide class for damages and injunctive relief); Duncan, et al. v. Abbott Laboratories, et al., No. 2001-035894, Super. Ct., Alameda Cty., CA, (nationwide class for damages and injunctive relief); Doherty, et al. v. Aventis Pasteur, et al., No. 325082, Super. Ct., San Francisco Co., CA (nationwide class for medical monitoring, personal injuries and injunctive relief); Zielinski, et al. v. Abbott Laboratories, et al., No. BC263444, Super. Ct., L.A. Cty., CA (nationwide class for damages and injunctive relief); Demos, et al. v. Aventis Pasteur, et al., No. 01-22544CA15, Cir. Ct., Dade Co., FL (nationwide class for medical monitoring, personal injuries and injunctive relief I-16 against future sales); Cyr, et al. v. Aventis Pasteur, Inc., et al., No. 01-C-663, Super. Ct., Hillsborough Co., NH (statewide class for personal injuries and injunctive relief); King, et al. v. Aventis Pasteur, Inc., No. 01-CV-1305, U.S.D.C., D. Ore. (nationwide class for personal injuries and injunctive relief); Mead v. Aventis Pasteur, Inc., et al., No. 01-CV-1402, U.S.D.C., D. Ore. (nationwide class for medical monitoring); and Garcia, et al. v. Aventis Pasteur, Inc., et al., No. C02-168C, U.S.D.C., W.D. Wash. (nationwide class for damages, medical monitoring and injunctive relief). The injunctive relief sought in the class actions includes both disgorgement of profits from the sale of the products and restitution. The Company expects that additional thimerosal cases may be filed in the future against it and the other companies that marketed thimerosal-containing products. On December 14, 2001, a putative class action was filed in the Superior Court of Washington for King County alleging breaches of fiduciary duty by the directors of Immunex (two of whom are executive officers of the Company), by the Company as Immunex's principal shareholder and by Immunex itself in connection with Immunex's negotiation of its merger agreement with Amgen. (Osher, et al. v. Immunex Corp., et al., No. 01-2-35162-1 SEA, Super Ct., King Cty., WA). The complaint, filed prior to the announcement of the Immunex/Amgen merger agreement, alleges that the merger discussions between Immunex and Amgen had, as of the date of the complaint, "stalled" because the Company was favoring its own interests to the detriment of Immunex's public shareholders. Plaintiffs seek preliminary and permanent injunctive relief preventing defendants from consummating "any transaction which improperly favors the interest" of the Company. The Company has been named as a defendant in two lawsuits alleging Medicare fraud arising out of the alleged manipulation of the Average Wholesale Price (AWP) of Medicare Part B "Covered Drugs." The first case, Citizens for Consumer Justice, et al. v. Abbott Laboratories, Inc., et al., No. OICV-12257, U.S.D.C., E.D. Mass., was filed in December 2001 by several consumer public interest groups and names as defendants the Company and 27 other pharmaceutical manufacturers. Each of the companies is alleged to have artificially inflated the AWP of its Medicare Covered Drugs. AWP is the price at which Medicare reimburses practitioners for drugs and the complaint alleges that it is often significantly higher than the actual price paid by the practitioner. Plaintiffs claim that their members who purchased Covered Drugs and paid a 20% co-payment under the Medicare reimbursement rules were injured by the allegedly-inflated AWPs. The Complaint alleges that defendants have engaged in a civil conspiracy under the Racketeer Influenced and Corrupt Organizations Act (RICO) and also alleges violations of federal antitrust laws. The second suit, State of Montana, et al. v. Abbott Laboratories, Inc., et al., No. ADV-2002-155, Dist. Ct., Lewis and Clark Cty., MT, was filed in February 2002 and names the Company and 17 other pharmaceutical company defendants. The complaint alleges that the defendants have inflated both AWPs and Average Manufacturer's Prices (AMPs). AMP is the basis for calculating Medicaid rebates to states to insure that they receive the manufacturer's "best price." The Montana complaint seeks compensatory and punitive damages, civil penalties and injunctive relief. In September 2000, Duramed Pharmaceuticals, Inc., which markets a hormone replacement therapy drug called Cenestin(R), filed a complaint against the Company (Duramed Pharmaceuticals, Inc. v. Wyeth-Ayerst Laboratories, Inc., No.-C-1-00-735, U.S.D.C., W.D. Ohio), alleging that the Company violated the antitrust laws through I-17 the use of exclusive contracts and "disguised" exclusive contracts in the sale of PREMARIN to managed care organizations. Duramed also alleged that Wyeth-Ayerst misled the FDA in order to exclude competition to PREMARIN, but does not allege any violation of law with respect to such alleged practices. However, those allegations have been dismissed by the district court. The Company believes that its conduct was lawful and that its pricing practices do not violate the antitrust laws. Following the filing of the Duramed case, five putative class action lawsuits have been filed on behalf of "end-payors" (defined as the last persons and entities in the chain of distribution) and direct purchasers in federal district court in Ohio, New Jersey and California state court alleging that the Company violated federal and state antitrust laws through alleged exclusionary practices involving PREMARIN and the Company's contracts with managed care organizations and pharmacy benefit managers. Ferrell, et al. v. Wyeth-Ayerst Laboratories, Inc., No. 1-01-CV-447 (W.D. Ohio); Forgue v. Wyeth-Ayerst Laboratories, Inc., et al., No. 1-01-CV-634 (S.D. Ohio); J.B.D.L. Corp. v. Wyeth-Ayerst Laboratories, Inc., et al., No. C-1-01-704 (S.D. Ohio); McDermott v. Wyeth-Ayerst Laboratories, Inc., et al., No. 01-CV-4690 (D.N.J.); and Blevins v. Wyeth-Ayerst Laboratories, Inc., No. 324380 (San Francisco Superior Ct.). The complaints seek injunctive relief, damages, and disgorgement of profits. The Company believes that its contracts involving PREMARIN do not violate state or federal laws and the Company will vigorously defend these lawsuits. In 2000, the Company entered into a consent decree with the FDA relating to the manufacturing of products by the Company at its facilities in Marietta, Pennsylvania and Pearl River, New York. This matter is discussed in greater detail under the caption "Regulation," herein, which discussion is incorporated herein by reference. On July 7, 1997, plaintiffs were awarded $44 million in compensatory damages and $1 million in punitive damages in an action, which was commenced in U.S. District Court in August 1993 (University of Colorado et al. v. American Cyanamid Company, Docket No. 93-K-1657, D. Col.). The plaintiffs had accused American Cyanamid Company ("Cyanamid") of misappropriating the invention of, and patenting as its own, the formula for the current MATERNA Multi-Vitamins. The complaint also contained allegations of conversion, fraud, misappropriation, wrongful naming of inventor, and copyright and patent infringement. The patent, whose ownership and inventorship is in dispute, was granted to Cyanamid in 1984. The Court had previously granted Cyanamid's summary judgment motions dismissing all counts for relief except for unjust enrichment and fraud, which were the issues tried before the court in a three-week bench trial in May 1996. Although the plaintiffs had earlier been granted summary judgment of their copyright infringement claim, the court declined to award plaintiffs damages on that claim. Plaintiffs' post-trial motions seeking to increase the damages to approximately $111 million (allegedly representing Cyanamid's gross profit for 1982-1985 from the sale of the reformulated MATERNA product) and to recover approximately $800,000 of attorneys' fees was denied. In November 1999, the Court of Appeals affirmed in part and vacated in part the District Court's judgment, and remanded this case to the District Court for further proceedings. Under this ruling, the $45 million judgment against the Company was vacated. Following remand, the District Court has concluded that University of Colorado employees are the sole inventors of the disputed patent, a holding which will be appealed by Cyanamid. A trial on potential damages was held in March 2001 I-18 and, in July 2001, the District Court awarded plaintiffs damages of approximately $24 million, together with pre-judgment interest, bringing the damages award to between approximately $45 million and $55 million. The Company has appealed the damages award to the U.S. Court of Appeals for the Federal Circuit. The Company is a party to a number of lawsuits brought on behalf of retail pharmacies and retail drug and grocery chains, which were filed in various federal and state courts against many pharmaceutical manufacturers and wholesalers. These cases allege that the Company and other defendants provided discriminatory price and promotional allowances to managed care organizations and others in violation of the Robinson-Patman Act and/or that the defendants engaged in collusive conduct related to the alleged discriminatory pricing in violation of the Sherman Antitrust Act as well as certain other violations of common law principles of unfair competition. These cases are similar to litigation previously settled by the Company, including a class action suit settled in 1996, In re Brand Name Prescription Drugs Antitrust Litigation (MDL 997 N.D. Ill.). The cases currently remaining against the Company in the brand name prescription drugs litigation are brought by certain retail pharmacies that opted out of the federal class action settlements. The Company believes that its pricing practices did not violate antitrust or other laws and is defending these cases. The Federal Trade Commission ("FTC") has accepted for public comment an agreement to settle the FTC's administrative complaint (In Re: Schering-Plough Corporation, et al., Docket No. 9297) regarding the Company's settlement of a patent infringement litigation with Schering-Plough Corporation ("Schering-Plough") relating to the Company's potential generic version of Schering-Plough's K-Dur potassium supplement product. Generally, the Company has agreed not to be a party to a settlement in a patent infringement matter in which an NDA holder agrees to provide anything of value to an alleged infringer and the infringer agrees to refrain from selling the drug for any period of time. However, the Company may enter such agreements in certain circumstances when the agreement has been approved by a court or the FTC. The settlement is not an admission of liability and was entered into to avoid the costs and risks of litigation. Following the filing of the administrative complaint by the FTC, numerous lawsuits were filed in federal and state courts alleging civil claims based on the same conduct alleged by the FTC. Approximately forty-three such lawsuits have been filed against the Company. Thirty-nine of these lawsuits are currently pending in federal court. Thirty-six of these federal cases have been consolidated as part of multidistrict federal litigation being conducted in the United States District Court for the District of New Jersey (In re K-Dur Antitrust Litigation, MDL 1419, D. N.J.). The remaining federal cases have been or will be coordinated as part of the multidistrict consolidated litigation. In three of these cases, plaintiffs allege to be direct purchasers of K-Dur, or claim to be assignees of direct purchasers of K-Dur. Some of these direct purchaser plaintiffs purport to bring class actions on behalf of direct purchasers of K-Dur nationwide. In forty cases, plaintiffs claim to be indirect purchasers or end-payors of K-Dur or to be bringing suit on behalf of such indirect purchasers; these indirect purchaser cases are brought as purported class actions on behalf of various groups of indirect purchasers. Some of these cases claim to be brought on behalf of indirect purchasers nationwide, while others of these cases purport to be brought on behalf of indirect purchasers from specified states or groups of states. One case is brought by the Commonwealth of Pennsylvania, through its Attorney I-19 General, on behalf of all persons, departments, agencies, and bureaus of the Commonwealth who purchased K-Dur or reimbursed such purchases. Generally, plaintiffs claim that a 1998 settlement agreement between the Company and Schering-Plough that resolved a patent infringement action unlawfully delayed the market entry of generic competition for K-Dur, and that this caused plaintiffs and others to be required to pay higher prices for potassium chloride supplements than plaintiffs claim they would have paid without the patent case settlement. Plaintiffs claim that this settlement restrained trade and constituted an agreement to allow Schering-Plough to monopolize the potassium chloride supplement markets. Based on these allegations, plaintiffs assert claims under federal and state antitrust laws, various other state statutes including unfair competition laws and consumer protection statutes, and under common law theories such as unjust enrichment. Plaintiffs seek various forms of relief including damages in excess of $100 million, treble damages, restitution, disgorgement, declaratory and injunctive relief, and attorneys' fees. The Company believes that its settlement of the patent infringement action with Schering-Plough did not violate any laws, including federal or state antitrust laws, and intends to vigorously defend these actions. In 1999, the Brazilian Administrative Economic Defense Agency ("SDE") and other government bodies initiated investigations of Laboratories Wyeth-Whitehall Ltda. and other pharmaceutical companies concerning possible violation of Brazilian competition laws. SDE alleges that the companies 1) sought to establish uniform commercial policies regarding wholesalers and 2) refused to sell product to wholesalers that distribute generic products manufactured by certain Brazilian pharmaceutical companies. Additionally, administrative investigations by SDE are looking at allegations that the Company and other pharmaceutical companies violated Brazilian antitrust and consumer protection laws by raising prices unlawfully. The Company has provided information to SDE and other government bodies. In 1999, an application from certain drug wholesalers alleging that the Company and certain other pharmaceutical companies violated South Africa's competition law by using a distributor owned by the companies. The Competition Commission subsequently filed a complaint with the Competition Tribunal alleging that certain practices by the jointly owned distribution company violated South Africa's competition law. Additionally, certain wholesalers filed a similar action. Generally, the complaints seek changes in distribution practices, certain structural changes in the joint distribution company, and civil penalties or damages. As discussed in Item I, the Company is a party to, or otherwise involved in, legal proceedings under CERCLA and similar state laws directed at the cleanup of various sites including 53 Superfund sites, including the Cyanamid-owned Bound Brook, N.J. site. The Company's potential liability varies greatly from site to site. For some sites, the potential liability is de minimis and, for others, the final costs of cleanup have not yet been determined. As assessments and cleanups proceed, these liabilities are reviewed periodically and are adjusted as additional information becomes available. Environmental liabilities are inherently unpredictable. I-20 The liabilities can change substantially due to such factors as additional information on the nature or extent of contamination, methods of remediation required and other actions by governmental agencies or private parties. The 53 Superfund sites exclude sites for which Cytec assumed full liability and agreed to indemnify Cyanamid but include certain sites for which there is shared responsibility between Cyanamid and Cytec. The Company has no reason to believe that it has any practical exposure to any of the liabilities against which Cytec has agreed to assume and indemnify Cyanamid. The Company intends to defend all of the foregoing litigation vigorously. In the opinion of the Company, although the outcome of any litigation cannot be predicted with certainty, the ultimate liability of the Company in connection with pending litigation and other matters described above will not have a material adverse effect on the Company's financial position but could be material to the results of operations and cash flows in any one accounting period. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS --------------------------------------------------- None. I-21 EXECUTIVE OFFICERS OF THE REGISTRANT AS OF MARCH 15, 2002 - --------------------------------------------------------- Each officer is elected to hold office until a successor is chosen or until earlier removal or resignation. None of the executive officers is related to another: Elected to Name Age Offices and Positions Office ---- --- --------------------- ------ John R. Stafford 64 Chairman of the Board May 2001 Chairman of Executive Committee, Ex officio Member of Management, Law/Regulatory Review, Operations, Human Resources and Benefits and Retirement Committees Business Experience: 1991 to May 2001, Chairman of the Board and Chief Executive Officer (President from May 1981 to May 1990 and from February 1994 to July 2000) May 2001 to date, Chairman of the Board Robert Essner 54 President and Chief Executive May 2001 Officer Member of Executive Committee, Chairman of Management, Law/Regulatory Review, Operations, Human Resources and Benefits and Retirement Committees Business Experience: To March 1997, President, Wyeth-Ayerst Laboratories, U.S. Pharmaceuticals Business March 1997 to September 1997, President, Wyeth-Ayerst Global Pharmaceuticals September 1997 to July 2000, Executive Vice President July 2000 to May 2001, President and Chief Operating Officer May 2001 to date, President and Chief Executive Officer I-22 Elected to Name Age Offices and Positions Office ---- --- --------------------- ------ Louis L. Hoynes, Jr. 66 Executive Vice President and July 2000 General Counsel Member of Management, Law/Regulatory Review, Operations, Human Resources and Benefits and Retirement Committees Business Experience: 1991 to July 2000, Senior Vice President and General Counsel July 2000 to date, Executive Vice President and General Counsel L. Patrick Gage, Ph.D. 59 Senior Vice President- January 2001 Science and Technology and President, Wyeth Research Member of Management, Law/Regulatory Review, Operations and Human Resources and Benefits Committees Business Experience: To January 1997, Chief Operating Officer, Genetics Institute January 1997 to March 1998, President, Genetics Institute March 1998 to January 2001, President, Wyeth-Ayerst Research January 2001 to date, Senior Vice President, Science and Technology I-23 Elected to Name Age Offices and Positions Office ---- --- --------------------- ------ Kenneth J. Martin 48 Senior Vice President and Chief February 2000 Financial Officer Member of Management, Law/Regulatory Review, Operations, Human Resources and Benefits and Retirement Committees Business Experience: To October 1996, President, American Home Foods November 1996 to February 1997, President, International Home Foods, Inc. February 1997 to March 1997, Executive Vice President, Wyeth-Ayerst Pharmaceuticals March 1997 to September 1998, President, Whitehall-Robins October 1998 to January 2000, Senior Vice President and Chief Financial Officer, Wyeth-Ayerst Pharmaceuticals February 2000 to date, Senior Vice President and Chief Financial Officer Bernard J. Poussot 50 Senior Vice President and January 2001 President, Wyeth Pharmaceuticals Member of Management, Law/Regulatory Review, Operations and Human Resources and Benefits Committees Business Experience: To January 1996, Executive Vice President, Wyeth-Ayerst International January 1996 to September 1997, President, Wyeth-Ayerst International September 1997 to January 2001, President, Wyeth-Ayerst Pharmaceuticals January 2001 to date, Senior Vice President I-24 Elected to Name Age Offices and Positions Office ---- --- --------------------- ------ Lawrence V. Stein 52 Senior Vice President and Deputy June 2001 General Counsel Member of Law/Regulatory Review and Operations Committees Business Experience: November 1992 to September 1997, Senior Vice President and General Counsel, Genetics Institute September 1997 to July 2000, Associate General Counsel and Senior Vice President and Chief Legal Counsel, Wyeth-Ayerst and Genetics Institute July 2000 to June 2001, Vice President and Deputy General Counsel June 2001 to date, Senior Vice President and Deputy General Counsel Paul J. Jones 56 Vice President and Comptroller April 1995 Member of Law/Regulatory Review and Operations Committees Business Experience: To April 1995, Senior Vice President - Finance and Administration, Wyeth-Ayerst Laboratories Division April 1995 to date, Vice President and Comptroller Rene R. Lewin 55 Vice President - Human Resources May 1994 Member of Management, Law/Regulatory Review, Operations, Human Resources and Benefits and Retirement Committees Business Experience: To May 1994, Executive Director Human Resources - Worldwide Pharmaceutical Division, Eli Lilly and Company May 1994 to date, Vice President - Human Resources I-25 Elected to Name Age Offices and Positions Office ---- --- --------------------- ------ Marily H. Rhudy 54 Vice President - Public Affairs September 1997 Member of Management and Operations Committees Business Experience: To April 1994, Assistant Vice President - Professional Affairs, Wyeth-Ayerst Laboratories Division April 1994 to March 1997, Vice President - Public Affairs, Wyeth-Ayerst Laboratories Division March 1997 to September 1997, Vice President - Global Public Affairs, Wyeth-Ayerst Global Pharmaceuticals September 1997 to date, Vice President - Public Affairs E. Thomas Corcoran 54 President, Fort Dodge Animal September 1995 Health Division Member of Management and Operations Committees Business Experience: September 1995 to date, President, Fort Dodge Animal Health Division Ulf Wiinberg 43 President, Wyeth Consumer Healthcare February 2002 Member of Management, Law/Regulatory Review, Operations, and Human Resources and Benefits Committees Business Experience: To May 1997, Area Vice President for Africa and the Middle East, Wyeth-Ayerst May 1997 to February 2002, Managing Director of the United Kingdom subsidiary of Wyeth-Ayerst Pharmaceuticals February 2002 to date, President, Wyeth Consumer Healthcare Joseph M. Mahady 48 President, Wyeth Pharmaceuticals - September 1997 North America Member of Management and Operations Committees Business Experience: September 1997 to date, President, Wyeth Pharmaceuticals - North America I-26 PART II ------- ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED ------------------------------------------------ STOCKHOLDER MATTERS ------------------- The New York Stock Exchange is the principal market on which the Company's Common Stock is traded. Tables showing the high and low sales price for the Common Stock, as reported in the consolidated transaction reporting system, and the dividends paid per common share for each quarterly period during the past two years, as presented in Market Prices of Common Stock and Dividends on page 56 of the Company's 2001 Annual Report to Stockholders, are incorporated herein by reference. There were 64,653 holders of record of the Company's Common Stock as of the close of business on March 1, 2002. ITEM 6. SELECTED FINANCIAL DATA ----------------------- The data with respect to the last five fiscal years, appearing in the Ten-Year Selected Financial Data presented on pages 32 and 33 of the Company's 2001 Annual Report to Stockholders, are incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL ------------------------------------------------- CONDITION AND RESULTS OF OPERATIONS ----------------------------------- Management's Discussion and Analysis of Financial Condition and Results of Operations, appearing on pages 57 through 66 of the Company's 2001 Annual Report to Stockholders, is incorporated herein by reference. ITEM 7(A). QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ---------------------------------------------------------- The Market Risk Disclosures as set forth in Management's Discussion and Analysis of Financial Condition and Results of Operations, appearing on pages 64 and 65 of the Company's 2001 Annual Report to Stockholders, are incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ------------------------------------------- The Consolidated Financial Statements and Notes to Consolidated Financial Statements on pages 34 through 54 of the Company's 2001 Annual Report to Stockholders, the Report of Independent Public Accountants on page 55, and Quarterly Financial Data (Unaudited) on page 56, are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND --------------------------------------------------------------- FINANCIAL DISCLOSURE -------------------- On March 13, 2002, the Board of Directors of Wyeth, upon recommendation of the Audit Committee, made a determination not to engage Arthur Andersen LLP ("Andersen") as the Company's independent public accountants and engaged PricewaterhouseCoopers LLP ("PwC") to serve as the Company's independent public accountants II-1 for the fiscal year 2002. The appointment of PwC is subject to stockholder ratification at the Company's 2002 Annual Meeting of Stockholders scheduled to be held on April 25, 2002. Andersen's reports on the Company's consolidated financial statements for each of the years ended December 31, 2001 and 2000 did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles. During the years ended December 31, 2001 and 2000 and through the filing date of this Annual Report on Form 10-K, there were no disagreements with Andersen on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure which, if not resolved to Andersen's satisfaction, would have caused them to make reference to the subject matter in connection with their report on the Company's consolidated financial statements for such years; and there were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K. During the years ended December 31, 2001 and 2000 and through the filing date of this Annual Report on Form 10-K, the Company did not consult PwC with respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company's consolidated financial statements, or any other matters or reportable events as set forth in Items 304(a)(2)(i) and (ii) of Regulation S-K. On March 18, 2002, the Company submitted a Current Report on Form 8-K relating to the foregoing matter which is incorporated herein by reference. In conjunction with such Current Report on Form 8-K, Andersen was provided with a copy of the disclosures relating to Andersen (which are identical to the disclosures set forth above) prior to such filing and Andersen provided a letter to the Securities and Exchange Commission, dated March 18, 2002, which was included as Exhibit 16 to such Current Report on Form 8-K stating its agreement with the statements included therein. II-2 PART III -------- ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT -------------------------------------------------- (a) Information relating to the Company's directors is incorporated herein by reference to pages 2 through 4 of a definitive proxy statement filed with the Securities and Exchange Commission on March 20, 2002 ("the 2002 Proxy Statement"). (b) Information relating to the Company's executive officers as of March 15, 2002 is furnished in Part I hereof under a separate unnumbered caption ("Executive Officers of the Registrant as of March 15, 2002"). (c) Information relating to certain filing obligations of directors and executive officers of the Company under the federal securities laws set forth on page 5 of the 2002 Proxy Statement under the caption "Section 16(a) Beneficial Ownership Reporting Compliance" is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION ---------------------- Information relating to executive compensation is incorporated herein by reference to pages 8 through 16 (excluding the performance graph on page 13 and the Equity Compensation Plan Information included on page 14) of the 2002 Proxy Statement. Information with respect to compensation of directors is incorporated herein by reference to pages 4 and 5 of the 2002 Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND --------------------------------------------------- MANAGEMENT ---------- Information relating to security ownership is incorporated herein by reference to pages 6 and 7 of the 2002 Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ---------------------------------------------- None. III-1 PART IV ------- ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K ---------------------------------------------------------------- (a)1. Financial Statements -------------------- The following Consolidated Financial Statements, Notes to Consolidated Financial Statements and Report of Independent Public Accountants, included on pages 34 through 54 of the Company's 2001 Annual Report to Stockholders, are incorporated herein by reference. Pages ----- Consolidated Balance Sheets as of December 31, 2001 and 2000 34 Consolidated Statements of Operations for the years ended December 31, 2001, 2000 and 1999 35 Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2001, 2000 and 1999 36 Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999 37 Notes to Consolidated Financial Statements 38-54 Report of Independent Public Accountants 55 (a)2. Financial Statement Schedules ----------------------------- The following consolidated financial information is included in Part IV of this report: Pages ----- Report of Independent Public Accountants on Supplemental Schedule IV-8 Schedule II - Valuation and Qualifying Accounts for the years ended December 31, 2001, 2000 and 1999 IV-9 Schedules other than those listed above are omitted because they are not applicable. IV-1 ITEM 14. (Continued) (a)3. Exhibits -------- Exhibit No. Description ----------- ----------- (3.1) The Company's Restated Certificate of Incorporation as amended to date. (3.2) The Company's By-Laws as amended to date. (4.1) Indenture, dated as of April 10, 1992, between the Company and The Chase Manhattan Bank (successor to Chemical Bank), as Trustee, is incorporated by reference to Exhibit 2 of the Company's Form 8-A dated August 25, 1992 (File 1-1225). (4.2) Supplemental Indenture, dated October 13, 1992, between the Company and The Chase Manhattan Bank (successor to Chemical Bank), as Trustee, is incorporated by reference to the Company's Form 10-Q for the quarter ended September 30, 1992 (File 1-1225). (4.3) Amended and Restated Rights Agreement, dated as of January 8, 2002, by and between the Company and The Bank of New York, as Rights Agent, with the form of Certificate of Designation attached as Exhibit A thereto and the form of Right Certificate attached as Exhibit B thereto is incorporated herein by reference to Exhibit 4.1 of the Company's Form 8-A/A, Amendment No. 2, dated January 8, 2002. (4.4) Certificate of Designation of Series A Junior Participating Preferred Stock of the Company is incorporated herein by reference to Exhibit 4.2 of the Company's Form 8-A, dated October 14, 1999. (10.1) Purchase Agreement, by and among American Cyanamid Company, American Home Products Corporation and BASF Aktiengesellschaft, dated as of March 20, 2000 is incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the period ended March 31, 2000 (Confidential Treatment Requested - confidential portions have been omitted and filed separately with the Commission). (10.2) First Amendment to the Purchase Agreement, by and among American Cyanamid Company, American Home Products Corporation, and BASF Aktiengesellschaft dated as of June 30, 2000 is incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on July 17, 2000 (Confidential Treatment Requested - confidential portions have been omitted and filed separately with the Commission). (10.3) Second Supplemental Indenture, dated as of March 30, 2001, between the Corporation and The Chase Manhattan Bank (as successor to Manufacturers Hanover Trust Company) is incorporated by reference to Exhibit 4.3 of the Registration Statement of Form S-4 of the Company filed on April 27, 2001. (10.4) Exchange and Registration Rights Agreement, dated March 30, 2001, among the Company and Chase Securities Inc., Salomon Smith Barney Inc., as Representatives of the several Initial Purchasers, is incorporated by reference to Exhibit 4.4 of the Registration Statement on Form S-4 of the Company filed on April 27, 2001. IV-2 (10.5) Second Amendment to the Purchase Agreement, by and among American Cyanamid Company, American Home Products Corporation, and BASF Aktiengesellschaft dated as of December 9, 2000 (Confidential Treatment Requested - confidential portions have been omitted and filed separately with the Commission). (10.6) B Credit Agreement, dated as of September 9, 1994, among the Company, American Home Food Products, Inc., Sherwood Medical Company, A.H. Robins Company, Incorporated, the several banks and other financial institutions from time to time parties thereto and The Chase Manhattan Bank (successor to Chemical Bank), as agent for the lenders thereunder, filed as Exhibit 11(b)(3) to Amendment No. 7 to the Schedule 14D-1, dated September 22, 1994 (File 1-1225), is incorporated herein by reference. (10.7) First Amendment to B Credit Agreement, dated as of August 4, 1995, among the Company, American Home Food Products, Inc., Sherwood Medical Company, A.H. Robins Company, Incorporated, the several banks and other financial institutions from time to time parties thereto and The Chase Manhattan Bank (successor to Chemical Bank), as agent for the lenders thereunder, is incorporated by reference to Exhibit 10.4 of the Company's Form 10-K for the year ended December 31, 1995 (File 1-1225). (10.8) Second Amendment to B Credit Agreement, dated as of August 2, 1996, among the Company, American Home Food Products, Inc., Sherwood Medical Company, A.H. Robins Company, Incorporated, the several banks and other financial institutions from time to time parties thereto and The Chase Manhattan Bank (successor to Chemical Bank), as agent for the lenders thereunder, is incorporated by reference to Exhibit 10.6 of the Company's Form 10-K for the year ended December 31, 1996 (File 1-1225). (10.9) Third Amendment to B Credit Agreement, dated as of July 31, 1997, among the Company, Sherwood Medical Company, A.H. Robins Company, Incorporated, AC Acquisition Holding Company, the several banks and other financial institutions from time to time parties thereto and The Chase Manhattan Bank (successor to Chemical Bank), as agent for the lenders thereunder, is incorporated by reference to Exhibit 10.8 of the Company's Form 10-K for the year ended December 31, 1997. (10.10) Letter, dated March 26, 1998, amending the B Credit Agreement, among the Company, AC Acquisition Holding Company, A.H. Robins Company, Incorporated, the lender parties thereto and The Chase Manhattan Bank (successor to Chemical Bank), as Agent, dated as of September 9, 1994 and as amended is incorporated herein by reference to Exhibit 10.1 of the Company's Form 10-Q for the quarter ended March 31, 1998. (10.11) Credit Agreement, dated as of March 5, 2001, among the Company, the banks and other financial institutions from time to time parties thereto and The Chase Manhattan Bank, as administrative agent for the lenders thereto is incorporated herein by reference to Exhibit 10.9 of the Company's 10-K for the year ended December 31, 2000. (10.12) Credit Agreement, dated as of March 4, 2002, among the Company, the banks and other financial institutions from time to time parties thereto and JPMorgan Chase Bank, as administrative agent for the lenders thereto. IV-3 (10.13)* 1985 Stock Option Plan, as amended, is incorporated by reference to Exhibit 10.4 of the Company's Form 10-K for the year ended December 31, 1991 (File 1-1225). (10.14)* Amendment to the 1985 Stock Option Plan is incorporated by reference to Exhibit 10.9 of the Company's Form 10-K for the year ended December 31, 1995 (File 1-1225). (10.15)* Amendment to the 1985 Stock Option Plan is incorporated by reference to Exhibit 10.12 of the Company's Form 10-K for the year ended December 31, 1996 (File 1-1225). (10.16)* 1990 Stock Incentive Plan is incorporated by reference to Exhibit 28 of the Company's Form S-8 Registration Statement File No. 33-41434 under the Securities and Exchange Act of 1933, filed June 28, 1991 (File 1-1225). (10.17)* Amendment to the 1990 Stock Incentive Plan is incorporated by reference to Exhibit 10.13 of the Company's Form 10-K for the year ended December 31, 1995 (File 1-1225). (10.18)* Amendment to the 1990 Stock Incentive Plan is incorporated by reference to Exhibit 10.21 of the Company's Form 10-K for the year ended December 31, 1996 (File 1-1225). (10.19)* Amendment to 1990 Stock Incentive Plan. (10.20)* 1993 Stock Incentive Plan, as amended to date, is incorporated by reference to Appendix III of the Company's definitive Proxy Statement filed March 18, 1999. (10.21)* Amendment to 1993 Stock Incentive Plan. (10.22)* 1996 Stock Incentive Plan, as amended to date, is incorporated by reference to Appendix II of the Company's definitive Proxy Statement filed March 18, 1999. (10.23)* Amendment to 1996 Stock Incentive Plan. (10.24)* 1999 Stock Incentive Plan is incorporated by reference to Appendix I of the Company's definitive Proxy Statement filed March 18, 1999. (10.25)* Amendment to 1999 Stock Incentive Plan. (10.26)* Form of Stock Option Agreement (phased vesting) is incorporated by reference to Exhibit 10.17 of the Company's Form 10-K for the year ended December 31, 1999. (10.27)* Form of Special Stock Option Agreement (phased vesting) is incorporated by reference to Exhibit 10.27 of the Company's Form 10-K for the year ended December 31, 1995 (File 1-1225). (10.28)* Form of Special Stock Option Agreement (three-year vesting) is incorporated by reference to Exhibit 10.28 of the Company's Form 10-K for the year ended December 31, 1995 (File 1-1225). *Denotes management contract or compensatory plan or arrangement required to be filed as an exhibit hereto. IV-4 (10.29)* Amendment to Special Stock Option Agreement is incorporated by reference to Exhibit 10.30 of the Company's Form 10-K for the year ended December 31, 1996 (File 1-1225). (10.30)* Form of Stock Option Agreement (transferable options) is incorporated by reference to Exhibit 10.21 of the Company's Form 10-K for the year ended December 31, 1999. (10.31)* Form of Restricted Stock Performance Award Agreement under the 1996 Stock Incentive Plan and 1999 Stock Incentive Plan (Subsequent Award) is incorporated herein by reference to Exhibit 10.25 of the Company's 10-K for the year ended December 31, 2000. (10.32)* Restricted Stock Trust Agreement under the 1993 Stock Incentive Plan is incorporated by reference to Exhibit 10.23 of the Company's Form 10-K for the year ended December 31, 1995 (File 1-1225). (10.33)* Management Incentive Plan, as amended to date is incorporated by reference to Exhibit 10.27 of the Company's Form 10-K for the year ended December 31, 1999. (10.34)* 1994 Restricted Stock Plan for Non-Employee Directors, as amended to date, is incorporated by reference to Exhibit 10.3 of the Company's Form 10-Q for the quarter ended June 30, 2001. (10.35)* Stock Option Plan for Non-Employee Directors is incorporated by reference to Exhibit 10.2 of the Company's Form 10-Q for the quarter ended June 30, 2001. (10.36)* Form of Stock Option Agreement under the Stock Option Plan for Non-Employee Directors is incorporated by reference to Exhibit 10.30 of the Company's Form 10-K for the year ended December 31, 1999. (10.37)* Savings Plan, as amended, to date. (10.38)* Retirement Plan for Outside Directors, as amended on January 27, 1994, is incorporated by reference to Exhibit 10.12 of the Company's Form 10-K for the year ended December 31, 1993 (File 1-1225). (10.39)* Directors' Deferral Plan is incorporated by reference to Exhibit 10.4 of the Company's Form 10-Q for the quarter ended June 30, 2001. (10.40)* Deferred Compensation Plan is incorporated by reference to Exhibit 10.1 of the Company's Form 10-Q for the quarter ended June 30, 2001. (10.41)* Executive Retirement Plan is incorporated by reference to Exhibit 10.2 of the Company's Form 10-Q for the quarter ended September 30, 1997. (10.42)* Executive Incentive Plan is incorporated by reference to Appendix D of the Company's definitive Proxy Statement, filed March 20, 2002. *Denotes management contract or compensatory plan or arrangement required to be filed as an exhibit hereto. IV-5 (10.43)* Supplemental Employee Savings Plan as amended to date. (10.44)* Supplemental Executive Retirement Plan is incorporated by reference to Exhibit 10.6 of the Company's Form 10-K for the year ended December 31, 1990 (File 1-1225). (10.45)* 2002 Stock Incentive Plan is incorporated by reference to Appendix C of the Company's definitive Proxy Statement, filed March 20, 2002. (10.46)* American Cyanamid Company's Supplemental Executive Retirement Plan is incorporated by reference to Exhibit 10K of American Cyanamid Company's Form 10-K for the year ended December 31, 1988 (File 1-3426). (10.47)* American Cyanamid Company's Supplemental Employees Retirement Plan Trust Agreement, dated September 19, 1989, between American Cyanamid Company and Morgan Guaranty Trust Company of New York is incorporated by reference to Exhibit 10K of American Cyanamid Company's Form 10-K for the year ended December 31, 1989 (File 1-3426). (10.48)* American Cyanamid Company's ERISA Excess Retirement Plan is incorporated by reference to Exhibit 10N of American Cyanamid Company's Form 10-K for the year ended December 31, 1988 (File 1-3426). (10.49)* American Cyanamid Company's Excess Retirement Plan Trust Agreement, dated September 19, 1989, between American Cyanamid Company and Morgan Guaranty Trust Company of New York is incorporated by reference to Exhibit 10M of American Cyanamid Company's Form 10-K for the year ended December 31, 1989 (File 1-3426). (10.50)* Form of Severance Agreement entered into between the Company and the executive officers specified therein and other executive officers is incorporated by reference to Exhibit 10.43 of the Company's Form 10-K for the year ended December 31, 1997. (10.51)* Form of Severance Agreement entered into between the Company and the executive officers specified therein is incorporated by reference to Exhibit 10.1 of the Company's Form 10-Q for the quarter ended June 30, 1998. (10.52)* Agreement, dated as of March 6, 2001, by and between the Corporation and John R. Stafford is incorporated by reference to Exhibit 10.1 of the Company's Form 10-Q for the quarter ended March 31, 2001. (10.53)* Amendatory Agreement, dated as of March 6, 2001, by and between the Corporation and John R. Stafford is incorporated by reference to Exhibit 10.2 of the Company's Form 10-Q for the quarter ended March 31, 2001. (10.54)* Union Savings Plan. (12) Computation of Ratio of Earnings to Fixed Charges. *Denotes management contract or compensatory plan or arrangement required to be filed as an exhibit hereto. IV-6 (13) 2001 Annual Report to Stockholders. Such report, except for those portions thereof which are expressly incorporated by reference herein, is furnished solely for the information of the Commission and is not to be deemed "filed" as part of this filing. (16) Letter from Arthur Andersen LLP to the Securities and Exchange Commission, dated March 18, 2002, is incorporated herein by reference to Exhibit 16 to the Current Form on Form 8-K, dated March 18, 2002. (21) Subsidiaries of the Company. (23) Consent of Independent Public Accountants relating to their report dated January 24, 2002, consenting to the incorporation thereof in Registration Statements on Form S-3 (File Nos. 33-45324 and 33-57339), Form S-4 (File No. 333-59642) and on Form S-8 (File Nos. 2-96127, 33-24068, 33-41434, 33-53733, 33-55449, 33-45970, 33-14458, 33-50149, 33-55456, 333-15509, 333-76939, 333-67008, 333-64154 and 333-59668) by reference to the Form 10-K of the Company filed for the year ended December 31, 2001. (99) Cautionary Statements regarding "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995. (99.1) Letter to the Securities and Exchange Commission regarding Arthur Andersen LLP (pursuant to Temporary Note 3T). (99.2) Final Nationwide Class Action Settlement Agreement, dated November 18, 1999, as amended to date is incorporated by reference to Exhibit 99.1 of the Company's Form 10-Q for the quarter ended September 30, 2000. (99.3) Consent Decree, dated October 3, 2000, is incorporated by reference to Exhibit 99.2 of the Company's Form 10-Q for the quarter ended September 30, 2000. (b) Reports on Form 8-K The following Current Reports on Form 8-K were filed by the Company: o December 18, 2001 relating to the proposed merger between Amgen, Inc. and Immunex. o January 8, 2002 relating to an Amended and Restated Rights Agreement by and between the Company and The Bank of New York. o March 11, 2002 announcing the Company formally changed its name to Wyeth. o March 13, 2002 to file the Company's 2001 Annual Report to Stockholders. o March 18, 2002 relating to the change in the Company's independent public accountant. *Denotes management contract or compensatory plan or arrangement required to be filed as an exhibit hereto. IV-7 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ---------------------------------------- To the Board of Directors and Stockholders of Wyeth: We have audited in accordance with auditing standards generally accepted in the United States, the consolidated financial statements included in Wyeth's (formerly American Home Products Corporation - a Delaware Corporation) Annual Report to Stockholders incorporated by reference in this Form 10-K, and have issued our report thereon dated January 24, 2002. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed in the accompanying index is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. The schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP New York, New York January 24, 2002 IV-8 Wyeth and Subsidiaries Schedule II - Valuation and Qualifying Accounts For the Years Ended December 31, 2001, 2000 and 1999 (Dollars in thousands)
Column A Column B Column C Column C Column D Column E 1 2 Balance Balance at Additions- at Beginning Charged to Adjustments Deductions End of Period Expense (A) (B) of Period --------- ---------- ----------- ---------- --------- Description Year ended 12/31/01: Allowance for doubtful accounts $ 114,003 $ 17,257 $ - $ 31,960 $ 99,300 Allowance for cash discounts 30,147 219,995 - 218,708 31,434 --------- ---------- ----------- ---------- --------- Total accounts receivable allowances $ 144,150 $ 237,252 $ - $ 250,668 $ 130,734 ========= ========== =========== ========== ========= Allowance for deferred tax assets $ 51,153 $ - $ - $ 1,571 $ 49,582 ========= ========== =========== ========== ========= Year ended 12/31/00: Allowance for doubtful accounts $ 113,640 $ 30,187 $ 94 $ 29,918 $ 114,003 Allowance for cash discounts 28,119 204,032 (1,787) 200,217 30,147 --------- ---------- ----------- ---------- --------- Total accounts receivable allowances $ 141,759 $ 234,219 $ (1,693) $ 230,135 $ 144,150 ========= ========== =========== ========== ========= Allowance for deferred tax assets $ 151,409 $ 74 $ (100,330) $ - $ 51,153 ========= ========== =========== ========== ========= Year ended 12/31/99 (C): Allowance for doubtful accounts $ 123,650 $ 32,779 $ - $ 42,789 $ 113,640 Allowance for cash discounts 27,927 204,533 - 204,341 28,119 --------- ---------- ----------- ---------- --------- Total accounts receivable allowances $ 151,577 $ 237,312 $ - $ 247,130 $ 141,759 ========= ========== =========== ========== ========= Allowance for deferred tax assets $ 237,174 $ 13,005 $ - $ 98,770 $ 151,409 ========= ========== =========== ========== =========
(A) Represents an increase to the beginning balance as a result of the consolidation of pharmaceutical operations in India and Japan, effective January 1, 2000, which were previously accounted for on an equity basis. Also, the beginning balance relating to Immunex, which was deconsolidated effective January 1, 2000, was excluded. (B) Represents amounts used for the purposes for which the accounts were created and reversal of amounts no longer required. (C) As a result of the sale of the Cyanamid Agricultural Products business on June 30, 2000, amounts for 1999 were restated, to reflect the business as a discontinued operation. IV-9 SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized. WYETH ----- (Registrant) March 28, 2002 By /S/ Kenneth J. Martin ------------------------- Kenneth J. Martin Senior Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signatures Title Date ---------- ----- ---- Principal Executive Officers: /S/ John R. Stafford Chairman of the Board March 28, 2002 - --------------------------------- John R. Stafford /S/ Robert Essner President March 28, 2002 - --------------------------------- Robert Essner and Chief Executive Officer Principal Financial Officer: /S/ Kenneth J. Martin Senior Vice President March 28, 2002 - --------------------------------- Kenneth J. Martin and Chief Financial Officer Principal Accounting Officer: /S/ Paul J. Jones Vice President and March 28, 2002 - --------------------------------- Paul J. Jones Comptroller Directors: /S/ Clifford L. Alexander, Jr. Director March 28, 2002 - --------------------------------- Clifford L. Alexander, Jr. /S/ Frank A. Bennack, Jr. Director March 28, 2002 - --------------------------------- Frank A. Bennack, Jr. /S/ Richard L. Carrion Director March 28, 2002 - --------------------------------- Richard L. Carrion /S/ John D. Feerick Director March 28, 2002 - --------------------------------- John D. Feerick IV-10 /S/ John P. Mascotte Director March 28, 2002 - --------------------------------- John P. Mascotte /S/ Mary Lake Polan, M.D., Ph.D. Director March 28, 2002 - --------------------------------- Mary Lake Polan, M.D., Ph.D. /S/ Ivan G. Seidenberg Director March 28, 2002 - --------------------------------- Ivan G. Seidenberg /S/ Walter V. Shipley Director March 28, 2002 - --------------------------------- Walter V. Shipley /S/ John R. Torell III Director March 28, 2002 - --------------------------------- John R. Torell III IV-11 INDEX TO EXHIBITS ----------------- Exhibit No. Description ----------- ----------- (3.1) The Company's Restated Certificate of Incorporation as amended to date. (3.2) The Company's By-laws as amended to date. (10.12) Credit Agreement, dated as of March 4, 2002, among the Company, the banks and other financial institutions from time to time parties thereto and JPMorgan Chase Bank, as administrative agent for the lenders thereto. (10.19)* Amendment to 1990 Stock Incentive Plan. (10.21)* Amendment to 1993 Stock Incentive Plan. (10.23)* Amendment to 1996 Stock Incentive Plan. (10.25)* Amendment to 1999 Stock Incentive Plan. (10.37)* Savings Plan, as amended to date. (10.43)* Supplemental Employee Savings Plan as amended to date. (10.54)* Union Savings Plan. (12) Computation of Ratio of Earnings to Fixed Charges. (13) 2001 Annual Report to Stockholders. Such report, except for those portions thereof which are expressly incorporated by reference herein, is furnished solely for the information of the Commission and is not to be deemed "filed" as part of this filing. (21) Subsidiaries of the Company. (23) Consent of Independent Public Accountants relating to their report dated January 24, 2002, consenting to the incorporation thereof in Registration Statements on Form S-3 (File Nos. 33-45324 and 33-57339), Form S-4 (File No. 333-59642) and on Form S-8 (File Nos. 2-96127, 33-24068, 33-41434, 33-53733, 33-55449, 33-45970, 33-14458, 33-50149, 33-55456, 333-15509, 333-76939, 333-67008, 333-64154 and 333-59668) by reference to the Form 10-K of the Company filed for the year ended December 31, 2001. (99) Cautionary Statements regarding "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995. (99.1) Letter to the Securities and Exchange Commission regarding Arthur Andersen LLP (pursuant to Temporary Note 3T). *Denotes management contract or compensatory plan or arrangement required to be filed as an exhibit hereto. EX-3.1 3 charter.txt RESTATED CERTIFICATE OF INCORPORATION RESTATED CERTIFICATE OF INCORPORATION OF WYETH AMENDED THROUGH MARCH 11, 2002 RESTATED CERTIFICATE OF INCORPORATION OF WYETH FIRST: The name of the corporation is: Wyeth. SECOND: The principal office of the corporation in the State of Delaware is located at 1013 Centre Road, in the City of Wilmington, County of New Castle. The name address of the agent of the corporation resident therein and in charge thereof is The Prentice-Hall Corporation System, Inc., 1013 Centre Road, Wilmington, Delaware 19805-1297. THIRD: The nature of the business or objects or purposes to be transacted, promoted or carried on by the corporation are as follows: (a) To manufacture, produce, purchase or otherwise acquire and to hold, own, use, lease, distribute or otherwise dispose of and generally to trade and deal in and with, at wholesale, retail or otherwise, any and all kinds of medicines, medicinal and pharmaceutical preparations, compounds and mixtures, food, beverage and confectionery products, toilet articles, drugs, chemicals, dyes, dye-stuffs and combinations, and mixtures and preparations thereof, and all kinds of tools, machinery, equipment, utensils, builders' hardware, housewares and household items of every type and description (including, without limitation on, cutlery, kitchen tools, flatware, cookware, household bakeware, egg beaters, can openers, cooking utensils, bathroom and closet fittings and accessories), commercial bakeware, industrial food handling equipment and aluminum foil and other containers, and materials and supplies for any of the foregoing or for use in connection with the business of the corporation. (b) To apply for, obtain, register, purchase, lease or otherwise acquire, hold, own, use, operate, introduce, develop or control, sell, assign or otherwise dispose of, take or grant licenses or other rights with respect to and in any and all ways to exploit or turn to account inventions, improvements, processes, copyrights, patents, trademarks, formulae, trade names and distinctive marks and similar rights of any and all kinds and whether granted, registered or established by or under the laws of the United States or of any state or country. (c) To acquire, buy, purchase, lease, own, hold, sell, mortgage and encumber improved and unimproved real estate wherever situated and to construct and erect thereon factories, works, plants, stores, mills, hotels, houses and building. (d) To purchase or otherwise acquire and to hold, sell, pledge or otherwise dispose of all forms of securities, including stocks, bonds, debentures, notes, certificates of indebtedness, certificates of interest, mortgages and other similar instruments and rights however issued or created, and to deal in and with the same and to issue in exchange therefor or in payment therefor its own stock, bonds or other obligations or securities and to exercise in respect thereof any andall rights, powers and privileges of individual ownership or interest therein,including the right to vote thereof and to consent or otherwise act with respect thereto; to do any and all acts and things for the preservation, protection, improvement and enhancement in value thereof, or designed to accomplish any such purpose and to aid by loan, subsidy, guaranty or in any other manner, those issuing, creating or responsible for any of such securities; to acquire or become interested in any such securities as aforesaid by original subscription, underwriting, participation in syndicates or otherwise and to make payments thereon as called for and to underwrite or subscribe for the same conditionally or otherwise and either with a view to investment or for resale or for any other lawful purpose. (e) To purchase or otherwise acquire, sell or otherwise dispose of, realize upon or otherwise turn to account, manage, liquidate or reorganize the properties, assets, business undertakings, enterprises or ventures or any part thereof of corporations, associations, firms, individuals, syndicates and others; to act as financial, commercial or general agent or representative of any corporation, association, firm, syndicate or individual and as such to develop, improve and extend the property, trade and business interests thereof and to aid any lawful enterprise in connection therewith and in connection with acting as agent or broker for any principal to give any other aid or assistance. (f) To borrow money and for moneys borrowed or in payment for property acquired or for any other objects and purposes of the corporation or otherwise in connection with the transaction of any part of its business to issue bonds, debentures, notes and other obligations secured or unsecured and to mortgage, pledge or hypothecate any or all of its properties or assets as security therefor; to make, accept, endorse, guarantee, execute and issue notes, bills of exchange and other obligations; to mortgage, pledge or hypothecate any stocks, bonds, other evidences of indebtedness or securities and any other property held by it or in which it may be interested and to loan money with or without collateral or other security; to guarantee the payment of dividends upon stocks or the principal of and/or interest upon bonds, notes or other evidences of indebtedness or obligations or the performance of the contracts or other undertakings of any corporation, copartnership, syndicate or individual; to enter into, make and perform contracts of every kind and for any lawful purpose with any person, firm, corporation or syndicate. (g) To purchase or otherwise acquire all or any part of the business, good will, rights, property and assets and to assume or otherwise provide for all or any part of the liabilities of any corporation, association, partnership or individual; to take over as a going concern and continue any business so acquire and to pay for any such business or properties, in cash, stock, bonds, debentures or obligations of this corporation or otherwise. (h) To manufacture, buy or otherwise acquire and to sell or otherwise dispose of, distribute, deal in and deal with, either as principal, agent, dealer or broker, goods, wares and merchandise of every kind and description, including all materials or substances now known or hereafter to be discovered or invented; to purchase or otherwise acquire and to sell or otherwise dispose of, distribute, deal in and deal with, either as principal, agent, dealer or broker, all kinds of personal property of every sort and description wheresoever situated and all interests therein which this corporation may deem necessary or convenient in connection with any part of its business. (i) To conduct any and all of its business in the State of Delaware and any other states, the District of Columbia, the territories, colonies and dependencies of the United States and in foreign countries and places and to have one or more offices outside of the State of Delaware, and to purchase or otherwise acquire, hold, mortgage, convey, transfer, or otherwise dispose of, outside of the State of Delaware, real and personal property. (j) To do all and everything necessary, suitable, convenient or proper for the accomplishment of any of the purposes or the attainment of any or all of the objects hereinbefore enumerated or incidental to the powers herein named, or which shall at any time appear conducive to or expedient for the protection or benefit of the corporation, either as holder of or as interested in any property or otherwise; and to have all the rights, powers and privileges named or hereafter conferred by the General Corporation Laws of the State of Delaware. The foregoing clauses shall be construed both as objects and powers and it is hereby expressly provided that the enumeration herein of specific objects and powers shall not be held to limit or restrict in any manner the general powers of this corporation and all the powers of this corporation and all the powers and purposes hereinbefore enumerated shall be exercised, carried on and enjoyed by this corporation within the State of Delaware and outside of the State of Delaware to such extent and in such manner as corporations organized under the General Corporation Laws of the State of Delaware may properly and legally exercise, carry on and enjoy. FOURTH: The total number of shares of Capital Stock which may be issued by the corporation is Two Billion Four Hundred Five Million (2,405,000,000) of which Two Billion Four Hundred Million (2,400,000,000) shares shall be Common Stock, par value of Thirty-three and One Third Cents (33-1/3 cents) per share and Five million (5,000,000) shares shall be Preferred Stock (hereinafter referred to as the "Preferred Stock"), par value of Two Dollars Fifty Cents ($2.50) per share. The designations and the powers, preferences and rights, and the qualifications, limitations or restrictions of the shares of each class of stock are as follows: PREFERRED STOCK I. The Preferred Stock may be issued from time to time in one or more series, each of such series to have such voting powers full or limited, or without voting powers, such designation, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof as are stated and expressed herein, or in a resolution or resolutions providing for the issue of such series adopted by the Board of Directors as hereinafter provided. II. Authority is hereby expressly granted to the Board of Directors, subject to the provisions of this Article Fourth, to authorize one or more series of Preferred Stock and, with respect to each series (except the series hereinafter designated as $2 Convertible Preferred Stock), to fix by resolution or resolutions providing for the issue of such series: (a) the number of shares to constitute such series and the distinctive designation thereof; (b) the dividend rate on the shares of such series, dividend payment dates, whether such dividends shall be cumulative, and, if cumulative, the date or dates from which dividends shall accumulate; (c) whether or not the shares of such series shall be redeemable, and, if redeemable, the redemption prices which the shares of such series shall be entitled to receive upon the redemption thereof; (d) whether or not the shares of such series shall be subject to the operation of retirement or sinking funds to be applied to the purchase or redemption of such shares for retirement and, if such retirement or sinking fund or funds be established, the annual amount thereof and the terms and provisions relative to the operation thereof; (e) whether or not the shares of such series shall be convertible into, or exchangeable for, shares of any other class or classes or of any other series of the same or any other class or classes of stock of the corporation and the conversion price or prices or ratio or ratios or the rate or rates at which such exchange may be made, with such adjustments, if any, as shall be stated and expressed or provided in such resolution or resolutions; (f) the preferences, if any, and the amounts thereof, which the shares of such series shall be entitled to receive upon the voluntary and involuntary dissolution of, or upon any distribution of the assets of, the corporation; (g) the voting power, if any, of the shares of such series; and (h) such other special rights and protective provisions as to the Board of Directors may seem advisable. Notwithstanding the fixing of the number of shares constituting a particular series (including the $2 Convertible Preferred Stock) upon the issuance thereof, the Board of Directors may at any time thereafter authorize the issuance of additional shares of the same series. III. Holders of Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors, out of funds legally available for the payment of dividends, dividends at the annual rates fixed by the Board of Directors for the respective series and no more, payable on such dates in each year as the Board of Directors shall fix for the respective series as provided in subdivision (b) of Section II of this Article Fourth (hereinafter referred to as "dividend dates"), in preference to dividends on any other class of stock of the corporation, so that unless all accrued dividends on all series of Preferred Stock entitled to cumulative dividends shall have been declared and set apart for payment through the last preceding dividend date set for all such series and dividends on all other series of Preferred Stock shall have been declared and set apart for payment at the rate to which such other series of Preferred Stock are entitled for the period commencing the second preceding dividend date and ending on the last preceding dividend date set for such series, no cash payment or distribution shall be made to holders of the Common Stock of the corporation. No dividend shall be declared and set apart for payment on any series of Preferred Stock in respect of any dividend period unless there shall likewise be or have been declared and set apart for payment on all shares of Preferred Stock of each series entitled to cumulative dividends at the time outstanding dividends ratably in accordance with the sums which would be payable on the said shares through the last preceding dividend date if all dividends were declared and paid in full. Nothing herein contained shall be deemed to limit the right of the corporation to purchase or otherwise acquire at any time any shares of its capital stock; provided that no shares of capital stock shall be repurchased at any time when accrued dividends on any series of Preferred Stock entitled to cumulative dividends remain unpaid for any period to and including the last preceding dividend date. For the purposes of this Article Fourth, and of any certificate fixing the terms of any series of Preferred Stock, the amount of dividends "accrued" on any share of Preferred Stock of any series entitled to cumulative dividends as at any dividend date shall be deemed to be the amount of any unpaid dividends accumulated thereon to and including such dividend date, whether or not earned or declared, and the amount of dividends "accrued" on any share of Preferred Stock of any series entitled to cumulative dividends as at any date other than a dividend date shall be calculated as the amount of any unpaid dividends accumulated thereon to and including the last preceding dividend date, whether or not earned or declared, plus an amount computed, on the basis of 360 days per annum, for the period after such last preceding dividend date to and including the date as of which the calculation is made at the annual dividend rate fixed for the shares of such series or class. IV. In the event that the Preferred Stock of any series shall be entitled to a preference upon the dissolution of, or upon any distribution of the assets of, the corporation, then upon any such dissolution of, or distribution of the assets of, the corporation, before any payment or distribution of the assets of the corporation (whether capital or surplus) shall be made to or set apart for any other series or class or classes of stock, the holders of such series of Preferred Stock shall be entitled to payment of the amount of the preference, if any, payable upon such dissolution of, or distribution of the assets of the corporation as may be fixed by the Board of Directors for the shares of the respective series as provided in subdivision (f) of Section II of this Article Fourth before any further payment or distribution shall be made on any other class or series of capital stock. If, upon any such dissolution, or distribution, the assets of the corporation distributable among the holders of any such series of the Preferred Stock entitled to a preference shall be insufficient to pay in full the preferential amount aforesaid, then such assets, or the proceeds thereof, shall be distributed among the holders of each such series of the Preferred Stock ratably in accordance with the sums which would be payable on such distribution if all sums payable were discharged in full. The voluntary sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the corporation, the merger or consolidation of the corporation into or with any other corporation, or the merger of any other corporation into it, shall not be deemed to be a dissolution of, or a distribution of the assets of, the corporation, for the purpose of this Section IV. V. In the event that the Preferred Stock of any series shall be redeemable, then, at the option of the Board of Directors, the corporation at any time or from time to time may redeem all, or any number less than all, of the outstanding shares of such series at the redemption price thereof fixed by the Board of Directors as provided in subdivision (c) of Section II of this Article Fourth (the sum so payable upon any redemption of Preferred Stock being herein referred to as the "redemption price"); provided, that not less than 30 days previous to the date fixed for redemption a notice of the time and place thereof shall be mailed to each holder of record of the shares so to be redeemed at his address as shown by the records of the corporation; and provided further, that in case of redemption of less than all of the outstanding shares of any series of Preferred Stock the shares to be redeemed shall be chosen by lot in such equitable manner as may be prescribed by the Board of Directors. At any time after notice of redemption shall have been mailed as above provided to the holders of the stock so to be redeemed, the corporation may deposit the aggregate redemption price, in trust, with a bank or trust company in the Borough of Manhattan, The City of New York, having capital, surplus and undivided profits of at least $5,000,000, named in such notice, for payment, on or before the date fixed for redemption, of the redemption price for the shares called for redemption. Upon the making of such deposit, or if no such deposit is made then upon such redemption date (unless the corporation shall default in making payment of the redemption price), holders of the shares of Preferred Stock called for redemption shall cease to be stockholders with respect to such shares notwithstanding that any certificate for such shares shall not have been surrendered, and thereafter such shares shall no longer be transferable on the books of the corporation and such holders shall have no interest in or claim against the corporation with respect to said shares, except the right (a) to receive payment of the redemption price upon surrender of their certificates, or (b) to exercise on or before the date fixed for redemption the rights, if any, not theretofore expiring, to convert the shares so called for redemption into, or to exchange such shares for, shares of stock of any other class or classes or of any other series of the same class or any other class or classes of stock of the corporation. Any funds deposited in trust as aforesaid which shall not be required for such redemption, because of the exercise of any right of conversion or otherwise subsequent to the date of such deposit, shall be returned to the corporation forthwith. The corporation shall be entitled to receive from any such bank or trust company the interest, if any, allowed on any moneys deposited as in this Section provided, and the holders of any shares so redeemed shall have no claim to any such interest. Any funds so deposited by the corporation and unclaimed at the end of five years from the date fixed for such redemption shall be repaid to the corporation upon its request, after which repayment the holders of such shares who shall not have made claim against such moneys prior to such repayment shall be deemed to unsecured creditors of the corporation, but only for a period of two years from the date of such repayment (after which all rights to holders of such shares as unsecured creditors or otherwise shall cease), for an amount equivalent to the amount deposited as above stated for the redemption of such shares and so repaid to the corporation, but shall in no event be entitled to any interest. In order to facilitate the redemption of any shares of Preferred Stock, the Board of Directors is authorized to cause the transfer books of the corporation to be closed as to the shares to be redeemed. VI. Any shares of Preferred Stock which shall at any time have been redeemed, or which shall at any time have been surrendered for conversion or exchange or for cancellation pursuant to any retirement or sinking fund provisions with respect to any series of Preferred Stock, shall be retired and shall thereafter have the status of authorized and unissued shares of Preferred Stock undesignated as to series. VII. There is hereby authorized an initial series of the Preferred Stock having the following voting powers, designation, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions: (a) The number of shares to constituted such series shall be Two million eight hundred thirty thousand (2,830,000) and the distinctive designation thereof shall be "$2 Convertible Preferred Stock". (b) The dividend rate on the shares of such series shall be $2.00 per annum, payable in cash quarterly on January 1, April 1, July 1 and October 1 in each year. Dividends shall accumulate on any shares of such series issued upon conversion of outstanding shares of Ekco Products Company upon the Merger Date of the Agreement of Merger (herein called the "Agreement of Merger") dated July 29, 1965 of American Home Products Corporation and Ekco Products Company from and after January 1, 1966 and upon any other shares of such series from and after the dividend date next following the issuance of such shares. (c) The shares of such series shall be redeemable on and after the fifth anniversary of the Merger Date of the Agreement of Merger if at the time of mailing of the notice of redemption the average market price per share (as hereafter defined) of the Common Stock is at least $80.00 per share, or in the event that an adjustment in the number of shares issuable upon conversion of shares of such series under Section (e) of this Article Fourth shall have occurred, then a market price per share equal to the product of multiplying $60.00 per share by the reciprocal of the then current conversion rate and the redemption price which the shares of such series shall be entitled to receive upon the redemption thereof shall be the amount of $60.00 per share in cash plus a sum equal to the accrued but unpaid dividends thereon to the redemption date. (d) The shares of such series shall not be subject to the operation of any sinking fund to be applied to the purchase or redemption of such shares for retirement. (e) Subject to the provisions for adjustment hereinafter set forth, the shares of such series shall be convertible at the option of the holder thereof, at any time, upon surrender for conversion to any Transfer Agent for such shares of the certificate representing the shares so to be converted, into full paid and non-assessable shares of Common Stock of the corporation at the rate of .75 shares of Common Stock for each such share of such series so surrendered for conversion. The right, if any, to convert shares of such series called for redemption shall terminate at the time specified in the notice of redemption given pursuant to the provisions of Section VII of this Article Fourth. Upon conversion, no payment or adjustment shall be made for dividends on any class of shares. The number of shares of Common Stock and the number of shares of stock of other classes of the corporation, if any, into which each share of such series is convertible shall be subject to adjustment from time to time as follows: (i) In case the corporation shall (a) take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend declared payable in shares of the corporation, (b) subdivide its outstanding Common Stock, (c) combine the outstanding Common Stock into a smaller number of shares, or (d) issue by reclassification of shares of Common Stock any shares of the Corporation, the holder of each share of such series shall thereafter be entitled to receive upon the conversion of such share, the number of shares of the corporation which he would have owned or have been entitled to receive after the happening of any of the events described above had such share been converted immediately prior to the happening of such event. Further such adjustment shall be made whenever any of the events listed above shall occur. (ii) In case the corporation shall take a record of the holders of its Common Stock for the purpose of entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the average market price (as hereinafter defined) for the time at which such record is taken, in each such case, the number of shares of Common Stock into which each such share of such series shall thereafter be convertible shall be determined by multiplying the number of shares of Common Stock into which such share of such series was theretofore convertible by a fraction of which the numerator shall be the sum of the number of shares of Common Stock outstanding at the time of the taking of such record and the number of additional shares of Common Stock so offered for subscription or purchase, and of which the denominator shall be the sum of the number of shares of Common Stock outstanding at the time of the taking of such record and the number of shares of Common Stock which the aggregate public offering price (without deduction of expenses of the issue, including underwriting commissions) of the total number of shares so offered would purchase at the average market price per share for such time. (iii) In case the corporation shall take a record of the holders of its Common Stock for the purpose of entitling them to receive any distribution of evidence of its indebtedness or assets (excluding cash distributions on Common Stock after December 31, 1964 not exceeding the amount of consolidated net earnings after December 31, 1964 of the corporation and its subsidiaries, less cash distributions after December 31, 1964 on stock other than Common Stock, all determined in accordance with good accounting practice) or rights to subscribe, excluding those referred to in paragraph (ii) above, in each such case the number of shares of Common Stock into which each such share of such series shall thereafter be convertible shall be determined by multiplying the number of shares of Common Stock into which such share of such series was theretofore convertible by a fraction of which the numerator shall be the average market price per share of Common Stock for the time at which such record is taken and of which the denominator shall be the average market price per share of Common Stock for such time less the fair value (as determined by the Board of Directors of the corporation, whose determination shall be conclusive and described in a statement filed with the Transfer Agent or Agents for such shares of such series and for the Common Stock) of the portion of the assets or evidences of indebtedness so distributed or of such subscription rights applicable to one of the outstanding shares of Common Stock. (iv) For the purpose of any computation under this Article Fourth, the "average market price per share" of any shares of capital stock for any time shall be the average of the daily mean of the high and low sales prices, or bid prices, as the case may be, for five consecutive business days commencing ten business days before the time in question on which transactions have been reported by any accepted financial publication of general circulation in the Borough of Manhattan, The City of New York, on the New York Stock Exchange, if such shares are regularly traded on such Exchange, or on any other national securities exchange if such shares be not regularly traded on the New York Stock Exchange, or if such shares be not regularly traded on any national securities exchange the bid prices as reported by the National Quotation Bureau, Inc. or by any successor organization. (v) No adjustment in the number of shares of Common Stock into which any share of such series is convertible shall be required unless such adjustment would require an increase or decrease of at least 1% in the total number of shares of Common Stock into which all shares of such series are then convertible; provided, however, that any adjustments which by reason of this paragraph (v) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. (vi) If the corporation shall take a record of the holders of its Common Stock for the purpose of entitling them to receive any dividend, distribution or subscription rights and shall, thereafter and before delivery to shareholders of any such dividend, distribution or subscription rights, legally abandon its plan to pay or deliver such dividend, distribution or subscription rights, then no adjustment in the number of shares of Common Stock or of other shares of the corporation into which any share of such Stock is convertible, nor the giving of any notice to the holders of shares of such series, shall be required by reason of the taking of such record. (vii) Whenever any adjustment is required in the shares into which any share of such series is convertible, the corporation shall forthwith (a) file with the Transfer Agent or Transfer Agents for shares of such series and for the Common Stock a statement describing in reasonable detail the adjustment and the method of calculation used, and (b) cause a notice stating the nature and amount of such adjustment to be published at least once in a newspaper printed in the English language and customarily published on five days each calendar week and of general circulation in the Borough of Manhattan, The City of New York and in the City of Chicago, Illinois. (viii) No fractional shares shall be issued upon conversion of shares of such series, but in lieu thereof the corporation shall pay to the holder thereof an amount in cash equal to the value of such fractional interest in a share determined upon the basis of the closing price per share on the New York Stock Exchange as reported in an accepted financial publication of general circulation in the Borough of Manhattan, The City of New York if such shares are regularly traded upon such exchange or on any other national securities exchange if such shares be not regularly traded on the New York Stock Exchange, or if such shares be not regularly traded on any national securities exchange upon the basis of the closing bid price reported by the National Quotation Bureau, Inc. or by any successor organization, on the date upon which the certificate representing the shares of such series shall be surrendered for conversion. (ix) Shares of such series shall be deemed to be converted and the holder thereof shall be deemed to have become a holder of record of the shares of the corporation into which the shares of such series are convertible at the close of business on the date upon which the certificate representing shares of such series has been surrendered to any Transfer Agent for conversion, or if such date shall be a legal holiday in the jurisdiction in which such Transfer Agent is located or a date fixed by the Board of Directors for the closing of the transfer books or the taking of a record of the holders of the shares of the corporation into which the shares of such series are convertible, then on the next succeeding business day when such transfer books are open. (x) The corporation shall at all times reserve and keep available out of its authorized but unissued shares the full number of shares into which all shares of such series from time to time outstanding are convertible. (f) The shares of such series shall be entitled to receive in preference to shares of the Common Stock of the corporation upon any dissolution of, or distribution of assets of, the corporation (i) the amount of $60.00 per share in the event of any voluntary liquidation, dissolution or winding-up of the corporation and (ii) the amount of $52.50 in the event of any involuntary liquidation, dissolution or winding-up of the corporation, plus, in either case, an amount equal to all accrued but unpaid dividends to the date of such liquidation, dissolution or winding-up. (g) The shares of such series shall be entitled to thirty-six (36) votes per share voting with the shares of Common Stock at any annual or special meeting of stockholders for the election of directors and upon any other matter coming before such meeting. In addition, the shares of such series shall have the following special voting powers and rights: (i) So long as any shares of such series are outstanding, the corporation shall not, without the consent (given by vote at a meeting called for that purpose) of the holders of at least two-thirds of the total number of shares of such series and any other series of the Preferred Stock then outstanding having voting rights in the premises, voting as a class: (a) create or authorize any class of stock ranking prior to or on a parity with the Preferred Stock, or create or authorize any obligation or security convertible into shares of stock of any such class; or (b) amend, alter, change or repeal any of the express terms of such series or of the Preferred Stock then outstanding in a manner prejudicial to the holders thereof; provided, however, if any such change shall effect only a single series of the Preferred Stock, then only the holders of such series shall have any special voting right hereunder. (ii) If and when dividends payable on such series shall be in default in an amount equivalent to six (6) full quarter-yearly dividends on all shares of such series at the time outstanding, the number of directors of the corporation shall thereupon, and until all dividends in default on such series shall have been paid or declared and set apart for payment, be two more than the full number constituting the Board of Directors immediately prior to such default. The holders of all shares of such series, voting separately as one class with any other series of the Preferred Stock having voting powers in the premises, shall be entitled to elect directors to fill the vacancies resulting from such increase in the number of directors of the corporation. Such holders shall, at a meeting called and held as provided in subparagraph (v) hereof elect such two directors to hold office until the next annual meeting of stockholders; provided, however, that the terms of office of such directors shall terminate upon the curing of all defaults in dividends on such series as provided in subparagraph (iii) hereof, unless dividend defaults shall still exist on other series of the Preferred Stock. (iii) If and when all dividends then in default on such series at the time outstanding shall be paid, the holders of shares of such series shall thereupon be divested of any special right with respect to the election of directors provided in subparagraph (ii) hereof and the number of directors of the corporation shall be reduced by two (except as provided in paragraph (ii) hereof); but always subject to the same provisions for vesting such special rights in such series in case of further like default or defaults in dividends thereon. (iv) In case of any vacancy in the Board of Directors occurring among the directors elected by the holders of such series, as a class, pursuant to subparagraph (ii) hereof, the holders of such series and of any other series of Preferred Stock then outstanding and entitled to vote may elect a successor to hold office for the unexpired term of the directors whose place shall be vacant. In all other cases, any vacancy occurring among the directors shall be filled by the vote of a majority of the remaining directors. (v) Whenever the holders of such series, as a class, become entitled to elect directors of the corporation pursuant to subparagraph (ii) or (iv) hereof, a meeting of the holders of such series shall be held at any time thereafter upon call by the holders of not less than 1,000 shares of such series or upon call by the Secretary of the corporation at the request in writing of any stockholder addressed to him at the principal office of the corporation. At all meetings of stockholders held for the purpose of electing directors during such times as the holders of shares of such series shall have the special right, voting separately as one class, to elect directors pursuant to subparagraph (ii) hereof, the presence in person or by proxy of the holders of a majority of the outstanding shares of the series of Preferred Stock entitled to vote separately as a class shall be required to constitute a quorum of such class for the election of directors for such class; provided, however, that the absence of a quorum of the holders of stock of such class shall not prevent the election at any such meeting or adjournment thereof of any other directors by the necessary quorum of the holders of all classes of stock having voting rights for the election of directors (other than as a separate class) if such quorum is present in person or by proxy at such meeting; and provided further that in the absence of a quorum of the holders of stock having the right to vote separately as a class, a majority of those holders of the stock of such class who are present in person or by proxy shall have power to adjourn the election of the directors to be elected by such class from time to time without notice other than announcement at the meeting until the holders of the requisite number of shares of such class shall be present in person or by proxy. (h) The shares of such series shall not have any other special rights or provisions. COMMON STOCK Each share of Common Stock shall be equal in all respects to every other share of the Common Stock of the Corporation. FIFTH: The corporation is to have perpetual existence. SIXTH: The private property of the stockholders shall not be subject to the payment of corporate debts to any extent whatever. SEVENTH: The Board of Directors of the corporation shall have power to issue the authorized shares of stock of the corporation from time to time for such consideration as they may fix and determine. EIGHTH: In furtherance and not in limitation of powers conferred by Statute the following provisions are inserted for the regulation of the business and to define and regulate the powers of the corporation and of its directors and stockholders: (a) The number of directors of the corporation shall be fixed and may be altered from time to time as may be provided in by-laws. Any vacancies in the Board of Directors, by reason of an increase in the number of directors or otherwise, shall be filled solely by the Board of Directors, by a majority vote of the directors then in office, though less than a quorum, but any such director so elected shall hold office only until the next succeeding annual meeting of stockholders. Advance notice of nominations for the election of directors, other than by the Board of Directors or a committee thereof, shall be given in the manner provided in the by-laws. (b) The Board of Directors may, by majority vote of the whole Board designate three or more directors to constitute an Executive Committee which, to the extent provided by the directors or in the by-laws, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the corporation and shall have power to authorize the seal of the corporation to be affixed to all papers which may require it. (c) The Board of Directors shall have power to make, alter, amend or repeal the by-laws of the corporation, but any by-laws so made, altered or amended by the directors may be altered or repealed by the stockholders. Notwithstanding the foregoing and anything contained in this Certificate of Incorporation to the contrary, sections two and seven of the by-laws shall not be altered, amended or repealed and no provision inconsistent therewith shall be adopted without the affirmative vote of the holders of at least 80% of the voting power of all the shares of the corporation entitled to vote generally in the election of directors, voting together as a single class. (d) No holder of stock shall be entitled as of right to subscribe for, purchase or receive any part of any authorized but unissued stock or of any new or additional issue of stock, preferred or common, or of bonds, notes, debentures or other securities convertible into stock, but all such unissued, new or additional shares of stock or bonds, notes, debentures or other securities convertible into stock may be issued and disposed of by the Board of Directors to such person or persons and on such terms and for such lawful consideration as the Board of Directors in their absolute discretion may deem advisable. (e) The corporation reserves the right to amend, alter or repeal any provision herein contained in the manner now or hereafter prescribed by law and all rights conferred on stockholders hereunder are granted subject to this provision. Notwithstanding the foregoing and anything contained in this Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least 80% of the voting power of all shares of the corporation entitled to vote generally in the election of directors, voting together a single class, shall be required to alter, amend, adopt any provision inconsistent with, or repeal, this Article EIGHTH or any provision hereof. (f) A director may (except directors elected by shares of Preferred Stock voting separately as a class), by vote of a majority of the entire Board of Directors for any cause deemed by them sufficient, be removed as such director. Any director may also be removed from office, for any cause deemed by them sufficient, by the affirmative vote of the holders of 80% of the combined voting power of the then outstanding shares of stock entitled to vote generally in the election of directors, voting together as a single class, except that directors elected by shares of Preferred Stock voting separately may only be removed by such stockholders at any special meeting for any cause deemed sufficient by such meeting. Directors of the corporation need not be stockholders therein. (g) A director of the corporation shall not, in the absence of fraud, be disqualified by his office from dealing or contracting with the corporation either as a vendor, purchaser or otherwise, nor in the absence of fraud shall any transaction or contract of the corporation be void or voidable by reason of the fact that any director or any firm of which any director is a member, or any corporation of which any director is a shareholder or director is in any way interested in such transaction or contract, provided that such transaction or contract is or shall be authorized, ratified or approved either: (1) by vote of a majority of a quorum of the Board of Directors or of the Executive Committee without counting in such majority or quorum any director so interested or a member of a firm so interested or a shareholder or a director of a corporation so interested, or (2) by vote at a stockholders' meeting of the holders of record of a majority of all the outstanding shares of stock of the corporation, or by writing or writings signed by a majority of such holders; nor shall any director be liable to account to the corporation for any profit realized by him from or through any such transaction or contract of the corporation ratified or approved as aforesaid by reason of the fact that he or any firm of which he is a member or any corporation of which he is a shareholder or director was interested in such transaction or contract. Nothing herein contained shall create any liability in the events above described or prevent the authorization, ratification or approval of such contracts or transactions in any other manner permitted by law. (h) Any action required or permitted to be taken by the stockholders of the corporation must be effected at a duly called annual or special meeting of such holders and may not be effected by any consent in writing by such holders. Except as provided in paragraph VII(g)(v) of Article FOURTH respecting rights of holders of Preferred Stock to call meetings of such holders in certain dividend default situations, special meetings of stockholders, unless otherwise provided in law, may be called only by the Chairman or Vice-Chairman of the Board of Directors or the President, or by the Secretary on the written request of a majority of all the directors, such request to state the purpose of the proposed meeting. NINTH: No director shall be personally liable to the corporation or its stockholders for monetary damages for any breach of fiduciary duty by such director as a director, except (i) for breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. EX-3.2 4 bylaws.txt BY-LAWS _______________________________________________________________________________ *************************************************************************** _______________________________________________________________________________ BY-LAWS OF WYETH AS AMENDED THROUGH MARCH 11, 2002 _______________________________________________________________________________ ************************************************************************* _______________________________________________________________________________ BY-LAWS of WYETH * * * * * * * * * * * * * * * * * * * * * STOCKHOLDERS MEETINGS 1. Annual Meeting. An annual meeting of stockholders for election of directors and transaction of other business properly before the meeting shall be held on the fourth Wednesday of April in each year, or on such other date and at such time as the Board of Directors may designate. Any business properly brought before an annual meeting of stockholders may be transacted at such meeting. To be properly brought before an annual meeting, business must be (i) specified in the written notice of the meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (ii) otherwise brought before the meeting by or at the direction of the Board of Directors, or (iii) otherwise properly brought before the meeting by a stockholder. For matters to be properly brought before an annual meeting by a stockholder (other than nominations for the election of directors), the stockholder must give written notice of the proposed matter, either by personal delivery or by United States mail, postage prepaid, to the Secretary of the corporation, not later than ninety days prior to the anniversary date of the immediately preceding annual meeting or not later than ten days after notice or public disclosure of the date of the annual meeting shall be given or made to stockholders, whichever date shall be earlier. Any such notice shall set forth as to each item of business the stockholder shall propose to bring before the meeting (i) the name and address of the stockholder proposing such item of business, (ii) a description of such item of business and the reasons for conducting it at such meeting and, in the event that such item of business shall include a proposal to amend either the Certificate of Incorporation or these by-laws, the text of the proposed amendment, (iii) a representation that the stockholder is a holder of record of stock of the corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such item of business and (iv) any material interest of the stockholder in such item of business. Only matters which shall have been properly brought before an annual meeting of stockholders in accordance with these by-laws shall be conducted at such meeting, and the presiding officer may refuse to permit any matters to be brought before such meeting which shall not have been properly brought before it in accordance with the foregoing procedure. 2. Special Meetings. Except as provided in paragraph VII (g) (v) of Article FOURTH of the Certificate of Incorporation respecting rights of holders of Preferred Stock to call meetings of such holders in certain dividend default situations, special meetings of stockholders, unless otherwise provided by law, may be called by the Chairman or Vice Chairman of the Board of Directors or the President or by the Secretary on the written request of a majority of all the directors, such request to state the purpose of the proposed meeting, which meeting shall thereupon be called by the Secretary. Business at special meetings shall be confined to the matters stated in the notice. 3. Notice. Written notice of each meeting of stockholders shall be mailed, not less than ten days prior to the meeting, to each stockholder entitled to vote at such address as appears on the stock books of the corporation. The notice shall specify the time and place of the meeting and, as to special meetings, the matter or matters to be acted upon at such meeting. 4. Place. Meetings of stockholders shall be held at the office of the corporation in Wilmington, Delaware, or at such other place, within or without the State of Delaware, as the Board of Directors may designate. 5. Quorum. Except as provided in paragraph VII (g) (v) of Article FOURTH of the Certificate of Incorporation respecting meetings of stockholders during certain dividend default situations, at which meetings holders of Preferred Stock have special voting rights, the holders of a majority of the outstanding stock having voting power, present in person or by proxy, shall constitute a quorum at all meetings of stockholders for the transaction of business unless otherwise provided by law. Except as provided in such paragraph VII (g) (v) of Article FOURTH of the Certificate of Incorporation, if a quorum shall not be present at any meeting of stockholders, the stockholders entitled to vote, present in person or by proxy, may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present; and at such adjourned meeting at which a quorum shall be present any business may be transacted which might have been transacted at the meeting originally called. 6. Voting; Proxies. At each meeting of stockholders every stockholder entitled to vote may vote in person or by proxy appointed by an instrument in writing subscribed by such stockholder or his duly appointed attorney-in-fact or in any other manner prescribed by the General Corporation Law of the State of Delaware. Except as provided in paragraphs VII (g) (i) and VII (g) (v) of Article FOURTH of the Certificate of Incorporation respecting holders of Preferred Stock voting in certain situations, each holder of Common Stock shall have one vote and each holder of Preferred Stock shall have thirty-six (36) votes on each matter submitted to a vote at a meeting of stockholders for each share of, respectively, Common and Preferred Stock having voting power, registered in his name on the stock books of the corporation. The vote for directors and, upon the demand of any stockholder, the vote upon any other matter before the meeting, shall be by ballot. Elections shall be decided by a plurality of the votes cast and other matters shall be decided by a majority of the votes cast on such matters. BOARD OF DIRECTORS 7. Powers; Number; Election; Term; Vacancies. The property and business of the corporation shall be managed by its Board of Directors, which shall be not less than eight nor more than fifteen in number as determined from time to time by the Board, except as provided in paragraph VII (g) (ii) of Article FOURTH of the Certificate of Incorporation respecting additional directors in certain dividend default situations. Directors shall be elected at the annual meeting of stockholders and each director shall continue in office until his successor shall be elected or until his earlier removal or resignation. Except as provided in paragraph VII (g) (ii) of Article FOURTH of the Certificate of Incorporation respecting additional directors in certain dividend default situations, nominations for the election of directors may be made by the Board of Directors or a committee appointed by the Board of Directors or by any stockholder entitled to vote in the election of directors generally. However, any stockholder entitled to vote in the election of directors generally may nominate one or more persons for election as directors only if written notice of such stockholder's intent to make such nomination or nominations has been given, either by personal delivery or by United States mail, postage prepaid, to the Secretary of the corporation not later than (i) with respect to an election to be held at an annual meeting of stockholders, ninety days prior to the anniversary date of the immediately preceding annual meeting, and (ii) with respect to an election to be held at a special meeting of stockholders for the election of directors, the close of business on the tenth day following the date on which notice of such meeting is first given to stockholders. Each such notice shall set forth: (a) the name and address of the stockholder who intends to make the nomination and of the person or persons to be nominated; (b) a representation that the stockholder is a holder of record of stock of the corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (d) such other information regarding each nominee proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission; and (e) the consent of each nominee to serve as a director of the corporation if so elected. The presiding officer of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure. Except as provided in Paragraph VII (g) (v) of Article FOURTH of the Certificate of Incorporation respecting the additional directors in certain dividend default situations, vacancies in the membership of the Board, whether or not caused by an increase in the number of directors, will be filled solely by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors. Any director elected in accordance with the preceding sentence shall hold office only until the next succeeding annual meeting of stockholders. 8. Regular Meetings. Regular meetings of the Board may be held without notice at such time and place as the Board shall from time to time determine. 9. Special Meetings. Special Meetings of the Board may be called by direction of the Chairman, the Vice Chairman, the President or two directors on two days notice to each director specifying the time and place of meeting. 10. Quorum; Voting. At all meetings of the Board a majority of all the directors then in office, or if the number of directors is then an even number, one-half such number shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board unless otherwise provided by law, the Certificate of Incorporation or these by-laws. 11. Compensation. Directors shall be paid such fees for their services as directors and for attending meetings of the Board and committees appointed thereby as shall be determined from time to time by the Board. The Board may also provide for compensation to a director for expenses he may incur in attending such meetings. Nothing herein shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefor. 12. Residual Powers of Board. In addition to the powers conferred by these by-laws upon the Board, the Board may exercise all such powers of the corporation and do all such lawful acts and things as are not by law, the Certificate of Incorporation or these by-laws directed or required to be exercised or done by the stockholders. Nothing contained in these by-laws shall restrict the Board or any committee thereof from taking any action in any manner permitted by law, including unanimous written consent and conference communication by means of telephone or similar communications equipment by which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this by-law shall constitute presence in person at such meeting. EXECUTIVE COMMITTEE 13. Appointment. The Board may by vote of a majority of all the directors appoint three or more members to constitute an Executive Committee which shall serve at the pleasure of the Board. Vacancies in the membership of the Executive Committee shall be filled by the Board by vote of a majority of all the directors. 14. Duties and Powers. During the intervals between meetings of the Board, the Executive Committee shall perform all the duties and exercise all the powers of the Board in the management of the property and business of the corporation except such duties and powers as are by law, the Certificate of Incorporation or these by-laws directed or required to be performed or exercised specifically by the Board as such or by any proportion thereof. The Chairman of the Executive Committee shall assist the Chairman of the Board, shall perform such of the duties and exercise such of the powers of the Chairman as the latter may delegate to him and shall, in the absence or disability of the President, perform the duties and exercise the powers of the President. He shall perform such other duties and exercise such other powers as the Board shall from time to time prescribe. 15. Meetings. The Executive Committee may meet at stated times without notice, or on two days notice to all by one of its members. 16. Quorum; Voting. A majority of the Executive Committee shall constitute a quorum for the transaction of business and the act of a majority of those present at any meeting at which there is a quorum shall be the act of the Committee. 17. Minutes. The Executive Committee shall keep regular minutes of its proceedings and report its actions to the Board when it so requests. 18 - 22 REMOVED AND RESERVED AUDIT COMMITTEE 23. Appointment. The Board shall appoint three or more directors of the corporation, none of whom is presently employed by the corporation or any of its subsidiaries, to constitute an Audit Committee, which shall serve at the pleasure of the Board. Vacancies in the membership of the Audit Committee shall be filled by the Board. 24. Duties and Powers. The Audit Committee shall recommend a firm of independent public accountants to be engaged as the principal auditor for each year's annual audit on behalf of the corporation subject to the approval of the Board of Directors and ratification by the stockholders. The Audit Committee shall discuss with the auditors the scope and results of the audit and shall report to the Board of Directors thereon. The Audit Committee shall undertake such other financial reviews as the Board deems appropriate. 25. Meetings. The Audit Committee may meet at stated times without notice, or on notice to all by the Chairman or Vice Chairman of the Board, the President, an Executive Vice President or a Senior Vice President, or by one of the members of the Audit Committee. 26. Quorum; Voting. A majority of the Audit Committee shall constitute a quorum for the transaction of business and the act of a majority of those present at any meeting at which there is a quorum shall be the act of the Committee. 27. Minutes. The Audit Committee shall keep regular minutes of its proceedings and make copies thereof available to the Board at its meetings. OTHER COMMITTEES 28. Appointment. The Board may from time to time appoint further standing or special committees of directors, officers or employees of the corporation or its subsidiaries to serve at the pleasure of the Board and confer upon such committees such powers and duties as the Board may deem expedient within the limits permitted by law. 29. Organization and Operation. Unless otherwise provided in the resolutions appointing any such committee and determining its powers and duties, the committee may establish procedures for calling and conducting meetings, provided that no less than a majority of its members shall constitute a quorum for the transaction of business and the act of no less than a majority of those present at a meeting at which there is a quorum shall be the act of the committee, and the committee shall keep regular minutes of its proceedings and report its actions to the Board when it so requests. OFFICERS 30. Principal Officers. The principal officers shall be chosen annually by the Board and shall be a Chairman of the Board of Directors, a President, one or more Vice Presidents, a Secretary, a Treasurer and a Comptroller and, in the discretion of the Board, a Vice Chairman of the Board of Directors, one or more Executive Vice Presidents and one or more Senior Vice Presidents. The Chairman or Vice Chairman and President may be the same person; the Secretary and Treasurer may be the same person and Executive Vice President, Senior Vice President or Vice President may hold at the same time the office of Secretary, Treasurer or Comptroller. The Chairman and Vice Chairman, if any, and the President shall be chosen from the members of the Board; the other principal officers need not be directors. 31. Other Officers. The Board may choose such other officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall perform such duties and exercise such powers as are delegated to them pursuant to these by-laws or as the Board shall from time to time prescribe. In addition, the Chief Executive Officer may choose such Vice President or assistant officers as he or she deems necessary, who shall hold their offices for such terms and shall perform such duties and exercise such powers as the Chief Executive Officer shall from time to time prescribe, provided, however, that officers so chosen by the Chief Executive Officer shall not be deemed to be principal officers of the Corporation unless and until they are so designated by the Board. 32. Salaries. The salaries of all principal officers shall be fixed by the Board. 33. Term of Office; Removal. Each officer shall hold office until his successor is chosen or until his earlier removal or resignation. The Board may remove any officer or agent provided that removal of a principal officer be by vote of a majority of all the directors. 34. Vacancies. Vacancies in any office may be filled by the Board. 35. Chairman. The Chairman of the Board of Directors shall preside at all meetings of stockholders and of the Board and shall be ex-officio a member of all standing committees of the Board. In the discretion of the Board, he may be designated as the chief executive officer of the corporation (the "Chief Executive Officer"). If the Chairman of the Board of Directors is designated as the Chief Executive Officer, in such capacity, he shall (i) have all powers and perform all duties incident to such chief executive office, (ii) subject to the direction of the Board, have general and active supervision of the property and business of the corporation, (iii) be the officer through whom the Board delegates authority to corporate management, (iv) be the medium of communication to the Board of information as to the affairs of the corporation and of all matters presented for the Board's consideration, and (v) be responsible to see that all orders and resolutions of the Board are carried into effect by the proper officers. The Chairman of the Board shall perform such other duties and exercise such other powers as the Board shall from time to time prescribe. 36. Vice Chairman. The Vice Chairman of the Board of Directors shall assist the Chairman of the Board, shall perform such of the duties and exercise such of the powers of the Chairman as the latter may delegate to him and shall, in the absence or disability of the Chairman, perform the duties and exercise the powers of the Chairman. He shall perform such other duties and exercise such other powers as the Board or the Chairman shall from time to time prescribe. 37. President. The President shall assist the Chairman and Vice Chairman of the Board, shall perform such of the duties and exercise such of the powers of the Chairman as the latter may delegate to him and shall, in the absence or disability of the Vice Chairman, perform the duties and exercise the powers of the Vice Chairman. In addition, in the discretion of the Board, he may be designated as the Chief Executive Officer. If the President is designated as the Chief Executive Officer, in such capacity, he shall (i) have all powers and perform all duties incident to such chief executive office, (ii) subject to the direction of the Board, have general and active supervision of the property and business of the corporation, (iii) be the officer through whom the Board delegates authority to corporate management, (iv) be the medium of communication to the Board of information as to the affairs of the corporation and of all matters presented for the Board's consideration and (v) be responsible to see that all orders and resolutions of the Board are carried into effect by the proper officers. The President shall perform such other duties and exercise such other powers as the Board shall from time to time prescribe. 38. Executive Vice Presidents. Each Executive Vice President shall serve in a general executive capacity, more particularly as general assistant to the President. In the absence or disability of the President, and in the event the Chairman of the Executive Committee is absent or disabled, an Executive Vice President shall, in the order of seniority in that office, perform the duties and exercise the powers of the President. Executive Vice Presidents shall perform such other duties and exercise such other powers as the Board, the Chief Executive Officer or the President shall from time to time prescribe. 39. Senior Vice Presidents. Each Senior Vice President shall serve in a general executive capacity, more particularly as general assistant to the President or to one or more Executive Vice Presidents. In the absence or disability of the President, and in the event the Chairman of the Executive Committee and all Executive Vice Presidents are absent or disabled, a Senior Vice President shall, in the order of seniority in that office, perform the duties and exercise the powers of the President. Senior Vice Presidents shall perform such other duties and exercise such other powers as the Board, the Chief Executive Officer or the President shall from time to time prescribe. 40. Vice Presidents. In the absence or disability of the Executive Vice Presidents and Senior Vice Presidents, a Vice President shall, in the order of seniority in that office, perform the duties and exercise the powers of the Executive Vice Presidents and Senior Vice Presidents. Vice Presidents shall perform such other duties and exercise such other powers as the Board, the Chief Executive Officer or the President shall from time to time prescribe. 41. Principal Financial Officer. The Board may designate an Executive Vice President, a Senior Vice President, a Vice President or the Treasurer as the Principal Financial Officer of the corporation. 42. Secretary. The Secretary shall attend all meetings of stockholders and of the Board and shall record the minutes of all proceedings of such meetings in books to be kept for that purpose, and shall perform like duties for the standing committees appointed by the Board unless the Board directs otherwise. He shall have custody of the seal of the corporation and shall affix it or cause it to be affixed to all instruments requiring it. He shall give or cause to be given the notice required of all meetings of stockholders and of the Board. He shall perform such other duties and exercise such other powers as the Board, the Chief Executive Officer or the President shall from time to time prescribe. 43. Treasurer. The Treasurer shall have general charge of and responsibility for the corporate funds and securities. He shall deposit or cause to be deposited in the name of the corporation all moneys and other valuable effects of the corporation in such depositories as may be designated in accordance with these by-laws. He shall disburse the funds of the corporation as directed by the Board or by any other principal officer, taking proper vouchers for such disbursements. He shall advise upon all terms of credit granted by the corporation. He shall render to the Board, when the Board so requests, an accounting of all his transactions as Treasurer and of the financial condition of the corporation. He shall perform such other duties and exercise such other powers as the Board, the Chief Executive Officer or the President shall from time to time prescribe. 44. Comptroller. The Comptroller shall have general supervision of the accounting practices of the corporation and its subsidiaries and the preparation of statements and other reports respecting financial aspects of the corporation's or its subsidiaries' operations. He shall establish, through appropriate channels, recording and reporting procedures and standards pertaining to such matters. He shall be responsible for collection of all corporation accounts. He shall perform such other duties and exercise such other powers as the Board, the Chief Executive Officer or the President shall from time to time prescribe. 45. Delegation of Officer's Duties by Board. In the absence or disability of any principal officer, or for any other reason that the Board may deem sufficient, the Board may by vote of a majority of all the directors delegate any or all of the powers or duties of such officer to any other officer. 46. Delegation of Officer's Duties by Officer. Any principal officer may delegate portions of his powers and duties to any assistant officer chosen by the Board and acting under the principal officer's supervision. 47. Indemnification of Directors, Officers and Employees. Each person (and heirs and legal representatives of such person) who serves or has served as a director, officer or employee of the corporation or of any other corporation or entity when requested by this corporation, and of which this corporation is or was a stockholder, a creditor or otherwise interested, shall be indemnified by this corporation against all liability and reasonable expense, including but not limited to counsel fees and disbursements and amounts of judgments, fines or penalties, incurred by or imposed upon him in connection with any claim, action, suit or proceeding, actual or threatened, whether civil, criminal, administrative or investigative, and appeals in which he may become involved as a party or otherwise by reason of acts or omissions in his capacity as and while a director, officer or employee of this corporation or such other corporation or entity, provided that such person is wholly successful with respect thereto and unless the Board in its absolute discretion shall determine that such person did not meet the standard of conduct required herein. The term "wholly successful" shall mean termination of any claim, action, suit or proceeding against such person without any finding of liability or guilt against him and without any settlement by payment, promise or undertaking by or for such person or the expiration of a reasonable period of time after the making of any claim or threat without action, suit or proceeding having been brought and without any settlement by payment, promise, or undertaking by or for such person. The standard of conduct required shall be that such person acted in good faith for a purpose which he reasonably believed to be in or not opposed to the best interests of the corporation, and, in addition, in any criminal action or proceeding, had no reasonable cause to believe that his conduct was unlawful. Should indemnification be requested hereunder in respect to any claim, action, suit or other proceeding where the person seeking indemnification has not been wholly successful, such indemnification may be made only upon the prior determination by a resolution of a majority of those members of the Board who are not involved in the claim, action, suit or other proceeding, that such person met the standards of conduct required herein, or, in the discretion of the Board, upon the prior determination by non-employee legal counsel, in written opinion, that such person has met such standards, and where a settlement is involved, that the amount thereof is reasonable. Indemnification under this by-law shall not include any amount payable by such person to the corporation or entity in satisfaction of any judgment or settlement, or any amount payable on account of profits realized by him in the purchase or sale of securities of the corporation, and shall be reduced by the amount of any other indemnification or reimbursement of such liability and expense to such person. The termination of any claim, action, suit or other proceeding, by judgment, order, settlement (whether with or without court approval) or conviction or upon a plea of guilty or of nolo contendere, or its equivalent, shall not of itself create a presumption that such person did not meet the standard of conduct required herein. Expenses incurred which are subject to indemnification hereunder may be advanced by the corporation prior to final disposition of the claim, action, suit or other proceeding upon receipt of an undertaking acceptable to the corporation by or on behalf of the recipient to repay such amount unless it shall ultimately be determined that he is entitled to indemnification. The right of indemnification herein provided shall be in addition to other rights to which those to be indemnified may otherwise be entitled by agreement, vote of stockholders, operation of law or otherwise, and shall be available whether or not the claim asserted against such person is based upon matters which antedate the adoption of this by-law. If any word, clause or provision of this by-law or any indemnification made hereunder shall for any reason be determined to be invalid, the provisions hereof shall not otherwise be affected thereby but shall remain in full force and effect. AUTHORITY TO ACT AND SIGN 48. Instrument Execution. Unless otherwise provided by law or by the Board, all instruments to be executed on behalf of the corporation, whether or not requiring the seal of the corporation, may be executed by the Chairman, the Vice Chairman, the President, any Executive Vice President, any Senior Vice President or any Vice President and attested by the Secretary or an Assistant Secretary. 49. Bank Accounts. Unless otherwise provided by the Board, any two of the following officers: the Chairman, the Vice Chairman, the President, any Executive Vice President, any Senior Vice President, any Vice President and the Treasurer, may from time to time (1) open and maintain in the name of the corporation, and terminate, general and special bank accounts for the funds of the corporation with such banks, trust companies or other depositories as they may designate and (2) designate, and revoke the designation of, the officers or employees of the corporation who may sign, manually or by facsimile, checks, drafts or orders on such bank accounts. Any such action, designation or revocation shall be by written instrument, signed by the officers taking the action or making or revoking the designation and filed with the bank, trust company or other depository. 50. Voting of Stock in Other Corporations. Unless otherwise directed by the Board, Chairman, the Vice Chairman, the President, any Executive Vice President, any Senior Vice President, the Treasurer or the Secretary may, on behalf of the corporation, attend, act and vote at any meeting of stockholders of any corporation in which this corporation may hold stock and at any such meeting shall possess and may exercise all rights of this corporation incident to ownership of such stock or may give a proxy or proxies in the name of this corporation to any other person or persons who may vote such stock and exercise any and all other rights in regard to it as are here accorded to the officers mentioned. 51. Sale and Transfer of Securities. Unless otherwise directed by the Board, any two of the following officers: the Chairman, the Vice Chairman, the President, any Executive Vice President, any Senior Vice President and the Treasurer may, on behalf of the corporation, transfer, convert, endorse, sell, assign, set over and deliver, or take action appropriate to the encumbrance by the corporation of any bonds, shares of stock, warrants or other securities owned by or standing in the name of the corporation, and may execute and deliver in the name of the corporation all written instruments necessary or proper to implement the authority herein contained. STOCK 52. Stock Certificates; Uncertificated Shares. The shares of the corporation shall be represented by certificates, provided that the Board of Directors of the corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. Notwithstanding the adoption of such a resolution by the Board of Directors, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the corporation by the Chairman or Vice Chairman of the Board of Directors, or the President or Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of such corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue. 53. Transfer. Transfer of stock shall be made on the books of the corporation only upon surrender of the certificate therefor, endorsed by the person named in the certificate or accompanied by proper written evidence of succession, assignment or authority to transfer such stock or upon receipt of proper transfer instructions from the owner of uncertificated shares. 54. Transfer Agent and Registrar. The Board may appoint one or more Transfer Agents to record transfers of shares of stock and to keep the stock certificate books, transfer books and stock ledgers of the corporation. The Board may also appoint one or more Registrars to register certificates of stock. The Board may require all certificates of stock to bear the signatures of either or both a Transfer Agent and a Registrar. Where any such certificate is manually signed by the Registrar, the signature of any Transfer Agent may be facsimile engraved or printed. 55. Record Date. The Board may fix in advance a date, not less than ten nor more than sixty days preceding the date of any meeting of stockholders or the date for the payment of any dividend or the date for the allotment of rights or the date when any change, conversion or exchange of stock shall go into effect or the date in connection with obtaining consent of stockholders or any class thereof for any purpose, as a record date for the determination of stockholders entitled to notice of and to vote at any such meeting or to receive payment of any such dividend or to receive any allotment of rights or to exercise the rights or to give such consent, as the case may be, notwithstanding any transfer of any stock on the books of the corporation after any such record date fixed as aforesaid. The Board may direct that the stock books of the corporation be closed against transfers during such period. 56. Registered Stockholders. The corporation shall be entitled to treat the holder of record of any share of stock as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, except as provided by law. 57. Lost Certificates. The Board may direct a new certificate of stock to be issued in place of any certificate theretofore issued and claimed to have been lost, stolen or destroyed, provided that any person claiming a certificate to be lost, stolen or destroyed shall make an affidavit of ownership and of the facts of such loss, theft or destruction and, if the Board so requires, shall advertise the same, and provided further that the Board may require the owner of the certificate claimed to be lost, stolen or destroyed, or his legal representative, to deliver to the corporation for itself, its officers Transfer Agents and Registrars, a bond of indemnity in such amount or unlimited in amount, upon such terms and secured by such surety as the Board may require. MISCELLANEOUS 58. Notices. Whenever under the provisions of these by-laws notice is required to be given to any person other than in his capacity as stockholder, it may be given by hand delivery, by telegram or by mail. Whenever under the provisions of these by-laws notice is required to be given to any stockholder, it may be given by mail, by depositing the same in the post office or a letter box, in a post-paid, sealed envelope, addressed to such stockholder at such address as appears on the stock books of the corporation, and such notice shall be deemed to be given at the time when the same shall be thus mailed. Any person entitled to notice under any provision of these by-laws may waive such notice. 59. Fiscal Year. The fiscal year of the corporation shall begin the first day of January in each year. 60. Offices. The corporation may have an office in New York, New York, and at such other places as the business of the corporation may require. 61. Seal. The corporate seal shall have inscribed thereon the name of the corporation and the words "Corporate Seal, Delaware." 62. Amendments. These by-laws may be altered or repealed and new by-laws may be adopted at any meeting of stockholders by the vote of the holders of a majority of the outstanding stock having voting power, provided the notice of such meeting includes the proposed alterations or repeal or the proposed new by-laws, or a summary thereof, or the Board by vote of a majority of all the directors. EX-10.12 5 credit.txt CREDIT AGREEMENT CREDIT AGREEMENT among AMERICAN HOME PRODUCTS CORPORATION, THE LENDERS PARTIES HERETO J.P. MORGAN SECURITIES INC., as Bookrunner and Lead Arranger CITIBANK, N.A. and COMMERZBANK AG, NEW YORK AND GRAND CAYMAN BRANCHES, as Co-Syndication Agents, THE DAI ICHI KANGYO BANK, LTD. and THE BANK OF NOVA SCOTIA, as Co-Documentation Agents and JPMORGAN CHASE BANK (f/k/a The Chase Manhattan Bank), as Administrative Agent - ------------------------------------------------------------------------------- Dated as of March 4, 2002 - ------------------------------------------------------------------------------- $3,000,000,000 CREDIT AGREEMENT, dated as of March 4, 2002, among AMERICAN HOME PRODUCTS CORPORATION, a Delaware corporation (the "Company"), the several banks and other financial institutions from time to time parties to this Agreement (collectively, the "Lenders"; individually, a "Lender"), CITIBANK, N.A. and COMMERZBANK AG, NEW YORK AND GRAND CAYMAN BRANCHES, as co-syndication agents (in such capacity, the "Co-Syndication Agents"), THE DAI ICHI KANGYO BANK, LTD. and THE BANK OF NOVA SCOTIA, as co-documentation agents (in such capacity, the "Co-Documentation Agents") and JPMORGAN CHASE BANK (f/k/a The Chase Manhattan Bank), a New York banking corporation, as administrative agent for the Lenders hereunder (in such capacity, the "Administrative Agent"). W I T N E S S E T H: WHEREAS, the Company has requested the Lenders to make loans to it in an amount up to $3,000,000,000 as more particularly described herein; WHEREAS, the Lenders are willing to make such loans on the terms and conditions contained herein; NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereto hereby agree as follows: SECTION 1. DEFINITIONS 1.1 Defined Terms. As used in this Agreement, terms defined in the preamble to this Agreement have the meanings therein indicated, and the following terms have the following meanings: "Absolute Rate Bid Loan Request": any Bid Loan Request requesting the Bid Loan Lenders to offer to make Bid Loans at an absolute rate (as opposed to a rate composed of the Applicable Index Rate plus (or minus) a margin). "Adjusted Capitalization": at any time, the sum of Consolidated Adjusted Indebtedness plus Consolidated Net Worth. "Administrative Agent": as defined in the first paragraph of this Agreement. "Affiliate": as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, a Person shall be deemed to be "controlled by" a Person if such Person possesses, directly or indirectly, power either (a) to vote 10% or more of the securities having ordinary voting power for the election of directors of such Person or (b) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise. "Aggregate Commitments": at any time the sum of the Commitments then in effect hereunder. "Aggregate Loans": at a particular time, the sum of the then aggregate outstanding principal amount of Committed Rate Loans and Bid Loans. "Agreement": this Credit Agreement, as amended, supplemented or modified from time to time in accordance with its terms. "Alternate Base Rate": for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base C/D Rate in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof: "Prime Rate" shall mean the rate of interest per annum publicly announced from time to time by JPMCB as its prime rate in effect at its principal office in New York City (each change in the Prime Rate to be effective on the date such change is publicly announced); "Base C/D Rate" shall mean the sum (rounded upwards, if necessary, to the next 1/16 of 1%) of (a) the product of (i) the Three-Month Secondary C/D Rate and (ii) a fraction, the numerator of which is one and the denominator of which is one minus the C/D Reserve Percentage and (b) the C/D Assessment Rate; "Three-Month Secondary C/D Rate" shall mean, for any day, the secondary market rate for three-month certificates of deposit reported as being in effect on such day (or, if such day shall not be a Business Day, the immediately preceding Business Day) by the Board of Governors of the Federal Reserve System (the "Board") through the public information telephone line of the Federal Reserve Bank of New York (which rate will, under the current practices of the Board of Governors of the Federal Reserve System, be published in Federal Reserve Statistical Release H.15(519) during the week following such day), or, if such rate shall not be so reported on such day or such immediately preceding Business Day, the average of the secondary market quotations for three-month certificates of deposit of major money center banks in New York City received at approximately 10:00 A.M., New York City time, on such day (or, if such day shall not be a Business Day, on the immediately preceding Business Day) by the Administrative Agent from three New York City negotiable certificate of deposit dealers of recognized standing selected by it; and "Federal Funds Effective Rate" shall mean, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published on the next succeeding Business Day, the average of the quotations for the day of such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it. If for any reason the Administrative Agent shall have determined (which determination shall be conclusive in the absence of manifest error) that it is unable to ascertain the Base C/D Rate or the Federal Funds Effective Rate, or both, for any reason, including the inability or failure of the Administrative Agent to obtain sufficient quotations in accordance with the terms thereof, the Alternate Base Rate shall be determined without regard to clause (b) or (c), or both, of the first sentence of this definition, as appropriate, until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Three-Month Secondary C/D Rate or the Federal Funds Effective Rate shall be effective on the opening of business on the date of such change. "Alternate Base Rate Loans": Committed Rate Loans that bear interest at an interest rate based on the Alternate Base Rate. "Applicable Index Rate": in respect of any Bid Loan requested pursuant to an Index Rate Bid Loan Request, the Eurodollar Rate applicable to the Interest Period for such Bid Loan. "Applicable Margin": for any day, (x) in the case of Alternate Base Rate Loans, 0% and (y) in the case of Eurodollar Loans, the rate per annum set forth below opposite the Rating Period then in effect, provided that during a Significant Usage Period, the Applicable Margin for all such Loans shall be increased by (i) .125% during a Category A Period, a Category B Period and/or a Category C Period and (ii) .250% during a Category D Period: Eurodollar Rating Rate Period Margin - ----------------------------------------- ------------------------- Category A Period .305% Category B Period .42% Category C Period .65% Category D Period .875% "Base C/D Rate": as defined in the definition of Alternate Base Rate. "Bid Loan": each Bid Loan made pursuant to subsection 2.2. "Bid Loan Confirmation": each confirmation by the Company of its acceptance of Bid Loan Offers, which Bid Loan Confirmation shall be substantially in the form of Exhibit F and shall be delivered to the Administrative Agent by facsimile transmission. "Bid Loan Date": in respect of a Bid Loan, the day on which a Bid Loan Lender makes such Bid Loan pursuant to subsection 2.2. "Bid Loan Lenders": Lenders from time to time designated as Bid Loan Lenders by the Company by written notice to the Administrative Agent (which notice the Administrative Agent shall transmit to each such Bid Loan Lender). "Bid Loan Offer": each offer by a Bid Loan Lender to make Bid Loans pursuant to a Bid Loan Request, which Bid Loan Offer shall contain the information specified in Exhibit D, in the case of an Absolute Rate Bid Loan Request, or Exhibit E, in the case of an Index Rate Bid Loan Request, and shall be delivered to the Administrative Agent by facsimile transmission or by telephone immediately confirmed by facsimile transmission. "Bid Loan Request": each request by the Company for Bid Loan Lenders to submit bids to make Bid Loans, which shall contain the information in respect of such requested Bid Loans specified in Exhibit B and shall be delivered to the Administrative Agent by facsimile transmission or by telephone, immediately confirmed by facsimile transmission. "Borrowing Date": in respect of any Committed Rate Loan, the date such Committed Rate Loan is made. "Business": as defined in subsection 3.10(b). "Business Day": a day other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to close; provided, however, that when used in connection with a rate determination, borrowing or payment in respect of a Eurodollar Loan or an Index Rate Bid Loan, the term "Business Day" shall also exclude any day on which commercial banks are not open for dealings in Dollar deposits in the London interbank market. "Category A Period": subject to the Category Rules, at any time that either (i) the S&P Credit Rating is A or better and the Short-Term Ratings are Tier I or (ii) the Moody's Credit Rating is A2 or better and the Short-Term Ratings are Tier I. "Category B Period": subject to the Category Rules, at any time that either (i) the S&P Credit Rating is A- or better or (ii) the Moody's Credit Rating is A3 or better and in either case a Category A Period is not then in effect. "Category C Period": subject to the Category Rules, at any time that either (i) the S&P Credit Rating is BBB+ or (ii) the Moody's Credit Rating is Baa1. "Category D Period": subject to the Category Rules, at any time that either (i) the S&P Credit Rating is BBB or lower or (ii) the Moody's Credit Rating is Baa2 or lower. "Category Rules": the Rating Period applicable at any time shall be: (a) except as provided in clause (b), (c) and (d) below, the highest Rating Period for which the Company meets either of the criteria set forth for such Rating Period, (b) except as provided in clauses (c) and (d) below, if the Credit Ratings differ by two or more Rating Period levels, the Rating Period which is one Rating Period above the Rating Period in which the lower Credit Ratings falls, (c) if one of the Credit Ratings falls in a Category D Period and the other Credit Rating falls in a higher Rating Period, a Category D Period and (d) if either S&P or Moody's fails to have outstanding at the time a Credit Rating due to the failure by the Company to provide requested information to, or otherwise to fully cooperate with, such rating agency in establishing a Credit Rating, a Category D Period. If the rating system of Moody's, S&P and/or Fitch shall change, or if any such rating agency shall cease to be in the business of rating corporate debt obligations, or if both Moody's and S&P shall fail to have outstanding a Credit Rating (other than by reason of the circumstances referred to in clause (d) of the preceding sentence), the Company and the Lenders shall negotiate in good faith to amend this definition to reflect such changed rating system or the unavailability of ratings from such rating agency and, pending the effectiveness of any such amendment, the applicable Rating Period shall be determined by reference to the ratings most recently in effect prior to such change or cessation. "C/D Assessment Rate": for any day, the net annual assessment rate (rounded upward to the nearest 1/100th of 1%) determined by JPMCB to be payable on such day to the Federal Deposit Insurance Corporation or any successor ("FDIC") for FDIC's insuring time deposits made in Dollars at offices of JPMCB in the United States. "C/D Reserve Percentage": for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor), for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding one billion Dollars in respect of new non-personal time deposits in Dollars in New York City having a three month maturity and in an amount of $100,000 or more. "Co-Documentation Agents": as defined in the first paragraph of this Agreement. "Co-Syndication Agents": as defined in the first paragraph of this Agreement. "Code": the Internal Revenue Code of 1986, as amended from time to time. "Commitment": as to any Lender, the obligation of such Lender to make Committed Rate Loans to the Company hereunder in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Lender's name on Schedule I hereof, as such amount may from time to time be reduced in accordance with this Agreement; collectively, as to all the Lenders, the "Commitments". "Commitment Percentage": as to any Lender at any time, the percentage which such Lender's Commitment then constitutes of the Aggregate Commitments (or (x) at any time after the Termination Date, (y) at any time after the Commitments shall have expired or terminated and (z) for the purposes of declaring the Loans to be due and payable pursuant to Section 6, the percentage which the aggregate principal amount of such Lender's Loans then outstanding constitutes of the aggregate principal amount of the Loans then outstanding). "Commitment Period": the period from and including the Effective Date to, but not including, the Termination Date or such earlier date on which the Commitments shall terminate as provided herein. "Commitment Transfer Supplement": a Commitment Transfer Supplement, substantially in the form of Exhibit G. "Committed Rate Loans": Loans made pursuant to subsection 2.1(a). "Commonly Controlled Entity": an entity, whether or not incorporated, which is under common control with the Company within the meaning of Section 4001 of ERISA or is part of a group which includes the Company and which is treated as a single employer under Section 414 of the Code. "Company": as defined in the first paragraph of this Agreement. "Consolidated Adjusted Indebtedness": at any date of determination, (i) Consolidated Indebtedness at such date minus (ii) all cash, cash equivalents and marketable securities held by the Company and its Subsidiaries at such date free of liens, restrictions and other encumbrances (other than as arising by operation of law in the ordinary course of business). "Consolidated Indebtedness": at any date of determination, the principal amount of all Indebtedness of the Company and its Subsidiaries required in accordance with GAAP to be accounted for as debt, determined on a consolidated basis in accordance with GAAP, provided that there shall be excluded from Consolidated Indebtedness up to $500,000,000 in respect of Financing Leases arising as a result of sale-leaseback transactions and which would otherwise be included in the calculation of Consolidated Indebtedness. "Consolidated Net Worth": at any date of determination, the stockholders' equity of the Company and its Subsidiaries determined in accordance with GAAP and as would be reflected on a consolidated balance sheet of the Company and its Subsidiaries plus the minority interests reflected on such consolidated balance sheet; provided that there shall be excluded from determining Consolidated Net Worth of the Company and its Subsidiaries (i) any foreign currency translation adjustment which otherwise would be included therein, (ii) the non-cash effects of any accounting standards adopted or issued by the Financial Accounting Standards Board after September 9, 1994 and (iii) the non-cash effects of any unusual charges or restructuring charges. "Consolidated Tangible Assets": at the time of determination thereof, the aggregate amount of all assets (as reflected on a consolidated balance sheet of the Company and its Subsidiaries) after deducting therefrom all goodwill, trade names, trademarks, patents, unamortized debt discount and expenses (to the extent included in said aggregate amount of assets) and other like intangibles, as set forth on the most recent consolidated balance sheet of the Company and its Subsidiaries and computed in accordance with GAAP. "Continuing Director": as defined in subsection 6(h). "Contractual Obligation": as to any Person, any provision of any security issued by such Person or of any agreement, instrument or undertaking to which such Person is a party or by which it or any of its property is bound. "Credit Ratings": at any time, the then Moody's Credit Rating and the then S&P Credit Rating. "Default": any of the events specified in Section 6, whether or not any requirement for the giving of notice or the lapse of time, or both, or any other condition, has been satisfied. "Dollars" and "$": dollars in lawful currency of the United States of America. "Effective Date": the date on which each of the conditions specified in subsection 4.1 are satisfied in full or waived in accordance with this Agreement. "Eligible Transferee": shall mean and include a commercial bank, financial institution or other "accredited investor" (as defined in Regulation D of the Securities Act of 1933, as amended). "Environmental Laws": any and all foreign, Federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority or other Requirements of Law (including common law) regulating, relating to or imposing liability or standards of conduct concerning protection of human health or the environment, as now or may at any time be in effect during the term of this Agreement. "ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time. "Eurodollar Loans": Committed Rate Loans the rate of interest applicable to which is based upon the Eurodollar Rate. "Eurodollar Rate": with respect to each day during each Interest Period pertaining to a Eurodollar Loan or an Index Rate Bid Loan, the rate per annum equal to the rate of interest determined on the basis of the rate for deposits in Dollars for a period equal to such Interest Period commencing on the first day of such Interest Period appearing on Page 3750 of the Telerate screen as of 11:00 A.M., London time, two Business Days prior to the beginning of such Interest Period. In the event that such rate does not appear on Page 3750 of the Telerate Service (or otherwise on such service), the "Eurodollar Rate" shall be determined by reference to such other publicly available service for displaying eurodollar rates as may be agreed upon by the Administrative Agent and Company or, in the absence of such agreement, the "Eurodollar Rate" shall instead be the rate per annum equal to the average (rounded upward to the nearest 1/16 of 1%) of the respective rates notified to the Administrative Agent by each of the Reference Lenders as the rate at which such Reference Lender is offered Dollar deposits at or about 10:00 A.M., New York City time, two Business Days prior to the beginning of such Interest Period in the interbank eurodollar market where the eurodollar and foreign currency and exchange operations of such Reference Lender are then being conducted for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount (i) in the case of Eurodollar Loans, comparable to the amount of the Eurodollar Loan of such Reference Lender to be outstanding during such Interest Period and (ii) in the case of an Index Rate Bid Loan by a Bid Loan Lender, equal to the amount of the Index Rate Bid Loan or Loans of such Bid Loan Lender to which such Interest Period applies. "Event of Default": any of the events specified in Section 6; provided, however, that any requirement for the giving of notice or the lapse of time, or both, or any other condition, has been satisfied. "Existing 364-Day Credit Agreement": the Credit Agreement, dated as of March 5, 2001, among the Company, the lenders party thereto and JPMCB, as administrative agent, as in effect immediately prior to the occurrence of the Effective Date. "Existing 5-Year Credit Agreement": the Credit Agreement, dated as of September 9, 1994, among the Company, various of its subsidiaries, the financial institutions from time to time party thereto and JPMCB, as administrative agent, as the same has been amended, restated, modified and/or otherwise supplemented through the Effective Date. "Facility Fee": as defined in subsection 2.4. "Facility Fee Percentage": a percentage equal to at any time (i) during a Category A Period, .07%, (ii) during a Category B Period, .08%, (iii) during a Category C Period, .10% and (iv) during a Category D Period, .125%. "Federal Funds Effective Rate": as defined in the definition of "Alternate Base Rate". "Financing Lease": any lease of property, real or personal, the obligations of the lessee in respect of which are required in accordance with GAAP to be capitalized on a balance sheet of the lessee. "Fitch": Fitch, Inc. "GAAP": generally accepted accounting principles in effect in the United States of America from time to time. "Governmental Authority": any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Guarantee Obligation": as to any Person (the "guaranteeing person"), any obligation of (a) the guaranteeing person or (b) another Person (including, without limitation, any bank under any letter of credit) to induce the creation of which the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the "primary obligations") of any other third Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person's maximum reasonably anticipated liability in respect thereof as determined by the Company in good faith. "Indebtedness": of any Person at any date, (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services (other than current trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices), (b) any other indebtedness of such Person which is evidenced by a note, bond, debenture or similar instrument, (c) all obligations of such Person under Financing Leases, (d) all obligations of such Person in respect of acceptances issued or created for the account of such Person and (e) all liabilities secured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof. "Index Rate Bid Loan": any Bid Loan made at an interest rate based upon the Applicable Index Rate (as opposed to an absolute rate). "Index Rate Bid Loan Request": any Bid Loan Request requesting the Bid Loan Lenders to offer to make Index Rate Bid Loans at an interest rate equal to the Applicable Index Rate plus (or minus) a margin. "Insolvency": with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of such term as used in Section 4245 of ERISA. "Insolvent": pertaining to a condition of Insolvency. "Interest Payment Date": (a) as to any Alternate Base Rate Loan, the last day of each March, June, September and December to occur while such Loan is outstanding and the Maturity Date, (b) as to any Eurodollar Loan having an Interest Period of three months or less, the last day of such Interest Period, and (c) as to any Eurodollar Loan having an Interest Period longer than three months, each day which is three months after the first day of such Interest Period and the last day of such Interest Period. "Interest Period": (a) with respect to any Eurodollar Loan, (i) initially, the period commencing on the Borrowing Date or conversion date, as the case may be, with respect to such Eurodollar Loan and ending one, two, three or six months thereafter, as selected by the Company in the notice of borrowing or notice of conversion given with respect thereto; and (ii) thereafter, each period commencing on the last day of the immediately preceding Interest Period applicable to such Eurodollar Loan and ending one, two, three or six months thereafter, as selected by the Company by irrevocable notice to the Administrative Agent not less than three Business Days prior to the last day of the then current Interest Period with respect thereto; and (b) with respect to any Bid Loan, the period commencing on the Bid Loan Date with respect to such Bid Loan and ending on the date not less than 7 nor more than 180 days thereafter, as specified by the Company in such Bid Loan Request; provided that the foregoing provisions are subject to the following: (A) if any Interest Period pertaining to a Eurodollar Loan or an Index Rate Bid Loan would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day; (B) any Interest Period pertaining to a Eurodollar Loan or an Index Rate Bid Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the relevant calendar month; (C) if any Interest Period pertaining to a Bid Loan made pursuant to an Absolute Rate Bid Loan Request would otherwise end on a day which is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day; (D) if the Company shall fail to give notice as provided above, the Company shall be deemed to have selected an Alternate Base Rate Loan to replace the affected Eurodollar Loan; (E) any Interest Period in respect of (x) any Eurodollar Loan made at a time when a Term Out Notice has not been given or (y) any Bid Loan which, in each case, would otherwise extend beyond the Termination Date shall end on the Termination Date; and (F) any Interest Period in respect of any Loan that would otherwise extend beyond the Maturity Date shall end on the Maturity Date. "JPMCB": JPMorgan Chase Bank (f/k/a The Chase Manhattan Bank). "Lender": as defined in the first paragraph of this Agreement. "Lien": any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement and any Financing Lease having substantially the same economic effect as any of the foregoing). "Loans": the collective reference to the Committed Rate Loans and the Bid Loans. "Majority Lenders": at any time, the Lenders whose Commitment Percentages hereunder aggregate in excess of 50%. "Material Adverse Effect": a material adverse effect on (a) the business, operations, property or condition (financial or otherwise) of the Company and its Subsidiaries taken as a whole, (b) the ability of the Company to perform its obligations under this Agreement or (c) the validity or enforceability of this Agreement or the rights or remedies of the Administrative Agent or the Lenders hereunder. "Materials of Environmental Concern": any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products or any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under any Environmental Law, including, without limitation, asbestos, polychlorinated biphenyls and urea-formaldehyde insulation. "Maturity Date": the Termination Date, provided that if the Company has delivered to the Administrative Agent a Term Out Notice, then the Maturity Date shall be the date which is the first anniversary of the Termination Date. "Moody's": Moody's Investors Service, Inc. "Moody's Credit Rating": at any time, the rating level (it being understood that numerical modifiers and (+) (-) modifiers shall constitute rating levels) then assigned by Moody's to the Company's senior unsecured long-term debt. "Multiemployer Plan": a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Participant": as defined in subsection 8.6(b). "PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA. "Permitted Liens": 1. Liens for taxes not yet due or which are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the Company or its Subsidiaries, as the case may be, in conformity with GAAP (or, in the case of Subsidiaries with significant operations outside of the United States of America, generally accepted accounting principles in effect from time to time in their respective jurisdictions of organization); 2. carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 60 days or which are being contested in good faith by appropriate proceedings; 3. pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation and deposits securing liability to insurance carriers under insurance or self-insurance arrangements; 4. deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; and 5. any extension, renewal or replacement (or successive extensions, renewals or replacements), in whole or in part, of any Lien referred to in the foregoing clauses; provided that the principal amount of Indebtedness secured thereby shall not exceed the principal amount of Indebtedness so secured at the time of such extension, renewal or replacement, and that such extension, renewal or replacement Lien shall be limited to all or a part of the property which secured the Lien so extended, renewed or replaced (plus improvements on such property). "Person": an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. "Plan": at any particular time, any employee benefit plan which is covered by ERISA and in respect of which the Company or a Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Prime Rate" as defined in the definition of Alternate Base Rate. "Properties": as defined in subsection 3.10(a). "Purchasing Lenders": as defined in subsection 8.6(c). "Rating Period": at any time, any of the Category A Period, the Category B Period, the Category C Period or the Category D Period as then in effect. "Reference Lenders": initially, JPMCB, Citibank, N.A. and Commerzbank AG, New York and Grand Cayman Branches. "Register": as defined in subsection 8.6(d). "Reorganization": with respect to any Multiemployer Plan, the condition that such Plan is in reorganization within the meaning of such term as used in Section 4241 of ERISA. "Replaced Lender" and "Replacement Lender": each as defined in subsection 2.18. "Reportable Event": any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty-day notice period is waived under subsections .22, .23, .25, .27, or .28 of PBGC Reg. Section 4043. "Requirement of Law": as to any Person, the Certificate of Incorporation and By-laws or other organizational or governing documents of such Person, and each law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Responsible Officer": the Executive Vice President, the Senior Vice President and CFO, the Treasurer, the Comptroller, the Assistant Comptroller or the Assistant Treasurer of the Company. "S&P": Standard & Poor's Ratings Services, a division of McGraw-Hill, Inc. "S&P Credit Rating": at any time, the rating level (it being understood that numerical modifiers and (+) (-) modifiers shall constitute rating levels) then assigned by S&P to the Company's senior unsecured long-term debt. "Short-Term Ratings": at any time, the rating level then assigned by each of S&P, Moody's and Fitch to the Company's senior unsecured short-term debt. "SEC": the Securities and Exchange Commission. "Significant Subsidiary": any Subsidiary that satisfies the requirements of Rule 1-02(w) of Regulation S-X as adopted by the Securities and Exchange Commission under the provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934 as in force on the date of this Agreement. "Significant Usage Period": any date (i) on which the Aggregate Loans exceed 25% of the Aggregate Commitments or (ii) occurring after the Termination Date on which Loans are outstanding. "Single Employer Plan": any Plan which is subject to Title IV of ERISA, but is not a Multiemployer Plan. "Subsidiary": as to any Person, a corporation, partnership or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Company. Notwithstanding the foregoing, Unrestricted Subsidiaries shall not be considered Subsidiaries of the Company for purposes of this Agreement, except that any Unrestricted Subsidiary shall be treated as a consolidated Subsidiary of the Company for purposes of calculating compliance with subsection 5.9 (and the definitions required to make such calculations) until such time as the Company certifies to the Administrative Agent that with respect to such Unrestricted Subsidiary, (x) the Company no longer desires to treat such Person as a consolidated Subsidiary for such purpose and (y) no creditor of such Person has recourse (whether pursuant to a guaranty or similar arrangement, or otherwise) to the Company or any of its Significant Subsidiaries with respect to any material obligations of such Person. "Taxes": as defined in subsection 2.17(a). "Termination Date": the earlier of (a) the Business Day immediately preceding the first anniversary of the Effective Date and (b) the date on which the Commitments shall terminate in accordance with the provisions of this Agreement. "Term Out Notice": a written notice given by the Company to the Administrative Agent (which will promptly transmit same to all the Lenders) given no more than 30 days and no less than one Business Day prior to the Termination Date stating that the Company has elected to extend the maturity of all Committed Rate Loans outstanding on the Termination Date to the date which is the first anniversary of the Termination Date (it being understood and agreed that the one Business Day notice requirement referred to above is not intended to limit or otherwise modify any other notice requirements provided in this Agreement). "Three-Month Secondary C/D Rate": as defined in the definition of Alternate Base Rate. "Tier I": at any time when at least two of the Short-Term Ratings are at or above the A-1, P-1 or F-1 levels. "Tranche": the collective reference to Eurodollar Loans whose Interest Periods begin and end on the same day. "Transferee": as defined in subsection 8.6(f). "Transfer Effective Date": as defined in each Commitment Transfer Supplement. "2.17 Certificate": as defined in subsection 2.17(b). "Type": as to any Loan, its nature as an Alternate Base Rate Loan or Eurodollar Loan, as the case may be. "Unrestricted Subsidiary": Any Person designated by the Company, in each case so long as (i) a majority of the equity interests are owned by the Company and its Subsidiaries and (ii) the Company and its Subsidiaries are unable to exercise control over such Person without material restriction. 1.2 Other Definitional Provisions. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto. (b) As used herein and in any certificate or other document made or delivered pursuant hereto, accounting terms relating to the Company and its Subsidiaries not defined in subsection 1.1 and accounting terms partly defined in subsection 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP. (c) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, subsection, Schedule and Exhibit references are to this Agreement unless otherwise specified. (d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. SECTION 2. THE COMMITTED RATE LOANS; THE BID LOANS; AMOUNT AND TERMS 2.1 The Committed Rate Loans. (a) During the Commitment Period, subject to the terms and conditions hereof, each Lender severally agrees to make loans (individually, a "Committed Rate Loan") to the Company from time to time in an aggregate principal amount at any one time outstanding not to exceed (after giving effect to the simultaneous use of the proceeds thereof to repay Loans) such Lender's Commitment, provided that no Committed Rate Loan shall be made hereunder which would result in the Aggregate Loans (after giving effect to the simultaneous use of the proceeds thereof to repay Loans) being in excess of the Aggregate Commitments then in effect. The Company may use the Commitments to borrow, repay and reborrow Committed Rate Loans from time to time during the Commitment Period, all in accordance with the terms and conditions hereof. (b) The Committed Rate Loans may be (i) Eurodollar Loans, (ii) Alternate Base Rate Loans or (iii) a combination thereof. (c) The Company may borrow Committed Rate Loans on any Business Day; provided, however, that the Company, shall give the Administrative Agent irrevocable notice thereof (which notice must be received by the Administrative Agent (i) prior to 12:00 Noon, New York City time, three Business Days prior to the requested Borrowing Date, in the case of Eurodollar Loans and (ii) prior to 11:00 A.M., New York City time, on the requested Borrowing Date, in the case of Alternate Base Rate Loans). Each such notice shall be given by facsimile transmission substantially in the form of Exhibit A (with appropriate insertions) or shall be given by telephone (specifying the information set forth in Exhibit A) promptly confirmed by notice given by facsimile transmission substantially in the form of Exhibit A (with appropriate insertions). On the day of receipt of any such notice from the Company, the Administrative Agent shall promptly notify each Lender thereof. Each Lender will make the amount of its share of each borrowing available to the Administrative Agent for the account of the Company at the office of the Administrative Agent set forth in subsection 8.2 by 11:00 A.M. (or 3:00 P.M., in the case of Alternate Base Rate Loans), New York City time, on the Borrowing Date requested by the Company in funds immediately available to the Administrative Agent as the Administrative Agent may direct. The proceeds of all such Committed Rate Loans will then be promptly made available to the Company by the Administrative Agent at the office of the Administrative Agent specified in subsection 8.2 by crediting the account of the Company on the books of such office of the Administrative Agent with the aggregate of the amount made available to the Administrative Agent by the Lenders and in like funds as received by the Administrative Agent. (d) All Committed Rate Loans shall be due and payable upon the Maturity Date. 2.2 The Bid Loans. (a) The Company may borrow Bid Loans from time to time on any Business Day during the Commitment Period in the manner set forth in this subsection and in amounts such that the Aggregate Loans at any time outstanding shall not exceed (after giving effect to the simultaneous use of the proceeds thereof to repay Loans) the Aggregate Commitments at such time, provided, however, that the aggregate principal amount of the outstanding Bid Loans of a Bid Loan Lender may (but shall not be required to) exceed its Commitment. (b) (i) The Company, shall request Bid Loans by delivering a Bid Loan Request to the Administrative Agent, not later than 12:00 Noon (New York City time) four Business Days prior to the proposed Bid Loan Date (in the case of an Index Rate Bid Loan Request), and not later than 10:00 A.M. (New York City time) one Business Day prior to the proposed Bid Loan Date (in the case of an Absolute Rate Bid Loan Request). Each Bid Loan Request may solicit bids for Bid Loans in an aggregate principal amount of $50,000,000 or an integral multiple of $5,000,000 in excess thereof and for not more than three alternative Interest Periods for such Bid Loans. The Interest Period for each Bid Loan shall end not less than 7 days (one month in the case of Index Rate Bid Loans) nor more than 180 days (six months in the case of Index Rate Bid Loans) after the Bid Loan Date therefor (and in any event subject to the proviso to the definition of "Interest Period" in subsection 1.1). The Administrative Agent shall promptly notify each Bid Loan Lender by facsimile transmission of the contents of each Bid Loan Request received by it. (ii) In the case of an Index Rate Bid Loan Request, upon receipt of notice from the Administrative Agent of the contents of such Bid Loan Request, any Bid Loan Lender that elects, in its sole discretion, to do so, shall irrevocably offer to make one or more Bid Loans to the Company at the Applicable Index Rate plus or minus a margin for each such Bid Loan determined by such Bid Loan Lender, in its sole discretion. Any such irrevocable offer shall be made by delivering a Bid Loan Offer to the Administrative Agent before 10:30 A.M. (New York City time) three Business Days before the proposed Bid Loan Date, setting forth the maximum amount of Bid Loans for each Interest Period, and the aggregate maximum amount for all Interest Periods, which such Lender would be willing to make (which amount may, subject to subsection 2.2(a), exceed such Lender's Commitment) and the margin above or below the Applicable Index Rate at which such Bid Loan Lender is willing to make each such Bid Loan; the Administrative Agent shall advise the Company before 11:15 A.M. (New York City time) three Business Days before the proposed Bid Loan Date of the contents of each such Bid Loan Offer received by it. If the Administrative Agent in its capacity as a Bid Loan Lender shall, in its sole discretion, elect to make any such offer, it shall advise the Company of the contents of its Bid Loan Offer before 10:15 A.M. (New York City time) three Business Days before the proposed Bid Loan Date. (iii) In the case of an Absolute Rate Bid Loan Request, upon receipt of notice from the Administrative Agent of the contents of such Bid Loan Request, any Bid Loan Lender that elects, in its sole discretion, to do so, shall irrevocably offer to make one or more Bid Loans to the Company at a rate or rates of interest for each such Bid Loan determined by such Bid Loan Lender in its sole discretion. Any such irrevocable offer shall be made by delivering a Bid Loan Offer to the Administrative Agent before 9:30 A.M. (New York City time) on the proposed Bid Loan Date, setting forth the maximum amount of Bid Loans for each Interest Period, and the aggregate maximum amount for all Interest Periods, which such Bid Loan Lender would be willing to make (which amount may, subject to subsection 2.2(a), exceed such Bid Loan Lender's Commitment) and the rate or rates of interest at which such Bid Loan Lender is willing to make each such Bid Loan; the Administrative Agent shall advise the Company before 10:15 A.M. (New York City time) on the proposed Bid Loan Date of the contents of each such Bid Loan Offer received by it. If the Administrative Agent in its capacity as a Bid Loan Lender shall, in its sole discretion, elect to make any such offer, it shall advise the Company of the contents of its Bid Loan Offer before 9:15 A.M. (New York City time) on the proposed Bid Loan Date. (iv) The Company shall before 11:45 A.M. (New York City time) three Business Days before the proposed Bid Loan Date (in the case of Bid Loans requested by an Index Rate Bid Loan Request) and before 10:45 A.M. (New York City time) on the proposed Bid Loan Date (in the case of Bid Loans requested by an Absolute Rate Bid Loan Request) either, in its absolute discretion: (A) cancel such Bid Loan Request by giving the Administrative Agent telephone notice to that effect, or (B) accept one or more of the offers made by any Bid Loan Lender or Bid Loan Lenders pursuant to clause (ii) or clause (iii) above, as the case may be, by giving telephone notice to the Administrative Agent (immediately confirmed by delivery to the Administrative Agent of a Bid Loan Confirmation) of the amount of Bid Loans for each relevant Interest Period to be made by each Bid Loan Lender (which amount shall be equal to or less than the maximum amount for such Interest Period specified in the Bid Loan Offer of such Bid Loan Lender, and for all Interest Periods included in such Bid Loan Offer shall be equal to or less than the aggregate maximum amount specified in such Bid Loan Offer for all such Interest Periods) and reject any remaining offers made by Bid Loan Lenders pursuant to clause (ii) or clause (iii) above, as the case may be; provided, however, that (x) the Company may not accept offers for Bid Loans for any Interest Period in an aggregate principal amount in excess of the maximum principal amount requested for such Interest Period in the related Bid Loan Request, (y) if the Company accepts any of such offers, it must accept offers strictly based upon pricing for such relevant Interest Period and no other criteria whatsoever and (z) if two or more Bid Loan Lenders submit offers for any Interest Period at identical pricing and the Company accepts any of such offers but does not wish to borrow the total amount offered by such Bid Loan Lenders with such identical pricing, the Company shall accept offers from all of such Bid Loan Lenders in amounts allocated among them pro rata according to the amounts offered by such Bid Loan Lenders (or as nearly pro rata as shall be practicable, after giving effect to the requirement that Bid Loans made by a Bid Loan Lender on a Bid Loan Date for each relevant Interest Period shall be in a principal amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof). (v) If the Company notifies the Administrative Agent that a Bid Loan Request is cancelled pursuant to clause (iv)(A) above, the Administrative Agent shall give prompt telephone notice thereof to the Bid Loan Lenders, and the Bid Loans requested thereby shall not be made. (vi) If the Company accepts pursuant to clause (iv)(B) above one or more of the offers made by any Bid Loan Lender or Bid Loan Lenders, the Administrative Agent shall promptly notify by telephone each Bid Loan Lender which has made such an offer of the aggregate amount of such Bid Loans to be made on such Bid Loan Date for each Interest Period and of the acceptance or rejection of any offers to make such Bid Loans made by such Bid Loan Lender. Each Bid Loan Lender which is to make a Bid Loan shall, before 12:00 Noon (New York City time) on the Bid Loan Date specified in the Bid Loan Request applicable thereto, make available to the Administrative Agent at its office set forth in subsection 8.2 the amount of Bid Loans to be made by such Bid Loan Lender, in immediately available funds. The Administrative Agent will make such funds available to the Company promptly on such date at the Administrative Agent's aforesaid address. As soon as practicable after each Bid Loan Date, the Administrative Agent shall notify each Lender of the aggregate amount of Bid Loans advanced on such Bid Loan Date and the respective Interest Periods therefor. (c) Within the limits and on the conditions set forth in this subsection, the Company may from time to time borrow under this subsection, repay pursuant to paragraph (d) below, and reborrow under this subsection. (d) The Company shall repay to the Administrative Agent for the account of each Bid Loan Lender which has made a Bid Loan to it on the last day of the Interest Period for such Bid Loan (such Interest Period being that specified by the Company for repayment of such Bid Loan in the related Bid Loan Request) the then unpaid principal amount of such Bid Loan. The Company shall not have the right to prepay any principal amount of any Bid Loan without the prior consent of the Bid Loan Lender with respect thereto. (e) The Company shall pay interest on the unpaid principal amount of each Bid Loan made to it from the applicable Bid Loan Date to the stated maturity date thereof, at the rate of interest determined pursuant to paragraph (b) above (calculated on the basis of a 360 day year for actual days elapsed), payable on the interest payment date or dates specified by the Company for such Bid Loan in the related Bid Loan Request. If all or a portion of the principal amount of any Bid Loan or any interest payable thereon shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall, without limiting any rights of any Lender under this Agreement, bear interest at a rate per annum which is (x) in the case of overdue principal, 2% above the rate which would otherwise be applicable to such Bid Loan until the scheduled maturity date with respect thereto and for each day thereafter at a rate per annum which is 2% above the Alternate Base Rate or (y) in the case of overdue interest, 2% above the Alternate Base Rate plus the Applicable Margin, in each case from the date of such non-payment until such amount is paid in full (as well after as before judgment). 2.3 Denomination of Committed Rate Loans. Each borrowing of Committed Rate Loans shall be in an aggregate principal amount of $50,000,000 or a whole multiple of $5,000,000 in excess thereof. 2.4 Fees. The Company agrees to pay to the Administrative Agent, for the ratable benefit of the Lenders, a facility fee (the "Facility Fee") in an amount equal to the Facility Fee Percentage, of (x) the Aggregate Commitments from and including the Effective Date to but excluding the Termination Date and (y) if an Extension Notice has been given by the Company, the Aggregate Loans from and including the Termination Date to but excluding the Maturity Date, in each case payable quarterly in arrears on the last day of each March, June, September and December, on the Termination Date and on the Maturity Date (or such earlier date after the Termination Date on which all Loans have been repaid). Such quarterly payment made hereunder shall be a payment in consideration for holding open the availability of the Commitments or making the Loans for the quarterly period completed on the date payment is due. 2.5 Changes of Commitments. (a) The Company shall have the right to terminate or reduce the unused portion of the Commitments at any time or from time to time upon not less than three Business Days' prior notice to the Administrative Agent (which shall notify the Lenders thereof as soon as practicable) of each such termination or reduction, which notice shall specify the effective date thereof and the amount of any such reduction (which shall be in a minimum amount of $50,000,000 or a whole multiple of $5,000,000 in excess thereof) and shall be irrevocable and effective only upon receipt by the Administrative Agent, provided that no such reduction or termination shall be permitted if after giving effect thereto, and to any prepayments of the Committed Rate Loans made on the effective date thereof, the then outstanding principal amount of the Aggregate Loans would exceed the Aggregate Commitments then in effect. (b) The Commitments once terminated or reduced pursuant to this subsection may not be reinstated. 2.6 Optional Prepayments. The Company may prepay Committed Rate Loans or (with the consent of the Bid Loan Lender in respect thereof) Bid Loans upon receipt by the Administrative Agent (which shall notify the Lenders thereof as soon as practicable) of irrevocable notice from the Company prior to 11:30 A.M. (New York City time) on the date of such prepayment. If any Eurodollar Loan shall be prepaid on any day other than the last day of the Interest Period applicable thereto, or prior to the conversion thereof if a notice of conversion has been delivered with respect thereto pursuant to Section 2.9, the Company shall, on the date of such payment, also pay all interest accrued on such Eurodollar Loan to the date of such payment and all amounts payable pursuant to subsection 2.16 in connection therewith. 2.7 Minimum Principal Amount of Tranches. All borrowings, payments and prepayments in respect of Committed Rate Loans shall be in such amounts and be made pursuant to such elections so that after giving effect thereto the aggregate principal amount of the Committed Rate Loans comprising any Tranche shall not be less than $50,000,000 or a whole multiple of $5,000,000 in excess thereof. 2.8 Committed Rate Loan Interest Rates and Payment Dates. (a) Each Committed Rate Loan comprising each Eurodollar Tranche shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Eurodollar Rate determined for such day plus the Applicable Margin. (b) The Alternate Base Rate Loans shall bear interest at a rate per annum equal to the Alternate Base Rate plus the Applicable Margin. (c) If all or a portion of the principal amount of any Committed Rate Loan which is a Eurodollar Loan shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue principal amount of such Committed Rate Loan shall be converted to an Alternate Base Rate Loan at the end of the Interest Period applicable thereto. (d) If all or a portion of (i) the principal amount of any Committed Rate Loan, (ii) any interest payable thereon or (iii) any fee or other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate per annum which is (x) in the case of overdue principal, the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this subsection plus 2% or (y) in the case of overdue interest, fees or other amounts, the rate described in paragraph (b) of this subsection plus 2%, in each case from the date of such non-payment until such amount is paid in full (after as well as before judgment). (e) Interest on each Committed Rate Loan shall be payable in arrears on each Interest Payment Date, provided that interest accruing pursuant to paragraph (d) of this subsection shall be payable from time to time on demand. 2.9 Conversion Options. (a) The Company may elect from time to time to convert Alternate Base Rate Loans to Eurodollar Loans by giving the Administrative Agent prior irrevocable written notice of such election received by the Administrative Agent prior to 12:00 Noon, New York City time, three Business Days prior to the proposed conversion date. The Company may elect from time to time to convert Eurodollar Loans to Alternate Base Rate Loans by giving the Administrative Agent prior irrevocable notice of such election received by the Administrative Agent prior to 12:00 Noon, New York City time, one Business Day prior to the proposed conversion date. If the date upon which an Alternative Base Rate Loan is to be converted to a Eurodollar Loan is not a Business Day in London, then such conversion shall be made on the next succeeding Business Day in London and during the period from such last day of an Interest Period to such succeeding Business Day such Loan shall bear interest as if it were an Alternate Base Rate Loan. All or any part of outstanding Eurodollar Loans and Alternate Base Rate Loans may be converted as provided herein, provided that (i) no Loan may be converted into a Eurodollar Loan when any Default or Event of Default has occurred and is continuing and the Administrative Agent or the Majority Lenders have determined that such conversion is not appropriate and (ii) partial conversions shall be in an aggregate principal amount of $50,000,000 or a whole multiple of $5,000,000 in excess thereof. (b) Any Eurodollar Loans may be continued as such upon the expiration of an Interest Period with respect thereto by compliance by the Company with the notice provisions contained in subsection 2.9(a); provided, that no Eurodollar Loan may be continued as such when any Default or Event of Default has occurred and is continuing, and the Administrative Agent or the Majority Lenders have determined that such a continuation is not appropriate, in which case such Loan shall be automatically converted to an Alternate Base Rate Loan on the last day of the then current Interest Period with respect thereto. 2.10 Computation of Interest and Fees. (a) Interest payable hereunder with respect to Alternate Base Rate Loans shall be calculated on the basis of a year of 365/6 days for the actual days elapsed. All other fees, interest and all other amounts payable hereunder shall be calculated on the basis of a 360 day year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify the Company and the Lenders of each determination of a Eurodollar Rate on the Business Day of the determination thereof. Any change in the interest rate on a Committed Rate Loan resulting from a change in the Alternate Base Rate shall become effective as of the opening of business on the day on which such change in the Alternate Base Rate shall become effective. The Administrative Agent shall as soon as practicable notify the Company and the Lenders of the effective date and the amount of each such change. (b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Company and the Lenders in the absence of manifest error. The Administrative Agent shall, at the request of the Company, deliver to the Company a statement showing the quotations and the computations used by the Administrative Agent in determining any interest rate. (c) If any Reference Lender's Commitment shall terminate for any reason whatsoever (otherwise than with termination of all the Commitments), such Reference Lender shall thereupon cease to be a Reference Lender, and if for any reason there shall cease to be at least three Reference Lenders, then the Administrative Agent (after consultation with the Company and the Lenders) shall, by notice to the Company and the Lenders, designate another Lender as a Reference Lender (who shall be reasonably acceptable to the Company) so that there shall at all times be at least three Reference Lenders. (d) Each Reference Lender shall use its best efforts to furnish quotations of rates to the Administrative Agent when and as contemplated hereby. If any of the Reference Lenders shall be unable or otherwise fails to supply such rates to the Administrative Agent upon its request, the rate of interest shall, subject to the provisions of subsection 2.13, be determined on the basis of the quotations of the remaining Reference Lenders or Reference Lender. 2.11 Pro Rata Treatment, Payments and Evidence of Debt. (a) Each borrowing of Committed Rate Loans and any reduction of the Commitments shall be made pro rata according to the respective Commitment Percentages of the Lenders. Each payment by the Company under this Agreement shall be applied, first, to any fees then due and owing by the Company pursuant to subsection 2.4, second, to interest then due and owing in respect of the Loans and, third, to principal then due and owing in respect of the Loans. Each payment by the Company on account of any fees pursuant to subsection 2.4 shall be made pro rata in accordance with the respective amounts due and owing. Each payment (other than prepayments) by the Company on account of principal of and interest on the Committed Rate Loans shall be made pro rata according to the respective amounts due and owing. Each prepayment on account of principal of the Loans (except to the extent designated to be applied to Bid Loans) shall be applied, first, to such of the Committed Rate Loans as the Company may designate (to be applied pro rata among the Lenders), and, second, after all Committed Rate Loans shall have been paid in full, to Bid Loans, pro rata according to the respective amounts outstanding; provided, that prepayments made pursuant to subsection 2.14 shall be applied in accordance with such subsection; and provided further that nothing herein shall be deemed to permit optional prepayments on account of Bid Loans without the prior consent of the Bid Loan Lender with respect thereto. (b) All payments (including prepayments) to be made by the Company on account of principal, interest and fees shall be made without defense, set-off or counterclaim (except as provided in subsection 2.17(b)) and shall be made to the Administrative Agent for the account of the Lenders at the Administrative Agent's office specified in subsection 8.2 in Dollars and in immediately available funds. The Administrative Agent shall distribute such payments to the Lenders entitled thereto promptly upon receipt in like funds as received. If any payment hereunder (other than payments on the Eurodollar Loans or Index Rate Bid Loans payable on the next preceding Business Day as a result of the following sentence) becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day, and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. If any payment on a Eurodollar Loan or an Index Rate Bid Loan becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Business Day. (c) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Company to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Company to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender's share thereof. The entries made in the accounts maintained pursuant to the two preceding sentences shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Company to repay the Loans in accordance with the terms of this Agreement. (d) Any Lender (including any Replacement Lender) may request that Loans made by it be evidenced by a promissory note. In such event, the Company shall prepare, execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form reasonably satisfactory to the Administrative Agent. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 8.6) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns). 2.12 Non-Receipt of Funds by the Administrative Agent. (a) Unless the Administrative Agent shall have been notified by a Lender prior to the time a Committed Rate Loan is to be made by such Lender (which notice shall be effective upon receipt) that such Lender does not intend to make the proceeds of such Committed Rate Loan available to the Administrative Agent, the Administrative Agent may assume that such Lender has made such proceeds available to the Administrative Agent at such time, and the Administrative Agent may in reliance upon such assumption (but shall not be required to) make available to the Company a corresponding amount. If such amount is made available to the Administrative Agent on a date after such Borrowing Date, such Lender shall pay to the Administrative Agent on demand an amount equal to the product of (i) the daily average Federal Funds Effective Rate during such period, times (ii) the amount of such Lender's Commitment Percentage of such borrowing, times (iii) a fraction, the numerator of which is the number of days that elapse from and including such Borrowing Date to the date on which such Lender's Commitment Percentage of such borrowing shall have become immediately available to the Administrative Agent and the denominator of which is 360. If such Lender's Commitment Percentage is not in fact made available to the Administrative Agent by such Lender within three Business Days of such Borrowing Date, the Administrative Agent shall be entitled to recover such amount with interest thereon at the rate per annum applicable to Alternate Base Rate Loans hereunder, on demand, from the Company. (b) Unless the Administrative Agent shall have been notified by the Company prior to the date on which any payment is due from it hereunder (which notice shall be effective upon receipt) that the Company does not intend to make such payment, the Administrative Agent may assume that the Company has made such payment when due, and the Administrative Agent may in reliance upon such assumption (but shall not be required to) make available to each Lender on such payment date an amount equal to the portion of such assumed payment to which such Lender is entitled hereunder, and if the Company has not in fact made such payment to the Administrative Agent, such Lender shall, on demand, repay to the Administrative Agent the amount made available to such Lender. If such amount is repaid to the Administrative Agent on a date after the date such amount was made available to such Lender, such Lender shall pay to the Administrative Agent on demand an amount equal to the product of (i) the daily average Federal Funds Effective Rate during such period, times (ii) the amount made available to such Lender by the Administrative Agent pursuant to this paragraph (b), times (iii) a fraction, the numerator of which is the number of days that elapse from and including the date on which such amount was made available to such Lender to the date on which such amount shall have been repaid to the Administrative Agent by such Lender and become immediately available to the Administrative Agent and the denominator of which is 360. (c) A certificate of the Administrative Agent submitted to the Company or any Lender with respect to any amount owing under this subsection shall be conclusive in the absence of manifest error. 2.13 Inability to Determine Interest Rate. (a) Notwithstanding any other provision of this Agreement, if (i) the Administrative Agent reasonably determines that, for any reason whatsoever, a rate for Eurodollar Loans cannot be determined as provided in the definition of Eurodollar Rate for any Interest Period or (ii) the Majority Lenders shall determine (which determination shall be conclusive) that the rates for the purpose of computing the Eurodollar Rate do not adequately and fairly reflect the cost to such Lenders of funding Eurodollar Loans that the Company has requested be outstanding as a Eurodollar Tranche during such Interest Period, the Administrative Agent shall forthwith give telephone notice of such determination, confirmed in writing, to the Company and the Lenders at least two Business Days prior to the first day of such Interest Period. Unless the Company shall have notified the Administrative Agent upon receipt of such telephone notice that it wishes to rescind or modify its request regarding such Eurodollar Loans, any Loans that were requested to be made as Eurodollar Loans shall be made as Alternate Base Rate Loans and any Loans that were requested to be converted into or continued as Eurodollar Loans shall be converted into Alternate Base Rate Loans. Until any such notice has been withdrawn by the Administrative Agent, no further Loans shall be made as, continued as, or converted into, Eurodollar Loans. (b) In the event that the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Company) that by reason of circumstances affecting the interbank eurodollar market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for any Interest Period with respect to a proposed Bid Loan to be made pursuant to an Index Rate Bid Loan Request, the Administrative Agent shall forthwith give telephone notice of such determination, confirmed in writing, to the Company and the Bid Loan Lenders at least two Business Days prior to the proposed Bid Loan Date, and such Bid Loans shall not be made on such Bid Loan Date. Until any such notice has been withdrawn by the Administrative Agent, no further Index Rate Bid Loan Requests shall be submitted by the Company. 2.14 Illegality. Notwithstanding any other provision of this Agreement, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof by any relevant Governmental Authority to any Lender shall make it unlawful for such Lender to make or maintain Eurodollar Loans as contemplated by this Agreement or to obtain in the interbank eurodollar market the funds with which to make such Loans, (a) such Lender shall promptly notify the Administrative Agent and the Company thereof, (b) the commitment of such Lender hereunder to make Eurodollar Loans or continue Eurodollar Loans as such shall forthwith be cancelled and (c) such Lender's Committed Rate Loans then outstanding as Eurodollar Loans, if any, shall be converted on the last day of the Interest Period for such Loans or within such earlier period as required by law into Alternate Base Rate Loans. The Company hereby agrees promptly to pay any Lender, upon its demand, any additional amounts necessary to compensate such Lender for actual and direct costs reasonably incurred by such Lender in making any repayment in accordance with this subsection including, but not limited to, any interest or fees payable by such Lender to lenders of funds obtained by it in order to make or maintain its Eurodollar Loans hereunder. A certificate as to any additional amounts payable pursuant to this subsection submitted by such Lender, through the Administrative Agent, to the Company shall be conclusive in the absence of manifest error. Each Lender agrees to use reasonable efforts to avoid or to minimize any amounts which may otherwise be payable pursuant to this subsection; provided, however, that such efforts shall not cause the imposition on such Lender of any additional costs or legal or regulatory burdens deemed by such Lender to be material. 2.15 Requirements of Law. (a) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof: (i) does or shall subject such Lender to any tax of any kind whatsoever with respect to this Agreement or any Eurodollar Loan made by it, or change the basis of taxation of payments to such Lender of principal, facility fee, interest or any other amount payable hereunder (except for changes in the rate of tax on the overall net income of such Lender); (ii) does or shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, or deposits or other liabilities in or for the account of, advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Lender which are not otherwise covered by subsection 2.15(b); (iii) does or shall impose on such Lender any other condition; and the result of any of the foregoing is to increase the cost to such Lender of making or maintaining Loans or to reduce any amount receivable hereunder, then, in any such case, the Company shall promptly pay such Lender, upon its demand, any additional amounts necessary to compensate such Lender for such additional cost or reduced amount receivable which such Lender reasonably deems to be material as determined by such Lender with respect to its Eurodollar Loans. A certificate as to any additional amounts payable pursuant to this subsection submitted by such Lender, through the Administrative Agent, to the Company shall be conclusive in the absence of manifest error. Each Lender agrees to use reasonable efforts to avoid or to minimize any amounts which might otherwise be payable pursuant to this paragraph of this subsection; provided, however, that such efforts shall not cause the imposition on such Lender of any additional costs or legal or regulatory burdens deemed by such Lender to be material. (b) In addition to amounts which may become payable from time to time pursuant to paragraph (a) of this subsection, the Company agrees to pay to each Lender which requests compensation under this paragraph (b) (by notice to the Company), on the last day of each Interest Period with respect to any Eurodollar Loan made by such Lender, so long as such Lender shall be required to maintain reserves against "Eurocurrency liabilities" under Regulation D of the Board of Governors of the Federal Reserve System (or, so long as such Lender may be required by such Board of Governors or by any other Governmental Authority to maintain reserves against any other category of liabilities which includes deposits by reference to which the interest rate on Eurodollar Loans is determined as provided in this Agreement or against any category of extensions of credit or other assets of such Lender which includes any Eurodollar Loans), an additional amount (determined by such Lender and notified to the Company) representing such Lender's calculation or, if an accurate calculation is impracticable, reasonable estimate (using such reasonable means of allocation as such Lender shall determine) of the actual costs, if any, incurred by such Lender during such Interest Period as a result of the applicability of the foregoing reserves to such Eurodollar Loans, which amount in any event shall not exceed the product of the following for each day of such Interest Period: (i) the principal amount of the Eurodollar Loans made by such Lender to which such Interest Period relates outstanding on such day; and (ii) the difference between (x) a fraction (expressed as a decimal) the numerator of which is the Eurodollar Rate (expressed as a decimal) applicable to such Eurodollar Loan and the denominator of which is one minus the maximum rate (expressed as a decimal) at which such reserve requirements are imposed by such Board of Governors or other Governmental Authority on such date minus (y) such numerator; and (iii) a fraction the numerator of which is one and the denominator of which is 360. (c) If any Lender shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any central bank or Governmental Authority made subsequent to the date hereof does or shall have the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, within 15 days after demand by such Lender, the Company shall pay to such Lender such additional amount as shall be certified by such Lender as being required to compensate it for such reduction. (d) Notwithstanding anything to the contrary contained herein, the Company shall not have any obligation to pay to any Lender amounts owing under this subsection 2.15 for any period which is more than 60 days prior to the date upon which the request for payment therefor is delivered to the Company; provided that in no event shall the Company have any obligation to pay to any Lender amounts owing under subsection 2.15(b) for any period which is prior to the commencement of the Interest Period in effect at the time a demand for payment is made by such Lender. (e) The agreements in this subsection shall survive the termination of this Agreement and payment of the Loans and all other amounts payable hereunder. 2.16 Indemnity. The Company hereby agrees to indemnify each Lender and to hold such Lender harmless from any funding loss or expense which such Lender may sustain or incur as a consequence of (a) default by the Company in payment of the principal amount of or interest on any Loan by such Lender in accordance with the terms of subsections 2.1(d), 2.2(d), 2.2(e) and 2.8(e), as the case may be, (b) default by the Company in making a borrowing after the Company has given a notice in accordance with subsection 2.1 or 2.2, (c) default by the Company in making any prepayment after the Company has given a notice in accordance with subsection 2.6 and/or (d) the making by the Company of a prepayment of a Committed Rate Loan (including without limitation, any prepayment of an Alternate Base Rate Loan after notice of conversion to a Eurodollar Loan has been delivered with respect thereto pursuant to Section 2.9), or the conversion thereof, on a day which is not the last day of the Interest Period with respect thereto, in each case including, but not limited to, any such loss or expense arising from interest or fees payable by such Lender to lenders of funds obtained by it in order to maintain its Loans hereunder. A certificate as to any additional amounts payable pursuant to this subsection submitted by any Lender, through the Administrative Agent, to the Company (which certificate must be delivered to the Administrative Agent within thirty days following such default, prepayment or conversion) shall be conclusive in the absence of manifest error. The agreements in this subsection shall survive termination of this Agreement and payment of the Loans and all other amounts payable hereunder. 2.17 Taxes. (a) All payments made by the Company hereunder will be, except as provided in subsection 2.17(b), made free and clear of, and without deduction or withholding for, any present or future taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any Governmental Authority or by any political subdivision or taxing authority thereof or therein with respect to such payments (but excluding any tax imposed on or measured by the net income or profits of a Lender pursuant to the laws of the jurisdiction in which it is organized or the jurisdiction in which the principal office or applicable lending office of such Lender is located or any subdivision thereof or therein) and all interest, penalties or similar liabilities with respect thereto (all such non-excluded taxes, levies, imposts, duties, fees, assessments or other charges being referred to collectively as "Taxes"). If any Taxes are so levied or imposed, the Company agrees to pay the full amount of such Taxes, and such additional amounts as may be necessary so that every payment of all amounts due under this Agreement, after withholding or deduction for or on account of any Taxes, will not be less than the amount provided for herein. The Company will furnish to the Administrative Agent as soon as practicable after the date the payment of any Taxes is due pursuant to applicable law certified copies (to the extent reasonably available and required by law) of tax receipts evidencing such payment by the Company. The Company agrees to indemnify and hold harmless each Lender, and reimburse such Lender upon its written request, for the amount of any Taxes so levied or imposed and paid by such Lender. (b) Each Lender that is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for United States income tax purposes agrees to deliver to the Company and the Administrative Agent on or prior to the Effective Date, or in the case of a Lender that is an assignee or transferee of an interest under this Agreement pursuant to subsection 8.6(c) (unless the respective Lender was already a Lender hereunder immediately prior to such assignment or transfer), on the date of such assignment or transfer to such Lender, (i) two accurate and complete original signed copies of Internal Revenue Service Form W-8ECI or W-8BEN with respect to the benefit of any income tax treaty (or successor forms) certifying to such Lender's entitlement to a complete exemption from United States withholding tax with respect to payments to be made under this Agreement, or (ii) if the Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code, either Internal Revenue Service Form W-8ECI or W-8BEN with respect to the benefit of any income tax treaty pursuant to clause (i) above, or (x) a certificate substantially in the form of Exhibit C (any such certificate, a "2.17 Certificate") and (y) two accurate and complete original signed copies of Internal Revenue Service Form W-8BEN (with respect to the portfolio interest exception) (or successor form) certifying to such Lender's entitlement to an exemption from United States withholding tax with respect to payments of interest to be made under this Agreement. In addition, each Lender agrees that it will deliver upon the Company's request updated versions of the foregoing, as applicable, whenever the previous certification has become obsolete or inaccurate in any material respect, together with such other forms as may be required in order to confirm or establish the entitlement of such Lender to a continued exemption from or reduction in United States withholding tax with respect to payments under this Agreement, or it shall immediately notify the Company and the Administrative Agent of its inability to deliver any such Form or Certificate, in which case such Lender shall not be required to deliver any such Form or Certificate pursuant to this subsection 2.17(b). Notwithstanding anything to the contrary contained in subsection 2.17(a), but subject to the immediately succeeding sentence, (x) the Company shall be entitled, to the extent it is required to do so by law, to deduct or withhold Taxes imposed by the United States (or any political subdivision or taxing authority thereof or therein) from interest, fees or other amounts payable hereunder for the account of any Lender which is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax purposes to the extent that such Lender has not provided to the Company U.S. Internal Revenue Service Forms that establish a complete exemption from such deduction or withholding and (y) the Company shall not be obligated pursuant to subsection 2.17(a) hereof to gross-up payments to be made to a Lender in respect of Taxes imposed by the United States if (I) such Lender has not provided to the Company the Internal Revenue Service Forms required to be provided to the Company pursuant to this subsection 2.17(b) or (II) in the case of a payment, other than interest, to a Lender described in clause (ii) above, to the extent that such Forms do not establish a complete exemption from withholding of such Taxes. Notwithstanding anything to the contrary contained in the preceding sentence or elsewhere in this subsection 2.17, the Company agrees to pay additional amounts and to indemnify each Lender in the manner set forth in subsection 2.17(a) (without regard to the identity of the jurisdiction requiring the deduction or withholding) in respect of any Taxes deducted or withheld by it as described in the immediately preceding sentence as a result of any changes after the Effective Date in any applicable law, treaty, governmental rule, regulation, guideline or order, or in the interpretation thereof, relating to the deducting or withholding of Taxes. (c) Each Lender agrees to use reasonable efforts (including reasonable efforts to change its lending office) to avoid or to minimize any amounts which might otherwise be payable pursuant to this subsection; provided, however, that such efforts shall not cause the imposition on such Lender of any additional costs or legal or regulatory burdens deemed by such Lender to be material. (d) If the Company pays any additional amount pursuant to this subsection 2.17 with respect to a Lender, such Lender shall use reasonable efforts to obtain a refund of tax or credit against its tax liabilities on account of such payment; provided that such Lender shall have no obligation to use such reasonable efforts if either (i) it is in an excess foreign tax credit position or (ii) it believes in good faith, in its sole discretion, that claiming a refund or credit would cause adverse tax consequences to it. In the event that such Lender receives such a refund or credit, such Lender shall pay to the Company an amount that such Lender reasonably determines is equal to the net tax benefit obtained by such Lender as a result of such payment by the Company. In the event that no refund or credit is obtained with respect to the Company's payments to such Lender pursuant to this subsection 2.17, then such Lender shall provide a certification that such Lender has not received a refund or credit for such payments. Nothing contained in this subsection 2.17 shall require a Lender to disclose or detail the basis of its calculation of the amount of any tax benefit or any other amount or the basis of its determination referred to in the proviso to the first sentence of this subsection 2.17 to the Company or any other party. (e) The agreements in this subsection shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 2.18 Replacement of Lenders. In the event that any Lender shall submit a request for additional reimbursement under subsection 2.15(a),(b) or (c) or subsection 2.17, the Company shall have the right to replace such Lender (the "Replaced Lender") with one or more other Eligible Transferee or Transferees, (collectively, the "Replacement Lender") reasonably acceptable to the Administrative Agent, provided that: (i) at the time of any replacement pursuant to this subsection 2.18, the Replacement Lender shall enter into one or more Commitment Transfer Supplements pursuant to subsection 8.6(c) (and with all fees payable pursuant to subsection 8.6(e) to be paid by the Replacement Lender) pursuant to which the Replacement Lender shall acquire all of the Commitments and outstanding Committed Rate Loans of the Replaced Lender hereunder and, in connection therewith, shall pay to the Replaced Lender in respect thereof an amount equal to the sum of (x) an amount equal to the principal of, and all accrued but unpaid interest on, all outstanding Committed Rate Loans of the Replaced Lender hereunder, and (y) an amount equal to all accrued but unpaid Facility Fees (if any) owing to the Replaced Lender pursuant to subsection 2.4 hereof; and (ii) all obligations of the Company owing to the Replaced Lender hereunder (including the aforesaid increased fees but other than (x) those specifically described in clause (i) above in respect of which the assignment purchase price has been, or is concurrently being, paid and (y) accrued but not due interest on, and the principal of, all Bid Loans of the Replaced Bank then outstanding (which will be paid when and as due by the Company)) shall be paid in full to such Replaced Lender by the Company concurrently with such replacement; provided, that, no such payment shall be required in respect of periods commencing (x) prior to the commencement of the Interest Period in respect of which such payment is sought, in the case of any payment pursuant to subsection 2.15(b), or (y) prior to the date which is 60 days prior to the date of such payment request, in all other cases. The Company will also be required to provide reimbursement to such Replaced Lender for any additional amounts owing pursuant to subsection 2.15(a), (b) or (c) or subsection 2.17 for the period subsequent to such request through the date of such replacement. Upon the execution of the respective Commitment Transfer Supplement and the payment of amounts referred to in clauses (i) and (ii) above, the Replacement Lender shall become a Lender hereunder and the Replaced Lender shall cease to constitute a Lender hereunder, except with respect to indemnification provisions under this Agreement (and the obligation, if any, owed it in respect of any outstanding Bid Loan), which shall survive as to such Replaced Lender. The Administrative Agent agrees with the Company to use diligent efforts to assist the Company in locating any necessary Replacement Lender. SECTION 3. REPRESENTATIONS AND WARRANTIES To induce the Lenders to enter into this Agreement and to make the Loans herein provided for, the Company hereby represents and warrants to the Administrative Agent and to each Lender that: 3.1 Financial Condition. The consolidated balance sheet of the Company and its consolidated Subsidiaries as at December 31, 2000 and as at September 30, 2001 and the related consolidated statements of income and of cash flows for the fiscal year or nine-month period ended on such date, reported on (in the case of such annual statements) by Arthur Andersen LLP, copies of which have heretofore been furnished to each Lender, are complete and correct and present fairly the consolidated financial condition of the Company and its consolidated Subsidiaries as at such date, and the consolidated results of their operations and their consolidated cash flows for the fiscal year or nine-month period then ended, subject in the case of the September 30, 2001 statements to normal year end adjustments. All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as disclosed therein). Neither the Company nor any of its consolidated Subsidiaries had, at the date of the balance sheets referred to above, any material Guarantee Obligation, contingent liabilities or liability for taxes, long-term lease or unusual forward or long-term commitment, including, without limitation, any material interest rate or foreign currency swap or exchange transaction, which is not reflected in the foregoing statements or in the notes thereto or in the Confidential Information Memorandum, dated February 2002. 3.2 No Change. Since December 31, 2000, there has been no development or event which has had a Material Adverse Effect. 3.3 Existence; Compliance with Law. Each of the Company and its Significant Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the corporate or partnership power and authority and the legal right to own and operate all its material property, to lease the material property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign corporation or partnership and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification except to the extent that the failure to so qualify or be in good standing would not, in the aggregate, have a Material Adverse Effect and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith would not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 3.4 Power; Authorization; Enforceable Obligations. The Company has full power and authority and the legal right to make, deliver and perform this Agreement and has taken all necessary action to authorize the execution, delivery and performance by it of this Agreement. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the borrowings hereunder or with the execution, delivery or performance of this Agreement by the Company or with the validity or enforceability of this Agreement against the Company. This Agreement has been duly executed and delivered on behalf of the Company. This Agreement constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). 3.5 No Legal Bar; No Default. The execution, delivery and performance of this Agreement, the borrowings thereunder and the use of the proceeds of the Loans will not violate any Requirement of Law or any Contractual Obligation of the Company or its Significant Subsidiaries, and will not result in, or require, the creation or imposition of any Lien on any of its or their respective properties or revenues pursuant to any Requirement of Law or Contractual Obligation. Neither the Company nor any of its Subsidiaries is in default under or with respect to any of its Contractual Obligations in any respect which would reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. 3.6 No Material Litigation. No litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the best knowledge of the Company, threatened by or against the Company or any of its Subsidiaries or against any of its or their respective properties or revenues (a) with respect to this Agreement or any Loan or any of the transactions contemplated hereby or (b) which would reasonably be expected to have a Material Adverse Effect. 3.7 Investment Company Act. The Company is not an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. 3.8 Federal Regulations. No part of the proceeds of any Loan hereunder will be used directly or indirectly for any purpose which violates, or which would be inconsistent with, the provisions of Regulation T, U or X of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect. No part of any such proceeds shall be used to purchase or carry any "Margin Stock", as that term is defined in said Regulation U. 3.9 ERISA. Neither a Reportable Event nor an "accumulated funding deficiency" (within the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Plan, and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code, except to the extent that any such occurrence or failure to comply would not reasonably be expected to have a Material Adverse Effect. No termination of a Single Employer Plan has occurred resulting in any liability that has remained underfunded, and no Lien in favor of the PBGC or a Plan has arisen, during such five-year period which would reasonably be expected to have a Material Adverse Effect. Except for the Company's Supplemental Executive Retirement Plan, the present value of all accrued benefits under each Single Employer Plan (based on those assumptions used to fund such Plans) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued benefits by an amount which would reasonably be expected to have a Material Adverse Effect. Neither the Company nor any Commonly Controlled Entity is currently subject to any liability for a complete or partial withdrawal from a Multiemployer Plan which would reasonably be expected to have a Material Adverse Effect. 3.10 Environmental Matters. Except to the extent that all of the following, in the aggregate, would not reasonably be expected to have a Material Adverse Effect: (a) To the best knowledge of the Company, the facilities and properties owned, leased or operated by the Company or any of its Subsidiaries (the "Properties") do not contain any Materials of Environmental Concern in amounts or concentrations which (i) constitute a violation of, or (ii) could give rise to liability under, any Environmental Law. (b) To the best knowledge of the Company, the Properties and all operations at the Properties are in compliance, and have in the last five years been in compliance, in all material respects with all applicable Environmental Laws, and there is no contamination at, under or about the Properties or violation of any Environmental Law with respect to the Properties or the business operated by the Company or any of its Subsidiaries (the "Business"). (c) Neither the Company nor any of its Subsidiaries has received any notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Properties or the Business, nor does the Company have knowledge or reason to believe that any such notice will be received or is being threatened. (d) To the best knowledge of the Company, Materials of Environmental Concern have not been transported or disposed of from the Properties in violation of, or in a manner or to a location which could give rise to liability under, any Environmental Law, nor have any Materials of Environmental Concern been generated, treated, stored or disposed of at, on or under any of the Properties in violation of, or in a manner that could give rise to liability under, any applicable Environmental Law. (e) No judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Company, threatened, under any Environmental Law to which the Company or any Subsidiary is or will be named as a party with respect to the Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Properties or the Business. (f) To the best knowledge of the Company, there has been no release or threat of release of Materials of Environmental Concern at or from the Properties, or arising from or related to the operations of the Company or any Subsidiary in connection with the Properties or otherwise in connection with the Business, in violation of or in amounts or in a manner that could give rise to liability under Environmental Laws. 3.11 Purpose of Loans. The proceeds of the Loans will be used (i) to back-up commercial paper, (ii) to finance payments to plaintiffs with tort claims relating to the Company's previously marketed diet drug products and (iii) for the Company's general corporate and working capital purposes. 3.12 Restrictions on Subsidiaries. There are no restrictions on the Company or any of its Subsidiaries which prohibit or otherwise restrict the transfer of cash or other assets (x) between the Company and any of its Subsidiaries or (y) between any Subsidiaries of the Company, other than (i) applicable restrictions of law imposed on Subsidiaries by the jurisdictions in which such Subsidiaries are incorporated or do business or (ii) other restrictions which, in the aggregate, do not encumber a material amount of cash or other assets. SECTION 4. CONDITIONS PRECEDENT 4.1 Conditions to Effective Date. This Agreement shall become effective upon the satisfaction of the following conditions precedent: (a) Execution of Agreement. The Administrative Agent shall have received one or more counterparts of this Agreement, executed by a duly authorized officer of each party hereto. (b) Officer's Certificate. The Administrative Agent shall have received, with a counterpart for each Lender, a certificate of a duly authorized officer of the Company dated the Effective Date, substantially in the form of Exhibit H with appropriate insertions and attachments. (c) Legal Opinion of Counsel. The Administrative Agent shall have received, with a copy for each Lender, an opinion of Louis L. Hoynes, Jr., Executive Vice President and General Counsel of the Company, dated the Effective Date and addressed to the Administrative Agent and the Lenders, substantially in the form of Exhibit I. Such opinion shall also cover such other matters incident to the transactions contemplated by this Agreement as the Administrative Agent shall reasonably require. (d) Fees. The Administrative Agent shall have received all fees due and payable on or prior to the Effective Date, and, to the extent invoiced at least two Business Days prior to the Effective Date, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Company hereunder. (e) Existing 364-Day Credit Agreement. All commitments under the Existing 364-Day Credit Agreement shall have terminated, and Loans under, and as defined in, the Existing 364-Day Credit Agreement (if any) shall have been repaid in full, together with all fees and other amounts owing thereunder. (f) Subsection 4.2 Conditions. The conditions specified in subsections 4.2(a) and (b) shall be satisfied on the Effective Date as if Loans were to be made on such date. (g) Additional Matters. All other documents and legal matters in connection with the transactions contemplated by this Agreement shall be reasonably satisfactory in form and substance to the Administrative Agent and its counsel. (h) Commitment Reductions under Existing 5-Year Credit Agreement. The Company shall have permanently reduced the aggregate commitments under its Existing 5-Year Credit Agreement from $2.0 billion to $1.0 billion in accordance with the terms thereof and, concurrently therewith, repaid any outstanding loans thereunder required as a result of such reduction. 4.2 Conditions to All Loans. The obligation of each Lender to make any Loan to be made by it hereunder (including the initial Loan to be made by it hereunder) is subject to the satisfaction of the following conditions precedent on the date of making such Loan: (a) Representations and Warranties. The representations and warranties made by the Company herein (except for, in the case of any Loan made after the Effective Date, the representations and warranties set forth in Sections 3.2 and 3.6) or which are contained in any certificate furnished at any time under or in connection herewith shall be true and correct in all material respects on and as of the date of such Loan as if made on and as of such date. (b) No Default or Event of Default. No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the Loan to be made on such date unless such Default or Event of Default shall have been waived in accordance with this Agreement. (c) Additional Conditions to Bid Loans. If such Loan is made pursuant to subsection 2.2 all conditions set forth in such subsection shall have been satisfied. (d) Additional Conditions to Committed Rate Loans. If such Loan is made pursuant to subsection 2.1, all conditions set forth in such subsection shall have been satisfied. Each acceptance by the Company of a Loan shall be deemed to constitute a representation and warranty by the Company as of the date of such Loan that the applicable conditions in paragraphs (a), (b), (c) and/or (d) of this subsection have been satisfied. SECTION 5. COVENANTS The Company hereby covenants and agrees that on the Effective Date, and thereafter for so long as this Agreement is in effect and until the Commitments have terminated and the Loans, together with interest, Facility Fees and all other amounts owing to the Administrative Agent or any Lender hereunder, are paid in full, the Company shall and, in the case of subsections 5.3, 5.4, 5.5 and 5.6, shall cause each of its Significant Subsidiaries to, and in the case of subsections 5.7, 5.8 and 5.10 shall cause each of its Subsidiaries to: 5.1 Financial Statements. Furnish to the Administrative Agent (with a sufficient number of copies for each Lender, which the Administrative Agent shall promptly furnish to each Lender): (a) as soon as available, but in any event within 120 days after the end of each fiscal year of the Company, a copy of the consolidated balance sheet of the Company and its consolidated Subsidiaries as at the end of such year and the related consolidated statements of income and retained earnings and of cash flows of the Company and its consolidated Subsidiaries for such year, setting forth in each case in comparative form the figures for the previous year, reported on without a "going concern" or like qualification or exception, or qualification indicating that the scope of the audit was inadequate to permit such independent certified public accountants to certify such financial statements without such qualification, by Arthur Andersen LLP or another firm of independent certified public accountants of nationally recognized standing; and (b) as soon as available, but in any event not later than 60 days after the end of each of the first three quarterly periods of each fiscal year of the Company, a copy of the Company's Report on Form 10-Q for such quarter, as filed with the Securities Exchange Commission; all such financial statements to be complete and correct in all material respects and to be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein (except as approved by such accountants or a Responsible Officer, as the case may be, and disclosed therein). 5.2 Certificates; Other Information. Furnish to the Administrative Agent (with a sufficient number of copies for each Lender, which the Administrative Agent shall promptly furnish to each Lender): (a) concurrently with the delivery of the financial statements referred to in subsection 5.1(a) above, a certificate of the independent certified public accountants reporting on such financial statements stating that in making the examination necessary therefor no knowledge was obtained of any Default or Event of Default, except as specified in such certificate; (b) concurrently with the delivery of the financial statements referred to in subsection 5.1(a) above and the Report on Form 10-Q for the Company's fiscal quarters referred to in subsection 5.1(b) above, a certificate of a Responsible Officer of the Company stating that, to the best of such Responsible Officer's knowledge, the Company during such period observed or performed all of its covenants and other agreements, and satisfied every material condition, contained in this Agreement to be observed, performed or satisfied by it, and that such Responsible Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate and such certificate shall include the calculation required to indicate compliance with subsection 5.9; (c) within thirty days after the same are sent, copies of all reports (other than those otherwise provided pursuant to subsection 5.1 and those which are of a promotional nature) and other financial information which the Company sends to its stockholders, and within thirty days after the same are filed, copies of all financial statements and non-confidential reports which the Company may make to, or file with, the Securities and Exchange Commission or any successor or analogous Governmental Authority; and (d) promptly, such additional financial and other information as the Administrative Agent, on behalf of any Lender, may from time to time reasonably request. 5.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its material obligations of whatever nature and any additional costs that are imposed as a result of any failure to so pay, discharge or otherwise satisfy such obligations, except when the amount or validity of such obligations and costs is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the Company or its Subsidiaries, as the case may be. 5.4 Conduct of Business and Maintenance of Existence. Preserve, renew and keep in full force and effect its corporate existence and take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its businesses; comply with all Contractual Obligations and Requirements of Law applicable to it except to the extent that failure to comply therewith would not, in the aggregate, have a Material Adverse Effect; not enter into any business which is material to the Company and its Subsidiaries taken as a whole, other than business in which the Company and its Subsidiaries are engaged on the date hereof and businesses directly related to such existing businesses. 5.5 Maintenance of Property; Insurance. Keep all material property useful and necessary in its business in good working order and condition; maintain with financially sound and reputable insurance companies insurance on all its property in at least such amounts and against at least such risks as are usually insured against in the same general area by companies engaged in the same or a similar business; and furnish to the Administrative Agent, upon written request, full information as to the insurance carried; provided, however, that the Company and its Subsidiaries may maintain self insurance plans to the extent companies of similar size and in similar businesses do so. 5.6 Inspection of Property; Books and Records; Discussions. Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its businesses and activities; and permit, during regular business hours and upon reasonable notice by the Administrative Agent, the Administrative Agent to visit and inspect any of its properties and examine and make abstracts from any of its books and records (other than materials protected by the attorney-client privilege and materials which the Company may not disclose without violation of a confidentiality obligation binding upon it) at any reasonable time and as often as may reasonably be desired, and to discuss the business, operations, properties and financial and other condition of the Company and its Significant Subsidiaries with officers and employees of the Company and its Significant Subsidiaries and with its independent certified public accountants. 5.7 Notices. Give notice to the Administrative Agent (which shall promptly transmit such notice to each Lender) of: (a) within five Business Days after the Company knows or has reason to know thereof, the occurrence of any material Default or Event of Default; (b) promptly, any default or event of default under any Contractual Obligation of the Company or any of its Significant Subsidiaries which would reasonably be expected to have a Material Adverse Effect; (c) promptly, any litigation, or any investigation or proceeding known to the Company, affecting the Company or any of its Significant Subsidiaries which would reasonably be expected to have a Material Adverse Effect; (d) as soon as possible and in any event within 30 days after the Company knows or has reason to know thereof: (i) the occurrence or expected occurrence of any Reportable Event with respect to any Plan, a failure to make any required contribution to a Plan, the creation of any Lien in favor of the PBGC or a Plan or any withdrawal from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan or (ii) the institution of proceedings or the taking of any other action by the PBGC or the Company or any Commonly Controlled Entity or any Multiemployer Plan with respect to the withdrawal from, or the terminating, Reorganization or Insolvency of, any Plan; and (e) promptly, any other development or event which would reasonably be expected to have a Material Adverse Effect. Each notice pursuant to this subsection shall be accompanied by a statement of a Responsible Officer of the Company setting forth details of the occurrence referred to therein and stating what action the Company proposes to take with respect thereto. 5.8 Environmental Laws. (a) Comply with, and ensure compliance by all tenants and subtenants, if any, with, all applicable Environmental Laws and obtain and comply in all material respects with and maintain, and ensure that all tenants and subtenants obtain and comply in all material respects with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws except to the extent that failure to do so would not reasonably be expected to have a Material Adverse Effect; (b) Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws and promptly comply in all material respects with all lawful orders and directives of all Governmental Authorities regarding Environmental Laws except to the extent that the same are being contested in good faith by appropriate proceedings and the pendency of such proceedings would not reasonably be expected to have a Material Adverse Effect; and (c) Defend, indemnify and hold harmless the Administrative Agent and the Lenders, and their respective employees, agents, officers and directors, from and against any and all claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature known or unknown, contingent or otherwise, arising out of, or in any way relating to the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of the Company, any of its Significant Subsidiaries or the Properties, or any orders, requirements or demands of Governmental Authorities related thereto, including, without limitation, attorney's and consultant's fees, investigation and laboratory fees, response costs, court costs and litigation expenses, except to the extent that any of the foregoing arise out of the gross negligence or willful misconduct of the party seeking indemnification therefor. The agreements in this paragraph shall survive repayment of the Loans and all other amounts payable hereunder. 5.9 Consolidated Adjusted Indebtedness to Adjusted Capitalization. Not permit the ratio of (i) Consolidated Adjusted Indebtedness to (ii) Adjusted Capitalization at any time to exceed .65 to 1:00. 5.10 Liens, Etc. Not create or suffer to exist any Lien upon or with respect to any of its properties, whether now owned or hereafter acquired, or assign, or assign any right to receive income, in each case to secure or provide for the payment of any Indebtedness of any Person, other than (i) purchase money Liens or purchase money security interests upon or in any property acquired or held by it or any Subsidiary in the ordinary course of business to secure the purchase price of such property or to secure indebtedness incurred solely for the purpose of financing the acquisition of such property, (ii) Liens or security interests existing on such property at the time of its acquisition (other than any such Lien or security interest created in contemplation of such acquisition), (iii) Liens or security interests existing on the Effective Date hereof, (iv) Liens or security interests on property financed through the issuance of industrial revenue bonds in favor of the holders of such bonds or any agent or trustee therefor, (v) Liens or security interests securing Indebtedness in an aggregate amount not in excess of 15% of the Company's Consolidated Tangible Assets or (vi) Permitted Liens. SECTION 6. EVENTS OF DEFAULT Upon the occurrence of any of the following events: (a) The Company shall fail to pay any principal on any Loan when due in accordance with the terms thereof or hereof on the maturity date thereof; or the Company shall fail to pay any interest on any Loan or any fee or other amount payable hereunder when due in accordance with the terms thereof or hereof and such failure shall continue unremedied for five Business Days (or in the case of any other amount that is not interest or a fee, three Business Days after the Company has received from the Administrative Agent notice of said default); or (b) Any representation or warranty made or deemed made by the Company herein or which is contained in any certificate, document or financial or other statement furnished at any time under or in connection with this Agreement shall prove to have been incorrect, false or misleading in any material respect on or as of the date made or deemed made; or (c) The Company shall (i) default in the due performance or observance of subsection 5.9 (provided that no Default or Event of Default shall arise or exist under this subsection 6(c)(i) in respect of such a breach if prior to the time the Company is required to give notice to the Lenders under subsection 5.7(a) of such breach, such breach has been cured (determined on a pro forma basis)), or (ii) default in any material respect in the observance or performance of any other term, covenant or agreement contained in this Agreement (other than as described in subsections 6(a) or 6(c)(i) above), and such default shall continue unremedied for a period of 30 days or more; or (d) The Company or any of its Significant Subsidiaries shall (i) default in any payment of principal of or interest on any Indebtedness (other than the Loans) in a principal amount outstanding of at least $100,000,000 in the aggregate for the Company and its Significant Subsidiaries or in the payment of any matured Guarantee Obligation in a principal amount outstanding of at least $100,000,000 in the aggregate for the Company and its Significant Subsidiaries beyond the period of grace (not to exceed 30 days), if any, provided in the instrument or agreement under which such Indebtedness or Guarantee Obligation was created; or (ii) default in the observance or performance of any other agreement or condition relating to any such Indebtedness in a principal amount outstanding of at least $100,000,000 in the aggregate for the Company and its Significant Subsidiaries or Guarantee Obligation in a principal amount outstanding of at least $100,000,000 in the aggregate for the Company and its Significant Subsidiaries or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Guarantee Obligation (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or such Guarantee Obligation to become payable; (e) (i) The Company or any of its Significant Subsidiaries shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or the Company or any such Significant Subsidiary shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the Company or any such Significant Subsidiary any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against the Company or any such Significant Subsidiary any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) the Company or any such Significant Subsidiary shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) the Company or any such Significant Subsidiary shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or (f) One or more judgments or decrees shall be entered against the Company or any of its Significant Subsidiaries involving in the aggregate a liability (not paid when due or covered by insurance) of $100,000,000 or more and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 30 days from the entry thereof; or (g) (i) Any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of the Company or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Majority Lenders, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the Company, any of its Significant Subsidiaries or any Commonly Controlled Entity shall, or in the reasonable opinion of the Majority Lenders is likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, any Multiemployer Plan or (vi) any other similar event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could have a Material Adverse Effect; or (h) Either (i) a "person" or a "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of more than 25% of the then outstanding voting stock of the Company or (ii) a majority of the Board of Directors of the Company shall consist of individuals who are not Continuing Directors; "Continuing Director" means, as of any date of determination, (i) an individual who on the date two years prior to such determination date was a member of the Company's Board of Directors and (ii) any new Director whose nomination for election by the Company's shareholders was approved by a vote of at least 75% of the Directors then still in office who either were Directors on the date two years prior to such determination date or whose nomination for election was previously so approved; then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (e) above in respect of the Company, automatically the Commitments shall immediately terminate and the Loans (with accrued interest thereon), and all other amounts owing under this Agreement shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) with the consent of the Majority Lenders, the Administrative Agent may, or upon the request of the Majority Lenders, the Administrative Agent shall, by notice to the Company declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate; and (ii) with the consent of the Majority Lenders, the Administrative Agent may, or upon the request of the Majority Lenders, the Administrative Agent shall, by notice of default to the Company, declare the Loans (with accrued interest thereon) and all other amounts owing under this Agreement to be due and payable forthwith, whereupon the same shall immediately become due and payable. Except as expressly provided above in this Section 6, presentment, demand, protest and all other notices of any kind are hereby expressly waived. SECTION 7. THE ADMINISTRATIVE AGENT 7.1 Appointment. Each Lender hereby irrevocably designates and appoints JPMCB as the Administrative Agent of such Lender under this Agreement, and each such Lender irrevocably authorizes JPMCB, as the Administrative Agent for such Lender, to take such action on its behalf under the provisions of this Agreement and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Administrative Agent. Neither the Co-Syndication Agents nor the Co-Documentation Agents shall have any duties under this Agreement. 7.2 Delegation of Duties. The Administrative Agent may execute any of its duties under this Agreement by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. 7.3 Exculpatory Provisions. Neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement (except for its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Company or any officer thereof contained in this Agreement or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or for any failure of the Company to perform its obligations hereunder. The Administrative Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance by the Company of any of the agreements contained in, or conditions of, this Agreement (other than the receipt by the Administrative Agent of the documents specified in subsection 4.1), or to inspect the properties, books or records of the Company. 7.4 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation reasonably believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Company), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent may deem and treat the payee of any Loan as the owner thereof for all purposes unless (a) a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent and (b) the Administrative Agent shall have received the written agreement of such assignee to be bound hereby as fully and to the same extent as if such assignee were an original Lender party hereto, in each case in form satisfactory to the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement unless it shall first receive such advice or concurrence of the Majority Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement in accordance with a request of the Majority Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans. 7.5 Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Administrative Agent has received notice from a Lender or the Company referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Majority Lenders; provided, however, that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders. 7.6 Non-Reliance on Administrative Agent and Other Lenders. Each Lender expressly acknowledges that neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representation or warranty to it and that no act by the Administrative Agent hereinafter taken, including any review of the affairs of the Company shall be deemed to constitute any representation or warranty by the Administrative Agent to any Lender. Each Lender represents to the Administrative Agent that it has, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Company and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Company. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of the Company which may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. 7.7 Indemnification. The Lenders agree to indemnify the Administrative Agent (to the extent not reimbursed by the Company and without limiting the obligation of the Company to do so), ratably according to their respective Commitment Percentages in effect on the date on which indemnification is sought under this subsection, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Loans) be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of this Agreement or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Administrative Agent under or in connection with any of the foregoing; provided, however, that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the Administrative Agent's gross negligence or willful misconduct. The agreements in this subsection shall survive the termination of this Agreement and payment of the Loans and all other amounts payable hereunder. 7.8 Administrative Agent in Its Individual Capacity. The Administrative Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Company as though the Administrative Agent were not the Administrative Agent hereunder. With respect to its Loans made or renewed by it, the Administrative Agent shall have the same rights and powers under this Agreement as any Lender and may exercise the same as though it were not the Administrative Agent, and the terms "Lender" and "Lenders" shall include the Administrative Agent in its individual capacity. 7.9 Successor Administrative Agent. The Administrative Agent may resign as Administrative Agent upon 15 days' notice to the Company and the Lenders. If the Administrative Agent shall resign as Administrative Agent under this Agreement, then the Majority Lenders shall appoint from among the Lenders a successor Administrative Agent for the Lenders, which successor shall be approved by the Company, whereupon such successor shall succeed to the rights, powers and duties of the Administrative Agent, and the term "Administrative Agent" shall mean such successor effective upon such appointment and approval, and the former Administrative Agent's rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement. After any retiring Administrative Agent's resignation as Administrative Agent, the provisions of this subsection shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. SECTION 8. MISCELLANEOUS 8.1 Amendments and Waivers. Neither this Agreement nor any terms hereof may be amended, supplemented or modified except in accordance with the provisions of this subsection. The Majority Lenders may, or, with the written consent of the Majority Lenders, the Administrative Agent may, from time to time, (a) enter into with the Company written amendments, supplements or modifications hereto for the purpose of adding any provisions to this Agreement or changing in any manner the rights of the Lenders or of the Company hereunder or (b) waive, on such terms and conditions as the Majority Lenders or the Administrative Agent, as the case may be, may specify in such instrument, any of the requirements of this Agreement or any Default or Event of Default and its consequences; provided, however, that no such waiver and no such amendment, supplement or modification shall (i) reduce the amount or extend the scheduled date of maturity of any Loan, or reduce the stated rate of any interest or fee payable hereunder (other than interest at the increased post-default rate) or extend the scheduled date of any payment thereof or increase the amount or extend the expiration date of any Lender's Commitment, in each case without the consent of each Lender directly affected thereby, or (ii) amend, modify or waive any provision of this subsection or reduce the percentage specified in the definition of Majority Lenders, or consent to the assignment or transfer by the Company of any of its rights and obligations under this Agreement, in each case without the written consent of all the Lenders, or (iii) amend, modify or waive any provision of Section 7 without the written consent of the then Administrative Agent. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Company, the Lenders and the Administrative Agent. In the case of any waiver, the Company, the Lenders and the Administrative Agent shall be restored to their former position and rights hereunder and under the outstanding Loans, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon. 8.2 Notices. Except as otherwise provided in Section 2, all notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when received by the respective party to whom sent, addressed as follows in the case of the Company and the Administrative Agent, and as set forth on Schedule II hereof in the case of the Lenders, or to such other address as may be hereafter notified by the respective parties hereto and any future holders of the Loans: The Company: American Home Products Corporation Five Giralda Farms Madison, New Jersey 07940 Attention: Vice President and Treasurer Telecopier: (973) 660-7174 Telephone: (973) 660-5402 with a copy to: Executive Vice President and General Counsel Telecopier: (973) 660-7156 Telephone: (973) 660-6040 he Administrative Agent: JPMorgan Chase Bank 270 Park Avenue New York, New York 10017 Attention: Dawn Lee Lum Telecopier: (212) 270-3279 Telephone: (212) 270-2472 and JPMorgan Chase Bank One Chase Manhattan Plaza, 8th Floor New York, New York 10081 Attention: Janet Belden Telecopier: (212) 270-5658 Telephone: (212) 552-7277 8.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Administrative Agent or any Lender, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 8.4 Survival of Representations and Warranties. All representations and warranties made hereunder and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the Loans and the making of the Loans, provided that all such representations and warranties shall terminate on the date upon which the Commitments have been terminated and all amounts owing hereunder and under any Loans have been paid in full. 8.5 Payment of Expenses and Taxes. The Company agrees (a) to pay or reimburse the Administrative Agent for all its reasonable out-of-pocket costs and expenses incurred in connection with the development, preparation, printing and execution of, and any amendment, supplement or modification to, this Agreement and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, together with the reasonable fees and disbursements of counsel to the Administrative Agent, (b) to pay or reimburse each Lender and the Administrative Agent for all its costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement and any such other documents, including, without limitation, the fees and disbursements of a single counsel to the Administrative Agent and to the several Lenders (or, to the extent that such counsel determines that the interests of the Administrative Agent and the Lenders materially differ, or that such representation would reasonably be expected to be unadvisable from any party's point of view, a single counsel to the Administrative Agent and a single counsel to the several Lenders), and (c) on demand, to pay, indemnify, and hold each Lender and the Administrative Agent harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other similar taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement and any such other documents, and (d) to pay, indemnify, and hold each Lender and the Administrative Agent (each, an "indemnified party") harmless from and against, any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement and any such other documents and the use, or proposed use, of proceeds of the Loans (all the foregoing, collectively, the "indemnified liabilities"); provided, however, that the Company shall have no obligation hereunder to any indemnified party with respect to indemnified liabilities arising from (i) the gross negligence or willful misconduct of such indemnified party, (ii) legal proceedings commenced against such indemnified party by any security holder or creditor thereof arising out of and based upon rights afforded such security holder or creditor solely in its capacity as such or (iii) legal proceedings commenced against any Lender by any other Lender or the Administrative Agent. The agreements in this subsection shall survive repayment of the Loans and all other amounts payable hereunder. 8.6 Successors and Assigns; Participations; Purchasing Lenders. (a) This Agreement shall be binding upon and inure to the benefit of the Company, the Lenders, the Administrative Agent and their respective successors and assigns, except that the Company may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Lender. (b) Any Lender may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time sell to one or more banks or other entities ("Participants") participating interests in any Loan owing to such Lender, any Commitment of such Lender, or any other interest of such Lender hereunder. In the event of any such sale by a Lender of participating interests to a Participant, such Lender's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof and the Company and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. No Lender shall transfer or grant any participation under which the Participant shall have rights to approve any amendment to or waiver of this Agreement except to the extent such amendment or waiver would (i) extend the scheduled maturity of any Loan in which such Participant is participating, or reduce the stated rate or extend the time of payment of interest or Facility Fees thereon (except in connection with a waiver of interest at the increased post-default rate) or reduce the principal amount thereof, or increase the amount of the Participant's participation over the amount thereof then in effect (it being understood that a waiver of any Default or Event of Default shall not constitute a change in the terms of such participation, and that an increase in any Commitment or Loan shall be permitted without consent of any Participant if the Participant's participation is not increased as a result thereof) or (ii) consent to the assignment or transfer by the Company of any of its rights and obligations under this Agreement. In the case of any such participation, the Participant shall not have any rights under this Agreement (the Participant's rights against such Lender in respect of such participation to be those set forth in the agreement executed by such Lender in favor of the Participant relating thereto) and all amounts payable by the Company hereunder shall be determined as if such Lender had not sold such participation, provided that each Participant shall be entitled to the benefits of subsections 2.15, 2.16, 2.17 and 8.5 with respect to its participation in the Commitments and the Loans outstanding from time to time; provided that no Participant shall be entitled to receive any greater amount pursuant to such subsections than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred. (c) Any Lender may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time sell, pursuant to a Commitment Transfer Supplement, to (i) any Lender or any affiliate thereof all or any part of its rights and obligations under this Agreement, and (ii) with the consent of the Administrative Agent and, so long as no Default or Event of Default under Section 6(a) or (e) is then in existence, the Company (in each case, which consent shall not be unreasonably withheld or delayed), to one or more additional banks or financial institutions ("Purchasing Lenders"), all or any part of its rights and obligations under this Agreement, in the case of the aforementioned clause (ii), in minimum amounts of $10,000,000 (or, if less, the entire amount of such Lender's obligations) so long as, in the case of each of the aforementioned clauses (i) and (ii) hereof, after giving effect thereto, the remaining Commitment of such selling Lender shall not be less than $10,000,000, unless such selling Lender has not retained any Commitment hereunder, and a Commitment Transfer Supplement has been executed by such Purchasing Lender, such transferor Lender (and, in the case of a Purchasing Lender that is not then a Lender or an affiliate thereof, by the Company and the Administrative Agent), and delivered to the Administrative Agent for its acceptance and recording in the Register. Upon such execution, delivery, acceptance and recording, from and after the Transfer Effective Date specified in such Commitment Transfer Supplement, (x) the Purchasing Lender thereunder shall be a party hereto and, to the extent provided in such Commitment Transfer Supplement, have the rights and obligations of a Lender hereunder with a Commitment as set forth therein, and (y) the transferor Lender thereunder shall, to the extent provided in such Commitment Transfer Supplement, be released from its obligations under this Agreement (and, in the case of a Commitment Transfer Supplement covering all or the remaining portion of a transferor Lender's rights and obligations under this Agreement, such transferor Lender shall cease to be a party hereto). Such Commitment Transfer Supplement shall be deemed to amend this Agreement to the extent, and only to the extent, necessary to reflect the addition of such Purchasing Lender and the resulting adjustment of Commitment Percentages arising from the purchase by such Purchasing Lender of all or a portion of the rights and obligations of such transferor Lender under this Agreement. (d) The Administrative Agent shall maintain at its address referred to in subsection 8.2 a copy of each Commitment Transfer Supplement delivered to it and a register (the "Register") for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Loans owing to, each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Company, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register as the owner of the Loan recorded therein for all purposes of this Agreement. The Register shall be available for inspection by the Company or any Lender at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of a Commitment Transfer Supplement executed by a transferor Lender and a Purchasing Lender (and, in the case of a Purchasing Lender that is not then a Lender or an affiliate thereof, by the Company and the Administrative Agent) together with payment to the Administrative Agent (by the transferor Lender or the Purchasing Lender, as agreed between them) of a registration and processing fee of $3,500 for each Purchasing Lender listed in such Commitment Transfer Supplement, the Administrative Agent shall (i) accept such Commitment Transfer Supplement, (ii) record the information contained therein in the Register and (iii) give prompt notice of such acceptance and recordation to the Lenders and the Company. (f) The Company authorizes each Lender to disclose to any Participant or Purchasing Lender (each, a "Transferee") and any prospective Transferee any and all financial information in such Lender's possession concerning the Company and its Affiliates which has been delivered to such Lender by or on behalf of the Company pursuant to this Agreement or which has been delivered to such Lender by or on behalf of the Company in connection with such Lender's credit evaluation of the Company and its Affiliates prior to becoming a party to this Agreement; in each case subject to subsection 8.14. (g) At the time of each assignment pursuant to this subsection 8.6 to a Person which is not already a Lender hereunder and which is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for Federal income tax purposes, the respective assignee Lender shall provide to the Company and the Administrative Agent the appropriate Internal Revenue Service Forms (and, if applicable, a 2.17 Certificate) described in subsection 2.17. (h) Nothing herein shall prohibit any Lender from pledging or assigning any of its rights under this Agreement (including, without limitation, any right to payment of principal and interest under any Loan) to any Federal Reserve Bank in accordance with applicable laws. 8.7 Adjustments; Set-off. (a) Each Lender agrees that if any Lender (a "benefited Lender") shall at any time receive any payment of all or part of its Committed Rate Loans, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in clause (e) of Section 6, or otherwise) in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of such other Lender's Committed Rate Loans, or interest thereon (except as expressly provided in subsection 2.18), such benefited Lender shall purchase for cash from the other Lenders a participating interest in such portion of each such other Lender's Committed Rate Loan, or shall provide such other Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such benefited Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such benefited Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. The Company agrees that each Lender so purchasing a portion of another Lender's Committed Rate Loan may exercise all rights of payment (including, without limitation, rights of set-off) with respect to such portion as fully as if such Lender were the direct holder of such portion. (b) In addition to any rights and remedies of the Lenders provided by law (including, without limitation, other rights of set-off), each Lender shall have the right, without prior notice to the Company, any such notice being expressly waived by the Company to the extent permitted by applicable law, upon the occurrence of any Event of Default, to setoff and appropriate and apply any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of the Company, or any part thereof in such amounts as such Lender may elect, against and on account of the obligations and liabilities of the Company to such Lender hereunder and claims of every nature and description of such Lender against the Company, in any currency, whether arising hereunder, under the Loans or under any documents contemplated by or referred to herein or therein, as such Lender may elect, whether or not such Lender has made any demand for payment and although such obligations, liabilities and claims may be contingent or unmatured. The aforesaid right of set-off may be exercised by such Lender against the Company or against any trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, receiver or execution, judgment or attachment creditor of the Company, or against anyone else claiming through or against the Company or any such trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, receiver, or execution, judgment or attachment creditor, notwithstanding the fact that such right of set-off shall not have been exercised by such Lender prior to the occurrence of any Event of Default. Each Lender agrees promptly to notify the Company and the Administrative Agent after any such set-off and application made by such Lender; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. 8.8 Table of Contents and Section Headings. The table of contents and the Section and subsection headings herein are intended for convenience only and shall be ignored in construing this Agreement. 8.9 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with the Company and the Administrative Agent. 8.10 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 8.11 Integration. This Agreement represents the agreement of the Company, the Administrative Agent and the Lenders with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Administrative Agent, the Company or any Lender relative to the subject matter hereof not expressly set forth or referred to herein. 8.12 Governing Law. This Agreement and the rights and obligations of the parties under this Agreement shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. 8.13 Consent to Jurisdiction and Service of Process. All judicial proceedings brought against the Company with respect to this Agreement may be brought in any state or federal court of competent jurisdiction in the State of New York, and, by execution and delivery of this Agreement, the Company accepts, for itself and in connection with its properties, generally and unconditionally, the non-exclusive jurisdiction of the aforesaid courts and irrevocably agrees to be bound by any final judgment rendered thereby in connection with this Agreement from which no appeal has been taken or is available. The Company irrevocably agrees that all process in any such proceedings in any such court may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to it at its address set forth in subsection 8.2 or at such other address of which the Administrative Agent shall have been notified pursuant thereto, such service being hereby acknowledged by the Company to be effective and binding service in every respect. Each of the Company, the Administrative Agent and the Lenders irrevocably waives any objection, including, without limitation, any objection to the laying of venue or based on the grounds of forum non conveniens which it may now or hereafter have to the bringing of any such action or proceeding in any such jurisdiction. Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of any Lender to bring proceedings against the Company in the court of any other jurisdiction. 8.14 Confidentiality. Each of the Lenders agrees that it will use its best efforts not to disclose without the prior consent of the Company (other than to its employees, auditors or counsel or to another Lender or to any affiliate of a Lender which is a prospective or actual Transferee) any information with respect to the Company and its Subsidiaries which is furnished pursuant to this Agreement or any documents contemplated by or referred to herein or therein and which is designated by the Company to the Lenders in writing as confidential, except that any Lender may disclose any such information (a) as has become generally available to the public other than by a breach of this subsection 8.14, (b) as may be required or appropriate in any report, statement or testimony submitted to any municipal, state or federal regulatory body having or claiming to have jurisdiction over such Lender or to the Federal Reserve Board or the Federal Deposit Insurance Corporation or similar organizations (whether in the United States or elsewhere) or their successors, (c) as may be required or appropriate in response to any summons or subpoena or any law, order, regulation or ruling applicable to such Lender, or (d) to any prospective Participant or assignee in connection with any contemplated transfer pursuant to subsection 8.6, provided that such prospective transferee shall have been made aware of this subsection 8.14 and shall have agreed to be bound by its provisions as if it were a party to this Agreement. 8.15 Acknowledgments. The Company hereby acknowledges that: (a) it has been advised by counsel in the negotiation, execution and delivery of the Agreement; (b) neither the Administrative Agent nor any Lender has any fiduciary relationship with or duty to the Company arising out of or in connection with this Agreement and the relationship between the Administrative Agent and the Lenders, on one hand, and the Company, on the other hand, in connection herewith is solely that of debtor and creditor; and (c) no joint venture exists among the Lenders with respect to this Agreement or among the Company and the Lenders. 8.16 Waivers Of Jury Trial. The Company, the Administrative Agent and the Lenders hereby irrevocably and unconditionally waive trial by jury in any legal action or proceeding relating to this Agreement and for any counterclaim therein. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered in New York, New York by its proper and duly authorized officers as of the day and year first above written. AMERICAN HOME PRODUCTS CORPORATION By: /s/ Jack M. O'Conner Title: Vice President & Treasurer JPMORGAN CHASE BANK (f/k/a The Chase Manhattan Bank), Individually and as Administrative Agent By: /s/ Dawn Lee Lum Title: Vice President CITIBANK, N.A., Individually and as Co-Syndication Agent By: /s/ William E. Clark Title: Managing Director COMMERZBANK AG, NEW YORK AND GRAND CAYMAN BRANCHES, Individually and as Co-Syndication Agent By: /s/ Robert S. Taylor, Jr. Title: Senior Vice President By: /s/ Andrew P. Lusk Title: Assistant Vice President THE BANK OF NOVA SCOTIA, Individually and as Co-Documentation Agent By: /s/ Brian S. Allen Title: Managing Director THE DAI ICHI KANGYO BANK, LTD., Individually and as Co-Documentation Agent By: /s/ Greg Botshon Title: Vice President BANCA NAZIONALE DEL LAVORO, S.P.A. - NEW YORK BRANCH By: /s/ Frederic W. Hall Title: Vice President By: /s/ Leonardo Valentini Title: First Vice President THE BANK OF NEW YORK By: /s/ Christopher Kordes Title: Vice President UBS AG, Stamford Branch By: /s/ Patricia O'Kicki Title: Director By: /s/ Wilfred V. Saint Title: Associate Director WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH By: /s/ Duncan M. Robertson Title: Director By: /s/ Anthony Alessandro Title: Manager FLEET NATIONAL BANK By: /s/ Wayne Trotman Title: EVP Corporate Banking DEUTSCHE BANK AG, NEW YORK BRANCH By: /s/ Iain Stewart Title: Director By: /s/ Jean M. Hannigan Title: Director FIRSTAR BANK, N.A. By: /s/ Richard W. Neltner Title: Senior Vice President MELLON BANK, N.A. By: /s/ Kristen M. Denning Title: Assistant Vice President MORGAN STANLEY BANK By: /s/ Jaap L. Tonckens Title: Vice President SAN PAOLO IMI S.P.A. By: /s/ Carlo Persico Title: General Manager By: /s/ Ettore Viazzo Title: Vice President WACHOVIA BANK, N.A. By: /s/ Paige Mesaros Title: Vice President THE NORTHERN TRUST COMPANY By: /s/ Eric Strickland Title: Vice President BANCO BILBAO VIZCAYA ARGENTARIA, S.A. By: /s/ Hector O. Villegas Title: Vice President By: /s/ Erich Michel Title: Vice President BANCO POPULAR DE PUERTO RICO By: /s/ Hector J. Gonzalez Title: Vice President THE GOVERNOR AND COMPANY OF BANK OF IRELAND By: /s/ Fran Collins Title: Senior Manager TORONTO DOMINION (TEXAS), INC. By: /s/ Ann S. Slanis Title: Vice President SCHEDULES Schedule I........Commitments Schedule II.......Bank Addresses and Lending Offices EXHIBITS Exhibit A.........Form of Borrowing Notice Exhibit B.........Form of Bid Loan Request Exhibit C.........Form of 2.17 Certificate Exhibit D.........Form of Bid Loan Offer - Absolute Rate Bid Loans Exhibit E.........Form of Bid Loan Offer - Index Rate Bid Loans Exhibit F.........Form of Bid Loan Confirmation Exhibit G.........Form of Commitment Transfer Supplement Exhibit H.........Form of Certificate of Secretary of the Company Exhibit I.........Form of Opinion of Counsel to the Company EX-10.19 6 amd1990.txt AMENDMENT TO 1990 STOCK INCENTIVE PLAN On January 31, 2002, the 1990 Stock Incentive Plan was amended, by deleting Paragraph 5 (d) and substituting the following paragraph: (d) Payment. The option price per share (the "Option Price") multiplied by the number of shares to be purchased by exercise of the Option shall be paid upon the exercise thereof. Unless the terms of an Option provide to the contrary, upon exercise, the aggregate Option Price shall be payable by delivering to the Company (i) cash equal to such aggregate Option Price, (ii) shares of the Company's Common Stock owned by the grantee having a fair market value on the day the Company's Common Stock is quoted on the Consolidated Transaction Reporting System immediately preceding the date of exercise (determined in accordance with Section 5(b) or as otherwise permitted by the Committee) at least equal to such aggregate Option Price, (iii) a combination of any of the above methods which total to such aggregate Option Price, or (iv) any other form of consideration which has been approved by the Committee, including under any approved cashless exercise mechanism; and payment of such aggregate Option Price by any such means shall be made and received by the Company prior to the delivery of the shares as to which the Option was exercised. The right to deliver in full or partial payment of such Option Price any consideration other than cash shall be limited to such frequency as the Committee shall determine in its absolute discretion. A holder of an Option shall have none of the rights of a stockholder until the shares are issued to him or her; provided that if an optionee exercises an Option and the appropriate purchase price is received by the Company in accordance with this Section 5(d) prior to any dividend record date, such optionee shall be entitled to receive the dividends which would be paid on the shares subject to such exercise if such shares were outstanding on such record date. EX-10.21 7 amd1993.txt AMENDMENT TO THE 1993 STOCK INCENTIVE PLAN On January 31, 2002, the 1993 Stock Incentive Plan was amended, by deleting Paragraph 5 (d) and substituting the following paragraph: (d) Payment. The option price per share (the "Option Price") multiplied by the number of shares to be purchased by exercise of the Option shall be paid upon the exercise thereof. Unless the terms of an Option provide to the contrary, upon exercise, the aggregate Option Price shall be payable by delivering to the Company (i) cash equal to such aggregate Option Price, (ii) shares of the Company's Common Stock owned by the grantee having a fair market value on the day the Company's Common Stock is quoted on the Consolidated Transaction Reporting System immediately preceding the date of exercise (determined in accordance with Section 5(b) or as otherwise permitted by the Committee) at least equal to such aggregate Option Price, (iii) a combination of any of the above methods which total to such aggregate Option Price, or (iv) any other form of consideration which has been approved by the Committee, including under any approved cashless exercise mechanism; and payment of such aggregate Option Price by any such means shall be made and received by the Company prior to the delivery of the shares as to which the Option was exercised. The right to deliver in full or partial payment of such Option Price any consideration other than cash shall be limited to such frequency as the Committee shall determine in its absolute discretion. A holder of an Option shall have none of the rights of a stockholder until the shares are issued to him or her; provided that if an optionee exercises an Option and the appropriate purchase price is received by the Company in accordance with this Section 5(d) prior to any dividend record date, such optionee shall be entitled to receive the dividends which would be paid on the shares subject to such exercise if such shares were outstanding on such record date. EX-10.23 8 amd1996.txt AMENDMENT TO THE 1996 STOCK INCENTIVE PLAN On January 31, 2002, the 1996 Stock Incentive Plan was amended, by deleting Paragraph 5 (d) and substituting the following paragraph: (d) Payment. The Option Price multiplied by the number of shares to be purchased by exercise of the Option shall be paid upon the exercise thereof. Unless the terms of an Option provide to the contrary, upon exercise, the aggregate Option Price shall be payable by delivering to the Company (i) cash equal to such aggregate Option Price, (ii) shares of the Company's Common Stock owned by the grantee having a fair market value on the day the Company's Common Stock is quoted on the Consolidated Transaction Reporting System immediately preceding the date of exercise (determined in accordance with Section 5(b) or as otherwise permitted by the Committee) at least equal to such aggregate Option Price, (iii) a combination of any of the above methods which total to such aggregate Option Price, or (iv) any other form of consideration which has been approved by the Committee, including under any approved cashless exercise mechanism; and payment of such aggregate Option Price by any such means shall be made and received by the Company prior to the delivery of the shares as to which the Option was exercised. The right to deliver in full or partial payment of such Option Price any consideration other than cash shall be limited to such frequency as the Committee shall determine in its absolute discretion. A holder of an Option shall have none of the rights of a stockholder until the shares are issued to him or her; provided that if an optionee exercises an Option and the appropriate purchase price is received by the Company in accordance with this Section 5(d) prior to any dividend record date, such optionee shall be entitled to receive the dividends which would be paid on the shares subject to such exercise if such shares were outstanding on such record date. EX-10.25 9 amd1999.txt AMENDMENT TO THE 1999 STOCK INCENTIVE PLAN On January 31, 2002, the 1999 Stock Incentive Plan was amended, by deleting Paragraph 5 (d) and substituting the following paragraph: (d) Payment. The Option Price multiplied by the number of shares to be purchased by exercise of the Option shall be paid upon the exercise thereof. Unless the terms of an Option provide to the contrary, upon exercise, the aggregate Option Price shall be payable by delivering to the Company (i) cash equal to such aggregate Option Price, (ii) shares of the Company's Common Stock owned by the grantee having a fair market value on the day the Company's Common Stock is quoted on the Consolidated Transaction Reporting System immediately preceding the date of exercise (determined in accordance with Section 5(b) or as otherwise permitted by the Committee) at least equal to such aggregate Option Price, (iii) a combination of any of the above methods which total to such aggregate Option Price, or (iv) any other form of consideration which has been approved by the Committee, including under any approved cashless exercise mechanism; and payment of such aggregate Option Price by any such means shall be made and received by the Company prior to the delivery of the shares as to which the Option was exercised. The right to deliver in full or partial payment of such Option Price any consideration other than cash shall be limited to such frequency as the Committee shall determine in its absolute discretion. A holder of an Option shall have none of the rights of a stockholder until the shares are issued to him or her; provided that if an optionee exercises an Option and the appropriate purchase price is received by the Company in accordance with this Section 5(d) prior to any dividend record date, such optionee shall be entitled to receive the dividends which would be paid on the shares subject to such exercise if such shares were outstanding on such record date. EX-10.37 10 savings.txt SAVINGS PLAN WYETH SAVINGS PLAN Third Restatement (As of January 1, 1997) As Amended to March 11, 2002 SECTION 1 INTRODUCTION This Plan shall be known as the "Wyeth Savings Plan" (the "Plan"). The Plan became effective as of April 1, 1985. In adopting this Plan, it was the purpose of Wyeth and other participating Employers to encourage Employees to save by providing a program of matching contributions by the Employer equal to fifty percent (50%) of salary deferral and after tax contributions of up to 6% of covered compensation. The Plan has been designed to provide benefits for eligible Employees upon their retirement, or termination of service and for their beneficiaries in the event of their death. The Plan is amended and restated effective January 1, 1997, unless otherwise noted herein, to comply with the Uruguay Round Agreements Act of 1994 ("GATT"); the Uniform Services Employment and Reemployment Rights Act of 1994 ("USERRA"); the Small Business Job Protection Act of 1996 ("SBJPA"); the Taxpayers Relief Act of 1997 ("TRA 97"); the Internal Revenue Service Restructuring and Reform Act of 1998 ("RRA 98"); and the Community Renewal Tax Relief Act of 2000 ("CRA") (collectively know as "GUST"). Benefits for any Participant, or Beneficiary of such Participant, who retired, died or terminated employment at any time prior to January 1, 1997 will be determined under the provisions of the Plan as in effect on the date of the Participant's retirement, death, or termination, unless additional benefits are specifically provided by a subsequent amendment to the Plan. The restated Plan contained herein will apply to Participants, or Beneficiaries of such Participants, who retire, die or terminate employment at any time on or after January 1, 1997. Effective March 11, 2002, the Company changed its corporate name from American Home Products Corporation to Wyeth and the name of the Plan was changed accordingly. SECTION 2 DEFINITIONS The terms used herein shall have the following meanings unless a different meaning is clearly required by the context: 2.01 "Account" means the bookkeeping account of a Participant kept pursuant to Section 5 which consists of subaccounts, including the Salary Deferral Account, the Rollover Account, the Matching Account, and the QVEC Account and the After Tax Contribution Account. 2.02 "Adjustment Factor" means the cost of living adjustment factor prescribed by the Secretary of the Treasury under Section 415(d) of the Code for years beginning after December 31, 1987, as applied to such items and in such manner as the Secretary shall provide. 2.03 "Affiliate" means any corporation which is a member of a controlled group of corporations (as defined in Section 414(b) of the Code) which includes the Company; any trade or business (whether or not incorporated) which is under common control (as defined in Section 414(c) of the Code) with the Company; any organization (whether or not incorporated) which is a member of an affiliated service group (as defined in Section 414(m) of the Code) which includes the Company; and any other entity required to be aggregated with the Company pursuant to regulations under Section 414(o) of the Code. 2.04 "After Tax Contribution Account" means the separate subaccount of the Participant's Account credited with After Tax Contributions pursuant to Section 4.1(b). 2.05 "After Tax Contributions" means contributions to the Plan made by a Participant during the Plan Year pursuant to Section 4.1(b). 2.06 " Code" means the Internal Revenue Code of 1986, as amended from time to time. 2.07 "Committee" means the Savings Plan Committee of the Company or its designee which is provided for in accordance with Section 12 of the Plan. 2.08 "Company" means Wyeth, a Delaware corporation. Prior to March 11, 2002, the term Company meant "American Home Products Corporation". For historical purposes, the term "American Home Products Corporation" has been retained where applicable. 2.09 "Covered Compensation" means a Participant's regular salary or wages for services rendered to the Employer, including overtime, sales bonuses, and commissions, the amount of elective deferrals made pursuant to Section 125 of the Code and the amount of Salary Deferral Contributions made by an Employer on behalf of a Participant to the Plan. Covered Compensation does not include other deferred compensation, amounts realized from the exercise of a nonqualified stock option or premature distribution of an incentive stock option or the lapse of restrictions applicable to restricted stock or other property, amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option or incentive stock option, premiums for group term life insurance, other amounts which receive special tax treatment or any benefits derived from the Company's Performance Incentive Award Program or other bonus or award programs. Beginning with the Plan Year commencing on January 1, 1989, for purposes of the Plan, the annual Covered Compensation of any Participant shall not exceed $200,000 multiplied by any cost of living factor prescribed by the Secretary of the Treasury under Section 415(d) of the Code. Beginning with the Plan Year commencing on January 1, 1994, for purposes of the Plan, the annual Covered Compensation of any Participant shall not exceed the OBRA '93 Compensation which shall equal $150,000 multiplied by any cost of living factor prescribed by the Secretary of the Treasury under Section 401(a)(17)(B) of the Code. Effective for Plan years beginning on and after January 1, 2002, Covered Compensation shall be limited as provided under Section 401(a)(17) of the Code as amended from time to time. For purposes of this Section, for Plan years beginning on and after January 1, 2001, Covered Compensation paid or made available during such Plan Year shall not include elective amounts that are not includible in the gross income of the Employee by reason of Section 132(f)(4) of the Code. 2.10 "Continuous Service" means the aggregate of the period of elapsed time between the commencement of an Employee's employment by the Employer and his or her Severance From Service, provided that Continuous Service shall include the period following a Severance From Service if an Employee is reemployed by the Employer within 12 months after such Severance From Service. If the Employee's Severance From Service occurs while the Employee is otherwise absent from employment, the period following such Severance From Service shall be counted as Continuous Service only if the Employee is reemployed by the Employer within 12 months following the commencement of such other absence from employment. However, in the case of determining the eligibility of a part-time or seasonal Employee to participate in the Plan, Continuous Service shall be computed as follows: (i) The "initial eligibility computation period" shall consist of the 12-consecutive month period beginning on the first day for which the part-time or seasonal Employee is credited with One Hour of Service (the "Employment Commencement Date.") If such part-time or seasonal Employee is credited with 1,000 or more Hours of Service during such initial 12-month period, he or she shall be credited with one year of Continuous Service. (ii) Thereafter, Continuous Service shall be computed on the basis of each Plan Year during which the part-time or seasonal Employee is credited with 1,000 or more Hours of Service during such Plan Year. The first Plan Year shall begin with the Plan Year which includes the first anniversary of the part-time or seasonal Employee's Employment Commencement Date. The computation period used for measuring eligibility after the 'initial eligibility computation period' will be used to measure breaks in service for eligibility to participate in the plan. 2.11 "Employee" means (i) any person employed by the Employer and shall include a person other than a non-resident alien as to the United States who is not a Participant in the Plan, who is then currently employed by the Company or a Subsidiary and who is then not currently entitled to receive any retirement benefits or disability benefits for total and permanent disability under any plan, program, contract, or arrangement of the Company or any subsidiary, or deemed totally and permanently disabled under the Plan, and (ii) Leased Employees within the meaning of Section 414(n)(2) of the Code. The term "Employee" shall not include any individual who performs services for the Employer and is classified or designated by the Employer as a fee for service worker or independent contractor even if such individual is later reclassified as a common law employee of the Employer by a government entity, a court of competent jurisdiction, arbitrator or other third party for any purpose. The term Employee shall also exclude Leased Employees. 2.12 "Employer" means the Company and any Affiliate which is a domestic corporation not operating primarily in Puerto Rico. 2.13 "Entry Date" means (1) for part-time Employees, the first day of any calendar month following 12 months of Continuous Service and attainment of age 21 provided the Employee has submitted a completed enrollment form to the Plan Administrator, and (2) for full-time Employees, the first day of any calendar month provided the Employee has submitted a completed enrollment form to the Plan Administrator. 2.14 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. 2.15 "Former Participant" means any person who terminates employment with the Company and was at one time a Participant and who has not yet received a complete distribution of his or her Account from the Plan. 2.16 "Fund" means the investment funds available to Participants under the Plan as selected by the Savings Plan Committee and as listed on Schedule A, which is attached hereto and incorporated herein by reference. 2.17 "Highly Compensated Employee" (a) Effective for Plan Years starting after December 31, 1996, the term "Highly Compensated Employee" includes highly compensated active Employees and highly compensated former Employees. A highly compensated active Employee means any Employee who: (1) was a Five-Percent Owner (as defined in section 416(i)(1) of the Code) at any time during the Look-Back Year or the Determination Year and applying the constructive ownership rules of Section 318 of the Code; or (2) for the Look-Back Year, had (i) received Compensation from the Employer or Affiliates in excess of $80,000, and (ii) if the Employer so elects, was in the Top-Paid Group during the Look-Back Year. The $80,000 amount is adjusted at the same time and in the same manner as under Code Section 415(d). In determining whether an Employee is a Highly Compensated Employee for years beginning in 1997, the above definition shall be treated as having been in effect for years beginning in 1996. A former Employee shall be treated as a Highly Compensated Employee if: (i) such Employee was a Highly Compensated Employee when such Employee separated from service, or (ii) such Employee was a Highly Compensated Employee for any Plan Year after attaining age 55. If the former Employee's separation from service occurred prior to January 1, 1987, he or she is a Highly Compensated Employee only if he or she satisfied clause (a) of this Section or received Compensation in excess of $50,000 during: (1) the year of his or her separation from service (or the prior year); or (2) any year ending after his or her 54th birthday. (b) For the purposes of this Section, the following definitions shall apply: "Compensation" means compensation within the meaning of Section 415(c)(3) of the Code. This determination will be made without regard to Sections 125, 402(e)(3) or 402(h)(1)(B) of the Code. "Determination Year" means the Plan Year with respect to which the determination of an individual's status as a "Highly Compensated Employee" (or Non-Highly Compensated Employee) is being made. "Look-Back Year" means the period of twelve (12) consecutive months immediately preceding the Determination Year or, if the Employer elects, the calendar year ending with or within the Determination Year. "Top-Paid Group" means that group of Employees of the Employer and its Affiliates who, when ranked on the basis of compensation paid during the Determination Year or Look-Back Year are among the twenty percent (20%) of Employees receiving the greatest amount of such compensation. Employees described in Section 414(q)(5) of the Code and the regulations promulgated thereunder shall be excluded. 2.18 "Hour of Service" with respect to any Plan Year or eligibility computation period, shall include the following: (1) Each hour for which an Employee is paid, or entitled to payment, for the performance of duties for the Employer. Such hours shall be credited to that Plan Year or eligibility computation period in which such duties were performed. (2) Each hour for which back pay, irrespective of mitigation of damages, is awarded or agreed to by the Employer, exclusive of hours previously credited under subparagraph (1), immediately above. Such hours shall be credited to that Plan Year or eligibility computation period to which such award or agreement pertains, and shall be computed and credited in the manner prescribed in subparagraph (3) immediately below. (3) Each hour for which an Employee is paid, or entitled to payment, directly or indirectly (through an insurer, trust fund or otherwise) by the Employer for a period of time during which no duties are performed (irrespective of whether he or she has ceased to be an Employee) on account of vacation, holiday, illness, incapacity, disability, layoff, jury duty or leave of absence, subject to the following: Notwithstanding the foregoing, (a) no more than 501 hours shall be credited for any such single continuous period, (b) no such hours shall be credited if such payment is made under a plan maintained solely for the purpose of complying with the applicable workmen's compensation, unemployment compensation and disability compensation laws, and (c) no such hours shall be credited for any payment which solely reimburses an Employee for medical or medically related expenses incurred by the Employee. The rules set forth in paragraphs (b) and (c) of the Department of Labor Regulation Section 2530.200b-2 are hereby incorporated by reference. (4) Solely for purposes of determining whether a One Year Period of Severance has occurred, each hour (not in excess of 501 hours) for which the Employee is absent from work and during which no duties are performed due to the pregnancy of the Employee, the birth of a child of the Employee, the placement of a child with the Employee in connection with the adoption of such child by the Employee, or the caring for such child for the period immediately following birth or placement. Any such hour shall be credited to the Plan Year or eligibility computation period in which such absence begins if, as of the date the absence begins, the Employee has completed less than 501 hours of service; in any other case, such hours shall be credited to the next Plan Year or eligibility computation period. 2.19 "Matching Account" means that separate subaccount of the Participant's Account credited with Matching Contributions under Section 4.5. 2.20 "Matching Contributions" means the contribution by the Employer to the Matching Account pursuant to Section 4.5. 2.21 "Non-Highly Compensated Employee" means an Employee who is not a Highly Compensated Employee. 2.22 "Normal Retirement Date" means the first day of the calendar month following the Participant's 65th birthday. 2.23 "Participant" means an Employee who pursuant to the terms of Section 3 is eligible to participate under the Plan and who elects to so participate. 2.24 "Plan" means the Wyeth Savings Plan. 2.25 "Plan Year" means the calendar year. 2.26 "Revaluation Date" means the date on which the Accounts under the Plan are valued pursuant to Section 5.3. 2.27 "Rollover Account" means the separate subaccount of a Participant's Account which is credited with Rollover Contributions pursuant to Section 4.11. 2.28 "Rollover Contribution" means (1) an Eligible Rollover Distribution within the meaning of Section 402(c)(4) of the Code; (2) a contribution by a Participant of a distribution received from the qualified plan of another employer provided the Participant makes the contribution within 60 days of his or her receipt of a distribution which satisfied the requirements of Section 402(c)(1) of the Code; or (3) a direct transfer of the Participant's interest from the trustee of a qualified plan maintained by another employer. Before accepting a Rollover Contribution, the Committee or its delegate may require the Participant to furnish satisfactory evidence that the proposed transfer is in fact a Rollover Contribution which the Code permits a Participant to make to a qualified plan. All Rollover Contributions shall be fully vested at all times. In addition, such Rollover Contributions must satisfy the requirements of Section 4.11. 2.29 "Salary Deferral Account" means the separate subaccount of a Participant's Account which is credited with Salary Deferral Contributions pursuant to Section 4.1(a). 2.30 "Salary Deferral Contribution" means the contribution paid by the Employer to the Trust, at the election of the Participant, in lieu of cash Compensation, which is credited to the Salary Deferral Account. 2.31 "Severance From Service" means the earliest of the following dates: (i) resignation, (ii) discharge, (iii) death or (iv) retirement. A Severance From Service shall also occur if an Employee remains continually absent from work (for any reason other than resignation, discharge, retirement or death) on the first anniversary of the first day of absence (except in the case of military leave). 2.32 "Trust" means the Trust established under Section 13 of the Plan which Trust shall form a part of the Plan. 2.33 "Trustee" means the Trustee designated in accordance with the provisions of the Trust. 2.34 "Trust Fund" means the assets of the Trust which shall include investments of the Participants' Accounts. 2.35 "Wyeth Common Stock" means the common stock of Wyeth. SECTION 3 PARTICIPATION 3.1 General. Each Employee who is employed in the United States by the Employer who is not a member of a recognized collective bargaining unit (unless there is a collective bargaining agreement making the Plan applicable to members of such unit) and Employees outside of the United States (except Employees of a division or subsidiary of the Company operating primarily in Puerto Rico) who are covered by the Wyeth Retirement Plan - United States shall be eligible to participate in the Plan when he or she has met the following conditions. Full time Employees of the Employer who have attained age 21 (i.e., Employees scheduled to work with the Employer at least 1,000 hours in a 12-month period) will be eligible to participate in the Plan as of their date of hire if they meet the other requirements of this Section 3.1, and part time and seasonal Employees who have attained age 21 (i.e., Employees scheduled to work with the Employer less than 1,000 hours in a 12-month period) will be eligible to participate in the Plan after they work 1,000 hours or more in a 12-month period with the Employer if they meet the other requirements of this Section 3.1. The Employee must submit an election to include a salary deferral agreement and/or authorization for After Tax Contribution, investment selection form, and a beneficiary designation form. Such written election shall be filed no later than 15 days prior to the Entry Date unless otherwise determined by the Committee. 3.2 Termination of Participation. A Participant shall cease to be a Participant upon his or her Severance From Service and having received a distribution of his or her entire Accounts under the Plan. 3.3 Reemployment. A Former Participant who is reemployed by the Employer shall be eligible again to participate in the Plan as of the next Entry Date following his or her date of reemployment provided that he or she has filed an election with the Committee described in Section 3.1. A former Employee who was not a Participant and is reemployed shall be eligible to participate when he or she meets the requirements of Section 3.1. 3.4 Collective Bargaining Agreements, Etc. If a Participant becomes covered by a collective bargaining agreement or is otherwise transferred to a position with the Employer which makes him or her ineligible to participate in the Plan, his or her participation in the Plan shall cease but he or she shall not be considered to have terminated employment. If such Employee subsequently ceases to be covered by a collective bargaining agreement or is otherwise transferred to a position which makes them eligible to participate, he or she shall again become eligible for participation. Notwithstanding the foregoing, an Employee who ceases to be a Participant upon being covered by a collective bargaining agreement shall nonetheless continue to be considered a Participant solely for purposes of the loan provisions as set forth in Article 9 of the Plan and the hardship distribution provision as set forth in Section 8.1. 3.5 Leased Employees. Any individual who is a Leased Employee, within the meaning of Section 414(n) of the Code, of an Employer shall not be eligible to participate in the Plan. For purposes of determining the number or identity of Highly Compensated Employees or for purposes of the pension requirements of Section 414(n)(3) of the Code, employees of the Employer shall include individuals defined as Leased Employees. "Leased Employee" shall mean a person who is not a common law employee of the Employer or an Affiliate but who provides services to the Employer or an Affiliate, and: (1) such services are performed pursuant to an agreement between the Employer and any other person or entity (the "Leasing Organization"); (2) the person performing the services has done so on a substantially full-time basis for at least one (1) year; and (3) for Plan Years starting before January 1, 1997, the services performed are of a type historically performed in the business field of the recipient by Employees; and (4) for Plan Years starting after December 31, 1996, the services are performed under the primary direction and control of the recipient of those services. Notwithstanding the preceding sentence, the Plan shall not treat an individual as a Leased Employee if the Leasing Organization covers the individual by a money purchase pension plan with a nonintegrated contribution rate of at least ten percent (10%) of Covered Compensation, and provides for immediate participation and full and immediate vesting, provided that Leased Employees constitute less than twenty percent (20%) of the Company's Non-Highly Compensated Employees. SECTION 4 CONTRIBUTIONS 4.1 Salary Deferral Contributions and After Tax Contributions. (a) Each Participant may authorize the Employer to contribute to the Trust on his or her behalf a Salary Deferral Contribution with respect to each Plan Year which shall be allocated to his or her Salary Deferral Account. A Participant may elect to have a stated whole percentage from 1% to 16% of his or her Covered Compensation allocated to his or her Salary Deferral Account. Such Salary Deferral Contributions shall be paid by the Employer to the Trustee at least monthly and each Participant's pay for such month shall be reduced by an identical amount. (b) Before a contribution is made as a Salary Deferral Contribution, the Committee may, in its discretion, decide that if the Average Actual Deferral Percentage Test set forth in Section 4.9 may not be met, a portion or all of such contribution for a Highly Compensated Employee that would otherwise have been allocated as a Salary Deferral Contribution shall in lieu thereof be allocated to an After Tax Contribution Account in accordance with a formula determined by the Committee. Independent of his or her election to defer compensation as a Salary Deferral Contribution, a Participant may elect to contribute on an after tax basis a portion of his or her Covered Compensation to his or her After Tax Contribution Account which, subject to any determination made by the Committee to comply with Section 4.10 shall be a stated whole percentage of the Participant's Covered Compensation for the Plan Year of not less than one percent (1%) nor more than sixteen percent (16%). (c) The combination of the Salary Deferral Contributions and After Tax Contributions for any Participant shall not be less than one percent (1%) nor exceed sixteen percent (16%) of the Participant's Covered Compensation for the Plan Year. 4.2 Maximum Amount of Salary Deferral Contributions. The maximum amount of Covered Compensation a Participant is permitted to defer during any calendar year is limited to $7,000 as adjusted by the Secretary of Treasury pursuant to Section 402(g)(5) of the Code. To the extent the Committee believes that a Participant's election of a Salary Deferral Contribution will exceed the limits set forth in the preceding paragraph, before a contribution is made as a Salary Deferral Contribution, a portion of or all of such contribution that would otherwise have been allocated as a Salary Deferral Contribution may in lieu thereof be allocated to an After Tax Contribution Account. To the extent any Salary Deferral Contributions in excess of the Section 402(g) of the Code are not corrected as indicated above, such excess Salary Deferral Contributions, plus any income and minus any loss allocable thereto, shall be distributed no later than April 15 to any Participant to whose account excess Salary Deferrals Contributions were assigned for the preceding year and who claims Salary Deferrals Contributions for such taxable year. Excess Salary Deferrals Contributions shall be adjusted for any income or loss in the same manner that income/earnings or loss is calculated under the Plan. However, such income or loss may be calculated using a reasonable method to be applied by the Committee on a uniform and non-discriminatory basis. 4.3 Election of Salary Deferral Contributions or After Tax Contributions. Each Participant electing to have the Employer contribute a Salary Deferral Contribution on his or her behalf or electing to make an After Tax Contribution shall file with the Committee on prescribed forms, 15 days prior to the Entry Date, an election of the percentage of his or her Covered Compensation (within the limits stated in and in accordance with the provisions of Section 4.1) to be contributed to his or her Salary Deferral Account or After Tax Contribution Account by authorizing the Employer to withhold such amount from his or her pay. 4.4 Vesting. A Participant shall be fully vested at all times in his or her Account attributable to his or her Salary Deferral Account, Rollover Contribution Account, and After Tax Contribution Account. A Participant shall also be fully vested in his or her account attributable to his or her Matching Account if he or she has five (5) or more years of Continuous Service. If the Participant has less than five (5) years of Continuous Service, he or she shall become vested in his or her Matching Account according to the following vesting schedule: Years of Continuous Service Vesting Percentage After 1 year 0% After 2 years 25% After 3 years 50% After 4 years 75% After 5 years 100% Regardless of the number of years of Continuous Service, a Participant shall be fully vested in his or her account, attributable to his or her Matching Account, and such benefit shall be non-forfeitable, when he or she attains age 65 or upon his or her death, if earlier. If a Participant receives a distribution from his or her Matching Account prior to incurring 5 consecutive One Year Periods of Severance and he or she is less than 100% vested in his or her Matching Account at such time, the vested portion of his or her Matching Account at any time thereafter shall be the Participant's (1) vested percentage of the sum of the balance of his or her Matching Account and all prior distributions from his or her Matching Account, minus (2) all prior distributions from his or her Matching Account. 4.5 Matching Contributions. The Employer shall contribute to each Matching Account a Matching Contribution in an amount equal to 50% of up to the first six percent (6%) of Covered Compensation which the Participant elects to either defer as a Salary Deferral Contribution or make as an After Tax Contribution in a Plan Year. Such Matching Contribution shall be contributed in cash. 4.6 Matching Contributions to be made from Earnings and Profits. Matching Contributions shall only be made out of current income or accumulated retained earnings. The Company and each Affiliate shall make Matching Contributions only with respect to its own Employees, provided, however, that if the Company or any Affiliate is prevented from making all or part of the Matching Contribution for any Plan Year by reason of insufficient accumulated retained earnings as of the close of such Plan Year, then a contribution equal to the amount which it is prevented from making for such year may be made by the Company if it is not prevented from contributing for such year. The foregoing proviso shall be interpreted in accordance with Section 404(a)(3)(B) of the Code, unless otherwise determined by the Company. 4.7 Forfeitures. Forfeitures of amounts in the Matching Accounts due to the fact that a Participant is not fully vested in such amounts shall be applied to reduce any subsequent Matching Contributions. 4.8 Changes and Suspensions of Salary Deferral Contributions and After Tax Contributions. A Participant may by 15 days advance written notice or by such other method acceptable to and approved by the Plan Administrator, change the rate of Salary Deferral Contributions and After Tax Contributions once each calendar quarter during a Plan Year effective on the first pay day of any month. A Participant may once each calendar quarter during a Plan Year, by 15 days advance written notice, elect to suspend all contributions to his or her Account on the first day of any pay period, but he or she may not thereafter recommence contributions for a three month period. 4.9 Limitation on Salary Deferral Contributions in Accordance with Section 401(k) of the Code. With respect to Salary Deferral Contributions, the Average Actual Deferral Percentage for Participants who are Highly Compensated Employees for the Plan Year must meet either of the following tests: (i) it must not exceed the Average Actual Deferral Percentage for Participants who are Non-Highly Compensated Employees for the Plan Year multiplied by 1.25; or (ii) it must not exceed the Average Actual Deferral Percentage for Participants who are Non-Highly Compensated Employees for the Plan Year multiplied by 2, provided that the Average Actual Deferral Percentage for Participants who are Highly Compensated Employees does not exceed the Average Actual Deferral Percentage for Participants who are Non-Highly Compensated Employees by more than two (2) percentage points or such lesser amount as the Secretary of the Treasury shall prescribe to prevent the multiple use of this alternative limitation with respect to any Highly Compensated Employee. Notwithstanding any other provision of the plan, Excess Contributions, plus any income and minus any loss allocable thereto, shall be distributed no later than the last day of each Plan year to Participants to whose accounts such Excess Contributions were allocated for the preceding Plan Year. Excess Contributions are allocated to the Highly Compensated Employees with the largest amounts of Employer contributions taken into account in calculating the Actual Deferral Percentage test for the year in which the excess arose, beginning with the Highly Compensated Employee with the largest amount of such employer contributions and continuing in descending order until all the Excess Contributions have been allocated. For purposes of the preceding sentence, the "largest amount" is determined after distribution of any Excess Contributions. Excess Contributions (including the amounts recharacterized) shall be treated as annual additions under the Plan. "Excess Contributions" shall mean, with respect to any Plan Year, the excess of: a. The aggregate amount of employer contributions actually taken into account in computing the Actual Deferral Percentage of Highly Compensated Employees for such Plan Year, over b. The maximum amount of such contributions permitted by the Actual Deferral percentage test (determined by hypothetically reducing contributions made on behalf of Highly Compensated Employees in order of the Actual Deferral Percentage, beginning with the highest of such percentages). For purposes of this Section 4.9, "Actual Deferral Percentage" means the ratio (expressed as a percentage) of Salary Deferral Contributions on behalf of the Participant for the Plan Year to the Participant's compensation for the Plan Year. "Average Actual Deferral Percentage" means the average (expressed as a percentage) of the Actual Deferral Percentages of the Participants in a group. "Participant" for purposes of this Section 4.9 and Section 4.10 means an Employee eligible to participate in the Plan, regardless of whether he or she elects to participate. "Compensation" for purposes of this Section 4.9 and Section 4.10 means all the compensation received during the Plan Year by the Participant from the Employer that is currently includible in gross income for income tax purposes (including, but not limited to, income attributable to non-qualified stock options or incentive stock options, regardless of whether such income is includible in gross income for the Plan Year in which the option is granted). "Compensation" for purposes of this Section 4.9 and Section 4.10 includes the amount of any Salary Deferral Contributions made by an Employee during a Plan Year and income under Code Section 125 or 402(a)(8). However, "Compensation" for purposes of this Section 4.9 and Section 4.10 shall not include any amounts received while an Employee is not a Participant. For purposes of this Section 4.9, the Actual Deferral Percentage for any Participant who is a Highly Compensated Employee for the Plan Year and who is eligible to have Salary Deferral Contributions allocated to his or her Account under two or more plans or arrangements described in Section 401(k) of the Code that are maintained by the Employer or an Affiliated Employer shall be determined as if all such Salary Deferral Contributions were made under a single arrangement. The Actual Deferral Percentage test described above will be conducted using the current year testing method provided, however, that the Plan may be amended at any time to change to the prior year testing method in those situations for which such a change is approved in Internal Revenue Service Notice 98-1 (Part VII(A) or in subsequent guidance promulgated by the Secretary of the Treasury. In the event it is determined that the amount of Salary Deferral Contributions made on behalf of Highly Compensated Employees would exceed the limits described in this Section 4.9, the amount of such Salary Deferral Contributions (and any related income) which causes such limits to be exceeded may, to the extent permitted under Section 4.10, be recharacterized and allocated to the After Tax Contribution Account, in accordance with procedures established by the Committee. Also, such Salary Deferral Contributions (and any related income) may be refunded to Highly Compensated Employees in accordance with procedures established by the Committee. The decision as to whether such Salary Deferral Contributions are to be recharacterized or refunded shall be made by the Committee. The amount of Excess Salary Deferral Contributions which is to be refunded or recharacterized as After-Tax Contributions shall be determined as set forth below for Plan Years commencing after December 31, 1996. On or before the fifteenth day of the third month following the end of each Plan Year, the Salary Deferral Contributions of the Highly Compensated Employee with the highest dollar amount of Salary Deferral Contributions for that Plan Year shall be recharacterized or reduced until either all Excess Salary Deferral Contributions have been distributed or until such Salary Deferral Contributions are equal to the dollar amount of Salary Deferral Contributions of the Highly Compensated Employee with the next highest dollar amount of such contributions, whichever occurs first. Step (1) above shall be repeated with respect to the Participant with the second and successive highest dollar amount of Salary Deferral Contributions under the Plan until the Plan has recharacterized or distributed all excess Salary Deferral Contributions. If the recharacterization or refunds described above are made, the Actual Deferral Percentage is treated as satisfying the non-discrimination test of Section 401(k)(3) of the Code regardless of whether the Actual Deferral Percentage, if recalculated after such refunds or recharacterizations have occurred would satisfy Section 401(k)(3) of the Code. Any amounts of Salary Deferral Contributions (and income thereon) under this section shall be subject to the provisions of Section 8 that apply to Salary Deferral Contributions. For purposes of Section 401(k)(2) of the Code, if a corrective distribution of Excess Salary Deferral Contributions has been made, the Average Actual Deferral Percentage of Highly Compensated Employees is deemed to be the largest amount permitted under Section 401(k)(2) of the Code. If Salary Deferral Contributions distributed pursuant to this paragraph have received any Matching Contributions, such Matching Contributions shall be forfeited, if forfeitable. The Administrator shall, to the extent administratively possible, recharacterize or refund all Excess Salary Deferral Contributions (and related income) which are required to be made pursuant to this Section, prior to the fifteenth day of the third month following the end of the Plan Year in which the excess Salary Deferral Contributions arose. Any refund or recharacterization of excess Salary Deferral Contributions must be made no later than 2 1/2 months after the close of the Plan Year in which the excess Salary Deferral Contributions relate. In any event, however, the excess After Tax Contributions and/or Matching Contributions and any income allocable thereto shall be distributed prior to the end of the Plan Year following the Plan Year in which the excess After-Tax Contributions arose. Also, before a contribution is made as a Salary Deferral Contribution, the Committee may, in its discretion, decide, that if the limitation set forth in this Section 4.10 may not be met, to limit the amount of Salary Deferral Contributions a Highly Compensated Employee can make or direct that a portion of all of such contribution for a Highly Compensated Employee shall in lieu thereof, to the extent permitted under Section 4.10, be allocated to an After Tax Contribution Account in accordance with procedures established by the Committee. 4.10 Limitation on After Tax Contributions and Matching Contributions In Accordance With Section 401(m) of the Code. With respect to After Tax Contributions and Matching Contributions, the Average Contribution Percentage for Participants who are Highly Compensated Employees for the Plan Year must meet either of the following tests: (i) it must not exceed the Average Contribution Percentage for Participants who are Non-Highly Compensated Employees for the Plan Year multiplied by 1.25; or (ii) it must not exceed the Average Contribution Percentage for Participants who are Non-Highly Compensated Employees for the Plan Year multiplied by 2, provided that the Average Contribution Percentage for Participants who are Highly Compensated Employees does not exceed the Average Contribution Percentage for Participants who are Non-Highly Compensated Employees by more than two (2) percentage points or such lesser amount as the Secretary of the Treasury shall prescribe to prevent the multiple use of this alternative limitation with respect to any Highly Compensated Employee. Notwithstanding any other provision of the plan, Excess Aggregate Contributions, plus any income and minus any loss allocable thereto, shall be forfeited, if forfeitable, or if not forfeitable, distributed no later than the last day of each Plan Year to participants to whose accounts such Excess Aggregate Contributions were allocated for the preceding Plan Year. Excess Aggregate Contributions are allocated to the Highly Compensated Employees with the largest Contribution Percentage Amounts taken into account in calculating the ACP test for the year in which the excess arose, beginning with the Highly Compensated Employee with the largest amount of such Contribution Percentage Amounts and continuing in descending order until all the Excess Aggregate Contributions have been allocated. For purposes of the preceding sentence, the "largest amount" is determined after distribution of any Excess Aggregate Contributions. Definitions: 1. "Excess Aggregate Contributions" shall mean, with respect to any Plan Year, the excess of: a. the aggregate Contribution Percentage Amounts taken into account in computing the numerator of the Contribution Percentage actually made on behalf of Highly Compensated Employees for such Plan Year, over b. The maximum Contribution Percentage Amounts permitted by the ACP test (determined by hypothetically reducing contributions made on behalf of Highly Compensated Employees in order of their Contribution Percentages beginning with the highest of such percentages). For purposes of this Section 4.10, "Average Contribution Percentage" means the average (expressed as a percentage) of the Contribution Percentages of the Participants in a group. "Contribution Percentage" means the ratio (expressed as a percentage) of the sum of the After Tax Contributions and Matching Contributions under the Plan on behalf of the Participant for the Plan Year to the Participant's compensation for the Plan Year. "Participant" and "Compensation" for purposes of this Section 4.10 have the same definitions as set forth in Section 4.9. In the event that the Plan satisfies the requirements of Section 410(b) of the Code only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of Section 410(b) of the Code only if aggregated with this Plan, this Section 4.10 shall be applied by determining the Contribution percentages of Participants as if all such plans were a single plan. In the event it is determined that the amount of the After Tax Contributions and Matching Contributions made on behalf of a Highly-Compensated Employee would exceed the limits described in this Section 4.10, the amount of such After-Tax Contributions and/or Matching Contributions (and any related income) which causes such limits to be exceeded may be distributed to individual Highly Compensated Employees (or, if forfeitable, forfeited) determined as set forth below for Plan Years commencing after December 31, 1996. The amount to be distributed pursuant to this paragraph shall be determined after taking into account any Salary Deferral Contributions that have been recharacterized as After-Tax Contributions under Section 4.9. For purposes of meeting the limitations described in Section 4.10, After-Tax Contributions that have not received a Matching Contribution may be distributed before After-Tax Contributions that have received a Matching Contribution. The After Tax Contributions and/or Matching Contributions of the Highly Compensated Employee with the highest dollar amount of such Contributions for the Plan Year shall be reduced until either all excess After Tax Contributions and/or Matching Contributions have been distributed or until the excess After Tax Contributions and/or Matching Contributions are equal to the dollar amount of the After Tax Contributions and/or Matching Contributions of the Highly Compensated Employee with the next highest dollar amount of contributions, whichever occurs first. Step (1) above shall be repeated with respect to the second and successive Highly Compensated Employee with the highest dollar amount of After Tax Contributions and/or Matching Contributions under the Plan until the Plan has distributed all excess After-Tax and/or Matching Contributions. If the refunds described above are made, the Average Actual Contribution Percentage is treated as meeting the non-discrimination test of Section 401(m)(2) of the Code regardless of whether the Average Actual Contribution Percentage, if recalculated after such distributions, would satisfy Section 401(m)(2) of the Code. For purposes of Section 401(m)(9) of the Code, if a corrective distribution of excess After Tax Contributions and/or Matching Contributions has been made, the Average Actual Contribution Percentage of Highly Compensated Employees is deemed to be the largest amount permitted under Section 401(m)(2) of the Code. Multiple Use Test. In order to prevent the multiple use of the alternative method described in Section 4.10(ii) and in Section 4.9(ii) above, any Highly Compensated Employee eligible to make Salary Deferral Contributions and After-Tax Contributions or to receive Company Matching Contributions under the Plan shall have his or her contribution percentage reduced if required pursuant to Regulation section 1.401(m)-2. The Administrator shall, to the extent administratively possible, distribute all After-Tax Contributions and any income allocable thereto which are required to be made pursuant to this Section, prior to the fifteenth day of the third month following the end of the Plan Year in which the excess Contributions arose. In any event, however, the excess Contributions and any income allocable thereto shall be distributed prior to the end of the Plan Year following the Plan Year in which the excess After-Tax Contributions arose. The determination and treatment of the Contribution Percentage of any Participant shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury. 4.11 Rollover Contributions From Other Qualified Plans. A Participant, with the approval of the Administrator (or its delegate) and upon a determination by the Administrator that a distributing plan is qualified under Section 401(a) of the Code, make, and that Plan shall accept, a Rollover contribution on the Participant's behalf from such distributing plan, provided that the Rollover Contribution is deposited to the Plan no later than 60 days receipt by the Participant thereof. The amount rolled over shall be subject to all of the terms and conditions of the Plan after it is rolled over, except that such amounts shall be fully vested at all times. The amounts rolled over shall be deposited in an account designated as the Participant's Rollover Account. Such amounts shall be invested in accordance with the Participant's investment elections in effect at the time of the rollover. The Administrator (or its delegate) may require a Participant to furnish such evidence as the Administrator may deem necessary or appropriate. Notwithstanding the foregoing, effective as of January 1, 1999, the Administrator shall accept distributions made from any defined benefit pension plan maintained by the Company which is qualified under Code Section 401(a) provided it is received by the Plan no later than the 60th day after the distribution was received or made payable to the Participant. For this purpose, a Rollover Contribution means (a) a contribution of a distribution received from the qualified plan of another employer, provided the Participant makes the contribution within 60 days of his or her receipt of a distribution which satisfied the requirements of Section 402(a)(5) of the Code and Section 402(c) or (b) a direct transfer of the Participant's interest from the trustee of a qualified plan maintained by another employer. SECTION 5 PARTICIPANT'S ACCOUNT 5.1 Separate Accounts. The Trustee shall maintain separate accounts for each Participant and Former Participant. Each Participant's or Former Participant's Account shall be divided into separate subaccounts: the Salary Deferral Account, QVEC Account, the After Tax Contribution Account, and the Matching Account, and the Rollover Account. 5.2 Separate Accounting. The amounts in a Participant's Salary Deferral Account, QVEC Account, After Tax Contribution Account, Matching Account, and Rollover Account shall at all times be separately accounted for by adjusting such accounts for withdrawals, distributions and contributions. Withdrawals, distributions, forfeitures (from Matching Accounts), and other credits or charges shall be separately allocated among Salary Deferral Accounts, After Tax Contribution Accounts, Matching Accounts, and Rollover Accounts on a reasonable and consistent basis. 5.3 Valuation of Trust. The assets of the Accounts of Participants shall be held by the Trustee. The assets of the Trust Plan shall be revalued by the Trustee at the close of each business day. In making such revaluation the Trustee shall take into account earnings or losses of the Trust Fund net of reasonable expenses and capital appreciation or depreciation in such assets whether or not realized. The method of revaluation shall be determined by the Trustee, and shall be followed with reasonable consistency from period to period. The amount credited to the Accounts of all Participants shall be adjusted as of each Revaluation Date so as to be equal to the value of such assets on such date. The settlement of the Accounts of a Participant shall be based upon the amount credited to his or her Accounts (pursuant to Section 6) as of the most recent revaluation completed prior to issuance of payments provided the Participant submits all documentation required to make settlement in the form, time and manner prescribed by the Committee. In making the adjustments, the Accounts of Participants shall be reduced by any payments made from the Accounts of the Participant and increased by any contributions made since the last adjustment. SECTION 6 INVESTMENTS AND OTHER PROVISIONS AFFECTING CONTRIBUTIONS 6.1 Investment of Participant's Account. Salary Deferral Contributions on behalf of a Participant shall be paid to the Trustee and allocated directly to the Participant's Salary Deferral Account, and After Tax Contributions shall be paid to the Trustee and allocated directly to the Participant's After Tax Contribution Account. A Participant may elect to have amounts credited to his or her Salary Deferral Account, After Tax Contribution Account, Matching Account, and Rollover Account each be invested in the Funds in ten (10%) percent multiples, in such a way that the combination of the percentage for the contributions to each Account totals 100%. Contributions need not be invested in the same manner. 6.2 Matching Account. Matching Contributions shall only be in the form of cash which shall be invested in any of the Funds as directed by the Participant. 6.3 Investment of Rollover Account. At the time a Rollover Contribution is made to the Plan at a Participant's direction which is made in accordance with Section 4.11, the Participant must elect, in such form, time and manner as prescribed as by the Committee, to have his or her Rollover Contribution invested in any of the investment Funds described in Section 6.1, in whole 10% increments. 6.4 Temporary Investments and Investment in Qualifying Employer Securities. The assets of the Trust Fund may be invested in qualifying employer securities as defined in ERISA, without regard to the percentage of the total fair market value of the Trust Fund or any Participant's Account which said investment comprises. Pending investment or reinvestment or pending payments or distribution, all or part of the Trust Fund may be invested temporarily in accounts with financial institutions or short-term financial instruments. 6.5 Change in Investment Election For Funds Contributed by a Participant . A Participant may change his or her investment election for his or her Salary Deferral Account, After Tax Contribution Account, or Matching Account to any of the investments set forth in Section 6.1 of the Plan by contacting the Trustee by telephonic or electronic means on any business day. The Committee may issue new rules for such changes in investment elections including rules with respect to the time, manner and form in which such changes are made. 6.6 Change in Investment Election for Funds Already Accumulated in a Participants' Accounts . A Participant or Former Participant may also transfer the value of his or her Accounts in any of the investment Funds set forth in Section 6.1 of the Plan to another investment Fund as set forth in said Section in whole percentages or in an amount of at least $250 (or the entire account balance if the amount is less than $250). To change an investment election for funds already accumulated in a Participant's Account, the Participant or Former Participant must contact the Trustee on any business day. This right to change existing investment allocations to or from any investment Fund offered by the Plan is subject to any transfer restrictions imposed by the Fund's management as set forth in a prospectus with respect to that Fund. The Committee may issue new rules for such changes in investment elections, including rules with respect to the time, manner and form in which such changes are made. 6.7 Return of Matching Contributions. In the event a Matching Contribution (a) is made under a mistake of fact, or (b) is conditioned upon deduction of the contribution under Section 404 of the Code and such deduction is disallowed, or (c) is conditioned upon qualification of the Plan under Section 401 (a) of the Code and the Plan does not so qualify, such contribution may be returned to the Employer within ninety days after the payment of the contribution, the disallowance of the deduction, or the date of denial of the Plan qualification, whichever is applicable. SECTION 7 DISTRIBUTIONS 7.1 Distribution After Retirement. After the retirement of a Participant at his or her then Normal Retirement Date or thereafter, the entire value of a Participant's Accounts shall be distributed to him or her in a lump sum payment in cash, unless he or she elects, pursuant to Section 7.6, to receive the Wyeth Common Stock Fund portion in Wyeth Common Stock. 7.2 Distribution After Death. After the death of a Participant, the Trustee, pursuant to directions from the Committee, shall pay in a lump sum payment the entire value of the deceased Participant's Account to the Participant's surviving spouse, or, if there is no surviving spouse or if the Participant had elected to have such lump sum payment made to someone other than his or her spouse and the spouse consents in writing to such election which consent acknowledges the effect of such election and such consent is witnessed by a notary public, then such lump sum payment shall be paid to the beneficiary designated by such Participant. The benefit payable under this Section will be distributed to the beneficiary named by the Participant no later than one year after the Participant's death, but if the designated beneficiary is the Participant's surviving spouse, the benefit will be distributed no later than the date on which the Participant would have attained age 70 1/2. If the Participant has no designated beneficiary or surviving spouse, the Participant's benefit must be distributed within five years after the Participant's death. 7.3 Designation of Beneficiary. A Participant at the time he or she joins the Plan shall designate a beneficiary or beneficiaries to receive the sums credited to his or her Account in the event of his or her death, if he or she has no surviving spouse at such time, which designation may be changed by the Participant from time to time and shall cease to be effective if he or she thereafter becomes married. To be effective, the original designation of the beneficiary and any subsequent change must be in writing on the form provided for that purpose by the Committee and filed with the Committee. 7.4 Failure to Designate a Beneficiary. In the event that a Participant has no surviving spouse at the time of his or her death and beneficiary is properly designated or that designated beneficiary predeceases the Participant, the Participant's account balance shall be paid in the following order of priority: (1) first, to the Participant's surviving children (if any), in equal shares; (2) second, if there are no surviving children, to the Participant's surviving parents, if any, in equal shares; and (3) finally, if there are no surviving parents, to the legal representatives of the Participant's estate. 7.5 Distribution After Termination of Employment. If a Participant terminates employment with the Employer due to resignation, discharge or the Participant retires before his or her Normal Retirement Date, he or she shall receive a lump sum cash distribution of his or her Salary Deferral Account, QVEC Account, After Tax Contribution Account, Rollover Account and the vested portion of his or her Matching Account if the value of his or her Account balance does not exceed $3,500, or does not exceed $5,000 for distributions occurring on or after January 1, 1998. If the value of his or her Account exceeds $3,500 at the time of such resignation, discharge or retirement (or exceeds $5,000 on or after January 1, 1998), any amount payable hereunder shall not be immediately distributed without his or her consent. The nonvested portion of the Matching Account of a Participant who receives a lump sum cash distribution shall be forfeited on his or her termination of employment and shall be restored only if the Participant is reemployed prior to incurring five consecutive One-Year Periods of Severance. A "One Year Period of Severance" shall occur if there is a Severance From Service and the Participant is not reemployed within the twelve consecutive month period commencing on the date of Severance From Service. (In the case of a Participant who is absent from service by reason of (i) the pregnancy of the Participant, (ii) the birth of a child of the Participant, (iii) the placement of a child with the Participant in connection with the adoption of such child by the Participant, or (iv) the caring for such child for the period immediately following such birth or placement, and such Participant is absent from service beyond the first anniversary of the first date of such absence, the Severance From Service date for such Participant is the second anniversary of the first date of such absence. The period between the first and second anniversaries of the first date of absence from work is neither a period of service nor a period of severance. If such Participant is not reemployed between the second and third anniversaries of the first date of absence from work a One-Year Period of Severance shall occur.) In the case of Participants who are part time or seasonal Employees a One Year Period of Severance shall be the Plan Year or other applicable computation period during which the Participant has not completed more than 500 Hours of Service. The nonvested portion of the Matching Account of a Participant who does not receive a lump sum cash distribution shall be forfeited when he or she has incurred five consecutive One Year Periods of Severance. Notwithstanding the foregoing, a Participant shall not incur a One-Year Period of Severance with respect to any period during which he or she is on a leave of absence under the federal Family and Medical Leave Act. 7.6 Election of Wyeth Common Stock; Converting Common Stock to Cash. If prior to the date of distribution, in accordance with rules adopted by the Committee, the Participant or other distributee elects to receive the Wyeth Common Stock Fund portion of his or her Account in Wyeth Common Stock, he or she will receive the number of shares of Wyeth Common Stock in such Account. Otherwise, all distributions will be in cash in a lump sum. Wyeth Common Stock converted into cash will be valued as the Revaluation Date set forth in Section 5.3. Distribution will be made as soon thereafter as is practicable in accordance with rules adopted by the Committee. 7.7 Time Distributions Are to Begin. Distribution of a Participant's Account, subject to Section 7.8, shall be made as soon as practicable but no later than 150 days after the end of the calendar quarter in which the following events occur: (1) For distributions on account of retirement, the Participant's retirement, or, if elected, either (i) December 31 of the year of retirement, or (ii) the last day of the sixth full calendar month following the Participant's date of retirement. (2) For distributions on account of death, the Committee receives satisfactory evidence of the death of the Participant and the identification of the beneficiary. (3) For distributions on account of termination of employment on account of resignation or discharge, the date of termination of employment, or, if elected, either (i) December 31 of the year of such termination or (ii) the last day of the sixth full calendar month following the Participant's date of termination of employment. Subject to Section 7.8, no person subject to Section 16(b) of the Securities Exchange Act of 1934 shall receive a distribution earlier than six (6) months from the date of his or her retirement or other termination of employment unless the Committee in its discretion shall authorize an earlier distribution in accordance with Section 7.7. 7.8 Limitations on Distributions. The entire interest of a Participant will be distributed based on the date of his or her retirement, death, or termination of employment as provided in this Section 7, provided, however, in no event will such interest be distributed earlier than the later of April 1 of the calendar year following the later of the calendar year in which the Participant attains age 70 1/2 or the calendar year in which he or she retires. Distributions will be made in accordance with Section 401(a)(9) of the Code and regulations thereunder. In addition, in accordance with Section 401(a)(14) of the Code, unless a Participant otherwise elects, the commencement of distributions will begin not later than the 60th day after the latest of the close of the Plan Year in which occurs: (1) the date a Participant attains age 65, (2) the 10th anniversary of the year in which a Participant commenced participation in the Plan, or (3) the Participant's termination of employment with the Employer. Unless otherwise permitted by law or regulation, distribution of benefits under this Plan must begin by the April 1 of the calendar year following the year in which the Participant attains age 70 1/2, regardless of whether the Participant is still working for the Employer at such time. The amount of the distribution which a Participant who is still working for the Employer must receive from the Plan shall be determined in accordance with regulations prescribed by the Secretary of the Treasury. Notwithstanding anything in the foregoing to the contrary, commencing as of January 1, 2000, distribution of benefits to a Participant who is not a five percent (5%) owner of the Employer, will begin no later than April 1 of the calendar year following the later to occur of the calendar year in which the Participant attains age 70 1/2 of the calendar year in which the Participant retires. Distributions to a Participant who is a 5% owner will begin no later than April 1 of the calendar year following the calendar year in which he or she attains age 70 1/2. With respect to distributions under the Plan made for calendar years beginning on or after January 1, 2002, the Plan will apply the minimum distribution requirements of Section 401(a)(9) of the Code in accordance with the regulations that were proposed on January 17, 2001, notwithstanding any provision of the Plan to the contrary. 7.9 Amount of Distribution Cannot be Ascertained or Participant or Beneficiary Cannot be Located. If the amount of payment required to commence by a certain date in accordance with the Plan cannot be ascertained by such date, or if it is not possible to make payment on such date because the Committee has been unable to locate the Participant or beneficiary, a payment retroactive to such date shall be made no later than 60 days after the earliest date on which the amount of such payment can be ascertained or the date on which the Participant or beneficiary is located. If after reasonable effort the Committee cannot locate the Participant or beneficiary, the Participant's Account shall be forfeited. The amount of such forfeiture shall reduce the Matching Contribution required to be made by the Employer. Any such forfeited Account shall be reinstated and become payable if a claim therefor is made by the Participant or beneficiary which is approved by the Committee. 7.10 Withholding Tax on Distributions. Distributions under the Plan shall be subject to tax withholding under all applicable tax laws. 7.11 Distribution Upon Sale of Stock or Substantially all the Assets of a Corporation as Permitted by Section 401(k)(2)(B)(i)(II) of the Code. (a) Upon the date of sale by the Company or a subsidiary thereof of substantially all of the assets (within the meaning of section 409 (d) (2) of the Code) used by the Company or subsidiary in a trade or business with respect to an Employee who continues employment with the corporation acquiring such assets, or (b) upon the date of sale of stock by the Company or a subsidiary thereof of its interest in a subsidiary (within the meaning of section 409 (d) (3) of the Code) with respect to an Employee who continues employment with the subsidiary which is sold, the Committee may exercise its discretion to distribute to a Participant in a lump sum distribution the Participant's Account Balance including the vested portion of his or her Matching Account if the value of the Account does not exceed $3,500 prior to January 1, 1998 or does not exceed $5,000 on or after January 1, 1998. If the value of his or her account exceeds $3,500 prior to January 1, 1998, (or exceeds $5,000 on or after January 1, 1998), any amount payable shall not be immediately distributed without the Participant's consent. This Section 7.11 shall be interpreted in accordance with the requirements of Section 401 (k) of the Code and the regulations issued thereunder. 7.12 Plan to Plan Transfers. The Committee may exercise its discretion from time to time to authorize the transfer of account balances for one or more Participants of such Participant's Accounts (including the vested portion of his or her Matching Account) to another plan in which such Participant also participates if such other plan also qualifies when applicable, under Section 401 (a) and Section 401 (k) of the Code, provided that the Committee is satisfied that such other plan will accept the transfer of such account balances and that such plan to plan transfer is otherwise in accordance with the applicable qualification requirements of the Code. 7.13 Rollover of Eligible Rollover Distributions. (1) Notwithstanding any provision of the Plan to the contrary that would otherwise limit a Distributee's election under this section 7.13, a Distributee may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a direct rollover. However, notwithstanding the above, the Plan Administrator may adopt procedures wherein the Plan will not make a distribution pursuant to this Section 7.13 unless the Eligible Rollover Distribution is at least $200, and that the Plan will directly rollover only a portion of an Eligible Rollover Distribution if the portion to be rolled over is at least $500. If a distribution is one to which Sections 401(a)(11) and 417 of the Code do not apply, such distribution may commence less than 30 days after the notice required under Section 1.411(a)-11(c) of the Income Tax Regulations is given, provided that: (i) The Plan Administrator clearly informs the Participant that the Participant has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution, and (ii) that Participant, after receiving the notice, affirmatively elects a distribution. (2) For purposes of this Section 7.13, the following definitions shall apply: Eligible Rollover Distribution. An Eligible Rollover Distribution is any distribution of all or any portion of the Plan benefit to the credit of the Distributee, except that an Eligible Rollover Distribution does not include any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee's designated beneficiary, or for a specific period of ten years or more; any distribution to the extent such distribution is required under Section 401(a)(9) of the Code, and a hardship withdrawal as described in Section 8.1 if (and only if) such withdrawal is made after December 31, 1999. Eligible Retirement Plan. An Eligible Retirement Plan is an individual retirement plan described in Section 408(b) of the Code, an annuity plan described in Section 403(a) of the Code, or a qualified trust described in Section 401(a) of the Code, that accepts the distributee's Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution to the surviving spouse of a Participant, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity. Distributee. A Distributee includes an Employee or former Employee. In addition, the Employee's or former Employee's surviving spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are Distributees with regard to the interest of the spouse or former spouse. Direct Rollover. A Direct Rollover is a payment by the Plan to the Eligible Retirement Plan specified by the Distributee. SECTION 8 WITHDRAWALS 8.1 Hardship Withdrawals. A Participant can withdraw amounts in his or her Salary Deferral Account (which for this purpose excepts investment income earned after January 1, 1989), Rollover Account and vested amounts in his or her Matching Contribution Account on account of a hardship. For the withdrawal to constitute a hardship, the withdrawal (1) must be made on account of an immediate and heavy financial need of the Participant, and (2) must be necessary to satisfy that need. The determination of whether a Participant has an immediate and heavy financial need is to be made by the Committee on the basis of all relevant facts and circumstances. A financial need shall not fail to qualify as immediate and heavy merely because such need was reasonably foreseeable or voluntarily incurred by the Participant. The following types of expenses will be deemed to constitute an immediate and heavy financial need for purposes of this Section 8.1: (i) medical expenses (described in Section 213(d) of the Code) incurred by the Participant or his or her spouse or dependents (as defined in Section 152 of the Code); (ii) purchase (excluding mortgage payments) of a principal residence for the Participant; (iii) payment of tuition and related educational fees for the next 12 months of post-secondary education for the Participant, his or her spouse, children or dependants; or (iv) the need to prevent the eviction of the Participant from his or her principal residence or foreclosure on the mortgage of the Participant's principal residence. Other types of expenses which the Internal Revenue Service deems are immediate and heavy financial needs as set forth in the publication of revenue rulings, notices and other documents of general applicability shall be deemed to constitute an immediate and heavy financial need for purposes of this Section 8.1. The requirement that a hardship withdrawal must be necessary to satisfy an immediate and heavy financial need will be met if the funds cannot be obtained from other resources reasonably available to the Participant and the amount distributed does not exceed the amount required to relieve the financial need. Before a Participant can make a hardship withdrawal, he or she must first withdraw all amounts in his or her After Tax Contribution Account, available for withdrawal, and take out a loan on amounts in his or her Plan Accounts, if available, under the provisions of Section 9. To the extent that a Participant cannot access funds necessary to meet his or her immediate and heavy financial need by a loan from his or her Plan Accounts or by a withdrawal of available amounts in his or her After Tax Contribution Account, the Participant must do (A) and (B) as follows: (A) The Participant must furnish the Committee with a signed statement representing that the required funds cannot be obtained: (i) through reimbursement or compensation by insurance; (ii) by reasonable liquidation of the Participant's assets, to the extent such liquidation would not itself cause an immediate and heavy financial need; for this purpose, the Participant's assets shall be deemed to include those assets of the Participant's spouse and minor children that are reasonably available to the Participant; (iii) by discontinuing his or her Salary Deferral Contributions and After Tax Contributions to the Plan; or (iv) by borrowing from plans maintained by any other employer or by borrowing from commercial sources on reasonable commercial terms. (B) The Participant must suspend all Salary Deferral Contributions and After Tax Contributions to the Plan for at least 12 months after receipt of the hardship withdrawal and the amount of the Participant's Salary Deferral Contributions for the calendar year after the year in which the hardship withdrawal was received cannot exceed the amount of the applicable limit on Salary Deferral Contributions, as set forth in Section 4.2, less the amount of the Participant's Salary Deferral Contributions made in the year the hardship withdrawal was received. A Participant shall notify the Committee in writing of his or her request to make a hardship withdrawal on a form provided therefor pursuant to rules established by the Committee. Hardship withdrawals shall also meet the following requirements: (i) No more than one hardship withdrawal per Plan Year shall be permitted. (ii) The minimum hardship withdrawal shall be $500.00. (iii) The hardship withdrawal shall not exceed the amount of the Participant's Salary Deferral Account, Rollover Account, and the vested portion of his or her Matching Account. (iv) The amount of the hardship withdrawal shall be deducted from the Participant's Salary Deferral Account, Rollover Account and Matching Account, as the case may be, and the balance remaining after the withdrawal shall then constitute the total value of the Participant's Salary Deferral Account, Rollover Account and Matching Account. Hardship withdrawals shall first be made from the Participant's Salary Deferral Account and when that is exhausted, may be made from the Rollover Account (until exhausted) and then from the vested portion of the Matching Account in that order. Such withdrawals shall be made from the Investment Funds in Participant's Accounts as designated by the Participant in writing to the Trustee/Recordkeeper. If a Participant fails to provide such instructions, each Account shall be charged proportionately based on the foregoing sentences and on the status at the most recent Revaluation Date with respect to the different investments options in the Accounts elected pursuant to Section 6.1. (v) All hardship withdrawals shall be made in cash. Conversion of Wyeth Common Stock to cash shall be done in the manner described in Section 7.6. (vi) All hardship withdrawals shall be paid in an amount determined in the discretion of the Committee (including amounts representing the amount of federal, state and local taxes the Participant will incur as a result of the withdrawal) in accordance with the hardship withdrawal application submitted by the Participant, based on the amount in the Participant's Account as of the Revaluation Date after the Committee makes its determination. (vii) In addition to a Participant's written request for a hardship withdrawal, the Participant must submit any additional documentation that the Committee may determine is necessary to evidence the nature and extent of the immediate and heavy financial need. 8.2 Withdrawals of After Tax Contributions. A Participant can withdraw amounts in his or her After Tax Contribution Account once a year, for any reason, in accordance with the following requirements: (i) such withdrawal request shall be made pursuant to instructions transmitted by either telephonic or electronic means from the Participant to the Trustee/Recordkeeper,; pursuant to rules established by the Committee; (ii) a Participant may make withdrawals of After-Tax Contributions once each calendar year, provided, however, that each withdrawal must be made in a minimum amount of at least $500; (iii) all withdrawals shall be made from the investment Funds in a Participant's After-Tax Contribution Account as specified by the Participant in instructions sent in accordance with subsection (i) above. If the Participant fails to provide such instructions, such withdrawals shall be charged proportionately to the Participant's investment Funds in his or her After-Tax Contributions Account as of the most recent Revaluation Date; and (iv) all withdrawals of amounts in the After Tax Contribution Account shall be made in either cash or Wyeth Common Stock, if applicable, as elected by the Participant in accordance with subsection (i) above. If the Participant fails to provide such instructions, such withdrawals shall be in cash. Conversion of Wyeth Common Stock to cash shall be done as soon as practicable after the receipt of instructions from the Participant. 8.3 Age 59 1/2 Withdrawal. Notwithstanding the provisions of Section 8.1, a Participant who has attained age 59 1/2 may make a withdrawal from his or her Salary Deferral Account, Rollover Account, and the vested portion of his or her Matching Account once a calendar year for any reason without having to demonstrate financial necessity. Such withdrawal shall be made in accordance with instructions sent by the Participant to the Trustee/Recordkeeper by either electronic or telephonic means in accordance with the rules set forth in Section 8.1 except for those provisions pertaining to the demonstration of an immediate and heavy financial need, financial necessity and suspension of Salary Deferral Contributions and After-Tax Contributions. 8.4 Withdrawals of Salary Deferral Contributions By Former Participants. A Former Participant may withdraw amounts from his or her Account, for any reason, if the following requirements are satisfied: (i) each withdrawal shall be made pursuant to instructions sent by the Participant either electronically or telephonically to the Trustee/Recordkeeper in accordance with procedures established or approved by the Administrator; (ii) a Participant may make such a withdrawal as frequently as he or she may desire, provided, however, that the minimum amount of each withdrawal must be at least $1,000; (iii) each withdrawal shall be made from the investment Funds in the Participant's Account as specified by the Participant in instructions provided as described in subsection (i) above. If a Participant fails to provide such instructions, the withdrawal shall be charged proportionately to such Participant's investment Funds in his or her Account as of the most recent Revaluation Date; and (iv) all withdrawals from a Participant's Account shall be made in cash or Wyeth common stock, if applicable, as elected by the Participant in instructions provided in accordance with subsection (i) above. If no such election is made, all such withdrawals will be made in cash. SECTION 9 LOANS 9.1 Loans. A Participant may borrow no more than once every six months from his or her Account under the Plan on terms specified by the Committee which are consistent with the requirements of Section 72(p), 401(k) and 4975(d)(1) of the Code, provided that: (a) The minimum loan amount must be $1,000 and the aggregate amount of all such loans to a Participant from this Plan shall not, at the time any such loan is made, exceed the lesser of (i) $50,000 reduced by the excess (if any) of the highest outstanding balance of loans from the Plan during the one (1) year period ending on the day before the date on which such loan was made, over the outstanding balance of loans from the Plan on the date on which such loan was made, or (ii) fifty percent (50%) of the vested portion of the Participant's Account Balance at the time of the making of such loan. For purposes of this limitation, all loans from all qualified plans maintained by the Employer or by any entity which is required to be aggregated with the Employer pursuant to Sections 414(b), (c), (m) or (o) must be aggregated. If a loan is repaid and another loan taken out within six months, the maximum loan amount cannot exceed the limits of section 72 (p) of the Code. (b) A Participant must apply for a loan by submitting a loan application authorized by the Committee. In order for a loan to be approved, the Participant must sign a document evidencing the loan request. A Participant who has applied for a home purchase/construction loan will be required to submit an executed copy of a purchase or construction agreement and a written statement certifying that the home will be used as the Participant's primary residence. (c) For purposes of subsection 9.1(a), a Participant's Account balance shall be valued as of a Revaluation Date immediately prior to receipt of the Participant's loan application. Issuance of the loan will be as soon as possible in the month in which a loan application is approved. (d) The maximum number of loans from the Plan which a Participant may have outstanding at the same time are two general purpose loans payable within five years and one loan to acquire or construct any dwelling to be used as the principal residence of the Participant payable within 15 years. (e) Any loan, by its terms, must be required to be repaid within a whole year term not exceeding five years, unless the loan is used to acquire or construct any dwelling to be used (within a reasonable time after the loan is made) as the principal residence of the Participant, in which case the whole year term can be from 1 to 15 years. Notwithstanding the foregoing, a loan must be scheduled to be repaid by the end of the year in which the Participant attains age 70 1/2. (f) The amount of the loan (principal plus interest) must be repaid through periodic deductions from the Participant's paycheck in accordance with his or her payroll frequency. Besides payroll frequency, the amount of the periodic deduction will be based upon the amount of the loan, the term of the loan, and, unless otherwise provided in Department of Treasury regulations, a substantially level amortization of the loan over the term of the loan. All amounts of loan repayments by the Participant shall be deposited into the investment accounts elected by the Participant in accordance with Section 6.1 in effect at the time the repayments were made. Repayments will begin with the first paycheck received in the month following the date the loan check is received by the Participant or as soon as practicable thereafter. Repayments will be deposited into the Participant's Account in the following order to the extent that money was borrowed from the Account: (1) After Tax Contribution Account, (2) Company Matching Account, (3) Rollover Account, and (4) Salary Deferral Account. (g) If a Participant terminates employment with the Employer due to resignation, discharge, retirement or death and the loan has not been repaid with interest as is required by the Plan or the loan is otherwise in default the remaining unpaid balance is due and payable. Such Participant's Account shall be reduced to the extent of the outstanding loan provided that the Participant has consented to the immediate distribution of his or her Account balance. If such Participant defers receipt of his or her distribution, he or she is required to repay the loan in full. (h) The loan funds will be charged against each of the Participant's investment options in the Participant's Accounts as specified by the Participant in instructions transmitted by either electronic or telephonic means by the Participant to the Trustee/Recordkeeper. If instructions are not provided by a Participant, the loan funds shall be charged ratably against each of the Participant's investment options within each of his or her Accounts. (i) Loan funds shall be charged first to the Salary Deferral Account and then, to the extent necessary, to the Rollover Account, to the Matching Account, and to the After Tax Contribution Account, in that order. (j) The interest rate charged for the term of a loan from the Plan will be provided such rate provides a return commensurate with the interest rates charged by persons in the business of lending money for loans which would be made under similar circumstances, or such other rate as permitted by government regulations or releases. Interest begins to accrue when payments are scheduled to commence. (k) A loan can be prepaid in full as early as six months into the loan prepayment period upon Committee approval. Partial prepayments are not permitted. (l) The loan will be declared in default if the Participant rescinds his or her payroll authorization deduction, or if the Participant is on an unpaid leave of absence or temporary layoff and there is a suspension of repayments beyond the end of the quarter following the quarter in which the repayment was due or the loan term and alternative repayment arrangements cannot be arranged. Upon default, if the loan is not repaid when called, the Committee may cancel the loan and treat the outstanding balance as a taxable withdrawal from the Plan. (m) The loan program under the Plan shall be administered by the Committee in a uniform and nondiscriminatory manner. The Committee may provide for an overall limit on the amount of loans that may be provided by the Plan at any one time and shall establish the appropriate and reasonable security and interest rates on such loans. The Committee shall have sole discretion (i) to determine which Participants are entitled to receive a loan, (ii) to determine under what conditions a loan shall be granted, (iii) to determine what the terms of the loan, promissory note and security agreement are, (iv) to determine when a loan is in default and what course of action to take, and (v) to determine other questions which arise under this Section 9, provided that such discretion shall be exercised in accordance with the requirements of law. SECTION 10 LIMITATIONS ON ANNUAL ADDITIONS 10.1 Basic Limitation. Subject to the adjustments hereinafter set forth, the maximum aggregate Annual Addition to a Participant's Account in any Limitation Year shall in no event exceed the lesser of: (a) $30,000 (or such greater amount as may be permitted under Section 415(d) of the Code; or (b) twenty-five percent (25%) of the amount of Participant's compensation for the Limitation Year (compensation for this purpose shall have the meaning within Section 415(c)(3) of the Code and the regulations thereunder). 10.2 Definitions. (a) For purposes of this Section 10 the term "Annual Addition" shall mean the sum for any Limitation Year of the following amounts: (1) Salary Deferral Contributions; (2) Matching Contributions; (3) After Tax Contributions; (4) Forfeitures arising from termination of employment if allocated to the Accounts of Participants; and (5) Any amount described in Sections 415(l)(1) and 419A(d)(2) of the Code. (b) For purposes of this Section 10 and Section 11, the term "Limitation Year" or "year" means the calendar year. 10.3 Limitation for Participants in a Combination of Plans. Notwithstanding the foregoing, in the case of an Employee who participates in this Plan and a defined benefit plan which meets the requirements of section 401(a) of the Code maintained by an Employer, the sum of the defined benefit plan fraction and the defined contribution plan fraction for any year shall not exceed 1.0. The foregoing limitation shall not apply for Plan Years beginning after December 31, 1999. (a) The term "defined benefit plan fraction" shall mean the projected annual benefit payable under the defined benefit plan, without regard to the restrictions imposed by section 415 of the Code, over the annual benefit which may be payable under such plan, taking into account such restrictions, but increased as provided in Section 415 (e) (2) (B) of the Code. (b) The term "defined contribution plan fraction" shall mean the actual aggregate Annual Additions, as herein defined, to this Plan determined as of the close of the year, over the aggregate of the maximum Annual Additions which could have been made for each year of the Participant's service had such Annual Additions been limited each such year to the maximum Annual Additions permitted under Section 415 of the Code, but increased as provided by Section 415(e) (3) of the Code, and taking into account the transition rules for years ending prior to January 1, 1983, prescribed under Section 415 of the Code and under ERISA. Effective as of the first day of the first Limitation Year commencing after December 31, 1999, and notwithstanding any other provision of the Plan, the benefit for any Participant shall be determined by applying the limitations of section 415 of the Code without regard to the limitations of section 415(e). 10.4 Treatment of Similar Plans. The limitations of this Section with respect to any Participant who at any time has participated in any other defined contribution plan which is qualified under Section 401(a) of the Code, or in more than one qualified defined benefit plan, maintained by an Employer or by a corporation which is a member of a controlled group of corporations (within the meaning of Section 1563(a) (determined without regard to Section 1563(a)(4) and (e)(3)(C), and Section 415(h) of the Code) of which an Employer is a member shall apply as if the total benefits payable under all such defined benefit plans in which the Participant has been a member were payable from one plan, and as if the total Annual Additions made to all defined contribution plans in which the Participant has been a member were made to one plan. For purposes of this Section 10, the term "Employer" includes any corporation which is a member of a controlled group, as described herein. 10.5 Preclusion of Excess Annual Additions. The Committee shall maintain records showing for each month during the Limitation Year a Participant's contributions credited to the Participant's Account, (including for this purpose, the forfeitures used to reduce such contributions). If the Committee determines at any time that no additional contributions may be made and credited to the Participant's Account during a year without exceeding the limitations prescribed in this Section 10 for the year, then no further contributions shall be made or credited to the Participant's Account during the year. If a portion, but not all, of the contributions which are scheduled to be made and credited to the Participant's Account during the year or the remainder of the year may be made and credited without exceeding the limitations prescribed hereunder, the Participant's contributions shall be reduced to such amount which shall cause the limitations to be met. 10.6 Adjustment to Defined Benefit Plan. Notwithstanding the provisions of Section 10.5, but after giving effect to the transition rule described in Section 415(e)(6) of the Code, in the event that the limitations prescribed under Section 10.4 are exceeded with respect to any Participant who participates in this Plan and a qualified defined benefit plan maintained by an Employer, the Employer shall freeze or reduce the benefits under the defined benefit plan prior to making any adjustments under this Plan. The limitations of this Section with respect to any Participant who at any time has participated in any other defined contribution plan which is qualified under Section 401(a) of the Code, or in more than one qualified defined benefit plan, maintained by an Employer or by a corporation which is a member of a controlled group of corporations (within the meaning of Section 1563(a) (determined without regard to Section 1563(a)(4) and (e)(3)(C), and Section 415(h) of the Code) of which an Employer is a member shall apply as if the total benefits payable under all such defined benefit plans in which the Participant has been a member were payable from one plan, and as if the total Annual Additions made to all defined contribution plans in which the Participant has been a member were made to one plan. For purposes of this Section 10, the term "Employer" includes any corporation which is a member of a controlled group, as described herein. Effective as of the first day of the first Limitation Year commencing after December 31, 1999, and notwithstanding any other provision of the Plan, the benefit for any Participant shall be determined by applying the limitation of Section 415 of the Code without regard to the limitations of Section 415(e) of the Code. 10.7 Disposal of Excess Annual Additions. In the event that, notwithstanding Section 10.5 hereof, the limitations with respect to Annual Additions prescribed hereunder are exceeded with respect to any Participant and such excess arises as a consequence of the crediting of forfeitures to the Participant's Account or a reasonable error in estimating the Participant's Compensation, such excess shall be disposed of by returning to the Participant Contributions to his or her Accounts if any, for the year in which the excess arose, and the earnings thereon, but only to the extent necessary to cause the Annual Additions to the Participant's Account to equal, but not exceed, the limitations prescribed hereunder. In the event that after such contributions and earnings are returned there remains an excess, such excess shall be held in a suspense account and reallocated among the Accounts of all Participants in the Limitation Year succeeding the year in which the excess arose. SECTION 11 TOP HEAVY PLAN RULES 11.1 General Rule. The Plan shall meet the requirements of this Section 11 in the event that the Plan is or becomes a Top-Heavy Plan. 11.2 Top-Heavy Plan. (a) Subject to the aggregation rules set forth in paragraph (b), the Plan shall be considered a Top-Heavy Plan pursuant to Section 416(g) of the Code in any Plan Year if, as of the Determination Date, the present value of the cumulative Accounts of all Key Employees exceeds sixty percent (60%) of the value of the cumulative accounts of all of the Employees as of such Date, excluding former Key Employees and excluding any Employee who has not received Compensation from the Employer during the five (5) consecutive Plan Year period ending on the Determination Date, but taking into account in computing the ratio any distributions made during the five (5) consecutive Plan Year period ending on the Determination Date. For purposes of the above ratio, the Account of a Key Employee shall be counted only once each Plan year, notwithstanding the fact that an individual may be considered a Key Employee for more than one reason in any Plan Year. (b) Aggregation and Coordination with Other Plans. For purposes of determining whether the Plan is a Top-Heavy Plan and for purposes of meeting the requirements of this Section 11, the Plan shall be aggregated and coordinated with other qualified plans in a Required Aggregation Group and may be aggregated or coordinated with other qualified plans in a Permissive Aggregation Group. If such Required Aggregation Group is Top-Heavy, this Plan shall be considered a Top-Heavy Plan. If such Permissive Aggregation Group is not Top-Heavy, this Plan shall not be a Top-Heavy Plan. Solely for purposes of determining if the Plan, or any other plan included in a required aggregation group of which this Plan is a part, is Top-Heavy the accrued benefit of a Non-Key Employee shall be determined under (a) the method, if any, that uniformly applies for accrual purposes under all plans maintained by an Affiliated Employer, or (b) if there is no such method, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional accrual rate of Section 411(b)(1)(C) of the Code. 11.3 Definitions. For the purpose of determining whether the Plan is Top-Heavy, the following definitions shall be applicable: (a) Determination and Valuation Dates. The term "Determination Date" shall mean, in the case of any Plan Year, the last day of the preceding Plan Year. The value of an individual's Account shall be determined as of the Valuation Date and shall include any contribution actually made after such Valuation Date but on or before the Determination Date. The term "Valuation Date" means the most recent Revaluation Date defined in Section 2.26 occurring within a twelve (12) month period ending on the Determination Date. (b) Key Employee. An individual shall be considered a Key Employee if he or she is an Employee or former Employee who at any time during the current Plan Year or any of the four (4) preceding Plan Years: (1) was an officer of the Employer who has annual compensation in excess of 50% of the amount in effect under Section 415(b)(1)(A) of the Code; provided, however that the number of individuals treated as Key Employees by reasons of being officers hereunder shall not exceed the lesser of 50 or 10% of all Employees, or (2) was one of the ten (10) Employees owning the largest interests in the Employer with annual Compensation in excess of the dollar limit on Annual Additions to a defined contribution plan under Section 415 of the Code, or (3) was a more than five percent (5%) owner of the Employer; or (4) was a more than one percent (1%) owner of the Employer whose annual compensation from the Employer in the applicable Plan year exceeded $150,000. For purposes of determining who is a Key Employee, ownership shall mean ownership of the outstanding stock of the Employer or of the total combined voting power of all stock of the Employer, taking into account the constructive ownership rules of Section 318 of the Code, as modified by Section 416 (i) (1) of the Code. For purposes of paragraph (1) but not for purposes of (2), (3) and (4), except for purposes of determining compensation under (4), the term "Employer" shall include any entity aggregated with an Employer pursuant to Section 414 (b), (c) or (m) of the Code. For purposes of paragraph (2), an Employee (or former Employee) who has some ownership interest is considered to be one of the top ten (10) owners unless at least ten (10) other Employees (or former Employees) own a greater interest than such Employee (or former Employee); provided that if an Employee has the same ownership interest as another Employee, the Employee having greater annual compensation from the Employer is considered to have the larger ownership interest. (c) Non-Key Employee. The term "Non-Key Employee" shall mean any Employee who is a Participant and who is not a Key Employee. (d) Beneficiary. Whenever the term "Key Employee", "former Key Employee", or "Non-Key Employee" is used herein, it includes the beneficiary or beneficiaries of such individual. If an individual is a Key Employee by reason of the foregoing sentence as well as a Key Employee in his or her own right, both the value of his or her inherited benefit and the value of his or her own account will be considered his or her account for purposes of determining whether the Plan is a Top-Heavy Plan. (e) Compensation and Compensation Limitation. For purposes of this Section 11, except as otherwise specifically provided, the term "Compensation" has the same meaning as in Subsection 10.1 (b). (f) Required Aggregation Group. The term "Required Aggregation Group" shall mean all other qualified defined benefit and defined contribution plans maintained by the Employer and in which a Key Employee participates, and each other plan of the Employer which enables any plan in which a Key Employee participates to meet the requirements of Sections 401(a) (4) or 410 of the Code. (g) Permissive Aggregation Group. The term "Permissive Aggregation Group" shall mean all other qualified defined benefit and defined contribution plans maintained by the Employer that meet the requirements of Sections 401(a)(4) and 410 of the Code when considered with a Required Aggregation Group. 11.4 Requirements Applicable if Plan is Top-Heavy. In the event the Plan is determined to be Top-Heavy for any Plan Year, the following requirements shall be applicable. (a) Minimum Allocation (1) In the case of a Non-Key Employee who is covered under this Plan but does not participate in any qualified defined benefit plan maintained by the Employer, the Minimum Allocation of contributions plus forfeitures allocated to the Account of each such Non-Key Employee who has not separated from service at the end of a Plan Year in which the Plan is Top-Heavy shall equal the lesser of three percent (3%) of compensation for such Plan Year or the largest percentage of compensation provided on behalf of any Key Employee for such Plan Year (including any Salary Deferral Contributions). The Minimum Allocation provided hereunder may not be suspended or forfeited under Sections 411(a)(3)(B) or 411(a)(3)(D) of the Code. The Minimum Allocation shall be made for a Non-Key Employee for each Plan Year in which the Plan is Top-Heavy, regardless of the Non-Key Employee's level of compensation, even if he or she has not completed a Year of Service in such Plan Year or if he or she has declined to elect to make Salary Deferral Contributions or After-Tax Contributions, provided, however, in order to receive such Minimum Allocation, the Non-Key Employee must not have Separated From Service before the end of the Plan Year for which the Plan is found to be Top-Heavy. (2) A Non-Key Employee who is covered under this Plan and under a qualified defined benefit plan maintained by the Employer shall not be entitled to the Minimum Allocation under this Plan but shall receive the minimum benefit provided under the terms of the qualified defined benefit plan. (b) Top Heavy Vesting Schedule. Unless the Plan's vesting is more favorable, Non-Key Employee whose employment is terminated after the completion of 2 or more Years of Service shall be entitled to receive his or her vested interest in the value of the Employer Contributions credited to his or her account determined in accordance with the following schedule: Years of Service Vested Percentage 2 20% 3 40% 4 60% 5 80% 6 100% The vesting schedule under this paragraph (b) shall apply to a Non-Key Employee's interest in the value of the Employer Contributions credited to his or her Account under the Plan before or while the Plan is a Top-Heavy Plan. A Non-Key Employee is at all times one hundred percent (100%) vested in the full value of his or her Account attributable to his or her Salary Deferral Contributions and Employee Contributions to the Plan. (c) Vesting Percentage. In the event that the Plan previously was a Top-Heavy Plan but subsequently is not a Top-Heavy Plan, the vesting schedule under paragraph (b) shall be changed to the vesting schedule provided under Section 4.4, provided, however, that any Non-Key Employee who has completed at least 3 or more Years of Service and who had at least one Hour of Service while the Plan was a Top Heavy Plan, shall be entitled to elect, within a reasonable period, which of the above two vesting schedules is applicable to his or her benefit. (d) Limitations on Annual Additions and Benefits. For purposes of computing the defined benefit plan fraction and defined contribution plan fraction as set forth in Sections 415(e)(2)(B) and 415(e)(3)(B) of the Code, the dollar limitations on benefits and annual additions applicable to a Limitation Year shall be multiplied by 1.0 rather than by 1.25. (e) Limitation on Compensation. The annual compensation of a Key Employee taken into account under the Plan shall not exceed the limitation on compensation as provided in Section 401(a)(17) of the Code, as may be adjusted for increases in the cost of living pursuant to regulations issued under Section 415 of the Code. SECTION 12 ADMINISTRATION 12.1 Savings Plan Committee. This Plan shall be administered by the Savings Plan Committee. No member of the Committee shall receive any compensation from the Trust Fund for his or her service thereon. The Committee shall be the "Administrator" of the Plan for purposes of Section 3(16)(A) of ERISA and the "Named Fiduciary" of the Plan pursuant to Section 402(a) of ERISA. The Committee may delegate various duties and responsibilities to one or more employees or agents as set forth herein. In carrying out their respective responsibilities under the Plan, the Committee and other Plan fiduciaries shall have the discretionary authority to interpret the terms of the Plan and to determine eligibility for an entitlement to Plan benefits in accordance with the terms of the Plan. Any interpretation or determination made pursuant to such discretionary authority shall be given full force and effect, unless it can be shown that the interpretation or determination was arbitrary and capricious. 12.2 Power and Duties of the Committee. (a) The Committee shall have the following powers and duties: (i) To establish and enforce such rules, regulations and procedures as it shall deem necessary or proper for the efficient administration of the Plan; (ii) To interpret the Plan, its interpretation thereof in good faith to be final and conclusive; (iii) To decide all questions concerning the Plan and the eligibility of any Employee to participate in the Plan; (iv) To compute the amount of benefits which shall be payable to any Participant, in accordance with the provisions of the Plan, and to determine the person or persons to whom such benefits shall be paid; and (v) To authorize the payment of benefits. (b) In the exercise of all of its functions, the Committee shall act in an impartial and nondiscriminatory manner. (c) The Committee shall act by a majority of its members and the action of a majority of the Committee without a meeting which is duly recorded or otherwise appropriately documented shall be the action of the Committee. 12.3 Claims Procedure. The Committee shall provide adequate notice in writing to any Participant or to any Beneficiary ("Claimant") whose claim for benefits under the Plan the Committee has denied within 90 days after the claim was received. The Committee's notice to the Claimant shall set forth: (a) The specific reason for the denial; (b) Specific references to pertinent Plan provisions on which the Committee based its denial; (c) A description of any additional material and information that is needed; and (d) That any appeal the Claimant wishes to make of the adverse determination must be in writing to the Committee within sixty (60) days after receipt of the Committee's notice of denial of benefits. The Committee's notice must further advise the Claimant that his or her failure to appeal the action to the Committee in writing within the sixty (60) day period will render the Committee's determination final, binding and conclusive. Such notice shall be forwarded to the Claimant within 90 days of the Committee's receipt of the claim; provided, however, that in special circumstances the Committee may extend the response period for up to an additional 90 days, in which event it shall notify the Claimant in writing of the extension, and shall specify the reason(s) for the extension. If the Claimant should appeal to the Committee, he or she, or his or her duly authorized representative, may submit, in writing, whatever issues and comments he or she or his or her duly authorized representative feels are pertinent. The Claimant, or his or her duly authorized representative, may review pertinent Plan documents. The Committee shall reexamine all facts to the appeal and make a final determination as to whether the denial of benefits is justified under the circumstances. The Committee shall advise the Claimant of its decision within sixty (60) days of the Claimant's written request for review, unless special circumstances (such as a hearing) would make the rendering of a decision within the sixty (60) day limit unfeasible, but in no event shall the Committee render a decision respecting a denial for a claim for benefits later than one hundred twenty (120) days after its receipt of a request for review. The Committee's notice of denial of benefits shall identify the name and address of the Committee to whom the Claimant may forward his or her appeal. 12.4 Records Management. The Committee shall designate in its sole discretion a firm or organization to maintain the required records and reports of the Plan. The Company shall pay all expenses of such firm or organization. SECTION 13 TRUST 13.1 Trust Fund. (a) A Trust Fund has been established into which shall be paid the contributions to the Accounts which shall be held in separate subaccounts. At no time prior to the satisfaction of all liabilities under this Plan with respect to Participants, Former Participants, and beneficiaries of Participants, shall any part of the corpus or income of the Trust Fund be used for or diverted to any purpose other than for their exclusive benefit, except as stated in Section 16. No person shall have any financial interest in or right to the Trust Fund or any part thereof, except as expressly provided for in this Plan and a Participant's interest may not be assigned or alienated by act of the Participant or by operation of law, except as provided in Section 16. (b) Each Participant or Former Participant or other person who shall claim the right to any payment under the Plan shall be entitled to look only to the Trust Fund for such payment. No liability for the payment of benefits under the Plan shall be imposed upon the Company, an Affiliate, the Committee, or the officers, directors, or stockholders of any such entity. 13.2 Administrative Expenses. The reasonable expenses of administering the Plan, as determined by the Administrator, shall be payable from the Trust maintained for the Plan, except to the extent that the Employer, in its discretion, pays the expenses directly. SECTION 14 FIDUCIARY RESPONSIBILITY 14.1 Conduct. Each fiduciary shall discharge his or her duties with respect to the Plan and Trust Agreement solely in the interest of the Participants, Former Participants, and beneficiaries of Participants for the exclusive purpose of providing benefits to Participants, Former Participants, and their beneficiaries, and defraying reasonable expenses of administering the Plan and Trust Fund with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims, and in accordance with this Plan and any other documents or instruments governing the Plan and Trust Fund. A fiduciary who complies with the foregoing standards shall not be liable for any loss, action or omission hereunder. 14.2 Allocation and Delegation of Responsibilities. Plan Fiduciaries may allocate the responsibilities, obligations and duties granted to them for the operation and administration of the Plan and Trust Agreement among themselves. Any Plan Fiduciary may designate other individuals, corporations or other entities, who are not Plan Fiduciaries, to carry out such Plan Fiduciary's responsibilities, obligations and duties with respect to the Plan and Trust Agreement, except to the extent that ERISA prohibits such delegation of authority and discretion. Such allocations and delegations may be revoked or modified at any time and any such allocation, delegation, revocation or modification shall be made by written instruments signed by the Plan Fiduciary, if an individual, or in the case of other entities who are Plan Fiduciaries, in accordance with the procedures governing the functions of such entity, and a written record shall be kept thereof. 14.3 Co-Fiduciary Responsibility. A Plan Fiduciary or any individual, corporation or other entity employed or appointed by a Plan Fiduciary to serve in a fiduciary capacity with respect to the Plan or Trust Fund shall be solely responsible for the responsibilities, obligations or duties allocated or delegated to it, whether under this Plan and Trust Agreement or under the terms and conditions of employment or appointment. No person to whom such responsibilities, obligations or duties have not been allocated or delegated shall be responsible with respect to any action directed, taken or omitted by the Plan Fiduciary or individual, corporation or other entity serving in a fiduciary capacity to whom such responsibilities, obligations or duties have been allocated or delegated unless he or she participates knowingly in, or knowingly undertakes to conceal, an act or omission of such other Plan Fiduciary or individual, corporation or entity, knowing such act or omission is a breach of fiduciary responsibility or, if he or she has knowledge of a breach, he or she fails to make reasonable efforts under the circumstances to remedy the breach. 14.4 Duties of Fiduciaries With Respect to Investments. The Trustee shall have primary responsibility for investment of the assets of the Trust Fund which it administers unless the Company shall either: (a) Allocate control and management of all or any portion of the Trust assets to an Investment Manager, or (b) Notify the Trustee that the Committee shall direct the Trustee in the investment of all or any portion of the Trust Fund. If the Company appoints an Investment Manager pursuant to the foregoing, such Investment Manager shall be an investment adviser registered under the Investment Advisers Act of 1940, a bank as defined in such Act, or an insurance company which is qualified to manage the assets of employee benefit plans under the laws of more than one state. An Investment Manager shall acknowledge in writing its appointment as a Plan Fiduciary hereof, and shall serve until a proper resignation is received by the Company, or until it is removed or replaced by the Company. The Company, the Affiliates, the Committee and the Trustee shall be under no duty to question the direction or lack of direction of any Investment Manager, but shall act and shall be fully protected in acting, in accordance with each such direction. An Investment Manager shall have sole investment responsibility for that portion of the Trust assets which it has been appointed to manage, and no other Plan Fiduciary or any Trustee shall have any responsibility for the investment of any such assets, the management of which has been delegated to an Investment Manager, or liability for any loss to or diminution in value of such Trust assets resulting from any action directed, taken or omitted by an Investment Manager. If the Company notifies the Trustee that the Committee will direct the Trustee in the investment of all or any portion of the Trust Fund, the Trustee shall be subject to proper directions of the Committee, which are made in accordance with the terms of the Plan and which are not contrary to the provisions of Title I of ERISA. The Trustee shall be fully protected in acting in accordance with each such direction. No other Plan Fiduciary shall have any responsibility for the investment of any asset of the Trust Fund, the direction of which is given to the Committee, or liability for any loss to or diminution in value of such Trust Fund resulting from any action taken or omitted by the Trustee in accordance with such direction. SECTION 15 AMENDMENT, TERMINATION, AND MERGER 15.1 Right to Amend or Terminate the Plan. It is the intention of the Company to continue this Plan indefinitely and to make such contributions as may be required hereunder regularly each year. Nevertheless, subject to the provisions hereinafter set forth, the Board of Directors of the Company reserves the right at any time or from time to time to amend, alter or discontinue the Plan in whole or in part. The Retirement Committee of the Company shall have the right to alter or amend the Plan if such action is necessary or desirable and is (1) required by law, agreed to through collective bargaining or is appropriate to maintain the tax-qualified status of the Plan, or (2) is estimated not to result in a cost increase to the Company in excess of five (5) percent, provided, however, that no amendment or alterations shall be made which: (a) shall adversely affect any right or obligations of any Participant with respect to any contributions made hereto; (b) permits any funds paid to the Trustee to revert to the Company; or (c) provides for the use of the assets of the Plan, or any part thereof other than for the exclusive benefit of Participants, former Participants or their Beneficiaries or paying the reasonable expenses of administering the Plan. (d) will deprive any Participant, Former Participant or his or her beneficiary, without his or her consent, of any benefit theretofore accrued to him or her under the Plan. (e) will, except as provided in Section 16, violate Section 15.1. Any amendment of the Plan may be made, retroactively if necessary, which the Company deems necessary or appropriate to conform the Plan to, or to satisfy the conditions of, ERISA, the Code, or any other law, governmental regulations or rulings. 15.2 Termination of the Plan. In the event of the complete termination of the Plan or upon complete discontinuance of contributions under the Plan, the interest of all Participants in their Account Balances under the Plan to the date of termination of the Plan, shall be fully vested and nonforfeitable. In the event of the partial termination of the Plan, the affected interests of the affected Participants shall be fully vested and nonforfeitable. 15.3 Merger, Consolidation or Transfer. In the case of a merger or consolidation of the Plan with, or transfer of assets or liabilities of the Trust Fund to, any other plan or trust, the terms of the merger, consolidation or transfer shall be such that the benefits to which a Participant is entitled immediately after the merger, consolidation or transfer shall be equal to or greater than the benefit to which the Participant is entitled immediately prior to the merger, consolidation or transfer. For purposes of this Section, the benefit to which a Participant is entitled shall be determined on the assumption that the Plan had terminated on the day such determination is made. SECTION 16 NONALIENATION OF BENEFITS EXCEPT FOR QUALIFIED DOMESTIC RELATIONS ORDERS Benefits provided under the Plan may not be assigned or alienated or otherwise subject in any manner to anticipation, sale, transfer, pledge, garnishment, encumbrance or charge except in the case of a Qualified Domestic Relations Order as defined in this Section 16. The Plan shall establish procedures to determine that the requirements of Section 414(p) of the Code are met with respect to Qualified Domestic Relations Orders. For purposes of this Section 16, a Qualified Domestic Relations Order must meet the following requirements of (a) and (b) set forth below. (a) A Qualified Domestic Relations Order consists of any judgment, decree, or order (including approval of a property settlement agreement) which relates to the provision of child support, alimony payments, or marital property rights of a spouse, child, or other dependent and is made pursuant to a State domestic relations law (including a community property law) and which creates or recognizes the existence of an alternate payee's right to, or assigns to an alternate payee the right to, receive all or a portion of the benefits payable with respect to a Participant under the Plan. (b) A Qualified Domestic Relations Order must also meet the following conditions: (i) Such Order must clearly specify the name and the last known mailing address (if any) of the Participant and the name and mailing address of each alternate payee covered by the Order. (ii) Such Order must clearly specify the amount or percentage of the Participant's benefits to be paid by the Plan to each such alternative payee, or the manner in which such amount or percentage is to be determined. (iii) Such Order must clearly specify the number of payments or period to which such Order applies and the name of the Plan. (iv) Such Order shall not require the Plan to provide any type or form of benefit, or any option, not otherwise provided under the Plan. (v) Such Order shall not require the Plan to provide increased benefits (determined on the basis of actuarial value). (vi) Such Order shall not require the payment of benefits to an alternate payee which are required to be paid to another alternate payee under another Order previously determined to be a Qualified Domestic Relations Order. This Section 16 shall be construed in accordance with Section 414(p) of the Code and regulations issued thereunder. After an Order has been found to meet the conditions for a Qualified Domestic Relations Order, the Administrator of the Plan may make payments to the alternate payee who has been assigned a right to benefits payable with respect to a Participant under the Plan as soon as administratively feasible in accordance with the terms of the Qualified Domestic Relations Order. SECTION 17 MISCELLANEOUS PROVISIONS 17.1 Plan Not a Contract of Employment. Nothing in the Plan shall give any Employee the right to be retained in the employ of the Company or any Affiliate; all Employees shall remain subject to discharge, discipline or lay-off to the same extent as if the Plan had not been put into effect. 17.2 Gender and Number. Wherever appropriate, the masculine pronoun as used herein shall mean the feminine, and the singular, the plural. 17.3 Governing Law. The Plan shall be governed in accordance with the laws of the State of New York except to the extent superseded by ERISA. 17.4 Records and Reports. The Committee or its designee shall exercise appropriate authority to comply with ERISA relating to records and reports to Participants and appropriate governmental agencies, including annual notification to Participants of their Account balances, and annual registration of the Plan. 17.5 Wyeth Common Stock. The Trustee shall vote Wyeth Common Stock represented by the units it holds in the Wyeth Common Stock Fund in accordance with the instructions received from the Participant and if no instructions are received such stock shall not be voted. 17.6 Communications. For all purposes under the Plan, any reference to the written form shall also include any telephonic or electronic form as approved by the Committee. SECTION 18 TREATMENT OF RETURNING VETERANS 18.1 Applicability and Effective Date. Notwithstanding any other provisions of the Plan, the rights of any Returning Veteran who resumes employment with the Company on or after December 12, 1994 shall be modified as set forth in this Section. 18.2 Definitions. For purposes of this Section 18, the terms defined herein shall have the following meanings: (a) "Qualified Military Service" means any service (either voluntary or involuntary) by an individual in the Uniformed Services if such individual is entitled to reemployment rights with the Company with respect to such service. (b) "Returning Veteran" means a former Employee who, on or after December 12, 1994, returns from Qualified Military Service to employment with the Company within the period of time during which his or her reemployment rights are protected by law. (c) "Uniformed Services" means the Armed Forces, the Army National Guard and Air National Guard (when engaged in active duty for training, inactive duty training, or full-time National Guard duty), the commissioned corps of the Public Health Service, and any other category of persons designated by the President of the Untied States in time of war or emergency. 18.3 Eligibility to Participate. For purposes of Section 3 of the Plan: (a) A Returning Veteran who was an Employee eligible to participate in the Plan immediately prior to his or her Qualified Military Service shall be deemed to have remained an eligible Employee throughout his or her Qualified Military Service. (b) A Returning Veteran who would have become a Participant in the Plan during the period of his or her Qualified Military Service but for the resulting absence from employment, shall be deemed to have become a Participant as of the date when he or she would have become a Participant if he or she had not entered into Qualified Military Service. 18.4 No Break in Service. A Returning Veteran shall be deemed not to have incurred any break in service on account of his or her Qualified Military Service. 18.5 Vesting Credit. A Returning Veteran's Years of Service for vesting purposes shall be determined under Section 4.4, except that with respect to any period of Qualified Military Service, he or she shall be credited with the Hours of Service with which he or she would have been credited had he or she remained an Employee during such period. 18.6 Restoration of Salary Deferral Contributions and After-Tax Contributions. (a) Each Returning Veteran who, during his or her period of Qualified Military Service would have been eligible to make Salary Deferral Contributions and After-Tax Contributions, shall be permitted to contribute an amount equal to the amount of Salary Deferral Contributions and After-Tax Contributions that the Employee could have made during such absence from employment. Such "make-up" contributions shall be made during the period that begins with the Employee's reemployment by the Employer and ends with: (i) the expiration of a period of five years, or (ii) if shorter, a period equal to three times the period of Qualified Military Service. (b) Any make-up contributions described in Subsection (a) hereof shall be made in addition to those Salary Deferral Contributions After-Tax Contributions that the Participant may elect to make after his or her reemployment pursuant to Section 4.1. 18.7 Determination of Covered Compensation. For purposes of determining the amount of any make-up contributions under this Section 18, and for applying the limits of Section 10, a Participant's Covered Compensation during any period of Qualified Military Service shall be deemed to equal either: (a) the Covered Compensation the Participant would have received but for such Qualified Military Service, based on the rate of pay he or she would have received from the Company; or (b) if the amount described in (a) above is not reasonably certain, the Participant's average Covered Compensation from a participating Company during the 12-month period immediately preceding the Qualified Military Service (or, if shorter, the period of employment immediately preceding the Qualified Military Service). Such amount shall be adjusted as necessary to reflect the length of the Participant's Qualified Military Service. 18.8 Restoration of Matching Contributions. If a Returning Veteran contributes "make-up" Salary Deferral Contributions After-Tax Contributions pursuant to Section 18.6, the Company shall contribute on his or her behalf the related Matching Contributions that it would have made under Sections 4.5 and 4.6 if such Salary Deferral Contributions After-Tax Contributions had been made in the year to which they relate. Such Matching Contributions shall not include the earnings that would have accrued on such amount or any forfeitures that would have been allocated to the Returning Veteran's Account during the period of Qualified Military Service. 18.9 Application of Certain Limitations. (a) For purposes of applying the limitations of Sections 4.9 and 4.10, any make-up contributions described in Section 18.6, and any related Matching Contributions described in Section 18.8, shall be treated as contributions for the Plan Year to which they relate, rather than the Plan Year in which they were actually made. (b) For purposes of applying the limitations of Section 4.2, any such make-up contributions shall be treated as contributions for the calendar year to which they relate, rather than the calendar year in which they are actually made. (c) For purposes of applying the limitations of applying the limitations of Sections 4.9 and 4.10 and Section 11, any make-up contributions described in Section 18.6 and related Matching Contributions described in Section 18.8 shall be disregarded, both for the Plan Year to which the contributions relate, and for the Plan Year in which they are actually made. 18.10 Suspension of Loan Repayments. Notwithstanding any provisions of Article 9 to the contrary, if a Participant receives a loan from the Plan and enters into Qualified Military Service during the term of the loan, a decrease in Compensation or failure to make required loan repayments during such Qualified Military Service shall not result in a default under Section 9.1(l). 18.11 Administrative Rules and Procedures. The Committee or the Administrator shall establish such rules and procedures as it deems necessary or desirable to implement the provisions of this Article, provided that they are not in violation of the Uniformed Services Employment and Reemployment Rights Act of 1994, any regulations thereunder, or any other applicable law. SCHEDULE A Investment Funds 1. Company Stock Fund 2. MSIFT Value Fund 3. Interest Income Fund 4. Fidelity U.S. Equity Index Portfolio 5. Fidelity Megellan Fund 6. Fidelity Low Price Stock Fund 7. Fidelity Balanced Fund 8. Fidelity International Growth and Income Fund AMERICAN HOME PRODUCTS CORPORATION SAVINGS PLAN (the "Plan") APPENDIX I VESTING FOR PARTICIPANTS WHO ARE TRANSFERRED TO BAUSCH & LOMB INCORPORATED American Home Products Corporation ("AHPC") and Bausch & Lomb Incorporated ("B&L") entered into an agreement (the "Purchase Agreement"), whereby B&L purchased, as of December 31, 1997 (the "Closing Date"), substantially all of the issued and outstanding shares and certain assets of Storz Instrument Company and Storz Ophthalmics, Inc. ("Storz"), wholly-owned subsidiaries of AHPC. Pursuant to Section 9.4.3 of the Purchase Agreement, the Plan is amended to provide that, notwithstanding the provisions of Section 4.4 of the Plan, a Plan Participant, as of the Closing Date, whose employment is transferred to B&L, as of the Closing Date, shall be fully vested in his or her benefit attributable to his or her Matching Account accrued as of the Closing Date, regardless of whether he or she has less than five years of Continuous Service. APPENDIX II- ROLLOVERS OF DISTRIBUTIONS TO THE PLAN FROM THE SOLVAY AMERICA COMPANIES' SAVINGS PLAN American Home Products Corporation ("AHPC") entered into a purchase agreement with Solvay America ("Purchase Agreement") whereby AHPC purchased certain assets of the Solvay Animal Health Division (the "Business") and certain employees of the Business became employees of AHPC pursuant to the Purchase Agreement (the "Transferred Employees"). As part of the Purchase Agreement, the Plan is hereby amended to permit Transferred Employees to roll over their account balances in the Solvay America Companies' Savings Plan (including loans) into the Plan. However, such rollovers shall only be permitted during a period commencing on the closing date for the acquisition of Solvay Animal Health Division (the "Closing Date") and ending ninety (90) calendar days thereafter. APPENDIX III - GENETICS INSTITUTE ACQUISITION Effective July 1, 1997, the Genetics Institute (401(k)) Savings and Investment Plan ("Genetics Institute Savings Plan") was merged into the American Home Products Corporation Savings Plan ("AHPC Savings Plan"). The following special provisions will apply under the AHPC Plan to Participants of the Genetics Institute Savings Plan. 1. Transfer of Assets The account balances of Participants in the Genetics Institute Savings Plan shall be transferred to the AHPC Savings Plan as of July 1, 1997 into investment funds under the AHPC Savings Plan which most closely correspond to the investment funds under the Genetics Institute Savings Plan in which such account balances are invested on that date. After the transfer, Participants in the Genetics Institute Savings Plan may thereafter elect, in accordance with the provisions of Section 6.5 of the AHPC Plan, to transfer these amounts into any other investment funds offered in the AHPC Savings Plan. 2. Participation Participants in the Genetics Institute Savings Plan as of June 30, 1997, who are actively employed with Genetics Institute shall become Participants in the AHPC Savings Plan as of such date. 3. Vesting Participants of the Genetics Institute Savings Plan who are actively employed by Genetics Institute or any of its affiliates on June 30, 1997, shall be 100% vested in all amounts in their accounts in the Genetics Institute Savings Plan as of such date (including any Company Matching Contributions and earnings on those contributions) regardless of the amount of the Participant's service. Participants of the Genetics Institute Savings Plan on June 30, 1997 who were not actively employed with Genetics Institute or any of its affiliates as of that date shall be vested in these accounts in accordance with the provisions of the Genetics Institute Savings Plan. With respect to contributions made to the AHPC Plan after June 30, 1997, former Participants of the Genetics Institute Savings Plan who had three or more years of service with Genetics Institute as of that date will be vested under either the AHPC Savings Plan vesting schedule or the Genetics Institute Savings Plan, based upon whichever provides the greater vested amount. Participants of the Genetics Institute Savings Plan on July 1, 1997 who had less than 3 years of service will be vested to the same extent as they were vested under the Genetics Institute Savings Plan on such date and future Company contributions shall be vested in accordance with the vesting provisions of the Plan. 4. Distributions Upon Employment Termination Amounts that have been contributed to the Genetics Institute Savings Plan and which have been transferred to the AHPC Savings Plan, as well as amounts contributed after July 1, 1997, shall be distributed in accordance with the provisions of Section 7 of the AHPC Savings Plan. 5. In-Service Withdrawals As of July 1, 1997, the provisions of the AHPC Savings Plan regarding in service withdrawals, as set forth in Section 8 of the AHPC Savings Plan, shall apply to the amounts transferred to the AHPC Savings Plan from the Genetics Institute Savings Plan. 6. Loans After July 1, 1997, the provisions of Section 9 of the AHPC Savings Plan shall apply with respect to loans to Participants whether or not the loan is made from amounts contributed to the Genetics Institute Savings Plan or the AHPC Savings Plan. AMERICAN HOME PRODUCTS CORPORATION SAVINGS PLAN (the "Plan") APPENDIX IV VESTING FOR PARTICIPANTS WHO ARE TRANSFERRED TO TYCO INTERNATIONAL (US), INC. American Home Products Corporation ("AHPC"), American Cyanamid Company ("Cyanamid"), and AHPC Subsidiary Holding Corporation ("AHPC Sub") entered into an agreement (the "Purchase Agreement") with Tyco International (US), Inc. ("Tyco"), dated as of October 20, 1997, whereby Tyco purchased, as of February 27, 1998 (the "Closing Date"), substantially all of the issued and outstanding shares and certain of the assets of Sherwood Medical Company, a wholly-owned subsidiary of AHPC. Pursuant to Section 9.4(c) of the Purchase Agreement, the Plan is amended to provide that, notwithstanding the provisions of Section 4.4 of the Plan, a Plan Participant, as of the Closing Date, whose employment is transferred to Tyco as of the Closing Date, shall be fully vested in his or her benefit attributable to his or her Matching Account accrued as of the Closing Date, regardless of whether he or she has less than five years of Continuous Service. AMERICAN HOME PRODUCTS CORPORATION SAVINGS PLAN (the "Plan") APPENDIX V - APOLLON ACQUISITION Employees of Apollon, Inc. ("Apollon"), on April 14, 1998, who are employed by American Home Products Corporation or one of its subsidiaries as of April 15, 1998 ("Transferred Employees") will become eligible for participation in the Plan, effective as of April 15, 1998, after satisfying the requirements of Section 3.1 of the Plan. For purposes of the eligibility requirements under Section 3.1 of the Plan and for purposes of the vesting requirements under Section 4.4 of the Plan, service of Transferred Employees under the Plan shall include their service with Apollon prior to April 15, 1998, provided however, that such service shall be credited in accordance with the provisions and rules of the Plan for the crediting of such service. AMERICAN HOME PRODUCTS CORPORATION SAVINGS PLAN (the "Plan") APPENDIX VI VESTING FOR PARTICIPANTS WHO ARE TRANSFERRED TO QIC HOLDING CORPORATION American Home Products Corporation ("AHPC") and A.H. Robins Company, Incorporated entered into an agreement (the "Purchase Agreement") with QIC Holding Corporation ("QIC"), dated as of May 28, 1998, whereby QIC purchased, as of June 5, 1998 (the "Closing Date"), substantially all of the issued and outstanding shares and certain of the assets of Quinton Instrument Company, a wholly-owned subsidiary of AHPC. Pursuant to Section 9.4(c) of the Purchase Agreement, the Plan is amended to provide that, notwithstanding the provisions of Section 4.4 of the Plan, a Plan Participant, as of the Closing Date, whose employment is transferred to QIC as of the Closing Date, shall be fully vested in his or her benefit attributable to his or her Matching Account accrued as of the Closing Date, regardless of whether he or she has less than five years of Continuous Service. AMERICAN HOME PRODUCTS CORPORATION SAVINGS PLAN (the "PLAN") APPENDIX VII - SOLGAR ACQUISITION Employees of Solgar Vitamins and Herb Company and Solgar Laboratories, Inc. ("Solgar Company") Effective July 30, 1998, the following special provisions shall apply under the American Home Products Corporation Savings Plan - United States (the "Plan"), notwithstanding any other provision of the Plan to the contrary, to employees of Solgar Vitamins and Herb Company and Solgar Laboratories, Inc. (the "Solgar Company"), who became employees of the American Home Products Corporation ("AHPC") on July 30, 1998, as a result of the purchase of assets of the Solgar Company by AHPC (the "Transferred Employees"). Transferred Employees will become eligible for participation in the Plan, effective as of July 30, 1998, after satisfying the requirements of Section 3.1 of the Plan. For purposes of the eligibility requirements under Section 3.1 of the Plan and the vesting requirements under Section 4.4 of the Plan, service of Transferred Employees under the Plan shall include their service with the Solgar Company prior to July 30, 1998, provided however, that such service shall be credited in accordance with the provisions and rules of the Plan for the crediting of such service. AMERICAN HOME PRODUCTS CORPORATION SAVINGS PLAN (the "Savings Plan") APPENDIX VIII VESTING FOR PARTICIPANTS TRANSFERRED TO SINALUNGA HOLDING B.V. American Home Products Corporation - Sinalunga Holding B.V. Agreement to Sell the Eurand Companies American Home Products Corporation ("AHPC") entered into an agreement (the "Purchase Agreement") with Sinalunga Holding B.V. ("Sinalunga"), a Dutch corporation, dated March 19, 1999, to purchase substantially all of the issued and outstanding shares of the Eurand Companies, a wholly-owned subsidiary of AHPC (the "Purchase Agreement"), as of April 1, 1999 (the "Closing Date"). Pursuant to Section 7.2(c) of the Purchase Agreement, the Savings Plan is hereby amended to provide that, notwithstanding the provisions of Section 4.4 of the Savings Plan, a Plan Participant as of the Closing Date, who becomes an employee of the Eurand Companies, Sinalunga or their affiliates as of the Closing Date, shall be fully vested in the portion of his or her Account attributable to Company Matching Contributions as of the Closing Date, regardless of whether he or she has less than five years of Continuous Service. AMERICAN HOME PRODUCTS CORPORATION SAVINGS PLAN (the "Plan") APPENDIX IX - GLAXO FACILITY PURCHASE American Home Products Corporation (the "Company") acquired substantially all of the assets of a facility located at 40 Technology Way, West Greenwich, Rhode Island, pursuant to a purchase agreement with Glaxo Wellcome Biopharmaceuticals, Inc., a Delaware corporation and wholly-owned subsidiary of Glaxo Wellcome, Inc. ("Glaxo"), dated August 23, 1999. Employees of Glaxo, on September 24, 1999 (the "Closing Date"), who are offered and accept employment with the Company or one of its subsidiaries as of the Closing Date in the United States (the "Glaxo Employees") will become eligible for participation in the Plan, effective as of the Closing Date, after satisfying the eligibility requirements of Section 3.1 of the Plan. For purposes of the eligibility requirements under Section 3.1 of the Plan and for purposes of the vesting requirements under Section 4.4 of the Plan, service of Glaxo Employees under the Plan shall include their service with Glaxo prior to the Closing Date, provided however, that such service shall be credited pursuant to the provisions and rules of the Plan for the crediting of service. AMERICAN HOME PRODUCTS CORPORATION SAVINGS PLAN - UNITED STATES (the "Savings Plan") VESTING FOR PARTICIPANTS AFFECTED BY THE SALE TO BASF AKTIENGESELLSCHAFT APPENDIX X American Home Products Corporation (the "Company") and American Cyanamid Company ("Cyanamid") a wholly-owned subsidiary of the Company, entered into an agreement with BASF Aktiengesellschaft, a corporation organized under the laws of Germany ("BASF"), dated as of March 20, 2000 (the "Purchase Agreement"), whereby the Company sold to BASF the crop protection business conducted by Cyanamid. Pursuant to Section 9.4(c) of the Purchase Agreement, the Savings Plan is hereby amended to provide that, notwithstanding the provisions of Section 4.4 of the Savings Plan, all Plan Participants who are "U.S. Employees" as defined in the Purchase Agreement (or whose employment is otherwise transferred to BASF in connection with the transactions contemplated by the Purchase Agreement), shall be fully vested in his or her benefit attributable to his or her Matching Account as of June 30, 2000 (the "Closing Date"), regardless of whether he or she has less than five years of Continuous Service. Notwithstanding the foregoing, Participants who are on disability, leave of absence, or lay off with recall rights on the Closing Date shall become fully vested in the benefits attributable to his or her Matching Account as of the time he or she returns to work and is transferred to employment with BASF, provided such return to employment occurs within 180 days after the Closing Date. Assets of Participants in the Savings Plan who become employed by BASF as of the Closing Date shall be transferred to the defined contribution plan of BASF as soon as practicable after the Closing Date. AMERICAN HOME PRODUCTS CORPORATION SAVINGS PLAN - UNITED STATES VESTING FOR PARTICIPANTS WHO ARE TRANSFERRED TO R.P. SCHERER, INC. APPENDIX XI American Home Products Corporation (the "Company") entered into an asset purchase agreement, dated December 22, 2000 (the "Purchase Agreement"), with R.P. Scherer Corporation ("Scherer") pursuant to which the Company agreed to sell and Scherer agreed to buy certain assets relating to the Company's vegetable-based capsule business. Pursuant to the terms of the Purchase Agreement, the American Home Products Corporation Savings Plan - United States (the "Plan") is hereby amended to provide that, notwithstanding the provisions of Section 4.4 of the Plan, a Participant in the Plan whose employment is transferred to Scherer in connection with the foregoing transaction shall be fully vested in his or her benefit attributable to his or her matching account accrued as of the date of the transfer of employment, regardless of whether he or she has less than five years of Continuous Service (as defined in the Savings Plan) on that date. AMERICAN HOME PRODUCTS SAVINGS PLAN - UNITED STATES EGTRRA AMENDMENTS APPENDIX XII SECTION 1. LIMITATIONS ON CONTRIBUTIONS 1. Effective date. This Section shall be effective for Limitation Years beginning after December 31, 2001. 2. Maximum Annual Addition. Except to the extent permitted under Section 7 of this amendment and Section 414(v) of the Code, if applicable, the Annual Addition that may be contributed or allocated to a Participant's Account under Section 10 of the Plan for any Limitation Year shall not exceed the lesser of: (a) $40,000, as adjusted for increases in the cost-of-living under Section 415(d) of the Code, or (b) 100 percent of the Participant's Compensation, within the meaning of Section 415(c)(3) of the Code, for the Limitation Year. The Compensation limit referred to in (b) shall not apply to any contribution for medical benefits after separation from service (within the meaning of Section 401(h) or Section 419A(f)(2) of the Code) which is otherwise treated as an Annual Addition. SECTION 2. INCREASE IN COMPENSATION LIMIT The annual Compensation of each Participant taken into account in determining allocations for any Plan Year beginning after December 31, 2001, shall not exceed $200,000, as adjusted for cost-of-living increases in accordance with Section 401(a)(17)(B) of the Code. Annual Compensation means Compensation during the Plan Year or such other consecutive 12-month period over which Compensation is otherwise determined under the Plan (the "determination period"). The cost-of-living adjustment in effect for a calendar year applies to annual Compensation for the determination period that begins with or within such calendar year. SECTION 3. MODIFICATION OF TOP-HEAVY RULES 1. Effective date. This Section shall apply for purposes of determining whether the Plan is a top-heavy Plan under Section 416(g) of the Code for Plan Years beginning after December 31, 2001, and whether the Plan satisfies the minimum benefits requirements of Section 416(c) of the Code for such years. This Section amends Section 11 of the Plan. 2. Determination of top-heavy status. 2.1 Key Employee. Key Employee means any Employee or former Employee (including any deceased employee) who at any time during the Plan Year that includes the Determination Date was an officer of the Employer having annual compensation greater than $130,000 (as adjusted under Section 416(i)(1) of the Code for Plan Years beginning after December 31, 2002), a 5-percent owner of the employer, or a 1-percent owner of the Employer having annual compensation of more than $150,000. For this purpose, annual compensation means compensation within the meaning of Section 415(c)(3) of the Code. The determination of who is a Key Employee will be made in accordance with Section 416(i)(1) of the Code and the applicable regulations and other guidance of general applicability issued thereunder. 2.2 Determination of present values and amounts. This Section 2.2 shall apply for purposes of determining the amounts of account balances of Employees as of the Determination Date. 2.2.1 Distributions during year ending on the Determination Date. The amounts of account balances of an Employee as of the Determination Date shall be increased by the distributions made with respect to the Employee under the Plan and any plan aggregated with the Plan under Section 416(g)(2) of the Code during the 1-year period ending on the Determination Date. The preceding sentence shall also apply to distributions under a terminated plan which, had it not been terminated, would have been aggregated with the Plan under Section 416(g)(2)(A)(i) of the Code. In the case of a distribution made for a reason other than separation from service, death, or disability, this provision shall be applied by substituting "5-year period" for "1-year period." 2.2.2 Employees not performing services during year ending on the Determination Date. The Accounts of any individual who has not performed services for the Employer during the 1-year period ending on the Determination Date shall not be taken into account. 3. Minimum benefits. Matching Contributions. Matching Contributions shall be taken into account for purposes of satisfying the minimum contribution requirements of Section 416(c)(2) of the Code and the Plan. The preceding sentence shall apply with respect to Matching Contributions under the Plan. Matching Contributions that are used to satisfy the minimum contribution requirements shall be treated as Matching Contributions for purposes of the actual contribution percentage test and other requirements of Section 401(m) of the Code. SECTION 4. DIRECT ROLLOVERS OF PLAN DISTRIBUTIONS 1. Effective date. This Section shall apply to distributions made after December 31, 2001. 2. Modification of definition of Eligible Rollover Distribution to exclude hardship withdrawals. For purposes of the direct rollover provisions in Section 7.14 of the Plan, any amount that is distributed on account of hardship shall not be an Eligible Rollover Distribution and the Distributee may not elect to have any portion of such a distribution paid directly to an Eligible Retirement Plan. 3. Modification of definition of Eligible Rollover Distribution to include after-tax contributions. For purposes of the direct rollover provisions in Section 7.14 of the Plan, a portion of a distribution shall not fail to be an Eligible Rollover Distribution merely because the portion consists of after-tax contributions which are not includible in gross income. However, such portion may be transferred only to an individual retirement account or annuity described in Section 408(a) or (b) of the Code, or to a qualified defined contribution plan described in Section 401(a) or 403(a) of the Code that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible. 4. Modification of definition of Eligible Retirement Plan. For purposes of the direct rollover provisions in Section 7.13 of the Plan, an Eligible Retirement Plan shall also mean an annuity contract described in section 403(b) of the Code and an eligible plan under section 457(b) of the Code which is maintained by a state, political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this plan. The definition of Eligible Retirement Plan shall also apply in the case of a distribution to a surviving spouse, or to a spouse or former spouse who is the alternate payee under a qualified domestic relation order, as defined in section 414(p) of the Code. The Plan will accept Participant Rollover Contributions and/or direct rollovers of Eligible Rollover Distributions made after December 31, 2001, from a qualified Plan described in Section 401(a) or 403(a) of the Code. SECTION 5. REPEAL OF MULTIPLE USE TEST The multiple use test described in Treasury Regulation Section 1.401(m)-2 and Section 4.10 of the Plan shall not apply for Plan Years beginning after December 31, 2001. SECTION 6. ELECTIVE DEFERRALS - CONTRIBUTION LIMITATION No Participant shall be permitted to have Salary Deferral Contributions made under this Plan, or any other qualified plan maintained by the Employer during any taxable year, in excess of the dollar limitation contained in Section 402(g) of the Code in effect for such taxable year, except to the extent permitted under Section 7 of this amendment and Section 414(v) of the Code, if applicable. SECTION 7. CATCH-UP CONTRIBUTIONS All Employees who are eligible to make Salary Deferral Contributions under this Plan and who have attained age 50 before the close of the Plan Year shall be eligible to make catch-up contributions in accordance with, and subject to the limitations of, Section 414(v) of the Code. Such catch-up contributions shall not be taken into account for purposes of the provisions of the Plan implementing the required limitations of Sections 402(g) and 415 of the Code. The Plan shall not be treated as failing to satisfy the provisions of the Plan implementing the requirements of Sections 401(k)(3), 401(k)(11), 401(k)(12), 410(b), or 416 of the Code, as applicable, by reason of the making of such catch-up contributions. This Section 7 shall apply to contributions made after December 31, 2001. SECTION 8. SUSPENSION PERIOD FOLLOWING HARDSHIP DISTRIBUTION A Participant who receives a distribution of Salary Deferral Contributions after December 31, 2001, on account of hardship shall be prohibited from making Salary Deferral Contributions and After-Tax Contributions under this Plan and all other plans of the Employer for 6 months after receipt of the distribution. SECTION 9. DISTRIBUTION UPON SEVERANCE FROM EMPLOYMENT 1. Effective date. This Section 9 shall apply for distributions and severances from employment occurring after the dates set forth below. 2. New distributable event. A Participant's Salary Deferral Contributions, Matching Contributions, and earnings attributable to these contributions shall be distributed on account of the Participant's severance from employment. However, such a distribution shall be subject to other provisions of the Plan regarding distributions, other than provisions that require a separation from service before such amounts may be distributed. This Section shall apply for distributions after severances from employment occurring after December 31, 2001. AMERICAN HOME PRODUCTS CORPORATION SAVINGS PLAN (the "Plan") VESTING FOR PARTICIPANTS WHO ARE TRANSFERRED TO IMMUNEX CORPORATION APPENDIX XIII American Home Products Corporation ("AHPC"), a Delaware corporation, and AHPC Subsidiary Holding Corporation, a Delaware corporation, (together with AHPC the "Sellers") entered into a purchase agreement with Immunex Corporation ("Immunex"), a Washington corporation, (the "Buyer"), dated November 6, 2001 (the "Purchase Agreement"), for the purchase as of January 3, 2002 (the "Closing Date") by Immunex of one thousand (1,000) shares of Greenwich Holdings Inc. ("Greenwich"), a Delaware corporation, which constitutes all of the issued and outstanding shares of capital stock of Greenwich. Pursuant to Section 8.1(b) of the Purchase Agreement, Buyers agreed to amend the Plan to provide that Participants in the Plan who have their employment transferred to Immunex on the Closing Date, the "Transferred Employees", as defined in the Purchase Agreement), shall be fully vested in their benefit attributable to their Matching Account as of the Closing Date, regardless of the number of years of Continuous Service of the Transferred Employees on that date. EX-10.43 11 sesp.txt SUPPLEMENTAL EMPLOYEE SAVINGS PLAN WYETH SUPPLEMENTAL EMPLOYEE SAVINGS PLAN (as amended to March 11, 2002) l. PURPOSE The purpose of the Supplemental Employee Savings Plan ("the Plan") is to provide a savings plan of deferred compensation for selected managers or highly compensated employees in situations where part of such employees' compensation falls outside of the IRS qualified savings plan. The Plan shall be implemented by agreements entered into between the selected employees and their respective employers which shall be either Wyeth ("Wyeth") or a U.S. or Puerto Rico subsidiary thereof. The Plan shall be unfunded for tax purposes and for purposes of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and shall be administered and interpreted in such manner as not to be subject to the participation and vesting, the funding and the fiduciary responsibility provisions of Title I of ERISA. Participants in the Plan have the status of general unsecured creditors of their employers and the Plan constitutes a mere promise by the employer to make benefit payments in the future. The Plan shall be administered by the Savings Plan Committee (the "Committee") which also administers the Wyeth Savings Plan. The Committee shall have sole discretion to determine which selected employees will be permitted to participate in the Plan. ll. ADMINISTRATION The Committee shall administer the Plan and shall have full authority to determine all questions arising in connection with the Plan, including its interpretation. The Committee's decisions shall be conclusive and binding on all persons. The Committee may adopt rules and procedures to implement the Plan. III. PARTICIPATION The Committee shall have discretion to determine which employees of Wyeth and its subsidiaries may participate in the Plan. The Committee shall also have discretion to determine when participation begins and terminates. At the discretion of the Committee, a selected employee may begin or terminate participation at any time by appropriate notice to the Committee. A letter designating selection shall be issued to such employee by such employee's employer. Such letter shall indicate the applicable salary for which the employee may participate. When the agreement set forth at the end of the Plan is executed by both the employee and the appropriate officer of the employer, it shall become effective and the employee shall thereupon become a participant in the Plan. An employee who accepts an offer to participate in the Plan agrees to have from 1% to 6% of his or her applicable salary, as determined by the Committee, reduced from salary otherwise payable in accordance with the terms and conditions set forth in Article IV. IV. PLAN FORMULA (1) In General Employee Salary Deferral Contributions, (1% to 6% of applicable salary) and Matching Contributions (50% of the Salary Deferral Contributions as defined in the Savings Plan, hereinafter referred to as "Salary Deferral Contributions" and "Matching Contributions" respectively) may be made to the Plan and the Plan may receive contributions of such amounts. Salary Deferral Contributions shall be withheld from the respective employee's salary and accounted for separately. Matching Contributions shall be accounted for separately. (2) Investments Salary Deferral Contributions and Matching Contributions shall be adjusted for investment experience in the same manner, as directed by the employee, that would have resulted if these contributions were able to be invested as Salary Deferral Contributions in the investment funds described in Section 6 of the Savings Plan which are set forth in Appendix A, as attached hereto, and incorporated herein by reference. (3) Valuation, Distributions and Vesting, Etc. The distribution of Salary Deferral Contributions and Matching Contributions shall be in a lump sum in cash and the amount of the distribution shall be determined in accordance with the investment performance under the applicable provisions of the Savings Plan as if such amounts had actually been invested in the same investment funds as set forth in Appendix A, as attached hereto, and incorporated herein by reference. Distributions shall be made in accordance with the provisions set forth in Section 7 of the Savings Plan, except that the Committee may waive one or more of the requirements set forth therein. No payments will be made under the Plan until the employee terminates employment by death or otherwise, or is permanently disabled. Vesting shall be determined in accordance with the same provisions set forth in the Savings Plan. Whatever beneficiary designations were made pursuant to the Saving Plan shall also apply to the Plan in the event of the Participant's death. Beneficiary designations shall be made pursuant to the Plan and in accordance with the agreement between the employer and the employee. Notwithstanding the provisions of this paragraph IV(3), distributions will only be made on six (6) months prior written notice or effective as of April 1, 2002, upon twelve months prior written notice. A Participant may elect, upon his or her separation from service, in lieu of receiving a distribution, to transfer part or all of the value of his or her account to the Wyeth Deferred Compensation Plan (the "Deferred Compensation Plan) on the terms and conditions set forth therein, provided that such Participant is a participant in the Deferred Compensation Plan and is Retirement Eligible (as defined in the Deferred Compensation Plan) at the time of his or her separation from service. Employee's foreign salary shall be converted into U.S. dollars under guidelines adopted by the Committee. V. FOREIGN LAW This Plan shall be construed so that foreign law does not apply. If foreign law should apply to a particular participant, participation in the Plan shall terminate for such participant and such participant shall be appropriately reimbursed for any Salary Deferral Contributions and Matching Contributions made to the date of such termination. VI. AMENDMENT AND TERMINATION The Plan may be terminated or amended at any time by the Committee provided that benefits vested prior to such termination or amendment shall remain unaffected. VII. GOVERNING LAW AND CONSTRUCTION The Plan shall be governed in accordance with the laws of the State of New York except to the extent superseded by ERISA. The provisions of the Savings Plan are hereby incorporated by reference to the extent that they are referred to herein and to the extent that they do not conflict with the express provisions of the Plan set forth above. The Plan shall be deemed to have been adopted contemporaneously with the Savings Plan so that elections of savings percentages made under the Savings Plan may be made effective at such election date under the Plan. If any provision of the Plan is unenforceable due to operation of law or is contrary to foreign law, such provision shall be severable and not affect other portions of the Plan. APPENDIX A - As Amended to July 1, 1997 INVESTMENT FUNDS AVAILABLE UNDER THE SUPPLEMENTAL EMPLOYEE SAVINGS PLAN The following funds shall be available for investment under the Supplemental Employee Savings Plan: 1. the Interest Income Fund; 2. the Fidelity Balanced Fund; 3. the Spartan U.S. Equity Index Fund; 4. the Fidelity Magellan Fund; 5. the Fidelity International Growth & Income Fund; 6. the Fidelity Low-Price Stock Fund; 7. the MSIF Trust Value Fund; and 8. the Wyeth Common Stock Fund EX-10.54 12 union.txt UNION SAVINGS PLAN WYETH UNION SAVINGS PLAN SECOND RESTATEMENT Restated as of January 1, 1997 As Amended to March 11, 2002 WYETH UNION SAVINGS PLAN (Restated as of January 1, 1997) The purpose of the Plan is to provide eligible employees with the opportunity to accumulate personal savings. The Plan is amended and restated, effective January 1, 1997, unless otherwise noted herein, to comply with the Uruguay Round Agreements Act of 1994 ("GATT"); the Uniform Services Employment and Reemployment Rights Act of 1994 ("USERRA"); the Small Business Job Protection Act of 1996 ("SBJPA"); the Taxpayers Relief Act of 1997 ("TRA 97"); the Internal Revenue Service Restructuring and Reform Act of 1998 ("RRA 98"); and the Community Renewal Tax Relief Act of 2000 ("CRA") (collectively know as "GUST"). Benefits for any Member or beneficiary of such Member, who retired, died or terminated employment at any time prior to January 1, 1997 will be determined under the provisions of the Plan as in effect on the date of the Member's retirement, death, or termination, unless additional benefits are specifically provided by a subsequent amendment to the Plan. The restated Plan contained herein will apply to Members, or beneficiaries of such Members, who retire, die or terminate employment at any time on or after January 1, 1997. Effective March 11, 2002, the Company changed its corporate name from American Home Products Corporation to Wyeth and the name of the Plan was changed accordingly. It is intended that the Plan and Trust Fund will be for the exclusive benefit of participating Members, their beneficiaries and families. Subject to the provisions of the Plan, and except as otherwise is permitted by law, in no event shall any part of the principal or income of the Trust Fund be paid to or revert to the Company. It is intended that the Plan and Trust will constitute a qualified plan and trust within the meaning of Section 401(a), Section 501(a) and Section 401(k) of the Code, and such intention shall be given great weight and consideration in the construction and interpretation of any provisions hereof. ARTICLE I DEFINITIONS As used herein: "Accounts" shall mean the bookkeeping accounts of a Member kept pursuant to Article V, including the Before-Tax Contribution Account, the Employee After-Tax Contribution Account, the Rollover Contribution Account, and the Company Contribution Account. "Act" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. "Adjustment Factor" shall mean the cost of living adjustment factor prescribed by the Secretary of the Treasury under Section 415(d) of the Code for years beginning after December 31, 1987, as applied to such items and in such manner as the Secretary shall provide. "Administrator" shall have the meaning specified in the Act and Section 16.01 of the Plan. "'Before-Tax Contribution" shall mean any amount constituting a reduction of the Covered Compensation of a Member which a Member shall have elected to cause the Participating Company which is the employer of such Member to contribute to the Plan on behalf of such Member in lieu of cash. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. "Company" or "Employer" shall mean Wyeth, a Delaware corporation, and any successor thereto. Prior to March 11, 2002, the term Company meant "American Home Products Corporation". For historical purposes, the term "American Home Products Corporation" has been retained where applicable. "Company Contribution" shall mean any contribution to the Plan by or on behalf of any Participating Company pursuant to Article V. "Company Stock" shall mean for purposes of this Plan, common stock of Wyeth. "Company Stock Fund" shall mean the investment in a fund that will consist primarily of Company Stock with a portion of the Fund invested in short-term investments for liquidity. Members' interests will be expressed in Units rather than Shares and the value of the Unit will reflect the combined value of Company Stock and the short-term investments. "Computation Period" shall mean with respect to a Member a twelve consecutive month period commencing on the date on which such person first becomes an Employee and on each succeeding anniversary thereof. "Covered Compensation" shall mean regular wages, salary, overtime and shift differentials for time worked prior to any reduction as contemplated by Article IV-A, or by Sections 125, 127, 129 or successor provisions of the Code, and exclusive of incentive compensation, any compensation for special remuneration or bonuses paid to an Employee by a Participating Company; provided, however, that in no event will the annual Covered Compensation of an Employee exceed the limitation provided for in Section 401(a)(17) of the Code, as adjusted by the Adjustment Factor. In addition to other applicable limitations set forth in the Plan, and notwithstanding any other provision of the Plan to the contrary, the annual Covered Compensation of each Employee taken into account under the Plan shall not exceed the OBRA'93 annual compensation limit. The OBRA'93 annual compensation limit is $150,000, as adjusted by the Commissioner for increases in the cost of living in accordance with Section 401(a)(17)(B) of the Code. The cost-of-living adjustment in effect for a calendar year applies to any period, not exceeding 12 months, over which Covered Compensation is determined (determination period) beginning in such calendar year. If a determination period consists of fewer than 12 months, the OBRA'93 annual compensation limit will be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is 12. Any reference in this Plan to the limitation under Section 401(a)(17) of the Code shall mean the OBRA'93 annual compensation limit set forth in this provision. If Covered Compensation for any prior determination period is taken into account in determining a Member's benefits accruing in the current Plan Year, the Covered Compensation for that prior determination period is subject to the OBRA'93 annual compensation limit in effect for that prior determination period. Effective for Plan Years beginning on and after January 1, 2002, Covered Compensation shall be limited as provided under Section 401(a)(17) of the Code as amended from time to time. For purposes of this Section, for Plan Years beginning on or after January 1, 2001, Covered Compensation paid or made available during such Plan Year shall not include elective amounts that are not includible in the gross income of the Employee by reason of Section 132(f)(4) of the Code. "Current Market Value" shall mean, with reference to Company Stock, the then fair market value thereof as determined by the Trustee in accordance with its standard procedures. "Employee" shall mean a person, other than a nonresident alien as to the United States who is not a Member of the Plan, who is then currently employed by the Company or a Subsidiary, and who is not then currently entitled to receive any retirement benefits or disability benefits for total and permanent disability, under any plan, program, contract or arrangement of the Company or any Subsidiary, or deemed totally and permanently disabled under the Plan. Unless otherwise specifically provided by the Board of Directors of the Company (or by any committee or person whom the Board of Directors may designate) with respect to any person or group of persons who become employed by a Participating Company in connection with the acquisition of any business or asset by the Company or a Subsidiary, such person or group of persons shall be considered Employees only during such time as the criteria of this paragraph are met. The term Employee shall not include an individual retained by the Company or a Subsidiary through or an agency to perform services for the Company or a Subsidiary who are classified or designated by the Company or a Subsidiary as an independent contractor or a fee for service worker, including, without limitation, any such individual who is or has been determined by a government entity, court, arbitrator or other third party to be a common law employee of the Company or a Subsidiary for any purpose and shall not include an individual designated as a Leased Employee. "Employee After-Tax Contributions" shall mean any after-tax contribution to the Plan made by a Member pursuant to Section 4.01. "Enrollment Date" shall mean the first day of each month while the Plan is in effect following a Member's satisfactory completion of the eligibility requirements of Article II. "Fund" shall mean any of the Funds specified in Section 6.01 or selected by the Savings Plan Committee to be an investment fund of the Plan as set forth in Schedule B which is attached hereto and incorporated herein by reference. "Highly Compensated Employee" shall mean: (a) effective for Plan Years starting after December 31, 1996, the term "Highly Compensated Employee" includes highly compensated active Employees and highly compensated former Employees. A highly compensated active Employee means any Employee who: (1) was a Five-Percent Owner (as defined in section 416(i)(1) of the Code and applying the constructive ownership rules of Section 318 of the Code) at any time during the Look-back Year or the Determination Year; or (2) for the Look Back Year, had (i) received Covered Compensation from the Employer or Affiliates in excess of $80,000, and (ii) if the Employer so elects, was in the Top-Paid Group during the Look-back Year. The $80,000 amount is adjusted at the same time and in the same manner as under Code section 415(d). In determining whether an Employee is a Highly Compensated Employee for years beginning in 1997, the above definition shall be treated as having been in effect for years beginning in 1996. A former Employee shall be treated as a Highly Compensated Employee if: (i) such Employee was a Highly Compensated Employee when such Employee separated from service, or (ii) such Employee was a Highly Compensated Employee for any Plan Year after attaining age 55. If the former Employee's separation from service occurred prior to January 1, 1987, he or she is a Highly Compensated Employee only if he or she satisfied clause (a) of this Section or received Compensation in excess of $50,000 during: (1) the year of his or her separation from service (or the prior year); or (2) any year ending after his or her 54th birthday. (b) For the purposes of this Section, the following definitions shall apply: "Compensation" means compensation within the meaning of Section 415(c)(3) of the Code. The determination will be made without regard to Sections 125, 402(e)(3) or 402(h)(1)(B) of the Code. "Determination Year" means the Plan Year with respect to which the determination of an individual's status as a "Highly Compensated Employee" (or Non-Highly Compensated Employee) is being made. "Look-Back Year" means the period of twelve (12) consecutive months immediately preceding the Determination Year or, if the Employer elects, the calendar year ending with or within the Determination Year. "Top-Paid Group" means that group of employees of the Employer and its Affiliates who, when ranked on the basis of compensation paid during the Determination Year or Look-back Year are among the 20 percent of Employees receiving the greatest amount of such compensation. Employees described in Section 414(q)(5) of the Code and the regulations promulgated thereunder shall be excluded. "Income" shall mean income with respect to contributions in a Member's Account(s) resulting from the investment and reinvestment of such contributions and any increment thereof and any distribution (and the net proceeds from the sale of any such distribution) with respect to any such investment and increments thereof. "Leased Employee" shall mean a person who is not a common law employee of the Employer or an Affiliate but who provides services to the Employer or an Affiliate, and: (1) such services are performed pursuant to an agreement between the Employer and any other person or entity (the "Leasing Organization"); (2) the person performing the services has done so on a substantially full-time basis for at least one (1) year; and (3) for Plan Years starting before January 1, 1997, the services performed are of a type historically performed in the business field of the recipient by employees; and (4) for Plan Years starting after December 31, 1996, the services are performed under the primary direction and control of the recipient of those services. Notwithstanding the preceding sentence, the Plan shall not treat an individual as a Leased Employee if the Leasing Organization covers the individual by a money purchase pension plan with a nonintegrated contribution rate of at least 10% of compensation, and provides for immediate participation and full and immediate vesting, provided that Leased Employees constitute less than 20% of the Company's Non-Highly Compensated Employees. "Member" shall mean and include (i) an Employee who is currently contributing to the Plan, and (ii) an Employee or former Employee who has any Shares or Units credited to any of his or her Accounts under the Plan. "Non-highly Compensated Employee" shall mean an Employee who is not a Highly Compensated Employee. "Participating Collective Bargaining Unit" shall mean a collective bargaining unit, which has bargained for and accepted participation in the Plan as set forth in Schedule A which is attached hereto and incorporated herein by reference. "Participating Company" shall mean and include (i) the Company, (ii) each Subsidiary that shall have elected to participate in the Plan with the consent of the Company, and (iii) with respect to United States citizens only, any Subsidiary which shall not have elected to participate in the Plan but which is (x) both a foreign subsidiary (within the meaning of Section 406 of the Code) of a domestic corporation (as contemplated by Section 406 of the Code) which is a Participating Company by reasons of clause (i) or (ii) hereof, and the subject of an agreement under Section 3121(1) of the Code, or (y) a domestic subsidiary (within the meaning of Section 407(a)(2)(A) of the Code) of a domestic parent corporation (within the meaning of Section 407(a)(2)(B) of the Code) which is a Participating Company by reason of clause (i) or (ii) hereof. "Payroll Deduction Authorization" shall mean any one of the several forms used by the Administrator from time to time for any of the purposes for which a Payroll Deduction Authorization is specified in the Plan. "Plan" shall mean the Wyeth Union Savings Plan, as from time to time amended. "Plan Fiduciary" shall mean the following: (a) The Employer and the Board of Directors of the Company and of each Subsidiary; (b) The Committee appointed in accordance with Article XVI of the Plan; and (c) The Trustee appointed in accordance with the provisions of the Trust Agreement. "Plan Year" shall mean the calendar year beginning January 1, 1997 and each calendar year thereafter during the existence of the Plan. "Rollover Contribution" shall mean any contribution to the Plan by a Member pursuant to Article XXI. "Shares" shall mean shares of the Mutual Funds with Vanguard or other Fund providers in which Members' Accounts are invested. "Subsidiary or Affiliate" shall mean a corporation or other entity not less than 80% of the voting stock, or not less than 80% of the other indicia of ownership (with a proportionate right to designate or control the management thereof), of which is owned directly or indirectly by the Company and/or any other Subsidiary or Subsidiaries, including, without limitation, all Members of a controlled group of corporations (as defined in Section 414(b) of the Code) which includes the Company; any trade or business (whether or not incorporated) which is under common control (as defined in Section 414(c) of the Code) with the Company; any organization (whether or not incorporated) which is a Member of an affiliated service group (as defined in Section 414(m) of the Code) which includes the Company; and any other entity required to be aggregated with the Company pursuant to regulations under Section 414(o) of the Code, with the Company, and any other entity which the Board of Directors of the Company may designate as a Subsidiary from time to time for the purposes of the Plan. Unless otherwise specifically provided by the Board of Directors of the Company (or any committee or person to whom the Board of Directors may delegate the authority) with respect to any Subsidiary, a Subsidiary shall be considered such (and employees thereof Employees) only during such time as the criteria of this paragraph are met. "Totally and Permanently Disabled", when used with respect to a Member, shall mean a person who is determined by the Company, on the basis of a written statement of a qualified physician selected by the Company, to be unable, indefinitely, as a result of any medical, physical or mental condition (whether occupational or non-occupational) to engage in any occupation of employment for substantial remuneration or profit other than for purposes of rehabilitation. "Trust Agreement" shall mean the assets of the trust established under Article XIII of the Plan, which trust shall form a part of the Plan. "Trust Fund" shall mean the assets of the trust established under Article XIII of the Plan, which trust shall form a part of the Plan. "Trustee" shall mean the trustee or trustees appointed by the Company pursuant to Article XIII. "Unit" shall have the meaning specified in Article VII. "Valuation Date" shall mean each day of any month on which the New York Stock Exchange is open for business. "Vanguard" shall mean the Vanguard Fiduciary Trust Company. ARTICLE II ELIGIBILITY Each Employee of a Participating Company who (1) has been employed by the Company or a Subsidiary at any time during at least one month of any twelve-month period ending on any anniversary of the date on which he or she first became employed by the Company or a Subsidiary, (2) is a member of a collective bargaining unit whose duly certified representative has been offered and accepted the Plan, and (3) is currently entitled to make contributions, shall upon completion of any forms required by the Administrator, be eligible to become a Member of the Plan; provided, however, that the Committee may waive any prior employment requirement set forth in this Article or in Article XXI with respect to any group of persons who become Employees as the result of the acquisition of any business or assets by a Participating Company, upon such terms and conditions as, and to the extent that, the Committee may specify. ARTICLE III PARTICIPATION Participation in the Plan shall be entirely voluntary. An eligible Employee may elect to become a Member of the Plan as of any Enrollment Date by delivering a Payroll Deduction Authorization to the Administrator or a Human Resources representative. A person shall continue to be a Member of the Plan so long as he or she has any Shares or Units credited to any of his or her Accounts under the Plan. ARTICLE IV EMPLOYEE CONTRIBUTIONS 4.01. Payroll Deductions. Each Member may make Employee After-Tax Contributions to the Plan only while an Employee, only from his or her Covered Compensation paid in the United States, and only by a payroll deduction of 1% to 16%, in whole percentages, as he or she may authorize from his or her Covered Compensation by delivering a Payroll Deduction Authorization form or by telephonic or electronic communication, which maximum percentage shall be reduced by the percentage of Covered Compensation of such Member represented by Before-Tax Contributions. 4.02. Adjustments. The percentage of Covered Compensation authorized as a payroll deduction for Employee After-Tax Contributions by a Member may be increased or decreased by the Member as of any Enrollment Date (but not more than once in any calendar quarter), by delivering a revised Payroll Deduction Authorization form. A resumption of Employee After-Tax Contributions, an increase in Employee After-Tax Contributions, the decrease of Employee After-Tax Contributions or, if the Member has previously adjusted his or her Employee After-Tax Contributions within twelve months, a termination of a Member's Payroll Deduction Authorization Form pursuant to Section 4.03, shall not be deemed an adjustment for purposes of the limitation of the number of adjustments permitted to a Member as specified in the preceding sentence. A change in Covered Compensation of a Member shall, without any notice being given by such Member, adjust the dollar amount of such Member's Employee After-Tax Contributions to that amount represented by the percentage previously in effect of his or her new Covered Compensation, so long as such amount may be deducted from his or her Covered Compensation paid in the United States. Such adjustment shall not be deemed an increase or decrease by a Member for the purposes of this Section. 4.03. Termination of Employee After-Tax Contributions. Payroll deductions for Employee After-Tax Contributions authorized by a Member may be terminated by him or her, effective as of any date determined by and in accordance with rules as established by the Committee, by delivering a revised Payroll Deduction Authorization form, or by telephonic or electronic communication as approved by and acceptable to the Administrator. If a Member shall become ineligible to make contributions to the Plan, his or her Payroll Deduction Authorization shall terminate immediately. 4.04. Resumption of Employee After-Tax Contributions. If the Payroll Deduction Authorization of a Member with respect to Employee After-Tax Contributions shall terminate, such individual thereafter may resume contributions to the Plan as of the next Enrollment Date on which such individual is eligible to authorize payroll deductions under the eligibility provisions of the Plan by delivering a new Payroll Deduction Authorization form or by telephonic or electronic communication as approved and acceptable to the Administrator. ARTICLE IV A VOLUNTARY PAY REDUCTIONS 4A.01. Contributions of Before-Tax Contributions. (a) In lieu of making all or any part of an Employee After-Tax Contribution, a Member may authorize, by delivering a Payroll Deduction Authorization form, or by telephonic or electronic communication as approved and acceptable to the Administrator, that such Member's Covered Compensation be reduced, subject to the limitations contained in the last two sentences of this Section 4A.01, 4A.03, 4A.03A and Section 5.02 by 1% to 16%, in whole percentages, and that such reduction be contributed to the Plan on behalf of such Member as a Before-Tax Contribution. The maximum amount of Covered Compensation a Member is permitted to defer during any calendar year is limited to $7,000 as adjusted by the Secretary of Treasury pursuant to Section 402(g) of the Code. Any amount that cannot be credited to his or her Employee Before-Tax Contribution account due to the foregoing limit shall be paid to the Member in cash. If the aggregate of: (i) the Before-Tax Contributions on behalf of a Member under this Plan for any Plan Year, and (ii) all other elective deferrals (as defined under Section 402(g)(3) of the Code) for such same Plan Year on behalf of such person under any other qualified benefit plan maintained by any other corporation or other entity which is, together with the Company treated as a single employer pursuant to Sections 414(b),(c),(m) or (o) of the Code, exceed the limitations of the last sentence of the preceding paragraph (such excess amounts being hereafter referred to as the "Excess Deferral Contributions"), then no later than April 15 of the following Plan Year, the Administrator shall distribute to such Member an amount of Before-Tax Contributions equal to the full amount of such Excess Deferral Contributions (together with the income allocable thereto for such prior Plan Year only). (b) A Member who is covered by an amendment to a collective bargaining agreement, dated March 22, 2001 (the "Amendment"), between Local No. 95, International Chemical Workers Union, AFL-CIO, Rouses Point, New York; Local No. 6, United Food and Commercial Workers International Union, AFL-CIO-CLC, Fort Dodge, Iowa; and Local No. 143, International Chemical Workers Union, AFL-CIO, Pearl River, New York, and the Company as agent for Wyeth-Ayerst Laboratories-Rouses Point, New York; Fort Dodge Laboratories-Fort Dodge, Iowa; and Wyeth-Ayerst Lederle-Pearl River, New York, may elect to contribute to the Plan as Before-Tax Contributions, the amount of a signing bonus to which he or she is entitled related to 2001 and/or 2004 pursuant to the Amendment, in lieu of receiving such amounts as cash. Such election shall be on a form supplied by the Administrator and must be made prior to the date such amounts would otherwise be payable to such Members. 4A.02. Method of Request; Termination; Adjustments. The percentage of Covered Compensation authorized as a payroll deduction for Before-Tax Contributions by a Member may be increased or decreased by him or her as of any Enrollment Date (but not more than once in any calendar quarter with respect to Before-Tax Contributions), by delivering a revised Payroll Deduction Authorization form, or by telephonic or electronic communication approved by the Administrator. A resumption of Before-Tax Contributions, a decrease of Before-Tax Contributions by reason of the election of an increase in Employee After-Tax Contributions, or, if the Member has previously adjusted his or her Before-Tax Contributions within twelve months, or a termination of a Member's Payroll Deduction Authorization form pursuant to this Section 4A.02 shall not be deemed an adjustment for purposes of the limitation of the number of increases or decreases permitted to a Member in any calendar quarter as specified in the first sentence of this Section 4A.02. A change in Covered Compensation of a Member shall, without any notice being given by such Member, adjust the dollar amount of the Before-Tax Contributions with respect to such Member to that amount represented by the percentage previously in effect of his or her new Covered Compensation, so long as such amount may be deducted from his or her Covered Compensation paid in the United States. Such adjustment shall not be deemed an increase or decrease for the purposes of the first sentence of this Section 4A.02. Payroll deductions for Before-Tax Contributions authorized by a Member may be terminated by him or her, effective as of any Enrollment Date, by delivering a revised Payroll Deduction Authorization form. If a Member shall become ineligible to make contributions to the Plan, his or her Payroll Deduction Authorization shall terminate immediately. If the Payroll Deduction Authorization of a Member with respect to Before-Tax Contributions terminates, such person thereafter may resume contributions to the Plan as of the next Enrollment Date on which such person is eligible to authorize payroll deductions under the eligibility provisions of the Plan by delivering a new Payroll Deduction Authorization form or by telephonic or electronic communication as approved and acceptable by the Administrator. 4A.03. Nondiscrimination Test for Before-Tax Contributions. From time to time during the course of the applicable Plan Year, the Administrator shall insure that either (i) the Average Actual Deferral Percentage for Eligible Members who are Highly Compensated Employees for the Plan Year shall not exceed the Average Actual Deferral Percentage for Eligible Members who are Non-highly Compensated Employees for the Plan Year multiplied by 1.25, or (ii) the Average Actual Deferral Percentage for Eligible Members who are Highly Compensated Employees for the Plan Year shall not exceed the Average Actual Deferral Percentage for Eligible Members who are Non-highly Compensated Employees for the Plan Year multiplied by 2, provided that the Average Actual Deferral Percentage for Eligible Members who are Highly Compensated Employees does not exceed the Average Actual Deferral Percentage for Eligible Members who are Non-highly Compensated Employees by more than two (2%) percentage points or such lesser amount as the Secretary of the Treasury shall prescribe to prevent the multiple use of this alternative limitation with respect to any Highly Compensated Employee. For the purpose of the foregoing determination, the following definitions shall be used. "Actual Deferral Percentage" shall mean the ratio (expressed as a percentage), of Before-Tax Contributions made on behalf of the Eligible Member for the Plan Year to the Eligible Member's Compensation for the Plan Year. For purposes of this Section and Section IV B, "Compensation" shall mean a Member's "Covered Compensation" for the Plan Year as herein defined. "Average Actual Deferral Percentage" shall mean the average (expressed as a percentage) of the Actual Deferral Percentages of the Eligible Members. "Eligible Members" shall mean all Employees of Participating Companies who are otherwise authorized under the terms of the Plan to have Before-Tax Contributions allocated to their Accounts for the Plan Year. For purposes of this section, the Actual Deferral Percentage for any Eligible Member who is a Highly Compensated Employee for the Plan Year and who is eligible to have Before-Tax Contributions allocated to his or her Account under two or more plans or arrangements described in Section 401(k) of the Code that are maintained by a Subsidiary shall be determined as if all such Before-Tax Contributions were made under a single arrangement. The determination and treatment of the Before-Tax Contributions, Compensation and Actual Deferral Percentage of any Member shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury. The test described above will be conducted using the current year testing method; provided, however, that the Plan may be amended to use the prior year testing method in those situations for which such changes are approved in Internal Revenue Service Notice 98-1, or subsequent guidance promulgated by the Secretary. In the event that neither the standard in clause (i) or (ii) of the first paragraph of this Section 4A.03 is met, the Administrator shall reduce the Before-Tax Contributions requested by the Highly Compensated Employees in any manner deemed equitable by the Administrator so as to insure compliance with the foregoing standards. A future required reduction in a Before-Tax Contribution shall be paid to the affected Member as, and with the remainder of, such Member's Covered Compensation, but such Member may direct that such amount (or any portion thereof) be treated as an Employee After-Tax Contribution. 4A.03A. Compliance with Non-Discrimination Test. Following the close of the applicable Plan Year (the "Testing Year"), but no later than the last day of the following Plan Year, the Administrator shall determine whether the test set out in the first paragraph of Section 4A.03 was in fact met for the Testing Year. In the event that the Administrator determines that such test was not in fact met for the Plan, then the amount of such Before-Tax Contributions (and any related Income) which causes such limits to be exceeded, (and any related Income) shall be distributed to Highly Compensated Employees or recharacterized as Employee After-Tax Contributions as described below. In determining whether the test set out in the first paragraph of Section 4A.03 was in fact met for the Testing Year, Before-Tax Contributions made on behalf of any Employee shall be so taken into account for the Testing Year only if: (i) such contributions are allocated to such Employee's Accounts under the Plan as of a date no later than the last day of the Testing Year, and (ii) such contributions are attributable to Covered Compensation that, but for the making of such contributions, would otherwise have been (A) received by such Employee during the testing year or (B) earned during the Testing Year and received by such Employee within 2 1/2 months after the end of the Testing Year. The amount of Excess Before-Tax Contributions which is to be refunded or recharacterized shall be determined as set forth below for Plan Years beginning after January 1, 1996: Notwithstanding any other provision of the plan, Excess Contributions, plus any income and minus any loss allocable thereto, shall be distributed no later than the last day of each Plan Year to members to whose accounts such Excess Contributions were allocated for the preceding Plan Year. Excess Contributions are allocated to the Highly Compensated Employees with the largest amounts of employer contributions taken into account in calculating the Actual Deferral Percentage test for the year in which the excess arose, beginning with the Highly Compensated Employee with the largest amount of such employer contributions and continuing in descending order until all the Excess Contributions have been allocated. For purposes of the preceding sentence, the "largest amount" is determined after distribution of any Excess Contributions. Excess Contributions (including the amounts recharacterized) shall be treated as annual additions under the plan. "Excess Contributions" shall mean, with respect to any Plan Year, the excess of: (a) The aggregate amount of employer contributions actually taken into account in computing the Actual Deferral Percentage of Highly Compensated Employees for such Plan Year, over (b) The maximum amount of such contributions permitted by the Actual Deferral Percentage test (determined by hypothetically reducing contributions made on behalf of Highly Compensated Employees in order of the Actual Deferral Percentage, beginning with the highest of such percentages). If the distributions or recharacterization described above are made, the Average Actual Deferral Percentage is treated as satisfying the non-discrimination test of Section 401(k)(3) of the Code regardless of whether the Average Actual Deferral Percentage, if recalculated after such distributions have occurred, would satisfy Section 401(k)(3) of the Code. For purposes of Section 401(k)(2) of the Code, if a corrective distribution of Excess Before-Tax Contributions has been made, the Average Actual Deferral Percentage of Highly Compensated Employees is deemed to be the largest amount permitted under Section 401(k)(2) of the Code. The Administrator shall, to the extent administratively possible, distribute all Excess Before-Tax Contributions and any income or loss allocable thereto which are required to be made pursuant to this Section, prior to the fifteenth day of the third month following the end of the Plan Year in which the Excess "Before-Tax" Contributions arose. In any event, however, the Excess Before-Tax Contributions and any Income allocable thereto shall be distributed prior to the end of the Plan Year following the Plan Year in which the Excess Before-Tax Contributions arose. Excess Before-Tax Contributions shall be treated as Annual Additions under Section 415 of the Code and Section 5.02 of the Plan. ARTICLE IV B NON-DISCRIMINATION TEST FOR COMPANY CONTRIBUTIONS AND EMPLOYEE AFTER-TAX CONTRIBUTIONS 4B.01. Non-Discrimination Test. From time to time during the course of the applicable Plan Year the Administrator shall, to the extent required for collectively bargained plans or in the Administrator's discretion, insure that either (i) the Average Contribution Percentage for Eligible Members who are Highly Compensated Employees for the Plan Year shall not exceed the Average Contribution Percentage for Eligible Members who are Non-highly Compensated Employees for the Plan Year multiplied by 1.25 or (ii) the Average Contribution Percentage for Eligible Members who are Highly Compensated Employees for the Plan Year shall not exceed the Average Contribution Percentage for Eligible Members who are Non-highly Compensated Employees for the Plan Year multiplied by 2, provided that the Average Contribution Percentage for Eligible Members who are Highly Compensated Employees does not exceed the Average Contribution Percentage for Eligible Members who are Non-highly Compensated Employees by more than two (2) percentage points or such lesser amount as the Secretary of the Treasury shall prescribe to prevent the multiple use of this alternative limitation with respect to any Highly Compensated Employee. 4B.02. Definitions. For purposes of this Article IV B only, the following definitions apply: "Average Contribution Percentage" shall mean the average (expressed as a percentage) of the Contribution Percentages of all the Eligible Members. "Contribution Percentage" shall mean the ratio (expressed as a percentage) of the sum of the Employee After-Tax Contributions, and Company Contributions (if applicable) under the Plan on behalf of the Eligible Member for the Plan Year to the Eligible Member's Compensation for the Plan Year. "Eligible Member" shall mean any Employee of a Participating Company who is otherwise authorized under the terms of the Plan to have Employee After-Tax Contributions or Company Contributions (if applicable) allocated to his or her Account for the Plan Year. 4B.03. Special Rules. For purposes of this Article IV B, the Contribution Percentage for any Eligible Member who is a Highly Compensated Employee for the Plan Year and who is eligible to make Employee After-Tax Contributions, or to have Company Contributions (if applicable) or Before-Tax Contributions allocated to his or her account under two or more plans described in Section 401(a) of the Code or arrangements described in Section 401(k) of the Code that are maintained by a Participating Company or a Subsidiary shall be determined as if all such contributions were made under a single plan. In the event that this Plan satisfies the requirements of Section 410(b) of the Code only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of Section 410(b) of the Code only if aggregated with this Plan, then this Article shall be applied by determining the Contribution Percentages of Eligible Members as if all such plans were a single plan. 4B.04. Compliance with Non-Discrimination Test. (a) Following the close of the applicable Plan Year (the "Testing Year"), but no later than the last day of the following Plan Year, the Administrator shall determine whether the test set out in Section 4B.01 was in fact met for the Testing Year. In the event the Administrator determines that such test was not in fact met for the Testing Year, then no later than the last day of the following Plan Year, the amount of the Employee After-Tax Contributions made on behalf of a Highly-Compensated Employee (and any related Income) which causes such limits to be exceeded may be distributed to individual Highly Compensated Employees determined as set forth below for Plan Years commencing after December 31, 1996. (b) Notwithstanding any other provision of the plan, Excess Aggregate Contributions, plus any income and minus any loss allocable thereto, shall be forfeited, if forfeitable, or if not forfeitable, distributed no later than the last day of each Plan Year to participants to whose accounts such Excess Aggregate Contributions were allocated for the preceding Plan Year. Excess Aggregate Contributions are allocated to the Highly Compensated Employees with the largest Contribution Percentage Amounts taken into account in calculating the Actual Contribution Percentage test for the year in which the excess arose, beginning with the Highly Compensated Employee with the largest amount of such Contribution Percentage Amounts and continuing in descending order until all the Excess Aggregate Contributions have been allocated. For purposes of the preceding sentence, the "largest amount" is determined after distribution of any Excess Aggregate Contributions. Excess Aggregate Contributions shall be treated as annual additions under the Plan. Definitions: 1. "Excess Aggregate Contributions" shall mean, with respect to any Plan Year, the excess of: a. The aggregate Contribution Percentage Amounts taken into account in computing the numerator of the Contribution Percentage actually made on behalf of Highly Compensated Employees for such Plan Year, over b. The maximum Contribution Percentage Amounts permitted by the Actual Contribution Percentage test (determined by hypothetically reducing contributions made on behalf of Highly Compensated Employees in order of their Contribution Percentages beginning with the highest of such percentages). (c) If the distribution described above is made, the Average Actual Contributions Percentage is treated as meeting the non-discrimination test of Section 401(m)(2) of the Code regardless of whether the Average Actual Contribution Percentage, if recalculated after such distributions, would satisfy Section 401(m)(2) of the Code. (d) For purposes of Section 401(m)(9) of the Code, if a corrective distribution of Excess Employee After-Tax Contributions has been made, the Average Actual Contribution Percentage of Highly Compensated Employees is deemed to be the largest amount permitted under Section 401(m)(2) of the Code. (e) The test described in Section 4B.01 above will be conducted using the current year testing method provided, however, that the Plan may be amended to use the prior year testing method in those situations for which such a change is approved in Internal Revenue Service Notice 98-1 (Part VII(A)) or in subsequent guidance promulgated by the Secretary of the Treasury. (f) The Administrator shall, to the extent administratively possible, distribute all Excess Employee After-Tax Contributions and any income allocable thereto which are required to be made pursuant to this Section, prior to the fifteenth day of the third month following the end of the Plan Year in which Excess Aggregate Employee After-Tax Contributions arose. Any Excess Aggregate After-Tax Contributions are to be distributed after the fifteenth day of the third month following the end of the Plan Year. In any event, however, the Excess Aggregate Employee After-Tax Contributions and any income allocable thereto shall be distributed prior to the end of the Plan Year following the Plan Year in which the Excess Employee After-Tax Contributions arose. Excess Aggregate After-Tax Contributions shall be treated as Annual Additions under Section 415 of the Code and Section 5.02 of the Plan. 4B.05. Multiple Use Test. In order to prevent the multiple use of the alternate method described in Section 4A.03 and Section 4B.04, any Highly Compensated Employee eligible to make Before-Tax Contributions and Employee After-Tax Contributions under the Plan shall have his or her contributions under the Plan reduced, if required, pursuant to Regulation section 1.401(m)-2. ARTICLE V COMPANY CONTRIBUTIONS 5.01. Company Contribution. As provided for below, Company Contributions (including any Matching Employee and Company Performance Contributions made under the prior Plan) shall no longer be available to Member's and shall cease effective December 31, 1996. The retention of this Article is purely for historical reference. The Company shall contribute to the Plan, out of its current or accumulated earnings and profits, but not otherwise, the following amounts, to the extent that they shall not exceed the amounts deductible under the applicable provision of the Code: (a) With respect to each Member who is an Employee of the Company, except as provided in paragraph (b) of this Section 5.01, and subject to Article X and Section 10A.04, the Company Contribution, which shall be an amount equal to 50% of the Member's first (3%) of Employee After-Tax Contribution and Before-Tax Contribution of each such Member, for each month for which such Member makes an Employee After-Tax Contribution or there is contributed on his or her behalf a Before-Tax Contribution; (b) with respect to Employee After-Tax Contributions deducted from, and Before-Tax Contributions reducing Covered Compensation paid after December 31, 1991 to each Member (other than a Member who is a member of a collective bargaining unit which has not been offered and accepted this provision and the other provisions of the Plan which become effective either January 1, 1992 or with respect to Covered Compensation paid before December 31, 1991) who has been an Employee of the Company or a Subsidiary at any time during at least three months of any calendar quarter period ending on any anniversary of the date on which he or she first became employed by the Company or a Subsidiary (provided, however, that (i) such eligibility requirements shall not apply to an Employee who becomes a Member in accordance with, and as described in, Article XXII B hereof, to the extent specified in such Article XXII B, and (ii) the Committee may waive any prior employment requirement set forth in this paragraph or in Article XXII B with respect to any group of persons who become Employees as the result of the acquisition of any business or assets by a Participating Company, upon such terms and conditions as, and to the extent that, the Committee may specify), subject to Article X and Section 10A.04, the Company Contribution, which shall be an amount equal to 75% of the first 4% of the Employee After-Tax Contribution and Before-Tax Contribution of each such Member, for each month for which such Member makes an Employee After-Tax Contribution or there is contributed on his or her behalf a Before-Tax Contribution. Notwithstanding the foregoing, effective on the dates set forth below, Company Contributions shall cease, effective at each of the facilities set forth below and shall not be applicable to any other Member beginning on or after January 1, 1997: at Pearl River, New York on January 15, 1996; at Bound Brook, New Jersey on January 26, 1996; at Danbury, Connecticut on June 14, 1996; and at Hannibal, Missouri on December 31, 1996. No Company Contributions shall be made to any Member on or after January 1, 1997. 5.02. Limitations. The "Annual Addition" which shall equal the total of (a) contributions made by all Participating Companies under this and any other defined contribution plan (as described in Section 415(k) of the Code) allocated for any Member in a Plan Year, plus (b) employee contributions allocated for such Member in such year, plus (c) forfeitures allocated for such Member in such year shall not exceed the Maximum Permissible Amount. The Maximum Permissible Amount with respect to any Participant shall be the lesser of (i) $30,000, or (ii) twenty-five percent (25%) of the Member's Covered Compensation for the Limitation Year. For the purpose of the foregoing, a Before-Tax Contribution shall be treated as a contribution by a Participating Company and shall be deducted from a Member's total Covered Compensation. The Annual Addition for any Plan Year beginning before January 1, 1987, shall not be recomputed to treat all employee contributions as part of the Annual Addition. If the Plan satisfied the applicable requirements of Section 415 of the Code as in effect for all Plan Years beginning before January 1, 1987, an amount shall be subtracted from the numerator of the defined contribution plan fraction (not exceeding such numerator) as prescribed by the Secretary of the Treasury so that the sum of the defined benefit plan fraction and defined contribution plan fraction computed under Section 415(e)(1) of the Code (as revised by this section) does not exceed 1.0 for such Plan Year; provided, however, that this sentence shall not apply for Plan Years beginning after December 31, 1999. ARTICLE V A TOP-HEAVY RULES 5A.01. Modification of Benefits. To the extent applicable to collectively bargained plans, the Plan will be considered a top-heavy plan for the year if as of the last day of the preceding year (hereinafter "determination date"), the Plan, together with all other employee benefit plans sponsored by the Company and qualified under Section 401(a) of the Code (including all terminated plans which covered a key employee and which were maintained within the five year period ending on the determination date), constitutes a "top heavy group" within the meaning of Section 416 of the Code, based on the calculations specified in Sections 416(g)(1), (2), (3) and (4) of the Code utilizing data as of the last day of the preceding year, and determining "key employees" as required by Section 416(i)(1) of the Code. If as of a determination date, the Plan is determined to be a top heavy plan, then, for the Plan Year immediately following such determination date, the rate of aggregate Company Contributions under the Plan (if any) and employer contributions under all other defined contribution plans (as described in Section 415(k) of the Code) included within the top-heavy group for all Members who (a) are Employees (regardless of the Employee's level of compensation and hours of service) and (b) are not key employees within the meaning of Section 416(i)(1) of the Code (other than such Members included in a unit of Employees covered by a collective bargaining agreement) shall be not less than the lesser of (i) 3% of such Member's compensation (within the meaning of Section 415(c)(3) of the Code) for such Plan Year and (ii) that percentage of such compensation which is equal to the percentage of such compensation for that key employee for which such percentage is the highest for such Plan Year represented by Company Contributions under this Plan and employer contributions under all other defined contribution plans included within the top-heavy group made on behalf of such key Employee. Pursuant to Section 416 of the Code, a defined benefit plan is top-heavy when the ratio of the present value of accrued benefits for key Employees to the present value of accrued benefits for all Employees exceeds 60%; a defined contribution plan is top-heavy when the ratio of account balances for key employees to account balances for all employees exceeds 60%. If there is more than one plan, the top-heavy ratios must be consolidated by adding together the numerators and then adding together the denominators to form one ratio. 5A.02. Termination of Benefit Modifications. The benefit modifications described in Section 5A.01 shall cease to apply for any Plan Year immediately following a determination date as of which the Plan together with all other employee benefit plans described in Section 5A.01 do not constitute a top-heavy group within the meaning of Section 416 of the Code. ARTICLE VI INVESTMENTS 6.01. Investment Funds. Subject to Sections 6.02, 6.04 and 10A.05, there shall be Funds available for the investment and reinvestment of contributions to the Plan as selected by the Savings Plan Committee as set forth in Schedule B which is attached hereto and incorporated herein by reference. 6.02. Investment Options of Members. The contribution amounts in a Member's Accounts shall be separately invested in any one or more of the Funds specified in Section 6.01 as such Member may elect; provided that an investment in any Fund shall be made in increments of 10% thereof. 6.03. Election of Investment Options. A Member's initial Payroll investment election shall be stated in his or her initial Payroll Deduction Authorization form. Investment elections shall remain in effect until changed by the Member with respect to future contributions to his or her Accounts as described below. The Member may make such election changes at any time by means of telephonic or electronic instructions to the Trustee/Recordkeeper on any business day which shall be effective as of the date received, provided such instructions are received prior to 4:00 p.m. Eastern Time. Instructions received after 4:00 p.m. Eastern Time shall be effective on the following business day. 6.04. Transfer of Accumulated Values. (a) Any Member may elect, as described below, to transfer any of the accumulated values in any of his or her Accounts in any one or more Funds and Income thereon, respectively, from such Fund or Funds to any other Fund or Funds, in specific dollar amounts or in whole percentages by telephoning the Trustee on any business day at the toll free number provided by the Trustee or by such electronic means as established by the Trustee for such purpose. The minimum amount that may be transferred into or out of a Fund shall be $250, provided, however, that if the Account balance of a Member is less than $250, the minimum amount that may be transferred shall be the entire Account balance. Any telephonic or electronic instructions received by a Trustee from a Member prior to 4:00 p.m. Eastern Time on a business day shall be effective as of that day. Any instructions received from a Member after 4:00 p.m. Eastern Time shall be effective on the following business day. 6.05. Investment of Company Contributions. A Member may invest Company Contributions, if any, in such Member's Account to any of the Funds and may transfer such amounts to any of the other Funds. Such elections may be made daily by telephonic or electronic means to the Trustee/Recordkeeper. Directions to change which are received by Vanguard by 4:00 P.M. will be made that day. Directions received by Vanguard after 4:00 P.M. on a business day will be made as of the close of business on the following business day. 6.06. Investment of Income. Income received from investments in the Funds shall be reinvested in the Fund from which it is derived. Dividends received on Company Stock in a form other than cash or additional shares of Company Stock shall be disposed of by the Trustee in a prudent manner as determined by the Trustee and the proceeds used to acquire shares of Company Stock. 6.07. Temporary Investments. Pending investment of any contributions in one of the Funds, the Trustee may retain such contributions in cash or may invest them in short-term obligations or in any common trust fund of the Trustee, in the Trustee's discretion. 6.08. Investments in Funds. Contributions made by a Member and Income attributable to such Contributions shall be invested as soon as practicable after receipt by the Trustee. The Trustee shall have complete discretion in choosing investments within the Funds described in Section 6.01 including the Vanguard Funds, and shall not be subject to direction by the Company or the Administrator or bound by any list of legal investments of a trustee or other fiduciary. 6.09. Common Trust Funds. Subject to the provisions of this Article, the Trustee may invest and reinvest all or any part of any Fund through the medium of any common trust fund of the Trustee qualified under Section 401(a) of the Code which is invested principally in property of a type authorized by the Plan for investment of such Fund. An investment in such a common trust fund or in any investment company shall not be deemed an investment in securities issued or guaranteed by the Company or a Subsidiary even if such securities are contained in such common trust or the portfolio of such investment company. 6.10. Voting and Registration of Company Stock. The shares of Company Stock held by the Trustee in the Company Stock Fund shall be registered in the name of the Trustee or its nominee, but shall not be voted by the Trustee or such nominee except as provided in Article XV. ARTICLE VII ----------- MEMBER'S ACCOUNTS IN FUNDS; -------------------------- MAINTENANCE AND VALUATION THEREOF 7.01. Separate Accounts. Each Member shall have established for him or her separate accounts in each Fund which shall reflect the value (as of the last preceding Valuation Date) of all his or her Employee After-Tax Contributions, Company Contributions, Rollover Contributions, and Before-Tax Contributions, respectively, invested in such Fund and the respective Income thereon. If a Member has received a loan from the Plan in accordance with Article X A, a Loan Account shall be established for him or her in accordance with Section 10A.05 hereof. 7.02. Payments to Trustee. Not later than fifteen business days after the end of each month, or at such other times as may be required under regulations promulgated by the Secretary of Labor, the Company shall transmit to the Trustee an amount equal to the aggregate amount of Employee After-Tax Contributions deducted in respect of the Plan during such month, or Before-Tax Contributions representing reductions of Covered Compensation during such month. Amounts received by the Company each month in repayment or prepayment of Article X A loans shall be paid to the Trustee no later than 15 business days after the end of such month and applied in accordance with Section 10A.06 hereof. Upon receipt of any Employee After-Tax Contributions, Rollover Contributions, or Before-Tax Contributions, by the Trustee, the aggregate amount thereof (and Income thereon, as from time to time received by the Trustee) shall be credited as hereinafter specified to the respective accounts of the Members in the respective Funds, and the Trustee shall hold, invest and dispose of the same as provided in the Plan. 7.03. Shares and Units. The values of the Funds administered by Vanguard will be represented by shares in each of the Funds credited to the Member's Accounts, which shares are valued daily in accordance with the specific valuation provisions of each Fund. Units of the Company Stock Fund and the Stable Value Fund shall be valued by determining the value of the assets of the Fund as of the Valuation Date, which shall be each business day, and deducting any liabilities due or accrued by the Fund as of such Valuation Date, and dividing the resulting value by the total number of Fund Units outstanding on the Valuation Date. 7.04. Crediting Units. As of each Valuation Date, and following the determination of the value of a Unit in the Company Stock Fund and Stable Value Fund the Account of each Member who has elected to invest any of his or her Member's contributions contributed on his or her behalf in such Fund shall be credited, as of such Valuation Date, with a number of Units of such Funds determined by dividing the value of such Unit on such Valuation Date into that portion of the Current Market Value of the Member's contributions to be invested in such Fund received by the Trustee since the last crediting of Units of such Fund and Income thereon. ARTICLE VIII VESTING 8.01. Employee After-Tax Contributions and Before-Tax Contributions. All Shares and Units attributable to Employee After-Tax Contributions, Rollover Contributions, and Before-Tax Contributions and Income respectively thereon shall be fully vested at all times and shall not any time be subject to forfeiture or divestiture. 8.02. Schedule of Vesting of Company Contributions. As provided for in Article V, Company Contributions ceased under the Plan as of December 31, 1996. Vesting of Units attributable to those Company Contributions is in accordance with the vesting schedule provided in such prior Plan and are now 100% fully vested. ARTICLE IX DISTRIBUTION FROM MEMBER'S ACCOUNTS UPON TERMINATION OF EMPLOYMENT 9.01. Lump Sum Distributions. In the event of the termination of employment of a Member, and unless the Member has otherwise elected in accordance with the Plan, the vested Share and Unit values as of the Valuation Date on or immediately preceding the date thereof of the Shares or Units in all of the Member's Accounts (other than any Loan Account, which shall be subject to Section 10A.08 hereof) shall be distributed as a lump sum distribution (i) to the Member commencing as soon as practicable after termination of employment or on such later date (subject to Section 9.08(b)) as the Member shall have elected, (ii) if the Member has so elected at any time prior to the distribution of such values, to the extent specified in such election and authorized by the Code, to an eligible retirement plan as defined in Section 402(a)(5)(E)(iv) of the Code commencing as soon as practicable after termination of employment or on such later date (subject to Section 9.08(b)) as the Member shall have elected, or (iii) if the Member's termination of employment was by reason of the death of the Member, as soon as practicable after termination of employment to the Member's surviving spouse, or if there is no surviving spouse or if the surviving spouse consents or has consented in the manner required under Section 417(a)(2) of the Code, to the previously designated beneficiary of such Member. Notwithstanding anything to the contrary in the preceding sentence, if at any time after termination of a Member's employment but prior to the annuity starting date (as defined in Section 417(f)(2) of the Code) respecting such lump-sum distribution, a Member shall die, the lump sum distribution payable to the Member shall be distributed as soon as practicable to the Member's surviving spouse or if there is no surviving spouse or if the surviving spouse consents or has consented in the manner required under Section 417(a)(2) of the Code, to the previously designated beneficiary of such Member. A lump sum distribution shall consist of cash representing the values of all Shares or Units in the Accounts of a Member and Income attributable thereto except such Units in the Company Stock Fund, which shall be distributed as the number of whole shares of Company Stock purchasable at the Current Market Value thereof with such Units of the Member in the Company Stock Fund and as cash to the extent of any fractional share. Units representing vested Company Contributions and Income thereon shall be distributed in the same manner as a Member's contributions and Income thereon in the Company Stock Fund. However, the recipient may elect that all Units in the Company Stock Fund in which such Member is vested shall be distributed in cash. The Administrator, prior to authorizing any distribution pursuant to clause (ii) of this Section 9.01, may require the submission of such evidence of the Trustee or other fiduciary under the eligible retirement plan to which such distribution is to be made certifying that such distributee is an eligible retirement plan as contemplated by Section 402(a)(5)(E)(iv) of the Code. 9.02. Distribution as an Annuity. The provisions of this Section shall only apply to Members who participated in the Plan on or prior to January 1, 1996. When a Member ceases to be an Employee and does not die prior to the annuity starting date (as defined in Section 417(f)(2) of the Code), if he or she has previously so elected, the vested Share and Unit values as of the Valuation Date on or immediately preceding the date thereof of the Shares and Units in all the Member's Accounts (other than any Loan Account, which shall be subject to Section 10A.08 hereof), and if the Member then has a spouse, shall be applied (subject to Section 9.08(a) to provide monthly payments from the Trust, commencing as soon as practicable after the termination of his or her status as an Employee or on such later date (subject to Section 9.08(b) as the Member shall have elected, to the Member for his or her life, and thereafter, monthly payments of 50% of the monthly payment made to the Member to such spouse, if surviving, for the life of such spouse. Notwithstanding the foregoing, this Section is not applicable to any Employee who becomes a Member on or after January 1, 1998. 9.03. Distributions in the Event of Death Prior to Annuity Starting Date. Upon the death of a Member prior to the annuity starting date (as defined in Section 417(f)(2) of the Code), the Share and Unit values as of the Valuation Date on or immediately preceding the date thereof of the Shares and Units in all the Member's Accounts (other than any Loan Account, which shall be subject to Section 10A.08 hereof), if the Member is then married, and if he or she has so elected, shall be applied (subject to Section 9.08(a)) to monthly payments, commencing as soon as practicable, to the surviving spouse of such Member for the life of such spouse. 9.04. Monthly Payments. When a Member ceases to be an Employee, if he or she has previously so elected, the vested Unit or Share values as of the Valuation Date on or immediately preceding the date thereof of the Shares and Units in all the Member's Accounts (other than any Loan Account which shall be subject to Section 10A.08 hereof) or in all such Accounts other than Unit values attributable to Units in the Company Stock Fund shall be applied (subject to Section 9.08(a)) to provide monthly payments from the Trust Fund for the Plan for 60, 120, 180, 240, 300 or 360 months commencing on the first day of the month immediately following the month of the termination of his or her status as an Employee or on such later date (subject to Section 9.08(b)) as the Member shall have elected. The amount of such monthly payments shall be as determined by the Administrator in accordance with the value of the Member's Accounts. Unit values attributable to Units in the Company Stock Fund not paid in monthly installments shall be paid in shares of Company Stock (to the extent of whole shares) and in cash as to any fractional share, all determined as provided in Section 9.01 hereof. In the event of the death of the Member prior to the annuity starting date or prior to the payment of the last annuity payment, such payments will be made or continued to the Member's surviving spouse, or if there is no surviving spouse, or if the surviving spouse consents in the manner required under Section 417(a)(2) of the Code, to the previously designated beneficiary of such Member. 9.05. Manner of Election of Payments. Any Member electing any optional form of distribution of benefits shall make such election by delivering a Payroll Deduction Authorization form. 9.06. Commencement of Benefits. Subject to Sections 9.01, 9.02, 9.03, 9.04 and 9.08 payment of benefits hereunder shall be made or commence as soon as practicable after the Member ceases to be an Employee, but in no event later than the 60th day after the latest of the close of the Plan Year in which (a) occurs the date on which the Member attains age 60; (b) occurs the tenth anniversary of the year in which the Member commenced participation in the Plan; or (c) the Member ceases to be an Employee. 9.07. Election of Benefits; Application. (a) No less than thirty (30) days and no more than ninety (90) days prior to the annuity starting date, the Committee shall provide to each Participant a written explanation of: (i) The terms and conditions of the qualified joint and survivor annuity; (ii) the Participant's right to make an election to waive the qualified joint and survivor annuity; (iii) The right of the Participant's spouse to consent to any election to waive the qualified joint and survivor annuity; (iv) The right of the Participant to revoke such election, and the effect of such revocation; and (v) The relative values of the various optional forms of benefits under the Plan. If a distribution is one to which Sections 401(a)(11) and 417 of the Code do not apply, such distribution may commence less than 30 days after the notice required under this Section is given, provided that: (a) the Committee clearly informs the Member that the Member has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option), and (b) the Member, after receiving the notice, affirmatively elects a distribution. The Administrator shall also provide in writing to each Member, within the applicable period, the following information: the Member's right to make, and the effect of, an election under Section 9.03; a description of the retirement benefits provided under Section 9.03 and the circumstances under which the benefits will be paid if elected; the Member's right to waive and reinstate an election under Section 9.03; and the rights of the Member's spouse under Section 9.09. As used in the preceding sentence, the "applicable period" means with respect to each Member, whichever of the following periods ends last: (i) the period beginning with the first day of the plan year in which the Member attains age 32 and ending with the close of the plan year preceding the plan year in which the Member attains age 35, (ii) a reasonable period after an individual becomes a Member, and (iii) a reasonable period after separation from service in case of a Member who separates before attaining age 35. (b) The period within which any election of benefits may be made under this Article IX shall begin not later than the 90th day prior to the first date on which such Member's retirement benefit could commence under any plan, program, contract or agreement of or with the Company or any subsidiary applicable to such Member (other than the Plan) or, if later, on the day such person first becomes a Member and shall end on the annuity starting date (as defined in Section 417(f)(2) of the Code), provided, however, that an election under Section 9.03 shall end on the date of the Member's death. Any election provided in this Article IX may be waived and/or reinstated during the period of time set forth in the preceding sentence. (c) Subject to Section 9.08, no benefits under the Plan need be paid to a Member until the Member has applied therefor in writing, specifying the payment option elected (if not previously specified) and giving such other information as the Administrator may reasonably specify to enable him or her to calculate the amount payable. If an application for benefits is received which is complete except that no payment option is specified, benefits shall be paid in the applicable form specified in Section 9.01, unless the Member has previously specified, and not revoked, another payment form. (d) No benefit shall be payable in more than one of the forms permitted by this Article IX. (e) A Member who receives a distribution or withdrawal from his or her Accounts in the Plan shall have the amounts so distributed or withdrawn made from the Funds in which such Member's funds are invested in accordance with elections made by the Member on a form supplied by the Administrator. If the Member fails to make such an election, the amounts shall be taken proportionately from the Funds in which his or her Accounts are invested. 9.08. Distributions of Small Amounts; Required Distributions. ----------------------------------------- ------------- (a) Anything to the contrary in this Article IX notwithstanding, if at the time of termination of employment a Member's Accounts (including any Loan Account) in the Plan have an aggregate present value not exceeding $3,500 for distributions occurring prior to January 1, 1998 or not exceeding $5,000 for distributions occurring on or after January 1, 1998, the vested values of the Shares and Units in such Member's Accounts (other than any Loan Account, which shall be subject to Section 10A.08 hereof), shall be distributed as a lump-sum distribution as soon as practicable to the Member, or where the Member's employment has terminated by reason of the death of such Member, to the surviving spouse of such Member, or if there is no surviving spouse or if the surviving spouse consents in the manner required under Section 417(a)(2) of the Code, to the previously designated beneficiary of such Member. No distribution may be made under the preceding sentence after the annuity starting date (as defined in Section 417(f)(2) of the Code) unless the Member and his or her spouse (or where the Member has died, the surviving spouse) consent in writing to such distribution. The "present value" for purposes of this Section 9.08(a) shall be calculated in accordance with Section 417(e)(3) of the Code. If at the time of termination of employment a Member's Accounts (including any Loan Account) in the Plan have an aggregate present value for distributions occurring prior to January 1, 1998, exceeding $3,500 or exceeding $5,000 on or after January 1, 1998, the vested unit values of the Shares and Units in such Member's Accounts (other than the Loan Account which shall be subject to Section 10A.08 hereof) shall be retained in the Plan and subject to Section 9.08(b) hereof, any distribution shall be deferred until after the Member makes a distribution election by delivering a Payroll Deduction Authorization. (b) Anything to the contrary in this Article IX notwithstanding, the entire interest of a Member will be distributed to him or her beginning no later than April 1 of the calendar year following the calendar year in which such Member attains age 70 1/2, over a period not extending beyond the life expectancy of such Member and a designated beneficiary. If the distribution of a Member's interest has begun in accordance with the first sentence of this Section 9.08(b) and the Member dies before his or her entire interest has been distributed to him or her, the remaining portion of such interest shall be distributed at least as rapidly as under the method of distribution being used under the first sentence of this Section 9.08(b). If a Member dies before the distribution of his or her interest has begun in accordance with the first sentence of this Section 9.08(b) the entire interest of such Member will be distributed within 5 years after the death of such Member, provided, however, if any portion of such Member's interest is payable to a designated beneficiary, such portion shall be distributed over a period not extending beyond the life expectancy of such beneficiary and shall begin not later than one (1) year after the date of such Member's death. Notwithstanding the preceding sentence, if such designated beneficiary is the surviving spouse of such Member the date on which the distributions are required to begin shall not be earlier than the date on which the deceased Member would have attained age 70-1/2, provided, however, if such surviving spouse dies before distributions to such spouse begin, this sentence shall be applied as if such surviving spouse were the Member. Notwithstanding the foregoing, for Plan Years commencing on or after January 1, 2000, a Member who is not a five (5) percent owner of the Employer shall have his or her entire interest in the Plan distributed no later than April 1 of the calendar year following the later of (a) the calendar year in which he or she attains age 70 1/2, or (b) the calendar year in which he or she retires. Notwithstanding anything else to the contrary herein, the Administrator may not direct the Trustee to distribution the Member's nonforfeitable Account balance, nor may the Member select to have the Trustee distribute his or her Account balance over a period extending beyond the Member's life expectancy or over a period extending beyond the joint and last survivor life expectancy of the Member and his or her designated Beneficiary. The minimum distribution for a calendar year equals the Member's nonforfeitable Account balance as of the most recent accounting date preceding the calendar year (adjusted for allocations of contributions, forfeitures and distributions made after the accounting date but prior to the end of the calendar year, if applicable), divided by the applicable life expectancy or, if the Member's spouse is not his or her designated Beneficiary, the applicable divisor determined from the table set forth in Q&A-4 of Section 1.401(a)(9)-2 of the proposed regulations. The applicable life expectancy shall be the Member's life expectancy (or joint and last survivor expectancy) calculated using the attained age of the Member (or designated Beneficiary) as of the Member's (or designated Beneficiary's) birthday in the first distribution calendar year reduced by one for each calendar year which elapsed since the date life expectancy was first calculated. Applicable life expectancies will be determined under the unisex life expectancy multiples under Treasury regulation Section 1.72-9, and will not be recomputed. The minimum distribution required for the Member's first distribution calendar year must be made on or before the Member's required beginning date. The minimum distribution for other calendar years, including the minimum distribution for the distribution calendar year in which the Member's required beginning date occurs, must be made on or before December 31 of that distribution calendar year. The first distribution calendar year is the calendar year immediately preceding the calendar year which contains the Member's required beginning date. All distributions under the Plan must be made in accordance with Section 401(a)(9) of the Code and the Treasury regulations thereunder. To the extent provisions of this Plan are inconsistent with Section 401(a)(9) of the Code, Section 401(a)(9) of the Code will override such provisions. With respect to distributions under the Plan made for calendar years beginning on or after January 1, 2002, the Plan will, if applicable, apply the minimum distribution requirements of Section 401(a)(9) of the Code in accordance with the regulations that were proposed on January 17, 2001, notwithstanding any provision of the Plan to the contrary. This amendment shall continue in effect until the end of the last calendar year beginning before the effective date of final regulations under Section 401(a)(9) or such other date as may be specified in guidance published by the Internal Revenue Service. 9.09. Spousal Consent. Notwithstanding anything to the contrary contained in this Article IX (other than Section 9.08 hereof), in the event that a Member is married at any time prior to the annuity starting date (as defined in Section 417(f)(2) of the Code) such Member must obtain the written consent of his or her spouse (in the manner required under Section 417(a)(2) of the Code) if the Member has elected or elects (i) a beneficiary other than his or her spouse under Section 9.01 or (ii) the benefit provided for in Sections 9.02, 9.03 or 9.04 hereof. No election shall be effective unless it is made in compliance with the preceding sentence. A Member who is married at any time prior to the annuity starting date (as defined in Section 417(f)(2) of the Code) may revoke an election (i) to name a beneficiary other than his or her spouse under Section 9.01 or (ii) to take the benefit specified in Section 9.02, 9.03 or 9.04 or elect again to take such benefits at any time and any number of times during the period specified in Section 9.07(b) provided that such Member obtains the written consent of his or her spouse (in the manner required under Section 417(a)(2) of the Code). ARTICLE X WITHDRAWALS FROM MEMBERS' ACCOUNTS DURING EMPLOYMENT 10.01. Frequency of Withdrawals. No Member while an Employee may exercise rights under this Article X more frequently than once in any calendar quarter, provided however, that effective as of January 1, 1998, such rights may be exercised only once in a calendar year. 10.02. Withdrawals of Before-Tax Contributions. (a) Prior to a Member attaining the age of 59 1/2, such Member may not withdraw while an Employee any Before-Tax Contributions contributed on his or her behalf (except in case of financial hardship within the meaning of Regulation 1.401(k)-1(d)(2) of the Code) or Income thereon. "Financial hardship" means an immediate and heavy financial need occurring in the personal affairs of a Member such as: (i) amounts needed to obtain medical services described in Section 213(d) of the Code incurred by the Member, the Member's spouse, or any dependents of the Member (as defined in Section 152 of the Code) or necessary for those persons to obtain medical care; (ii) costs directly related to the purchase (excluding mortgage payments) of a principal residence for the Member; (iii) payment of tuition and related educational fees for the next 12 months of post-secondary education for the Member, his or her spouse, children, or dependents; or (iv) payments necessary to prevent the eviction of the Member from his or her place of residence or foreclosure on the mortgage of the Member's principal residence. A distribution will be deemed to be necessary to satisfy an immediate and heavy financial need of a Member if all of the following requirements are satisfied: (1) The distribution is not in excess of the amount of the immediate and heavy financial need of the Member including anticipated federal, state and local income taxes and penalties on the distribution, and (2) The Member has obtained all distributions, other than hardship distributions, and all nontaxable (at the time of the distribution) loans currently available under all plans maintained by the Company; and (3) The Member's After-Tax Contributions and Before-Tax Contributions under this Plan (and any other qualified or non-qualified plan of deferred compensation maintained by the Company) are suspended under a legally enforceable arrangement for at least twelve months after receipt of the hardship distribution; and (4) The Member may not make Before-Tax Contributions for the Member's taxable Year immediately following the taxable year of the hardship distribution in excess of the limitation set forth in Codes 402(g) for such next taxable year minus the amount of the Members Before-Tax Contributions for the year of the hardship withdrawal. The decision of the Administrator will be final in determining the existence of a hardship and the amount which may be withdrawn, but the Administrator shall make such determinations on a uniform and non-discriminatory basis. After receipt by a Member of a hardship withdrawal, the Member's right to make Employee After-Tax Contributions and Before-Tax Contributions shall be suspended for twelve (12) months. (b) When a Member has attained age 59 1/2, Before-Tax Contributions contributed on behalf of such Member and Income thereon may be withdrawn by such Member while an Employee as if such Before-Tax Contributions were Employee After-Tax Contributions and Income thereon, respectively, and the terms "Employee After-Tax Contributions," and "Income" as used hereinafter in this Article X, shall be deemed to include the respective Before-Tax Contributions and Income thereon in the accounts of Members aged 59 1/2 or more. 10.03. Withdrawals of Employee After-Tax Contributions. A Member while an Employee may withdraw from his or her accounts representing Employee After-Tax Contributions and Income thereon cash in an amount for a minimum amount of $500 of the lesser of (i) all Shares or Units therein with an aggregate value equal to the amount of such Member's Employee After-Tax Contributions not previously withdrawn or distributed or (ii) all the Shares or Units in such accounts to the extent not attributable to Income. Such withdrawal shall be made as close as practicable to equally from all Funds in which any Employee After-Tax Contributions of such Member are then invested. 10.04. Withdrawals of Remaining Shares or Units in Accounts Representing Employee After-Tax Contributions. After or contemporaneous with the maximum permitted withdrawals pursuant to Section 10.03, a Member while an Employee may withdraw in cash the value of all remaining Shares or Units in all Funds in the Member's Accounts representing Employee After-Tax Contributions. Each such request for a withdrawal shall terminate the Member's eligibility to have Company Contributions (if applicable) credited to his or her account for a period of nine months, effective as of the first payroll period ending on or after the effective date of any such withdrawal as provided in Section 10.07. 10.05. Withdrawals of Company Contributions. After or contemporaneous with the maximum permitted withdrawals pursuant to Section 10.04 and, if a Member had Accounts reflecting Employee After-Tax Contributions, Section 10.03, a Member while an Employee may withdraw in cash an amount not in excess of the sum of (i) the value of all vested Shares or Units in his or her Account in the Company Stock Fund representing Company Contributions (if applicable) (but not Income thereof) which have been credited to such account for at least 24 months as of the effective date of the withdrawal and (ii) the value of all vested Shares or Units in his or her Account in the Company Stock Fund representing Income on Company Contributions, regardless of how long the related Company Contributions have been credited to such Account as of the effective date of the withdrawal. Each such request for withdrawal shall terminate the Member's eligibility to have Company Contributions credited to his or her Account for a period of twelve months, effective as of the first payroll period ending on or after the effective date of any such withdrawal as provided in Section 10.06. 10.06. Effective Date. Each withdrawal shall be effective as of the business day on which the Trustee receives properly authorized instructions to make such withdrawals from the Plan Administrator (provided such instructions are received by the Trustee in good order prior to 4:00 p.m. Eastern Time). If not received by 4:00 P.M., the withdrawal shall be effective as of the next business day. The value of Shares or Units credited to the Member's Accounts shall be calculated (in the manner specified in Article VII) as of such Valuation Date. The amounts to which the Member is entitled shall be delivered to the Member as soon as practicable after the effective date of the withdrawal. 10.07. Withdrawals in Company Stock. To the extent of any withdrawal pursuant to this Article X of the value of Units in the Company Stock Fund, such withdrawal may be made, at the election of the Member, in shares of Company Stock (to the extent of whole shares) and in cash as to any fractional shares, all determined as provided in Section 9.01. 10.08. Termination of Employment; Eligibility Upon Re-Employment. If a Member who receives a distribution of his or her vested interest in Company Contributions (and Income attributable thereto) by reason of termination of his or her employment by the Company and all Subsidiaries again becomes employed by the Company or a Subsidiary within twelve months of his or her date of termination of employment, he or she shall be deemed to have made a withdrawal pursuant to Section 10.05 as of the date of his or her prior termination of employment. ARTICLE X A LOANS 10A.01. Eligibility and Loan Amount. (a) Active Members and, any other persons to the extent required by the Act or the Code or rules and regulations promulgated thereunder, shall be eligible to receive a loan from the Plan in accordance with the provisions set forth in this Article X A. "Active Member" for purposes of this Article X A shall mean any Member who is an Employee and who is not on layoff or leave of absence status for any reason or absent from work due to any disability. (b) Provided a Member meets the other requirements set forth in this Article X A, the Plan shall make a loan to a Member requesting the same in an amount which upon aggregating all such loans to a Member shall not, at the time any such loan is made, exceed the lesser of (i) $50,000 reduced by the excess (if any) of the highest outstanding balance of loans from the Plan during the one (1) year period ending on the day before the date on which such loan was made, over the outstanding balance of loans from the Plan on the date on which such loan was made, or (ii) fifty percent (50%) of the vested portion of the Participant's Account Balance at the time of the making of such loan. For purposes of this limitation, all loans from all qualified plans maintained by the Employer or by any entity which is required to be aggregated with the Employer pursuant to Sections 414(b), (c), (m) or (o) must be aggregated. (c) The minimum amount of any loan shall be $1,000. 10A.02. Term. Loans shall be granted for a minimum term of one year and for terms that are an integral multiple of one year up to a maximum term of five years; provided, however, that a loan may have a term of up to fifteen years if the purpose of the loan is to acquire the Member's principal residence. 10A.03. Interest Rate. The interest rate to be charged on a loan for the length of its term will be fixed and provide a return commensurate with the interest rates charged by institutions in the business of lending money for loans which would be made under similar circumstances, or such other rate as permitted by government regulations or releases. The interest rate in effect at the time a loan is approved shall be the fixed rate of interest charged on such loan over its entire term. Interest on a loan shall be calculated on the basis of actual days elapsed and a year of 365 days. Interest shall accrue from the date the loan amount is disbursed to a Member. 10A.04. Conditions to Loan Approval and Disbursement. (a) No loan shall be made to a Member prior to the execution and delivery by a Member of (i) a note and security agreement evidencing the loan from the Plan to such Member, (ii) any truth in lending disclosure material, and (iii) if such Member is receiving Covered Compensation, a Payroll Deduction Authorization authorizing payroll deductions for payment of interest on and principal of such loan. (b) A loan shall not be approved by the Plan prior to the Member's repaying in full all amounts due under any and all prior loans from the Plan. (c) The loan amount shall be disbursed as soon as practicable after the loan is approved by the Plan. (d) No more than one loan may be outstanding at any time with respect to a Member. 10A.05. Funding of Loans. (a) A loan from the Plan shall be funded as of a Valuation Date by (i) reducing the value of certain Accounts (as described in paragraph (b) below) of the Member requesting the loan by an amount equal to the loan amount, and (ii) transferring the proceeds resulting from such reduction to the Member's loan account (the "Loan Account"). Amounts in the Loan Account are then distributed as loan proceeds to the Member. From the time of loan disbursement to the Member and until the loan amount is repaid in full, the Member's Loan Account shall be treated as invested in the loan to the extent of any unpaid balance. A transfer to the Loan Account shall not constitute an investment election for purposes of Section 6.03 hereof. (b) Units and Shares shall be canceled on a pro rata basis in all Funds in which the Member is invested on the date the loan is approved by the Administrator. These Units or Shares shall be adjusted by redeeming the appropriate Funds using the value of the Funds as of the Valuation Date on which Vanguard receives authorized directions from the Plan Administrator to make the loan, provided that the directions are received properly executed prior to 4:00 P.M. Eastern Time. If the directions are received after 4:00 P.M. Eastern Time, the Accounts of a Member will be adjusted effective as of the next business day. 10A.06. Loan Repayment and Prepayment. (a) A loan shall be amortized in level payments. For a Member with an outstanding loan, interest and principal shall be payable on each payroll payment date. Commencing with the first payroll payment made in the month following the month in which the loan amount is disbursed, repayment shall be accomplished through regular payroll deductions. (b) Payments of principal and interest shall be applied to reduce amounts outstanding on a loan and shall be allocated to a Member's Loan Account and then applied to purchase Shares and Units in accordance with the Member's then current investment directions for contributions being made to the Savings Plan. (c) At any time after the sixth month anniversary date of a loan, a Member shall be entitled to prepay the loan in full. No partial prepayments shall be permitted. 10A.07. Loan Default. A Member's failure to make any payment of principal or interest on a loan when due (and in no event later than the end of the calendar quarter following the calendar quarter in which payment is due) shall constitute a "Default". ARTICLE XI MEMBERS' STATEMENTS At such times during the year as the Plan Administrator may deem appropriate, but no less frequently than annually, there shall be furnished to each Member a statement as of the end of such year of the value of the securities and cash in his or her Accounts. Such statement shall be deemed to have been accepted by the Member, his or her spouse at any time, if any, and his or her beneficiaries designated under Article XXI hereof as correct unless written notice to the contrary from the Member shall be received by the Administrator within 30 days after the mailing of such statement to the Member. ARTICLE XII NOTICES, ETC. 12.01. Notices to Employees, Etc. All notices, statements and other communications from the Administrator or a Participating Company to an Employee, Member or designated beneficiary required or permitted hereunder shall be deemed to have been duly given, furnished, delivered or transmitted, as the case may be, when delivered to (or when mailed by first class mail, postage prepaid and addressed to) the Employee at his or her work location, or to the Employee, Member or beneficiary at his or her address last appearing on the books of the Administrator. 12.02. Notices to Administrator. All notices, instructions and other communications from an Employee or Member to the Administrator required or permitted hereunder shall be effectuated by delivering to the Administrator, at least fifteen (or such lesser number of days as the Administrator from time to time may determine) days prior to the Enrollment Date or other applicable effective date in question a Payroll Deduction Authorization in the manner set forth therein, except as otherwise set forth in the Plan. A Payroll Deduction Authorization applicable to future Covered Compensation shall be effective with respect to Covered Compensation for pay periods commencing on and after the Enrollment Date in respect of which such Payroll Deduction Authorization was delivered. ARTICLE XIII APPOINTMENT OF TRUSTEE The Company shall appoint one or more individuals or corporations to act as Trustee under the Plan, and at any time may remove the Trustee and appoint a successor Trustee. The Company may, without reference to or action by any Employee, Member or beneficiary or any other Participating Company, enter into such Trust Agreement with the Trustee and from time to time enter into such further agreements with the Trustee, make such amendments to such Trust Agreement or further agreements and take such other steps and execute such other instruments as the Company in its sole discretion may deem necessary or desirable to carry the Plan into effect or to facilitate its administration. ARTICLE XIV APPLICATION OF FORFEITED CONTRIBUTIONS (a) Any of the Units in a Member's Account reflecting Company Contributions and Income attributable thereto which shall be forfeited pursuant to the provisions of the Plan shall be applied to reduce the Company Contributions of the Participating Company by which such Member was last employed. (b) If a check issued to a Member from the Plan is not cashed within 24 months after it is received by a Member, such check shall be forfeited to the Trust provided, however, if the Member should subsequently return and file a claim for the amount of the forfeited check, such amount shall be paid to the Member. ARTICLE XV VOTING OF COMPANY STOCK The Trustee, itself or by its nominee, shall vote shares of Company Stock attributable to Units of the Company Stock Fund in the Accounts of Members as follows: 15.01. Notice. The Company shall notify the Member of the date and purposes of each meeting of stockholders of the Company at which holders of shares of Company Stock shall be entitled to vote in the same manner as such holders are notified, and the Member shall instruct the Trustee as to the voting at such meetings of shares of Company Stock attributable to the Units of the Company Stock Fund in the Accounts of such Member, whether or not vested. 15.02. Vote. The Trustee, itself or by proxy, shall vote shares of Company Stock in such Accounts of the Member in accordance with instruction of the Member. 15.03. No Discretion. If, within five business days prior to such meeting of stockholders, the Trustee shall not have received instructions from the Members in respect of any shares of Company Stock in the Accounts of the Members, the Trustee may vote such shares at such meeting in the same proportion as such shares for which the Trustee has received timely instructions, subject to applicable law. ARTICLE XVI ADMINISTRATION 16.01. Savings Plan Committee. (a) This Plan shall be administered by the Savings Plan Committee. No member of the Committee shall receive any compensation from the Trust Fund for his or her service thereon. The Committee shall be the 'Administrator' of the Plan for purposes of Section 3(16) (A) of ERISA and the 'Named Fiduciary' of the Plan pursuant to Section 402(a) of ERISA. The Committee may delegate various duties and responsibilities to one or more employees or agents as set forth therein. In carrying out their respective responsibilities under the Plan, the Committee and other Plan fiduciaries shall have discretionary authority to interpret the terms of the Plan and to determine eligibility for an entitlement to Plan benefits in accordance with the terms of the Plan. Any interpretation or determination made pursuant to such discretionary authority shall be given full force and effect, unless it can be shown that the interpretation or determination was arbitrary and capricious. The Committee shall act by a majority of its members and the action of a majority of the Committee without a meeting which is duly recorded or otherwise appropriately documented shall be the action of the Committee. (b) In the exercise of all of its functions, the Committee shall act in an impartial and nondiscriminatory manner. (c) The Committee shall act by a majority of its members and the action of a majority of the Committee without a meeting which is duly recorded or otherwise appropriately documented shall be the action of the Committee. 16.02. Records Management. The Committee shall designate in its sole discretion a firm or organization to maintain the required records and reports of the Plan. 16.03. Books and Records. The Administrator shall cause to be maintained at all times accounts in such form and detail as are necessary for the effective administration of the Plan, except for records pertaining to the holdings in the various Funds other than the Stable Value Fund, which shall be kept by the Trustee. 16.04. Powers of the Administrator. The Administrator shall have all powers required for the administration and operation of the Plan, including, but not limited to, the following discretionary powers: (a) To establish and enforce such rules, regulations and procedures as it deems necessary or proper for the efficient administration of the Plan; (b) The discretionary authority to interpret the Plan and to decide any and all matters arising hereunder, including the right to remedy possible ambiguities, inconsistencies or omissions, and his or her decision or action in respect thereof shall be conclusive and binding upon all past, present and future Employees, Members and their beneficiaries, all Participating Companies and upon the Trustee; provided, however, that all such interpretations and decisions shall be applied without discrimination and in a uniform manner to all Employees, Members and beneficiaries similarly situated; and provided further, that no such interpretation shall limit or restrict the exercise by the Trustee of its fiduciary duties with respect to the Plan; (c) To decide all questions concerning the Plan and the eligibility of any Employee to participate in the Plan. (d) To authorize disbursements from the Trust on account of distributions and withdrawals; (e) To employ such advisors (including, but not limited to, attorneys, independent public accountants, and investment advisors) and such technical and clerical personnel as may be required in the Administrator's discretion for the proper administration of the Plan; (f) To designate, in his or her discretion, other fiduciaries with respect to the Plan, and to allocate to such fiduciaries such powers (including the appointment of advisors) and responsibilities (other than trustee responsibilities) with respect to the operation and administration of the Plan as he or she shall deem appropriate; (g) To compute the amount of benefits which shall be payable to any Member in accordance with the provisions of the Plan and to determine the person or persons to whom such benefits shall be paid; and (h) To authorize the payment of benefits. In carrying out his or her powers under this Section, the Administrator will be entitled to rely conclusively upon all information, tables, valuations, certificates, opinions and reports which will be furnished by any accountant, counsel, advisor, Employee or beneficiary. 16.05. Communications. Any person desiring to communicate with the Administrator, including any person claiming benefits under the Plan, shall direct such communication or claim to the Administrator, Wyeth Union Savings Plan, Wyeth, c/o Savings Plan Committee, Five Giralda Farms, Madison, New Jersey 07940. 16.06. Claims Review Procedure. (a) If any claim under the Plan is denied in whole or in part, the Administrator shall notify the claimant thereof in writing within a reasonable period of time after submission of such claim. Such written notice shall contain: (i) the specific reason or reasons for the denial; (ii) a specific reference to the provisions of the Plan on which such denial is based; (iii) a description of any additional material or information necessary for such person to perfect such claim, and an explanation of why such material or information is necessary; and (iv) an explanation of the Plan's review procedure as hereinafter set forth. (b) Every claimant whose claim has been denied in whole or in part, and any authorized representative of such person, may review all documents pertinent to such denial and, within 60 days after receipt by such claimant of the notification provided for in paragraph (a) of this Section, may request, by written notice sent to the Administrator, a review of such denial and may submit to the Administrator written issues and comments for consideration as part of such review. No claimant or representative shall have any right to appear personally, nor shall the Administrator be obligated to hold any meetings with any claimant or representative, or hold any hearings, as part of such review. The Administrator shall conduct such review as expeditiously as reasonably possible, and shall give due consideration to all written issues and comments submitted by or on behalf of such claimant. A decision on such review shall be made, if reasonably possible, not later than 60 days after the request for such review, but in any event not later than 120 days after receipt of such request. Such decision shall be in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, and shall also include specific references to the pertinent Plan provisions on which the decision is based. Effective for claims filed on or after January 1, 2002, a claim for benefits under the Plan and Trust shall be made by the Member or his or her Beneficiary (or his or her authorized representative) (hereinafter referred to as "Claimant") in writing to and in the form as prescribed by the Administrator. If such claim is wholly or partially denied (i.e., there is an adverse benefit determination), the Administrator shall provide such Claimant a written notice to that effect no later than ninety (90) days after the Plan's receipt of the Member's claim. However, if the Administrator determines that an extension of time for processing the claim is required as a result of special circumstances, written notice of the extension shall be furnished to the Claimant prior to the termination of the initial 90-day period. In no event shall such extension exceed a period of ninety (90) days from the end of such initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Administrator expects to render the benefit determination. The Administrator shall provide a Claimant with written or electronic notification of any adverse benefit determination. Any electronic notification shall comply with the standards imposed by DOL Regulation 2520.104b-1(c)(1)(i), (iii), and (iv). The notification shall set forth, in a manner calculated to be understood by the Claimant, the specific reason or reasons for the adverse determination; reference to the specific Plan provisions on which the determination is based; a description of any additional material or information necessary for the Claimant to perfect the claim and an explanation of why such material or information is necessary; a description of the Plan's review procedures and the time limits applicable to such procedures, including a statement of the Claimant's right to bring a civil action under section 502(a) of ERISA following an adverse benefit determination on review. The Claimant shall have a reasonable opportunity to appeal and receive a full and fair review of an adverse benefit determination by the Named Fiduciary of the Plan. The Administrator shall provide a Claimant at least 60 days following receipt of a notification of an adverse benefit determination within which to appeal the determination. As part of its appeal review procedures, the Administrator shall provide a Claimant the opportunity to submit written comments, documents, records, and other information relating to the claim for benefits; provide that a Claimant shall be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the Claimant's claim for benefits; and provide for a review that takes into account all comments, documents, records, and other information submitted by the Claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. A document, record, or other information will be considered relevant if such document, record, or other information was relied upon in making the benefit determination; was submitted, considered, or generated in the course of making the benefit determination, without regard to whether such document, record, or other information was relied upon in making the benefit determination; or demonstrates compliance with the administrative processes and safeguards otherwise designed to ensure and to verify that benefit claims determinations are made in accordance with the governing documents and are applied consistently. After the Named Fiduciary has had an opportunity to review a Claimant's appeal of an adverse benefit determination, the Administrator shall notify a Claimant of the benefit determination on review within a reasonable period of time, but not later than 60 days after receipt of the Claimant's request for review by the Plan, unless the Administrator determines that special circumstances (such as the need to hold a hearing, if the Plan's procedures provide for a hearing) require an extension of time for processing the claim. If the Administrator determines that an extension of time for processing is required, written notice of the extension shall be furnished to the Claimant prior to the termination of the initial 60-day period. In no event shall such extension exceed a period of 60 days from the end of the initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Plan expects to render the determination on review. For purposes of this paragraph, "notification" shall mean written or electronic notification and shall include the specific reason or reasons for the adverse determination; reference to the specific Plan provisions on which the benefit determination is based; a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the Claimant's claim for benefits; and a statement of the Claimant's right to bring an action under section 502(a) of ERISA. Whether a document, record, or other information is relevant to a claim for benefits shall be determined as provided for in the above paragraph. For purposes of reviewing an appeal of an adverse benefit determination, the period of time within which a benefit determination on review is required to be made shall begin at the time an appeal is properly filed, without regard to whether all the information necessary to make a benefit determination on review accompanies the filing. In the event that a period of time is extended as permitted above due to a Claimant's failure to submit information necessary to decide a claim, the period for making a benefit determination on review shall be tolled from the date on which the notification of the extension is sent to the Claimant until the date on which the Claimant responds to the request for additional information. The decision made at the appeal level will be binding, final and conclusive upon all parties. 16.07. Payment of Administrative Expenses . The reasonable expenses of administering the Plan, as determined by the Administrator, shall be payable from the Trust for the Plan, except to the extent that the Company, in its discretion, pays the expenses directly. ARTICLE XVII FIDUCIARY RESPONSIBILITY 17.01. Conduct. Each fiduciary shall discharge his or her duties with respect to the Plan and Trust Agreement solely in the interest of the Members and beneficiaries of Members for the exclusive purpose of providing benefits to Members and their beneficiaries, and defraying reasonable expenses of administering the Plan and Trust Fund with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with enterprise of a like character and with like aims, and in accordance with this Plan and any other documents or instruments governing the Plan and Trust Fund. A fiduciary who complies with the foregoing standards shall not be liable for any loss, action or omission hereunder. 17.02 Allocation and Delegation of Responsibilities. Plan Fiduciaries may allocate the responsibilities, obligations and duties granted to them for the operation and administration of the Plan and Trust Agreement among themselves. Any Plan Fiduciary may designate other individuals, corporations or other entities, who are not Plan Fiduciaries, to carry out such Plan Fiduciary's responsibilities, obligations and duties with respect to the Plan and Trust Agreement, except to the extent that ERISA prohibits such delegation of authority and discretion. Such allocations and delegations may be revoked or modified at any time and any such allocation, delegation, revocation or modification shall be made by written instruments signed by the Plan Fiduciary, if an individual, or in the case of other entities who are Plan Fiduciaries, in accordance with the procedures governing the functions of such entity, and a written record shall be kept thereof. 17.03 Co-Fiduciary Responsibility. A Plan Fiduciary or any individual, corporation or other entity employed or appointed by a Plan Fiduciary to serve in a fiduciary capacity with respect to the Plan or Trust Fund shall be solely responsible for the responsibilities, obligations or duties allocated or delegated to it, whether under this Plan and Trust Agreement or under the terms and conditions of employment or appointment. No person to whom such responsibilities, obligations or duties have not been allocated or delegated shall be responsible with respect to any action directed, taken or omitted by the Plan Fiduciary or individual, corporation or other entity serving in a fiduciary capacity to whom such responsibilities, obligations or duties have been allocated or delegated unless he or she participates knowingly in, or knowingly undertakes to conceal, an act or omission of such other Plan Fiduciary or individual, corporation or entity, knowing such act or omission is a breach of fiduciary responsibility or, if he or she has knowledge of a breach, he or she fails to make reasonable efforts under the circumstances to remedy the breach. 17.04 Duties of Fiduciaries With Respect to Investments. The Trustee shall have primary responsibility for investment of the assets of the Trust Fund which he or she administers unless the Company shall either: (a) Allocate control and management of all of any portion of the Trust assets to an Investment Manager, or (b) Notify the Trustee that the Committee shall direct the Trustee in the investment of all for any portion of the Trust Fund. If the Company appoints an Investment Manager pursuant to the foregoing, such Investment Manager shall be an investment adviser registered under the Investment Advisers Act of 1940, a bank as defined in such Act, or an insurance company which is qualified to manage the assets of employee benefit plans under the laws of more than one state. An Investment Manager shall acknowledge in writing its appointment as a Plan Fiduciary hereof, and shall serve until a proper resignation is received by the Company, or until it is removed or replaced by the Company. The Company, the Subsidiaries, the Committee and the Trustee shall be under no duty to question the direction or lack of direction of any Investment Manager, but shall act and shall be fully protected in acting, in accordance with each such direction. An Investment Manager shall have sole investment responsibility for that portion of the Trust assets which it has been appointed to manage, and no other Plan Fiduciary or any Trustee shall have any responsibility for the investment of any such assets, the management of which has been delegated to an Investment Manager, or liability for any loss to or diminution in value of such Trust assets resulting from any action directed, taken or omitted by an Investment Manager. If the Company notifies the Trustee that the Committee will direct the Trustee in the investment of all or any portion of the Trust Fund, the Trustee shall be subject to proper directions of the Committee, which are made in accordance with the terms of the Plan and which are not contrary to the provisions of Title I of ERISA. The Trustee shall be fully protected in acting in accordance with each such direction. No other Plan Fiduciary shall have any responsibility for the investment of any asset of the Trust Fund, the direction of which is given to the Committee, or liability for any loss to or diminution in value of such Trust Fund resulting from action taken or omitted by the Trustee in accordance with such direction. ARTICLE XVIII TERMINATION, AMENDMENT, MODIFICATION AND SUSPENSION 18.01. Amendment for Compliance with Law. The Board of Directors shall have the right to terminate, amend, or modify the Plan at any time for any reason; provided, however, that notwithstanding any other provision of the Plan, the Retirement Committee may amend or modify the Plan if such action is necessary or desirable and is (1) required by law, agreed to through collective bargaining or is appropriate to maintain the tax-qualified status of the Plan, or (2) is estimated not to result in a cost increase to the Company of more than five (5) percent, provided, however, that no amendment or alteration shall be made which: (a) shall adversely affect any right or obligation of any Participant with respect to any contribution made thereto; or (b) permits any fund paid. (a) shall adversely affect any right or obligation of any Participant with respect to any contributions made thereto; (b) permits any funds paid to the Trustee to revert to the Company; or (c) provides for the use of the assets of the Plan, or any part thereof other than for the exclusive benefit of Participants, former Participants or their Beneficiaries or paying the reasonable expenses of administering the Plan. 18.02. Effect. Any termination, amendment, modification or suspension of the Plan may affect Members in the Plan at the time thereof as well as future Members. 18.03. Immediate Vesting; Subsequent Distribution. Upon termination of the Plan or upon complete discontinuance of Company Contributions under the Plan having the effect of terminating the Plan, or upon complete discontinuance of Company Contributions under the Plan in respect of the employees of any Participating Company or in respect of the Employees of any entity by reason of such entity no longer being a Subsidiary, or in respect of all employees of the Company or its Subsidiaries located in any one state, territory or country solely by reason of such location and under circumstances in which such persons have not ceased to be Employees of the Company or a Subsidiary, in any such event having the effect of terminating the Plan as to such persons, all Units in the Accounts of persons affected thereby that are attributable to Company Contributions and Income thereon shall vest in such persons immediately. In the event of any termination or discontinuance referred to in this Section 18.03, the accounts of all affected Members will be distributed in accordance with Article IX, except that Before-Tax Contributions of affected Members who have not attained age 59 1/2 and Income thereon shall be distributed prior to such affected Member attaining such age only as permitted by Section 10.02(a). Upon such affected Member attaining age 59 1/2, such Before-Tax Contributions and Income thereon shall thereupon be distributed in accordance with Article IX. Notwithstanding the foregoing, if (a) the Savings Plan Committee directs the Administrator (in the case of (i) termination of the Plan, or (ii) the complete discontinuance of Company Contributions under the Plan having the effect of terminating the Plan, or (iii) the complete discontinuance of Company Contributions under the Plan in respect of all employees of the Company and its Subsidiaries located in any state, territory or country solely by reason of such location and under circumstances in which such persons have not ceased to be Employees of the Company or a Subsidiary, or (iv) upon complete discontinuance of Company Contributions under the Plan in respect of the Employees of any Participating Company where such former Participating Company remains a Subsidiary) or (b) the Administrator directs, in his or her discretion (in the case of a discontinuance of Company Contributions in respect of any entity by reason of such entity no longer being a Subsidiary and upon request of the Savings Plan Committee of such entity), that all Shares or Units in the Accounts of the persons affected thereby shall be transferred to a successor employees' trust described in Section 401(a) of the Code which is exempt from tax under Section 501(a) (or the analogous provisions of the Puerto Rico Tax Account) of the Code and which is authorized to accept such transfer, then in either such event such Units (including Shares or Units representing Before-Tax Contributions and Income thereon) shall be so transferred upon receipt by the Administrator, the Trustee and the trustee of such successor trust of such assurances as they shall respectively require that such transfer complies with the Act and the Code. In the event of such transfer, no Member or former Member shall have any right to any distribution from the Plan in lieu of such transfer to such other trust. Notwithstanding the foregoing, any such transfer to a trust which is part of a plan with respect to which the Internal Revenue Service has not issued a determination that such plan is qualified under Section 401(a) (unless the plan of which such trust forms a part is treated as a trust described in Section 401(a) pursuant to an election under Section 1022(i) of the Employees Retirement Income Security Act of 1974, as amended) shall be subject to the condition that, if no such determination has been issued within twelve months after such transfer, such Units shall be promptly re-transferred to the Trust. 18.04. No Diversion. Anything herein to the contrary notwithstanding, no termination, amendment or modification of the Plan or suspension of any provision thereof may (a) diminish the Shares or Units or value thereof in any Account of a Member as of the effective date of such termination, amendment, modification or suspension, or (b) have the effect of diverting all or any part of such Units amounts or value thereof in any Account of a Member as of the effective date of such termination, amendment, modification or suspension to purposes other than for the exclusive benefit of the Member and his or her beneficiaries, including any surviving spouse. 18.05. Further Restrictions on Rights of Company. (a) The rights of the Company hereunder are subject to the applicable rights granted to Members pursuant to Section 8.04. (b) There will be no merger or consolidation with, or transfer of any assets or liabilities to, any other plan, unless each Member will be entitled to receive a benefit immediately after such merger, consolidation, or transfer as if this Plan were then terminated which is at least equal to the benefit he or she would have been entitled to immediately before such merger, consolidation, or transfer as if this Plan had been terminated. ARTICLE XIX MEMBERS' RIGHTS NOT TRANSFERABLE OR ASSIGNABLE 19.01. Benefits Not Assignable. No right or interest of any Member under the Plan or in any of his or her Accounts shall be assignable or transferable, in whole or in part, either directly or by operation of law or otherwise, including without limitation, by execution, levy, garnishment, attachment, pledge or in any other manner, but excluding devolution by death or mental incompetency. No attempted assignment or transfer thereof shall be effective, and no right or interest of any Member under the Plan or in any of his or her accounts shall be liable for, or subject to, any obligation or liability of such Member. 19.02. Qualified Domestic Relations Order. Nothing in this Article XIX shall be deemed to apply to any payments required to made pursuant to any order of any court or agency which the Administrator determines to be a qualified domestic relations order, as defined in Section 206(d)(3)(B) of the Act. 19.03. Qualified Domestic Relations Order Procedure. Upon receipt by the Plan of any domestic relations order, the Administrator will promptly notify the affected Member and any Alternate Payee (as defined in Section 206(d)(3)(K) of the Act) of the receipt thereof and of the Plan's procedures for determining whether such order is a qualified domestic relations order, shall make such determination within a reasonable period after receipt of such order, and shall notify such Member and such Alternate Payee of such determination promptly thereafter. During the period in which the determination of whether a domestic relations order is a qualified domestic relations order is being made, the Administrator shall cause to be segregated in a separate account in the Plan the amounts which would have been payable to the Alternate Payee specified in such domestic relations order during such period if the order had been determined upon receipt to be a qualified domestic order, and such amounts shall be paid to such alternate payee if it is determined within eighteen months after receipt by the Administrator that such domestic relations order is a qualified domestic relations order. If, within such eighteen months, it is determined that such domestic relations order is not a qualified domestic relations order, or if such determination has not been made, then the Administrator shall pay the aggregate amounts segregated in such separate account to the Plan, the Member, or such other person or persons who would have been entitled to such amounts if there had been no order. No payment from such segregated account to any person shall be required to include interest. 19.04. Interest Rate For Qualified Domestic Relations Order. To the extent that any qualified domestic relations order requires payments to be made to an Alternate Payee prior to the time that the affected Member has separated from the service, as if such Member had retired on the date on which such payment is to begin under such order, and taking into account only the then present value of benefits actually accrued, the interest rate assumption utilized in determining such present value shall be six and one-half percent. 19.05 Obligation of Company. In the absence of a breach by the Administrator or any other fiduciary of the Plan of its or his or her fiduciary obligations to the Plan, the obligation of the Plan to the affected Member and to each Alternate Payee shall be discharged to the extent of any payment to either such Member or to such Alternate Payee based upon any determination by the Administrator that a domestic relations order is or is not a qualified domestic relations order. ARTICLE XX DESIGNATION OF BENEFICIARIES Effective January 1, 1983, each Member making any election under the Plan, and each surviving spouse, and each beneficiary who is a natural person, to whom any benefit under the Plan becomes payable shall file with the Administrator a written designation of a beneficiary or beneficiaries, in such proportions or sequence (in the event of the death of any such beneficiary prior to the completion of payments to such beneficiary) as the Member or surviving spouse or other beneficiary shall designate, to receive, subject to applicable law and any reasonable limitation of general application established by the Administrator, distributions from the Plan in the event of his or her death prior to complete distribution of benefits hereunder. A Member or such surviving spouse or other beneficiary may from time to time as permitted by the Plan revoke or change any such designation, subject to applicable laws and governmental regulations at the time in effect and any regulations which the Administrator may prescribe. In the case of lump sum distributions in respect of a deceased Member, if such Member did not designate a beneficiary, or if such beneficiary did not survive the Member, such distribution shall be made in the following order: first, to a Member's surviving spouse, if any; second, if there is no surviving spouse, to the Member's surviving children, if any, in equal shares; third, if there are no surviving children, to the Member's surviving parents, if any, in equal shares; and fourth, if there are no surviving parents, to the legal representative of the Member's estate. Any distribution in accordance with this Article XXI shall constitute a complete release of all Participating Companies, the Administrator and, the Trustee of all obligations with respect to such distribution. ARTICLE XXI TRANSFERS FROM OTHER QUALIFIED PLANS AND QUALIFIED TRUSTS 21.01. Transfers. In the event of an entity becoming a Subsidiary or of the acquisition by the Company or any Subsidiary of any business the employees of which become Employees, the Plan, upon authorization of the Board of Directors (or any committee or person to whom the Board of Directors may delegate the authority), may accept, from (a) any pension plan qualified under Section 401 of the Code which formerly provided coverage for such persons or (b) any trust qualified under Section 501 of the Code which formerly provided coverage for such persons, assets allocable to the accounts of such persons, subject to such reasonable conditions as the Administrator may impose to insure compliance with applicable law. Any transfers contemplated by this Section 21.01 shall be allocated and invested as contemplated by the Plan or as the Board of Directors (or any committee or person to whom the Board of Directors may delegate the authority) shall specify in authorizing such transfer as contemplated by this Section 21.01. 21.02. Transfers of Employees. If any Employee is transferred from a Subsidiary which is not a Participating Company to a Participating Company and elects to become a Member of the Plan, such person may elect, by filing a Payroll Deduction Authorization with the Administrator, to have transferred to the trust forming part of this Plan all of such person's individual account balances in any defined contribution individual account plan of such Subsidiary which is not a Participating Company in which such person participated as an employee thereof, subject to the requirements of such plan and its related trust, and subject to such reasonable conditions as the Administrator may propose to insure compliance with applicable law. Such transfer shall be effected as of such Valuation Date as the Administrator shall designate. 21.03. No Benefit Reduction. Nothing in this Article XXI shall be deemed to authorize or permit any reduction of the present value of any benefit attributable to any person. ARTICLE XXII ROLLOVER 22.01. Rollover. An Employee who was (a) a Member of a pension plan qualified under Section 401 of the Code, (b) covered by a trust qualified under Section 501 of the Code shall be permitted to transfer in cash his or her aggregate account balance from such prior plan into the Plan. Any such transfer shall be effected by the Employee delivering (on an Enrollment Date following within the period prescribed in the preceding sentence) a Rollover Application specifying the Fund or Funds in which such Employee's Rollover amount is to be invested. Notwithstanding any other provision in this Section 22.01 any transfers contemplated by this Section shall be subject to such reasonable conditions as the Administrator may impose to insure compliance with applicable law. 22.02. Direct Rollovers to Other Plans. (a) This section applies to distributions made on or after January 1, 1993. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a Distributee's election under this Section, a Distributee may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an "Eligible Rollover Distribution" paid directly from the Plan to an "Eligible Retirement Plan" specified by the distributee in a "Direct Rollover". (b) Definitions. "An Eligible Rollover Distribution" means any distribution of all or any portion of the balance to the credit of a Distributee, except that an Eligible Rollover Distribution does not include: (1) any distribution that is one of a series of substantially equal Periodic Payments (not less frequently than annually) made for (I) the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee's designated beneficiary, or (II) for a specified period of ten years or more; (2) any distribution to the extent such distribution is required under section 401(a)(9) of the Code; and (3) the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities) (4) A hardship withdrawal as described in Section 10.02 if (and only if) such withdrawal is made after December 31, 1999. (c) "Eligible Retirement Plan" for purposes of the Plan means an individual retirement account described in section 408(a) of the Code, an individual retirement annuity described in section 408(b) of the Code, an annuity plan described in section 403(a) of the Code, or a qualified trust described in section 401(a) of the Code that accepts the Distributee Member's Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution to the surviving spouse, an eligible retirement plan is an individual retirement account or individual retirement annuity. (d) "Distributee" means an employee or former employee. In addition, the employee's spouse or former employee's surviving spouse and the employee's or former Member's spouse or former spouse who is the Alternate Payee under a qualified domestic relations order, as defined in section 414(p) of the Code, are Distributees with regard to the interest of the spouse or former spouse. (e) "Direct Rollover" means a payment by the plan to the Eligible Retirement Plan specified by the Distributee. 22.03. No Benefit Reduction. Nothing in this Article XXII shall be deemed to authorize or permit any reduction of the account balance of any benefit attributable to any person. ARTICLE XXIII MISCELLANEOUS PROVISIONS 23.01. Burden of Investment Risk. Each Member assumes all risk connected with any decrease in the market price of any securities, including Company Stock, credited to any of his or her Accounts. 23.02. No Contract of Employment. The establishment of the Plan shall not be construed as conferring any legal rights upon any Employee or any person for a continuation of employment nor shall it interfere with the rights of any Participating Company to discharge any Member or to treat him or her without any regard to the effect that such treatment might have on him or her as a Member. 23.03. Governing Law. This Plan shall be construed and interpreted in accordance with the laws of the State of New York, to the extent not pre-empted by the Act. 23.04. Leased Employees. Notwithstanding any other provisions of the Plan, for purposes of the pension requirements of Section 414(n)(3) of the Code, the employees of a Participating Company shall include individuals defined as "Employees" in Article I of the Plan. A Leased Employee within the meaning of Section 414(n)(2) of the Code shall become a Member in, or accrue benefits under, the Plan based on service as a Leased Employee only as provided in provisions of the Plan other than this Section 23.04. ARTICLE XXIV TREATMENT OF RETURNING VETERANS 24.01. Applicability and Effective Date. Notwithstanding, any other provisions of the Plan, the rights of any Returning Veteran who resumes employment with the Company on or after December 12, 1994 shall be modified as set forth in this Section. 24.02. Definitions. For purposes of this Section 24, the terms defined herein shall have the following meanings: (a) "Qualified Military Service" means any service (either voluntary or involuntary) by an individual in the Uniformed Services if such individual is entitled to reemployment rights with the Company with respect to such service. (b) "Returning Veteran" means a former Employee who, on or after December 12, 1994, returns from Qualified Military Service to employment with the Company within the period of time during which his or her reemployment rights are protected by law. (c) "Uniformed Services" means the Armed Forces, the Army National Guard and Air National Guard (when engaged in active duty for training, inactive duty training, or full-time National Guard duty), the commissioned corps of the Public Health Service, and any other category of persons designated by the President of the Untied States in time of war or emergency. 24.03. Eligibility to Participate. For purposes of Section 3 of the Plan: (a) A Returning Veteran who was an Employee eligible to participate in the Plan immediately prior to his or her Qualified Military Service shall be deemed to have remained an eligible Employee throughout his or her Qualified Military Service. (b) A Returning Veteran who would have become a Participant during the period of his or her Qualified Military Service but for the resulting absence from employment, shall be deemed to have become a Participant as of the date when he or she would have become a Participant if he or she had not entered into Qualified Military Service. 24.04. No Break in Service. A Returning Veteran shall be deemed not to have incurred any break in service on account of his or her Qualified Military Service. 24.05. Vesting Credit. To the extent applicable, a Returning Veteran's years of service for vesting purposes shall be determined under Article VIII, except that with respect to any period of Qualified Military Service, he or she shall be credited with the hours of service with which he or she would have been credited had he or she remained an Employee during such period. 24.06. Restoration of Before-Tax and After-Tax Contributions. (a) Each Returning Veteran who, during his or her period of Qualified Military Service would have been eligible to make Before-Tax and After-Tax Contributions, shall be permitted to contribute an amount equal to the amount of Before Tax Contributions that he or she could have made during such absence from employment. Such "make-up" contributions shall be made during the period that begins with the Employee's reemployment by the Employer and ends with: (i) the expiration of a period of five years, or (ii) if shorter, a period equal to three times the period of Qualified Military Service. (b) Any make-up contributions described in Subsection (a) hereof shall be made in addition to those Before-Tax Contributions or After-Tax Contributions that the Participant may elect to make after his or her reemployment pursuant to Section 4.01. 24.07. Determination of Compensation. For purposes of determining the amount of any make-up contributions under this Section 24.07, and for applying the limits of Section 5.02, a Member's Covered Compensation during any period of Qualified Military Service shall be deemed to equal either: (a) the Covered Compensation the Member would have received but for such Qualified Military Service, based on the rate of pay he or she would have received from the Company; or (b) if the amount described in (a) above is not reasonably certain, the Member's average Covered Compensation from a participating Company during the 12-month period immediately preceding the Qualified Military Service (or, if shorter, the period of employment immediately preceding the Qualified Military Service). Such amount shall be adjusted as necessary to reflect the length of the Member's Qualified Military Service. 24.08. Application of Certain Limitations. (a) For purposes of applying the limitations of Sections IV A and IV B, any make-up contributions described in Section 24.06, and any related Matching Contributions described in Section 24.08, shall be treated as contributions for the Plan Year to which they relate, rather than the Plan Year in which they were actually made. (b) For purposes of applying the limitations of Section IV A, any such make-up contributions shall be treated as contributions for the calendar year to which they relate, rather than the calendar year in which they are actually made. (c) For purposes of applying the limitations of applying the limitations of Sections IV A and IV B and Section V A, any make-up contributions described in Section 24.06 and related Company Contributions described in Section 24.08 (if any) shall be disregarded, both for the Plan Year to which the contributions relate, and for the Plan Year in which they are actually made. 24.09. Suspension of Loan Repayments. Notwithstanding any provisions of Article X A to the contrary, if a Member receives a loan from the Plan and enters into Qualified Military Service during the term of the loan, a decrease in Covered Compensation or failure to make required loan repayments during such Qualified Military Service shall not result in a default under Article X A. 24.10. Administrative Rules and Procedures. The Committee or the Administrator shall establish such rules and procedures as it deems necessary or desirable to implement the provisions of this Article, provided that they are not in violation of the Uniformed Services Employment and Reemployment Rights Act of 1994, any regulations thereunder, or any other applicable law. Wyeth Union Saving Plan Schedule A The following is a list of collective bargaining units, which have negotiated for and accepted participation in the Wyeth Union Savings Plan: 1. Teamsters Local 781 at Carol Stream, Illinois 2. International Chemical Workers Union Local 143 at Pearl River, New York 3. International Chemical Workers Union Council/UFEW Local 887-C at Hannibal, Missouri 4. International Chemical Workers Union Local 111 at Bound Brook, New Jersey 5. International Chemical Workers Union Local 560 at Danbury, Connecticut 6. International Chemical Workers Union Local 95 - Rouses Point, New York 7. Local 6, United Food and Chemical Workers International Union, AFL-CIO-CLC, Fort Dodge, Iowa WYETH UNION SAVINGS PLAN SCHEDULE B 1. Stable Value Fund (Vanguard Retirement Savings Trust) 2. Vanguard Balanced Index Fund 3. Vanguard 500 Index Fund 4. Vanguard Small-Cap Index Fund 5. Vanguard Total International Stock Index Fund 6. Wyeth Common Stock Fund AMERICAN HOME PRODUCTS CORPORATION UNION SAVINGS PLAN (the "Plan") APPENDIX I VESTING FOR PARTICIPANTS WHO ARE TRANSFERRED TO TYCO INTERNATIONAL (U.S.), INC. American Home Products Corporation ("AHPC"), American Cyanamid Company ("Cyanamid"), and AHPC Subsidiary Holding Corporation ("AHPC Sub") entered into an agreement (the "Purchase Agreement") with Tyco International (U.S.), Inc. ("Tyco"), dated as of October 20, 1997, whereby Tyco purchased, as of February 27, 1998 (the "Closing Date"), substantially all of the issued and outstanding shares and certain of the assets of Sherwood Medical Company, a wholly-owned subsidiary of AHPC. Pursuant to Section 9.4(c) of the Purchase Agreement, the Plan is amended to provide that, notwithstanding the provisions of Section 4.4 of the Plan, a Plan Participant, as of the Closing Date, whose employment is transferred to Tyco as of the Closing Date, shall be fully vested in his or her benefit attributable to his or her Matching Account accrued as of the Closing Date, regardless of whether he or she has less than five years of Continuous Service. AMERICAN HOME PRODUCTS CORPORATION UNION SAVINGS PLAN (the "Union Savings Plan") VESTING FOR PARTICIPANTS WHO ARE TRANSFERRED TO BASF AKTIENGESELLSCHAFT APPENDIX II American Home Products Corporation (the "Company") and American Cyanamid Company, a Maine Corporation ("Cyanamid") a wholly-owned subsidiary of the Company, entered into an agreement with BASF Aktiengesellschaft, a corporation organized under the laws of Germany ("BASF"), dated as of March 20, 2000 (the "Purchase Agreement"), whereby the Company sold to BASF the crop protection business conducted by Cyanamid. Pursuant to Section 9.4(c) of the Purchase Agreement, the Union Savings Plan is hereby amended as of June 30, 2000 (the "Closing Date") to provide that, notwithstanding the provisions of Section of the Union Savings Plan, all Plan Participants who are "U.S. Employees" as defined in the Purchase Agreement (or whose connection with the transactions contemplated by the Purchase Agreement) whose employment is transferred to BASF as of the Closing Date, shall be fully vested in his or her benefit attributable to his or her Matching Account accrued as of the Closing Date, regardless of whether he or she has less than five years of Continuous Service. However, Participants who are on disability, leave of absence, or layoff with recall rights on the Closing Date shall be fully vested in his or her benefit attributable to his or her Matching Contributions (is any) as of the time he or she returns to work and is transferred to employment with BASF, provided such return to employment and transfer occurs within 180 days after the Closing Date. AMERICAN HOME PRODUCTS UNION SAVINGS PLAN - UNITED STATES EGTRRA AMENDMENTS APPENDIX III SECTION 1. LIMITATIONS ON CONTRIBUTIONS 1. Effective date. This Section shall be effective for Limitation Years beginning after December 31, 2001. 2. Maximum Annual Addition. Except to the extent permitted under Section 7 of this amendment and Section 414(v) of the Code, if applicable, the Annual Addition that may be contributed or allocated to a Participant's Account under Section 10 of the Plan for any Limitation Year shall not exceed the lesser of: (a) $40,000, as adjusted for increases in the cost-of-living under Section 415(d) of the Code, or (b) 100 percent of the Participant's Compensation, within the meaning of Section 415(c)(3) of the Code, for the Limitation Year. The Compensation limit referred to in (b) shall not apply to any contribution for medical benefits after separation from service (within the meaning of Section 401(h) or Section 419A(f)(2) of the Code) which is otherwise treated as an Annual Addition. SECTION 2. INCREASE IN COMPENSATION LIMIT The annual Compensation of each Participant taken into account in determining allocations for any Plan Year beginning after December 31, 2001, shall not exceed $200,000, as adjusted for cost-of-living increases in accordance with Section 401(a)(17)(B) of the Code. Annual Compensation means Compensation during the Plan Year or such other consecutive 12-month period over which Compensation is otherwise determined under the Plan (the "determination period"). The cost-of-living adjustment in effect for a calendar year applies to annual Compensation for the determination period that begins with or within such calendar year. SECTION 3. MODIFICATION OF TOP-HEAVY RULES 1. Effective date. This Section shall apply for purposes of determining whether the Plan is a top-heavy Plan under Section 416(g) of the Code for Plan Years beginning after December 31, 2001, and whether the Plan satisfies the minimum benefits requirements of Section 416(c) of the Code for such years. This Section amends Section 11 of the Plan. 2. Determination of top-heavy status. 2.1 Key Employee. Key Employee means any Employee or former Employee (including any deceased employee) who at any time during the Plan Year that includes the Determination Date was an officer of the Employer having annual compensation greater than $130,000 (as adjusted under Section 416(i)(1) of the Code for Plan Years beginning after December 31, 2002), a 5-percent owner of the employer, or a 1-percent owner of the Employer having annual compensation of more than $150,000. For this purpose, annual compensation means compensation within the meaning of Section 415(c)(3) of the Code. The determination of who is a Key Employee will be made in accordance with Section 416(i)(1) of the Code and the applicable regulations and other guidance of general applicability issued thereunder. 2.2 Determination of present values and amounts. This Section 2.2 shall apply for purposes of determining the amounts of account balances of Employees as of the Determination Date. 2.2.1 Distributions during year ending on the Determination Date. The amounts of account balances of an Employee as of the Determination Date shall be increased by the distributions made with respect to the Employee under the Plan and any plan aggregated with the Plan under Section 416(g)(2) of the Code during the 1-year period ending on the Determination Date. The preceding sentence shall also apply to distributions under a terminated plan which, had it not been terminated, would have been aggregated with the Plan under Section 416(g)(2)(A)(i) of the Code. In the case of a distribution made for a reason other than separation from service, death, or disability, this provision shall be applied by substituting "5-year period" for "1-year period." 2.2.2 Employees not performing services during year ending on the Determination Date. The Accounts of any individual who has not performed services for the Employer during the 1-year period ending on the Determination Date shall not be taken into account. 3. Minimum benefits. Matching Contributions. Matching Contributions shall be taken into account for purposes of satisfying the minimum contribution requirements of Section 416(c)(2) of the Code and the Plan. The preceding sentence shall apply with respect to Matching Contributions under the Plan. Matching Contributions that are used to satisfy the minimum contribution requirements shall be treated as Matching Contributions for purposes of the actual contribution percentage test and other requirements of Section 401(m) of the Code. SECTION 4. DIRECT ROLLOVERS OF PLAN DISTRIBUTIONS 1. Effective date. This Section shall apply to distributions made after December 31, 2001. 2. Modification of definition of Eligible Rollover Distribution to exclude hardship withdrawals. For purposes of the direct rollover provisions in Section 7.14 of the Plan, any amount that is distributed on account of hardship shall not be an Eligible Rollover Distribution and the Distributee may not elect to have any portion of such a distribution paid directly to an Eligible Retirement Plan. 3. Modification of definition of Eligible Rollover Distribution to include after-tax contributions. For purposes of the direct rollover provisions in Section 7.14 of the Plan, a portion of a distribution shall not fail to be an Eligible Rollover Distribution merely because the portion consists of after-tax contributions which are not includible in gross income. However, such portion may be transferred only to an individual retirement account or annuity described in Section 408(a) or (b) of the Code, or to a qualified defined contribution plan described in Section 401(a) or 403(a) of the Code that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible. 4. Modification of definition of Eligible Retirement Plan. For purposes of the direct rollover provisions in Section 7.13 of the Plan, an Eligible Retirement Plan shall also mean an annuity contract described in section 403(b) of the Code and an eligible plan under section 457(b) of the Code which is maintained by a state, political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this plan. The definition of Eligible Retirement Plan shall also apply in the case of a distribution to a surviving spouse, or to a spouse or former spouse who is the alternate payee under a qualified domestic relation order, as defined in section 414(p) of the Code. The Plan will accept Participant Rollover Contributions and/or direct rollovers of Eligible Rollover Distributions made after December 31, 2001, from a qualified Plan described in Section 401(a) or 403(a) of the Code. SECTION 5. REPEAL OF MULTIPLE USE TEST The multiple use test described in Treasury Regulation Section 1.401(m)-2 and Section 4.10 of the Plan shall not apply for Plan Years beginning after December 31, 2001. SECTION 6. ELECTIVE DEFERRALS - CONTRIBUTION LIMITATION No Participant shall be permitted to have Salary Deferral Contributions made under this Plan, or any other qualified plan maintained by the Employer during any taxable year, in excess of the dollar limitation contained in Section 402(g) of the Code in effect for such taxable year, except to the extent permitted under Section 7 of this amendment and Section 414(v) of the Code, if applicable. SECTION 7. CATCH-UP CONTRIBUTIONS All Employees who are eligible to make Salary Deferral Contributions under this Plan and who have attained age 50 before the close of the Plan Year shall be eligible to make catch-up contributions in accordance with, and subject to the limitations of, Section 414(v) of the Code. Such catch-up contributions shall not be taken into account for purposes of the provisions of the Plan implementing the required limitations of Sections 402(g) and 415 of the Code. The Plan shall not be treated as failing to satisfy the provisions of the Plan implementing the requirements of Sections 401(k)(3), 401(k)(11), 401(k)(12), 410(b), or 416 of the Code, as applicable, by reason of the making of such catch-up contributions. This Section 7 shall apply to contributions made after December 31, 2001. SECTION 8. SUSPENSION PERIOD FOLLOWING HARDSHIP DISTRIBUTION A Participant who receives a distribution of Salary Deferral Contributions after December 31, 2001, on account of hardship shall be prohibited from making Salary Deferral Contributions and After-Tax Contributions under this Plan and all other plans of the Employer for 6 months after receipt of the distribution. SECTION 9. DISTRIBUTION UPON SEVERANCE FROM EMPLOYMENT 1. Effective date. This Section 9 shall apply for distributions and severances from employment occurring after the dates set forth below. 2. New distributable event. A Participant's Salary Deferral Contributions, Matching Contributions, and earnings attributable to these contributions shall be distributed on account of the Participant's severance from employment. However, such a distribution shall be subject to other provisions of the Plan regarding distributions, other than provisions that require a separation from service before such amounts may be distributed. This Section shall apply for distributions after severances from employment occurring after December 31, 2001. EX-12 13 exhibit12.txt Exhibit 12 Wyeth Computation of Ratio of Earnings to Fixed Charges (3) (In Thousands, except ratio amounts)
Years Ended December 31, ----------------------------------------------------------------------- 2001 2000 1999 1998 1997 ---------- ----------- ----------- ---------- ---------- Earnings Income (loss) from continuing operations before federal and foreign taxes (2) $2,868,747 ($1,101,040) ($1,907,299) $3,089,936 $2,364,753 Add: Fixed charges 439,058 324,887 403,694 371,986 513,860 Minority interests 20,841 26,784 30,301 620 2,421 Distributed equity income 0 0 0 771 0 Amortization of capitalized interest 2,497 1,917 1,803 1,487 1,057 Less: Equity income 70,372 55,991 2,122 473 9,777 Capitalized interest 94,257 43,303 15,375 9,497 12,898 ---------- ----------- ----------- ---------- ---------- Total earnings (loss) as defined $3,166,514 ($846,746) ($1,488,998) $3,454,830 $2,859,416 ========== =========== =========== ========== ========== Fixed Charges: Interest and amortization of debt expense $301,145 $238,840 $343,271 $322,970 $461,370 Capitalized interest 94,257 43,303 15,375 9,497 12,898 Interest factor of rental expense (1) 43,656 42,744 45,048 39,519 39,592 ---------- ----------- ----------- ---------- ---------- Total fixed charges as defined $439,058 $324,887 $403,694 $371,986 $513,860 ========== =========== =========== ========== ========== Ratio of earnings to fixed charges (2) 7.2 - - 9.3 5.6 (1) A 1/3 factor was used to compute the portion of rental expenses deemed representative of the interest factor. (2) The results of operations for the twelve months ended December 31, 2001 are adequate to cover fixed charges as defined. However, the ratio is negatively affected by the REDUX and PONDIMIN diet drug litigation charge of $950,000 taken in the third quarter of 2001. Excluding the additional charge for the REDUX and PONDIMIN diet drug litigation, the pro forma ratio of earnings to fixed charges would be 9.4 for the twelve months ended December 31, 2001. The results of operations for the year ended December 31, 2000 are inadequate to cover total fixed charges as defined. The coverage deficiency for the year ended December 31, 2000 is $324,887. Excluding the charge for the REDUX and PONDIMIN diet drug litigation of $7,500,000, the gain on sale of Immunex common stock of $2,061,204 and the Warner-Lambert Company termination fee of $1,709,380, the pro forma ratio of earnings to fixed charges would be 8.9 for the year ended December 31, 2000. The results of operations for the year ended December 31, 1999 are inadequate to cover total fixed charges as defined. The coverage deficiency for the year ended December 31, 1999 is $403,694. Excluding the charge for the REDUX and PONDIMIN diet drug litigation of $4,750,000, the pro forma ratio of earnings to fixed charges would be 8.1 for the year ended December 31, 1999. (3) Amounts have been restated to reflect the Cyanamid Agricultural Products business as a discontinued operation.
EX-13 14 ars2001.txt ANNUAL REPORT HIGHLIGHTS Years Ended December 31, (In thousands except per share amounts)
2001 2000 Net Revenue $14,128,514 $13,213,671 Income from Continuing Operations before Unusual Items* 2,900,294 2,514,004 Diluted Earnings per Share before Unusual Items* 2.18 1.90 Income (Loss) from Continuing Operations 2,285,294 (901,040) Diluted Earnings (Loss) per Share from Continuing Operations 1.72 (0.69) Dividends per Common Share 0.92 0.92 Total Assets 22,967,922 21,092,466 Stockholders' Equity 4,072,573 2,818,093
Contents Message to Stockholders 2 Strong Product Growth... for Today and Tomorrow 7 Wyeth's Pipeline for Growth 28 Principal Products 30 Financial Review 31 Directors and Officers 67 Corporate Data 68 Mission, Vision and Values IBC
*For identification of each specific unusual item occurring in 2001 and 2000, refer to "2001, 2000 and 1999 Unusual Transactions" on page 60 within Management's Discussion and Analysis of Financial Condition and Results of Operations. [PICTURE OF ROBERT ESSNER] Robert Essner, President and Chief Executive Officer MESSAGE TO STOCKHOLDERS The change of our corporate name to Wyeth on March 11, 2002 clearly signals the emergence of American Home Products Corporation (AHP) as a top-tier global pharmaceutical company. Our outstanding results in 2001 - the year in which AHP celebrated its 75th anniversary - reflect the strength of the Company and its products. Worldwide net revenue increased by 7 percent to more than $14 billion, and income from continuing operations - excluding unusual items detailed in the financial section of this report - grew by 15 percent for the year, to $2.9 billion, the highest operating earnings in our history. To maintain that momentum, we are intensifying our focus on innovative first- and best-in-class medicines while making major investments in manufacturing and quality assurance across our global supply chain. Our employees are united in a common mission with shared values that will allow us to achieve an ambitious vision: to be recognized as the best pharmaceutical company in the world. We foresee robust, long-term growth for Wyeth because the Company has a unique combination of strategic assets that set us apart from our competitors: - - STRONG FOUNDATION PRODUCTS - Our current product portfolio includes the PREMARIN family of hormone replacement therapy (HRT) products - which became Wyeth's first $2 billion product line in 2001 - and EFFEXOR/EFFEXOR XR, our novel antidepressant, which reached $1.5 billion in sales in 2001. We also have some of the world's best-known consumer health care brands, including ADVIL, CENTRUM and ROBITUSSIN. - - SUCCESSFUL NEW PRODUCTS - In the last three years, Wyeth has launched nine new products, and three of these have been among the most successful prescription medication launches of all time: ENBREL, PREVNAR and PROTONIX. These three products together produced sales of more than $2.2 billion in 2001, and each has the potential to exceed $1 billion in annual sales in the near future. Two important new products - FLUMIST, an innovative intranasal influenza vaccine, and rhBMP-2, a locally applied recombinant protein therapy that induces bone growth - are expected to reach the market during 2002. - - FAVORABLE PATENT SITUATION - With the success of our new products, Wyeth has one of the lowest exposures to near-term patent expiration of all the major pharmaceutical companies, a tremendous competitive advantage. Our broad-based portfolio also means that our growth is not dependent on the success or patent life of one or two products. 2 - - ROBUST PIPELINE - We have built an impressive new product pipeline across a wide range of therapeutic areas that address significant unmet medical needs. We expect this pipeline to yield several new first- or best-in-class products by 2004-2005. - - UNIQUE R&D TECHNOLOGY BASE - Wyeth is one of a select few major pharmaceutical companies with significant research programs, manufacturing capabilities and marketed products in three discovery and development platforms: small molecules, proteins and vaccines. We also are one of the world's largest biotechnology companies. This breadth of expertise provides unique research synergies and fuels our ability to explore multiple paths in the search for new therapies. All of these assets are driven by our most important resource: the talent, commitment and experience of our more than 52,000 employees around the world. RESULTS OF OPERATIONS Wyeth's worldwide net revenue for 2001 grew to $14.1 billion, an increase of 7 percent over 2000 net revenue. Excluding the negative impact of foreign exchange, worldwide net revenue increased by 9 percent for the year. Income and diluted earnings per share from continuing operations - including unusual items - were $2.3 billion and $1.72, respectively. This compares with a loss and diluted loss per share from continuing operations of $901 million and $0.69, respectively, in 2000. The 2000 results included a $7.5 billion charge related to litigation involving the diet drugs REDUX and PONDIMIN. In 2001, we took an additional diet drug litigation charge of $950 million to cover additional anticipated funding requirements for the nationwide, class action settlement and other estimated costs associated with the litigation. On January 3, 2002, as a result of the completion of the appeals process, the class action settlement regarding the diet drugs received final judicial approval. Excluding these and other unusual items from the 2001 and 2000 results - and including the dilutive effect of common stock equivalents in 2000 - income and diluted Income from continuing operations grew by 15 percent for the year. [PICTURE OF JOHN R. STAFFORD] John R. Stafford, Chairman of the Board Pharmaceutical Net Revenue ($ in millions) [PLOT POINTS TO COME] 3 earnings per share from continuing operations for 2001 increased by 15 percent to $2.9 billion and $2.18, respectively, compared with $2.5 billion and $1.90, respectively, in 2000. In December 2001, Amgen Inc. and Immunex Corporation announced that Amgen would acquire Immunex, a company in which Wyeth is the largest shareholder. Wyeth and Immunex co-promote ENBREL - the breakthrough treatment for rheumatoid arthritis - in North America. Wyeth supports the acquisition and has agreed to vote its shares in favor of the transaction because we believe it will benefit the future growth of ENBREL. Wyeth will continue to co-promote ENBREL in North America, and we retain exclusive international rights to the product. WYETH PHARMACEUTICALS Wyeth's prescription pharmaceutical business, now called Wyeth Pharmaceuticals, enjoyed strong growth in 2001. Worldwide net revenue for human pharmaceuticals increased by 10 percent for the year to $10.9 billion. Excluding the negative impact of foreign exchange, the increase was 12 percent for the year. Sales of the PREMARIN family of HRT products continued to grow, surpassing $2 billion in worldwide sales in 2001, an increase of 11 percent for the year. EFFEXOR/EFFEXOR XR reached $1.5 billion in worldwide sales for 2001 - a 33 percent increase over 2000 - with the addition of a new indication in the United States for use in preventing the relapse and recurrence of depression. ENBREL achieved sales of $856 million - an increase of 24 percent over 2000. In January 2002, ENBREL received a new indication in the United States for the treatment of psoriatic arthritis, making it the first therapy approved for this painful condition. Wyeth also is investing more than $1 billion to increase ENBREL production capacity for the global market. PREVNAR, Wyeth's vaccine for the prevention of invasive pneumococcal disease, is the most successful vaccine ever launched. It has reached nearly 95 percent of all eligible infants and toddlers in the United States after less than two years on the market. Sales of PREVNAR, launched in the first quarter of 2000, increased by 73 percent to $798 million. Wyeth's proton pump inhibitor (PPI), PROTONIX - licensed from Byk Gulden for marketing in the United States - more than tripled its 2000 U.S. sales to $561 million for 2001. It is the only PPI approved in both oral and intravenous formulations for gastroesophageal reflux disease in the U.S. market. Other prescription pharmaceutical products with strong growth in 2001 included CORDARONE I.V. (an anti-arrhythmic); ZOSYN/TAZOCIN (an injectable antibiotic); ALTACE (an angiotensin-converting-enzyme inhibitor); and our recombinant therapies for hemophilia A and B, REFACTO and BENEFIX, respectively. PREMARIN products exceeded $2 billion in global sales in 2001. WYETH CONSUMER HEALTHCARE Wyeth Consumer Healthcare - the new name of our non-prescription consumer health care products division - recorded $2.4 billion in worldwide net sales, a slight decrease versus 2000. Research and Development Expenditures ($ in millions) [PLOT POINTS TO COME] 4 ADVIL, CENTRUM, CALTRATE and CHAP STICK experienced growth for the year, while sales of cough/cold/allergy products such as ROBITUSSIN and DIMETAPP decreased. The division's brands remain some of the strongest and best known in the world: Nine of our consumer products rank number one or two in their categories in the United States, and three of our global brands - ADVIL, CENTRUM and ROBITUSSIN - are among the top 12 consumer health care brands worldwide. FORT DODGE ANIMAL HEALTH The Fort Dodge Animal Health Division - whose name remains unchanged because it is highly recognized in its field and closely associated with its products - recorded worldwide net sales of $776 million, a decline of 2 percent for 2001. This was primarily due to a general weakening in livestock markets globally and continuing concerns about foot-and-mouth and mad cow diseases. However, Fort Dodge introduced an innovative canine heartworm preventative in the United States in 2001 that rapidly achieved robust sales. The new treatment, called PROHEART 6, provides six months of protection from heartworm infection with a single injectable dose. INVESTING IN THE FUTURE Wyeth continues to make substantial investments to support the Company's growth. Our research and development expenditures in 2001 totaled nearly $1.9 billion, and we expect that amount to exceed $2 billion in 2002. In addition, we are in the second year of a five-year capital investment initiative to expand our biopharmaceutical manufacturing capabilities in the United States, and we are building a new $1.5 billion biopharmaceutical development and manufacturing facility near Dublin, Ireland. We expect our total capital spending in the five-year period from 2001 through 2005 to reach $7 billion, the majority of which is for increased production capacity - a clear indication of our confidence in the future. In 2002, we will invest more than $300 million to support our number one operating objective - to make sure that our manufacturing and operations maintain high quality standards. Prior to our entry into a consent decree with the U.S. Food and Drug Administration - focusing on Wyeth's compliance with current Good Manufacturing Practices - we began a companywide initiative to address these issues. Our efforts include strengthening sustainable compliance by taking a more focused and rigorous approach to the creation and standardization of robust procedures and systems across our global supply chain and distribution network. Quality and sustainable compliance will continue to be the highest priorities for Wyeth in the years ahead. Our research and development expenditures in 2001 totaled nearly $1.9 billion. It is with great sadness that we note the passing of William F. Laporte, Director Emeritus and former Chairman and President of American Home Products, in September 2001. Mr. Laporte was a tireless leader who spent his entire 63-year business career at AHP. He was instrumental in building the Company into the global pharmaceutical leader it is today. 5 INSIDE WYETH On May 1, 2001, Robert Essner, President of Wyeth, was elected Chief Executive Officer of the Company. John R. Stafford remains Chairman of the Board. In June 2001, Lawrence V. Stein was elected Senior Vice President and Deputy General Counsel, and Jeffrey S. Sherman was elected Vice President and Associate General Counsel. In February 2002, Ulf Wiinberg was appointed President of Wyeth Consumer Healthcare, and in March 2002, Mary Katherine Wold was elected Vice President - Taxes. In addition, two corporate officers retired in the past 12 months: Thomas G. Cavanagh, Vice President - Investor Relations, in March 2001, after more than 31 years of service to the Company; and Thomas M. Nee, Vice President - Taxes, after more than 15 years of service, in February 2002. We thank these individuals for their valuable contributions. A BRIGHT FUTURE With the strategic assets that we have in place and the investments we are making for the future, Wyeth's growth potential has never been better. We remain confident that we will deliver strong results in 2002 and beyond. Our product portfolio is the most robust it has ever been. In 1997, we had a single billion-dollar franchise: PREMARIN. Just five years later, in 2002, we expect to have two $2 billion franchises - PREMARIN and EFFEXOR - and two additional billion-dollar products, ENBREL and PREVNAR, which were not even on the market in 1997. We have one of the lowest patent-expiration exposures in the industry. In addition, we have unmatched research and development capabilities across the spectrum of small molecules, proteins and vaccines. In the near future, Wyeth expects to be the largest vaccine company in the world. We already are one of the largest global manufacturers of biopharmaceutical products. Furthermore, with our broad and deep pipeline, we expect to introduce new products in 2004 and 2005 that will keep Wyeth in the lead as an innovator of first- or best-in-class medicines. We have the right people and the right business strategies in place to realize this enormous potential. By working toward a common mission and operating according to our values, we will achieve Wyeth's vision to be the world's best pharmaceutical company. Given the events of 2001 that touched all of us, we want to thank our employees for their continued dedication and commitment to the success of the Company. We are particularly proud of the thousands of employees who contributed their time, effort and money to help the victims, families and rescue workers affected by the September 11 tragedy. It is the strength of all of us, working together to move ahead, that will create a bright future. As we work, we have the satisfaction of knowing that our efforts are producing medicines that make a difference in the lives of people around the world, every day. Wyeth's vision is to be the world's best pharmaceutical company. /s/ Robert Essner Robert Essner, President and Chief Executive Officer /s/ John R. Stafford John R. Stafford, Chairman of the Board March 11, 2002 6 STRONG PRODUCT GROWTH ... FOR TODAY AND TOMORROW Outstanding brands, exciting new products and a rich research pipeline will drive Wyeth's growth. [Photo] 7 Wyeth's product portfolio, with major brands such as PREMARIN, EFFEXOR XR, PREVNAR, ENBREL, PROTONIX, ADVIL and CENTRUM, is improving the quality of life for millions of people around the world. These foundation products are expected to produce strong sales growth over the next few years. During 2002, we anticipate that FLUMIST and rhBMP-2 will join our product lineup, with the potential to benefit millions of additional patients. Wyeth also has one of the broadest and deepest new product pipelines in the pharmaceutical industry. Our scientists currently are exploring more than 60 new therapies targeting significant medical conditions such as diabetes, breast cancer, multiple sclerosis, HIV, Alzheimer's disease and schizophrenia. Equally important, Wyeth's research and development efforts have the unique capability to take multiple paths toward discovering novel therapies. This combination of strong existing products, promising research projects and wide-ranging scientific resources should continue to drive Wyeth's growth while addressing some of the world's most important medical needs. Photo Caption: "I started taking PREMARIN after a hysterectomy, and it made an immediate difference in getting me back to normal. Now, more than 15 years later, I continue to lead an active life. I enjoy long-distance swimming, and I'm also a dancer. There's nothing I want to do that I can't do, and I credit PREMARIN for that." Marianne Anthe Philadelphia, Pennsylvania Callout: More than 11 million women used a PREMARIN product last year for menopausal symptoms and osteoporosis. PREMARIN: 60 YEARS AND GROWING Sales of the PREMARIN family of products increased by 11 percent in 2001, and PREMARIN became the first Wyeth brand to surpass $2 billion in annual sales. In the United States alone, more than 11 million women used a PREMARIN product last year for relief of menopausal symptoms and for osteoporosis prevention. The continuing popularity of PREMARIN is particularly remarkable for a brand that will celebrate 60 years on the market in 2002. To maintain this impressive legacy, Wyeth continues to enhance its hormone replacement therapy (HRT) franchise. We have filed regulatory submissions for lower dose formulations of PREMARIN and PREMARIN/MPA for the relief of vasomotor symptoms related to menopause, as well as for the prevention of postmenopausal osteoporosis. We anticipate final regulatory approval for these low-dose products by the end of 2002. 8 [Photo] 9 [Photo] 10 Additionally, in the second half of 2002, a New Drug Application (NDA) will be filed for an HRT product that combines PREMARIN with trimegestone, a novel progestin. While HRT is well-accepted by women in the United States, with about 30 percent to 35 percent of eligible women taking advantage of this therapy, the number of women using HRT in other parts of the developed world ranges from 20 percent to less than 5 percent. Wyeth is continuing its efforts to bring the benefits of HRT to millions of additional women worldwide through educational programs, new products and, in the case of Japan, local clinical trials. EFFEXOR: TREATING A GLOBAL HEALTH PROBLEM Since its launch in 1994, EFFEXOR has helped millions of patients transform the despair of depression and generalized anxiety disorder (GAD) into the joy of everyday living. According to the World Health Organization, major depressive disorder affects an estimated 120 million people worldwide - making it the world's fourth greatest public health problem. Photo Caption: "I was always worried, even about the smallest things. EFFEXOR XR has helped reduce my anxiety so I can be `me' again. My family relationships have improved, especially with my three boys. I'm more fun and productive, and I'm better able to deal with the worries of being a parent. EFFEXOR XR has restored me to the person I really am." Elizabeth Duthie, with son Kevin Oyster Bay, New York Callout: EFFEXOR XR helps transform the despair of depression into the joy of everyday living. In 2001, EFFEXOR and EFFEXOR XR reached $1.5 billion in annual worldwide sales - an increase of 33 percent over 2000. Momentum for EFFEXOR continues to build with the addition of new indications as well as its approval in dozens of countries for depression and GAD. EFFEXOR XR was approved by the U.S. Food and Drug Administration (FDA) in May 2001 for use in preventing the relapse and recurrence of depression. Also in 2001, Wyeth filed a supplemental NDA in the United States and Canada for the use of EFFEXOR XR in social anxiety disorder. Approval for this indication is expected before the end of 2002. Phase III clinical trials are under way to evaluate EFFEXOR XR for the treatment of panic disorder and for depression and GAD in pediatrics. EFFEXOR/EFFEXOR XR is expected to maintain its strong growth performance over the next few years and is targeted to reach sales of $3 billion by the end of 2004. 11 PREVNAR: REDUCING CHILDHOOD ILLNESSES PREVNAR is Wyeth's innovative 7-valent vaccine for the prevention of invasive pneumococcal disease, a major source of serious childhood illness. It is the most successful vaccine product ever launched, achieving cumulative sales of almost $1 billion in its first 18 months on the market. Sales in 2001 totaled nearly $800 million - up by 73 percent over 2000. More important, millions of infants and children have been vaccinated with PREVNAR, with immunization compliance rates reaching as high as 95 percent for all eligible infants and toddlers in the United States. Callout: PREVNAR is preventing thousands of cases of serious pneumococcal disease in infants and children. Photo Caption: As a mother, you want to do everything you can to make sure your baby is happy and healthy. When Alexa's doctor recommended PREVNAR, I saw it as an essential ingredient to ensure her continued well-being. Now I have the peace of mind of knowing that my daughter is protected against many serious childhood illnesses." Elva Gomez, and daughter Alexa Mountain View, California Post-marketing studies show that PREVNAR has reduced the incidence of invasive pneumococcal disease caused by the seven serotypes contained in the vaccine by 87 percent in infants under one year of age. The widespread use of PREVNAR in the United States has made a major impact in helping prevent an estimated 17,000 cases of invasive pneumococcal disease that occurred every year prior to the introduction of the vaccine. These invasive diseases, which can be associated with significant morbidity and mortality, include bacteremia, septicemia, bacteremic pneumonia and meningitis. The vaccine also has been approved in more than 45 other countries. Negotiations are under way in many of those countries concerning immunization recommendations and reimbursements, and we expect international use of the vaccine to grow significantly over the next few years. The PREVNAR story is far from over. Wyeth has a vaccine in Phase III clinical trials that combines a 9-valent version of the pneumococcal vaccine with MENINGITEC - Wyeth's successful meningococcal Group C vaccine. Research also is under way to study the use of a pneumococcal vaccine in high-risk adults and to expand the vaccine to include serotypes that are more prevalent in the developing world, where invasive pneumococcal disease kills an estimated 1.2 million young children annually. 12 [Photo] 13 [Photo] 14 ENBREL: A BREAKTHROUGH FOR RHEUMATOID ARTHRITIS Since its introduction in 1998, ENBREL has been used by more than 100,000 patients to relieve the symptoms of moderate to severe rheumatoid arthritis (RA), for inhibiting the progression of structural damage in the joints of early stage RA patients and for treating juvenile RA. ENBREL achieved sales of $856 million in 2001, a 24 percent increase over 2000. Wyeth co-promotes ENBREL in North America with Immunex Corporation and has exclusive international rights to the product. Photo Caption: "I can remember times when I was hardly able to move because of my rheumatoid arthritis. I was physically and mentally drained. After I started using ENBREL, I felt like I had been reawakened. I began zipping around like a young man. Now I'm able to accomplish so much that I was missing out on, like painting. I feel terrific." George Beach Philadelphia, Pennsylvania Callout: ENBREL helps control pain, swelling and other RA symptoms, allowing patients to lead active and productive lives. It is estimated that more than 6 million people are afflicted with rheumatoid arthritis worldwide. Additionally, 2 million people have a related condition called psoriatic arthritis - a painful chronic inflammatory disease characterized by both joint and skin manifestations. In January 2002, the FDA approved ENBREL for the treatment of psoriatic arthritis - the first therapy specifically approved to reduce the signs and symptoms of this condition. A regulatory submission for psoriatic arthritis in Europe was filed in late 2001. ENBREL currently is undergoing Phase II clinical trials in Europe as a treatment for psoriasis. Additionally, in February 2002, ENBREL received European Commission approval for the treatment of early RA. To meet the growing demand for this breakthrough biopharmaceutical therapy, Wyeth is investing more than $1 billion to increase production capacity at facilities in the United States and Ireland. These investments ultimately will create the capacity to support $4 billion in annual ENBREL sales. Commercial production from the expanded U.S. facility, located in West Greenwich, Rhode Island, should begin in the second half of 2002, which will substantially increase the availability of ENBREL for new patients. PROTONIX: GROWING RELIEF FOR GERD PROTONIX, Wyeth's proton pump inhibitor for the treatment of gastroesophageal reflux disease (GERD), continued its strong growth in 2001. Licensed from Byk Gulden for marketing in the United States, PROTONIX 15 achieved sales of $561 million in just its second year on the U.S. market - almost four times its 2000 sales. With FDA approval of PROTONIX I.V. in March 2001, it also is the first and only proton pump inhibitor to be approved in both oral and intravenous formulations for GERD - a condition caused by the chronic reflux, or backup, of stomach acid into the esophagus that can cause significant tissue damage if left untreated. Wyeth continued to extend the product's treatment profile with the approval of PROTONIX tablets in June 2001 for the maintenance of healing erosive esophagitis and the reduction in relapse rates of heartburn symptoms in patients with GERD. In addition, PROTONIX I.V. received approval for the treatment of pathological hypersecretion associated with Zollinger-Ellison Syndrome (ZES), which is characterized by chronic peptic ulcers caused by an oversecretion of stomach acid. Wyeth also submitted a supplemental NDA for PROTONIX tablets for treating ZES and is researching pediatric applications for PROTONIX. Photo caption: "Since my doctor switched me to PROTONIX, I don't have the lingering acidity problems I had with other medications. In fact, I don't really think about my condition anymore. That's a big difference for me. I enjoy cooking, and now I don't have to adjust or eliminate seasonings in my favorite dishes. I can eat whatever I like." William Abrams Maple Shade, New Jersey Callout: PROTONIX provides effective relief for gastroesophageal reflux disease. OTHER GROWING PRODUCTS While PREMARIN, EFFEXOR, PREVNAR, ENBREL and PROTONIX were major drivers of growth for Wyeth's prescription pharmaceutical business in 2001, a number of other products achieved significant results during the year, including: - - CORDARONE I.V., an antiarrhythmic medication, continued to experience steady growth following the presentation of a major study demonstrating its superiority for treating life-threatening arrhythmias. CORDARONE I.V. sales increased 31 percent in 2001, to $244 million. - - ZOSYN/TAZOCIN, a broad spectrum injectable antibiotic that is effective against serious infections, attained $427 million in sales - an 11 percent increase over 2000 - and now is available in 85 countries. - - ALTACE, an angiotensin-converting-enzyme (ACE) inhibitor co-promoted in the United States by Wyeth and King Pharmaceuticals, Inc., experienced a 65 percent increase in new prescriptions. ALTACE is the only ACE inhibitor with an indication to reduce the risk of stroke, heart attack and cardiovascular death in at-risk patients over age 55. 16 [Photo] 17 [Photo] 18 - - REFACTO and BENEFIX, Wyeth's recombinant hemophilia treatments, reached combined global sales of $360 million in 2001. REFACTO AF, an enhanced version of the product made without the use of animal- or human-derived proteins in any part of the manufacturing process, began Phase III clinical trials in 2001. - - RAPAMUNE, our novel immunosuppressant for kidney transplantation, more than doubled its 2000 sales and was launched in 17 additional countries in 2001. More than 7,000 transplant patients have used RAPAMUNE since its launch, and it now is used by more than 100 major U.S. transplant centers that account for 75 percent of all transplants in the country. GROWING FOR THE FUTURE While the strength of Wyeth's existing product portfolio is providing outstanding growth for the Company, our wide array of research programs holds the potential to dramatically accelerate our future growth. Included among the many projects in our development track are therapies that, if successful, could revolutionize the treatment of serious medical conditions. Photo Caption: "I wrote my Ph.D. thesis on the evolution and mutation of the influenza virus so it's a thrill for me to be working on the FLUMIST vaccine - knowing that it should soon be available to help prevent this serious illness in adults and children." Debbie Buonagurio, Ph.D., Principal Research Scientist, Wyeth Research, shown in the lab examining virus plaques, and in a field engaged in her favorite hobby, bird watching. Callout: Wyeth scientists are exploring vaccine therapies for serious bacterial and viral diseases. DISCOVERING NEW VACCINES The next exciting Wyeth product that we anticipate will reach the market is FLUMIST, an innovative influenza vaccine licensed from Aviron. FLUMIST is unique because it is administered as an easy-to-use nasal spray. An application for regulatory approval in the United States was filed late in 2000, and FDA approval is anticipated this year - in time for FLUMIST to be available for the 2002-2003 flu season. Annual influenza outbreaks in the United States typically affect 10 percent to 20 percent of the general population and cause an estimated 20,000 deaths. The efficacy of FLUMIST in children, combined with its easy-to-administer formulation, could have a substantial impact on these outbreaks. Wyeth also is applying its extensive experience in vaccine science to a variety of other bacterial and viral diseases. 19 Phase I trials are being conducted for a combination vaccine against respiratory syncytial virus and parainfluenza - two serious respiratory illnesses - and for a herpes simplex vaccine. In addition, research is under way on therapeutic/prophylactic vaccines for HIV. IMPROVING WOMEN'S HEALTH Wyeth's global leadership in women's health research continues to focus on advances in hormone replacement therapy that could benefit millions of women around the world. A major research effort is under way at Wyeth's Women's Health Research Institute to develop new therapies that utilize tissue-selective estrogens. These estrogens target receptors in specific tissue systems, such as bone, offering the opportunity to optimize the efficacy and tolerability of hormone therapies and to create a new treatment paradigm for postmenopausal women. In June 2001, Wyeth began Phase III clinical trials for bazedoxifene - a novel tissue-selective estrogen receptor modulator - for the prevention and treatment of postmenopausal osteoporosis. Phase III trials also have begun for a menopausal therapeutic that combines bazedoxifene and PREMARIN. Photo Caption: "Our research in tissue-selective estrogens such as bazedoxifene could lead to a new generation of hormone replacement therapies for postmenopausal women. I enjoy the challenge of moving a new therapy through the clinical process and proving that it works." Barry Komm, Ph.D., Director, Cell Biology, Wyeth Research, pictured here pursuing his passion for woodworking, with son Mickey, and working at a DNA extractor in the lab. Callout: Women's Health researchers at Wyeth are focusing on advances that could benefit millions of patients worldwide. REPAIRING BONE Another Wyeth innovation anticipated to reach the market in 2002 is rhBMP-2, a recombinant protein therapy - locally applied - that induces bone growth. Wyeth has filed for regulatory approval for rhBMP-2 in the United States and Europe as a treatment for long-bone fractures that require surgical management. In January 2002, the Orthopedic and Rehabilitation Devices Panel of the FDA recommended approval of an application from Medtronic Sofamor Danek, in collaboration with Wyeth, for the use of rhBMP-2 in spinal fusion surgery. This indication is for improvements in the surgical treatment of certain types of spinal degenerative disc diseases. The surgery uses rhBMP-2 in combination with a medical device to fuse vertebrae for the relief of lower back pain. This new procedure eliminates the need for - and the pain of - harvesting bone from the hip for spinal fusion surgery by using a collagen sponge 20 [Photo] 21 [Photo] 22 infused with rhBMP-2 to stimulate bone growth and fuse the vertebrae. Phase III clinical trials also are under way to test rhBMP-2 for dental/craniofacial surgical repair, and we expect to file an NDA for this application by the end of 2002. BATTLING CANCER CCI-779 is one of several potential therapies in Wyeth's oncology product pipeline designed to interfere with "signal transduction" - cellular processes that "tell" a cell when to divide. By inhibiting the signals for cell division, these compounds hold the potential to control tumor growth. CCI-779 is in Phase II clinical trials for the treatment of patients with breast cancer. Phase III trials for the treatment of renal cell carcinoma already are under way, and the FDA has designated the compound for "fast-track" development in this indication. In July 2001, Wyeth announced an agreement to collaborate with Taxolog, Inc. to develop anti-tumor agents based on Taxolog's research into a class of compounds that appear to block cell division by disrupting essential intracellular mechanisms. In preclinical testing, the first of these compounds - MAC-321 - demonstrated outstanding activity in recognized animal models of human cancer. Photo Caption: "Having spent years as an endocrinologist treating patients with type II diabetes, I know that current therapies often have only limited effectiveness. I'm excited about the potential of ertiprotafib to help the millions of people affected by this life-threatening disease." Kelly Davis, M.D., Assistant Vice President, Clinical R&D, Wyeth Research, displaying her prized collection of majolica pottery, and giving a presentation on ertiprotafib. Callout: Researchers in metabolic disorders at Wyeth are developing a potentially life-saving diabetes treatment. FIGHTING DIABETES AND HEART DISEASE Non-insulin dependent diabetes mellitus (known as type II diabetes) affects millions of people worldwide, and more than 700,000 patients with the condition are diagnosed each year in the United States. In type II diabetes, tissues that normally react to insulin develop a "resistance" to its actions, allowing blood sugar levels to rise and altering vital processes in the body that can lead to kidney failure, nerve damage and blindness. Wyeth's metabolic disease researchers are developing a potentially life-saving treatment for type II diabetes called ertiprotafib (PTP-112) - a small molecule with a novel therapeutic action that keeps the insulin receptors "turned on" and prolongs the body's responses to insulin. Ertiprotafib began Phase II clinical trials in both the United States and Europe in 2001. 23 Wyeth's biotechnology resources also have created a recombinant protein therapy called rPSGL-Ig that is in Phase II clinical trials to evaluate its ability to accelerate clot destruction and prevent reperfusion injury following a heart attack. TARGETING ALZHEIMER'S DISEASE One of Wyeth's most intriguing research efforts is targeted at Alzheimer's disease - a devastating condition that affects millions of older adults around the world and for which there is no current therapy that alters the onset or progression of the disease. Wyeth's Neuroscience group is taking a multi-pronged approach that draws on the Company's resources in all three technology platforms to tackle this difficult disease. One line of attack, being developed in conjunction with Elan Corporation, involves several types of immunotherapies that are designed to reduce and prevent the deposition of amyloid plaque in the brain - a substance believed to be associated with the progression of Alzheimer's disease. Although the first of these projects has been discontinued, other immunotherapeutics are in preclinical development. In addition, Wyeth is developing a small molecule therapy, SRA-333, that takes a completely different approach to the symptomatic treatment of Alzheimer's disease. This experimental therapy is expected to begin clinical trials before the end of this year. Wyeth's Neuroscience group has several other promising therapies in development, including a treatment for schizophrenia that is in Phase I trials and a therapy for multiple sclerosis. Photo Caption: "As a fitness professional, I encounter people every day who get discouraged about exercising because of soreness. Even after a lifetime of sports and fitness, I still get sore muscles. I advise people to start a new exercise program slowly, then build intensity and endurance. And I tell them that nothing beats ADVIL to relieve muscle aches and get them back in the game." Denise Austin Washington, D.C. Callout: ADVIL is one of the world's top consumer health care brands. BUILDING STRONG CONSUMER HEALTH BRANDS Wyeth Consumer Healthcare continues to focus on building strong global brands. Three of our well-established product lines - ADVIL, CENTRUM and ROBITUSSIN - are among the top 12 consumer health care product franchises in the world. Other key Wyeth Consumer Healthcare global brands include the CALTRATE family of calcium supplements, CHAP STICK and 24 [Photo] 25 PREPARATION H. After more than 100 years on the market, CHAP STICK product sales grew by 13 percent in the United States last year. U.S. sales of PREPARATION H - a product that has been available for almost 50 years - increased by 16 percent over 2000. The ADVIL Cold & Sinus family and CENTRUM PERFORMANCE, a premium multivitamin, also showed strong growth in the United States. New products or line extensions launched during 2001 include two new ROBITUSSIN Syrup formulations, ROBITUSSIN Sunny Orange cough drops, PREPARATION H Wipes and Children's ADVIL Blue Raspberry. Callout: PROHEART 6 provides six months of continuous protection from canine heartworm infection with a single dose. Caption: "PROHEART 6 offers many advantages over traditional oral canine heartworm treatments. It is administered intravenously in a veterinarian's office, so PROHEART 6 eliminates concerns about owner compliance and whether a dosage was really absorbed or rejected by the animal. And we have an accurate record of exactly when each treatment was given." Tim Haevernick, D.V.M. Veterinarian Mill Valley, California BREAKTHROUGHS IN ANIMAL HEALTH The highlight of 2001 for Wyeth's Fort Dodge Animal Health Division was the approval and launch in the United States of PROHEART 6 - an innovative canine heartworm preventative that is a breakthrough in animal health pharmaceuticals. Unlike traditional heartworm preventatives, PROHEART 6 provides six months of continuous protection from heartworm infection with a single injectable dose. PROHEART 6 achieved global sales of $84 million in 2001. A similar product has been approved in Australia, Japan and Italy. Fort Dodge received a conditional license in the United States to distribute its first-in-class West Nile Virus vaccine for horses to protect against this sometimes fatal disease that has spread to more than 20 states. In Spain, BIODECTIN, which provides immunization against clostridial diseases and persistent treatment of parasites in sheep, was the first combination pharmaceutical and biological product ever registered in Europe. 26 [Photo] 27 WYETH'S PIPELINE FOR GROWTH Shown here are some of the new products and new indications which are in post-Phase I clinical trials or have been submitted for regulatory approval.
PHASE II PHASE III REGULATORY REVIEW Phase II: Phase III: Regulatory Review: Determination Determination Evaluation of of safe and of overall safety and effective benefit/risk efficacy data dosage for an ratio for an by governmental experimental experimental regulatory medicine, medicine, agencies generally generally conducted in conducted in hundreds of thousands of patients patients WOMEN'S HEALTH CARE BAZEDOXIFENE (TSE-424) Postmenopausal osteoporosis X X BAZEDOXIFENE/PREMARIN(R) Postmenopausal osteoporosis X X Vasomotor symptoms of menopause X X PREMARIN(R) LOW DOSE Postmenopausal osteoporosis X X X Vasomotor symptoms of menopause X X X PREMARIN(R)/MPA LOW DOSE Postmenopausal osteoporosis X X X Vasomotor symptoms of menopause X X X PREMARIN(R)/TRIMEGESTONE Postmenopausal osteoporosis X X Vasomotor symptoms of menopause X X TRIMEGESTONE/17(BETA)-ESTRADIOL Postmenopausal osteoporosis (EU) X X Vasomotor symptoms of menopause (EU) X X X NEUROSCIENCE THERAPY EFFEXOR(R) XR Depression and generalized anxiety disorder in pediatrics X X Panic disorder X X Social anxiety disorder (U.S. and Canada) X X X VACCINES AND INFECTIOUS DISEASES COLD-ADAPTED INFLUENZA VACCINE Liquid formulation X X FLUMIST(TM) INTRANASAL INFLUENZA VACCINE Frozen formulation X X X PREVNAR(R) Otitis media X X X ZOSYN(R) Nosocomial pneumonia q6h (U.S.) X X 9-VALENT PNEUMOCOCCAL AND MENINGOCOCCAL GROUP C CONJUGATE VACCINE X X
28
PHASE II PHASE III REGULATORY REVIEW MUSCULOSKELETAL THERAPIES ENBREL(R) Ankylosing spondylitis X X Psoriatic arthritis (EU) X X X Psoriasis X J695 (ANTI-IL-12) Rheumatoid arthritis (joint with Abbott Laboratories) X rhBMP-2 Dental/craniofacial X X Lumbar interbody spinal fusion (collaboration with Medtronic Sofamor Danek) X X X Lumbar posterolateral spinal fusion (collaboration with Medtronic Sofamor Danek) X X Orthopedic trauma (long-bone fractures requiring surgery) X X X INTERNAL MEDICINE CORDARONE(R) AQ (AMIODARONE AQUEOUS) Recurrent ventricular fibrillation and unstable ventricular tachycardia (U.S.) X X ERTIPROTAFIB (PTP-112) Type II diabetes X PROTONIX(R) ORAL Zollinger-Ellison Syndrome (U.S.) X X X rhIL-11 Oral therapy in inflammatory bowel disease X rPSGL-Ig Acute coronary syndrome/acute myocardial infarction X IMMUNOLOGY AND ONCOLOGY CCI-779 Renal cell carcinoma X X Various solid tumors X MYLOTARG(R) Induction/consolidation in acute myeloid leukemia X RAPAMUNE(R) Conversion in liver transplant X X Conversion in renal transplant X X Maintenance regimen in renal transplant (U.S.) X X X Pediatric usage X X HEMOPHILIA REFACTO(R) AF Hemophilia A X X
29 PRINCIPAL PRODUCTS WYETH PHARMACEUTICALS HEMOPHILIA BeneFIX ReFacto IMMUNOLOGY & ONCOLOGY Mylotarg Neumega Rapamune INFECTIOUS DISEASES Minocin Minomycin Pipracil Suprax Tazocin Zosyn INTERNAL MEDICINE Altace (1) Cordarone I.V. Protonix Protonix I.V. Zebeta Ziac Zoton MUSCULOSKELETAL Enbrel (2) Seltouch Synvisc NEUROSCIENCE Efexor Effexor Effexor XR Sonata NUTRITIONALS Materna Nursoy Progress Progress Gold Promil Promil Gold Promise SMA SMA Gold S-26 S-26 Gold VACCINES FluShield HibTITER Meningitec Pnu-Imune 23 Prevenar Prevnar WOMEN'S HEALTH CARE Alesse Harmonet Loette Lo/Ovral Minesse Minulet Premarin Premphase Prempro Totelle Tri-Minulet Trinordiol Triphasil WYETH CONSUMER HEALTHCARE ANALGESICS Advil Anacin Anadin Children's Advil Robaxin Spalt COUGH/COLD/ALLERGY Advil Cold & Sinus Dimetapp Dristan Robitussin Robitussin Honey Products NUTRITIONAL SUPPLEMENTS Caltrate Centrum Centrum Jr. Centrum Kids Centrum Performance Centrum Select Centrum Silver Polase Solgar Vitasprint B12 OTHER PRODUCTS Anbesol Chap Stick FiberCon Preparation H Primatene FORT DODGE ANIMAL HEALTH Biodectin Bursine Cydectin Duramune Duvaxyn EtoGesic Fel-O-Vax Fluvac LymeVax Pentofel Polyflex Poulvac ProHeart Pyramid Quest Suvaxyn ToDAY ToMORROW Torbugesic Triangle West Nile Virus Vaccine (1) Co-promoted with King Pharmaceuticals, Inc. (2) Co-promoted with Immunex Corporation The above principal products are identified as trademarks used by Wyeth and its subsidiaries. 30 FINANCIAL REVIEW Jerauld Skotnicki, Ph.D., Director, Discovery Chemical Sciences, Wyeth Research, demonstrates the structure of the CCI-779 molecule. Ten-Year Selected Financial Data 32 Consolidated Balance Sheets 34 Consolidated Statements of Operations 35 Consolidated Statements of Changes in Stockholders' Equity 36 Consolidated Statements of Cash Flows 37 Notes to Consolidated Financial Statements 38 Report of Independent Public Accountants 55 Management Report on Financial Statements 55 Quarterly Financial Data (Unaudited) 56 Market Prices of Common Stock and Dividends 56 Management's Discussion and Analysis of Financial Condition and Results of Operations 57
[BACKGROUND PICTURE OF JERAULD SKOTNICKI, Ph.D.] 31 TEN-YEAR SELECTED FINANCIAL DATA (Dollar amounts in thousands except per share amounts)
YEARS ENDED DECEMBER 31, 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------ SUMMARY OF NET REVENUE AND EARNINGS Net revenue(1)(2) $ 14,128,514 $ 13,213,671 $ 11,815,138 Income (loss) from continuing operations(1)(3) 2,285,294 (901,040) (1,207,243) Diluted earnings (loss) per share from continuing operations(1)(3)(4) 1.72 (0.69) (0.92) Dividends per common share 0.9200 0.9200 0.9050 YEAR-END FINANCIAL POSITION Current assets(1) $ 9,766,753 $ 10,180,811 $ 12,384,778 Current liabilities(1)(5) 7,257,181 9,742,059 6,480,383 Ratio of current assets to current liabilities(1)(5) 1.35 1.05 1.91 Total assets(1) 22,967,922 21,092,466 23,123,756 Long-term debt(1)(6) 7,357,277 2,394,790 3,606,423 Average stockholders' equity(5) 3,445,333 4,516,420 7,914,772 STOCKHOLDERS -- OUTSTANDING SHARES Number of common stockholders 64,698 58,355 62,482 Weighted average common shares outstanding used for diluted earnings per share calculation (in thousands)(4) 1,330,809 1,306,474 1,308,876 EMPLOYMENT DATA(1) Number of employees at year end 52,289 48,036 46,815 Wages and salaries $ 2,536,220 $ 2,264,258 $ 2,032,431 Benefits (including social security taxes) 691,018 602,816 593,222
32 Wyeth and Subsidiaries TEN-YEAR SELECTED FINANCIAL DATA (CONTINUED)
YEARS ENDED DECEMBER 31, 1998 1997 1996 - --------------------------------------------------------------------------------------------------------------------------------- SUMMARY OF NET REVENUE AND EARNINGS Net revenue(1)(2) $ 11,219,752 $ 12,027,541 $ 12,040,836 Income (loss) from continuing operations(1)(3) 2,152,344 1,747,638 1,651,617 Diluted earnings (loss) per share from continuing operations(1)(3)(4) 1.61 1.33 1.28 Dividends per common share 0.8700 0.8300 0.7825 YEAR-END FINANCIAL POSITION Current assets(1) $ 10,698,188 $ 10,025,512 $ 10,310,256 Current liabilities(1)(5) 3,478,119 3,476,322 3,584,256 Ratio of current assets to current liabilities(1)(5) 3.08 2.88 2.88 Total assets(1) 20,224,231 19,851,517 19,924,666 Long-term debt(1)(6) 3,839,402 5,007,610 6,010,297 Average stockholders' equity(5) 8,895,024 7,568,672 6,252,545 STOCKHOLDERS -- OUTSTANDING SHARES Number of common stockholders 65,124 64,313 67,545 Weighted average common shares outstanding used for diluted earnings per share calculation (in thousands)(4) 1,336,641 1,312,975 1,287,790 EMPLOYMENT DATA(1) Number of employees at year end 47,446 54,921 54,194 Wages and salaries $ 2,175,517 $ 2,428,518 $ 2,439,604 Benefits (including social security taxes) 577,930 619,528 614,179
YEARS ENDED DECEMBER 31, 1995 1994(7) 1993 1992 - --------------------------------------------------------------------------------------------------------------------------------- SUMMARY OF NET REVENUE AND EARNINGS Net revenue(1)(2) $ 11,391,497 $ 8,828,732 $ 8,261,276 $ 7,819,957 Income (loss) from continuing operations(1)(3) 1,472,525 1,525,517 1,469,300 1,460,842 Diluted earnings (loss) per share from continuing operations(1)(3)(4) 1.18 1.24 1.17 1.15 Dividends per common share 0.7550 0.7350 0.7150 0.6650 YEAR-END FINANCIAL POSITION Current assets(1) $ 11,084,841 $ 11,321,682 $ 4,807,684 $ 4,552,077 Current liabilities(1)(5) 3,929,940 4,291,452 1,584,411 1,492,717 Ratio of current assets to current liabilities(1)(5) 2.82 2.64 3.03 3.05 Total assets(1) 20,721,093 21,328,267 7,687,353 7,141,405 Long-term debt(1)(6) 7,806,717 9,972,444 859,278 601,934 Average stockholders' equity(5) 4,898,550 4,065,295 3,719,539 3,431,568 STOCKHOLDERS -- OUTSTANDING SHARES Number of common stockholders 68,763 71,223 72,664 73,064 Weighted average common shares outstanding used for diluted earnings per share calculation (in thousands)(4) 1,250,902 1,234,100 1,252,990 1,267,240 EMPLOYMENT DATA(1) Number of employees at year end 58,957 70,300 51,399 50,653 Wages and salaries $ 2,512,418 $ 1,811,402 $ 1,654,984 $ 1,575,615 Benefits (including social security taxes) 641,169 439,572 396,045 367,899
- ---------- (1) As a result of the sale of the Cyanamid Agricultural Products business on June 30, 2000, amounts for the years 1994 through 1999 were restated to reflect this business as a discontinued operation. Beginning in 1994, current assets include the net assets of the discontinued business held for sale related to the Cyanamid Agricultural Products business. (2) The Company early adopted new authoritative accounting guidance as of January 1, 2001 reflecting certain rebates and sales incentives (i.e., coupons and other rebate programs) as reductions of revenues instead of selling and marketing expenses. Net revenue for all prior periods presented has been reclassified to comply with the income statement classification requirements of the new guidance. (3) See Management's Discussion and Analysis of Financial Condition and Results of Operations for amounts related to gain on sale of Immunex common stock, termination fee, litigation charges, goodwill impairment and special charges for the years ended December 31, 2001, 2000 and 1999. (4) The weighted average common shares outstanding for diluted loss per share for 2000 and 1999 did not include common stock equivalents, as the effect would have been antidilutive. (5) As a result of the litigation charges of $7,500,000 and $4,750,000 in 2000 and 1999, respectively, related to the litigation brought against the Company regarding the use of the diet drugs REDUX or PONDIMIN, current liabilities have increased substantially in 2000 and 1999 compared with prior years, and the ratio of current assets to current liabilities and average stockholders' equity has decreased substantially in 2000 and 1999 compared with prior years. (6) In the 2001 first quarter, the Company obtained a new $3,000,000 credit facility to support increased commercial paper borrowings and issued $3,000,000 of Senior Notes. The proceeds from these borrowings are used for the Company's general corporate and working capital requirements, including payments related to the REDUX and PONDIMIN diet drug litigation. (7) The 1994 information reflects the acquisition of American Cyanamid Company for the one-month period ended December 31, 1994. Wyeth and Subsidiaries 33 CONSOLIDATED BALANCE SHEETS (In thousands except share and per share amounts)
DECEMBER 31, 2001 2000 - ---------------------------------------------------------------------------------------------------------------------------- ASSETS Cash and cash equivalents $ 1,744,734 $ 2,644,306 Marketable securities 1,281,988 341,031 Accounts receivable less allowances (2001 -- $130,734 and 2000 -- $144,150) 2,743,040 2,740,272 Inventories 1,754,971 1,531,727 Other current assets including deferred taxes 2,242,020 2,923,475 --------------------------------- TOTAL CURRENT ASSETS 9,766,753 10,180,811 Property, plant and equipment: Land 138,837 149,810 Buildings 3,294,004 2,694,612 Machinery and equipment 3,796,117 3,510,529 Construction in progress 1,715,493 1,223,282 --------------------------------- 8,944,451 7,578,233 Less accumulated depreciation 2,662,291 2,543,409 --------------------------------- 6,282,160 5,034,824 Goodwill and other intangibles, net of accumulated amortization (2001 -- $1,895,670 and 2000 -- $1,739,368) 3,851,934 4,052,410 Other assets including deferred taxes 3,067,075 1,824,421 --------------------------------- TOTAL ASSETS $22,967,922 $21,092,466 ================================= - ---------------------------------------------------------------------------------------------------------------------------- LIABILITIES Loans payable $ 2,097,354 $ 58,717 Trade accounts payable 672,457 595,233 Accrued expenses 4,257,523 8,831,459 Accrued federal and foreign taxes 229,847 256,650 --------------------------------- TOTAL CURRENT LIABILITIES 7,257,181 9,742,059 Long-term debt 7,357,277 2,394,790 Other noncurrent liabilities 3,355,793 5,226,495 Accrued postretirement benefits other than pensions 925,098 911,029 --------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- STOCKHOLDERS' EQUITY $2.00 convertible preferred stock, par value $2.50 per share; 5,000,000 shares authorized 51 55 Common stock, par value $0.33 1/3 per share; 2,400,000,000 shares authorized (outstanding shares: 2001 -- 1,320,570,000 and 2000 -- 1,311,774,000) 440,190 437,258 Additional paid-in capital 4,295,051 3,952,457 Retained earnings (accumulated deficit) 170,309 (899,118) Accumulated other comprehensive loss (833,028) (672,559) --------------------------------- TOTAL STOCKHOLDERS' EQUITY 4,072,573 2,818,093 --------------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $22,967,922 $21,092,466 =================================
The accompanying notes are an integral part of these Consolidated Financial Statements. 34 Wyeth and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share amounts)
YEARS ENDED DECEMBER 31, 2001 2000 1999 - ----------------------------------------------------------------------------------------------------------------------------------- NET REVENUE $ 14,128,514 $ 13,213,671 $ 11,815,138 ---------------------------------------------------- Cost of goods sold 3,388,776 3,269,418 3,022,556 Selling, general and administrative expenses 5,179,285 4,983,465 4,322,207 Research and development expenses 1,869,679 1,687,889 1,587,505 Interest expense, net 146,358 57,562 213,866 Other income, net (274,331) (161,039) (255,697) Gain on sale of Immunex common stock -- (2,061,204) -- Termination fee -- (1,709,380) -- Litigation charges 950,000 7,500,000 4,750,000 Goodwill impairment -- 401,000 -- Special charges -- 347,000 82,000 ---------------------------------------------------- Income (loss) from continuing operations before federal and foreign taxes 2,868,747 (1,101,040) (1,907,299) Provision (benefit) for federal and foreign taxes 583,453 (200,000) (700,056) ---------------------------------------------------- INCOME (LOSS) FROM CONTINUING OPERATIONS 2,285,294 (901,040) (1,207,243) Discontinued operations: Income (loss) from operations of discontinued agricultural products business (including federal and foreign taxes of $57,289 and $1,551 for 2000 and 1999, respectively) -- 103,346 (19,878) Loss on disposal of agricultural products business (including federal and foreign tax charges of $855,248) -- (1,572,993) -- ---------------------------------------------------- LOSS FROM DISCONTINUED OPERATIONS -- (1,469,647) (19,878) ---------------------------------------------------- NET INCOME (LOSS) $ 2,285,294 $ (2,370,687) $ (1,227,121) ==================================================== BASIC EARNINGS (LOSS) PER SHARE FROM CONTINUING OPERATIONS $ 1.74 $ (0.69) $ (0.92) BASIC LOSS PER SHARE FROM DISCONTINUED OPERATIONS -- (1.12) (0.02) ---------------------------------------------------- BASIC EARNINGS (LOSS) PER SHARE $ 1.74 $ (1.81) $ (0.94) ==================================================== DILUTED EARNINGS (LOSS) PER SHARE FROM CONTINUING OPERATIONS $ 1.72 $ (0.69) $ (0.92) DILUTED LOSS PER SHARE FROM DISCONTINUED OPERATIONS -- (1.12) (0.02) ---------------------------------------------------- DILUTED EARNINGS (LOSS) PER SHARE $ 1.72 $ (1.81) $ (0.94) ====================================================
The accompanying notes are an integral part of these Consolidated Financial Statements. Wyeth and Subsidiaries 35 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (In thousands except per share amounts)
$2.00 RETAINED ACCUMULATED CONVERTIBLE ADDITIONAL EARNINGS OTHER TOTAL PREFERRED COMMON PAID-IN (ACCUMULATED COMPREHENSIVE STOCKHOLDERS' STOCK STOCK CAPITAL DEFICIT) LOSS EQUITY - ---------------------------------------------------------------------------------------------------------------------------------- Balance at January 1, 1999 $64 $437,466 $3,072,874 $ 6,432,729 $(328,337) $ 9,614,796 ===================================================================================== Net loss (1,227,121) (1,227,121) Currency translation adjustments (285,963) (285,963) Unrealized gains on marketable securities 815 815 ------------- Comprehensive loss (1,512,269) ------------- Cash dividends declared: Preferred stock (per share: $2.00) (50) (50) Common stock (per share: $0.905) (1,183,571) (1,183,571) Common stock acquired for treasury (6,409) (39,505) (1,012,385) (1,058,299) Common stock issued for stock options 3,376 230,894 234,270 Conversion of preferred stock and other exchanges (3) 206 128,442 (8,775) 119,870 ------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 1999 61 434,639 3,392,705 3,000,827 (613,485) 6,214,747 ===================================================================================== - ---------------------------------------------------------------------------------------------------------------------------------- Net loss (2,370,687) (2,370,687) Currency translation adjustments (70,496) (70,496) Unrealized gains on marketable securities 11,422 11,422 ------------- Comprehensive loss (2,429,761) ------------- Cash dividends declared: Preferred stock (per share: $2.00) (46) (46) Common stock (per share: $0.92) (1,201,431) (1,201,431) Common stock acquired for treasury (2,472) (16,316) (374,289) (393,077) Common stock issued for stock options 4,949 405,933 410,882 Conversion of preferred stock and other exchanges (6) 142 170,135 (6,663) 163,608 International operations year end change 53,171 53,171 ------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 2000 55 437,258 3,952,457 (899,118) (672,559) 2,818,093 ===================================================================================== - ---------------------------------------------------------------------------------------------------------------------------------- Net income 2,285,294 2,285,294 Currency translation adjustments (166,200) (166,200) Unrealized gains on derivative contracts 7,865 7,865 Unrealized losses on marketable securities (2,134) (2,134) ------------- Comprehensive income 2,124,825 ------------- Cash dividends declared: Preferred stock (per share: $2.00) (42) (42) Common stock (per share: $0.92) (1,211,012) (1,211,012) Common stock issued for stock options 2,774 221,857 224,631 Conversion of preferred stock and other exchanges (4) 158 120,737 (4,813) 116,078 ------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 2001 $51 $440,190 $4,295,051 $ 170,309 $(833,028) $ 4,072,573 =====================================================================================
The accompanying notes are an integral part of these Consolidated Financial Statements. 36 Wyeth and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
YEARS ENDED DECEMBER 31, 2001 2000 1999 - ----------------------------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Income (loss) from continuing operations $ 2,285,294 $ (901,040) $(1,207,243) Adjustments to reconcile income (loss) from continuing operations to net cash provided from/(used for) operating activities of continuing operations: Litigation charges 950,000 7,500,000 4,750,000 Gain on sale of Immunex common stock -- (2,061,204) -- Goodwill impairment -- 401,000 -- Special charges -- 347,000 82,000 Gains on sales of assets (249,399) (159,430) (205,739) Depreciation 426,590 336,239 341,871 Amortization 181,139 198,810 199,307 Deferred income taxes 267,820 (814,282) (1,410,068) Diet drug litigation payments (7,257,882) (3,966,845) (117,581) Contributions to defined benefit pension plans (429,710) (17,554) (14,259) Deconsolidation of Immunex -- (236,768) -- Changes in working capital, net of businesses acquired, sold or deconsolidated: Accounts receivable (68,984) (433,182) 164,588 Inventories (273,063) 31,188 (115,699) Other current assets (395,764) 179,817 (170,478) Trade accounts payable and accrued expenses 277,009 270,518 (73,946) Accrued federal and foreign taxes (14,654) (393,330) (121,227) Other items, net (145,231) 196,405 391,851 ---------------------------------------------------- Net cash provided from/(used for) continuing operations (4,446,835) 477,342 2,493,377 Net cash provided from/(used for) discontinued operations -- 77,600 (327,771) ---------------------------------------------------- NET CASH PROVIDED FROM/(USED FOR) OPERATING ACTIVITIES (4,446,835) 554,942 2,165,606 ==================================================== - ----------------------------------------------------------------------------------------------------------------------------------- INVESTING ACTIVITIES Purchases of property, plant and equipment (1,924,265) (1,681,906) (937,435) Proceeds from sale of agricultural products business -- 3,800,000 -- Proceeds from sale of Immunex common stock -- 2,404,875 -- Proceeds from sales of assets 408,230 256,192 327,730 Purchases of marketable securities (2,703,252) (677,802) (789,846) Proceeds from sales and maturities of marketable securities 1,762,295 384,292 383,941 ---------------------------------------------------- NET CASH PROVIDED FROM/(USED FOR) INVESTING ACTIVITIES (2,456,992) 4,485,651 (1,015,610) ==================================================== - ----------------------------------------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES Net proceeds from/(repayments of) debt 7,007,156 (3,080,381) 1,593,468 Dividends paid (1,211,054) (1,201,477) (1,183,621) Purchases of common stock for treasury -- (393,077) (1,058,299) Exercises of stock options 224,631 410,882 234,270 ---------------------------------------------------- NET CASH PROVIDED FROM/(USED FOR) FINANCING ACTIVITIES 6,020,733 (4,264,053) (414,182) ---------------------------------------------------- Effect of exchange rate changes on cash balances (16,478) (24,949) (25,418) ---------------------------------------------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (899,572) 751,591 710,396 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 2,644,306 1,892,715 1,182,319 ---------------------------------------------------- CASH AND CASH EQUIVALENTS, END OF YEAR $ 1,744,734 $ 2,644,306 $ 1,892,715 ====================================================
The accompanying notes are an integral part of these Consolidated Financial Statements. Wyeth and Subsidiaries 37 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION: The accompanying Consolidated Financial Statements include the accounts of Wyeth (formerly American Home Products Corporation) and its majority-owned subsidiaries (the Company). The financial statements have been prepared in accordance with accounting principles generally accepted in the United States and necessarily include amounts based on judgments and estimates made by management. Effective January 1, 2000, the financial results of certain pharmaceutical subsidiaries in Japan and India, which previously were included on an equity basis, were consolidated in the financial results of the Company due to changes which gave the Company the ability to exercise control over the operations of these affiliates. Also, effective January 1, 2000, the financial results of Immunex Corporation (Immunex), which previously were consolidated, were deconsolidated and included on an equity basis in the results of operations of the Company (see Note 2). Prior to 2000, certain of the Company's international affiliates reported their results of operations on a one-month lag (year ended November 30), which allowed more time to compile results. In December 2000, the one-month lag was eliminated, primarily to reflect the results of these operations on a more timely basis. As a result, December 2000 income from continuing operations for these entities of $53.2 million was recorded directly to stockholders' equity. DESCRIPTION OF BUSINESS: The Company is a U.S.-based multi-national corporation engaged in the discovery, development, manufacture, distribution and sale of a diversified line of products in two primary businesses: Pharmaceuticals and Consumer Health Care. Pharmaceuticals include branded and generic human ethical pharmaceuticals, biologicals, nutritionals, and animal biologicals and pharmaceuticals. Principal products include women's health care products, neuroscience therapies, cardiovascular products, infant nutritionals, gastroenterology drugs, anti-infectives, vaccines, biopharmaceuticals, oncology therapies, musculoskeletal therapies, hemophilia treatments and immunological products. Principal animal health products include vaccines, pharmaceuticals, endectocides and growth implants. Consumer Health Care products include analgesics, cough/cold/allergy remedies, nutritional supplements, herbal products, and hemorrhoidal, antacid, asthma and other relief items sold over-the-counter. The Company sells its diversified line of products to wholesalers, pharmacies, hospitals, physicians, retailers and other health care institutions located in various markets in more than 140 countries throughout the world. The Company is not dependent on any single customer or major group of customers for its net revenue. The Company is not dependent on any one patent-protected product or line of products for a substantial portion of its net revenue or results of operations. However, PREMARIN, one of the Company's conjugated estrogens products, which has not had patent protection for many years, contributes significantly to net revenue and results of operations. EQUITY METHOD OF ACCOUNTING: The Company accounts for its investments in 20%- to 50%-owned companies using the equity method. Accordingly, the Company's share of the earnings of these companies is included in Other income, net. The related equity investment is included in Other assets including deferred taxes. At December 31, 2001, Immunex was the Company's only material equity investment. Immunex is a biopharmaceutical company that discovers, manufactures and markets therapeutic products for the treatment of cancer and musculoskeletal disorders such as rheumatoid arthritis. See Note 2 for discussion of Immunex-related transactions in 2001 and 2000. CASH EQUIVALENTS consist primarily of certificates of deposit, time deposits and other short-term, highly liquid securities with original maturities of three months or less and are stated at cost. The carrying value of cash equivalents approximates fair value due to the short-term, highly liquid nature of cash equivalents. MARKETABLE SECURITIES consist of U.S. government or agency issues, commercial paper, time deposits and corporate bonds and are stated at fair value, which approximates cost due to the short-term, highly liquid nature of these securities (less than six months). All marketable securities are available-for-sale investments. The fair values are estimated based on current market prices. INVENTORIES are valued at the lower of cost or market. Inventories valued under the last-in, first-out (LIFO) method amounted to $319.9 million and $325.1 million at December 31, 2001 and 2000, respectively. The current value exceeded the LIFO value by $59.5 million and $59.7 million at December 31, 2001 and 2000, respectively. The remaining inventories are valued primarily under the first-in, first-out (FIFO) method. Inventories at December 31 consisted of:
(In thousands) 2001 2000 - -------------------------------------------------------------------------------- Finished goods $ 653,108 $ 585,123 Work in progress 674,636 586,656 Materials and supplies 427,227 359,948 ------------------------------- $1,754,971 $1,531,727 ===============================
PROPERTY, PLANT AND EQUIPMENT is carried at cost. Depreciation is provided over the estimated useful lives of the related assets placed into service, principally on the straight-line method. GOODWILL AND OTHER INTANGIBLES: Goodwill is defined as the excess of cost over the fair value of net assets acquired and is amortized using the straight-line method over various periods ranging from 15 to 40 years. Other intangibles are recorded at cost and amortized from three to 10 years. The Company continually reviews goodwill and other intangibles to evaluate whether changes have occurred that would suggest such assets may be impaired. If circumstances suggest an impairment, undiscounted 38 Wyeth and Subsidiaries future cash flows of such assets acquired or purchased are estimated. If this estimate indicates that goodwill or other intangibles are not recoverable, the carrying value of the goodwill or other intangibles is reduced to fair value by the estimated shortfall of future cash flows on a discounted basis. As of January 1, 2002, the Company will implement new authoritative accounting guidance relating to both the initial recording and subsequent impairment testing of goodwill and other intangibles. Refer to "Recently Issued Accounting Standards" herein for discussion of the Company's implementation of this new guidance. DERIVATIVE FINANCIAL INSTRUMENTS: The Company currently manages its exposure to certain market risks, including foreign exchange and interest rate risks, through the use of derivative financial instruments, and accounts for them in accordance with Statement of Financial Accounting Standards (SFAS) Nos. 133, Accounting for Derivative Instruments and Hedging Activities, and 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities. On the date that the Company enters into a derivative contract, it designates the derivative as: (1) a hedge of the fair value of a recognized asset or liability (fair value hedge), (2) a hedge of a forecasted transaction or the variability of cash flows that are to be received or paid in connection with a recognized asset or liability (cash flow hedge), (3) a foreign currency fair value or cash flow hedge (foreign currency hedge) or (4) a derivative instrument that is not designated for hedge accounting treatment. For derivative contracts that are designated and qualify as fair value hedges (including foreign currency fair value hedges), the derivative instrument is marked-to-market with gains and losses recognized in current period earnings to offset the respective losses and gains recognized on the underlying exposure. For derivative contracts that are designated and qualify as cash flow hedges (including foreign currency cash flow hedges), the effective portion of gains and losses on these contracts is reported as a component of accumulated other comprehensive income (loss) and reclassified into earnings in the same period the hedged transaction affects earnings. Any hedge ineffectiveness on cash flow hedges is immediately recognized in earnings. The Company also enters into derivative contracts that are not designated as hedging instruments. These derivative contracts are recorded at fair value with the gain or loss recognized in current period earnings. The Company does not hold any derivative instruments for trading purposes. See Note 7 for further description of the Company's specific programs to manage risk using derivative financial instruments. CURRENCY TRANSLATION: The majority of the Company's international operations are translated into U.S. dollars using current foreign currency exchange rates with currency translation adjustments reflected in Accumulated other comprehensive loss in stockholders' equity. Currency translation adjustments comprise the majority of Accumulated other comprehensive loss on the Consolidated Balance Sheets and the Consolidated Statements of Changes in Stockholders' Equity. Currency translation adjustments related to international operations in highly inflationary economies are included in the results of operations. REVENUE RECOGNITION: Revenue from the sale of Company products is recognized in Net revenue upon shipment to customers. Provisions for certain rebates, product returns and discounts to customers are provided for as reductions in determining Net revenue in the same period the related sales are recorded. Revenue under co-promotion agreements from the sale of products developed by other companies, such as the Company's arrangement with Immunex to co-promote ENBREL and with King Pharmaceuticals, Inc. to co-promote ALTACE, is recorded as alliance revenue, which is included in Net revenue. Such alliance revenue is earned when the co-promoting company ships the product to a third party. Selling and marketing expenses related to alliance revenue are included in Selling, general and administrative expenses. SHIPPING AND HANDLING COSTS, which include transportation to customers, transportation to distribution points, warehousing and handling costs, are included in Selling, general and administrative expenses. The Company typically does not charge customers for shipping and handling costs. Shipping and handling costs were $228.9 million, $212.5 million and $204.5 million in 2001, 2000 and 1999, respectively. REBATES AND SALES INCENTIVES, which are deducted to arrive at Net revenue,are offered to customers based upon volume purchases, the attainment of market share levels, sales support, government mandates, coupons and consumer discounts. Rebates and sales incentives accruals included in Accrued expenses at December 31, 2001 and 2000 were $615.0 million and $482.7 million, respectively. Wyeth and Subsidiaries 39 EARNINGS (LOSS) PER SHARE: The following table sets forth the computations of basic earnings (loss) per share and diluted earnings (loss) per share:
(In thousands except per share amounts) YEARS ENDED DECEMBER 31, 2001 2000 1999 - -------------------------------------------------------------------------------- Income (loss) from continuing operations less preferred dividends $2,285,252 $ (901,086) $(1,207,293) Loss from discontinued operations -- (1,469,647) (19,878) -------------------------------------------- Net income (loss) less preferred dividends $2,285,252 $(2,370,733) $(1,227,171) Denominator: Weighted average common shares outstanding 1,317,102 1,306,474 1,308,876 -------------------------------------------- Basic earnings (loss) per share from continuing operations $ 1.74 $ (0.69) $ (0.92) Basic loss per share from discontinued operations -- (1.12) (0.02) -------------------------------------------- Basic earnings (loss) per share $ 1.74 $ (1.81) $ (0.94) ============================================ Income (loss) from continuing operations $2,285,294 $ (901,040) $(1,207,243) Loss from discontinued operations -- (1,469,647) (19,878) -------------------------------------------- Net income (loss) $2,285,294 $(2,370,687) $(1,227,121) Denominator: Weighted average common shares outstanding 1,317,102 1,306,474 1,308,876 Common stock equivalents of outstanding stock options and deferred contingent common stock awards* 13,707 -- -- -------------------------------------------- Total shares* 1,330,809 1,306,474 1,308,876 -------------------------------------------- Diluted earnings (loss) per share from continuing operations* $ 1.72 $ (0.69) $ (0.92) Diluted loss per share from discontinued operations* -- (1.12) (0.02) -------------------------------------------- Diluted earnings (loss) per share* $ 1.72 $ (1.81) $ (0.94) ============================================
* The total weighted average common shares outstanding for diluted loss per share for 2000 and 1999 did not include common stock equivalents, as the effect would have been antidilutive. RECENTLY ISSUED ACCOUNTING STANDARDS: In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 142, Goodwill and Other Intangible Assets, which supersedes APB Opinion No. 17, Intangible Assets, and addresses how intangible assets that are acquired individually or with a group of other assets should be accounted for in financial statements upon their acquisition. The statement also addresses how goodwill and other intangibles should be accounted for after they have been initially recognized in the financial statements. With the adoption of SFAS No. 142, goodwill no longer is amortized over its estimated useful life but is subject to at least an annual assessment for impairment by applying a fair-value-based test. The same applies to other intangibles, which have been determined to have indefinite useful lives. Other intangibles with finite lives will continue to be amortized. The Company will adopt SFAS No. 142 as of January 1, 2002. In accordance with the adoption of SFAS No. 142, as of January 1, 2002, the Company will cease amortizing goodwill. Included in Selling, general and administrative expenses for 2001 was approximately $160.5 million ($153.9 million after-tax or $0.12 per share-diluted) of goodwill amortization. The Company currently is assessing the impact the new impairment testing requirements may have on its financial position, results of operations and cash flows. In October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which superseded existing guidance. The provisions of SFAS No. 144 are effective for fiscal years beginning after December 15, 2001 and generally are to be applied prospectively. SFAS No. 144 augments the criteria that would have to be met to classify an asset as held-for-sale and refines the guidance in determining fair value in measuring an impairment. The statement also requires expected future operating losses from discontinued operations to be recorded in the period in which the losses are incurred (rather than as of the date management commits to a formal plan to dispose of a segment, as was previously required). In addition, the qualifications for dispositions to be considered discontinued operations have been expanded. The Company adopted this statement on January 1, 2002 and will prospectively comply with all criteria outlined in SFAS No. 144. In April 2001, the Emerging Issues Task Force (EITF) reached a consensus on Issue No. 00-25, Vendor Income Statement Characterization of Consideration Paid to a Reseller of the Vendor's Products. EITF No. 00-25 requires the cost of certain vendor considerations to be classified as a reduction of revenue rather than a marketing expense. The Company will adopt the provisions of EITF No. 00-25 as of January 1, 2002. The adoption of EITF No. 00-25 will result in reclassifications of certain marketing expenses to revenues and will have no effect on income from continuing operations. The Company does not anticipate the adoption of this consensus to significantly affect the growth rate of net revenues. RECLASSIFICATIONS: Certain reclassifications have been made to the December 31, 2000 and 1999 Consolidated Financial Statements to conform with the December 31, 2001 presentation. 2. ACQUISITIONS, DIVESTITURES AND DISCONTINUED OPERATIONS Discontinued Operations -- Cyanamid Agricultural Products On March 20, 2000, the Company signed a definitive agreement with BASF Aktiengesellschaft (BASF) to sell the Cyanamid 40 Wyeth and Subsidiaries Agricultural Products business which manufactures, distributes and sells crop protection and pest control products worldwide. On June 30, 2000, the sale was completed, and BASF paid the Company $3,800.0 million in cash and assumed certain debt. The Company recorded an after-tax loss on the sale of this business of $1,573.0 million or $1.20 per share-diluted and reflected this business as a discontinued operation in the 2000 first quarter. The loss on the sale included closing costs from the transaction and reflected operating income of the discontinued business from April 1, 2000 through June 30, 2000 (the disposal date). The loss on the sale was due primarily to a difference in the basis of the net assets sold for financial reporting purposes compared with the Company's basis in such net assets for tax purposes. This difference related, for the most part, to goodwill, which is not recognized for tax purposes. As a result, the transaction generated a taxable gain requiring the recording of a tax provision, in addition to a book loss related to a write-off of net assets in excess of the selling price. The Consolidated Financial Statements and related Notes for the period ended December 31, 1999 have been restated, where applicable, to reflect the Cyanamid Agricultural Products business as a discontinued operation. Operating results of discontinued operations were as follows: (In thousands except per share amounts)
STATEMENT OF OPERATIONS ------------------------- Years Ended December 31, 2000 1999 - -------------------------------------------------------------------------------------- Net revenue $ 546,790 $1,668,980 ---------------------------- Income (loss) before federal and foreign taxes 160,635 (18,327) Provision for federal and foreign taxes 57,289 1,551 ---------------------------- Income (loss) from operations of discontinued agricultural products business 103,346 (19,878) Loss on disposal of agricultural products business (including federal and foreign tax charges of $855,248) (1,572,993) -- ---------------------------- Loss from discontinued operations $(1,469,647) $ (19,878) ============================ Diluted loss per share from discontinued operations $ (1.12) $ (0.02) ============================
Immunex Transactions: 2001 Proposed Acquisition of Immunex by Amgen In December 2001, Amgen Inc. and Immunex signed a definitive agreement providing for Amgen, the world's largest biotechnology company, to acquire Immunex in a merger transaction. Under the terms of the agreement, each share of Immunex common stock will be exchanged for 0.44 shares of Amgen common stock and $4.50 in cash. The transaction has been structured as a tax-free reorganization, and Immunex shareholders will not be taxed to the extent that they receive Amgen stock. As part of the agreement, Amgen will acquire the 41% ownership in Immunex held by the Company at December 31, 2001 for the same consideration per share, providing the Company with over $1,000.0 million in cash and approximately an 8% ownership in Amgen. The Company has agreed to vote its shares in favor of the transaction. The transaction is anticipated to close in the second half of 2002, subject to approval by shareholders of both companies, as well as customary regulatory approvals. The Company and Immunex co-promote ENBREL in the United States and Canada with the Company having exclusive international rights to the product. The financial aspects of the existing licensing and marketing rights to ENBREL remain unchanged. 2000 Transactions in Immunex Common Stock In October 2000, the Company increased its ownership in Immunex from approximately 53% to approximately 55% by converting a $450.0 million convertible subordinated note into 15,544,041 newly issued shares of common stock of Immunex. In November 2000, through a public equity offering, the Company sold 60.5 million shares of Immunex common stock, and Immunex sold 20 million shares of newly issued Immunex common stock. Proceeds to the Company were approximately $2,404.9 million resulting in a gain on the sale of $2,061.2 million ($1,414.9 million after-tax or $1.08 per share-diluted). Included in the gain on the sale was a noncash pre-tax gain of $303.2 million ($200.2 million after-tax), representing the Company's increase in its proportionate share of the net book value of Immunex from Immunex's issuance of 20 million shares of its common stock at a price above the net book value per share owned by the Company. The Company used the net proceeds from the sale of its Immunex common stock to reduce outstanding commercial paper and for other general corporate purposes. The public equity offering reduced the Company's ownership in Immunex from approximately 55% to approximately 41%, which represented the ownership at December 31, 2001 and 2000. As a result of the reduction in ownership below 50%, the Company included the financial results of Immunex on an equity basis retroactive to January 1, 2000. 3. TERMINATION FEE, GOODWILL IMPAIRMENT AND SPECIAL CHARGES Termination Fee On November 3, 1999, the Company and Warner-Lambert Company entered into an agreement to combine the two companies in a merger-of-equals transaction. On February 6, 2000, the merger agreement was terminated. The Company recorded income of $1,709.4 million ($1,111.1 million after-tax or $0.85 per share-diluted) resulting from the receipt of a $1,800.0 million termination fee provided for under the merger agreement offset, in part, by certain related expenses. Goodwill Impairment Based on projected profitability and future cash flows associated with generic pharmaceuticals and the SOLGAR consumer health care product line, it was determined that goodwill related to Wyeth and Subsidiaries 41 these product lines, at December 31, 2000, was impaired. As a result, the Company recorded a charge of $401.0 million ($341.0 million after-tax or $0.26 per share-diluted) in 2000 to write down the carrying value of goodwill, to fair value, based upon discounted future cash flows. Special Charges: Voluntary Market Withdrawals In November 2000, the U.S. Food and Drug Administration (FDA) requested that the pharmaceutical industry voluntarily stop producing and distributing products containing phenylpropanolamine (PPA). The Company immediately ceased global production and shipments of any products containing PPA and voluntarily withdrew any such products from customer warehouses and retail store shelves. As a result, the Company recorded a special charge of $80.0 million ($52.0 million after-tax or $0.04 per share-diluted) to provide primarily for product returns and the write-off of inventory. The Company already had reformulated a majority of the products involved in the voluntary market withdrawal and began shipping these products in the United States at the end of November 2000. At December 31, 2001, all amounts provided for the PPA voluntary market withdrawal had been utilized. During the 1999 second quarter, the Company recorded a special charge aggregating $82.0 million ($53.0 million after-tax or $0.04 per share-diluted) for estimated costs associated with the suspension of shipments and the voluntary market withdrawal of ROTASHIELD, the Company's rotavirus vaccine. At December 31, 2001, all amounts provided for the ROTASHIELD voluntary market withdrawal had been utilized. Product Discontinuations During the 2000 fourth quarter, the Company recorded a special charge of $267.0 million ($173.0 million after-tax or $0.13 per share-diluted) related to the discontinuation of certain products manufactured at the Company's Marietta, Pennsylvania and Pearl River, New York facilities. Approximately $227.1 million related to noncash costs for fixed asset impairments and inventory write-offs, with the remainder of the charge covering severance obligations, idle plant costs and contract termination costs. During 2001, approximately $7.8 million of these costs were paid, leaving an accrual of $32.1 million at December 31, 2001. The timing of the remaining costs to be incurred has been delayed as the Company has continued to produce certain products in response to a potential market shortage for these products and the related medical necessity. As a result, the majority of the remaining costs will not be expended until 2003. Restructuring Charge and Related Asset Impairments In December 1998, the Company recorded a special charge for restructuring and related asset impairments of $321.2 million ($224.8 million after-tax or $0.17 per share-diluted) to recognize the costs of the reorganization of the pharmaceutical and nutritional supply chains (primarily in the Asian-Pacific and Latin American regions), the reorganization of the U.S. pharmaceutical and consumer health care distribution systems, and a reduction in personnel from the globalization of certain business units. The reorganization of the pharmaceutical and nutritional supply chains will result in the closure of 14 plants (nine pharmaceutical and five nutritional). The reorganization of the U.S. pharmaceutical and consumer health care distribution systems resulted in the closure of three distribution centers. The restructuring ultimately will result in the elimination of 3,900 positions offset, in part, by 1,000 newly created positions in the same functions at other locations. The components of this charge were as follows: (i) personnel costs of $120.0 million, (ii) noncash costs for fixed asset write-offs of $115.2 million and (iii) other closure/exit costs of $86.0 million. The noncash costs of $115.2 million reduced the carrying value of the fixed assets to their estimated fair value, taking into consideration depreciation expected during the transition period, which was determined by experience with similar properties and external appraisals. These fixed assets, with a fair value of $11.6 million, have remained operational during the transition period of obtaining the necessary regulatory approvals to relocate these operations to new and existing facilities. Since these fixed assets have remained in use, depreciation was not suspended and will be recognized over the transition period. Other closure/exit costs are a direct result of the restructuring plan. The majority of the other closure/exit costs are anticipated to be paid after the facilities cease production and prior to disposition. These costs include non-cancelable operating leases, security, utilities, maintenance, property taxes and other related costs that will be paid during the disposal period. Due to the specialized nature of these facilities, the majority of the costs will be paid over a two- to three-year period as product transfers are approved by regulatory authorities and manufacturing sites are closed. However, delays in obtaining certain regulatory approvals and other closure delays will cause certain costs to be paid after that period. At December 31, 2001, approximately 3,700 positions had been eliminated, and two distribution centers owned by the Company and a leased distribution center had been closed. Of 14 manufacturing plants originally anticipated to be closed, eight were closed in 2000 and two were closed during 2001. The Company currently anticipates utilizing the remainder of the restructuring accruals in 2002, assuming no further delays in regulatory approvals. 42 Wyeth and Subsidiaries Activity in the restructuring accruals from continuing operations was as follows:
PERSONNEL FIXED ASSET OTHER CLOSURE/ (In thousands) COSTS WRITE-OFFS EXIT COSTS TOTAL - ------------------------------------------------------------------------------------------------------ Restructuring accruals at inception $ 119,975 $ 115,225 $ 86,000 $ 321,200 Cash expenditures (527) -- (922) (1,449) Write-offs of fixed assets -- (115,225) -- (115,225) ------------------------------------------------------ Restructuring accruals at December 31, 1998 119,448 -- 85,078 204,526 Cash expenditures (64,695) -- (5,817) (70,512) ------------------------------------------------------ Restructuring accruals at December 31, 1999 54,753 -- 79,261 134,014 Cash expenditures (48,504) -- (19,626) (68,130) ------------------------------------------------------ Restructuring accruals at December 31, 2000 6,249 -- 59,635 65,884 Redistributions 14,000 -- (14,000) -- Cash expenditures (11,212) -- (15,016) (26,228) ------------------------------------------------------ Restructuring accruals at December 31, 2001 $ 9,037 $ -- $ 30,619 $ 39,656 ======================================================
During the 2001 second quarter, the Company made redistribution adjustments between categories to increase accrual balances for personnel costs by $14.0 million and to decrease other closure/exit costs by $14.0 million. These redistributions were necessary due to higher than expected enhanced pension benefits and outplacement costs for non-U.S. employees, updated forecasts of employees within the affected facilities, and lower than expected other closure/exit costs. The original scope of the restructuring program remains substantially unchanged. 4. DEBT AND FINANCING ARRANGEMENTS The Company's debt at December 31 consisted of:
(In thousands) 2001 2000 - ----------------------------------------------------------------------------- Commercial paper $4,817,205 $ 798,029 Notes payable: 6.50% notes due 2002 250,000 250,000 5.875% notes due 2004 500,000 -- 7.90% notes due 2005 1,000,000 1,000,000 6.25% notes due 2006 1,000,000 -- 6.70% notes due 2011 1,500,000 -- 7.25% debentures due 2023 250,000 250,000 Pollution control and industrial revenue bonds: 1.8% - 5.8% due 2006 - 2020 83,950 85,150 Other debt: 0.5% - 17.0% due 2002 - 2009 40,674 70,328 Fair value of interest rate swaps 12,802 -- ----------------------------- 9,454,631 2,453,507 Less current portion 2,097,354 58,717 ----------------------------- $7,357,277 $2,394,790 =============================
The fair value of the Company's outstanding debt was $9,607.7 million and $2,506.6 million at December 31, 2001 and 2000, respectively. The fair value of the Company's outstanding debt was estimated based on market prices. The weighted average interest rate on the commercial paper outstanding at December 31, 2001 and 2000 was 2.09% and 6.45%, respectively. The commercial paper had original maturities that did not exceed 270 days and a weighted average remaining maturity of 37 days and 35 days at December 31, 2001 and 2000, respectively. Revolving Credit Facilities The Company maintains a $2,000.0 million credit facility, which supports borrowings under the commercial paper program and terminates on July 31, 2002. Since the $2,000.0 million credit facility terminates in less than one year, commercial paper outstanding of $1,817.2 million, supported by this facility, was classified as current debt in Loans payable as of December 31, 2001. In addition, in March 2001, the Company obtained new credit facilities totaling $6,000.0 million. The new credit facilities included a $3,000.0 million, 364-day credit facility (which also supports borrowings under the commercial paper program) and a 364-day bridge facility to capital markets, which was terminated on March 30, 2001 as discussed below. Any borrowings under the new 364-day credit facility that are outstanding upon its termination in March 2002 are extendible for an additional year. The portion of commercial paper outstanding at December 31, 2001 supported by the $3,000.0 million, 364-day credit facility was classified as Long-term debt since the Company intends, and has the ability, to refinance these obligations through the issuance of additional commercial paper or through the use of its $3,000.0 million credit facility as described above. The proceeds from the credit facilities may be used to support commercial paper and the Company's general corporate and working capital requirements, including payments related to the REDUX and PONDIMIN diet drug litigation. The credit facilities contain substantially identical financial and other covenants, representations, warranties, conditions and default provisions. At December 31, 2001 and 2000, there were no borrowings outstanding under the facilities. Wyeth and Subsidiaries 43 In March 2002, subsequent to the date of the "Report of Independent Public Accountants," the Company renewed the $3,000.0 million credit facility for an additional 364-day term and reduced the $2,000.0 million credit facility to $1,000.0 million until it matures on July 31, 2002. Bridge Facility and Notes The new credit facilities also included a $3,000.0 million, 364-day bridge facility, which was terminated when the Company issued $3,000.0 million of Senior Notes (the Notes) on March 30, 2001. These Notes consisted of three tranches, which pay interest semiannually on March 15 and September 15, in a transaction exempt from registration under the Securities Act of 1933, as amended (the Securities Act), pursuant to Rule 144A, as follows: - $500.0 million 5.875% Notes due March 15, 2004 - $1,000.0 million 6.25% Notes due March 15, 2006 - $1,500.0 million 6.70% Notes due March 15, 2011 As of June 15, 2001, pursuant to an exchange offer made by the Company, substantially all the Notes had been exchanged for new notes which have substantially identical terms and which have been registered under the Securities Act. The interest rate payable on each series of Notes is subject to an increase of 0.25 percentage points per level of downgrade in the Company's credit rating by Moody's or S&P. However, the total adjustment to the interest rate for the series of Notes cannot exceed two percentage points. There is no adjustment to the interest rate payable on each series of Notes for the first single level downgrade in the Company's credit rating by S&P. In the case of the $1,500.0 million 6.70% Notes, the interest rate in effect on March 15, 2006 for such Notes will, thereafter, become the effective interest rate until maturity on March 15, 2011. The Company would incur a total of approximately $7.5 million of additional annual interest expense for every 0.25 percentage point increase in the interest rate. If Moody's or S&P subsequently were to increase the Company's credit rating, the interest rate payable on each series of Notes is subject to a decrease of 0.25 percentage points for each level of credit rating increase. The interest rate payable for the series of Notes cannot be reduced below the original coupon rate of each series of Notes. The Company entered into two $750.0 million notional amount interest rate swaps relating to the $1,500.0 million 6.70% Notes under which the Company effectively converted the fixed rate on these Notes to a floating rate of interest which is based on LIBOR. See Note 7 for further discussion of the interest rate swaps. In addition to the $3,000.0 million of Notes described above, the Company has outstanding the following non-callable, unsecured and unsubordinated debt instruments: - $250.0 million 6.50% Notes due October 2002, interest payments due on April 15 and October 15 - $1,000.0 million 7.90% Notes due February 2005, interest payments due on February 15 and August 15 - $250.0 million 7.25% debentures due March 2023, interest payments due on March 1 and September 1 The aggregate maturities of debt during the next five years and thereafter at December 31, 2001 are as follows:
(In thousands) - -------------------------------------------------------------------------------- 2002 $2,097,354 2003 7,929 2004 505,917 2005 1,001,380 2006 1,012,480 Thereafter 1,829,571 --------- 6,454,631 Commercial paper classified as Long-term debt 3,000,000 --------- Total debt $9,454,631 ==========
Interest payments in connection with the Company's debt obligations for the years ended December 31, 2001, 2000 and 1999 amounted to $331.7 million, $343.0 million and $294.8 million, respectively. Interest expense, net included interest income of $154.8 million, $181.3 million and $129.4 million in 2001, 2000 and 1999, respectively. Interest capitalized in connection with capital projects was $94.3 million, $43.3 million and $15.4 million in 2001, 2000 and 1999, respectively. 5. OTHER NONCURRENT LIABILITIES Other noncurrent liabilities include reserves for the REDUX and PONDIMIN litigation (see Note 12), reserves relating to income taxes, environmental matters, product liability and other litigation, as well as restructuring, pension and other employee benefit liabilities, and minority interests. The Company has responsibility for environmental, safety and cleanup obligations under various local, state and federal laws, including the Comprehensive Environmental Response, Compensation and Liability Act, commonly known as Superfund. At December 31, 2001, the Company was a party to, or otherwise involved in, legal proceedings directed at the cleanup of 53 Superfund sites. It is the Company's policy to accrue for environmental cleanup costs if it is probable that a liability has been incurred and an amount is reasonably estimable. In many cases, future environmental-related expenditures cannot be quantified with a reasonable degree of accuracy. Environmental expenditures that relate to an existing condition caused by past operations that do not contribute to current or future results of operations are expensed. As investigations and cleanups proceed, environmental-related liabilities are reviewed and adjusted as additional information becomes available. The aggregate environmental-related accruals were $364.2 million and $378.6 million at December 31, 2001 and 2000, respectively. Environmental-related accruals have been recorded without giving effect to any possible future 44 Wyeth and Subsidiaries insurance proceeds or the timing of payments. See Note 12 for discussion of contingencies. In 2000, the Company introduced a new incentive program to employees, the Performance Incentive Award Program (PIA), which awards employees based on the Company's operating results and the individual employee's performance. Substantially all U.S. and Puerto Rico exempt employees, who are not subject to other incentive programs, and key international employees are eligible to receive cash awards under PIA. The value of PIA awards for 2001 and 2000 was $117.3 million and $94.7 million, respectively. In 1999, cash bonuses totaling $38.8 million were paid to key employees. Through 1998, the Company provided incentive awards under the Management Incentive Plan (MIP), which provided for cash and deferred contingent common stock awards to key employees. Deferred contingent common stock awards plus accrued dividends, related to the MIP program, totaling 875,206 shares were outstanding at December 31, 2001. 6. PENSIONS AND OTHER POSTRETIREMENT BENEFITS PENSIONS: The Company sponsors various retirement plans for most full-time employees. These defined benefit and defined contribution plans cover all U.S. and certain international locations. Total pension expense from continuing operations for both defined benefit and defined contribution plans for 2001, 2000 and 1999 was $141.9 million, $107.7 million and $95.5 million, respectively. Pension expense from continuing operations for defined contribution plans for 2001, 2000 and 1999 totaled $67.0 million, $62.9 million and $61.6 million, respectively. Pension plan benefits for defined benefit plans are based primarily on participants' compensation and years of credited service. Investment responsibility for the pension plan assets is assigned to outside investment managers and is limited to certain asset allocation criteria and investment guidelines established by the Company. Employees do not have any ability to determine the investment allocation of the pension plan assets. Generally, contributions to defined contribution plans are based on a percentage of the employee's compensation. The Company's 401(k) savings plans have been established for substantially all U.S. employees. Certain employees are eligible to enroll in the plan on their hire date and can contribute between 1% and 16% of their annual pay. The Company provides a matching contribution to eligible participants of 50% on the first 6% of annual pay contributed to the plan, or a maximum of 3% of annual pay. Employees can direct their contributions and the Company's matching contributions into any of the funds offered. These funds provide participants with a cross section of investing options, including the Company's common stock. All contributions to the Company's common stock, whether by employee or employer, can be transferred to other fund choices daily. OTHER POSTRETIREMENT BENEFITS: The Company provides postretirement health care and life insurance benefits for retired employees of most domestic locations and Canada. Most full-time employees become eligible for these benefits after attaining specified age and service requirements. Although the Company sold the Cyanamid Agricultural Products business in 2000 (see Note 2), which was accounted for as a discontinued operation, the pensions and other postretirement benefits were excluded from the sale for U.S. plans since employees of the Cyanamid Agricultural Products business accrued benefits in plans that encompassed other business segments. Except for one pension plan in Germany, all international plans will continue to be maintained by the Company to pay benefits that were accrued prior to the sale. Accordingly, projected benefit obligations, fair value of plan assets and (prepaid)/accrued benefit costs were not restated, except to reflect the sale of the pension plan in Germany. However, components of net periodic benefit cost from continuing operations were restated to reflect the Cyanamid Agricultural Products business as a discontinued operation. The change in projected benefit obligation, change in plan assets, reconciliation of funded status and amounts recognized in the Consolidated Balance Sheets for the Company's defined benefit plans (principally U.S. plans) for 2001 and 2000 were as follows:
PENSIONS OTHER POSTRETIREMENT BENEFITS ----------------------------- -------------------------------- CHANGE IN PROJECTED BENEFIT OBLIGATION (In thousands) 2001 2000 2001 2000 - --------------------------------------------------------------------------------------------------------------------------- Projected benefit obligation at January 1 $3,210,575 $3,005,665 $1,020,330 $1,076,298 Consolidation of Japan benefit plan -- 186,327 -- -- Service cost 78,634 74,656 24,179 20,460 Interest cost 226,786 225,248 76,966 77,666 Service and interest cost -- discontinued operations -- 3,074 -- 2,189 Amendments 9,796 11,235 -- 16,952 Net actuarial loss/(gain) 104,938 71,158 227,758 (72,589) Curtailments/settlements -- (39,826) -- (24,289) Benefits paid (284,603) (296,613) (78,516) (75,900) Currency translation adjustment (30,094) (30,349) (632) (457) -------------------------------------------------------------- Projected benefit obligation at December 31 $3,316,032 $3,210,575 $1,270,085 $1,020,330 ==============================================================
Wyeth and Subsidiaries 45 \
PENSIONS OTHER POSTRETIREMENT BENEFITS ---------------------------- ----------------------------- CHANGE IN PLAN ASSETS (In thousands) 2001 2000 2001 2000 - ----------------------------------------------------------------------------------------------------------- Fair value of plan assets at January 1 $ 2,816,016 $ 3,001,154 -- -- Consolidation of Japan benefit plan -- 76,089 -- -- Actual return on plan assets (213,908) 34,607 -- -- Amendments 6,754 -- -- -- Company contributions 429,710 17,554 $ 78,516 $ 75,900 Benefits paid (284,603) (296,613) (78,516) (75,900) Currency translation adjustment (15,347) (16,775) -- -- -------------------------------------------------------------- Fair value of plan assets at December 31 $ 2,738,622 $ 2,816,016 $ -- $ -- ==============================================================
PENSIONS OTHER POSTRETIREMENT BENEFITS (In thousands) -------------------------- ----------------------------- RECONCILIATION OF FUNDED STATUS 2001 2000 2001 2000 - ----------------------------------------------------------------------------------------------------------- Funded status $ 577,410 $ 394,559 $ 1,270,085 $ 1,020,330 Unrecognized net actuarial loss (603,051) (44,225) (243,292) (15,603) Unrecognized prior service cost (57,193) (60,502) (16,695) (18,698) Unrecognized net transition obligation (5,301) (8,266) -- -- ---------------------------------------------------------------- (Prepaid)/accrued benefit costs $ (88,135) $ 281,566 $ 1,010,098 $ 986,029 ================================================================
PENSIONS (In thousands) ---------------------------- AMOUNTS RECOGNIZED IN THE CONSOLIDATED BALANCE SHEETS 2001 2000 - ----------------------------------------------------------------------- Prepaid benefit cost $ (212,967) $ (8,537) Accrued benefit liability 124,832 290,103
In December 2001, the Company made a $400.0 million funding contribution to the U.S. Non-bargaining defined benefit pension plan (largest U.S. plan) due primarily to the decrease in the plan assets and, as a result, the anticipation of future statutory funding requirements. The decline in the global equity markets that occurred during 2001 contributed significantly to the decrease in the plan assets. The impact of the negative market returns was attributable to most of the increase in the unrecognized net actuarial loss since the difference between the expected return and actual return on plan assets is deferred. The net actuarial loss for other postretirement benefits of $227.8 million in 2001 resulted primarily from a change in the assumption for future increases in per capita cost of health care benefits and other changes in actuarial assumptions. There were no plan assets for the Company's other postretirement benefit plans at December 31, 2001 and 2000 as postretirement benefits are funded by the Company when claims are paid. The current portion of the accrued benefit liability for other postretirement benefits was $85.0 million and $75.0 million at December 31, 2001 and 2000, respectively. At December 31, 2001 and 2000, the accumulated benefit obligations, which represent the obligations of the defined benefit plans if the plans were terminated and before considering plan assets, were $2,971.8 million and $2,934.0 million, respectively. Assumptions used in developing the projected benefit obligations at December 31 were as follows:
PENSIONS OTHER POSTRETIREMENT BENEFITS WEIGHTED AVERAGE ASSUMPTIONS ---------------------------- --------------------------------- AT DECEMBER 31, 2001 2000 1999 2001 2000 1999 - ----------------------------------------------------------------------------------------------------------------------------------- Discount rate 7.25% 7.5% 7.75% 7.25% 7.5% 7.75% Rate of compensation increase 4.0% 4.0% 4.5% -- -- -- Expected return on plan assets 9.25% 9.5% 9.5% -- -- -- Increases in per capita cost of health care benefits that gradually decreases and is held constant thereafter beginning in 2005 -- -- -- 9.5%-5.0% 7.0%-5.0% 7.5%-5.0%
The assumed health care cost trend rates have a significant effect on the amounts reported. A one percentage point increase in the assumed health care cost trend rates would increase the postretirement benefit obligation by $146.4 million and the total service and interest cost components from continuing operations by $13.7 million. A one percentage point decrease in the 46 Wyeth and Subsidiaries assumed health care cost trend rates would decrease the postretirement benefit obligation by $122.3 million and the total service and interest cost components from continuing operations by $11.3 million. Net periodic benefit cost from continuing operations for 2001, 2000 and 1999 of the Company's defined benefit plans (principally U.S. plans) was as follows:
PENSIONS OTHER POSTRETIREMENT BENEFITS COMPONENTS OF NET PERIODIC BENEFIT COST ------------------------------------ ------------------------------------ FROM CONTINUING OPERATIONS (In thousands) 2001 2000 1999 2001 2000 1999 - ----------------------------------------------------------------------------------------------------------------------------------- Service cost $ 78,634 $ 74,656 $ 69,056 $ 24,179 $ 20,460 $ 23,001 Interest cost 226,786 225,248 211,971 76,966 77,666 74,871 Expected return on plan assets (246,449) (270,131) (260,323) -- -- -- Amortization of prior service cost 11,720 10,704 10,734 2,003 330 339 Amortization of transition obligation 1,999 2,184 1,114 -- -- -- Recognized net actuarial loss 2,250 2,091 2,827 127 134 6,852 Curtailment gain -- -- (1,502) -- -- -- ----------------------------------------------------------------------------- Net periodic benefit cost from continuing operations $ 74,940 $ 44,752 $ 33,877 $ 103,275 $ 98,590 $ 105,063 =============================================================================
Net periodic pension benefit cost from continuing operations was higher in 2001 compared with 2000 due primarily to the decrease in the expected return on plan assets of the U.S. pension plans. The fair value of the U.S. pension plan assets between 2000 and 1999 decreased by $270.2 million, which negatively affected the amount of expected return on plan assets for 2001. Net periodic pension benefit cost from continuing operations was higher in 2000 compared with 1999 due primarily to consolidating a subsidiary in Japan effective January 1, 2000 (see Note 1). As a result of the sale of the Cyanamid Agricultural Products business, the Company realized a curtailment gain related to the pension plans of $25.5 million. This curtailment gain was recorded in Loss on disposal of agricultural products business. 7. DERIVATIVE INSTRUMENTS AND FOREIGN CURRENCY RISK MANAGEMENT PROGRAMS As of January 1, 2001, the Company adopted SFAS Nos. 133 and 138, which require that all derivative financial instruments be measured at fair value and be recognized as assets or liabilities on the balance sheet with changes in the fair value of the derivatives recognized in either income (loss) from continuing operations or accumulated other comprehensive income (loss), depending on the timing and designated purpose of the derivative. The fair value of forward contracts and interest rate swaps reflects the present value of the future potential gain if settlement were to take place on December 31, 2001, with the fair value of option contracts reflecting the present value of future cash flows if the contract were settled on December 31, 2001. The impact on the Company's financial position, results of operations and cash flows, upon adoption of these pronouncements, was immaterial. The Company currently engages in two primary programs to manage its exposure to foreign currency risk. The two programs and the corresponding derivative contracts outstanding as of December 31, 2001 were as follows: 1. Short-term foreign exchange forward contracts and swap contracts are used to neutralize month-end balance sheet exposures. These contracts essentially take the opposite currency position of that projected in the month-end balance sheet to counterbalance the effect of any currency movement. These derivative instruments are not designated as hedges and are recorded at fair value with any gains or losses recognized in current period earnings in accordance with the requirements of SFAS Nos. 133 and 138. In 2001, the Company recorded a gain of $28.7 million in Other income, net relating to gains and losses on these foreign exchange forward contracts and swap contracts. The $28.7 million consists of gains and losses from contracts settled during 2001, as well as contracts outstanding at December 31, 2001 that are recorded at fair value. 2. The Company uses foreign currency put options and foreign currency forward contracts in its cash flow hedging program to cover foreign currency risk related to international intercompany inventory sales. These instruments are designated as cash flow hedges, and, in accordance with SFAS Nos. 133 and 138, any unrealized gains or losses are included in accumulated other comprehensive income (loss) with the corresponding asset or liability recorded in the balance sheet. As of December 31, 2001, $4.4 million after-tax of net gains relating to these cash flow hedges was included in Accumulated other comprehensive loss with the corresponding assets/liabilities recorded in Other current assets including deferred taxes/Accrued expenses. The unrealized net gains in Accumulated other comprehensive loss will be reclassified into the Consolidated Statement of Operations when the intercompany inventory is sold to a third party. As such, the Company anticipates recognizing these net gains during the next six months. Put option contracts outstanding as of December 31, 2001 expire no later than June 2002. Occasionally the Company purchases foreign currency put options outside of the cash flow hedging program to protect additional intercompany inventory sales. These put Wyeth and Subsidiaries 47 options do not qualify as cash flow hedges under SFAS Nos. 133 and 138 and were recorded at fair value with all gains or losses, which were not significant, recognized in current period earnings immediately. In addition to the programs identified above, the Company has entered into a foreign exchange forward contract to hedge against foreign exchange fluctuations on a yen denominated long-term intercompany loan to the Company's Japanese subsidiary. The forward contract has been designated as and qualifies for foreign currency cash flow hedge accounting treatment. As of December 31, 2001, the Company had recorded gains of $3.5 million after-tax in Accumulated other comprehensive loss relating to this foreign exchange forward contract. The Company also has entered into interest rate swaps to manage interest rate exposures. The Company strives to achieve a desired balance between fixed-rate and floating-rate debt and has entered into two effective fair value interest rate swaps on its $1,500.0 million 6.70% Notes to ensure this desired balance between fixed-rate and floating-rate debt. The interest rate swaps effectively converted a portion of the Company's fixed-rate debt into floating-rate debt. Interest expense on the $1,500.0 million 6.70% Notes is adjusted to include the payments made or received under the interest rate swap agreements. The fair value of the swaps relating to the $1,500.0 million 6.70% Notes, as of December 31, 2001, excluding accrued interest, was an asset of $12.8 million and has been recorded in Other assets including deferred taxes with the corresponding adjustment recorded to the underlying 6.70% Notes in Long-term debt. 8. CAPITAL STOCK There were 2,400,000,000 shares of common stock and 5,000,000 shares of preferred stock authorized at December 31, 2001 and 2000. Of the authorized preferred shares, there is a series of shares (20,486 and 21,948 outstanding at December 31, 2001 and 2000, respectively) which is designated as $2.00 convertible preferred stock. Each share of the $2.00 series is convertible at the option of the holder into 36 shares of common stock. This series may be called for redemption at $60.00 per share plus accrued dividends. On October 7, 1999, the Company's Board of Directors declared a dividend of one preferred share purchase right for each share of common stock outstanding on October 18, 1999. The rights also apply to all future stock issuances. Each right permits the holder, under certain circumstances and upon the occurrence of certain events, to purchase from the Company one one-thousandth of a share of Series A Junior Participating Preferred Stock of the Company (the Series A Preferred Stock) at an exercise price of $225 per one one-thousandth of a share of Series A Preferred Stock under a Rights Plan relating to such Series A Preferred Stock. The 5,000,000 shares of preferred stock authorized will be used for the exercise of any preferred share purchase rights. The Rights Plan has provisions that are triggered if any person or group acquires beneficial ownership of 15% or more of the outstanding common stock or acquires the Company in a merger or other business combination (an Acquiring Person). In such event, stockholders (other than the Acquiring Person) would receive stock of the Company or the Acquiring Person, as the case may be, having a market value of twice the exercise price along with substantially increased voting and dividend rights, among other things. The rights expire on October 7, 2009, and prior to there being an Acquiring Person, the Company may redeem the rights issued under the Rights Plan for $0.01 per right. The Company can, for so long as the rights are then redeemable, supplement or amend the Rights Plan in any respect without the approval of any holders of the rights. At any time after the rights are no longer redeemable, the Company may supplement or amend the Rights Plan in certain respects provided that no such supplement or amendment shall adversely affect the interests of the holders of Rights Certificates as such (other than an Acquiring Person or an Affiliate or Associate of an Acquiring Person). Changes in outstanding common shares during 2001, 2000 and 1999 were as follows:
(In thousands except shares of preferred stock) 2001 2000 1999 - ---------------------------------------------------------------------------- Balance at January 1 1,311,774 1,303,916 1,312,399 Issued for stock options 8,550 15,123 10,589 Purchases of common stock for treasury -- (7,414) (19,226) Conversions of preferred stock (1,462, 2,293 and 1,239 shares in 2001, 2000 and 1999, respectively) and other exchanges 246 149 154 ---------------------------------------- Balance at December 31 1,320,570 1,311,774 1,303,916 ========================================
The Company has a common stock repurchase program under which the Company is authorized to repurchase common shares. At December 31, 2001, the Company was authorized to repurchase 6,492,460 common shares in the future. 9. STOCK OPTIONS The Company has one Stock Option Plan and four Stock Incentive Plans. No further grants may be made under the Stock Option Plan or the Stock Incentive Plan approved in 1990. Under the Stock Incentive Plans, options to purchase a maximum of 181,000,000 shares may be granted at prices not less than 100% of the fair market value of the Company's common stock on the date the option is granted. At December 31, 2001, there were 19,974,293 shares available for future grants under the Stock Incentive Plans. In January 2002, the Board of Directors adopted, subject to stockholder approval at the Company's annual meeting on April 25, 2002, the 2002 Stock Incentive Plan under which 65,000,000 shares are available for future grants. 48 Wyeth and Subsidiaries The plans provide for the granting of incentive stock options as defined under the Internal Revenue Code. Under the plans, grants may be made to selected officers and employees of non-qualified stock options with a 10-year term or incentive stock options with a term not exceeding 10 years. The plans also provide for the granting of stock appreciation rights (SAR), which entitle the holder to receive shares of the Company's common stock or cash equal to the excess of the market price of the common stock over the exercise price when exercised. At December 31, 2001, there were no outstanding SARs. Each Stock Incentive Plan allows for, among other things, the issuance of up to 8,000,000 shares (24,000,000 shares in the aggregate for all Stock Incentive Plans) as restricted stock awards. Restricted stock awards representing 290,995, 148,900 and 148,850 units were granted in 2001, 2000 and 1999, respectively, under the plans to certain employees, including key executives. Most of these units are converted to shares of restricted stock based on the achievement of certain performance criteria related to performance years 1999 through 2005. The remaining units are converted generally at the end of four years. Under the Stock Option Plan for Non-Employee Directors, a maximum of 250,000 shares may be granted to non-employee directors at 100% of the fair market value of the Company's common stock on the date of the grant. Stock options granted to non-employee directors were 36,000, 21,000 and 21,000 in 2001, 2000 and 1999, respectively. Shares available for future grants at December 31, 2001 were 172,000. Under the 1994 Restricted Stock Plan for Non-Employee Directors, a maximum of 100,000 restricted shares may be granted to non-employee directors. The restricted shares granted to each non-employee director are not delivered prior to the end of a five-year restricted period. At December 31, 2001, 64,800 shares were available for future grants. Stock option information related to the plans was as follows:
WEIGHTED Weighted Weighted AVERAGE Average Average EXERCISE Exercise Exercise STOCK OPTIONS 2001 PRICE 2000 Price 1999 Price - ------------------------------------------------------------------------------------------------------------------------------- Outstanding at January 1 82,751,313 $43.74 85,244,130 $39.13 75,790,629 $30.53 Granted 28,360,196 56.89 16,496,678 56.51 21,945,755 62.00 Canceled (2,558,655) 57.36 (3,866,134) 58.32 (1,903,601) 51.83 Exercised (2001 -- $14.52 to $62.31 per share) (8,549,782) 26.74 (15,123,361) 27.90 (10,588,653) 22.76 ----------- ---------- ---------- Outstanding at December 31 (2001 -- $14.52 to $65.19 per share) 100,003,072 48.57 82,751,313 43.74 85,244,130 39.13 ----------- ---------- ---------- Exercisable at December 31 57,205,798 41.93 51,830,094 35.31 52,789,450 28.27 ----------- ---------- ----------
The following table summarizes information regarding stock options outstanding at December 31, 2001:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE - -------------------------------------------------------------------------------------- ------------------------------------- WEIGHTED AVERAGE WEIGHTED AVERAGE WEIGHTED AVERAGE RANGE OF NUMBER REMAINING EXERCISE NUMBER EXERCISE EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE PRICE EXERCISABLE PRICE - ---------------------------------------------------------------------------------------------------------------------------------- $14.52 to 19.99 11,672,218 2.4 years $17.90 11,672,218 $17.90 20.00 to 29.99 4,253,391 3.9 years 26.34 4,253,391 26.34 30.00 to 39.99 12,442,005 4.8 years 36.18 12,442,005 36.18 40.00 to 49.99 624,588 7.1 years 45.93 446,583 46.22 50.00 to 59.99 52,067,568 8.4 years 55.25 16,380,958 52.38 60.00 to 65.19 18,943,302 7.6 years 62.30 12,010,643 62.33 ----------- ---------- 100,003,072 6.9 years 48.57 57,205,798 41.93 =========== ==========
The Company accounts for stock-based compensation using the intrinsic value method. Accordingly, no compensation expense has been recognized for stock options. If compensation expense for the Company's stock options issued in 2001, 2000 Wyeth and Subsidiaries 49 and 1999 had been determined based on the fair value method of accounting, the Company's net income (loss) and earnings (loss) per share would have been adjusted to the pro forma amounts indicated below:
(In thousands except per share amounts) 2001 2000 1999 - ----------------------------------------------------------------------------------- Net income (loss) less preferred dividends: As-reported $ 2,285,252 $ (2,370,733) $ (1,227,171) Pro forma 2,084,564 (2,520,657) (1,312,238) Basic earnings (loss) per share: As-reported $ 1.74 $ (1.81) $ (0.94) Pro forma 1.58 (1.93) (1.00) Net income (loss): As-reported $ 2,285,294 $ (2,370,687) $ (1,227,121) Pro forma 2,084,606 (2,520,611) (1,312,188) Diluted earnings (loss) per share*: As-reported $ 1.72 $ (1.81) $ (0.94) Pro forma 1.57 (1.93) (1.00)
* The total weighted average common shares outstanding for diluted loss per share for 2000 and 1999 did not include common stock equivalents, as the effect would have been antidilutive. The fair value of issued stock options is estimated on the date of grant using a variant of the Black-Scholes option pricing model incorporating the following assumptions for stock options granted in 2001, 2000 and 1999, respectively: expected volatility (the amount by which the stock price is expected to fluctuate) of 32.1%, 31.2% and 25.0%; expected dividend yield of 1.6%, 1.6% and 2.2%; risk-free interest rate of 4.8%, 6.3% and 5.6%; and expected life of five, five and four years. The weighted average fair value of stock options granted during 2001, 2000 and 1999 was $17.76, $18.76 and $14.36 per option share, respectively. 10. ACCUMULATED OTHER COMPREHENSIVE LOSS Accumulated other comprehensive loss consists of changes in foreign currency translation adjustments, net unrealized gains on derivative contracts and net unrealized gains (losses) on marketable securities. The following table sets forth the changes in each component of Accumulated other comprehensive loss:
FOREIGN NET UNREALIZED NET UNREALIZED ACCUMULATED CURRENCY GAINS ON GAINS (LOSSES) ON OTHER TRANSLATION DERIVATIVE MARKETABLE COMPREHENSIVE (In thousands) ADJUSTMENTS(1) CONTRACTS(2) SECURITIES LOSS - ------------------------------------------------------------------------------------------------------------------ Balance January 1, 1999 $(329,004) -- $ 667 $(328,337) Period change (285,963) -- 815 (285,148) -------------------------------------------------------------------------- Balance December 31, 1999 (614,967) -- 1,482 (613,485) Period change (70,496) -- 11,422 (59,074) -------------------------------------------------------------------------- Balance December 31, 2000 (685,463) -- 12,904 (672,559) Period change (166,200) $7,865 (2,134) (160,469) -------------------------------------------------------------------------- Balance December 31, 2001 $(851,663) $7,865 $10,770 $(833,028) ==========================================================================
(1) Income taxes are generally not provided for foreign currency translation adjustments, as such adjustments relate to permanent investments in international subsidiaries. (2) Deferred income tax provided for net unrealized gains on derivative contracts in 2001 was $1,000. 11. INCOME TAXES The provision (benefit) for federal and foreign income taxes from continuing operations consisted of:
(In thousands) YEARS ENDED DECEMBER 31, 2001 2000 1999 - ----------------------------------------------------------------- Current: Federal $(96,805) $ 321,484 $ 290,020 Foreign 412,438 292,798 419,992 ----------------------------------- 315,633 614,282 710,012 Deferred: Federal 270,144 (836,883) (1,399,709) Foreign (2,324) 22,601 (10,359) ----------------------------------- 267,820 (814,282) (1,410,068) ----------------------------------- $583,453 $(200,000) $ (700,056) ===================================
Net deferred tax assets inclusive of valuation allowances for certain deferred tax assets were reflected on the Consolidated Balance Sheets at December 31 as follows:
(In thousands) 2001 2000 - ---------------------------------------------------------------- Net current deferred tax assets $1,526,690 $2,595,662 Net noncurrent deferred tax assets 1,583,599 795,441 ----------------------- Net deferred tax assets $3,110,289 $3,391,103 =======================
Deferred income taxes are provided for temporary differences between the financial reporting basis and the tax basis of the Company's assets and liabilities. Deferred tax assets result principally from the recording of certain accruals and reserves, which currently are not deductible for tax purposes, as well as net operating loss carryforwards generated primarily from deductible payments associated with the REDUX and PONDIMIN diet drug 50 Wyeth and Subsidiaries litigation. Deferred tax liabilities result principally from tax on earnings expected to be remitted to the United States and the use of accelerated depreciation for tax purposes. The components of the Company's deferred tax assets and liabilities at December 31 were as follows:
(In thousands) 2001 2000 - ----------------------------------------------------------------------- Deferred tax assets: Diet drug product litigation accruals $ 650,192 $ 2,857,951 Product litigation and environmental liabilities and other accruals 660,282 760,827 Postretirement, pension and other employee benefits 536,676 592,709 Net operating loss and other tax credit carryforwards 1,756,522 4,134 Goodwill impairment 52,837 60,000 Restructuring and product discontinuations 113,638 129,143 Inventory reserves 127,175 94,393 Investments and advances 31,869 38,894 Research and development costs 554,521 -- Intangibles 58,538 51,568 Other 40,375 63,437 --------------------------- Total deferred tax assets 4,582,625 4,653,056 --------------------------- Deferred tax liabilities: Tax on earnings expected to be remitted to the United States (700,000) (700,000) Depreciation (370,916) (277,512) Pension benefits and other employee benefits (140,004) (54,751) Equity investments (110,204) (102,945) Other (101,630) (75,592) --------------------------- Total deferred tax liabilities (1,422,754) (1,210,800) --------------------------- Deferred tax asset valuation allowances (49,582) (51,153) --------------------------- Net deferred tax assets $ 3,110,289 $ 3,391,103 ===========================
Valuation allowances have been established for certain deferred tax assets related to environmental liabilities and other operating accruals as the Company determined that it was more likely than not that these benefits will not be realized. During 2001 and 2000, the valuation allowance decreased by $1.6 million and $100.3 million, respectively. The decrease of the valuation allowance in 2000 related to a reduction in net operating loss carryforwards as a result of the deconsolidation of Immunex (see Note 2). The Company has provided $700.0 million of federal income taxes on unremitted earnings from its international subsidiaries that may be remitted back to the United States. Federal income taxes were not provided on unremitted earnings expected to be permanently reinvested internationally. If federal income taxes were provided, they would approximate $380.0 million. Reconciliations between the Company's effective tax rate and the U.S. statutory rate from continuing operations, excluding the diet drug litigation charges in 2001, 2000 and 1999 (see Note 12), the effect of the termination fee in 2000 (see Note 3), gain on the sale of Immunex common stock in 2000 (see Note 2), goodwill impairment in 2000 (see Note 3) and special charges in 2000 and 1999 (see Note 3), were as follows:
TAX RATE YEARS ENDED DECEMBER 31, 2001 2000 1999 - ------------------------------------------------------------ U.S. statutory rate 35.0% 35.0% 35.0% Effect of Puerto Rico and Ireland manufacturing operations (9.1) (8.6) (9.0) Research credits (2.1) (1.7) (1.4) Goodwill amortization 1.2 1.5 1.8 Other, net (0.9) (0.7) 0.7 ----- ----- ----- Effective tax rate from continuing operations 24.1% 25.5% 27.1% ===== ===== =====
Including the effect of the 2001 litigation charge (which had a 35.3% tax benefit), the overall effective tax rate from continuing operations in 2001 was 20.3%. Including the effect of the termination fee and the gain on the sale of Immunex common stock in 2000 (which had tax provisions of 35.0% and 31.4%, respectively), and the tax benefits associated with the 2000 litigation charge, goodwill impairment and special charges (with effective rates of 28.3%, 15.0% and 35.2%, respectively), the overall effective tax rate from continuing operations in 2000 was an 18.2% tax benefit. Including the effect of the 1999 litigation charge and special charge (which had 30.8% and 35.4% of tax benefits, respectively), the overall effective tax rate from continuing operations in 1999 was a 36.7% tax benefit. The difference in the tax benefits related to the 2000 and 1999 litigation charges versus the statutory rate of 35.0% was caused by provisions of $500.0 million and $200.0 million in 2000 and 1999, respectively, for additional federal income taxes, net of tax credits, that may be paid if the Company remits certain international earnings, taxed at a lower rate than in the United States, to the United States for diet drug litigation settlement payments. Total income tax payments, net of tax refunds, for continuing and discontinued operations in 2001, 2000 and 1999 amounted to $493.6 million, $1,038.3 million and $717.2 million, respectively. 12. CONTINGENCIES AND LITIGATION CHARGES The Company is involved in various legal proceedings, including product liability and environmental matters of a nature considered normal to its business (see Note 5 for discussion of environmental matters). It is the Company's policy to accrue for amounts related to these legal matters if it is probable that a liability has been incurred and an amount is reasonably estimable. The Company has been named as a defendant in numerous legal actions relating to the diet drugs REDUX or PONDIMIN, which the Company estimated were used in the United States, prior to their 1997 voluntary market withdrawal, by Wyeth and Subsidiaries 51 approximately 5.8 million people. These actions allege, among other things, that the use of REDUX and/or PONDIMIN, independently or in combination with the prescription drug phentermine (which the Company did not manufacture, distribute or market), caused certain serious conditions, including valvular heart disease. On October 7, 1999, the Company announced a nationwide, class action settlement (the settlement) to resolve litigation brought against the Company regarding the use of the diet drugs REDUX or PONDIMIN. The settlement covers all claims arising out of the use of REDUX or PONDIMIN, except for claims of primary pulmonary hypertension (PPH), and is open to all REDUX or PONDIMIN users in the United States, regardless of whether they have lawsuits pending. On November 23, 1999, U.S. District Judge Louis C. Bechtle granted preliminary approval of the settlement and directed that notice of the settlement terms be provided to class members. The notice program began in December 1999. In early May 2000, the district court held a hearing on the fairness of the terms of the settlement, with an additional one-day hearing on August 10, 2000. On August 28, 2000, Judge Bechtle issued an order approving the settlement. Several appeals were taken from that order to the U.S. Court of Appeals for the Third Circuit. All but one of those appeals was withdrawn during 2001, and, on August 15, 2001, the Third Circuit affirmed the approval of the settlement. When no petitions to the U.S. Supreme Court for certiorari were filed by January 2, 2002, the settlement was deemed to have received final judicial approval on January 3, 2002. Payments by the Company related to the settlement are made into settlement Funds A and B (the settlement funds). Fund A is intended to cover refunds, medical screening costs, additional medical services and cash payments, education and research costs, and administration costs. Fund B will compensate claimants with significant heart valve disease. Payments to provide settlement benefits, if needed, may continue for approximately 16 years after final judicial approval. Payments to the settlement funds in 2001, 2000 and 1999 were $936.7 million, $383.0 million and $75.0 million, respectively. Diet drug users choosing to opt out of the settlement class were required to do so by March 30, 2000. The Company has resolved the claims of the majority of these initial opt outs and continues to resolve the claims of the remaining individuals. The settlement agreement also gives class members who participate in the settlement the opportunity to opt out of the settlement at two later stages, although there are restrictions on the nature of claims they can pursue outside of the settlement. Class members who are diagnosed with certain levels of valvular regurgitation within a specified time frame can opt out following their diagnosis and prior to receiving any further benefits under the settlement (intermediate opt outs). Class members who are diagnosed with certain levels of regurgitation and who elect to remain in the settlement, but who later develop a more severe valvular condition, may opt out at the time the more serious condition develops (back-end opt outs). Under either of these latter two opt out alternatives, class members may not seek or recover punitive damages, may sue only for the condition giving rise to the opt out right, and may not rely on verdicts, judgments or factual findings made in other lawsuits. On January 18, 2002, as collateral for the Company's financial obligations under the settlement, the Company established a security fund in the amount of $370.0 million and recorded such amount in Other assets including deferred taxes. The funds are owned by the Company and will earn interest income for the Company while residing in the security fund. The Company will be required to deposit an additional $180.0 million in the security fund if the Company's credit rating, as reported by both Moody's and S&P, falls below investment grade. The Company recorded an initial litigation charge of $4,750.0 million ($3,287.5 million after-tax or $2.51 per share-diluted), net of insurance, in connection with the REDUX and PONDIMIN litigation in 1999, an additional charge of $7,500.0 million in 2000 ($5,375.0 million after-tax or $4.11 per share-diluted), and a third litigation charge of $950.0 million ($615.0 million after-tax or $0.46 per share-diluted) in the 2001 third quarter. The combination of these three charges represents the estimated total amount required to resolve all diet drug litigation, including anticipated funding requirements for the nationwide, class action settlement, anticipated costs to resolve the claims of any members of the settlement class who in the future may exercise an intermediate or back-end opt out right, costs to resolve the claims of PPH claimants and initial opt out claimants, and administrative and litigation expenses. At December 31, 2001, $1,857.7 million of the litigation accrual remained; $1,150.0 million and $707.7 million were included in Accrued expenses and Other noncurrent liabilities, respectively. At December 31, 2000, $8,165.6 million of the litigation accrual remained; $5,900.0 million and $2,265.6 million were included in Accrued expenses and Other noncurrent liabilities, respectively. Payments to the nationwide, class action settlement funds, individual settlement payments, legal fees and other items were $7,257.9 million, $3,966.8 million and $117.6 million for 2001, 2000 and 1999, respectively. The Company is self-insured against ordinary product liability risks and has liability coverage, in excess of certain limits and subject to certain policy ceilings, from various insurance carriers. In the opinion of the Company, although the outcome of any legal proceedings cannot be predicted with certainty, the ultimate liability of the Company in connection with its legal proceedings will not have a material adverse effect on the Company's financial position but could be material to the results of operations and cash flows in any one accounting period. 52 Wyeth and Subsidiaries The Company leases certain property and equipment for varying periods under operating leases. Future minimum rental payments under non-cancelable operating leases from continuing operations with terms in excess of one year in effect at December 31, 2001 are as follows:
(In thousands) - ---------------------------------------------------------------- 2002 $ 80,845 2003 74,312 2004 55,546 2005 50,214 2006 46,687 Thereafter 35,289 -------- Total rental commitments $342,893 ========
Rental expense from continuing operations for all operating leases was $133.7 million, $128.2 million and $135.1 million in 2001, 2000 and 1999, respectively. 13. COMPANY DATA BY OPERATING AND GEOGRAPHIC SEGMENT The Company has three reportable segments: Pharmaceuticals, Consumer Health Care and Corporate. The Company's Pharmaceuticals and Consumer Health Care reportable segments are strategic business units that offer different products and services. The reportable segments are managed separately because they manufacture, distribute and sell distinct products and provide services, which require various technologies and marketing strategies. The Company is not dependent on any single customer or major group of customers for its net revenue (see Note 1). The Pharmaceuticals segment manufactures, distributes and sells branded and generic human ethical pharmaceuticals, biologicals, nutritionals, and animal biologicals and pharmaceuticals. Principal products include women's health care products, neuroscience therapies, cardiovascular products, infant nutritionals, gastroenterology drugs, anti-infectives, vaccines, biopharmaceuticals, oncology therapies, musculoskeletal therapies, hemophilia treatments and immunological products. Principal animal health products include vaccines, pharmaceuticals, endectocides and growth implants. The Consumer Health Care segment manufactures, distributes and sells over-the-counter health care products whose principal products include analgesics, cough/cold/allergy remedies, nutritional supplements, herbal products, and hemorrhoidal, antacid, asthma and other relief items. Corporate is responsible for the treasury, tax and legal operations of the Company's businesses and maintains and/or incurs certain assets, liabilities, expenses, gains and losses related to the overall management of the Company which are not allocated to the other reportable segments. The accounting policies of the segments described above are the same as those described in "Summary of Significant Accounting Policies" in Note 1. The Company evaluates the performance of the Pharmaceuticals and Consumer Health Care reportable segments based on income from continuing operations before taxes which includes goodwill amortization, gains on the sales of non-corporate assets and certain other items. Corporate includes special charges, interest expense and interest income, gains on the sales of investments and other corporate assets, including the sale of Immunex common stock, the Warner-Lambert Company termination fee, certain litigation provisions, including the REDUX and PONDIMIN litigation charges, goodwill impairment and other miscellaneous items. COMPANY DATA BY OPERATING SEGMENT
(In millions) YEARS ENDED DECEMBER 31, 2001 2000 1999 - --------------------------------------------------------------------- NET REVENUE FROM CUSTOMERS(1) Pharmaceuticals $ 11,716.5 $ 10,772.6 $ 9,469.7 Consumer Health Care 2,412.0 2,441.1 2,345.4 --------------------------------------- Consolidated Total $ 14,128.5 $ 13,213.7 $ 11,815.1 ======================================= INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE TAXES(2) Pharmaceuticals $ 3,503.5 $ 2,919.5 $ 2,538.6 Consumer Health Care 592.1 626.6 594.6 Corporate(3) (1,226.9) (4,647.1) (5,040.5) --------------------------------------- Consolidated Total $ 2,868.7 $ (1,101.0) $ (1,907.3) ======================================= DEPRECIATION AND AMORTIZATION EXPENSE Pharmaceuticals $ 539.1 $ 458.8 $ 465.6 Consumer Health Care 53.1 61.0 57.3 Corporate 15.5 15.2 18.3 --------------------------------------- Consolidated Total $ 607.7 $ 535.0 $ 541.2 ======================================= EXPENDITURES FOR LONG-LIVED ASSETS Pharmaceuticals $ 1,827.7 $ 1,720.1 $ 1,038.9 Consumer Health Care 67.8 38.4 66.8 Corporate 178.0 55.0 31.4 --------------------------------------- Consolidated Total $ 2,073.5 $ 1,813.5 $ 1,137.1 ======================================= TOTAL ASSETS AT DECEMBER 31, Pharmaceuticals(4) $ 13,820.3 $ 12,388.6 $ 11,101.4 Consumer Health Care 1,736.3 1,697.2 1,864.4 Net assets -- discontinued business held for sale -- -- 4,192.3 Corporate 7,411.3 7,006.7 5,965.7 --------------------------------------- Consolidated Total $ 22,967.9 $ 21,092.5 $ 23,123.8 =======================================
Wyeth and Subsidiaries 53 COMPANY DATA BY GEOGRAPHIC SEGMENT
(In millions) YEARS ENDED DECEMBER 31, 2001 2000 1999 - ------------------------------------------------------------------ NET REVENUE FROM CUSTOMERS(1)(5) United States $ 9,029.0 $ 8,045.1 $ 7,214.2 United Kingdom 694.4 898.1 745.1 Other International 4,405.1 4,270.5 3,855.8 ----------------------------------- Consolidated Total $14,128.5 $13,213.7 $11,815.1 =================================== LONG-LIVED ASSETS AT DECEMBER 31,(5) United States $ 7,583.4 $ 6,228.8 $ 6,379.7 Ireland 652.7 386.2 326.8 Other International 2,482.6 2,688.6 2,498.0 ----------------------------------- Consolidated Total $10,718.7 $ 9,303.6 $ 9,204.5 ===================================
- ----------- (1) 2000 and 1999 were restated to reflect the early adoption of new authoritative accounting guidance as of January 1, 2001 reflecting certain rebates and sales incentives (i.e., coupons and other rebate programs) as reductions of revenues instead of selling and marketing expenses. (2) Income (loss) from continuing operations before taxes included goodwill amortization for 2001, 2000 and 1999 as follows: Pharmaceuticals -- $136.8, $147.8 and $154.3 and Consumer Health Care -- $23.7, $31.8 and $32.7, respectively. (3) 2001, 2000 and 1999 Corporate included litigation charges of $950.0, $7,500.0 and $4,750.0, respectively, relating to the litigation brought against the Company regarding the use of the diet drug products REDUX or PONDIMIN. The charges provide for all anticipated payments in connection with the nationwide, class action settlement, anticipated costs to resolve the claims of any members of the settlement class who in the future may exercise an intermediate or back-end opt out right, costs to resolve the claims of PPH claimants and initial opt out claimants, and administrative and litigation expenses, net of insurance (see Note 12). The charges related to the Pharmaceuticals operating segment. 2000 Corporate also included: - Income of $1,709.4 resulting from the receipt of a $1,800.0 termination fee provided for under the merger agreement with Warner-Lambert Company offset, in part, by certain related expenses (see Note 3). - Income of $2,061.2 relating to the Company selling a portion of its investment in Immunex common stock in a public equity offering with Immunex (see Note 2). The transaction related to the Pharmaceuticals operating segment. - Goodwill impairment of $401.0 related to the goodwill associated with generic pharmaceuticals and the SOlGAR consumer health care product line. The charge related to the operating segments as follows: Pharmaceuticals -- $231.0 and Consumer Health Care -- $170.0 (see Note 3). - A special charge of $80.0 related to the voluntary ceasing of production and subsequent market withdrawal of products containing PPA (see Note 3). The charge related to the Consumer Health Care operating segment. - A special charge of $267.0 related to costs associated with certain product discontinuations (see Note 3). The charge related to the Pharmaceuticals operating segment. 1999 Corporate also included a special charge of $82.0 related to the suspension of shipments and the voluntary market withdrawal of ROTASHIELD, the Company's rotavirus vaccine (see Note 3). The charge related to the Pharmaceuticals operating segment. (4) 2001 and 2000 included an equity investment in Immunex of $845.4 and $759.2, respectively. Immunex was a consolidated subsidiary in 1999. (5) Other than the United States and the United Kingdom, no other country in which the Company operates had net revenue of 5% or more of the respective consolidated total. Other than the United States and Ireland, no country in which the Company operates had long-lived assets of 5% or more of the respective consolidated total. The basis for attributing net revenue to geographic areas is the location of the customer. Long-lived assets consist of property, plant and equipment, goodwill and other intangibles, and other assets, excluding deferred taxes, net investments in equity companies and other investments. 54 Wyeth and Subsidiaries REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and Stockholders of Wyeth: We have audited the accompanying consolidated balance sheets of Wyeth (formerly American Home Products Corporation -- a Delaware corporation) and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Wyeth and subsidiaries as of December 31, 2001 and 2000, and the results of their operations and cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States. Arthur Andersen LLP New York, New York January 24, 2002 MANAGEMENT REPORT ON FINANCIAL STATEMENTS Management has prepared and is responsible for the Company's Consolidated Financial Statements and related Notes to Consolidated Financial Statements. They have been prepared in accordance with accounting principles generally accepted in the United States and necessarily include amounts based on judgments and estimates made by management. All financial information in this Annual Report is consistent with the financial statements. The Company maintains internal accounting control systems and related policies and procedures designed to provide reasonable assurance that assets are safeguarded, that transactions are executed in accordance with management's authorization and are properly recorded, and that accounting records may be relied upon for the preparation of financial statements and other financial information. The design, monitoring and revision of internal accounting control systems involve, among other things, management's judgment with respect to the relative cost and expected benefits of specific control measures. The Company also maintains an internal auditing function, which evaluates and formally reports on the adequacy and effectiveness of internal accounting controls, policies and procedures. The Company's financial statements have been audited by independent public accountants who have expressed their opinion with respect to the fairness of these statements. The Audit Committee of the Board of Directors, composed of non-employee directors, meets periodically with the independent public accountants and internal auditors to evaluate the effectiveness of the work performed by them in discharging their respective responsibilities and to assure their independent and free access to the Committee. John R. Stafford Robert Essner Kenneth J. Martin Chairman of the Board President and Senior Vice President Chief Executive and Chief Financial Officer Officer Wyeth and Subsidiaries 55 QUARTERLY FINANCIAL DATA (UNAUDITED)
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER (IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 2001 2001 2001 2001 - ------------------------------------------------------------------------------------------------------------------------------------ Net revenue $3,449,176 $3,216,420 $3,736,250 $ 3,726,668 Gross profit 2,650,573 2,425,379 2,856,328 2,807,458 Income from continuing operations(1) 733,554 476,996 252,072 822,672 Diluted earnings per share from continuing operations(1) 0.55 0.36 0.19 0.62 Net income(1) 733,554 476,996 252,072 822,672
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER (IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 2000 2000 2000 2000 - ------------------------------------------------------------------------------------------------------------------------------------ Net revenue(2) $3,195,852 $3,026,215 $3,503,605 $ 3,487,999 Gross profit(2) 2,413,860 2,255,173 2,658,346 2,616,874 Income (loss) from continuing operations(1)(3) 1,746,009 412,734 762,100 (3,821,883) Diluted earnings (loss) per share from continuing operations(1)(3)(4) 1.32 0.31 0.58 (2.91) Net income (loss)(1)(3)(5) 276,362 412,734 762,100 (3,821,883)
(1) Third Quarter 2001 and Fourth Quarter 2000 included litigation charges of $615,000 after-tax and $0.46 per share-diluted and $5,375,000 after-tax and $4.10 per share-diluted, respectively, in connection with litigation brought against the Company regarding the use of the diet drugs REDUX or PONDIMIN. Fourth Quarter 2000 also included: - Income of $1,414,859 after-tax and $1.08 per share-diluted related to the Company selling a portion of its investment in Immunex common stock in a public equity offering with Immunex. - Goodwill impairment of $341,000 after-tax and $0.26 per share-diluted related to the goodwill associated with generic pharmaceuticals and the SOLGAR consumer health care product line. - A special charge of $52,000 after-tax and $0.04 per share-diluted related to the voluntary ceasing of production and subsequent voluntary market withdrawal of products containing PPA. - A special charge of $173,000 after-tax and $0.13 per share-diluted related to costs associated with certain product discontinuations. (2) First, Second, Third and Fourth Quarters 2000 were restated to reflect the early adoption of new authoritative accounting guidance as of January 1, 2001 reflecting certain rebates and sales incentives (i.e., coupons and other rebate programs) as reductions of revenues instead of selling and marketing expenses. (3) First Quarter 2000 included income of $1,111,097 after-tax and $0.84 per share-diluted resulting from the receipt of a $1,800,000 termination fee provided for under the merger agreement with Warner-Lambert Company offset, in part, by certain related expenses. (4) The weighted average common shares outstanding for diluted loss per share for the Fourth Quarter 2000 did not include common stock equivalents, as the effect would have been antidilutive. In addition, the sum of the 2000 diluted earnings (loss) per share from continuing operations did not equal the full year 2000 diluted loss per share from continuing operations for the same reason. (5) As of the 2000 First Quarter, the Company reflected the Cyanamid Agricultural Products business, which was sold on June 30, 2000, as a discontinued operation and recorded a loss on disposal of such business of $1,572,993, net of tax charges of $855,248. MARKET PRICES OF COMMON STOCK AND DIVIDENDS
2001 RANGE OF PRICES* 2000 Range of Prices* ----------------------------------------- ----------------------------------------- DIVIDENDS Dividends HIGH LOW PER SHARE High Low per Share - -------------------------------------------------------------------------------------------------------------------- First quarter $62.50 $52.00 $0.23 $56.25 $39.38 $0.23 Second quarter 63.80 54.06 0.23 61.63 50.94 0.23 Third quarter 62.31 53.20 0.23 60.13 50.38 0.23 Fourth quarter 62.25 55.70 0.23 65.25 53.50 0.23
* Prices are those of the New York Stock Exchange--Composite Transactions. 56 Wyeth and Subsidiaries MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following commentary should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements on pages 34 to 54. RESULTS OF OPERATIONS Basis of Presentation Management's discussion and analysis of results of operations for 2001 vs. 2000 and 2000 vs. 1999 are presented on an as-reported basis, except for Net revenue variation explanations between 2000 and 1999, which are presented on an as-reported and pro forma basis. Effective January 1, 2000, the financial results of certain pharmaceutical subsidiaries in Japan and India, which previously were included on an equity basis, were consolidated in the financial results of the Company. The financial results of Immunex, which previously were consolidated in the financial results of the Company, were deconsolidated and included on an equity basis, retroactive to January 1, 2000, within the pharmaceuticals segment. Accordingly, alliance revenue was recorded in 2001 and 2000 for co-promotion agreements between the Company and Immunex. The 2000 vs. 1999 pro forma net revenue percentage changes reflect the respective consolidation and deconsolidation of these subsidiaries and include alliance revenue from Immunex, assuming all transactions occurred as of January 1, 1999. Neither the consolidation nor the deconsolidation of these subsidiaries had any effect on income from continuing operations in 2000. In addition, the Company early adopted new authoritative accounting guidance as of January 1, 2001 reflecting certain rebates and sales incentives (i.e., coupons and other rebate programs) as reductions of revenues instead of selling and marketing expenses. Financial information for all prior periods presented has been reclassified to comply with the income statement classification requirements of the new guidance. These reclassifications had no effect on total net revenue growth between the periods presented. However, consumer health care net revenue growth for 2000 vs. 1999 was 3% without the reclassification adjustments as compared with the as-reported growth rate of 4%. Net Revenue Worldwide net revenue increased 7% to $14.1 billion for 2001 on an as-reported basis. Worldwide net revenue increased 12% to $13.2 billion for 2000 on an as-reported basis. After adjusting for the consolidation and deconsolidation of the subsidiaries identified above, and including alliance revenue from Immunex, pro forma worldwide net revenue for 2000 increased 13% due primarily to higher worldwide sales of pharmaceuticals. The following table sets forth 2001, 2000 and 1999 worldwide net revenue results by operating segment together with the percentage changes in "As-Reported" and "Pro Forma" (where applicable) worldwide net revenue from prior years:
2001 VS. 2000 2000 vs. 1999 ------------- ------------------------------ (Dollar amounts in millions) YEARS ENDED DECEMBER 31, As-Reported -------------------------------------------- % Increase As-Reported Pro Forma NET REVENUE 2001 2000 1999 (Decrease) % Increase % Increase - ---------------------------------------------------------------------------------------------------------------------------------- Operating Segment: Pharmaceuticals $11,716.5 $10,772.6 $ 9,469.7 9% 14% 16% Consumer Health Care 2,412.0 2,441.1 2,345.4 (1)% 4% 4% --------------------------------------------------------------------------------------------------- Consolidated Net Revenue $14,128.5 $13,213.7 $11,815.1 7% 12% 13% ===================================================================================================
2001 VS. 2000 Worldwide pharmaceutical net revenue increased 9% (10% for human pharmaceuticals) for 2001. Excluding the negative impact of foreign exchange, worldwide pharmaceutical net revenue increased 11% for 2001. U.S. pharmaceutical net revenue increased 15% for 2001 due primarily to higher sales of PROTONIX (introduced in the 2000 second quarter), PREVNAR (introduced in the 2000 first quarter), EFFEXOR XR (as a result of higher volume and market share of new prescriptions as well as expanded indications), PREMARIN products and CORDARONE I.V., and alliance revenue offset, in part, by lower sales of ZIAC (due to generic competition) and generic products (discontinuance of certain oral generics). International pharmaceutical net revenue decreased 1% for 2001 due primarily to lower sales of MENINGITEC and animal health products offset, in part, by higher sales of EFFEXOR XR (as a result of higher volume and market share of new prescriptions, as well as expanded indications), ENBREL (internationally the Company has exclusive marketing rights to ENBREL), ZOTON and infant nutritionals. Sales of MENINGITEC, the Company's meningococcal meningitis vaccine, decreased as compared with the prior year, as it was used in 2000 to vaccinate nearly all children and adolescents in the United Kingdom. The product currently is being launched in 10 other European countries; however, the Company does not currently anticipate that any of these markets, individually, will provide sales volume equivalent to that generated in the United Kingdom. The decline in animal health product revenues was due primarily to a general continued weakening in the livestock markets and continuing concerns about foot-and-mouth and mad cow diseases. Worldwide consumer health care net revenue decreased 1% for 2001. Excluding the negative impact of foreign exchange, worldwide consumer health care net revenue was unchanged for Wyeth and Subsidiaries 57 2001. U.S. consumer health care net revenue was unchanged for 2001 as a result of higher sales of CHAP STICK, CALTRATE and ADVIL being offset by lower sales of cough/cold/allergy products and FLEXAGEN. International consumer health care net revenue decreased 3% for 2001 due primarily to the divestiture of two international non-core products which occurred early in 2001, as well as lower sales of cough/cold/allergy products. These decreases were partially offset by higher sales of CENTRUM products, CALTRATE and ADVIL. 2000 VS. 1999 Worldwide pharmaceutical net revenue increased 14% on an as-reported basis and 16% (primarily human pharmaceuticals) on a pro forma basis for 2000. Excluding the negative impact of foreign exchange, pro forma worldwide pharmaceutical net revenue increased 19% for 2000. Pro forma U.S. pharmaceutical net revenue increased 22% for 2000 due primarily to higher sales of PREVNAR (introduced in the 2000 first quarter), EFFEXOR XR (as a result of higher volume and market share of new prescriptions, as well as expanded indications), PROTONIX (introduced in the 2000 second quarter), PREMARIN products and animal health products, and alliance revenue offset, in part, by lower sales of LODINE (due to generic competition) and factor VIII. Pro forma international pharmaceutical net revenue increased 7% for 2000 due primarily to higher sales of MENINGITEC (introduced in the United Kingdom in the 1999 fourth quarter), EFFEXOR XR (as a result of higher volume and market share of new prescriptions, as well as expanded indications) and REFACTO (introduced in the 1999 second quarter). Worldwide consumer health care net revenue increased 4% on an as-reported and pro forma basis for 2000. Excluding the negative impact of foreign exchange, worldwide consumer health care net revenue increased 6% for 2000. U.S. consumer health care net revenue increased 5% for 2000 due primarily to higher sales of CENTRUM products (including Centrum Performance, which was launched in the United States in the 1999 fourth quarter), cough/cold/allergy products, CHAP STICK and FLEXAGEN (introduced in the United States in the 2000 second quarter). International consumer health care net revenue increased 2% for 2000 due primarily to higher sales of CENTRUM products and CALTRATE offset, in part, by lower sales of ANACIN. The following table sets forth the percentage changes in 2001 as-reported and 2000 pro forma worldwide net revenue by operating segment and geographic area compared with the prior year, including the effect volume, price and foreign exchange had on these percentage changes:
% Increase (Decrease) % Increase (Decrease) Years Ended December 31, 2001 Years Ended December 31, 2000(1)(2) ---------------------------------------------- ------------------------------------------- Foreign Total Net Foreign Total Net Volume Price Exchange Revenue Volume Price Exchange Revenue - --------------------------------------------------------------------------------------------------------------------------- PHARMACEUTICALS United States 10% 5% -- 15% 15% 7% -- 22% International 4% 1% (6)% (1)% 14% -- (7)% 7% ----------------------------------------------- ------------------------------------------- Total 8% 3% (2)% 9% 15% 4% (3)% 16% =============================================== =========================================== CONSUMER HEALTH CARE United States (2)% 2% -- -- 4% 1% -- 5% International (1)% 3% (5)% (3)% 4% 3% (5)% 2% ----------------------------------------------- ------------------------------------------- Total (2)% 2% (1)% (1)% 4% 2% (2)% 4% =============================================== =========================================== TOTAL United States 8% 4% -- 12% 13% 5% -- 18% International 4% 1% (6)% (1)% 12% 1% (7)% 6% ----------------------------------------------- ------------------------------------------- Total 6% 3% (2)% 7% 13% 3% (3)% 13% =============================================== ===========================================
(1) Effective January 1, 2000, the financial results of certain subsidiaries in Japan and India, which previously were included on an equity basis, were consolidated in the results of the Company. Also effective January 1, 2000, the financial results of Immunex, which previously were consolidated in the results of the Company, were deconsolidated and included on an equity basis. Accordingly, alliance revenue was recorded in 2000 for co-promotion agreements between the Company and Immunex. The 2000 pro forma net revenue percentage changes reflect the respective consolidation and deconsolidation of these subsidiaries and include alliance revenue from Immunex, assuming all transactions occurred as of January 1, 1999. Neither the consolidation nor the deconsolidation of these subsidiaries, nor the inclusion of alliance revenue from Immunex, had any effect on income from continuing operations in 2000. (2) 2000 was restated to reflect the early adoption of new authoritative accounting guidance as of January 1, 2001 reflecting certain rebates and sales incentives (i.e., coupons and other rebate programs) as reductions of revenues instead of selling and marketing expenses. 58 Wyeth and Subsidiaries Operating Expenses 2001 VS. 2000 COST OF GOODS SOLD, as a percentage of Net revenue, decreased to 24.0% for 2001 compared with 24.7% for 2000. Excluding alliance revenue, cost of goods sold, as a percentage of net sales, for 2001 was 24.5%, a 0.6% decrease from 25.1% in 2000. The margin improvement resulted from a favorable mix of higher margin products in both the pharmaceuticals and consumer health care segments and lower royalty expenses offset, in part, by increased costs associated with improving the U.S. production supply chain processes. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES, as a percentage of Net revenue, decreased to 36.7% for 2001 compared with 37.7% for 2000. The lower ratio of selling, general and administrative expenses resulted from non-recurring launch expenses, primarily media, related to pharmaceutical product launches in 2000, and lower co-promotion expenses for ZIAC, due to reduced sales as a result of generic competition. This ratio improvement was partially offset by an increase in selling and marketing expenses in the Company's animal health division to support the domestic launch of PROHEART 6, a new single dose, canine heartworm preventative product. RESEARCH AND DEVELOPMENT EXPENSES increased 11% for 2001 due primarily to increased headcount and other research operating expenses, including higher chemical and material costs, and ongoing clinical trials of pharmaceuticals in several therapeutic categories. These increases were partially offset by lower costs resulting from the timing of payments pursuant to certain pharmaceutical collaborations and lower payments under licensing agreements. Pharmaceutical research and development expenditures accounted for 96%, 96% and 95% of total research and development expenditures in 2001, 2000 and 1999, respectively. Pharmaceutical research and development expenses, as a percentage of worldwide pharmaceutical net revenue, exclusive of infant nutritional sales and alliance revenue, were 17%, 16% and 17% in 2001, 2000 and 1999, respectively. 2000 VS. 1999 COST OF GOODS SOLD, as a percentage of Net revenue, decreased to 24.7% for 2000 compared with 25.6% for 1999. Excluding alliance revenue,cost of goods sold, as a percentage of net sales, for 2000 was 25.1%, a 0.5% decrease from 1999. A favorable mix of higher margin products in the pharmaceuticals segment was offset, in part, by an increase in royalty expenses and costs associated with improving the production and supply chain processes at certain international sites. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES, as a percentage of Net revenue, increased to 37.7% for 2000 compared with 36.6% for 1999. Higher selling, general and administrative expenses were due primarily to increased selling and marketing expenses supporting higher field sales headcount and salaries, promotional efforts for recent product launches and rapid growth products, and direct-to-consumer programs. The increase in the ratio of these expenses, as a percentage of Net revenue, was offset, in part, by deconsolidating Immunex in 2000 as these expenses carried a higher expense ratio and by consolidating Japan and India in 2000 as their expense ratio was lower than the Company overall. RESEARCH AND DEVELOPMENT EXPENSES increased 6% for 2000 due primarily to certain advancements and ongoing clinical trials of pharmaceuticals in several therapeutic categories, as well as additional payments for existing licensing agreements offset, in part, by lower costs as a result of deconsolidating Immunex in 2000. Interest Expense and Other Income 2001 VS. 2000 INTEREST EXPENSE, NET increased substantially for 2001 due primarily to higher weighted average debt outstanding, as compared with 2000. Weighted average debt outstanding during 2001 and 2000 was $7,270.9 million and $3,853.0 million,respectively. The increase in interest expense was partially offset by higher capitalized interest resulting from additional capital projects, recognized during 2001, and lower interest rates on outstanding commercial paper. OTHER INCOME, NET increased 70% for 2001 due primarily to lower non-recurring charges (as described below in the 2000 vs. 1999 Other income, net analysis), higher gains on the sales of non-strategic assets and higher equity income. 2000 VS. 1999 INTEREST EXPENSE, NET decreased 73% for 2000 due primarily to an increase in interest income as a result of higher cash and cash equivalents, as well as lower debt resulting from the payoff of the $1,000.0 million of 7.70% notes on February 15, 2000. In addition, on June 30, 2000, the Company used a portion of the proceeds from the sale of the Cyanamid Agricultural Products business to pay down a substantial portion of the outstanding commercial paper borrowings. Weighted average debt outstanding during 2000 and 1999 was $3,853.0 million and $4,889.0 million, respectively. OTHER INCOME, NET decreased 37% for 2000 due primarily to non-recurring charges(including: payments for access to various pharmaceutical collaborations, costs associated with a consent decree entered into with the FDA in the 2000 third quarter (described below) and costs related to a product discontinuation) and lower gains on the sales of non-strategic assets offset, in part, by an insurance recovery of environmental costs, higher equity income and lower Year 2000 conversion costs. In conjunction with the consent decree identified above, the Company recorded a pre-tax charge of $56.1 million which included payments to the U.S. government and charges associated with actions required by the FDA based on an inspection of the Marietta, Pennsylvania and Pearl River, New York facilities. Pursuant to the consent decree, the Company will have a comprehensive Wyeth and Subsidiaries 59 inspection performed by expert consultants to determine compliance with current Good Manufacturing Practices. 2001, 2000 and 1999 Unusual Transactions During the 2001 third quarter, the Company recorded a charge of $950.0 million ($615.0 million after-tax or $0.46 per share-diluted) relating to the litigation brought against the Company regarding the use of the diet drugs Redux or Pondimin. An initial litigation charge of $4,750.0 million ($3,287.5 million after-tax or $2.51 per share-diluted) was recorded in the 1999 third quarter followed by an additional litigation charge of $7,500.0 million ($5,375.0 million after-tax or $4.11 per share-diluted) recorded in the 2000 fourth quarter. The combination of these three charges represents the estimated total amount required to resolve all diet drug litigation, including all anticipated funding requirements for the nationwide, class action settlement and costs to resolve the claims of any members of the settlement class who in the future may exercise an intermediate or back-end opt out right. Additionally, these charges will cover any remaining administrative and legal expenses and costs associated with the resolution of the claims of the initial opt outs and primary pulmonary hypertension claimants (see Note 12 to the Consolidated Financial Statements and the "Liquidity, Financial Condition and Capital Resources" section herein for further discussion relating to the Company's additional financing requirements for the future settlement payments). During the 2000 first quarter, the Company and Warner-Lambert Company terminated their merger agreement. The Company recorded income of $1,709.4 million ($1,111.1 million after-tax or $0.85 per share-diluted) in income from continuing operations resulting from the receipt of a $1,800.0 million termination fee provided for under the merger agreement offset, in part, by certain related expenses (see Note 3 to the Consolidated Financial Statements). In November 2000, the Company and Immunex completed a public equity offering allowing the Company to sell 60.5 million shares of Immunex common stock. Proceeds to the Company were $2,404.9 million, resulting in a gain on the sale of $2,061.2 million ($1,414.9 million after-tax or $1.08 per share-diluted). The Company used the net proceeds from the sale of its Immunex common stock to reduce outstanding commercial paper and for other general corporate purposes (see Note 2 to the Consolidated Financial Statements). In November 2000, in accordance with an FDA request, the Company immediately ceased global production and shipments of any products containing PPA and voluntarily withdrew any such products from customer warehouses and retail store shelves. As a result, the Company recorded a special charge of $80.0 million ($52.0 million after-tax or $0.04 per share-diluted) to provide primarily for product returns and the write-off of inventory (see Note 3 to the Consolidated Financial Statements). During the 2000 fourth quarter, the Company recorded a special charge of $267.0 million ($173.0 million after-tax or $0.13 per share-diluted) related to the discontinuation of certain products. The special charge provided for fixed asset impairments, inventory write-offs, severance obligations, idle plant costs and contract termination costs (see Note 3 to the Consolidated Financial Statements). At December 31, 2000, the Company performed goodwill and other intangible reviews and noted that projected profitability and future cash flows associated with generic pharmaceuticals and the SOLGAR consumer health care product line would not be sufficient to recover the remaining goodwill related to these product lines. As a result, the Company recorded a charge of $401.0 million ($341.0 million after-tax or $0.26 per share-diluted) to write down the carrying value of goodwill related to these product lines, to fair value, representing discounted future cash flows (see Note 3 to the Consolidated Financial Statements). During the 1999 second quarter, the Company recorded a special charge aggregating $82.0 million ($53.0 million after-tax or $0.04 per share-diluted) for estimated costs associated with the suspension of shipments and the voluntary market withdrawal of ROTASHIELD, the Company's rotavirus vaccine (see Note 3 to the Consolidated Financial Statements). 60 Wyeth and Subsidiaries Income (Loss) from Continuing Operations before Taxes The following table sets forth worldwide income (loss) from continuing operations before taxes by operating segment together with the percentage changes from the comparable periods in the prior year on an as-reported basis:
2001 VS. 2000 2000 vs. 1999 (Dollar amounts in millions) YEARS ENDED DECEMBER 31, ------------- ------------- INCOME (LOSS) FROM CONTINUING --------------------------------------------- % Increase % Increase OPERATIONS BEFORE TAXES(1) 2001 2000 1999 (Decrease) (Decrease) - --------------------------------------------------------------------------------------------------------------------- Operating Segment: Pharmaceuticals $ 3,503.5 $ 2,919.5 $ 2,538.6 20% 15% Consumer Health Care 592.1 626.6 594.6 (6)% 5% -------------------------------------------------------------------------------- 4,095.6 3,546.1 3,133.2 15% 13% Corporate(2) (1,226.9) (4,647.1) (5,040.5) (74)% (8)% -------------------------------------------------------------------------------- Total(3) $ 2,868.7 $(1,101.0) $(1,907.3) -- (42)% ================================================================================
(1) Income (loss) from continuing operations before taxes included goodwill amortization for 2001, 2000 and 1999 as follows: Pharmaceuticals--$136.8, $147.8 and $154.3 and Consumer Health Care--$23.7, $31.8 and $32.7, respectively. (2) 2001, 2000 and 1999 Corporate included litigation charges of $950.0, $7,500.0 and $4,750.0, respectively, relating to the litigation brought against the Company regarding the use of the diet drugs REDUX or PONDIMIN. The charges provide for all anticipated payments in connection with the nationwide, class action settlement, anticipated costs to resolve the claims of any members of the settlement class who in the future may exercise an intermediate or back-end opt out right, costs to resolve the claims of PPH claimants and initial opt out claimants, and administrative and litigation expenses, net of insurance. 2000 Corporate also included: - Income of $1,709.4 resulting from the receipt of a $1,800.0 termination fee provided for under the merger agreement with Warner-Lambert Company offset, in part, by certain related expenses. - Income of $2,061.2 related to the Company selling a portion of its investment in Immunex common stock in a public equity offering with Immunex. - Goodwill impairment of $401.0 related to the goodwill associated with generic pharmaceuticals and the SOLGAR consumer health care product line. - A special charge of $80.0 related to the voluntary ceasing of production and subsequent market withdrawal of products containing PPA. - A special charge of $267.0 related to costs associated with certain product discontinuations. 1999 Corporate also included a special charge of $82.0 related to the suspension of shipments and the voluntary market withdrawal of ROTASHIELD, the Company's rotavirus vaccine. Excluding the 2001, 2000 and 1999 litigation charges, 2000 termination fee, 2000 gain on the sale of Immunex common stock, 2000 goodwill impairment, and 2000 and 1999 special charges, Corporate expenses, net increased 63% for 2001 and decreased 19% for 2000. (3) Excluding the 2001, 2000 and 1999 litigation charges, 2000 termination fee, 2000 gain on the sale of Immunex common stock, 2000 goodwill impairment, and 2000 and 1999 special charges, total income from continuing operations before taxes increased 13% for 2001 and 15% for 2000. The following explanations of changes in income (loss) from continuing operations before taxes, by operating segment, for 2001 compared with 2000, and 2000 compared with 1999, exclude items listed in footnote (2) to the table above: PHARMACEUTICALS Worldwide pharmaceutical income from continuing operations before taxes increased 20% (22% for human pharmaceuticals) for 2001 due primarily to higher U.S. net revenue (favorable product mix) and other income, net (primarily lower non- recurring charges and higher gains on asset sales) offset, in part, by higher selling, general and administrative expenses and research and development expenses. Higher selling, general and administrative expenses were due primarily to increased promotional expenses to support existing product lines and sales force expansion offset, in part, by a decrease in marketing expenses related to product launches that occurred in 2000. Worldwide pharmaceutical income from continuing operations before taxes increased 15% (11% for human pharmaceuticals) for 2000 due primarily to higher worldwide net revenue (including alliance revenue) offset, in part, by higher selling, general and administrative expenses, research and development expenses, and other expenses (primarily non-recurring charges). Higher selling, general and administrative expenses were due primarily to increased media and promotional expenses to support product launches and existing product lines through increased headcount. CONSUMER HEALTH CARE Worldwide consumer health care income from continuing operations before taxes decreased 6% for 2001 due primarily to lower worldwide sales and lower other income, net (primarily lower gains on sales of non-strategic assets). Worldwide consumer health care income from continuing operations before taxes increased 5% for 2000 due primarily to higher worldwide sales. CORPORATE Corporate expenses, net increased 63% for 2001 due primarily to higher interest expense, net and lower other income related to Wyeth and Subsidiaries 61 an insurance recovery of environmental costs recorded in 2000 offset, in part, by lower general and administrative expenses. Corporate expenses, net decreased 19% for 2000 due primarily to lower interest expense, net and current year insurance recoveries related to environmental costs offset, in part, by lower gains on sales of non-strategic assets, higher general and administrative expenses, and costs related to a product discontinuation. Effective Tax Rate The effective tax rate for 2001 was 24.1% compared with 25.5% for 2000 and 27.1% for 1999. The downward trend in the effective tax rates was due primarily to an increased benefit from manufacturing in lower taxed jurisdictions and higher research credits. Income (Loss) and Diluted Earnings (Loss) per Share from Continuing Operations Income and diluted earnings per share from continuing operations in 2001 were $2,285.3 million and $1.72, respectively, compared with a loss and diluted loss per share from continuing operations of $901.0 million and $0.69 in 2000, respectively. Loss and diluted loss per share from continuing operations in 1999 were $1,207.2 million and $0.92, respectively. The income (loss) from continuing operations for 2001, 2000 and 1999 included the following unusual items:
Diluted Earnings (Loss) Per Income (Loss) Share From Continuing From Continuing Operations Operations (In millions, except per share amounts) -------------------------------------- -------------------------------------- YEARS ENDED DECEMBER 31, 2001 2000 1999 2001 2000 1999 - --------------------------------------------------------------------------------------------------------------------------- Income from continuing operations before unusual items and including the dilutive effect of common stock equivalents (CSE) $ 2,900.3 $ 2,514.0 $ 2,133.3 $ 2.18 $ 1.90 $ 1.61 Dilutive effect of CSE* -- -- -- -- 0.02 0.02 -------------------------------------- -------------------------------------- $ 2,900.3 $ 2,514.0 $ 2,133.3 $ 2.18 $ 1.92 $ 1.63 Warner-Lambert Company termination fee -- 1,111.1 -- -- 0.85 -- Gain on sale of Immunex common stock -- 1,414.9 -- -- 1.08 -- Redux and Pondimin diet drug litigation charges (615.0) (5,375.0) (3,287.5) (0.46) (4.11) (2.51) Goodwill impairment -- (341.0) -- -- (0.26) -- Special charges: Voluntary market withdrawals -- (52.0) (53.0) -- (0.04) (0.04) Product discontinuations -- (173.0) -- -- (0.13) -- -------------------------------------- -------------------------------------- Income (loss) from continuing operations $ 2,285.3 $ (901.0) $(1,207.2) $ 1.72 $ (0.69) $ (0.92) ====================================== ======================================
* The $0.02 per share benefit represents the impact on income from continuing operations of excluding the dilutive effect of CSE. 2001 diluted earnings per share from continuing operations of $2.18 includes the dilutive impact of CSE. For further details related to the items listed in the table above, refer to the discussion of "2001, 2000 and 1999 Unusual Transactions" herein. Excluding all unusual items from the 2001 and 2000 results listed in the table above and including the $0.02 per share dilutive effect of common stock equivalents in the 2000 results, both income and diluted earnings per share from continuing operations in 2001 increased 15% compared with 2000. The increases were due primarily to higher U.S. pharmaceutical net revenue and higher other income, net offset, in part, by higher selling, general and administrative expenses, research and development expenses, and interest expense, net. Excluding all unusual items from the 2000 and 1999 results listed in the table above and including the $0.02 per share dilutive effect of common stock equivalents in 2000 and 1999 results, both income and diluted earnings per share from continuing operations in 2000 increased 18% compared with 1999. The increases were due primarily to higher worldwide sales of pharmaceuticals and lower interest expense, net offset, in part, by higher selling, general and administrative expenses and research and development expenses. Discontinued Operations On June 30, 2000, the Company announced that it had completed the sale of the Cyanamid Agricultural Products business to BASF. Under the terms of the definitive agreement, BASF paid the Company $3,800.0 million in cash and assumed certain debt. As a result, the Company recorded an after-tax loss on the sale 62 Wyeth and Subsidiaries of this business of $1,573.0 million or $1.20 per share-diluted and reflected this business as a discontinued operation beginning in the 2000 first quarter and restated all prior periods presented (see Note 2 to the Consolidated Financial Statements). LIQUIDITY, FINANCIAL CONDITION AND CAPITAL RESOURCES CASH AND CASH EQUIVALENTS decreased $899.6 million, while total debt increased by $7,001.1 million in 2001. The activity of these cash flows during 2001 related primarily to the following items: - Payments of $7,257.9 million related to the REDUX and PONDIMIN litigation. These payments were financed primarily from borrowing activities. As discussed in Note 12 to the Consolidated Financial Statements, during 1999, the Company announced a nationwide, class action settlement to resolve litigation brought against the Company regarding the use of the diet drugs REDUX or PONDIMIN. Payments to provide settlement benefits, if needed, may continue for approximately 16 years after final judicial approval. Payments made to date and future payments related to the diet drug litigation are anticipated to be financed through existing cash resources, cash flows from operating activities, additional commercial paper borrowings, as well as term debt financings and international earnings remitted back to the United States, if necessary. - Capital expenditures of $1,924.3 million due primarily to new production capacity expansion worldwide, including biotechnology facilities, research and development facilities, and to improve compliance of U.S. supply chain processes. A similar level of capital expenditures is expected to continue in 2002. - Dividends totaling $1,211.1 million consisting primarily of the Company's annual common stock dividend of $0.92 per share that provided the Company's stockholders with an approximate yield of 1.5%. - Net marketable security purchases, throughout 2001, of $941.0 million to support an effective cash management strategy. - Contributions to fund the Company's defined benefit pension plans totaling $429.7 million. - An increase in other current assets, excluding deferred taxes, of $395.8 million primarily for anticipated tax refunds. - An increase in inventories of $273.1 million primarily related to planning for expected product demand. These cash uses were partially offset by other net cash generated by operations of $3,909.6 million, proceeds from sales of assets of $408.2 million, proceeds from the exercise of stock options of $224.6 million and the proceeds from borrowing activities identified above. ADDITIONAL LIQUIDITY, FINANCIAL CONDITION AND CAPITAL RESOURCE INFORMATION At December 31, 2001, the carrying value of cash equivalents approximated fair value due to the short-term, highly liquid nature of cash equivalents, which have original maturities of three months or less. Interest rate fluctuations would not have a significant effect on the fair value of cash equivalents held by the Company. The Company maintains a $2,000.0 million credit facility, which supports borrowings under the commercial paper program and terminates on July 31, 2002. Since the $2,000.0 million credit facility terminates in less than one year, commercial paper outstanding of $1,817.2 million, supported by this facility, was classified as current debt in Loans payable as of December 31, 2001. In March 2001, the Company obtained an additional revolving credit facility of $3,000.0 million to support its commercial paper program. The Company offers its commercial paper in a very liquid market commensurate with its short-term credit ratings from Moody's (P2), S&P (A1) and Fitch (A1). In March 2002, subsequent to the date of the "Report of Independent Public Accountants," the Company renewed the $3,000.0 million credit facility for an additional 364-day term, and reduced the $2,000.0 million credit facility to $1,000.0 million until it matures on July 31, 2002. In March 2001, the Company issued three tranches of Notes in a transaction exempt from registration under the Securities Act, pursuant to Rule 144A, as follows: - $500.0 million 5.875% Notes due March 15, 2004 - $1,000.0 million 6.25% Notes due March 15, 2006 - $1,500.0 million 6.70% Notes due March 15, 2011 The interest rate payable on each series of Notes is subject to an increase of 0.25 percentage points per level of downgrade in the Company's credit rating by Moody's or S&P. However, the total adjustment to the interest rate for the series of Notes cannot exceed two percentage points. There is no adjustment to the interest rate payable on each series of Notes for the first single level downgrade in the Company's credit rating by S&P. In the case of the $1,500.0 million 6.70% Notes, the interest rate in effect on March 15, 2006 for such Notes will, thereafter, become the effective interest rate until maturity on March 15, 2011. The Company would incur a total of approximately $7.5 million of additional annual interest expense for every 0.25 percentage point increase in the interest rate. If Moody's or S&P subsequently were to increase the Company's credit rating, the interest rate payable on each series of Notes would be subject to a decrease of 0.25 percentage points for each level of credit rating increase. The interest rate payable for the series of Notes cannot be reduced below the original coupon rate of each series of Notes. In addition to the Notes issued in March 2001, the Company has outstanding: $250.0 million 6.50% Notes due October Wyeth and Subsidiaries 63 2002, $1,000.0 million 7.90% Notes due February 2005 and $250.0 million 7.25% debentures due March 2023. The Company has a common stock repurchase program under which the Company is authorized, at December 31, 2001, to repurchase 6,492,460 additional shares in the future. Depending upon market conditions, among other things, the Company may make limited repurchases of its common stock to offset stock issuances in connection with exercises of stock options during 2002. Management remains confident that cash flows from operating activities and available financing resources will be adequate to fund the Company's operations, pay all amounts related to the REDUX and PONDIMIN diet drug litigation, pay dividends, maintain the ongoing programs of capital expenditures, including the amount already committed at December 31, 2001 of $851.6 million, and repay both the principal and interest on its outstanding obligations, without requiring the disposition of any significant strategic core assets or businesses. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to market risk from changes in foreign currency exchange rates and interest rates that could impact its financial position, results of operations and cash flows. The Company manages its exposure to these market risks through its regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. The Company uses derivative financial instruments as risk management tools and not for trading purposes. In addition, derivative financial instruments are entered into with a diversified group of major financial institutions in order to manage the Company's exposure to non-performance on such instruments. FOREIGN CURRENCY RISK MANAGEMENT: The Company generates a portion of Net revenue from sales to customers located outside the United States, principally in Europe. International sales are generated mostly from international subsidiaries in the local countries with the sales typically denominated in the local currency of the respective country. These subsidiaries also incur most of their expenses in the local currency. Accordingly, most international subsidiaries use the local currency as their functional currency. International business, by its nature, is subject to risks including, but not limited to: differing economic conditions, changes in political climate, differing tax structures, other regulations and restrictions, and foreign exchange rate volatility. Accordingly, future results could be adversely impacted by changes in these or other factors. The Company has established programs to protect against adverse changes in exchange rates due to foreign currency volatility. The Company believes that the foreign currency risks to which it is exposed are not reasonably likely to have a material adverse effect on the Company's financial position, results of operations or cash flows due to the high concentration of sales in the United States. No single foreign currency accounted for 5% or more of 2001 or 2000 worldwide net revenue, except for the British pound sterling, which accounted for 5% and 7% of 2001 and 2000 worldwide net revenue, respectively. On January 1, 2002, 12 member countries of the European Union adopted the Euro as a new common legal currency. Collectively, these countries accounted for 11% of both 2001 and 2000 worldwide Net revenue. INTEREST RATE RISK MANAGEMENT: The fair value of the Company's fixed-rate long-term debt is sensitive to changes in interest rates. Interest rate changes result in gains/losses in the market value of this debt due to differences between the market interest rates and rates at the inception of the debt obligation. The Company manages this exposure to interest rate changes primarily through the use of interest rate swaps. The Company has swapped an appropriate amount of its fixed rate debt into variable rate debt to maintain a fixed-to-variable ratio of approximately 1 to 1 on its total debt position, consistent with the Company's debt management philosophy. At December 31, 2001, the notional/contract amounts, carrying values and fair values of the Company's financial instruments were as follows:
(Dollar amounts in millions) Notional/ DESCRIPTION Contract Amount Carrying Value Fair Value - -------------------------------------------------------------------------------- Forward contracts(1) $ 438.8 $ 17.9 $ 17.9 Option contracts(1) 796.4 12.9 12.9 Interest rate swaps 1,500.0 12.8 12.8 Outstanding debt(2) 9,445.5 9,454.6 9,607.7
(1) If the value of the U.S. dollar were to increase or decrease by 10%, in relation to all hedged foreign currencies, the net receivable on the forward and option contracts would decrease or increase by approximately $68.6. (2) If the interest rates were to increase or decrease by one percentage point, the fair value of the outstanding debt would increase or decrease by approximately $215.1. The estimated fair values approximate amounts at which these financial instruments could be exchanged in a current transaction between willing parties. Therefore, fair values are based on estimates using present value and other valuation techniques that are significantly affected by the assumptions used concerning the amount and timing of estimated future cash flows and discount rates that reflect varying degrees of risk. Specifically, the fair value of forward contracts and interest rate swaps reflects the 64 Wyeth and Subsidiaries present value of the future potential gain if settlement were to take place on December 31, 2001; the fair value of option contracts reflects the present value of future cash flows if the contracts were settled on December 31, 2001; and the fair value of outstanding debt instruments reflects a current yield valuation based on observed market prices as of December 31, 2001. FORWARD-LOOKING INFORMATION AND FACTORS THAT MAY AFFECT FUTURE RESULTS This Annual Report, including management's discussion and analysis set forth herein, contains certain forward-looking statements, including, among other things, statements regarding the Company's results of operations, future impact of presently known trends, Euro currency, competition, liquidity, financial condition and capital resources, PREMARIN, ENBREL supply, MENINGITEC sales, foreign currency and interest rate risk, the nationwide, class action settlement relating to REDUX and PONDIMIN, and additional litigation charges related to REDUX and PONDIMIN including those for opt outs. These forward-looking statements are based on current expectations of future events that involve risks and uncertainties, including, without limitation, risks associated with the inherent uncertainty of pharmaceutical research, product development, manufacturing and commercialization, and economic conditions, including interest and currency exchange rate fluctuations, the impact of competitive or generic products, product liability and other types of lawsuits, the impact of legislative and regulatory compliance and product approval obtainment, and patents. From time to time, we also may provide oral or written forward-looking statements in other materials we release to the public. However, the Company assumes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. Certain additional factors which could cause the Company's actual results to differ materially from expected and historical results have been identified by the Company in Exhibit 99 to the Company's 2000 Annual Report on Form 10-K, and the Company's 2001 Annual Report on Form 10-K, which will be filed by April 1, 2002, as well as the sections identified below. FUTURE IMPACT OF PRESENTLY KNOWN TRENDS PENSION ASSETS AND OTHER POSTRETIREMENT PLAN ASSUMPTIONS As a result of the recent retraction in the global equity markets, the Company has experienced a significant reduction in the market value of assets held by the Company's pension plan. The Company's pension plan assets also were decreased by the normal annual benefit payments, which historically have been offset by the positive actual return on plan assets. In order to mitigate the decline, the Company made a $400.0 million funding contribution to the U.S. Non-bargaining pension plan in December 2001. Despite the contribution, the market value decline is expected to negatively impact pension expense in 2002. In addition, based on an annual internal study of actuarial assumptions, the expected long-term rate of return on plan assets and discount rate both have been decreased by 25 basis points to 9.25% and 7.25%, respectively. As a result of these developments, the 2002 net periodic benefit cost for pensions is anticipated to be approximately $40.0 million to $50.0 million higher than in 2001. The Company also has reviewed the principal actuarial assumptions relating to its other postretirement plan. In response to the recent increase in health care costs in the United States, the Company has increased the health care cost trend rate to 9.5% for 2001, decreasing to 5.0% by 2005. In reviewing postretirement claims data and other related assumptions, the Company believes that this trend rate increase appropriately reflects the trend aspects of the Company's postretirement plan as of December 31, 2001. As a result of the increase in the health care cost trend rate, the 2002 net periodic benefit cost for other postretirement benefits is anticipated to be approximately $10.0 million to $20.0 million higher than in 2001. PROPOSED ACQUISITION OF IMMUNEX BY AMGEN In December 2001, Amgen Inc. and Immunex signed a definitive agreement providing for Amgen to acquire Immunex in a merger transaction. The terms of the agreement require that each share of Immunex common stock be exchanged for 0.44 shares of Amgen common stock and $4.50 in cash. Upon completion of the merger transaction, the Company would receive over $1,000.0 million in cash proceeds, based upon the number of shares the Company owned of Immunex as of December 31, 2001. The Company may use these cash proceeds to repay outstanding debt obligations, fund ongoing programs of capital expenditures or fund other working capital requirements. POTENTIAL TAX REFUND On October 5, 2001, the U.S. District Court for the District of Columbia entered judgment in favor of the Company in Boca Investerings Partnership v. U.S., in which the Company challenged the disallowance by the Internal Revenue Service (IRS) of a capital loss deduction in 1990 related to a partnership investment. The Court ordered the IRS to refund the tax paid, approximately $226.0 million, together with interest. The IRS has appealed the decision and, as a result, the Company has not recognized this anticipated refund in its 2001 Consolidated Financial Statements. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS As of January 1, 2002, the Company adopted SFAS No. 142, Goodwill and Other Intangible Assets, which requires, among other things, the ceasing of amortization of goodwill and certain indefinite lived intangibles. In accordance with the adoption of SFAS No. 142, the Company will cease amortizing goodwill. Included in Selling, general and administrative expenses for 2001 Wyeth and Subsidiaries 65 was approximately $160.5 million ($153.9 million after-tax or $0.12 per share-diluted) of goodwill amortization. The Company currently is assessing the impact the new impairment testing requirements may have on its financial position, results of operations and cash flows. In April 2001, the EITF reached a consensus on Issue No. 00-25, Vendor Income Statement Characterization of Consideration Paid to a Reseller of the Vendor's Products. EITF No. 00-25 requires the cost of certain vendor considerations be classified as a reduction of revenue rather than a marketing expense. The Company will adopt the provisions of EITF No. 00-25 effective January 1, 2002. The adoption of EITF No. 00-25 will result in reclassifications of certain marketing expenses to revenues and will have no effect on income from continuing operations. The Company does not anticipate the adoption of this consensus to significantly affect the growth rate of net revenues. CRITICAL ACCOUNTING POLICIES The Company does not consider any specific accounting policies to be critical to the economic success of the entity. The Company does not participate in, nor has created, any off-balance sheet financing or other off-balance sheet special purpose entities, other than operating leases. In addition, the Company does not enter into any derivative financial instruments for trading purposes and uses derivative financial instruments solely for managing its exposure to certain market risks from changes in foreign currency exchange rates and interest rates. Euro Currency On January 1, 2002, Euro banknotes and coins were introduced in 12 of the 15 member states of the European Union. The new common legal currency replaces the individual national currencies that currently are being withdrawn. The Company has effectively converted to the new single currency by identifying critical areas affected by the change and by successfully implementing programs to facilitate transition. The costs related to the Euro conversion and transition period did not have a material adverse effect on the Company's financial position, results of operations or cash flows. Competition The Company operates in the highly competitive pharmaceutical and consumer health care industries. The Company is not dependent on any one patent-protected product or line of products for a substantial portion of its net revenues or results of operations. PREMARIN, the Company's principal conjugated estrogens product manufactured from pregnant mare's urine, and related products PREMPRO and PREMPHASE (which are single tablet combinations of the conjugated estrogens in PREMARIN and the progestin medroxyprogesterone acetate), are the leaders in their categories and contribute significantly to net revenue and results of operations. PREMARIN's natural composition is not subject to patent protection (although PREMPRO has patent protection). The principal uses of PREMARIN, PREMPRO and PREMPHASE are to manage the symptoms of menopause and to prevent osteoporosis, a condition involving a loss of bone mass in postmenopausal women. Estrogen-containing products manufactured by other companies have been marketed for many years for the treatment of menopausal symptoms, and several of these products also have an approved indication for the prevention of osteoporosis. During the past several years, other manufacturers have introduced products for the treatment and/or prevention of osteoporosis. New products containing different estrogens than those found in PREMPRO and PREMPHASE and having many forms of the same indications also have been introduced. Some companies have attempted to obtain approval for generic versions of PREMARIN. These products, if approved, would be routinely substitutable for PREMARIN and related products under many state laws and third-party insurance payer plans. In May 1997, the FDA announced that it would not approve certain synthetic estrogen products as generic equivalents of PREMARIN given known compositional differences between the active ingredient of these products and PREMARIN. Although the FDA has not approved any generic equivalent to PREMARIN to date, PREMARIN will continue to be subject to competition from existing and new competing estrogen and other products for its approved indications and may be subject to generic competition from either synthetic or natural conjugated estrogens products in the future. At least one other company has announced that it is in the process of developing a generic version of PREMARIN from the same natural source, and the Company currently cannot predict the timing or outcome of these or any other efforts. The Company has been experiencing inconsistent results on dissolution testing of certain dosage strengths of PREMARIN and is working with the FDA to resolve this issue. Until this issue is resolved, supply shortages of one or more dosage strengths may occur. Although these shortages may adversely affect PREMARIN sales in one or more accounting periods, the Company believes that, as a result of current adequate inventory levels and the Company's enhanced process controls, testing protocols and an ongoing formulation improvement project, overall PREMARIN family sales will not be significantly impacted. ENBREL Supply Although the market demand for ENBREL is increasing, the sales growth currently is constrained by limits on the existing source of supply. This is expected to continue until the retrofitting of a Rhode Island facility is completed and approved, which is expected to occur in 2002. If the market demand continues to grow, there may be further supply constraints even after the Rhode Island facility begins producing ENBREL. The current plan for the longer term includes a new manufacturing facility, which is being constructed in Ireland. 66 Wyeth and Subsidiaries DIRECTORS AND OFFICERS BOARD OF DIRECTORS John R. Stafford (1) Chairman of the Board Clifford L. Alexander, Jr. (2,4) President, Alexander & Associates, Inc. Frank A. Bennack, Jr. (1,3,5) President and Chief Executive Officer, The Hearst Corporation Richard L. Carrion (3,5) Chairman, President and Chief Executive Officer, Popular, Inc. and Banco Popular de Puerto Rico Robert Essner (1) President and Chief Executive Officer John D. Feerick (2,3) Dean, Fordham University School of Law John P. Mascotte (2,3,5) Retired President and Chief Executive Officer, Blue Cross and Blue Shield of Kansas City, Inc. Mary Lake Polan, M.D., Ph.D., M.P.H. (2,4) Chairman and Professor, Department of Gynecology and Obstetrics, Stanford University School of Medicine Ivan G. Seidenberg (1,4,5) President and Co-Chief Executive Officer, Verizon Communications, Inc. Walter V. Shipley (3,5) Retired Chairman of the Board, The Chase Manhattan Corporation John R. Torell III (2,4) Partner Core Capital Group DIRECTOR EMERITUS John W. Culligan Retired -- Former Chairman of the Board PRINCIPAL CORPORATE OFFICERS John R. Stafford (6,7,8,9,10) Chairman of the Board Robert Essner (6,7,8,9,10) President and Chief Executive Officer Louis L. Hoynes, Jr. (6,7,8,9,10) Executive Vice President and General Counsel L. Patrick Gage, Ph.D. (6,7,8,9) Senior Vice President -- Science and Technology Kenneth J. Martin (6,7,8,9,10) Senior Vice President and Chief Financial Officer Bernard J. Poussot (6,7,8,9) Senior Vice President Lawrence V. Stein (7,8) Senior Vice President and Deputy General Counsel John B. Adams Vice President -- Corporate Development Egon E. Berg Vice President and Associate General Counsel Bruce Fadem Vice President -- Corporate Information Services and Chief Information Officer Leo C. Jardot Vice President -- Government Relations Paul J. Jones (7,8) Vice President and Comptroller Rene R. Lewin (6,7,8,9,10) Vice President -- Human Resources Jack M. O'Connor (9) Vice President and Treasurer Marily H. Rhudy (6,8) Vice President -- Public Affairs Jeffrey S. Sherman Vice President and Associate General Counsel Steven A. Tasher (7) Vice President -- Environmental Affairs and Facilities Operations, and Associate General Counsel Justin R. Victoria Vice President -- Investor Relations Mary Katherine Wold (9) Vice President -- Taxes Eileen M. Lach Secretary and Associate General Counsel -- International PRINCIPAL DIVISION AND SUBSIDIARY OFFICERS Fort Dodge Animal Health Division E. Thomas Corcoran (6,8) President Specialty Pharmaceuticals Division David G. Strunce President Wyeth Consumer Healthcare Ulf Wiinberg (6,7,8,9) President Wyeth Consumer Healthcare International Bruce I. Macphail (8) President Wyeth Consumer Healthcare U.S. Douglas A. Rogers (8) President Wyeth Pharmaceuticals Bernard J. Poussot (6,7,8,9) President Wyeth Pharmaceuticals -- Europe, Middle East and Africa Robert N. Power (8) President Wyeth Pharmaceuticals -- Intercontinental Region Mark M. Larsen (8) President Wyeth Pharmaceuticals -- North America Joseph M. Mahady (6,8) President Wyeth Research L. Patrick Gage, Ph.D. (6,7,8,9) President Wyeth Vaccines and Nutrition Kevin L. Reilly President (1) Executive Committee (2) Audit Committee (3) Compensation and Benefits Committee (4) Corporate Issues Committee (5) Nominating and Governance Committee (6) Management Committee (7) Law/Regulatory Review Committee (8) Operations Committee (9) Human Resources and Benefits Committee (10) Retirement Committee Wyeth and Subsidiaries 67 CORPORATE DATA EXECUTIVE OFFICES Wyeth Five Giralda Farms Madison, NJ 07940 (973) 660-5000 STOCK TRADING INFORMATION Wyeth stock is listed on the New York Stock Exchange (ticker symbol: WYE). INDEPENDENT PUBLIC ACCOUNTANTS Arthur Andersen LLP 1345 Avenue of the Americas New York, NY 10105 ANNUAL MEETING The Annual Meeting of Stockholders will be held on Thursday, April 25, 2002 at the Headquarters Plaza Hotel in Morristown, New Jersey. STOCKHOLDER ACCOUNT INFORMATION The Bank of New York is the transfer agent, registrar, dividend disbursing agent and dividend reinvestment agent for the Company. Stockholders of record with questions about lost certificates, lost or missing dividend checks, or notification of change of address should contact: The Bank of New York P.O. Box 11002 Church Street Station New York, NY 10286 (800) 565-2067 (Inside the United States and Canada) (610) 312-5303 (Outside the United States and Canada) For the hearing impaired: (888) 269-5221 (TDD) Via e-mail: shareowner-svcs@bankofny.com Internet address: www.stockbny.com BUYDIRECT STOCK PURCHASE AND SALE PLAN The BuyDIRECT plan provides stockholders of record and new investors with a convenient way to make cash purchases of the Company's common stock and to automatically reinvest dividends. Inquiries should be directed to The Bank of New York. FORM 10-K A copy of the Company's Annual Report on Form 10-K may be obtained by any stockholder without charge through The Bank of New York. EQUAL EMPLOYMENT OPPORTUNITY Our established affirmative action and equal employment programs demonstrate our long-standing commitment to provide job and promotional opportunities for all qualified persons regardless of age, color, disability, national origin, race, religion, sex, sexual orientation, status as a Vietnam-era veteran or a special disabled veteran, or any military uniformed services obligation. POLICY ON HEALTH, SAFETY AND ENVIRONMENTAL PROTECTION Copies of the Company's "Policy on Health, Safety and Environmental Protection" and "2000 Environmental and Safety Report" may be obtained upon written request to: Wyeth Department of Environment and Safety Five Giralda Farms Madison, NJ 07940 WYETH ON THE INTERNET Wyeth's Internet address is: www.wyeth.com TRADEMARKS Product designations appearing in differentiated type are trademarks. Design: Arnold Saks Associates Major Photography: Mark Tuschman 68 Wyeth and Subsidiaries Text: Fulton Communications EX-21 15 exhibit21.txt EXHIBIT 21 SUBSIDIARIES OF THE COMPANY --------------------------- DECEMBER 31, 2001 ----------------- State or Country Name of Incorporation ---- ---------------- Domestic - -------- Ayerst-Wyeth Pharmaceuticals Incorporated Delaware Cyanamid International Corporation Limited Delaware Greenwich Holdings Inc.* Delaware MDP Holdings, Inc. Delaware Route 24 Holdings, Inc. Delaware American Cyanamid Company Maine Wyeth-Ayerst International Inc. New York Wyeth-Ayerst Pharmaceuticals, Inc. New York Wyeth-Ayerst Lederle, Inc. Puerto Rico Wyeth-Whitehall Pharmaceuticals, Inc. Puerto Rico Berdan Insurance Company Vermont Foreign - ------- Laboratorios Wyeth-Whitehall Ltda. Brazil Wyeth-Ayerst Canada Inc. Canada John Wyeth & Brother Limited England Wyeth-Lederle France Wyeth-Pharma GmbH Germany AHP Finance Ireland Limited Ireland Wyeth Lederle S.p.A. Italy Wyeth Lederle Japan, Ltd. Japan Wyeth S.A. de C.V. Mexico AHP Manufacturing B.V. Netherlands Wyeth Philippines, Inc. Philippines Wyeth Nutritionals (Singapore) Pte. Ltd. Singapore Wyeth Pharmaceuticals (Singapore) Pte. Ltd. Singapore Wyeth Farma S.A. Spain Wyeth Lederle Nordiska A.B. Sweden Dimminaco AG Switzerland Cyanamid Taiwan Corporation Taiwan There have been omitted from the above list the names of subsidiaries which, considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary. * Sold to Immunex Corporation on January 2, 2002 EX-23 16 exhibit23.txt EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS ----------------------------------------- As independent public accountants, we hereby consent to the incorporation by reference in this Form 10-K of our report dated January 24, 2002 included in Wyeth's (formerly American Home Products Corporation - a Delaware Corporation) Annual Report to Stockholders for the year ended December 31, 2001. Furthermore, we consent to the incorporation of our reports dated January 24, 2002 included in or made part of this Form 10-K, into the Company's previously filed Registration Statements on Form S-3 (File Nos. 33-45324 and 33-57339), Form S-4 (File No. 333-59642) and on Form S-8 (File Nos. 2-96127, 33-24068, 33-41434, 33-53733, 33-55449, 33-45970, 33-14458, 33-50149, 33-55456, 333-15509, 333-76939, 333-67008, 333-64154 and 333-59668). ARTHUR ANDERSEN LLP New York, New York March 28, 2002 EX-99 17 exhibit99.txt CAUTIONARY STATEMENTS EXHIBIT 99 Exhibit 99 to the Annual Report on Form 10-K for the Fiscal Year Ended December 31, 2001 Cautionary Statements Regarding "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995 Forward-looking statements may appear in periodic reports filed with the Securities and Exchange Commission (including the Company's Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q), in press releases, in the Company's Annual Report to Stockholders and other reports to stockholders, and in other communications made by the Company. These forward-looking statements can be identified by their use of words such as "anticipates," "expects," "is confident," "plans," "could," "will," "believes," "estimates," "forecasts," "projects" and other words of similar meaning. These forward-looking statements address various matters including the Company's results of operations, future impact of presently known trends, Euro currency, competition, liquidity, financial condition and capital resources, PREMARIN, ENBREL supply, MENINGITEC sales, foreign currency and interest rate risk, the nationwide, class action settlement relating to REDUX and PONDIMIN, and additional litigation charges related to REDUX and PONDIMIN including those for opt outs, market position and product development. These forward-looking statements are based on current expectations of future events. From time to time, the Company may provide oral and written forward-looking statements in other materials we release to the public. However, the Company undertakes no obligation to update any forward-looking statements, but investors are advised to consult any further disclosures by the Company on these forward-looking statements in its subsequent filings pursuant to the Securities Exchange Act of 1934. As permitted by the Private Securities Litigation Reform Act of 1995, the Company is hereby filing the following cautionary statements identifying important factors, which among others, could cause the Company's actual results to differ materially from expected and historical results: Competitive implications on the Company's pricing and marketing strategies due to the conversion to the Euro. Competitive factors including managed care groups, institutions and government agencies seeking price discounts; scientific and technological advances attained by competitors; patents granted to competitors; changes in promotional regulations or practices; development of alternative therapies; potential generic competition for PREMARIN and for other health care products as such products mature. In the United States, among other developments, consolidation among managed care organizations may increase price pressure and may result in managed care organizations having greater influence over prescription decisions through formulary decisions and other policies. Government laws and regulations affecting U.S. and international operations, including trade, monetary and fiscal policies, taxes (including the phasing out of the Section 936 income tax credit), price controls, changes in governments and legal systems, as well as actions affecting approvals of products and licensing. Uncertainties of the FDA approval process and possible regulatory action (including compliance with current good manufacturing practice (cGMP) regulations for pharmaceutical and biological products) and the regulatory approval processes and possible regulatory action of other non-U.S. countries, including, without limitation, delays in approval of new products or business interruptions related to regulatory action, or recalls or decisions not to release its products or certain lots of products. Governmental factors including laws, regulations and judicial decisions at the state and federal level related to Medicare, Medicaid and health care reform; and laws and regulations affecting pricing and pharmaceutical reimbursement. Inherent uncertainty of pharmaceutical research, difficulties or delays in product development, manufacturing and commercialization including, but not limited to, the inability to identify viable new chemical compounds, successfully complete clinical trials, difficulties in manufacturing complex products, particularly biological products, on a commercial scale, and gain and maintain market acceptance of approved products. Difficulties or delays in product development can also affect the Company's other businesses. New product candidates that appear promising in development may fail to reach market for numerous reasons. They may be found to be ineffective or to have harmful side effects in clinical or pre-clinical testing, or be too difficult or too expensive to manufacture. Changes in inventory levels maintained by pharmaceutical wholesalers can cause reported sales for a particular period to differ significantly in either direction from underlying prescriber demand. Difficulties or delays in product manufacturing or marketing, including but not limited to, the inability to build up production capacity commensurate with demand, the ability of our suppliers to provide raw material, or the failure to predict market demand for or to gain market acceptance of approved products could affect future results. Unexpected safety or efficacy concerns arising with respect to marketed products, whether or not scientifically justified, leading to product recalls, withdrawals or declining sales. Growth in costs and expenses, including changes in product mix, and the impact of any acquisitions or divestitures, restructuring and other unusual items that could result from evolving business strategies, impairments in asset carrying values, and changing organizational structures. Product liability litigation related to the Company's health care and other products including, without limitation, litigation associated with the Company's diet drug products, REDUX and PONDIMIN. Other legal factors include, without limitation, antitrust litigation, tax matters, environmental and security law concerns, derivative actions, complying with the consent decree with the FDA, changes in intellectual property legal protections and remedies, and patent disputes with competitors, any of which could preclude commercialization or negatively affect the profitability of existing products or products in development. Changes in accounting standards promulgated by the Financial Accounting Standards Board, the Emerging Issues Task Force, the Securities and Exchange Commission, and the American Institute of Certified Public Accountants, which are adverse to the Company. Continued consolidation in the health care industry and the ability to attract and retain management and other key employees could affect the Company's competitive position. Changing economic conditions including inflation and fluctuations in interest rates and foreign currency exchange rates. This list should not be considered an exhaustive statement of all potential risks and uncertainties. EX-99.1 18 exhibit991.txt LETTER PURSUANT TO TEMPORARY NOTE 3T EXHIBIT 99.1 LETTER TO COMMISSION PURSUANT TO TEMPORARY NOTE 3T -------------------------------------------------- Wyeth Five Giralda Farms Madison, NJ 07940 March 28, 2002 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549-0408 Ladies and Gentlemen: Pursuant to Temporary Note 3T to Article 3 of Regulation S-X, Wyeth has obtained a letter of representation from Arthur Andersen LLP ("Andersen") stating that the December 31, 2001 audit was subject to its quality control system for the U.S. accounting and auditing practice to provide reasonable assurance that the engagement was conducted in compliance with professional standards, that there was appropriate continuity of Andersen personnel working on the audit, availability of national office consultation, and availability of personnel at foreign affiliates of Andersen to conduct the relevant portions of the audit. Very truly yours, /S/ Kenneth J. Martin - ------------------------------- Kenneth J. Martin Senior Vice President and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----