-----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, Gl70SjvbQgjlKV7ZM3D1FpPWkScExUHqKN5r8NQwv1/KBkrhMzPPQK0ApNMDnjRx NGXn5zC+OUt6M6cbLlGQ1A== 0000005187-03-000006.txt : 20030331 0000005187-03-000006.hdr.sgml : 20030331 20030331153912 ACCESSION NUMBER: 0000005187-03-000006 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 22 CONFORMED PERIOD OF REPORT: 20021231 FILED AS OF DATE: 20030331 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-01225 FILM NUMBER: 03630326 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 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN HOME PRODUCTS CORP DATE OF NAME CHANGE: 20020308 10-K 1 ann10k2.txt 2002 ANNUAL REPORT ON FORM 10-K 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, 2002 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 New York Stock Exchange par value - ----------------------------------------- ---------------------------------- Common Stock, $0.33 - 1/3 par value (including Preferred Stock Purchase New York Stock Exchange Rights) - ----------------------------------------- ---------------------------------- 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 (ss. 229.405 of this chapter) 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. [ ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes X No ----- State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter. Aggregate market value at June 30, 2002 $67,830,556,262 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 3, 2003 ------------- Common Stock, $0.33 - 1/3 par value 1,326,558,410 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) 2002 Annual Report to Stockholders - In Parts I, II and IV - -------------------------------------------------------------- (2) Proxy Statement filed on March 18, 2003 - In Part III - --------------------------------------------------------- PART I ------ ITEM 1. BUSINESS -------- General ------- Unless stated to the contrary, or unless the context otherwise requires, references to the Company in this report include Wyeth and subsidiaries. Wyeth, a Delaware corporation (the "Company") organized in 1926, which on March 11, 2002 changed its name from American Home Products Corporation, is currently engaged in the discovery, development, manufacture, distribution and sale of a diversified line of products in two primary businesses: Pharmaceuticals and Consumer Healthcare. Pharmaceuticals include branded human ethical pharmaceuticals, biologicals, nutritionals, and animal biologicals and pharmaceuticals. Principal products include women's health care products, neuroscience therapies, cardiovascular products, nutritionals, gastroenterology drugs, anti-infectives, vaccines, oncology therapies, musculoskeletal therapies, hemophilia treatments and immunological products. Principal animal health products include vaccines, pharmaceuticals, endectocides and growth implants. Consumer Healthcare products include analgesics, cough/cold/allergy remedies, nutritional supplements, lip balm, and hemorrhoidal, antacid, asthma and other relief items sold over-the-counter. Prior to July 15, 2002, the Company was the beneficial owner of 223,378,088 shares of common stock of Immunex Corporation ("Immunex"). On July 15, 2002, Amgen Inc. ("Amgen") completed its acquisition of Immunex in a merger transaction. Under the terms of the acquisition agreement, each share of Immunex common stock was exchanged for 0.44 shares of Amgen common stock and $4.50 in cash. Accordingly, the Company received 98,286,358 shares of Amgen common stock (representing approximately 7.7% of Amgen's outstanding common stock) and $1.005 billion in cash in exchange for all of its shares of Immunex common stock. The Company began selling its Amgen shares in the 2002 fourth quarter and completed the sales of all such shares as of January 21, 2003 for aggregate net proceeds of $4.831 billion. The Company and Amgen continue to co-promote ENBREL in the United States and Canada with the Company having exclusive international rights to ENBREL. The financial aspects of the existing licensing and marketing rights to ENBREL remain unchanged. In October 2000, the Company had increased its ownership in Immunex (subsequently acquired by Amgen) 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, at that time, 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. I-1 On June 30, 2000, the Company completed the sale of its Cyanamid Agricultural Products business, a manufacturer, distributor, and seller of crop protection and pest control products worldwide, to BASF Aktiengesellschaft ("BASF") for $3.8 billion in cash and the assumption of certain debt. The Company recorded an after-tax loss on the sale of this business and reflected this business as a discontinued operation in the 2000 first quarter. The loss on the sale was determined based on the difference in the book value of the net assets sold compared with the price received for these net assets. The sale of the Cyanamid Agricultural Products business produced a gain for tax purposes and a loss for book purposes, as the Company did not get a step-up in cost basis for tax purposes. This divergence, primarily caused by goodwill, was included in the basis for book purposes but was not included in the basis for tax purposes. The lower tax basis created a taxable gain that required a tax provision of approximately $855.2 million. This tax provision was combined with the pre-tax book loss of approximately $717.8 million for a total after-tax loss on the sale of the business of $1,573.0 million. 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. Additional information relating to Immunex/Amgen common stock transactions and the Cyanamid Agricultural Products business disposition is set forth in Note 2 of the Notes to Consolidated Financial Statements in the Company's 2002 Annual Report to Stockholders and is incorporated herein by reference. Also included in Note 2 are descriptions of the 2002 first quarter sale of the Company's Rhode Island facility to Immunex (subsequently acquired by Amgen) and the 2002 fourth quarter sale of the Company's generic human injectables product line to Baxter Healthcare Corporation. Reportable Segments ------------------- Financial information, by reportable segment, for each of the three years ended December 31, 2002 is set forth in Note 15 of the Notes to Consolidated Financial Statements in the Company's 2002 Annual Report to Stockholders and is incorporated herein by reference. The Company has three reportable segments: Pharmaceuticals, Consumer Healthcare, and Corporate. The Company's Pharmaceuticals and Consumer Healthcare 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 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. Wholesale distributors and large retail establishments account for a large portion of the Company's trade receivables and consolidated net revenue, especially in the United States. The Company's top three I-2 customers in the United States accounted for 25% of the Company's consolidated net revenue in 2002, as is typical in the pharmaceutical industry. In light of this concentration, the Company continuously monitors the creditworthiness of its customers and has established internal policies regarding customer credit limits. The product designations appearing in differentiated type herein are trademarks. PHARMACEUTICALS SEGMENT The Pharmaceuticals segment manufactures, distributes, and sells branded 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, and TRIPHASIL (marketed as TRINORDIOL internationally); neuroscience therapies including ATIVAN, EFFEXOR (marketed as EFEXOR internationally) and EFFEXOR XR; cardiovascular products including ALTACE and INDERAL: nutritionals including S26, 2ND AGE PROMIL and 3RD AGE PROGRESS (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); oncology therapies; musculoskeletal therapies including ENBREL (which, under an agreement, is co-promoted by Wyeth and Amgen 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) and REFACTO albumin-free formulated Factor VIII (Recombinant); and immunological products including RAPAMUNE. Principal animal health product categories include pharmaceuticals, vaccines including WEST NILE - INNOVATOR and 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 2002, 2001 and 2000, were sales of women's health care products totaling $2.5 billion, $2.8 billion and $2.7 billion, respectively, which includes sales of the PREMARIN family of products of $1.9 billion, $2.1 billion and $1.9 billion, respectively. In addition, aggregate sales of the EFFEXOR family of products of $2.1 billion and $1.5 billion accounted for more than 10% of consolidated net revenue in 2002 and 2001, respectively. Except as noted above, no other single pharmaceutical product or category of products accounted for more than 10% of consolidated net revenue in 2002, 2001 or 2000. CONSUMER HEALTHCARE SEGMENT The Consumer Healthcare segment manufactures, distributes and sells over-the-counter health care products. Principal consumer healthcare product categories and their respective products are: analgesics including ADVIL; cough/cold/allergy remedies I-3 including ALAVERT, ROBITUSSIN and DIMETAPP; nutritional supplements including CENTRUM products, CALTRATE and SOLGAR products; 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. No single consumer healthcare product or category of products accounted for more than 10% of consolidated net revenue in 2002, 2001 or 2000. 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, income, expenses, gains and losses related to the overall management of the Company which are not allocated to the other reportable segments. These items include interest expense and interest income, gains on the sales of investments and other corporate assets, other miscellaneous items, and unusual items, including: gains relating to Immunex/Amgen common stock transactions, the Warner-Lambert Company termination fee, certain litigation provisions, including the REDUX and PONDIMIN litigation charges, goodwill impairments, if any and any special charges. See Note 15 of the Notes to Consolidated Financial Statements in the Company's 2002 Annual Report to Stockholders for corporate segment information as well as additional disclosure relating to the unusual items listed above. 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 SYNVISC and PROTONIX are in each case produced by a single third-party manufacturer, and raw materials for ZOTON, ZOSYN and oral contraceptives are sourced from sole third-party suppliers. Patents and Trademarks ---------------------- Patent protection is, in the aggregate, considered to be of material importance to the Company's marketing of pharmaceutical products in the United States and in most major foreign markets. Patents may cover products, formulations, processes for, or intermediates useful in, the manufacture of products, or the uses of products. The Company owns, has applied for, or is licensed under, a large number of patents, both in the United States and other countries. 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, its scope of coverage, and the availability of legal remedies in the country. There is no assurance that the patents the Company is seeking will be granted or that the patents the Company has been granted would be found valid if challenged. Moreover, patents relating to particular products, I-4 uses, formulations, or processes do not preclude other manufacturers from employing alternative processes or from marketing alternative products or formulations that might successfully compete with our patented products. Patent portfolios developed for products introduced by the Company normally provide market exclusivity. The Company considers patent protection for certain products, processes, and uses to be important to its operations. For many of its products, in addition to compound patent protection, the Company holds other patents on manufacturing processes, formulations, or uses that may extend exclusivity beyond the expiration of the compound patent. Patents are in effect for the following major products in the United States. SYNVISC, a visco supplementation for treatment of osteoarthritis of the knee, has patent protection until at least 2010. The anti-infective ZOSYN has patent protection until at least 2007. ENBREL (which, under an agreement, is co-promoted by Wyeth and Amgen in the United States and Canada with Wyeth having exclusive international rights to the product) has patent protection until at least 2014. The anti-depressant EFFEXOR and EFFEXOR XR have patent protection until at least 2008 (Refer herein for discussion of Abbreviated New Drug Application ("ANDA") filing being submitted by a generic competitor relating to EFFEXOR XR). PREMPRO, a combination estrogen and progestin product, has patent protection until at least 2015. BENEFIX Coagulation Factor IX (Recombinant), a blood-clotting factor for hemophilia B, has patent protection until at least 2011. REFACTO, a recombinant Factor VIII product without human serum albumin, has patent protection until at least 2010. PREVNAR, the Company's seven-valent pneumococcal conjugate vaccine has patent protection until at least 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 2010, 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: later-expiring patents on processes and intermediates (for example, those related to economical methods of manufacture of the active ingredient of such product), patents relating to the use of products, patents relating to novel compositions and formulations; manufacturing trade secrets; trademark use; and marketing exclusivity that may be available under pharmaceutical regulatory laws. 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 I-5 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. Outside the United States, the standard of intellectual property protection for pharmaceuticals varies widely. While many countries have reasonably strong patent laws, other countries currently provide little or no effective protection for inventions or other intellectual property rights. Under the Trade-Related Aspects of Intellectual Property Agreement ("TRIPs") administered by the World Trade Organization ("WTO"), over 140 countries have now agreed to provide non-discriminatory protection for most pharmaceutical inventions and to assure that adequate and effective rights are available to all patent owners. However, in many countries, this agreement will not become fully effective for many years. It is possible that changes to this agreement will be made in the future that will diminish or further delay its implementation in developing countries. It is too soon to assess how much, if at all, the Company will benefit commercially from these changes. The Drug Price Competition and Patent Term Restoration Act of 1984, commonly known as "Hatch-Waxman," made a complex set of changes to both patent and new-drug-approval laws in the United States. Before Hatch-Waxman, no drug could be approved without providing the U.S. Food and Drug Administration ("FDA") complete safety and efficacy studies, i.e., a complete New Drug Application ("NDA"). Hatch-Waxman authorizes the FDA to approve generic versions of innovative medicines without such information by filing an ANDA. In an ANDA, the generic manufacturer must demonstrate only pharmaceutical equivalence and bioequivalence between the generic version and the NDA-approved drug - not safety and efficacy. Absent a successful patent challenge, the FDA cannot approve an ANDA until after the innovator's patents expire. However, after the innovator has marketed its product for four years, a generic manufacturer may file an ANDA alleging that one or more of the patents listed in the innovator's NDA are invalid or not infringed. This allegation is commonly known as a "Paragraph IV certification." The innovator must then file suit against the generic manufacturer to protect its patents. If one or more of the NDA-listed patents are successfully challenged, the first filer of a Paragraph IV certification may be entitled to a 180-day period of market exclusivity over all other generic manufacturers. In recent years, generic manufacturers have used Paragraph IV certifications extensively to challenge patents on a wide array of innovative pharmaceuticals, and the Company expects this trend to continue. Proposals have been introduced in Congress to amend various aspects of Hatch-Waxman. In general, the proposals appear to be principally designed to encourage more Paragraph IV challenges to innovator patents. The Company cannot predict whether any changes will be made to Hatch-Waxman or what impact they would have on its business. The Company has filed a suit against Teva Pharmaceuticals, USA ("Teva") alleging that the filing of an ANDA by Teva seeking FDA approval to market 37.5 mg, 75 mg and 150 mg Venlafaxine HCl Extended-Release Capsules infringes certain of the Company's patents. Venlafaxine is the generic name for EFFEXOR XR. This matter is more fully described in Item 3. Legal Proceedings, which discussion is incorporated herein by reference. I-6 Aventis Pharma Deutchland ("Aventis") and King Pharmaceuticals, Inc. ("King") have filed suit against Cobalt Pharmaceuticals ("Cobalt"). The complaint relates to allegations that the filing of an ANDA by Cobalt seeking FDA approval to market generic 1.25 mg, 2.5 mg, 5 mg, and 10 mg ramipril capsules infringes an Aventis patent. The Company co-promotes ALTACE (ramipril) together with King. This matter is more fully described in Item 3. Legal Proceedings, which discussion is incorporated herein by reference. Sales in the consumer healthcare 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 a fixed term and can be renewed indefinitely. In the aggregate the value of these trademarks and brand names are important to the Company's operations. Seasonality ----------- Sales of consumer healthcare products are affected by seasonal demand for cough/cold products and, as a result, second quarter results for consumer healthcare products tend to be lower than results in other quarters. 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 competitors within both the global human ethical pharmaceutical and global animal health industries. 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 I-7 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 and/or different progestins than those found in PREMPRO and PREMPHASE, utilizing various forms of delivery and having one or more 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 continues to experience inconsistent results on dissolution testing of certain dosage forms 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 continue to occur. Although these shortages may adversely affect PREMARIN sales in one or more accounting periods, the Company believes that, as a result of current inventory levels and the Company's enhanced process controls, testing protocols and the ongoing formulation improvement project, as well as reduced demand, overall PREMARIN family sales will not be significantly impacted by the dissolution issues. The marketing exclusivity for CORDARONE I.V. ended on October 11, 2002, and, accordingly, sales of CORDARONE I.V. materially decreased due to the subsequent introduction of several generic products, several of which have been approved by the FDA. CORDARONE I.V. had net sales of $265 million during the year ended December 31, 2002. Market demand for ENBREL is strong; however the sales growth had been constrained by limits on the existing source of supply. In December 2002, the retrofitted Rhode Island facility owned by Amgen was completed and manufacturing production was approved by the FDA. Consequently, manufacturing capacity for ENBREL has since increased significantly. Market demand is expected to continue to grow and additional manufacturing supply is projected to be required. In April 2002, Immunex (prior to being I-8 acquired by Amgen) announced it entered into a manufacturing agreement with Genentech, Inc. to produce ENBREL beginning in 2004, subject to FDA approval. The current plan for the longer term includes an additional manufacturing facility, which is being constructed by the Company in Ireland and expansion of the Rhode Island facility, both of which are expected to be completed during 2005. Sales of PREVNAR have been affected by manufacturing related constraints on product availability. The Company is continuing to implement manufacturing improvements and has allocated additional personnel and equipment to increase the production of PREVNAR. Additional manufacturing capacity, principally in fill/finish capacity, will also become available in 2003 and beyond. While the Company's efforts are expected to significantly increase the available supply for the market in 2003; the manufacturing processes for this product are very complex, and there can be no assurance that unanticipated manufacturing-related difficulties will not constrain PREVNAR sales in 2003 or beyond. Refer to "Patents and Trademarks" section, herein for discussion of ANDA filings being submitted by generic competitors relating to EFFEXOR XR and ALTACE. 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 HEALTHCARE SEGMENT The consumer healthcare business has many competitors. Based on net sales, the Company believes it ranks within the top five competitors within the global consumer healthcare 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, growth of generic and store brands, and scientific and technological advances. 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. During 2002, several major collaborative research and I-9 development arrangements were initiated or continued with other pharmaceutical and biotechnology companies. Research and development expenditures totaled approximately $2.080 billion in 2002, $1.870 billion in 2001 and $1.688 billion in 2000 with approximately 95%, 96% and 96% of these expenditures in the pharmaceutical area in 2002, 2001 and 2000, respectively. At December 31, 2002, the Company's significant new product opportunities included 4 New Drug Applications, one preliminary market approval application and one biologics license application filed with the FDA for review, and 61 active Investigational New Drug Applications. Additionally, the Company has filed 9 Supplemental Drug Applications seeking approval for significant new uses of existing products. During 2002, FDA approval was granted for PROTONIX Delayed-Release tablets for the long-term treatment of pathological hypersecretory conditions, including Zollinger-Ellison Syndrome. Also during 2002, the European Commission approved INDUCTOS (rhBMP-2/ACS) (which, under an agreement, is co-developed and promoted by Wyeth and Yamanouchi Europe, B.V.), which consists of a unique recombinant protein that stimulates bone growth to facilitate the healing of long-bone fractures requiring open surgical management. The European Commission also approved ENBREL for the treatment of psoriatic arthritis in December 2002. In February 2003, FDA approval was granted for EFFEXOR XR for the treatment of patients with social anxiety disorder and in March 2003 a new lower dose form of PREMPRO was approved for postmenopausal symptomatic women. Additionally, in December 2002, the FDA approved ALAVERT, the first over-the-counter non-sedating antihistamine competitor to Claritin(R). In November 2002, the Orthopedic and Rehabilitation Panel of the FDA Medical Devices Advisory Committee recommended that the FDA approve rhBMP-2, to be applied to an absorbable collagen sponge ("ACS") to treat open long-bone fractures. In addition, the FDA's Vaccines and Related Biological Products Advisory Committee recommended that the FDA approve FLUMIST to prevent influenza in healthy children, adolescents and adults ages 5 through 49. Regulation ---------- The Company's various health care products are subject to regulation by government agencies throughout the world. The primary emphasis of these regulatory 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, and consumer health care products. 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 I-10 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, and an increasing number of its consumer healthcare 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 countries where the Company does business outside the United States, 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 new or currently marketed drugs, if certain pediatric studies requested by FDA 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 Pharmaceutical division, a related subsidiary and certain 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 I-11 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. 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 7 of the Notes to Consolidated Financial Statements in the Company's 2002 Annual Report to Stockholders and is incorporated herein by reference. Employees --------- At the end of 2002, the Company had 52,762 employees worldwide, with 29,361 employed in the United States including Puerto Rico. Approximately 16% 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 domestic and international operations for each of the three years ended December 31, 2002 is set forth in Note 15 of the Notes to Consolidated Financial Statements in the Company's 2002 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 2002 amounted to 37% of the Company's total worldwide net revenue. I-12 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 Financial Condition and Results of Operations in the Company's 2002 Annual Report to Stockholders and is incorporated herein by reference. Availability of Information --------------------------- The annual report on Form 10-K and all other Company periodic reports (including quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments thereto) are available promptly after filing with the Securities and Exchange Commission on the Company's internet website (www.wyeth.com) without charge. ITEM 2. PROPERTIES ---------- The Company's corporate headquarters and the headquarters of its consumer healthcare 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. Radnor pharmaceutical operations are expected to move to Collegeville in 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, 2002, 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 Healthcare: United States: Charles City, Iowa (M) Fort Dodge, Iowa (M, R) Andover, Massachusetts (M, R) Cambridge, Massachusetts (R) St. Louis, Missouri (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) I-13 Collegeville, Pennsylvania (R) 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) 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 healthcare facilities. The Company has a pharmaceutical manufacturing facility under construction in Grange Castle, Ireland. Further, the Company is working to support larger scale manufacturing in Sanford, North Carolina and Carolina, Puerto Rico. The Company believes that its properties are 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, but preliminary, information provided to the Company on September 12, I-14 1997 by the 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 PONDIMIN (which in combination with phentermine, a product that was not manufactured, distributed or sold by the Company, was commonly referred to as "fen-phen") and REDUX 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 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 until 2018, 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 all but a small percentage of these initial opt outs and continues to work toward resolving those that remain. As originally designed, 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. In March 2003, the Court approved a Sixth Amendment to the settlement agreement, discussed below, which provides certain class members with an additional limited opt out right. On November 23, 1999, United States District Judge Louis C. Bechtle, the judge then 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. On August 28, 2000, Judge Bechtle issued an order approving the settlement. On August 15, 2001, the United States Court of Appeals for 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. I-15 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 million. In April 2002, pursuant to an agreement among the Company, class counsel and representatives of the settlement trust, an additional $45 million (later reduced to $35 million) was added to the security fund, bringing the total amount in the security fund to $405 million. Under the terms of the nationwide class action settlement, the period during which class members could register to receive a screening echocardiogram from the settlement trust ended on August 2, 2002. Those echocardiograms must be completed by July 3, 2003, unless that date is further extended by the court. Class members whose trust-supplied echocardiograms demonstrate FDA-positive levels of heart valve regurgitation (mild or greater aortic valve regurgitation or moderate or greater mitral valve regurgitation) will have 120 days to elect either to remain in the settlement or to withdraw from the settlement and proceed as an intermediate opt out (with specific rights and limitations defined in the settlement). Class members who chose to obtain their own echocardiogram outside of the settlement were required to have completed those echocardiograms by January 3, 2003; the date by which any of those class members whose echocardiograms show FDA-positive levels of regurgitation must make such an election is May 3, 2003. As originally designed, the settlement was comprised of two settlement funds. Fund A (with a present value at the time of settlement of $1 billion) was created to cover refunds, medical screening costs, additional medical services and cash payments, education and research costs, and administration costs. Fund A has been fully funded by contributions by the Company. Fund B (which was to be funded by the Company on an as-needed basis up to a total of $2.55 billion) would compensate claimants with significant heart valve disease according to a settlement matrix. Any funds remaining in Fund A after all Fund A obligations were met are to be added to Fund B to be available to pay Fund B injury claims. In December 2002, following a joint motion by the Company and plaintiffs' counsel, the Court approved an additional amendment to the settlement agreement. This Fifth Amendment to the settlement provided for the merger of Funds A and B into a combined fund which will now cover all expenses and injury claims in connection with the settlement. The effect of the merger is to accelerate the spillover of the expected remainder in Fund A, which will now be available to pay Fund B claims. The merger of the two funds took place in January 2003. In February 2003, as required by the amendment to the settlement agreement merging the two funds, an additional $535.2 million was added to the security fund described above. In March 2003, following another joint motion by the Company and plaintiffs' counsel, the Court approved the Sixth Amendment to the settlement agreement. Under this amendment, any class member who claims a matrix benefit by May 3, 2003 (rendering them ineligible to exercise a back-end opt out) would be permitted to exercise a new "Sixth Amendment Opt Out" right under certain specified conditions. First, the settlement trust must have determined that the claimant qualifies for a matrix benefit which the trust does not have adequate funds to pay. Second, the Company must have elected not to deposit additional funds into the settlement to pay the matrix benefit. I-16 Third, the claimant must exercise this new opt out right within 120 days of being notified that he or she is eligible to do so. This new opt out right has all of the same limitations - including those on punitive, multiple or exemplary damages - as intermediate or back-end opt outs. An additional limitation on the Sixth Amendment Opt Out right is the claimant's agreement to name only Wyeth as a defendant in any ensuing litigation and to be the sole plaintiff in such litigation. The Company recorded an initial litigation charge of $4.75 billion, net of insurance, in connection with the REDUX and PONDIMIN litigation in 1999, and additional charges of $7.5 billion in 2000, $950 million in 2001 and $1.4 billion in 2002. The principal reason for the charge taken in 2002 was that the volume and size of the claims filed in the nationwide settlement were greater than anticipated. The combination of these four 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. On February 7, 2003, a jury in Santa Fe, New Mexico hearing the REDUX lawsuit of Garcia v. Wyeth-Ayerst Laboratories Division of American Home Products Corporation, et al., No. D-0101-CV-2000-1387 (1st Jud. Dist. Ct., Santa Fe Cty.) rendered a verdict in favor of the Company. Plaintiff has indicated that she intends to pursue an appeal. Based upon the information available at this time, the Company believes that its reserves will be adequate to cover the remaining obligations relating to the diet drug litigation. However, in light of the inherent uncertainty in estimating litigation exposure and the fact that substantial additional information will become available in the coming months, it is possible that additional reserves will be required. The Company was also named as a nominal 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, was a shareholder derivative action filed against the Company, certain directors, a former director and officer of the Company, and certain officers which sought 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 contained 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. On August 28, 2001, the New Jersey Superior Court, Chancery Division, granted the defendants' 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. The dismissal without leave to replead was affirmed by the Appellate Division in January 2003. I-17 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. By final judgment dated August 14, 2002, United States District Judge Richard A. Schell granted in part and denied in part the Company's motion for summary judgment in the cases pending before him in the federal multidistrict NORPLANT litigation. In re: Norplant Contraceptive Products Liability Litigation, MDL No. 1038, U.S.D.C., E.D. Tex. Judge Schell concluded that the learned intermediary doctrine barred plaintiffs claims relating to any of 26 "Adverse Reactions" included on the NORPLANT product labeling and that there was insufficient evidence to support plaintiffs' allegations relating to any side effects not among those 26 listed in the labeling. The effect of Judge Schell's ruling was to grant summary judgment against 2,960 plaintiffs in 710 cases (virtually all of the plaintiffs asserting claims in the MDL). Eighteen plaintiffs appealed this judgment to the United States Court of Appeals for the Fifth Circuit. Seventeen of those appellants subsequently dropped their appeals. The appeal is now fully briefed. The Louisiana Court of Appeals for the Fourth Circuit has recently affirmed a lower court's certification of a statewide class of Louisiana NORPLANT users. Davis v. American Home Products Corporation, No. CDC 94-11684, Orleans Parish. The Company plans to appeal that decision to the Louisiana Supreme Court. The Company continues to believe that it has compelling appellate arguments against class certification, which has been denied in all other federal and state cases. The Company continues to defend several individual NORPLANT cases alleging disparate injuries, including complications stemming from the removal of NORPLANT capsules, miscarriage and stroke. On July 9, 2002, interim findings from the Women's Health Initiative ("WHI") study evaluating hormone replacement therapy were released. The estrogen plus progestin arm of the study (in which the Company's PREMPRO product was used as the study drug) was stopped early because of findings of slightly increased risks of breast cancer, stroke and coronary heart disease among the women taking the drug compared to those in the placebo group. The Company is currently defending thirteen class action lawsuits relating to the product: Lewers, et al. v. Wyeth, No. 02C 4970, U.S.D.C., N.D. Ill.; Cyrus, et al. v. Wyeth, No. 03 CV 754, U.S.D.C., S.D.N.Y.; Dooley, et al. v. Wyeth, No. 03-2034 KHV, U.S.D.C., D. Kan.; Krznaric, et al. v. Wyeth, No. EDCV 02-953 VAP SGL, U.S.D.C., C.D. Ga.; Szabo, et al. v. Wyeth, No. SA02-757, U.S.D.C., C.D. Cal.; Favela et al., v. Wyeth, No. 02-5893DT, U.S.D.C., C.D. Cal.; Cook, et al., v. Wyeth, No. 4-02-CV-00529WRW, U.S.D.C., E.D. Ark.; Koenig, et al., v. Wyeth, No. 02-18165 CA 27, U.S.D.C., S.D. Fla.; Gallo, et al. v. Wyeth, No. 02857, Ct. Comm. Pleas, Phil. Cty., PA; Kuhn, et al. v. Wyeth, No. 02C4970, Cir. Ct., Brooke Cty., WV; Paul, et al. v. Wyeth, No. 03-2-17002-0 SEA, Super. Ct., King Cty., WA; Crosby, et al. v. Wyeth, No. 03CH04774, Cir. Ct., Cook Cty., IL; and Albertson, et al., v. Wyeth, No. 002944, Ct. Comm. Pleas, Phil. Cty., PA. Plaintiffs in seven of the cases (Lewers, Cyrus, Dooley, Krznaric, Crosby, Szabo and Favela) each seek to represent a nationwide class of women who have ever ingested PREMPRO. They generally seek similar relief on behalf of the putative class: 1) purchase price refunds; 2) personal injury damages; 3) medical monitoring expenses and 4) an order requiring the Company to inform the public of the reported risks of PREMPRO. The plaintiffs in the Albertson and Gallo cases seek to I-18 represent classes of Pennsylvania women who have ingested the drug and seek purchase price refunds and medical monitoring expenses on their behalf. Plaintiffs in the Cook, Koenig, Paul and Kuhn cases seek similar relief on behalf of putative classes of Arkansas, Florida, Washington and West Virginia users of the product, respectively. In addition to the class actions, the Company is defending approximately 40 individual actions (with a total of approximately 60 named plaintiffs) in various courts for personal injuries including breast cancer, stroke and heart disease. The federal Judicial Panel on Multidistrict Litigation ("JPML") has ordered that all federal PREMPRO cases be transferred for coordinated pretrial proceedings to the United States District Court for the Eastern District of Arkansas, before United States District Judge William R. Wilson, Jr. In the litigation involving DURACT, the Company's non-narcotic analgesic pain reliever which was voluntarily withdrawn from the market in 1998, one putative personal injury class action remains pending. Chimento, et al. v. Wyeth-Ayerst, et al., No. 982488, Dist. Ct., St. Bernard Parish, LA, seeks the certification of a class of Louisiana residents who were exposed to and who suffered injury 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. There are also five individual lawsuits pending involving ten former DURACT users alleging various injuries, including kidney failure, hepatitis, liver transplant and death. 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 ("Sherwood") 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. ("Tyco"), 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 health care 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 dismissed. The Company is being defended and indemnified in each of these cases by Tyco with respect to injuries alleged to have occurred after I-19 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 health care workers who, during the period January 18, 1997 to January 18, 2000, sustained a contaminated needlestick while using one of the defendants' products, reported the incident 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. Plaintiffs have not pursued the matter on remand. The cases pending in Oklahoma and South Carolina remain dormant. No discovery has been undertaken in those matters and no class certification hearing dates have been set. In March 2003, class certification was denied in the Benner case in New York. 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. Effective November 6, 2000, the Company announced that it would no longer ship products containing PPA to its retailers. The Company has since been named as a defendant in approximately 700 lawsuits (on behalf of a total of approximately 2,500 plaintiffs) filed in federal and state courts throughout the United States, as well as one case filed in the Ontario Superior Court of Justice. All federal cases involving PPA claims have 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). Four of the PPA lawsuits are putative class actions. One of the putative class actions (the lawsuit pending in Canada) alleges claims for personal injury and economic loss. McColl, et al. v. Whitehall-Robins Inc., No. 02-CV-239690CF, Ontario Superior Court of Justice. The other three putative class action lawsuits allege misrepresentations regarding the risks involved with products containing PPA and seek disgorgement or restitution of any moneys acquired by means of the alleged misrepresentation, as well as attorneys' fees, on behalf of the putative classes. These cases include: Guinta, et al. v. American Home Products Corporation, No. MID-L-010277-01, Super. Ct., Middlesex Cty., NJ; Horne, et al. v. American Home Products, Inc., et al., No. CV-02-0894, U.S.D.C., W.D. Wash.; and Risti, et al. v Novartis Consumer Health, Inc., et al., No. MID-L-4053-01 Super. Ct., Middlesex Cty., NJ. Class certification has not yet been decided in any of these four cases. In every instance to date in which class certification has been decided in a PPA case (in 14 cases in federal and state courts), certification has been denied. Three of the individual personal injury PPA cases are currently scheduled for trial later in 2003. The Company has been served with approximately 230 lawsuits, ten of which are putative class actions, alleging that the cumulative effect of thimerosal, a preservative used in I-20 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 and relief sought are as follows: Daigle, et al. v. Aventis Pasteur Inc., et al., No. 02-2131F, Super. Ct., Suffolk Cty., MA (statewide class for medical monitoring, a fund for research and compensation for personal injuries); Demos, et al. v. Aventis Pasteur, et al., No. 01-22544CA15, Circ. Ct., Dade Cty., FL (nationwide class for medical monitoring, personal injuries and injunctive relief against future sales); Cyr, et al. v. Aventis Pasteur, Inc., et al., No. 01-C-663, Super. Ct., Hillsborough Cty., NH (statewide class for personal injuries and injunctive relief); King, et al. v. Aventis Pasteur, Inc., et al., No. 01-CV-1305, U.S.D.C., D. Ore. (nationwide class for personal injuries and injunctive relief); Mead, et al. v. Aventis Pasteur, Inc., et al., No. 01-CV-1402, U.S.D.C., D. Ore. (nationwide class for medical monitoring); Garcia, et al., v. Abbott, et al., No. C02-168C, District Court, Western District of Seattle, WA (nationwide class on behalf of all individuals who purchased any childhood vaccine containing thimerosal); Shadie, et al. v. Abbott, et al., No. 3-CV-02-0702, U.S.D.C., M.D., Pa. (nationwide class on behalf of all childhood vaccinated with thimerosal-containing vaccines from 1990 to present); Ashton, et al. v. Aventis Pasteur Inc., et al., Class Action Complaint 004026, Ct. Comm. Pleas, Philadelphia Cty., PA (nationwide class action for medical monitoring, personal injuries and injunctive relief); Wax, et al. v. Abbott, et al., No. CV 02 2018, U.S.D.C., E.D.N.Y. (nationwide class on behalf of all persons residing in the U.S. who were exposed to thimerosal); Castaldi et al. v. Aventis Pasteur Inc., et al., Master Complaint No. 2, Coordination Proceeding, The Vaccine Cases, No. 4246, Super. Ct., Los Angeles Cty., CA (statewide class for medical monitoring). The Company is in the process of filing motions to dismiss in all of the cases for failure of the minor plaintiffs to file in the first instance under the National Vaccine Injury Compensation Program (the "Vaccine Act"). The Vaccine Act mandates that plaintiffs alleging injury from childhood vaccines first bring a claim under the Vaccine Act. At the conclusion of that proceeding, the plaintiff may bring a lawsuit in state or federal court. In July 2002, the United States Court of Federal Claims, which handles all cases brought under the Vaccine Act, issued Autism General Order #1 (the "Order") accepting jurisdiction of the thimerosal matters by establishing an Omnibus Autism Proceeding, which allows petitioners who claim to suffer from autism or autism spectrum disorder as a result of receiving thimerosal-containing childhood vaccines the chance to proceed pursuant to a two-step procedure that will occur over a period of two years. The first step will be an inquiry into the general causation issues involved in the cases; the second step will entail the application of the general causation conclusions to the individual cases. Petitioners claiming injury from thimerosal in childhood vaccines are not required, however, to proceed under the Order and may continue to pursue claims under the Vaccine Act in the normal course, which may allow petitioners to proceed in state or federal court after the expiration of 240 days. In addition to the claims brought by or on behalf of children allegedly injured by exposure to thimerosal, certain of the approximately 230 thimerosal cases have been brought by parents in their individual capacities, for loss of services and loss of I-21 consortium of the injured child. These claims are not currently covered by the Vaccine Act, although every court that has addressed this issue has determined that it is appropriate to stay such claims when there is a related claim pending under the Vaccine Act. To the extent a claim is asserted for loss of consortium that is not linked to a claim filed under the Vaccine Act, it is possible that courts will allow such parental claims to proceed in state or federal court. The Company is unable at the present time to estimate a range of potential exposure, if any, with respect to the NORPLANT, PREMPRO, DURACT, needlestick, PPA, and thimerosal litigations. 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, U.S.D.C., D. Col.). The plaintiffs had accused American Cyanamid Company 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 on 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 1982-1995 from the sale of the reformulated MATERNA product) and to recover approximately $0.8 million of attorneys' fees were 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 conducted an oral hearing on the inventorship issue and, in March 2001, a trial on damages issues was held. The District Court concluded that University of Colorado employees are the sole inventors of the disputed patent. In August 2002, the District Court handed down its final findings of fact and conclusion of law and entered its judgment awarding plaintiffs compensatory damages of $55.7 million plus punitive damages of $1 million. The Company has appealed to the U.S. Court of Appeals for the Federal Circuit, appealing the District Court's earlier holding of liability (i.e., that the University of Colorado employees are the sole inventors of the MATERNA formulation patent) as well as the damage awards. In September 2002, Israel Bio-Engineering Project ("IBEP") filed an action against Amgen, Immunex, the Company and one of the Company's subsidiaries (Israel Bio-Engineering Project v. Amgen, Inc. et al., Docket No.02-6860 RGK, U.S.D.C., C.D.Ca.) alleging infringement of U.S. Patent 5,981,701, by the manufacture, offer for sale, distribution and sale of ENBREL. IBEP is not the assignee of record of this patent, but is alleging ownership. IBEP has requested a jury trial. IBEP seeks an accounting of I-22 damages and of any royalties or license fees paid to a third party and seeks to have the damages trebled on account of alleged willful infringement. IBEP also seeks to require the defendants to take a compulsory non-exclusive license. The matter is in a preliminary stage. The Company intends, and Amgen has advised the Company that it intends, to vigorously defend this litigation. Under its agreement with Amgen for the promotion of ENBREL, the Company has an obligation to pay a portion of the patent litigation expenses related to ENBREL in the U.S. and Canada as well as a portion of any damages or other monetary relief awarded in such patent litigation. On March 24, 2003, the Company filed suit in the United States District Court for the District of New Jersey against Teva Pharmaceuticals, USA (Wyeth v. Teva Pharmaceuticals, USA, Inc., Docket No. 03-CV-1293 (KSH), U.S.D.C., D. N.J.) alleging that the filing of an ANDA by Teva seeking FDA approval to market 37.5 mg, 75 mg and 150 mg Venlafaxine HCl Extended-Release Capsules infringes certain of the Company's patents. Venlafaxine is the generic name for EFFEXOR. The patents involved in the litigation relate to extended release formulations of venlafaxine and/or methods of their use. These patents expire in 2017. Teva has asserted that these patents are invalid and/or not infringed. Under the 30-month stay provision of the Hatch-Waxman Act, any FDA approval of Teva's ANDA cannot be made effective before August 2005 unless the court earlier decides that the patents are invalid or not infringed. Teva has not, to date, made any allegations as to the Company's patent covering the compound, venlafaxine. Accordingly, Teva's ANDA may further not be approved until the expiration of that patent, and its associated pediatric exclusivity period, on June 13, 2008. On March 14, 2003, Aventis Pharma Deutchland and King Pharmaceuticals, Inc. filed a patent infringement suit against Cobalt Pharmaceuticals in the United States District Court for the District of Massachusetts (Aventis Pharma Deutschland GmbH and King Pharmaceuticals, Inc. v. Cobalt Pharmaceuticals Inc., Docket No. 03-10492JLT, U.S.D.C., D. Mass.) alleging that Cobalt infringes an Aventis patent, which expires in October 2008, by filing an ANDA with the FDA seeking approval to market generic 1.25 mg, 2.5 mg, 5 mg and 10 mg ramipril capsules. The Company co-promotes ALTACE (ramipril) together with King Pharmaceuticals, Inc. The patent at issue in this litigation concerns the compound ramipril. Cobalt has alleged that this patent is invalid. Under the 30-month stay provision of the Hatch-Waxman Act, any FDA approval of Cobalt's ANDA cannot be made effective before August 2005, unless the court earlier finds the patent invalid or not infringed. The suit does not concern a second patent, which also covers ramipril, that expires in January 2005. Cobalt has stated that it is not seeking FDA approval until this second patent expires in January 2005. Schering Corporation has appealed to the U.S. Court of Appeals for the Federal Circuit the decision in August 2002 in favor of the Company by the U.S. District Court for the District of New Jersey that claims 1 and 3 of Schering's patent claiming a metabolite of loratadine were invalid. Schering Corp. v. Geneva Pharmaceuticals, Inc., et al., Docket Numbers 02-1545 and 02-1549, U.S.C.A., Fed. Cir. The Company had been sued by Schering for infringing this patent as a result of filing applications with the FDA seeking I-23 to market generic and over-the-counter loratadine products. Oral argument on Schering's appeal is scheduled for April 8, 2003. The Company has been named as a defendant in eight 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., is a putative class action 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 basis for 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. Recently, plaintiffs in the Citizens for Consumer Justice case filed an Amended Consolidated Complaint that does not name Wyeth as a defendant. No claims are therefore currently pending against the Company in this matter. The Company has, however, been named as a defendant in several similar cases, as described below. The federal Judicial Panel on Multidistrict Litigation has ordered that these cases be transferred to the Honorable Patti Saris, U.S.D.J., the judge handling the Citizens for Consumer Justice case. Rice, et al. v. Wyeth, et al., No. CO2-3925 MJJ, U.S.D.C., N.D. Cal.; Virag, et al. v. Wyeth, et al., No. 02-8417 RSWL (VBK), U.S.D.C., N.D. Cal.; and Turner, et al. v. Wyeth, et al., No. 412357, Super. Ct., San Francisco Cty., CA, are all putative class actions on behalf of California patients and third party payers who allegedly have been injured by the defendants' alleged manipulation of the AWPs for their pharmaceutical products. All these cases seek equitable and injunctive relief, including restitution under California's unfair and deceptive practices statute. A similar case, Swanston, et al., v. Abbott Laboratories, Inc., et al., No. CV-03-0062-PHX-SMM, U.S.D.C., D. Ariz., seeks similar relief on behalf of a putative class of Arizona residents. In addition, the Company has been named as a defendant in three lawsuits instituted by state attorneys general claiming injuries on behalf of both the state and its citizens. State of Montana v. Wyeth, et al., No. CV 02-09-H-DWM, U.S.D.C., D. Mont.; State of Nevada v. Wyeth et al., No. CV-N-02-0202, U.S.D.C., D. Nev.; State of California, et al. v. Wyeth, et al., No. BC 287198 A, Super. Ct., Los Angeles Cty., CA. A suit making similar claims has been instituted by Suffolk County, New York: County of Suffolk v. Wyeth, et al., No. CV 03 229, U.S.D.C., E.D.N.Y. With the exception of the State of California case, all of these cases are either now or shortly will be pending in federal court and are in the process of being transferred to the United States District Court for the District of Massachusetts pursuant to order of the JPML. Plaintiffs are resisting the removal of these matters to federal court and the subsequent transfers to the MDL proceedings, so far without success. In September 2000, Duramed Pharmaceuticals, Inc., a manufacturer of a hormone replacement therapy called Cenestin(R) that has since been acquired by Barr Laboratories, Inc., filed a complaint against the Company (Duramed Pharmaceuticals, Inc. v. Wyeth-Ayerst Laboratories, Inc., No.-C-1-00-735, U.S.D.C., S.D. Ohio), alleging that the I-24 Company violated the antitrust laws through the use of exclusive contracts and "disguised" exclusive contracts in the sale of PREMARIN to managed care organizations. The complaint also alleges that the Company attempted to monopolize and monopolized the hormone replacement therapy market in violation of the antitrust laws through the use of such alleged exclusive contracts. The District Court has dismissed allegations that the Company misled the FDA about Cenestin(R) in order to exclude competition to PREMARIN. The Company and Barr Laboratories, Inc. have reached an agreement in principle to enter into a transaction in which, inter alia, Barr will acquire rights to several currently marketed Wyeth products and a sublicense for a compound in development. As part of that agreement in principle, the Company and Barr also agreed to settle the Duramed action. The proposed transaction has cleared the mandatory waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. Based on the parties' agreement in principle to settle the litigation, the Court dismissed the Duramed action with prejudice. The amended dismissal order provides that either party may reopen the action by May 15, 2003 if the settlement is not consummated. Following the filing of the Duramed case, seven putative class action lawsuits were filed on behalf of "end-payors" (defined as the last persons and entities in the chain of distribution) and direct purchasers in federal district courts in Ohio and New Jersey and in California state courts 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. Due to certain consolidations in the Ohio federal district court, four putative class actions are presently pending against the Company. Two putative class actions, one direct purchaser and one indirect purchaser, are pending in Ohio federal district court, and two putative indirect purchaser class actions are pending in California state courts. Plaintiffs' motions for class certification are pending and have yet to be addressed by the courts. 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. The Company has been 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 prices 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.). Cases with similar allegations have been filed in state courts on behalf of purported classes of consumer purchasers. In 2002, the Company settled or was dismissed from all remaining state court cases. Three cases remain pending in federal court against the Company. These cases involve plaintiffs that had 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 the remaining cases. I-25 Plaintiffs have filed numerous lawsuits in federal and state courts alleging civil claims relating to the settlement by the Company of patent infringement litigation with Schering-Plough Corporation concerning a generic version of Schering-Plough's K-Dur potassium chloride product. The Company is aware of approximately forty-five such lawsuits that have been filed against the Company. Forty-one of these lawsuits are currently pending in federal court. Thirty-five of these federal cases have been consolidated as part of federal multidistrict 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 two of these cases, plaintiffs allege to be direct purchasers of K-Dur, or claim to be assignees of direct purchasers of K-Dur. One of these direct-purchaser cases is brought as a purported class action on behalf of direct purchasers of K-Dur nationwide. In forty-one 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 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 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 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 has reached a settlement with direct purchasers representing approximately 23% of direct purchases. The Florida Attorney General's Office has initiated an inquiry into whether the Company's settlement with Schering-Plough violates Florida's antitrust laws. The Company has cooperated with the Attorney General's requests for documents and other information. 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. I-26 In 1999, the Brazilian Administrative Economic Defense Agency ("SDE") and local police authorities initiated investigations of Laboratories Wyeth-Whitehall Ltda. and other pharmaceutical companies concerning possible violation of Brazilian competition laws. SDE alleges that the companies sought to establish uniform commercial policies regarding wholesalers and 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 both to SDE and to police authorities. The police authorities have terminated their investigation, concluding that the companies were not engaged in any illegal action. The SDE investigation is still being carried out. Following a 1999 application from certain drug wholesalers alleging that Wyeth South Africa Pty. Ltd. and certain other pharmaceutical companies violated South Africa's competition law, the Competition Commission in South Africa filed a referral with the Competition Tribunal, which alleges that International Health Distributors ("IHD") has violated South Africa's competition law. IHD, which is a joint venture of eleven pharmaceutical companies (including Wyeth South Africa), provides distribution services for the joint venture members. The Commission's referral alleges that IHD members have engaged in various prohibited practices. Certain wholesalers in South Africa also sued IHD and its members based on similar allegations. Generally, the Commission's referral and the wholesalers' action seek changes in distribution practices, certain structural changes in the joint distribution company, and civil penalties or damages. Wyeth South Africa has reached an agreement to settle the claims alleged by the wholesalers. The Competition Commission's action is still pending. Based on a referral from the United Kingdom Office of Fair Trading, which conducted a year-long inquiry, the UK Competition Commission is investigating the pricing and distribution practices of Fort Dodge Animal Health and other animal health suppliers in the UK. The inquiry is focusing on the rebate practices of animal health suppliers, the price differential between certain animal health products sold in the UK as opposed to other European countries and the industry practice of selling to wholesalers but not directly to pharmacists or veterinarians. The inquiry also is examining transfer pricing for animal health products. The Commission has the authority to order changes in business practices. The Company expects issuance of the Competition Commission's final report in the near future. The Antitrust Division of the United States Department of Justice has impaneled a grand jury and has issued a subpoena to the Company in connection with its investigation into allegations of collusive activities with another pharmaceutical company. These allegations relate to commission rates paid to a broker for a small segment of the over-the-counter drug business, principally sales to off-shore oil rigs, during 2001 and 2002. The Company is cooperating with the Antitrust Division and believes that its activities regarding brokers have not violated the antitrust laws. I-27 The Securities and Exchange Commission ("SEC") is conducting an investigation into allegations raised by a former employee of the Company in a lawsuit claiming retaliation and constructive discharge. These allegations relate, among other things, to certain compensation-related tax issues in several foreign jurisdictions. The Company is cooperating fully with the SEC and believes that these mattters will not result in material liability to the Company. The Federal Trade Commission is conducting a preliminary investigation into licensing agreements involving other pharmaceutical companies and the Company relating to the research, manufacture and sale of Recombinant Factor VIII products. The Company is cooperating with the Commission and believes that its agreements concerning its Recombinant Factor VIII products do not violate the antitrust laws. As discussed in Item 1., 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 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. 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 Company's Wyeth Medica Ireland ("WMI") subsidiary has received a summons filed in the Irish High Court in Dublin by Schuurmans & Van Ginneken ("SvG"), a Netherlands-based molasses and liquid storage concern. The summons puts WMI on notice that SvG intends to file a formal complaint with the High Court alleging, inter alia, that WMI conspired with its waste disposal contractors to improperly dispose of a sugar water process stream that contained medroxyprogesterone acetate ("MPA"). SvG purchased sugar recovered from that process stream for use in its molasses refining operations. SvG has indicated that it seeks compensation for the contamination and disposal of up to 26,000 tons of molasses allegedly contaminated with MPA. SvG further seeks compensation on behalf of an unspecified number of its animal feed customers who are alleged to have used contaminated molasses in their livestock feed formulations. The summons does not specify the amount of damages sought. On July 26, 2002, a Brazilian Federal Public Attorney filed a public civil action against the Federal Government of Brazil, Laboratorios Wyeth-Whitehall Ltda. ("LWWL"), a Brazilian subsidiary of the Company, and Colgate Palmolive Company, as represented by its Brazilian subsidiary, Kolynos do Brasil Ltda. ("Kolynos"), seeking to nullify and overturn the April 11, 2000 decision by the Brazilian First Board of Tax Appeals which had found that the capital gain of LWWL from its divestiture of its oral healthcare business was not taxable in Brazil. The action seeks to hold LWWL jointly and severally liable with Kolynos and the Brazilian Federal Government. The amount of taxes originally attributable to the transaction was approximately $80 million. Management believes that this action is without merit. I-28 On January 10, 2003, the U.S. Court of Appeals for the District of Columbia Circuit reversed a decision of the District Court holding that the Company was entitled to refunds with respect to taxes paid in the amount of approximately $227 million and interest thereon (approximately $155 million) with respect to losses claimed as a deduction for federal income tax purposes arising from a partnership investment in Boca Investerings Partnership (Boca Investerings Partnership v. U.S., Docket No. 01-5429, 314 F. 3rd 625, D.C. Cir. 2003). On March 26, 2003, the Company's Petition for Panel Rehearing and Rehearing En Banc to the U.S. Court of Appeals for the District of Columbia Circuit were denied and remanded to the District Court for additional proceedings consistent with the U.S. Court of Appeals' opinion. The Company is considering a writ for certiorari to the U.S. Supreme Court. 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-29 EXECUTIVE OFFICERS OF THE REGISTRANT AS OF MARCH 15, 2003 - --------------------------------------------------------- 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 ---- --- --------------------- ------ Robert Essner 55 Chairman of the Board, President May 2001 and Chief Executive 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 December 2002, President and Chief Executive Officer January 2003 to date, Chairman of the Board, President and Chief Executive Officer Louis L. Hoynes, Jr. 67 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 I-30 Elected to Name Age Offices and Positions Office ---- --- --------------------- ------ Kenneth J. Martin 49 Executive Vice President and February 2000 Chief 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 International 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 June 2002, Senior Vice President and Chief Financial Officer June 2002 to date, Executive Vice President and Chief Financial Officer Bernard J. Poussot 51 Executive Vice President and January 2001 President, Wyeth Pharmaceuticals Member of Management, Law/Regulatory Review, Operations and Human Resources and Benefits Committees Business Experience: January 1996 to September 1997, President, Wyeth-Ayerst International September 1997 to January 2001, President, Wyeth-Ayerst Pharmaceuticals January 2001 to June 2002, Senior Vice President and President, Wyeth Pharmaceuticals June 2002 to date, Executive Vice President and President, Wyeth Pharmaceuticals I-31 Elected to Name Age Offices and Positions Office ---- --- --------------------- ------ Lawrence V. Stein 53 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 57 Vice President and Comptroller April 1995 Member of Law/Regulatory Review and Operations Committees Business Experience: April 1995 to date, Vice President and Comptroller Rene R. Lewin 56 Vice President - Human Resources May 1994 Member of Management, Law/Regulatory Review, Operations, Human Resources and Benefits and Retirement Committees Business Experience: May 1994 to date, Vice President - Human Resources I-32 Elected to Name Age Offices and Positions Office ---- --- --------------------- ------ Marily H. Rhudy 55 Vice President - Public Affairs September 1997 Member of Management and Operations Committees Business Experience: 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 55 President, Fort Dodge Animal September 1995 Health Division Member of Management, Operations and Human Resources and Benefits Committees Business Experience: September 1995 to date, President, Fort Dodge Animal Health Division Ulf Wiinberg 44 President, Wyeth Consumer February 2002 Healthcare 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 I-33 Elected to Name Age Offices and Positions Office ---- --- --------------------- ------ Joseph M. Mahady 49 Senior Vice President and September 1997 President, Wyeth Pharmaceuticals - North America Member of Management and Operations Committees Business Experience: September 1997 to June 2002, President, Wyeth Pharmaceuticals - North America June 2002 to date, Senior Vice President and President, Wyeth Pharmaceuticals - North America Robert R. Ruffolo, Jr. 52 Senior Vice President and June 2002 President, Wyeth Research Member of Management, Law/Regulatory Review, Operations and Human Resources and Benefits Committees Business Experience: To November 2000, Senior Vice President and Director, Biological Sciences, SmithKline Beecham November 2000 to June 2002, Executive Vice President, Pharmaceutical Research and Development, Wyeth Research June 2002 to date, Senior Vice President and President, Wyeth Research Robert N. Power 46 President, Wyeth Pharmaceuticals - June 2002 International Member of Management and Operations Committees Business Experience: March 1998 to June 2002, President, Wyeth Pharmaceuticals - Europe/Middle East/Africa June 2002 to date, President, Wyeth Pharmaceuticals - International I-34 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 54 of the Company's 2002 Annual Report to Stockholders, are incorporated herein by reference. There were 61,111 holders of record of the Company's Common Stock as of the close of business on March 3, 2003. 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 26 and 27 of the Company's 2002 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 55 through 68 of the Company's 2002 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 page 65 of the Company's 2002 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 28 through 51 of the Company's 2002 Annual Report to Stockholders, the Reports of Independent Accountants on page 52, and Quarterly Financial Data (Unaudited) on page 54, are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ------------------------------------------------ ACCOUNTING AND FINANCIAL DISCLOSURE ----------------------------------- None. II-1 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 3 through 5 of a definitive proxy statement filed with the Securities and Exchange Commission on March 18, 2003 ("the 2003 Proxy Statement"). (b) Information relating to the Company's executive officers as of March 15, 2003 is furnished in Part I hereof under a separate unnumbered caption ("Executive Officers of the Registrant as of March 15, 2003"). (c) Information relating to certain filing obligations of directors and executive officers of the Company under the federal securities laws set forth on page 9 of the 2003 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 11 through 22 (excluding the performance graph on page 19 and the Equity Compensation Plan Information included on page 20) of the 2003 Proxy Statement. Information with respect to compensation of directors is incorporated herein by reference to pages 6 and 7 of the 2003 Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND --------------------------------------------------- MANAGEMENT ---------- Information relating to security ownership is incorporated herein by reference to pages 10 and 11 of the 2003 Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ---------------------------------------------- None. ITEM 14. CONTROLS AND PROCEDURES ----------------------- Within the 90 days prior to the date of filing this annual report on Form 10-K, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are reasonably effective in design and practice to alert them, in a timely manner, to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company's periodic SEC filings. Subsequent to the date of that evaluation, there have III-1 been no significant changes in the Company's internal controls or in other factors that could significantly affect internal controls, nor were any corrective actions required with regard to significant deficiencies or material weaknesses. III-2 PART IV ------- ITEM 15. 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 Reports of Independent Accountants, included on pages 28 through 52 of the Company's 2002 Annual Report to Stockholders, are incorporated herein by reference. Pages ----- Consolidated Balance Sheets as of December 31, 2002 and 2001 28 Consolidated Statements of Operations for the years ended December 31, 2002, 2001 and 2000 29 Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2002, 2001 and 2000 30 Consolidated Statements of Cash Flows for the years ended December 31, 2002, 2001 and 2000 31 Notes to Consolidated Financial Statements 32-51 Reports of Independent Accountants 52 (a)2. Financial Statement Schedule ---------------------------- The following consolidated financial information is included in Part IV of this report: Pages ----- Reports of Independent Accountants on Supplemental Schedule IV-10 Schedule II - Valuation and Qualifying Accounts for the years ended December 31, 2002, 2001 and 2000 IV-11 Schedules other than those listed above are omitted because they are not applicable. IV-1 ITEM 15. (Continued) (a)3. Exhibits -------- Exhibit No. Description ----------- ----------- (2.1) Amended and Restated Agreement and Plan of Merger, dated as of December 16, 2001, by and among Amgen, AMS Acquisition Inc. and Immunex (filed as Annex A to Amendment No. 1 to Amgen's Registration Statement on Form S-4 (File No. 333-81832) on March 22, 2002 and incorporated by reference to Exhibit 2.1 of the Company's Form 10-Q for the quarter ended June 30, 2002). (2.2) First Amendment to Amended and Restated Agreement and Plan of Merger dated as of July 15, 2002, by and among Amgen, AMS Acquisition Inc. and Immunex (filed as Exhibit 2.2 to Post-Effective Amendment No. 1 to Amgen's Registration Statement on Form S-4 (file No. 333-81832) on July 15, 2002 and incorporated by reference to Exhibit 2.2 of the Company's Form 10-Q for the quarter ended June 30, 2002). (3.1) The Company's Restated Certificate of Incorporation is incorporated by reference to Exhibit 3.1 of the Company's Annual Report on Form 10-K for the year ended December 31, 2001. (3.2) The Company's By-Laws is incorporated by reference to Exhibit 3.2 of the Company's Annual Report on Form 10-K for the year ended December 31, 2001. (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 Quarterly Report on Form 10-Q for the quarter ended September 30, 1992 (File 1-1225). (4.3) Second Supplemental Indenture, dated as of March 30, 2001, between the Company 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. (4.4) Third Supplemental Indenture, dated as of February 14, 2003, between the Company and JPMorgan Chase Bank (as successor to Manufacturers Hanover Trust Company). (4.5) 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. IV-2 (4.6) 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) 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. (10.4) 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 is incorporated by reference to Exhibit 10.5 of the Company's Annual Report on Form 10-K for the year ended December 31, 2001. (Confidential Treatment Requested - confidential portions have been omitted and filed separately with the Commission). (10.5) 3-Year Credit Agreement, dated as of March 3, 2003 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. (10.6) 364 Day Credit Agreement, dated as of March 3, 2003 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. (10.7) Stockholders' Rights Agreement, dated as of December 16, 2001, by and among Amgen, the Company, MDP Holdings, Inc. and Lederle Parenterals, Inc. (filed as Annex C to Amendment No. 1 to Amgen's Registration Statement on Form S-4 (File No. 333-81832) on March 22, 2002 and incorporated by reference to Exhibit 10.1 of the Company's Form 10-Q for the quarter ended June 30, 2002). (10.8) Shareholder Voting Agreement, dated as of December 16, 2001, among Amgen Inc., Wyeth (formerly American Home Products Corporation), MDP Holdings, Inc. and Lederle Parenterals, Inc. (incorporated by reference to Exhibit 2.2 of Immunex's Current Report on Form 8-K filed December 17, 2001). IV-3 (10.9)* 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). (10.10)* Amendment to the 1990 Stock Incentive Plan is incorporated by reference to Exhibit 10.13 of the Company's Annual Report on Form 10-K for the year ended December 31, 1995 (File 1-1225). (10.11)* Amendment to the 1990 Stock Incentive Plan is incorporated by reference to Exhibit 10.21 of the Company's Annual Report on Form 10-K for the year ended December 31, 1996 (File 1-1225). (10.12)* Amendment to the 1990 Stock Incentive Plan is incorporated by reference to Exhibit 10.19 of the Company's Annual Report on Form 10-K for the year ended December 31, 2001. (10.13)* 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. (10.14)* Amendment to the 1993 Stock Incentive Plan is incorporated by reference to Exhibit 10.21 of the Company's Annual Report on Form 10-K for the year ended December 31, 2001. (10.15)* 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. (10.16)* Amendment to the 1996 Stock Incentive Plan is incorporated by reference to Exhibit 10.23 of the Company's Annual Report on Form 10-K for the year ended December 31, 2001. (10.17)* 1999 Stock Incentive Plan is incorporated by reference to Appendix I of the Company's definitive Proxy Statement filed March 18, 1999. (10.18)* Amendment to 1999 Stock Incentive Plan is incorporated by reference to Exhibit 10.25 of the Company's Annual Report on Form 10-K for the year ended December 31, 2001. (10.19)* Form of Stock Option Agreement (phased vesting). (10.20)* Form of Special Stock Option Agreement (three-year vesting) is incorporated by reference to Exhibit 10.28 of the Company's Annual Report on Form 10-K for the year ended December 31, 1995 (File 1-1225). (10.21)* Amendment to Special Stock Option Agreement is incorporated by reference to Exhibit 10.30 of the Company's Annual Report on Form 10-K for the year ended December 31, 1996 (File 1-1225). (10.22)* Form of Stock Option Agreement (transferable options). *Denotes management contract or compensatory plan or arrangement required to be filed as an exhibit hereto. IV-4 (10.23)* Form of Restricted Stock Performance Award Agreement under the 1996 Stock Incentive Plan, 1999 Stock Incentive Plan and 2002 Stock Incentive Plan (initial award). (10.24)* Form of Restricted Stock Performance Award Agreement under the 1996 Stock Incentive Plan, 1999 Stock Incentive Plan and 2002 Stock Incentive Plan (subsequent award). (10.25)* Form of Special Stock Option Agreement with Robert Essner dated June 21, 2001 (transferable option). (10.26)* Form of Restricted Stock Award Agreement with Robert Essner dated June 21, 2001 (cliff vesting). (10.27)* Form of Restricted Stock Award Agreement with Robert Ruffolo dated January 23, 2001 (phased vesting). (10.28)* Restricted Stock Trust Agreement under the 1993 Stock Incentive Plan is incorporated by reference to Exhibit 10.23 of the Company's Annual Report on Form 10-K for the year ended December 31, 1995 (File 1-1225). (10.29)* Management Incentive Plan, as amended to date is incorporated by reference to Exhibit 10.27 of the Company's Annual Report on Form 10-K for the year ended December 31, 1999. (10.30)* 1994 Restricted Stock Plan for Non-Employee Directors, as amended to date, is incorporated by reference to Exhibit 10.3 of the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001. (10.31)* Stock Option Plan for Non-Employee Directors is incorporated by reference to Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001. (10.32)* 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 Annual Report on Form 10-K for the year ended December 31, 1999. (10.33)* Savings Plan, as amended, is incorporated by reference to Exhibit 10.37 of the Company's Annual Report on Form 10-K for the year ended December 31, 2001. (10.34)* Retirement Plan for Outside Directors, as amended on January 27, 1994, is incorporated by reference to Exhibit 10.12 of the Company's Annual Report on Form 10-K for the year ended December 31, 1993 (File 1-1225). (10.35)* Directors' Deferral Plan as amended to date. *Denotes management contract or compensatory plan or arrangement required to be filed as an exhibit hereto. IV-5 (10.36)* Executive Incentive Plan is incorporated by reference to Appendix D of the Company's definitive Proxy Statement, filed March 20, 2002. (10.37)* Deferred Compensation Plan is incorporated by reference to Exhibit 10 of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2002. (10.38)* Executive Retirement Plan is incorporated by reference to Exhibit 10.5 of the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002. (10.39)* Supplemental Employee Savings Plan is incorporated by reference to Exhibit 10.43 of the Company's Annual Report on Form 10-K for the year ended December 31, 2001. (10.40)* Supplemental Executive Retirement Plan is incorporated by reference to Exhibit 10.6 of the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002. (10.41)* 2002 Stock Incentive Plan is incorporated by reference to Appendix C of the Company's definitive Proxy Statement, filed March 20, 2002. (10.42)* American Cyanamid Company's Supplemental Executive Retirement Plan is incorporated by reference to Exhibit 10K of American Cyanamid Company's Annual Report on Form 10-K for the year ended December 31, 1988 (File 1-3426). (10.43)* 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 Annual Report on Form 10-K for the year ended December 31, 1989 (File 1-3426). (10.44)* American Cyanamid Company's ERISA Excess Retirement Plan is incorporated by reference to Exhibit 10N of American Cyanamid Company's Annual Report on Form 10-K for the year ended December 31, 1988 (File 1-3426). (10.45)* 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 Annual Report on Form 10-K for the year ended December 31, 1989 (File 1-3426). (10.46)* Form of Severance Agreement entered into between the Company and all executive officers is incorporated by reference to Exhibit 10.43 of the Company's Annual Report on Form 10-K for the year ended December 31, 1997 (File 1-1225). *Denotes management contract or compensatory plan or arrangement required to be filed as an exhibit hereto. IV-6 (10.47)* Agreement, dated as of March 6, 2001, by and between the Company and John R. Stafford is incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001. (10.48)* Amendatory Agreement, dated as of March 6, 2001, by and between the Company and John R. Stafford is incorporated by reference to Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001. (10.49)* Union Savings Plan is incorporated by reference to Exhibit 10.54 of the Company's Annual Report on Form 10-K for the year ended December 31, 2001. (10.50)* Equity Loan Agreement and Promissory Noted, dated April 9, 2002, between the Company and Ulf Wiinberg. (12) Computation of Ratio of Earnings to Fixed Charges. (13) 2002 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 by reference to Exhibit to the Company's Current Report on Form 8-K, dated March 18, 2002. (21) Subsidiaries of the Company. (23) Consent of Independent Public Accountants, PricewaterhouseCoopers LLP, relating to their report dated January 27, 2003, except for Note 16 which is as of March 3, 2003, 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, 333-59668, 333-89318, 333-98619 and 333-98623) by reference to the Form 10-K of the Company filed for the year ended December 31, 2002. (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) is incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2001. (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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2000. *Denotes management contract or compensatory plan or arrangement required to be filed as an exhibit hereto. IV-7 (99.3) Fifth Amendment, dated November 21, 2002, to Final Nationwide Class Action Settlement Agreement, dated November 18, 1999, as amended. (99.4) Sixth Amendment, dated January 10, 2003, to Final Nationwide Class Action Settlement Agreement, dated November 18, 1999, as amended. (99.5) Consent Decree, dated October 3, 2000, is incorporated by reference to Exhibit 99.2 of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000. (99.6) Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 is incorporated by reference to Exhibit 99.1 of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2002. (99.7) Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 is incorporated by reference to Exhibit 99.2 of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2002. (99.8) Statement Under Oath made by Robert Essner, dated August 8, 2002, pursuant to the Securities and Exchange Commission Order Requiring the Filing of Sworn Statements pursuant to Section 21 (a)(1) of the Securities Exchange Act of 1934 (SEC File No. 4-460) incorporated by reference to Exhibit 99.1 of the Company's Current Report on Form 8-K, dated August 8, 2002. (99.9) Statement Under Oath made by Kenneth J. Martin, dated August 8, 2002, pursuant to the Securities and Exchange Commission Order Requiring the Filing of Sworn Statements pursuant to Section 21 (a)(1) of the Securities Exchange Act of 1934 (SEC File No. 4-460) incorporated by reference to Exhibit 99.2 of the Company's Current Report on Form 8-K, dated August 8, 2002. (99.10) Press Release reporting Wyeth's earnings results for the 2002 Fourth Quarter and Full Year is incorporated by reference to Exhibit 99 of the Company's Current Report on Form 8-K dated January 28, 2003. (99.11) Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 is incorporated by reference to Exhibit 99.4 of the Company's Amendment to Form 10-K Annual Report for the year ended December 31, 2001 on Form 10-K/A, dated December 23, 2002. (99.12) Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 is incorporated by reference to Exhibit 99.5 of the Company's Amendment to Form 10-K Annual Report for the year ended December 31, 2001 on Form 10-K/A, dated December 23, 2002. (99.13) Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (99.14) Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. IV-8 (99.15) Amended and Restated Promotion Agreement, dated as of December 16, 2001, by and between Immunex, the Company and Amgen Inc. (filed as Exhibit 10.1 to Amgen's Registration Statement on Form S-4 (File No. 333-81832) on January 31, 2002 and incorporated by reference to Exhibit 99.2 of the company's Current report on form 8-K, dated July 29, 2002). (b) Reports on Form 8-K ------------------- The following Current Reports on Form 8-K or Form 8-K/A were filed by the Company: o December 12, 2002 relating to the exchange of Immunex shares for Amgen common stock in the acquisition of Immunex by Amgen and the subsequent sales of a portion of the Company's Amgen common stock holdings (including disclosure on Item 2). o December 23, 2002 to amend the March 13, 2002 current report on Form 8-K to delete Item 5 and replace it with Item 9. o January 28, 2003 relating to the exchange of Immunex shares for Amgen common stock in the acquisition of Immunex by Amgen and the subsequent sales of the Company's remaining Amgen common stock holdings (including disclosure on Item 2). o January 28, 2003 to file the Company's 2002 Fourth Quarter and Full Year Press Release. o March 13, 2003 relating to furnishing Wyeth's 2002 Annual Report to Stockholders. IV-9 REPORTS OF INDEPENDENT ACCOUNTANTS ---------------------------------- To the Board of Directors of Wyeth: Our audit of the consolidated financial statements referred to in our report dated January 27, 2003, except for Note 16 which is as of March 3, 2003, included in Wyeth's Annual Report to Stockholders incorporated by reference in the Form 10-K also included an audit of the financial statement schedule listed in Item 15(a)2 of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. The 2000 financial statement schedule information of the Company was audited by other independent accountants who have ceased operations. Those independent accountants expressed an unqualified opinion on that financial statement schedule information in their report dated January 24, 2002. PricewaterhouseCoopers LLP Florham Park, NJ January 27, 2003 The following is a copy of a report issued by Arthur Andersen LLP and included in the 2001 Form 10-K report filed on March 29, 2002. This report has not been reissued by Arthur Andersen LLP and Arthur Andersen LLP has not consented to its use in this Annual Report on Form 10-K. 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) 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-10 Wyeth and Subsidiaries Schedule II - Valuation and Qualifying Accounts For the Years Ended December 31, 2002, 2001 and 2000 (Dollars in thousands)
Column A Column B Column C Column C Column D Column E (1) (2) Balance at Additions- Balance Beginning Charged to at end of Description of Period Expense Adjustments(A) Deductions Period - ------------------------------------ ---------- ---------- ----------- ---------- --------- Year ended 12/31/02: - ------------------------------------ Allowance for doubtful accounts $ 99,300 $ 5,969 $ - $ 1,354 $ 103,915 Allowance for cash discounts 31,434 219,354 - 222,361 28,427 ---------- ---------- ----------- ---------- --------- Total accounts receivable allowances $ 130,734 $ 225,323 $ - $ 223,715 $ 132,342 ========== ========== =========== ========== ========= Allowance for deferred tax asssets $ 49,582 $ - $ - $ 945 $ 48,637 ========== ========== =========== ========== ========= 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 asssets $ 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 asssets $ 151,409 $ 74 $ (100,330) $ - $ 51,153 ========== ========== =========== ========== ========= (A) Represents adjustments 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.
IV-11 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 31, 2003 By /S/ Kenneth J. Martin --------------------------------------- Kenneth J. Martin Executive 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 Officer: /S/ Robert Essner Chairman of the Board, March 31, 2003 - --------------------------------- President and Robert Essner Chief Executive Officer Principal Financial Officer: /S/ Kenneth J. Martin Executive Vice President March 31, 2003 - --------------------------------- and Chief Financial Officer Kenneth J. Martin Principal Accounting Officer: /S/ Paul J. Jones Vice President and March 31, 2003 - --------------------------------- Comptroller Paul J. Jones Directors: /S/ Clifford L. Alexander, Jr. Director March 31, 2003 - --------------------------------- Clifford L. Alexander, Jr. /S/ Frank A. Bennack, Jr. Director March 31, 2003 - --------------------------------- Frank A. Bennack, Jr. /S/ Richard L. Carrion Director March 31, 2003 - --------------------------------- Richard L. Carrion /S/ John D. Feerick Director March 31, 2003 - --------------------------------- John D. Feerick /S/ John P. Mascotte Director March 31, 2003 - --------------------------------- John P. Mascotte IV-12 /S/ Mary Lake Polan, M.D., Ph.D., M.P.H. Director March 31, 2003 - --------------------------------- Mary Lake Polan, M.D., Ph.D., M.P.H. /S/ Ivan G. Seidenberg Director March 31, 2003 - --------------------------------- Ivan G. Seidenberg /S/ Walter V. Shipley Director March 31, 2003 - --------------------------------- Walter V. Shipley /S/ John R. Torell III Director March 31, 2003 - --------------------------------- John R. Torell III IV-13 Certifications -------------- I, Robert Essner, certify that: 1. I have reviewed this annual report on Form 10-K of Wyeth (the registrant); 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. By /s/ Robert Essner -------------------------------- Robert Essner Chairman, President and Chief Executive Officer Date: March 31, 2003 Certifications -------------- I, Kenneth J. Martin, certify that: 1. I have reviewed this annual report on Form 10-K of Wyeth (the registrant); 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. By /s/ Kenneth J. Martin ----------------------------------- Kenneth J. Martin Executive Vice President and Chief Financial Officer Date: March 31, 2003 INDEX TO EXHIBITS ----------------- Exhibit No. Description ----------- ----------- (4.4) Third Supplemental Indenture, dated as of February 14, 2003, between the Company and JPMorgan Chase Bank (as successor to Manufacturers Hanover Trust Company). (10.5) 3-Year Credit Agreement, dated as of March 3, 2003 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. (10.6) 364 Day Credit Agreement, dated as of March 3, 2003 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)* Form of Stock Option Agreement (phased vesting). (10.22)* Form of Stock Option Agreement (transferable options). (10.23)* Form of Restricted Stock Performance Award Agreement under the 1996 Stock Incentive Plan, 1999 Stock Incentive Plan and 2002 Stock Incentive Plan (initial award). (10.24)* Form of Restricted Stock Performance Award Agreement under the 1996 Stock Incentive Plan, 1999 Stock Incentive Plan and 2002 Stock Incentive Plan (subsequent award). (10.25)* Form of Special Stock Option Agreement with Robert Essner dated June 21, 2001 (transferable option). (10.26)* Form of Restricted Stock Award Agreement with Robert Essner dated June 21, 2001 (cliff vesting). (10.27)* Form of Restricted Stock Award Agreement with Robert Ruffolo dated January 23, 2001 (phased vesting). (10.35)* Directors' Deferral Plan as amended to date. (10.50)* Equity Loan Agreement and Promissory Note, dated April 9, 2002, between the Company and Ulf Wiinberg. (12) Computation of Ratio of Earnings to Fixed Charges. (13) 2002 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. *Denotes management contract or compensatory plan or arrangement required to be filed as an exhibit hereto. (21) Subsidiaries of the Company. (23) Consent of Independent Public Accountants, PricewaterhouseCoopers LLP, relating to their report dated January 27, 2003, except for Note 16 which is as of March 3, 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, 333-59668, 333-89318, 333-98619 and 333-98623) by reference to the Form 10-K of the Company filed for the year ended December 31, 2002. (99) Cautionary Statements regarding "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995. (99.3) Fifth Amendment, dated November 21, 2002, to Final Nationwide Class Action Settlement Agreement, dated November 18, 1999, as amended. (99.4) Sixth Amendment, dated January 10, 2003, to Final Nationwide Class Action Settlement Agreement, dated November 18, 1999, as amended. (99.13) Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (99.14) Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. EX-4.4 3 indent3.txt THIRD SUPPLEMENTAL INDENTURE THIRD SUPPLEMENTAL INDENTURE, dated as of February 14, 2003 (this "Third Supplemental Indenture"), between WYETH, a Delaware corporation (formerly known as American Home Products Corporation) (the "Issuer") and JPMORGAN CHASE BANK (as successor to THE CHASE MANHATTAN BANK), a corporation duly organized and existing under the laws of the State of New York, as trustee (the "Trustee"). W I T N E S S E T H WHEREAS, the Issuer and the Trustee have duly executed and delivered an Indenture, dated as of April 10, 1992 (as amended on October 13, 1992, the "Indenture"), providing for the authentication, issuance, delivery and administration of unsecured debentures, notes or other evidences of indebtedness to be issued in one or more series by the Issuer (the "Securities"); WHEREAS, pursuant to the terms of the Indenture, the Issuer desires to provide for the establishment of new series of Securities (the "Notes") to be issued under the Indenture in an aggregate principal amount of up to $1,800,000,000, which may be authenticated and delivered as provided in the Indenture; WHEREAS, the Issuer desires to amend the provisions of the Indenture to issue the Notes under the terms of the Indenture as supplemented hereby; WHEREAS, Section 8.1 of the Indenture expressly permits the Issuer and the Trustee to enter into one or more supplemental indentures for the purposes, inter alia, of establishing the forms and terms of Securities to be issued under the Indenture or making certain provisions in the Indenture which the Issuer deems necessary or desirable, and permits the execution of such supplemental indentures without the consent of the Holders of any Securities then outstanding; WHEREAS, for the purposes hereinabove recited, and pursuant to due corporate action, the Issuer has duly determined to execute and deliver to the Trustee this Third Supplemental Indenture; and WHEREAS, all conditions and requirements necessary to make this Third Supplemental Indenture a valid, legal and binding instrument in accordance with its terms have been done and performed, and the execution and delivery hereof have been in all respects duly authorized; NOW, THEREFORE, in consideration of the premises, the Issuer and the Trustee mutually covenant and agree as follows: SECTION 1. DEFINITIONS. 1.1 All terms contained in this Third Supplemental Indenture shall, except as specifically provided herein or except as the context may otherwise require, have the meanings given to such terms in the Indenture. 1.2 Unless the context otherwise requires, the following terms shall have the following meanings: "Depositary" means The Depository Trust Company or any other depositary from time to time specified pursuant to the Indenture. "Global Note Legend" means the legend set forth in Exhibit A hereto which is required to be placed on all Global Notes issued under this Third Supplemental Indenture. "Global Notes" mean Notes constituting Registered Global Securities substantially in the form of Exhibit A hereto and bearing the Global Note Legend. "Registrar" means the registrar specified from time to time pursuant to Section 3.2 of the Indenture. "Securities Act" means the Securities Act of 1933, as amended. SECTION 2. TERMS AND CONDITIONS OF THE SECURITIES. There is hereby authorized the following series of Notes: 2.1 4.125% Notes due 2008. (a) A new series of senior unsecured notes is hereby authorized and designated as the "4.125% Notes due 2008". (b) The 4.125% Notes due 2008 shall be limited in aggregate principal amount to $300,000,000 and, subject to adjustment as described in the form of Note attached hereto as Exhibit A, shall bear interest at a rate of 4.125% per annum, shall mature on March 1, 2008 and shall be subject to optional redemption at any time by the Issuer pursuant to the terms set forth in the form of Note with respect thereto. 2.2 5.250% Notes due 2013. (a) A new series of senior unsecured notes is hereby authorized and designated as the "5.250 % Notes due 2013". (b) The 5.250% Notes due 2013 shall be limited in aggregate principal amount to $1,500,000,000 and, subject to adjustment as described in the form of Note attached hereto as Exhibit A, shall bear interest at a rate of 5.250% per annum, shall mature on March 15, 2013 and shall be subject to optional redemption at any time by the Issuer pursuant to the terms set forth in the form of Note with respect thereto. 2.3 Issuance of Additional Securities. The Issuer shall be permitted to amend this Third Supplemental Indenture in order to increase the aggregate principal amount of Notes of any series that may be issued hereunder without the consent of the Holders of Notes of any series so affected. 2.4 Form of Global Notes. The Notes shall be issued in the form of Global Notes (including the Global Note Legend thereon and the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced to reflect any redemptions. Any endorsement of a Global Note to reflect the amount of any decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee, as custodian of the Global Notes, in accordance with instructions given by the Holder thereof. SECTION 3. MISCELLANEOUS. 3.1 Ratification of Indenture. The Indenture, as supplemented by this Third Supplemental Indenture, is in all respects ratified and confirmed, and this Third Supplemental Indenture shall be deemed a part of the Indenture in the manner and to the extent herein and therein provided. 3.2 GOVERNING LAW. THIS THIRD SUPPLEMENTAL INDENTURE, EACH NOTE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS THIRD SUPPLEMENTAL INDENTURE AND EACH NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. 3.3 Counterparts. This Third Supplemental Indenture may be executed in several counterparts, each of which shall be an original, and all collectively but one and the same instrument. 3.4 The Trustee. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Third Supplemental Indenture or for or in respect of the recitals contained herein, all of which are made solely by the Issuer. IN WITNESS WHEREOF, the parties hereto have caused this Third Supplemental Indenture to be executed as of the date first above written. WYETH, as Issuer By: ------------------------------------------- Name: Title: JPMORGAN CHASE BANK, as Trustee By: ------------------------------------------- EXHIBIT A [FACE OF NOTE] THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.9 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.8 OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.10 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE ISSUER. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC") TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. No. __________ $_____________ CUSIP:____________ WYETH o% Notes due 20__ ORIGINAL ISSUE DATE: INTEREST PAYMENT DATES: INTEREST RATE: RECORD DATES: MATURITY DATE: Wyeth, a Delaware corporation (together with its successors and assigns, the "Issuer"), for value received, hereby promises to pay to _______ or registered assignees, the principal sum of _______ on the Maturity Date specified above and to pay interest thereon at the Interest Rate per annum specified above, semiannually in arrears on each Interest Payment Date specified above during each year commencing on the Interest Payment Date next succeeding the Original Issue Date specified above, and at maturity (or on any redemption or repayment date). Interest on this Note will accrue from the most recent Interest Payment Date to which interest has been paid or duly provided for, or, if no interest has been paid or duly provided for, from the Original Issue Date, until the principal hereof has been paid or duly made available for payment (except as provided below). The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, subject to certain exceptions described herein, be paid to the person in whose name this Note (or one or more predecessor Notes) is registered at the close of business on the applicable Record Date specified above relating to such Interest Payment Date (whether or not a Business Day); provided, however, that interest payable at maturity (or on any redemption or repayment date) will be payable to the person to whom the principal hereof shall be payable. As used herein, "Business Day" means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized or required by law or regulation to close in The City of New York. Payment of the principal of this Note, any premium and the interest due at maturity (or on any redemption or repayment date) will be made in immediately available funds upon surrender of this Note at the office or agency of the Paying Agent, as defined on the reverse hereof, maintained for that purpose in the Borough of Manhattan, The City of New York, or at such other paying agency as the Issuer may determine. Payment of the principal of and premium, if any, and interest on this Note will be made by U.S. dollar check mailed to the address of the person entitled thereto as such address shall appear in the Note register. A holder of U.S. $10,000,000 or more in aggregate principal amount of Notes having the same Interest Payment Date will be entitled to receive payments of interest, other than interest due at maturity or on any date of redemption or repayment, by wire transfer of immediately available funds if appropriate wire transfer instructions have been received by the Paying Agent in writing not less than 15 calendar days prior to the applicable Interest Payment Date. Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Note shall not be entitled to any benefit under the Indenture, as defined on the reverse hereof, or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Issuer has caused this Note to be duly executed under its corporate seal. DATED: WYETH By: _____________________ Name: Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes referred to in the within-mentioned Indenture. JPMORGAN CHASE BANK, as Trustee By: _____________________ Name: Title: Authorized Officer [BACK OF NOTE] This Note is one of a duly authorized issue of o% Notes due 20__ (the "Notes") of the Issuer. The Notes are issuable under an indenture, dated as of April 10, 1992 (as amended by the Supplemental Indenture dated as of October 13, 1992, and as further amended by the Third Supplemental Indenture dated as of February 14, 2003, the "Indenture"), each between the Issuer and JPMorgan Chase Bank (successor to The Chase Manhattan Bank), as trustee (the "Trustee," which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities of the Issuer, the Trustee and holders of the Notes and the terms upon which the Notes are, and are to be, authenticated and delivered. The Issuer has appointed JPMorgan Chase Bank at its principal corporate trust office in The City of New York as the paying agent (the "Paying Agent," which term includes any additional or successor Paying Agent appointed by the Issuer) with respect to the Notes. The terms of individual Notes may vary with respect to interest rates, interest rate formulas, issue dates, maturity dates or otherwise, all as provided in the Indenture. To the extent not inconsistent herewith, the terms of the Indenture are hereby incorporated by reference herein. At any time on or after February 11, 2003, to and including March 15, 2006, the interest rate payable on this Note will be subject to adjustment from time to time if either Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Ratings Services, a division of McGraw-Hill, Inc. ("S&P") downgrades the rating ascribed to the Notes as set forth below. (a) If the rating from Moody's is decreased to a rating set out below, the interest rate will increase from the rate set forth on the face of this Note by the percentage per annum set opposite that rating: Rating Percentage ------ ---------- Baal..................................... .25% Baa2..................................... .50% Baa3..................................... .75% Bal...................................... 1.00% (b) If the rating from S&P is decreased to a rating set out below, the interest rate will increase from the rate set forth on the face of this Note by the percentage per annum set opposite that rating: Rating Percentage ------ ---------- BBB+..................................... .25% BBB...................................... .50% BBB-..................................... .75% BB+...................................... 1.00% Each adjustment required by any decrease in rating above, whether occasioned by the action of Moody's or S&P, shall be made independent of any and all other adjustments. If Moody's or S&P subsequently increases its ratings of the Notes to any of the thresholds set forth above, the interest rate on this Note will be readjusted downwards to the percentage set forth opposite such ratings threshold above, provided that in no event shall (a) the interest rate payable with respect to this Note be reduced to below the interest rate set forth on the face of this Note, and (b) the total increase in the interest rate on this Note exceed 2.00% per annum. Any interest rate increase or decrease, as described herein, will take effect from the Interest Payment Date following which a ratings change requires an adjustment in the interest rate. The interest rate in effect on March 15, 2006 for this Note will, thereafter, become the effective interest rate on this Note until maturity. This Note may be redeemed in whole or in part at the option of the Issuer upon payment of the redemption price specified below. If the Issuer exercises the option to redeem this Note, the redemption price will equal the greater of (i) 100% of the principal amount of this Note or (ii) the sum, as determined by the Quotation Agent (defined below), of the present value of the principal amount of this Note and the remaining scheduled payments of interest on this Note from the redemption date to the Maturity Date, exclusive of interest accrued to the redemption date, discounted from the scheduled payment dates to the redemption date on a semiannual basis (assuming a 360-day year of twelve 30-day months) at the Treasury Rate (defined below) plus -M104-basis points, plus accrued and unpaid interest on the principal amount being redeemed to the date of redemption. Notice of redemption shall be mailed to the registered holders of the Notes designated for redemption at their addresses as the same shall appear on the Note register not less than 30 nor more than 60 days prior to the date fixed for redemption, subject to all the conditions and provisions of the Indenture. In the event of redemption of this Note in part only, a new Note or Notes for the amount of the unredeemed portion hereof shall be issued in the name of the holder hereof upon the cancellation hereof. For purposes of the immediately preceding paragraph, the following defined terms shall have the meanings specified: "Comparable Treasury Issue" means the United States Treasury security selected by the Quotation Agent as having a maturity comparable to the Remaining Life that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity with the Remaining Life. "Comparable Treasury Price" means, with respect to any redemption date, the average of two Reference Treasury Dealer Quotations for such redemption date. "Quotation Agent" means the Reference Treasury Dealer appointed by the Issuer. "Reference Treasury Dealer" means each of J.P. Morgan Securities Inc. and Salomon Smith Barney Inc., and their successors; provided, however, that if any of the foregoing ceases to be a primary U.S. Government securities dealer in New York City (a "Primary Treasury Dealer"), the Issuer will substitute therefor another Primary Treasury Dealer. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Trustee, of the bid and asked price for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third Business Day preceding such redemption date. "Treasury Rate" means, with respect to any redemption date, the rate per annum equal to the semiannual yield to maturity of the Comparable Treasury Issue, calculated on the third business day preceding such redemption date using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date. Interest payments on this Note will include interest accrued to but excluding the Interest Payment Dates or the Maturity Date (or any earlier redemption or repayment date), as the case may be. Interest payments for this Note will be computed and paid on the basis of a 360-day year of twelve 30-day months. In the case where the Interest Payment Date or the Maturity Date (or any redemption or repayment date) does not fall on a Business Day, payment of interest, premium, if any, or principal otherwise payable on such date need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date or on the Maturity Date (or any redemption or repayment date), and no interest on such payment shall accrue for the period from and after the Interest Payment Date or the Maturity Date (or any redemption or repayment date) to such next succeeding Business Day. This Note and all the obligations of the Issuer hereunder are direct, unsecured obligations of the Issuer and rank without preference or priority among themselves and pari passu with all other existing and future unsecured and unsubordinated indebtedness of the Issuer, subject to certain statutory exceptions in the event of liquidation upon insolvency. This Note, and any Note or Notes issued upon registration of transfer or exchange hereof, is issuable only in fully registered form, without coupons, and is issuable only in denominations of U.S. $1,000 and any integral multiple of U.S. $1,000 in excess thereof. The Trustee has been appointed registrar for the Notes, and the Trustee will maintain at its principal corporate trust office in The City of New York a register for the registration and transfer of Notes. This Note may be transferred at the aforesaid office of the Trustee by surrendering this Note for cancellation, accompanied by a written instrument of transfer in form satisfactory to the Trustee and duly executed by the registered holder hereof in person or by the holder's attorney duly authorized in writing, and thereupon the Trustee shall issue in the name of the transferee or transferees, in exchange herefor, a new Note or Notes having identical terms and provisions and having a like aggregate principal amount in authorized denominations, subject to the terms and conditions set forth herein; provided, however, that the Trustee will not be required (i) to register the transfer of or exchange any Note that has been called for redemption in whole or in part, except the unredeemed portion of Notes being redeemed in part, (ii) to register the transfer of or exchange any Note if the holder thereof has exercised his right, if any, to require the Issuer to repurchase such Note in whole or in part, except the portion of such Note not required to be repurchased, or (iii) to register the transfer of or exchange Notes to the extent and during the period so provided in the Indenture with respect to the redemption of Notes. Notes are exchangeable at said office for other Notes of other authorized denominations of equal aggregate principal amount having identical terms and provisions. All such exchanges and transfers of Notes will be free of charge, but the Issuer may require payment of a sum sufficient to cover any tax or other governmental charge in connection therewith. All Notes surrendered for exchange shall be accompanied by a written instrument of transfer in form satisfactory to the Trustee and executed by the registered holder in person or by the holder's attorney duly authorized in writing. The date of registration of any Note delivered upon any exchange or transfer of Notes shall be such that no gain or loss of interest results from such exchange or transfer. In case any Note shall at any time become mutilated, defaced or be destroyed, lost or stolen and such Note or evidence of the loss, theft or destruction thereof (together with the indemnity hereinafter referred to and such other documents or proof as may be required in the premises) shall be delivered to the Trustee, a new Note of like tenor will be issued by the Issuer in exchange for the Note so mutilated or defaced, or in lieu of the Note so destroyed or lost or stolen, but, in the case of any destroyed or lost or stolen Note, only upon receipt of evidence satisfactory to the Trustee and the Issuer that such Note was destroyed or lost or stolen and, if required, upon receipt also of indemnity satisfactory to each of them. All expenses and reasonable charges associated with procuring such indemnity and with the preparation, authentication and delivery of a new Note shall be borne by the owner of the Note mutilated, defaced, destroyed, lost or stolen. The Indenture provides that, (a) if an Event of Default (as defined in the Indenture) due to the default in payment of principal of, or interest on, any series of debt securities issued under the Indenture, including the series of Notes of which this Note forms a part, or due to the default in the performance or breach of any other covenant or warranty of the Issuer applicable to the debt securities of such series but not applicable to all outstanding debt securities issued under the Indenture shall have occurred and be continuing, either the Trustee or the holders of not less than 25% in aggregate principal amount of all affected debt securities issued under the Indenture then outstanding (treated as one class) may then declare the principal of all debt securities of all such series and interest accrued thereon to be due and payable immediately and (b) if an Event of Default due to a default in the performance of any other of the covenants or agreements in the Indenture applicable to all outstanding debt securities issued thereunder, including this Note, or due to certain events of bankruptcy, insolvency and reorganization of the Issuer, shall have occurred and be continuing, either the Trustee or the holders of not less than 25% in aggregate principal amount of all debt securities issued under the Indenture then outstanding (treated as one class) may declare the principal of all such debt securities and interest accrued thereon to be due and payable immediately, but upon certain conditions such declarations may be annulled and past defaults may be waived (except a continuing default in payment of principal of, or interest on, such debt securities) by the holders of a majority in principal amount of the debt securities of all affected series then outstanding. The Indenture permits the Issuer and the Trustee, with the consent of the holders of not less than a majority in aggregate principal amount of the debt securities of all series issued under the Indenture then outstanding and affected (voting as one class), to execute supplemental indentures adding any provisions to or changing in any manner the rights of the holders of each series so affected; provided that the Issuer and the Trustee may not, without the consent of the holder of each outstanding debt security affected thereby, (a) extend the final maturity of any such debt security, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, or reduce any amount payable on redemption or repayment thereof, or change the currency of payment thereof, or impair or affect the right of any holder to institute suit for the payment thereof; or (b) reduce the aforesaid percentage in principal amount of debt securities the consent of the holders of which is required for any such supplemental indenture; or (c) modify any of the foregoing provisions except to increase any such percentage or to provide that other provisions cannot be modified or waived without the consent of each affected holder. So long as this Note shall be outstanding, the Issuer will cause to be maintained an office or agency for the payment of the principal of and premium, if any, and interest on this Note as herein provided in the Borough of Manhattan, The City of New York, and an office or agency in said Borough of Manhattan for the registration, transfer and exchange as aforesaid of the Notes. The Issuer may designate other agencies for the payment of said principal, premium and interest at such place or places (subject to applicable laws and regulations) as the Issuer may decide. So long as there shall be such an agency, the Issuer shall keep the Trustee advised of the names and locations of such agencies, if any are so designated. With respect to moneys paid by the Issuer and held by the Trustee or any Paying Agent for payment of the principal of or interest or premium, if any, on any Notes that remain unclaimed at the end of two years after such principal, interest or premium shall have become due and payable (whether at maturity or upon call for redemption or otherwise), (i) the Trustee or such Paying Agent shall notify the holders of such Notes that such moneys shall be repaid to the Issuer and any person claiming such moneys shall thereafter look only to the Issuer for payment thereof and (ii) such moneys shall be so repaid to the Issuer. Upon such repayment all liability of the Trustee or such Paying Agent with respect to such moneys shall thereupon cease, without, however, limiting in any way any obligation that the Issuer may have to pay the principal of or interest or premium, if any, on this Note as the same shall become due. No provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of, premium, if any, and interest on this Note at the time, place and rate, and in the coin and currency, herein prescribed unless otherwise agreed between the Issuer and the registered holder of this Note. Prior to due presentment of this Note for registration of transfer, the Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the holder in whose name this Note is registered as the owner hereof for all purposes, whether or not this Note be overdue, and none of the Issuer, the Trustee or any such agent shall be affected by notice to the contrary. No recourse under or upon any obligation, covenant or agreement contained in the Indenture, or in this Note, or because of the indebtedness evidenced hereby, shall be had against any incorporator, as such, or against any past, present or future stockholder, officer or director, as such, of the Issuer or of any successor, either directly or through the Issuer or any successor, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issuance hereof, expressly waived and released. This Note shall for all purposes be governed by, and construed in accordance with, the laws of the State of New York. All terms used in this Note which are defined in the Indenture and not otherwise defined herein shall have the meanings assigned to them in the Indenture. Assignment Form To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to - ------------------------------------------------------------ (Insert assignee's soc. sec. or tax I.D. no.) - -------------------------------------------------------------------------- - -------------------------------------------------------------------------- - -------------------------------------------------------------------------- - -------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint to transfer this Note on the books of the Issuer. The agent may substitute another to act for him. - -------------------------------------------------------------------------- Date: Your Signature: (Sign exactly as your name appears on the face of this Note) Tax Identification No: SIGNATURE GUARANTEE: --------------------------------- Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:
Amount of decrease Principal Amount of in Principal Amount of increase in this Global Note Amount of this Principal Amount of following such decrease Signature of authorized Date of Exchange Global Note this Global Note (or increase) officer of Trustee ================= - ----------------------------------------------------------------------------------------------
EX-10.5 4 credit3yr.txt CREDIT AGREEMENT (3 YEAR) EXECUTION COPY [3-Year Credit Facility] CREDIT AGREEMENT among WYETH, THE LENDERS PARTIES HERETO J.P. MORGAN SECURITIES INC. AND SALOMON SMITH BARNEY INC., as Co-Lead Arrangers and Joint Book Managers CITIBANK, N.A., as Syndication Agent THE BANK OF NOVA SCOTIA, COMMERZBANK AG, NEW YORK AND GRAND CAYMAN BRANCHES AND UBS AG, STAMFORD BRANCH, as Co-Documentation Agents and JPMORGAN CHASE BANK, as Administrative Agent - ------------------------------------------------------------------------------- Dated as of March 3, 2003 - ------------------------------------------------------------------------------- CREDIT AGREEMENT, dated as of March 3, 2003, among WYETH, 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., a national banking corporation, as syndication agent (in such capacity, the "Syndication Agent"), THE BANK OF NOVA SCOTIA, COMMERZBANK AG, NEW YORK AND GRAND CAYMAN BRANCHES and UBS AG, STAMFORD BRANCH, as co-documentation agents (in such capacity, the "Co-Documentation Agents") and JPMORGAN CHASE 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 $1,350,000,000 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 Facilities Commitments": at any time the sum of the Aggregate Commitments then in effect hereunder and of the commitments then in effect under the 364-Day Credit Agreement. "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, the rate per annum that is the higher of (i) 0% and (ii) 1.25% less than the Applicable Margin for Eurodollar Loans at such time 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 .250%: Eurodollar Rating Rate Period Margin - ----------------------------------------- ------------------------- Category A Period .3750% Category B Period .600% Category C Period .825% Category D Period 1.050% Category E Period 1.275% "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 (ii) the Moody's Credit Rating is Baa2. "Category E 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 Baa3 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 E Period and the other Credit Rating falls in a higher Rating Period, a Category E 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 E 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. "Code": the Internal Revenue Code of 1986, as amended from time to time. "Co-Documentation Agents": as defined in the first paragraph of this Agreement. "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 the same may be modified), 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 4, 2002, among the Company, the lenders party thereto and JPMCB, as administrative agent, as in effect immediately prior to the occurrence of 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, .125%, (ii) during a Category B Period, .150%, (iii) during a Category C Period, .175%, (iv) during a Category D Period, .200% and (v) during a Category E Period, .225%. "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 Termination 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; and (E) any Interest Period in respect of any Loan that would otherwise extend beyond the Termination Date shall end on the Termination Date. "JPMCB": JPMorgan Chase 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. "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, the Category D Period or the Category E Period as then in effect. "Reference Lenders": JPMCB and Citibank, N.A. "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.ss.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. "SEC": the Securities and Exchange Commission (and any successor thereto). "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. "Significant Subsidiary": any Subsidiary that satisfies the requirements of Rule 1-02(w) of Regulation S-X as adopted by the SEC 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 on which the Aggregate Loans plus the aggregate outstanding principal amount of the loans under the 364-Day Credit Agreement exceed 25% of the Aggregate Facilities Commitments. "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. "Syndication Agent": as defined in the first paragraph of this Agreement. "Taxes": as defined in subsection 2.17(a). "Termination Date": the earlier of (a) the third anniversary of the Effective Date and (b) the date on which the Commitments shall terminate in accordance with the provisions of this Agreement. "364-Day Credit Agreement": the Credit Agreement, dated as of March 3, 2003, among the Company, the lenders party thereto, JPMCB, as administrative agent and Citibank, N.A., as syndication agent, as in effect from time to time. "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 Termination 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 the Aggregate Commitments from and including the Effective Date to but excluding the Termination Date, payable quarterly in arrears on the last day of each March, June, September and December, and on the Termination Date. 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. (a) 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. (b) If any Eurodollar Loan shall be prepaid on any day under this subsection 2.6 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 subsection 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 two 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 two 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 subsection 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 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); or (ii) 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; provided however, that the Company shall have no obligation under this subsection 2.15 to pay such Lender any additional amounts with respect to any such additional cost or reduced amount receivable resulting from taxes addressed in subsection 2.17. 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 subsection 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 net profits of a Lender (or franchise, capital or other similar taxes imposed in lieu of a tax on net income or net profits), 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 that would have been paid had no such withholding or deduction of Taxes been made. 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 federal 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 under Sections 871(h) or 881(c) of the Code) (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 that is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for United States federal income tax purposes and (y) the Company shall not be obligated pursuant to subsection 2.17(a) hereof to gross-up payments to be made to or otherwise indemnify a Lender in respect of such Taxes to the extent that such Lender has not provided to the Company U.S. Internal Revenue Service Forms (and, if applicable, a 2.17 Certificate) that establish a complete exemption from such deduction or withholding. 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 the incremental amount of Taxes deducted or withheld or required to be deducted or withheld by it as a result of any changes after 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), after the date of such assignment or transfer to such Lender, in any applicable law, treaty, governmental rule, regulation, guideline or order, or in the interpretation thereof, relating to the deducting or withholding of Taxes even if such Lender is unable, as a result of such changes, to deliver the forms or 2.17 Certificate described in clause (i) or (ii) of the first sentence of this subsection 2.17(b). (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(d) 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 (if the Company so requests) under the 364-Day Credit Agreement, 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 thereunder, 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 thereof; and (ii) all obligations of the Company owing to the Replaced Lender hereunder and (if the Company so requests) under the 364-Day Credit Agreement (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 Supplements 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, 2001 and as September 30, 2002 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 PricewaterhouseCoopers 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, 2002 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. 3.2 No Change. Since December 31, 2001 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. This Agreement, and/or the proceeds of the Loans, will be used (i) to support commercial paper and (ii) 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) 364-Day Credit Agreement. The Effective Date under, and as defined in, the 364-Day Credit Agreement shall have occurred or shall concurrently occur. (g) 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. (h) 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. 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 subsections 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: (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 PricewaterhouseCoopers LLP or another firm of independent certified public accountants of nationally recognized standing; (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, as filed with the SEC; and (c) together with each financial statement delivered pursuant to clauses (a) and (b), any certification to the SEC of such financial statements by the Company's chief executive officer and chief financial officer, in each case to the extent required to be made publicly available as part of or accompanying such financial statements; 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; provided that, with respect to any report, financial statement or other information required to be delivered pursuant to subsection 5.2(c) which has been filed with the SEC, such report, financial statement or other information shall be deemed to have been furnished by the Company to the Administrative Agent upon receipt of a written notice by the Administrative Agent from the Company stating that such report, financial statement or other information has been so filed with the SEC; (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, non-confidential periodic reports and reports filed on Form 8-K which the Company may make to, or file with, the SEC or any analogous Governmental Authority (other than those otherwise provided pursuant to subsection 5.1); 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 .60 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 existing on such property at the time of its acquisition (other than any such Lien created in contemplation of such acquisition), (iii) Liens existing on the Effective Date hereof, (iv) Liens 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 securing Indebtedness in an aggregate amount not in excess of 15% of the Company's Consolidated Tangible Assets, (vi) Liens on property subject to escrow or similar arrangements established in connection with litigation settlements, (vii) Liens incurred pursuant to a receivables securitization or (viii) 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; or (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 Syndication Agent 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: Wyeth 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 The 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 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. (a) The Company, the Lenders, the Syndication Agent, the Co-Documentation Agents and the Administrative Agent hereby agree that each of the Company, the Lenders, the Syndication Agent, the Co-Documentation Agents and the Administrative Agent (and each of their respective, and their respective affiliates' employees, officers, directors, agents and advisors) is, and has been from the commencement of discussions with respect to the facility established by this Agreement (the "Facility"), permitted to disclose to any and all Persons, without limitation of any kind, the tax treatment and tax structure of the Facility, and all materials of any kind (including opinions or other tax analyses) that are or have been provided to the Company, such Lender, the Syndication Agent, the Co-Documentation Agents or the Administrative Agent relating to such tax treatment and tax aspects. In this regard, each of the Company, the Lenders, the Syndication Agent, the Co-Documentation Agents and the Administrative Agent acknowledges and agrees that its disclosure of the tax treatment and tax structure of the Facility is not limited in any way by an express or implied understanding or agreement, oral or written (whether or not such understanding or agreement is legally binding). Furthermore, each of the Company, the Lenders, the Syndication Agent, the Co-Documentation Agents and the Administrative Agent acknowledges and agrees that it does not know or have reason to know that its use or disclosure of information relating to the tax treatment and tax structure of the Facility is limited in any other manner (such as where the facility is claimed to be proprietary or exclusive) for the benefit of any other Person. To the extent that disclosure of the tax treatment and tax structure of the Facility by the Company, the Syndication Agent, the Co-Documentation Agents, the Administrative Agent or the Lenders is limited by any existing agreement between the Company and the Administrative Agent, the Syndication Agent, the Co-Documentation Agents or the Lenders, such limitation is agreed to be void ab initio and such agreement is hereby amended to permit disclosure of the tax treatment and tax structure of the Facility as provided in this paragraph (a). (b) Each of the Lenders agrees that it will maintain in confidence, and will not 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 connection with any litigation with respect to this Agreement or in response to any summons or subpoena or any law, order, regulation or ruling applicable to such Lender, or (d) to any prospective Transferee 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. WYETH By:___________________________________ Name: Title: JPMORGAN CHASE BANK, Individually and as Administrative Agent By:___________________________________ Name: Title: CITIBANK, N.A., Individually and as Syndication Agent By:___________________________________ Name: Title: THE BANK OF NOVA SCOTIA, Individually and as Co-Documentation Agent By:___________________________________ Name: Title: COMMERZBANK AG, NEW YORK AND GRAND CAYMAN BRANCHES, Individually and as Co-Documentation Agent By:___________________________________ Name: Title: UBS AG, CAYMAN ISLANDS BRANCH, Individually and as Co-Documentation Agent By:___________________________________ Name: Title: BANCA NAZIONALE DEL LAVORO, S.P.A. - NEW YORK BRANCH, Individually and as Managing Agent By:___________________________________ Name: Title: THE BANK OF NEW YORK By:___________________________________ Name: Title: FLEET NATIONAL BANK By:___________________________________ Name: Title: MORGAN STANLEY BANK By:___________________________________ Name: Title: SAN PAOLO IMI S.P.A. By:___________________________________ Name: Title: U.S. BANK N.A. By:___________________________________ Name: Title: WACHOVIA BANK, NATIONAL ASSOCIATION By:___________________________________ Name: Title: ABN AMRO BANK N.V. By:___________________________________ Name: Title: CREDIT AGRICOLE INDOSUEZ By:___________________________________ Name: Title: MELLON BANK, N.A. By:___________________________________ Name: Title: THE NORTHERN TRUST COMPANY, By:___________________________________ Name: Title: BANCO POPULAR DE PUERTO RICO By:___________________________________ Name: Title: THE GOVERNOR AND COMPANY OF BANK OF IRELAND By:___________________________________ Name: Title: BANCO BILBAO VIZCAYA ARGENTARIA, S.A. By: ___________________________________ Name: Title: SCHEDULE I COMMITMENTS Lender Commitment JPMorgan Chase Bank $175,000,000.00 Citibank, N.A. $175,000,000.00 The Bank of Nova Scotia $134,166,666.67 Commerzbank AG, New York and Grand Cayman Branches $134,166,666.67 UBS AG, Stamford Branch $134,166,666.66 Banca Nazionale del Lavoro $75,000,000.00 The Bank of New York $50,000,000.00 Fleet National Bank $50,000,000.00 Morgan Stanley Bank $50,000,000.00 SAN PAOLO IMI S.p.A. $50,000,000.00 U.S. Bank N.A. $50,000,000.00 Wachovia Bank, National Association $50,000,000.00 ABN Amro Bank N.V. $45,000,000.00 Credit Agricole Indosuez $37,500,000.00 Mellon Bank, N.A. $37,500,000.00 The Northern Trust Company $37,500,000.00 Banco Popular de Puerto Rico $25,000,000.00 Bank of Ireland $25,000,000.00 Banco Bilbao Vizcaya Argentaria, S.A. $15,000,000.00 Total $1,350,000,000.00 BANK ADDRESSES AND LENDING OFFICES JPMorgan Chase Bank 270 Park Avenue New York, New York 10017 Attention: Dawn Lee Lum Telephone: (212) 270-2472 Facsimile: (212) 270-3279 with copies to: One Chase Manhattan Plaza, 8th Floor New York, New York 10081 Attention: Janet Belden Telephone: (212) 552-7277 Facsimile: (212) 270-5658 Citibank, N.A. 388 Greenwich Street New York, New York 10043 Attention: William Clark Telephone: (212) 816-8183 Facsimile: (212) 816-8051 The Bank of Nova Scotia 600 Peachtree Street, Suite 2700 Atlanta, GA 30308 Attention: Patrick Brown Telephone: (404) 877-1506 Facsimile: (404) 888-8982 CommerzBank 2 World Financial Center New York, NY 10281 Attention: Robert Taylor Telephone: (212) 266-7708 Facsimile: (212) 266-7594 UBS AG, Stamford Branch 677 Washington Boulevard Stamford, CT 06901 Attention: Marie Haddad Telephone: (203) 719-5609 Facsimile: (203) 719-3888 Banca Nazionale Del Lavoro 25 West 51 Street New York, NY 10019 Attention: Francesco DiMario Telephone: (212) 314-0239 Facsimile: (212) 765-2978 The Bank of New York 1 Wall Street New York, NY 10286 Attention: Tom McCormack Telephone: (212) 635-1395 Facsimile: (212) 635-1481 Fleet National Bank 100 Federal Street Boston, MA 02110 Attention: Roger Boucher Telephone: (617) 434-3951 Facsimile: (617) 434-0819 Morgan Stanley Bank 2500 Lake Park Blvd., Suite 300 C West Valley City, UT 84120 Attention: David Morin Telephone: (212) 762-2621 Facsimile: (212) 507-3138 San Paolo IMI S.p.A 245 Park Avenue New York, NY 10167 Attention: Luca Sacchi Telephone: (212) 692-3130 Facsimile: (212) 692-3178 US Bank, N.A. 425 Walnut Street, 8th floor Cincinnati, OH 45202 Attention: Richard Neltner Telephone: (513) 632-4073 Facsimile: (513) 632-2068 Wachovia Bank, National Association 191 Peachtree St. NE Atlanta, GA 30303 Attention: Keith Burson Telephone: (312) 574-5965 Facsimile: (312) 574-5970 ABN Amro Bank N.V. 208 South Lasalle Street, Suite 1500 Chicago, IL 60604 Attention: Henry Sosa Telephone: (212) 409-1488 Facsimile: (212) 409-1641 Credit Agricole Indosuez 55 East Monroe, 47th Floor Chicago, IL 60603 Attention: Richard Drennan Telephone: (312) 917-7441 Facsimile: (312) 372-3724 Mellon Bank N.A. 1735 Market Street, 7th Floor Philadelphia, Pennsylvania 19103 Attention: Kristen Denning Telephone: (215) 553-3239 Facsimile: (215) 553-4899 Northern Trust Company 50 S.LaSalle Street Chicago, IL 60675 Attention: Alfred Armengol Telephone: (312) 557-1498 Facsimile: (312) 444-5055 Banco Popular de Puerto Rico 7 West 51st Street New York, NY 10019 Attention: Hector Gonzalez Telephone: (212) 445-1988 Facsimile: (212) 245-4677 Bank of Ireland Bank of Ireland Corp. Banking Block B2, Lower Baggot Street Dublin 2, Ireland Attention: Fran Collins Telephone: 00 353 1 604 4141 Facsimile: 00 353 1 604 4240 Banco Bilbao Vizcaya Argentaria 1345 Avenue of the Americas, 45th Floor New York, NY 10105 Attention: Hector Villegas Telephone: (212) 728-1513 Facsimile: (212) 333-2904 EX-10.6 5 credit364.txt CREDIT AGREEMENT (364-DAY) EXECUTION COPY [364-Day Credit Facility] CREDIT AGREEMENT among WYETH, THE LENDERS PARTIES HERETO J.P. MORGAN SECURITIES INC. AND SALOMON SMITH BARNEY INC., as Co-Lead Arrangers and Joint Book Managers CITIBANK, N.A., as Syndication Agent THE BANK OF NOVA SCOTIA, COMMERZBANK AG, NEW YORK AND GRAND CAYMAN BRANCHES AND UBS AG, STAMFORD BRANCH, as Co-Documentation Agents and JPMORGAN CHASE BANK, as Administrative Agent - ------------------------------------------------------------------------------- Dated as of March 3, 2003 - ------------------------------------------------------------------------------- CREDIT AGREEMENT, dated as of March 3, 2003, among WYETH, 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., a national banking corporation, as syndication agent (in such capacity, the "Syndication Agent"), THE BANK OF NOVA SCOTIA, COMMERZBANK AG, NEW YORK AND GRAND CAYMAN BRANCHES and UBS AG, STAMFORD BRANCH, as co-documentation agents (in such capacity, the "Co-Documentation Agents") and JPMORGAN CHASE 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 $1,350,000,000 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 Facilities Commitments": at any time the sum of the Aggregate Commitments then in effect hereunder and of the commitments then in effect under the 3-Year Credit Agreement. "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, the rate per annum that is the higher of (i) 0% and (ii) 1.25% less than the Applicable Margin for Eurodollar Loans at such time and (y) in the case of Eurodollar Loans, the rate per annum set forth below opposite the Rating Period then in effect, provided that (1) during a Significant Usage Period, the Applicable Margin for all such Loans shall be increased by .250% and (2) at any time after the Termination Date during which Loans are outstanding, the Applicable Margin for all Loans shall be increased by .500%: Eurodollar Rating Rate Period Margin - ----------------------------------------- ------------------------- Category A Period .40% Category B Period .625% Category C Period .850% Category D Period 1.075% Category E Period 1.300% "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 (ii) the Moody's Credit Rating is Baa2. "Category E 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 Baa3 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 E Period and the other Credit Rating falls in a higher Rating Period, a Category E 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 E 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. "Code": the Internal Revenue Code of 1986, as amended from time to time. "Co-Documentation Agents": as defined in the first paragraph of this Agreement. "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 the same may be modified), 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 4, 2002, among the Company, the lenders party thereto and JPMCB, as administrative agent, as in effect immediately prior to the occurrence of 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, .100%, (ii) during a Category B Period, .125%, (iii) during a Category C Period, .150%, (iv) during a Category D Period, .175% and (v) during a Category E Period, .200%. "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 either 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. "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 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, the Category D Period or the Category E Period as then in effect. "Reference Lenders": JPMCB and Citibank, N.A. "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.ss.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. "SEC": the Securities and Exchange Commission (and any successor thereto). "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. "Significant Subsidiary": any Subsidiary that satisfies the requirements of Rule 1-02(w) of Regulation S-X as adopted by the SEC 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 prior to the Termination Date on which the Aggregate Loans plus the aggregate outstanding principal amount of the loans under the 3-Year Credit Agreement exceed 25% of the Aggregate Facilities Commitments. "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. "Syndication Agent": as defined in the first paragraph of this Agreement. "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 occurring on 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. "3-Year Credit Agreement": the Credit Agreement, dated as of March 3, 2003, among the Company, the lenders party thereto, JPMCB, as administrative agent, and Citibank, N.A., as syndication agent, as in effect from time to time. "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 a Term-Out 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 (in the case of the Facility Fee relating to clause (x)) and on the Maturity Date (or such earlier date after the Termination Date on which all Loans have been repaid) (in the case of the Facility Fee relating to clause (y)). 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. (a) 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. (b) If any Eurodollar Loan shall be prepaid on any day under this subsection 2.6 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 subsection 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 two 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 two 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 subsection 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 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); or (ii) 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; provided however, that the Company shall have no obligation under this subsection 2.15 to pay such Lender any additional amounts with respect to any such additional cost or reduced amount receivable resulting from taxes addressed in subsection 2.17. 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 subsection 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 net profits of a Lender (or franchise, capital or other similar taxes imposed in lieu of a tax on net income or net profits), 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 that would have been paid had no such withholding or deduction of Taxes been made. 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 federal 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 under Sections 871(h) or 881(c) of the Code) (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 that is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for United States federal income tax purposes and (y) the Company shall not be obligated pursuant to subsection 2.17(a) hereof to gross-up payments to be made to or otherwise indemnify a Lender in respect of such Taxes to the extent that such Lender has not provided to the Company U.S. Internal Revenue Service Forms (and, if applicable, a 2.17 Certificate) that establish a complete exemption from such deduction or withholding. 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 the incremental amount of Taxes deducted or withheld or required to be deducted or withheld by it as a result of any changes after 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), after the date of such assignment or transfer to such Lender, in any applicable law, treaty, governmental rule, regulation, guideline or order, or in the interpretation thereof, relating to the deducting or withholding of Taxes even if such Lender is unable, as a result of such changes, to deliver the forms or 2.17 Certificate described in clause (i) or (ii) of the first sentence of this subsection 2.17(b). (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(d) 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 (if the Company so requests) under the 3-Year Credit Agreement, 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 thereunder, 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 thereof; and (ii) all obligations of the Company owing to the Replaced Lender hereunder and (if the Company so requests) under the 3-Year Credit Agreement (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 Supplements 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, 2001 and as September 30, 2002 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 PricewaterhouseCoopers 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, 2002 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. 3.2 No Change. Since December 31, 2001 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. This Agreement, and/or the proceeds of the Loans, will be used (i) to support commercial paper and (ii) 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) 3-Year Credit Agreement. The Effective Date under, and as defined in, the 3-Year Credit Agreement shall have occurred or shall concurrently occur. (g) 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. (h) 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. 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 subsections 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: (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 PricewaterhouseCoopers LLP or another firm of independent certified public accountants of nationally recognized standing; (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, as filed with the SEC; and (c) together with each financial statement delivered pursuant to clauses (a) and (b), any certification to the SEC of such financial statements by the Company's chief executive officer and chief financial officer, in each case to the extent required to be made publicly available as part of or accompanying such financial statements; 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; provided that, with respect to any report, financial statement or other information required to be delivered pursuant to subsection 5.2(c) which has been filed with the SEC, such report, financial statement or other information shall be deemed to have been furnished by the Company to the Administrative Agent upon receipt of a written notice by the Administrative Agent from the Company stating that such report, financial statement or other information has been so filed with the SEC; (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, non-confidential periodic reports and reports filed on Form 8-K which the Company may make to, or file with, the SEC or any analogous Governmental Authority (other than those otherwise provided pursuant to subsection 5.1); 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 .60 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 existing on such property at the time of its acquisition (other than any such Lien created in contemplation of such acquisition), (iii) Liens existing on the Effective Date hereof, (iv) Liens 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 securing Indebtedness in an aggregate amount not in excess of 15% of the Company's Consolidated Tangible Assets, (vi) Liens on property subject to escrow or similar arrangements established in connection with litigation settlements, (vii) Liens incurred pursuant to a receivables securitization or (viii) 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; or (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 Syndication Agent 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: Wyeth 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 The 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 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. (a) The Company, the Lenders, the Syndication Agent, the Co-Documentation Agents and the Administrative Agent hereby agree that each of the Company, the Lenders, the Syndication Agent, the Co-Documentation Agents and the Administrative Agent (and each of their respective, and their respective affiliates' employees, officers, directors, agents and advisors) is, and has been from the commencement of discussions with respect to the facility established by this Agreement (the "Facility"), permitted to disclose to any and all Persons, without limitation of any kind, the tax treatment and tax structure of the Facility, and all materials of any kind (including opinions or other tax analyses) that are or have been provided to the Company, such Lender, the Syndication Agent, the Co-Documentation Agents or the Administrative Agent relating to such tax treatment and tax aspects. In this regard, each of the Company, the Lenders, the Syndication Agent, the Co-Documentation Agents and the Administrative Agent acknowledges and agrees that its disclosure of the tax treatment and tax structure of the Facility is not limited in any way by an express or implied understanding or agreement, oral or written (whether or not such understanding or agreement is legally binding). Furthermore, each of the Company, the Lenders, the Syndication Agent, the Co-Documentation Agents and the Administrative Agent acknowledges and agrees that it does not know or have reason to know that its use or disclosure of information relating to the tax treatment and tax structure of the Facility is limited in any other manner (such as where the facility is claimed to be proprietary or exclusive) for the benefit of any other Person. To the extent that disclosure of the tax treatment and tax structure of the Facility by the Company, the Syndication Agent, the Co-Documentation Agents, the Administrative Agent or the Lenders is limited by any existing agreement between the Company and the Administrative Agent, the Syndication Agent, the Co-Documentation Agents or the Lenders, such limitation is agreed to be void ab initio and such agreement is hereby amended to permit disclosure of the tax treatment and tax structure of the Facility as provided in this paragraph (a). (b) Each of the Lenders agrees that it will maintain in confidence, and will not 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 connection with any litigation with respect to this Agreement or in response to any summons or subpoena or any law, order, regulation or ruling applicable to such Lender, or (d) to any prospective Transferee 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. WYETH By: ___________________________________ Name: Title: JPMORGAN CHASE BANK, Individually and as Administrative Agent By: ___________________________________ Name: Title: CITIBANK, N.A., Individually and as Syndication Agent By: ___________________________________ Name: Title: THE BANK OF NOVA SCOTIA, Individually and as Co-Documentation Agent By:___________________________________ Name: Title: COMMERZBANK AG, NEW YORK AND GRAND CAYMAN BRANCHES, Individually and as Co-Documentation Agent By:___________________________________ Name: Title: UBS AG, CAYMAN ISLANDS BRANCH, Individually and as Co-Documentation Agent By:___________________________________ Name: Title: BANCA NAZIONALE DEL LAVORO, S.P.A. - NEW YORK BRANCH, Individually and as Managing Agent By:___________________________________ Name: Title: THE BANK OF NEW YORK By:___________________________________ Name: Title: FLEET NATIONAL BANK By:___________________________________ Name: Title: MORGAN STANLEY BANK By:___________________________________ Name: Title: SAN PAOLO IMI S.P.A. By:___________________________________ Name: Title: U.S. BANK N.A. By:___________________________________ Name: Title: WACHOVIA BANK, NATIONAL ASSOCIATION By:___________________________________ Name: Title: ABN AMRO BANK N.V. By:___________________________________ Name: Title: CREDIT AGRICOLE INDOSUEZ By:___________________________________ Name: Title: MELLON BANK, N.A. By:___________________________________ Name: Title: THE NORTHERN TRUST COMPANY By:___________________________________ Name: Title: BANCO POPULAR DE PUERTO RICO By:___________________________________ Name: Title: THE GOVERNOR AND COMPANY OF BANK OF IRELAND By:___________________________________ Name: Title: BANCO BILBAO VIZCAYA ARGENTARIA, S.A. By:___________________________________ Name: Title: SCHEDULE I COMMITMENTS Lender Commitment JPMorgan Chase Bank $175,000,000.00 Citibank, N.A. $175,000,000.00 The Bank of Nova Scotia $134,166,666.67 Commerzbank AG, New York and Grand Cayman Branches $134,166,666.67 UBS AG, Stamford Branch $134,166,666.66 Banca Nazionale del Lavoro $75,000,000.00 The Bank of New York $50,000,000.00 Fleet National Bank $50,000,000.00 Morgan Stanley Bank $50,000,000.00 SAN PAOLO IMI S.p.A. $50,000,000.00 U.S. Bank N.A. $50,000,000.00 Wachovia Bank, National Association $50,000,000.00 ABN Amro Bank N.V. $45,000,000.00 Credit Agricole Indosuez $37,500,000.00 Mellon Bank, N.A. $37,500,000.00 The Northern Trust Company $37,500,000.00 Banco Popular de Puerto Rico $25,000,000.00 Bank of Ireland $25,000,000.00 Banco Bilbao Vizcaya Argentaria, S.A. $15,000,000.00 Total $1,350,000,000.00 BANK ADDRESSES AND LENDING OFFICES JPMorgan Chase Bank 270 Park Avenue New York, New York 10017 Attention: Dawn Lee Lum Telephone: (212) 270-2472 Facsimile: (212) 270-3279 with copies to: One Chase Manhattan Plaza, 8th Floor New York, New York 10081 Attention: Janet Belden Telephone: (212) 552-7277 Facsimile: (212) 270-5658 Citibank, N.A. 388 Greenwich Street New York, New York 10043 Attention: William Clark Telephone: (212) 816-8183 Facsimile: (212) 816-8051 The Bank of Nova Scotia 600 Peachtree Street, Suite 2700 Atlanta, GA 30308 Attention: Patrick Brown Telephone: (404) 877-1506 Facsimile: (404) 888-8982 CommerzBank 2 World Financial Center New York, NY 10281 Attention: Robert Taylor Telephone: (212) 266-7708 Facsimile: (212) 266-7594 UBS AG 677 Washington Boulevard Stamford, CT 06901 Attention: Marie Haddad Telephone: (203) 719-5609 Facsimile: (203) 719-3888 Banca Nazionale Del Lavoro 25 West 51 Street New York, NY 10019 Attention: Francesco DiMario Telephone: (212) 314-0239 Facsimile: (212) 765-2978 The Bank of New York 1 Wall Street New York, NY 10286 Attention: Tom McCormack Telephone: (212) 635-1395 Facsimile: (212) 635-1481 Fleet National Bank 100 Federal Street Boston, MA 02110 Attention: Roger Boucher Telephone: (617) 434-3951 Facsimile: (617) 434-0819 Morgan Stanley Bank 2500 Lake Park Blvd., Suite 300 C West Valley City, UT 84120 Attention: David Morin Telephone: (212) 762-2621 Facsimile: (212) 507-3138 San Paolo IMI S.p.A 245 Park Avenue New York, NY 10167 Attention: Luca Sacchi Telephone: (212) 692-3130 Facsimile: (212) 692-3178 US Bank, N.A. 425 Walnut Street, 8th floor Cincinnati, OH 45202 Attention: Richard Neltner Telephone: (513) 632-4073 Facsimile: (513) 632-2068 Wachovia Bank, National Association 191 Peachtree St. NE Atlanta, GA 30303 Attention: Keith Burson Telephone: (312) 574-5965 Facsimile: (312) 574-5970 ABN Amro Bank N.V. 208 South Lasalle Street, Suite 1500 Chicago, IL 60604 Attention: Henry Sosa Telephone: (212) 409-1488 Facsimile: (212) 409-1641 Credit Agricole Indosuez 55 East Monroe, 47th Floor Chicago, IL 60603 Attention: Richard Drennan Telephone: (312) 917-7441 Facsimile: (312) 372-3724 Mellon Bank N.A. 1735 Market Street, 7th Floor Philadelphia, Pennsylvania 19103 Attention: Kristen Denning Telephone: (215) 553-3239 Facsimile: (215) 553-4899 Northern Trust Company 50 S.LaSalle Street Chicago, IL 60675 Attention: Alfred Armengol Telephone: (312) 557-1498 Facsimile: (312) 444-5055 Banco Popular de Puerto Rico 7 West 51st Street New York, NY 10019 Attention: Hector Gonzalez Telephone: (212) 445-1988 Facsimile: (212) 245-4677 Bank of Ireland Bank of Ireland Corp. Banking Block B2, Lower Baggot Street Dublin 2, Ireland Attention: Fran Collins Telephone: 00 353 1 604 4141 Facsimile: 00 353 1 604 4240 Banco Bilbao Vizcaya Argentaria 1345 Avenue of the Americas, 45th Floor New York, NY 10105 Attention: Hector Villegas Telephone: (212) 728-1513 Facsimile: (212) 333-2904 EX-10.19 6 phased.txt FORM OF STOCK OPTION AGREEMENT (PHASED VESTING) WYETH STOCK OPTION AGREEMENT (Phased Vesting) UNDER: DATED: OPTION PRICE: INCENTIVE STOCK OPTION SHARES: NON-QUALIFIED STOCK OPTION SHARES: 1. Under the terms and conditions of this Agreement and of the Wyeth (the "Company") Stock Incentive Plan set forth above (the "Plan"), a copy of which is attached hereto and incorporated herein by reference, the Company (at the request of the Company's subsidiary employing Optionee, if applicable) hereby grants to Optionee an option or options (together, the "Option") to purchase the number of shares of the Company's Common Stock as specified above ("Option Shares") at the option price also above specified. Capitalized terms not otherwise defined herein have the meanings assigned to them in the Plan. 2. This Option may be exercised, in whole or in part from time to time in any whole number of Option Shares, upon and after the earlier of (i) in the case of the Incentive Stock Option, if any, and Non-Qualified Stock Option, respectively, with respect to one-third of the Option Shares (rounded down), the date that is one year from the date of grant of this Option, with respect to an additional one-third of the Option Shares (rounded down), the date that is two years from the date of grant of this Option and, with respect to the remaining one-third of the Option Shares, the date that is three years from the date of grant of this Option, or (ii) the date of the death, Disability or Retirement (each as defined in the Plan) of Optionee. Option exercises are subject, however, to the provisions of Section 5 of the Plan which generally requires that at the time of exercise (or, in the case of an event described in clause (ii), the date of termination of Optionee's employment with the Company and its subsidiaries), Optionee is or was employed by the Company or one or more of its subsidiaries and has been continuously employed by the Company or one or more of its subsidiaries for at least two years and since the date of grant. Once this Option becomes exercisable, it shall remain exercisable until its expiration as described in paragraph 3 below. To the extent Option Shares have been purchased pursuant to the exercise of this Option, such shares shall no longer be available for purchase hereunder. The date after which this Option may be exercised will be accelerated upon a Change in Control of the Company (as defined in the Plan) and upon such occurrence may be cashed out at the discretion of the Compensation and Benefits Committee on the terms described in Section 9 of the Plan. 3. This Option shall expire upon the date that is ten years from the date of grant or earlier as provided in Section 5 of the Plan which provides, among other things, that Options shall expire upon the first to occur of the following: (i) immediately upon the date of (A) the termination with the Company and its subsidiaries of Optionee's employment by the Company or any of its subsidiaries because of Optionee's deliberate gross misconduct (as determined by the Compensation and Benefits Committee), (B) Optionee's voluntary termination with the Company and its subsidiaries of employment other than for Disability or Retirement, or (C) Optionee's violation of (x) the noncompetition, or cooperation provisions of Section 5(g) of the Plan, or (y) the undertaking not to deliberately cause substantial harm to the Company as set forth in Section 5(g) of the Plan, or (ii) the date that is three months from the date of the termination with the Company and its subsidiaries of Optionee's employment by the Company or any of its subsidiaries for any reason other than death, Disability, Retirement or deliberate gross misconduct (as determined by the Compensation and Benefits Committee). 4. To the extent any Incentive Stock Option granted hereby becomes exercisable for the first time in the aggregate amount of more than $100,000 (fair market value at time of grant) during any calendar year (including for this purpose any other Incentive Stock Options previously granted to Optionee by the Company), such excess will be treated as a non-qualified stock option under U.S. federal tax provisions, if applicable. In addition, any such incentive stock option exercised by Optionee after three months after separation from service to the Company (or after one year after total and permanent disability) will be treated as a non-qualified stock option under applicable U.S. federal tax provisions. 5. In order to exercise this Option, Optionee must either (i) follow the procedures required by the third party processing administrator (the "processing administrator") designated by the Company's Treasurer, or (ii) if Optionee has not been notified of the designation of the processing administrator, send the Company's Treasurer an option exercise notice indicating the number of Option Shares for which the Option is to be exercised at that time and the form in which the certificates are to be registered for Option Shares purchased (in the name of Optionee or in Optionee's name and that of another person(s) as joint tenants with the right of survivorship). At the time of exercise, Optionee shall make payment of the Option Price for the Option Shares being purchased in accordance with the processing administrator's procedures or, if applicable, by submitting to the Company's Treasurer, together with the option exercise notice, such payment in the form of (x) a personal or bank check in U.S. Dollars payable to Wyeth and drawn on or payable at a United States bank, and/or (y) shares of the Company's common stock issued in Optionee's name which were either (I) acquired by the Optionee from a person other than the Company or (II) held by the Optionee for at least six months, which shares shall be duly assigned to the Company, or (z) by any other form of consideration which has been approved by the Compensation and Benefits Committee, as and to the extent provided and permitted by Section 5(d) of the Plan. Notwithstanding anything to the contrary herein, the processing administrator, the Company or its subsidiaries shall have the right to deduct from the gross cash proceeds or the number of Option Shares to be delivered upon exercise of this Option or any similar options previously granted by the Company to Optionee such cash or the number of Option Shares, respectively, as may be necessary to satisfy the minimum amount of federal, state or local taxes or other deductions legally required to be withheld before disbursing the net proceeds (less any related administrative fees and expenses) or Option Shares to Optionee or in the alternative such parties may require Optionee to deliver to the processing administrator, the Company or its subsidiaries an amount of cash or number of shares of common stock of the Company to satisfy such fees, expenses and withholding before disbursing the net proceeds or Option Shares to Optionee. 6. This Agreement and this Option as well as the Company's obligation to sell and deliver Option Shares covered by this Option is subject to all federal, state and other laws, rules and regulations of the United States and/or of the country wherein Optionee resides or is employed. Compliance with any recording, protocolization or registration requirements and payment of any fees or taxes applicable to this Agreement or the transactions it contemplates are the exclusive responsibility of Optionee. 7. This Option is not transferable or assignable other than by will or by the laws of descent and distribution and may be exercised during Optionee's lifetime only by him or her. After Optionee's death, the Option may be exercised only by Optionee's legal representative or legatee or such other person designated by an appropriate court as the person entitled to make such exercise. The Option may be exercised after Optionee's death only to the extent that Optionee was entitled to exercise it at the time of Optionee's death. 8. In the event that this Agreement also contains a grant of a Stock Appreciation Right (an "SAR") in connection with the Option, the terms of the SAR shall be governed by the provisions of Section 6 of the Plan. 9. Subject to the express provisions of the Plan, this Agreement and the Plan are to be interpreted and administered by the Compensation and Benefits Committee, whose determination will be final. 10. By signing this Option Agreement, Optionee hereby unambiguously consents to and authorizes the disclosure of information related to the grant of the Option, including without limitation, information regarding Optionee's age, date of birth and details regarding the Option or any similar options previously granted by the Company, to Optionee, the Company, any third-party retained by the Company to administer the exercise of the Option, the Company's subsidiary(ies) currently and/or previously employing Optionee and governmental and regulatory authorities having jurisdiction over this Agreement or the transactions it contemplates. The purpose of the information transfer is to allow Optionee to exercise the Options in accordance with (i) the terms under which they were granted and (ii) applicable laws; the information disclosed will be retained for the period of time necessary to achieve this purpose. 11. This Agreement shall be governed by the laws of the State of Delaware and in accordance with such federal law as may be applicable. WYETH /s/ Robert Essner Chairman, President and Chief Executive Officer Accepted and agreed to: Optionee's Signature - ------------------------------- EX-10.22 7 transfer.txt FORM OF STOCK OPTION AGREEMENT (TRANSFERABLE) WYETH STOCK OPTION AGREEMENT (Transferable Option) UNDER: [YEAR] STOCK INCENTIVE PLAN DATED: OPTION PRICE: INCENTIVE STOCK OPTION SHARES: NON-QUALIFIED STOCK OPTION SHARES: 1. Under the terms and conditions of this Agreement and of the Wyeth (the "Company") Stock Incentive Plan set forth above (the "Plan"), a copy of which is attached hereto and incorporated herein by reference, the Company (at the request of the Company's subsidiary employing Optionee, if applicable) hereby grants to the Optionee an option or options (together, the "Option") to purchase the number of shares of the Company's Common Stock as specified above ("Option Shares") at the option price also above specified. Capitalized terms not otherwise defined herein have the meanings assigned to them in the Plan. 2. This Option may be exercised, in whole or in part from time to time in any whole number of Option Shares, upon and after the earlier of (i) in the case of the Incentive Stock Option, if any, and Non-Qualified Stock Option, respectively, with respect to one-third of the Option Shares (rounded down), the date that is one year from the date of grant of this Option, with respect to an additional one-third of the Option Shares (rounded down), the date that is two years from the date of grant of this Option and, with respect to the remaining one-third of the Option Shares, the date that is three years from the date of grant of this Option, or (ii) the date of the death, Disability or Retirement (each as defined in the Plan) of Optionee. Option exercises are subject, however, to the provisions of Section 5 of the Plan which generally requires that at the time of exercise (or, in the case of an event described in clause (ii), the date of termination of Optionee's employment with the Company and its subsidiaries) Optionee is or was employed by the Company or one or more of its subsidiaries and has been continuously employed by the Company or one or more of its subsidiaries for at least two years and since the date of grant. Once this Option becomes exercisable, it shall remain exercisable until its expiration as described in paragraph 3 below. To the extent Option Shares have been purchased pursuant to the exercise of this Option, such shares shall no longer be available for purchase hereunder. The date after which this Option may be exercised will be accelerated upon a Change in Control of the Company (as defined in the Plan) and upon such occurrence may be cashed out at the discretion of the Compensation and Benefits Committee on the terms described in Section 9 of the Plan. 3. This Option shall expire upon the date that is ten years from the date of grant or earlier as provided in Section 5 of the Plan which provides, among other things, that Options shall expire upon the first to occur of the following: (i) immediately upon the date of (A) the termination with the Company and its subsidiaries of Optionee's employment by the Company or any of its subsidiaries because of Optionee's deliberate gross misconduct (as determined by the Compensation and Benefits Committee), (B) Optionee's voluntary termination with the Company and its subsidiaries of employment other than for Disability or Retirement, or (C) Optionee's violation of (x) the noncompetition, or cooperation provisions of Section 5(g) of the Plan, or (y) the undertaking not to deliberately cause substantial harm to the Company as set forth in Section 5(g) of the Plan or (ii) the date that is three months from the date of the termination with the Company and its subsidiaries of Optionee's employment by the Company or any of its subsidiaries for any reason other than death, Disability, Retirement or deliberate gross misconduct (as determined by the Compensation and Benefits Committee). 4. To the extent any Incentive Stock Option granted hereby becomes exercisable for the first time in the aggregate amount of more than $100,000 (fair market value at time of grant) during any calendar year (including for this purpose any other Incentive Stock Options previously granted to the Optionee by the Company), such excess will be treated as a non-qualified stock option under U.S. federal tax provisions, if applicable. In addition, any such incentive stock option exercised by Optionee after three months after separation from service to the Company (or after one year after total and permanent disability) will be treated as a non-qualified stock option under applicable U.S. federal tax provisions. 5. In order to exercise this Option, Optionee must either (i) follow the procedures required by the third party processing administrator (the "processing administrator") designated by the Company's Treasurer, or (ii) if Optionee has not been notified of the designation of the processing administrator, send the Company's Treasurer an option exercise notice indicating the number of Option Shares for which the Option is to be exercised at that time and the form in which the certificates are to be registered for Option Shares purchased (in the name of Optionee (or a permitted Transferee (as defined in paragraph 7, below), or in Optionee's name and that of another person(s) as joint tenants with the right of survivorship). At the time of exercise, Optionee shall make payment of the Option Price for the Option Shares being purchased in accordance with the processing administrator's procedures or, if applicable, by submitting to the Company's Treasurer, together with the option exercise notice, such payment in the form of (x) a personal or bank check in U.S. Dollars payable to Wyeth and drawn on or payable at a United States bank, and/or (y) shares of the Company's common stock issued in Optionee's (or permitted Transferee's) name which were either (I) acquired by the Optionee from a person other than the Company or (II) held by the Optionee for at least six months, which shares shall be duly assigned to the Company, or (z) by any other form of consideration which has been approved by the Compensation and Benefits Committee, as and to the extent provided and permitted by Section 5(d) of the Plan. Notwithstanding anything to the contrary herein, the processing administrator, the Company or its subsidiaries shall have the right to deduct from the gross cash proceeds or the number of Option Shares to be delivered upon exercise of this Option or any similar options previously granted by the Company to Optionee such cash or the number of Option Shares, respectively, as may be necessary to satisfy the minimum amount of federal, state or local taxes or other deductions legally required to be withheld before disbursing the net proceeds (less any related administrative fees and expenses) or Option Shares to Optionee or in the alternative such parties may require Optionee to deliver to the processing administrator, the Company or its subsidiaries an amount of cash or number of shares of common stock of the Company to satisfy such fees, expenses and withholding before disbursing the net proceeds or Option Shares to Optionee. 6. This Agreement and this Option as well as the Company's obligation to sell and deliver Option Shares covered by this Option is subject to all federal, state and other laws, rules and regulations of the United States and/or of the country wherein Optionee resides or is employed. Compliance with any recording, protocolization or registration requirements and payment of any fees or taxes applicable to this Agreement or the transactions it contemplates are the exclusive responsibility of Optionee. 7. This Option is not transferable or assignable other than by will or by the laws of descent and distribution and may be exercised during Optionee's lifetime only by him or her except that the Optionee may irrevocably transfer all or a portion of the non-qualified stock options represented hereby to (i) the spouse (current or former), children, stepchildren, grandchildren or step-grandchildren of the Optionee ("Immediate Family Members"), (ii) a trust or trusts for the exclusive benefit of such Immediate Family Members, or (iii) a general or limited partnership or other entity in which such Immediate Family Members are the only partners or beneficial owners, provided that (x) there may be no consideration for any such transfer, (y) the Optionee submits to the Company an Option Transfer Form duly completed and executed by the Optionee and Transferee in the form attached as Exhibit A hereto, and (z) subsequent transfers shall be prohibited except by will or the laws of descent and distribution. Following transfer, any such Option shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, provided that for purposes of the Plan the term "Optionee" shall be deemed to include a permitted transferee hereunder (the "Transferee"), provided, however, that (i) the events of death, Disability, Retirement or other termination of employment (and any other provision regarding employment) described in paragraphs 2 and 3 of this Agreement and Sections 5(f) and 5(g) of the Plan shall continue to be applied with respect to the Optionee, and following any such events, the transferred Option shall be exercisable by the Transferee only to the extent, and for the periods specified in the Plan, and (ii) the cashless exercise program referred to in Section 5(d) of the Plan shall not apply to Transferee unless specifically permitted by the Compensation and Benefits Committee. If such Option is transferred to a Transferee, upon exercise of such Option, if any taxes are withheld from the proceeds remitted (in cash or stock) to Transferee or if the Transferee separately satisfies any withholding tax obligation, the amount of the withholding tax shall be deemed to be a loan from Transferee to Optionee. 8. After Optionee's death, the Option may be exercised only by Optionee's legal representative or legatee or such other person designated by an appropriate court as the person entitled to make such exercise or, subject to paragraph 7 above, by other Transferees. The Option may be exercised after Optionee's death by any permitted distributee or Transferee only to the extent that Optionee was entitled to exercise it at the time of Optionee's death. 9. In the event that this Agreement also contains a grant of a Stock Appreciation Right (an "SAR") in connection with the Option, the terms of the SAR shall be governed by the provisions of Section 6 of the Plan, provided, however, that any permitted transfer of an Option, in accordance with paragraph 7 hereof, shall result in the automatic termination of any SARs in tandem with such Option. 10. Subject to the express provisions of the Plan, this Agreement and the Plan are to be interpreted and administered by the Compensation and Benefits Committee, whose determination will be final. 11. By signing this Option Agreement, Optionee hereby unambiguously consents to and authorizes the disclosure of information related to the grant of the Option, including without limitation, information regarding Optionee's age, date of birth and details regarding the Option or any similar options previously granted by the Company, to Optionee, the Company, any third-party retained by the Company to administer the exercise of the Option, the Company's subsidiary(ies) currently and/or previously employing Optionee and governmental and regulatory authorities having jurisdiction over this Agreement or the transactions it contemplates. The purpose of the information transfer is to allow Optionee to exercise the Options in accordance with (i) the terms under which they were granted and (ii) applicable laws; the information disclosed will be retained for the period of time necessary to achieve this purpose. 12. This Agreement shall be governed by the laws of the State of Delaware and in accordance with such federal law as may be applicable. WYETH /s/ Robert Essner President and Chief Executive Officer Accepted and agreed to: - --------------------------------------- Optionee's Signature - --------------------------------------- Optionee's Social Security Number OPTION TRANSFER FORM Reference is made to the Stock Option, Agreement dated _____________________ (the "Agreement"), under which Wyeth (the "Company") granted to the undersigned transferor ("Optionee") non-qualified stock options covering _________________ shares of the Company's Common Stock under the [Year] Stock Incentive Plan (the "Plan"). Capitalized terms used herein without definition are used as defined in the Agreement and the Plan. The Optionee hereby transfers non-qualified stock options covering __________________ shares of the Company's Common Stock (the "Options") granted under the Plan pursuant to the Agreement to the following transferee (the "Transferee"): Name of person or entity Social security or tax ID number Type of entity (if applicable) Relationship to Optionee Address The Optionee and, by its execution of this form, the Transferee, hereby represent and warrant to the Company that the Transferee is a permitted transferee in accordance with paragraph 7 of the Agreement and under Section 5(h) of the Plan. It is understood and agreed by Optionee and Transferee that (i) the Compensation and Benefits Committee shall be entitled, in its sole discretion, to determine whether such transfer is in accordance with such requirements, and (ii) the Company and the Compensation and Benefits Committee shall be under no obligation to notify the Transferee of the termination date of any Option transferred hereunder. The Transferee hereby agrees, subject to paragraph 7 of the Agreement, to be bound by all of the terms, conditions and limitations set forth in the Agreement and the Plan binding upon the Optionee under the Agreement, and specifically understands that (i) the events of death, Disability, Retirement or other termination of employment (and any other provisions regarding employment) described in paragraphs 2 and 3 of the Agreement and Sections 5(f) and 5(g) of the Plan shall continue to be applied with respect to the Optionee, and following any such events, the transferred Options shall be exercisable by the Transferee only to the extent, and for the periods specified in the Plan, and (ii) the Options may not, without the consent of the Compensation and Benefits Committee, be transferred by the Transferee except by will or pursuant to the laws of descent and distribution. The Transferee understands and acknowledges that any shares of Common Stock purchased by the Transferee pursuant to the Options may not be registered under the Securities Act of 1933, as amended, and that such shares may contain a restrictive legend in substantially the form as set forth below (in addition to any legend required under applicable state securities laws): THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT. In order to enforce the foregoing, the Company may impose stop-transfer instructions with respect to such securities until such time as the Company is reasonably satisfied that such restrictions are no longer applicable to the sale of such securities. The Optionee further represents and warrants to the Company and the Transferee that (i) Optionee has delivered to the Transferee a copy of the Agreement and the Plan, (ii) Optionee has consulted with qualified income and estate tax advisors in determining to transfer the Options to the Transferee or waives any such requirement to do so and (iii) Optionee has considered and understands each of the following: 1. The transfer to the Transferee is irrevocable. 2. Optionee will not control the exercise of the Options once they have been transferred. 3. Optionee is assuming all of the risks and possible consequences associated with the transfer of the Options, and acknowledges that the Company and its representatives are not responsible or liable for any tax, penalty, judgment or outcome resulting from the transfer of the Options. OPTIONEE: TRANSFEREE: - ---------------------------------- --------------------------------- EX-10.23 8 inirspa.txt RSPA AGREEMENT (INITIAL AWARD) WYETH RESTRICTED STOCK PERFORMANCE AWARD AGREEMENT UNDER THE [YEAR] STOCK INCENTIVE PLAN DATE: NUMBER OF SHARES SUBJECT TO TARGET AWARD: [Name] [address] [address] Under the terms and conditions of this Agreement and of the Company's [year] Stock Incentive Plan (the "Plan"), a copy of which has been delivered to you and is made a part hereof, the Company hereby awards to you restricted stock units (the "Units") representing shares of the Company's Common Stock (the "Common Stock") subject to the restrictions set forth in this Agreement in the amount set forth above (the "Target Award"). Upon the satisfaction by the Company of certain performance criteria as described in Paragraph 3 of this Agreement, the Units will be converted into shares of the Company's Common Stock subject to certain restrictions (the "Restricted Stock") or Common Stock, in each case, on the terms and conditions set forth herein. Except as provided herein, the terms used in this Agreement shall have the same meanings as in the Plan. 1. Rights as Stockholders. Prior to the satisfaction of the performance criteria, no shares of the Company's Common Stock represented by the Units will be earmarked for you or your account nor shall you have any of the rights of a stockholder with respect to such shares. Upon issuance of the shares of Restricted Stock as of a Conversion Date (as defined herein) or Common Stock as of a Determination Date (as defined herein), as the case may be, you will be the owner of record of such shares and shall receive either (through book-entry form) a credit to an account maintained on your behalf or a stock certificate representing such shares of Common Stock and you shall be entitled to all of the rights of a stockholder of the Company, including the right to vote and the right to receive dividends, subject, in each case, to the provisions of Paragraph 4 and, in the case of Restricted Stock, subject to the restrictions set forth in paragraph 2 and the legend described in paragraph 7. If you receive any additional shares by reason of being the holder of Restricted Stock under this Agreement, all additional shares shall be subject to the provisions of this Agreement and certificates (or book-entry accounts) evidencing ownership of the additional shares thereon shall bear the legend. 2. Restricted Period. You may not sell, transfer, assign, pledge or otherwise encumber or dispose of any Units granted hereunder prior to their conversion to Restricted Stock or Common Stock. In addition, with respect to shares of Restricted Stock which have been converted upon satisfaction of the criteria set forth in Section 3(a) hereof, you may not sell, transfer, assign, pledge, or otherwise encumber or dispose of any such shares of Restricted Stock during the period (the "Restricted Period") from the date of this Agreement through the last Conversion Date. 3. Conversion to Restricted Stock. (a) At meetings of the Committee to be held within 60 days after the end of each of the current year and the two immediately succeeding years or at such other time or times as the Committee in its discretion deems appropriate, the Committee shall compare the EPS (as defined below) for such year with the EPS Target (as defined below) for such year (the date on which each such determination is made being referred to herein as a "Conversion Date"). If, on the date of such meeting, the Committee determines that, with respect to the preceding year: (i) EPS is less than 92.5% of the EPS Target, then all rights with respect to one-third of the Target Award (the "Annual Target Amount") shall be subject to subparagraph 3(b) below; (ii) EPS is greater than or equal to 92.5% of the EPS Target and less than or equal to 97% of the EPS Target, then Units representing 75% of the Annual Target Amount shall be converted into Restricted Stock and all rights with respect to the remaining portion of such Annual Target Amount shall be subject to subparagraph 3(b) below; (iii)EPS is greater than 97.5% of the EPS Target and less than or equal to 102.5% of the EPS Target, then Units representing the entire Annual Target Amount shall be converted into Restricted Stock; and (iv) EPS is greater than 102.5% of the EPS Target, then Units representing the entire Annual Target Amount shall be converted into Restricted Stock and you shall be entitled to receive an additional grant of Restricted Stock representing 25% of the Annual Target Amount (a "Bonus Award"); such additional grant to be made by the Committee at such meeting. (b) In the event that, with respect to any one or more of the three years covered by subparagraph (a) above, all or a portion of the Annual Target Amount is not converted to Restricted Stock on the applicable Conversion Date pursuant to subparagraph 3(a)(i) or (ii) above, or the Bonus Award is not earned pursuant to subparagraph 3(a)(iv) above (each, an "Unearned Bonus Award"), the Units represented by such Annual Target Amount or portion thereof, if any, shall be eligible for subsequent conversion to shares of Common Stock as provided in this subparagraph and the Unearned Bonus Award shall also be eligible to be earned. At a meeting of the Committee to be held on a date within 60 days after the end of (i) 2004, with respect to the unconverted Annual Target Amount or portion thereof relating to 2002, if any (the "2002 Amount") and/or the corresponding Unearned Bonus Award, if any, (ii) 2005, with respect to the unconverted Annual Target Amount or portion thereof relating to 2003, if any (the "2003 Amount") and/or the corresponding Unearned Bonus Award, if any, and (iii) 2006, with respect to the unconverted Annual Target Amount or portion thereof, if any (the "2004 Amount"), and/or the corresponding Unearned Bonus Award, if any, or in any such case on such other date as the Committee in its discretion deems appropriate (each, a "Determination Date") the Committee shall determine the Total Shareholder Return (as defined herein) of the Company and of each member of the Peer Group (as defined herein), and shall rank them comparatively, for the years (x) 2002 through 2004, with respect to the 2002 Amount (and the corresponding Unearned Bonus Award, if any), (y) 2003 through 2005, with respect to the 2003 Amount (and the corresponding Unearned Bonus Award, if any), and (z) 2004 through 2006, with respect to the 2004 Amount (and the corresponding Unearned Bonus Award, if any), and, in the event that the Company ranks within the highest three, then the 2002 Amount, the 2003 Amount or the 2004 Amount, as the case may be, shall be converted to Common Stock on the applicable Determination Date and/or you shall be entitled to receive the Unearned Bonus Award, if any, corresponding to such years, which award shall be granted by the Committee at such meeting, and if not, then such amounts shall be forfeited and all rights thereto shall be surrendered to the Company. (c) Notwithstanding anything to the contrary contained in this Agreement, Units shall be converted in whole numbers of shares only and, if necessary, (i) the Annual Target Amount shall be rounded up or down (A) to the nearest whole number for the first two years and (B) for the third year to equal, together with the Annual Target Amounts for the first two years, the Target Award; and (ii) the calculations based upon such amounts in subparagraphs 3(a)(ii) and 3(a)(iv) above shall be rounded up or down to the nearest whole number. (d) As used in this Agreement, the term: (i) "EPS" for any year means the earnings or net income per share of common stock of the Company for such year, adjusted to exclude the effect of extraordinary or unusual items of income or expense, all as determined in good faith by the Committee acting in its sole discretion. (ii) "EPS Target" shall be $2.53 for 2002 and, for 2003 and 2004, shall be the amount established by the Committee at a meeting to be held no later than March 1 of each such year; provided, however, that if for any reason the Committee shall determine that the EPS Target is no longer a practicable or appropriate measure of financial performance, the Committee may take action to substitute another financial measure as it deems appropriate under the circumstances. (iii)"Peer Group" shall consist of those companies listed on Annex A attached hereto which Annex may be amended from time to time as a result of circumstances, e.g., merger, consolidations, etc., deemed by the Committee in its sole discretion to warrant such amendment. (iv) "Total Shareholder Return" for any company for any period shall mean the percentage change in the per share stock market price of such company's common stock (or equivalent security) during such period (assuming that each of such company's per share dividends are reinvested in such security at the closing market per share price as of the last trading day of the calendar quarter in which the ex-dividend date for such dividend occurs) which shall be calculated in good faith by the Committee acting in its sole discretion. 4. Restricted Stock Trust. (a) Subject to Paragraph 4(b) below, you are eligible to make a one-time irrevocable election to cause the Company to contribute as of each Conversion Date and/or Determination Date (as applicable) the shares of Restricted Stock or Common Stock, issuable hereunder to the Restricted Stock Trust (as defined below) by completing the form set forth on Schedule A attached hereto wherein such shares of stock shall be held, subject to claims of the Company's creditors, until delivery to you under the terms of Paragraph 5 herein. Subject to Paragraph 4(b), below, if you do not make such election, such shares shall be delivered to you as provided in Paragraph 5(a)(i) of this Agreement. (b) Notwithstanding anything to the contrary contained in this Agreement, if you are, or, in the judgment of the Committee, are expected to be a Named Executive Officer with respect to any year in which a Conversion Date or a Determination Date occurs, then you will be deemed to have made the election under Paragraph 4(a) above to have the Restricted Stock or Common Stock into which Units shall be converted on such date and thereafter contributed to the Restricted Stock Trust. (c) For purposes of this Agreement: (i) "Named Executive Officer" shall mean the Chief Executive Officer of the Company or any of the four highest compensated officers (other than the Chief Executive Officer of the Company) whose total compensation payable is required to be reported to shareholders under the Securities Exchange Act of 1934, as amended (the "1934 Act"); and (ii) "Restricted Stock Trust" means the trust fund established under the Restricted Stock Trust Agreement dated as of April 20, 1994 as amended (the "Trust Agreement") to accommodate the deferral of delivery of shares of Common Stock and/or Restricted Stock represented by Units (and any dividends paid thereon) as provided in Paragraph 5(a)(ii) of this Agreement, which trust fund is subject to the claims of the Company's general creditors under federal and state law in the event of insolvency of the Company as described in the Trust Agreement. 5. Delivery of Shares of Common Stock. (a) Subject to Paragraphs 4 and 9 of this Agreement, as soon as practicable after the Restricted Period, all shares of Restricted Stock granted hereunder shall be cancelled and in replacement thereof, or, in the case of Units converted to Common Stock, on any Determination Date following the termination of the Restricted Period, you shall receive either (through book-entry form) a credit to an account maintained on your behalf or a certificate representing the Common Stock free of any restrictive legend other than as may be required by applicable state or federal securities law, with such Common Stock to be either (i) so delivered to you promptly or (ii) if you have made or are deemed to have made the election under Paragraph 4 above, contributed to the Restricted Stock Trust, in which case such shares shall be maintained in the Restricted Stock Trust and delivery shall be deferred in accordance with the election set forth on Schedule A attached hereto, or if either (1) no such election is made or (2) your employment with the Company is terminated prior to Retirement for any reason (including death), delivery shall be made on the first business day of the calendar year following your termination of employment or as otherwise provided in the Trust Agreement. (b) Notwithstanding any other provisions hereof, the number of shares of Common Stock which shall be delivered to you pursuant to Paragraph 5(a) either directly or from the Restricted Stock Trust shall be (i) the number of such shares which would have been delivered in the absence of this Paragraph 5(b) minus (ii) the number of whole shares of Common Stock necessary to satisfy the minimum federal, state and/or local income tax withholding obligations which are imposed on the Company by applicable law in respect of the delivery of such award as well as other withholding obligations (e.g., Social Security and Medicare) which may be due and payable under applicable law as of the lapse of the Restricted Period as defined in Paragraph 2, whether or not delivery of such shares is deferred under Paragraph 4 (and which may be satisfied by the reduction effected hereby in the number of deliverable shares), it being understood that the value of the shares referred to in clause (ii) above shall be determined, for the purposes of satisfying such withholding obligations, on the basis of the average of the high and low per share prices for the Common Stock as reported on the Consolidated Transaction Reporting System on the designated date of delivery, or on such other reasonable basis for determining fair market value as the Committee may from time to time adopt. 6. Termination of Employment. (a) Subject to Section 7(f) of the Plan, in the event of your termination of employment during the Restricted Period for any reason other than death, Disability or Retirement, you shall forfeit all rights to all Units and Restricted Stock granted hereunder and you agree (i) to assign, transfer, and deliver the Restricted Stock and all rights to any unconverted Units to the Company and (ii) that you shall cease to be a shareholder of the Company with respect to such Restricted Stock, provided the Committee may provide for a partial or complete exception to this requirement as it deems equitable in its sole discretion. (b) In the event that your employment is terminated due to Disability or Retirement, or in the event of your death, vesting of all shares of Restricted Stock covered by the Target Award and any related Bonus Award and delivery of the shares of Common Stock of the Company represented thereby will be made to you or your designated beneficiary or your legal representative, legatee or such other person designated by an appropriate court as entitled to receive the same, as the case may be, on the terms and, subject to the conditions of this Agreement, including Paragraph 3 above. 7. Legend. Each book-entry or certificate evidencing ownership of Restricted Stock issued during the Restricted Period shall bear the following legend: "These shares have been issued or transferred subject to a Restricted Stock Performance Award and are subject to substantial restrictions, including a prohibition against transfer and a provision requiring transfer of these shares to the Company without payment in the event of termination of the employment of the registered owner under certain circumstances all as more particularly set forth in a Restricted Stock Performance Award Agreement dated April 25, 2002, a copy of which is on file with the Company." 8. Miscellaneous. This Agreement may not be amended except in writing and neither the existence of the Plan and this Agreement nor the Target Award granted hereby shall create any right to continue to be employed by the Company or its subsidiaries and your employment will continue to be at will and terminable at will by the Company. In the event of a conflict between this Agreement and the Plan, the Plan shall govern. 9. Compliance With Laws. (a) This Agreement shall be governed by the laws of the state of Delaware and any applicable laws of the United States. Notwithstanding anything herein to the contrary, the Company shall not be obligated to cause to be delivered any Restricted Stock or shares of Common Stock of the Company represented thereby pursuant to this Agreement unless and until the Company is advised by its counsel that the issuance of such shares either (through book-entry form) by a credit to an account maintained on your behalf or by delivery of certificates representing such shares is in compliance with all applicable laws and regulations of governmental authority. The Company shall in no event be obliged to register any securities pursuant to the Securities Act of 1933 (as now in effect or as hereafter amended) or to take any other action in order to cause the issuance of such shares either (through book-entry form) by a credit to an account maintained on your behalf or by delivery of certificates representing such shares to comply with any such law or regulation. (b) If you are subject to Section 16 of the 1934 Act, transactions under the Plan and this Agreement are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the 1934 Act. To the extent any provision of the Plan, this Agreement or action by the Committee involving you is deemed not to comply with an applicable condition of Rule 16b-3, such provision or action shall be deemed null and void as to you, to the extent permitted by law and deemed advisable by the Committee. Moreover, in the event the Plan and/or this Agreement does not include a provision required by Rule 16b-3 to be stated therein, such provision (other than one relating to eligibility requirements or the price and amount of awards as applicable) shall be deemed automatically to be incorporated by reference into the Plan and/or this Agreement insofar as you are concerned, with such incorporation to be deemed effective as of the effective date of such Rule 16b-3 provision. WYETH By: Vice President and Treasurer Accepted and agreed to: Name (Please Print) Social Security Number Signature Date of Birth SCHEDULE A ELECTION FORM (To Be Completed in Conjunction with Your Restricted Stock Performance Award Agreement) I, , hereby make an election to defer distribution of all shares of Common Stock or Restricted Stock issuable to me pursuant to the Restricted Stock Performance Award Agreement (the "Agreement"), less those shares necessary to satisfy any applicable withholding obligation under Paragraph 5(b) of the Agreement and to cause the Company to contribute such shares to the Restricted Stock Trust (with any dividends thereon to be reinvested under BuyDIRECT, a direct purchase and sale plan for Wyeth Common Stock). See Note Below I, , hereby make an election to receive a distribution of such number of shares in the Restricted Stock Trust under the Agreement to which I am entitled in substantially equal annual installments over a period not to exceed ten years as follows, commencing at the time indicated by my election as set forth below, subject to the provisions of the Agreement, including Paragraph 5 thereof (provided, however, that in the event of my death all remaining installments shall be accelerated and promptly distributed): Circle the number of annual installments: 2 3 4 5 6 7 8 9 10 Indicate your election: Commencing after: ___ Retirement (as defined in the Plan) ___ Specific date to commence distribution after my Retirement Date but in no event shall any annual installment be made after the tenth anniversary of my Normal Retirement Date (age 65). Indicate specific date: ____________________ month/day/year These elections shall be irrevocable upon execution of the Agreement. Signature of Executive Dated: Witnessed: NOTE: 1. If you are or are expected to be a Named Executive Officer with respect to any year in which a Conversion Date or Determination Date occurs, you will be deemed to have elected deferred distribution hereunder. Beneficiary Designation In the event of my death, I designate the following beneficiary(ies) to receive any shares of the Company's Common Stock to be distributed to me or which have been deferred on my behalf to the Restricted Stock Trust under this Agreement together with any dividends thereon. Beneficiary(ies) Contingent Beneficiary(ies) Signature of Executive Dated: Witnessed: Annex A Peer Group Abbott Laboratories Bristol-Myers Squibb Company Eli Lilly and Company Johnson & Johnson Merck & Co., Inc. Pfizer Inc. Schering-Plough Corporation EX-10.24 9 rspa.txt RSPA AGREEMENT (SUBSEQUENT AWARD) WYETH RESTRICTED STOCK PERFORMANCE AWARD AGREEMENT UNDER THE [YEAR] STOCK INCENTIVE PLAN DATE: NUMBER OF SHARES SUBJECT TO TARGET AWARD: Under the terms and conditions of this Agreement and of the Company's [year] Stock Incentive Plan (the "Plan"), a copy of which has been delivered to you and is made a part hereof, the Company hereby awards to you restricted stock units (the "Units") representing shares of the Company's Common Stock (the "Common Stock") subject to the restrictions set forth in this Agreement in the amount set forth above (the "Target Award"). Upon the satisfaction by the Company of certain performance criteria as described in Paragraph 3 of this Agreement, the Units will be converted into shares of the Company's Common Stock, on the terms and conditions set forth herein. Except as provided herein, the terms used in this Agreement shall have the same meanings as in the Plan. 1. Rights as Stockholders. Prior to the satisfaction of the performance criteria, no shares of the Company's Common Stock represented by the Units will be earmarked for you or your account nor shall you have any of the rights of a stockholder with respect to such shares. Upon issuance of the shares of Common Stock as of the Conversion Date (as defined herein) or the Determination Date (as defined herein), as the case may be, you will be the owner of record of such shares and shall receive either (through book-entry form) a credit to an account maintained on your behalf or a stock certificate representing such shares of Common Stock and you shall be entitled to all of the rights of a stockholder of the Company, including the right to vote and the right to receive dividends, subject to the provisions of Paragraph 4. 2. Restricted Period. During the period (the "Restricted Period") from the date of this Agreement through the Conversion Date (with respect to the Units converted on such date) and the Determination Date (with respect to the remaining Units, if any), you may not sell, transfer, assign, pledge, or otherwise encumber or dispose of the Units granted hereunder. 3. Conversion to Common Stock. (a) At a meeting of the Committee to be held within 60 days after the end of 2004 or at such other time or times as the Committee in its discretion deems appropriate, the Committee shall compare the EPS (as defined below) with the EPS Target (as defined below) for such year. If, on the date of such meeting (the "Conversion Date"), the Committee determines that: (i) EPS is less than 92.5% of the EPS Target, then all rights with respect to the Target Award shall be subject to subparagraph 3(b) below; (ii) EPS is greater than or equal to 92.5% of the EPS Target and less than or equal to 97% of the EPS Target, then Units representing 75% of the Target Award shall be converted into Common Stock and all rights with respect to the remaining portion of such Target Award shall be subject to subparagraph 3(b) below; (iii) EPS is greater than 97.5% of the EPS Target and less than or equal to 102.5% of the EPS Target, then Units representing the entire Target Award shall be converted into Common Stock; and (iv) EPS is greater than 102.5% of the EPS Target, then Units representing the entire Target Award shall be converted into Common Stock and you shall be entitled to receive an additional grant of Common Stock representing 25% of the Target Award (a "Bonus Award"); such additional grant to be made by the Committee at such meeting. (b) In the event that all or a portion of the Target Award is not converted to Common Stock on the Conversion Date pursuant to subparagraphs 3(a)(i) or (ii) above, or the Bonus Award is not earned pursuant to subparagraph 3(a)(iv) above (an "Unearned Bonus Award"), the Units represented by such Target Award or portion thereof shall be eligible for subsequent conversion to shares of Common Stock as provided in this subparagraph and the Unearned Bonus Award shall also be eligible to be earned. At a meeting of the Committee to be held on a date within 60 days after the end of 2006 or on such other date as the Committee in its discretion deems appropriate (the "Determination Date"), the Committee shall determine the Total Shareholder Return (as defined herein) of the Company and of each member of the Peer Group (as defined herein), and shall mark them comparatively, for the years 2004 through 2006 and, in the event that the Company ranks within the highest three, then Units representing the Target Award or portion thereof shall be converted to Common Stock on the applicable Determination Date and/or you shall be entitled to receive the Unearned Bonus Award, if any, which award shall be granted by the Committee at such meeting, and if not, then such amounts shall be forfeited and all rights thereto shall be surrendered to the Company. (c) Notwithstanding anything to the contrary contained in this Agreement, Units shall be converted into Common Stock, in whole numbers of shares only and, if necessary, the calculations based upon such amounts in subparagraphs 3(a)(ii) and 3(a)(iv) above shall be rounded up or down to the nearest whole number. (d) As used in this Agreement, the term: (i) "EPS" means the earnings or net income per share of common stock of the Company for 2004, adjusted to exclude the effect of extraordinary or unusual items of income or expense, all as determined in good faith by the Committee acting in its sole discretion. (ii) "EPS Target" shall be the amount established by the Committee at a meeting to be held no later than March 1, 2004; provided, however, that if for any reason the Committee shall determine that the EPS Target is no longer a practicable or appropriate measure of financial performance, the Committee may take action to substitute another financial measure as it deems appropriate under the circumstances. (iii) "Peer Group" shall consist of those companies listed on Annex A attached hereto which Annex may be amended from time to time as a result of circumstances, e.g., merger, consolidations, etc., deemed by the Committee in its sole discretion to warrant such amendment. (iv) "Total Shareholder Return" for any company for any period shall mean the percentage change in the per share stock market price of such company's common stock (or equivalent security) during such period (assuming that each of such company's per share dividends are reinvested in such security at the closing market per share price as of the last trading day of the calendar quarter in which the ex-dividend date for such dividend occurs) which shall be calculated in good faith by the Committee acting in its sole discretion. 4. Restricted Stock Trust. (a) Subject to Paragraph 4(b) below, you are eligible to make a one-time irrevocable election to cause the Company to contribute as of the Conversion Date and the Determination Date, the shares of Common Stock issuable hereunder, to the Restricted Stock Trust (as defined below) by completing the form set forth on Schedule A attached hereto wherein such shares of stock shall be held, subject to claims of the Company's creditors, until delivery to you under the terms of Paragraph 5 herein. Subject to Paragraph 4(b), below, if you do not make such election, such shares shall be delivered to you as provided in Paragraph 5(a)(i) of this Agreement. (b) Notwithstanding anything to the contrary contained in this Agreement, if you are or, in the judgment of the Committee, are expected to be a Named Executive Officer with respect to the year in which the Conversion Date or the Determination Date occurs, then you will be deemed to have made the election under Paragraph 4(a) above to have the Common Stock issuable hereunder as of such date and thereafter contributed to the Restricted Stock Trust. (c) For purposes of this Agreement: (i) "Named Executive Officer" shall mean the Chief Executive Officer of the Company or any of the four highest compensated officers (other than the Chief Executive Officer of the Company) whose total compensation payable is required to be reported to shareholders under the Securities Exchange Act of 1934, as amended (the "1934 Act"); and (ii) "Restricted Stock Trust" means the trust fund established under the Restricted Stock Trust Agreement, dated as of April 20, 1994 as amended (the "Trust Agreement"), to accommodate the deferral of delivery of shares of Common Stock represented by Units (and any dividends paid thereon) as provided in Paragraph 5(a)(ii) of this Agreement, which trust fund is subject to the claims of the Company's general creditors under federal and state law in the event of insolvency of the Company as described in the Trust Agreement. 5. Delivery of Shares of Common Stock. (a) Subject to Paragraphs 4 and 9 of this Agreement, as soon as practicable after each of the Conversion Date and the Determination Date, all shares of Common Stock, if any, to be issued to you as of any such date, shall be issued either (through book-entry form) by a credit to an account maintained on your behalf or a certificate representing the Common Stock free of any restrictive legend other than as may be required by applicable state or federal securities law, with such Common Stock to be either (i) so delivered to you promptly or (ii) if you have made or are deemed to have made the election under Paragraph 4 above, contributed to the Restricted Stock Trust, in which case such shares shall be maintained in the Restricted Stock Trust and delivery shall be deferred in accordance with the election set forth on Schedule A attached hereto, or if either (1) no such election is made or (2) your employment with the Company is terminated prior to Retirement for any reason (including death), delivery shall be made on the first business day of the calendar year following your termination of employment or as otherwise provided in the Trust Agreement. (b) Notwithstanding any other provisions hereof, the number of shares of Common Stock which shall be delivered to you pursuant to Paragraph 5(a) either directly or from the Restricted Stock Trust shall be (i) the number of such shares which would have been delivered in the absence of this Paragraph 5(b) minus (ii) the number of whole shares of Common Stock necessary to satisfy the minimum federal, state and/or local income tax withholding obligations which are imposed on the Company by applicable law in respect of the delivery of such award as well as other withholding obligations (e.g. Social Security and Medicare) which may be due and payable under applicable law as of the lapse of the Restricted Period as defined in Paragraph 2, whether or not delivery of such shares is deferred under Paragraph 4 (and which may be satisfied by the reduction effected hereby in the number of deliverable shares), it being understood that the value of the shares referred to in clause (ii) above shall be determined, for the purposes of satisfying such withholding obligations, on the basis of the average of the high and low per share prices for the Common Stock as reported on the Consolidated Transaction Reporting System on the designated date of delivery, or on such other reasonable basis for determining fair market value as the Committee may from time to time adopt. 6. Termination of Employment. (a) Subject to Section 7(f) of the Plan, in the event of your termination of employment during the Restricted Period for any reason other than death, Disability or Retirement, you shall forfeit all rights to all Units granted hereunder and you agree to assign, transfer, and deliver such Units to the Company, provided, the Committee may provide for a partial or complete exception to this requirement as it deems equitable in its sole discretion. (b) In the event that your employment is terminated due to Disability or Retirement, or in the event of your death, vesting of Units relating to the Target Award and any related Bonus Award and delivery of the shares of Common Stock of the Company represented thereby will be made to you or your designated beneficiary or your legal representative, legatee or such other person designated by an appropriate court as entitled to receive the same, as the case may be, on the terms and, subject to the conditions of this Agreement, including Paragraph 3 above. 7. [Reserved]. 8. Miscellaneous. This Agreement may not be amended except in writing and neither the existence of the Plan and this Agreement nor the Target Award granted hereby shall create any right to continue to be employed by the Company or its subsidiaries and your employment will continue to be at will and terminable at will by the Company. In the event of a conflict between this Agreement and the Plan, the Plan shall govern. 9. Compliance With Laws. (a) This Agreement shall be governed by the laws of the state of Delaware and any applicable laws of the United States. Notwithstanding anything herein to the contrary, the Company shall not be obligated to cause to be delivered any Units or shares of Common Stock of the Company represented thereby pursuant to this Agreement unless and until the Company is advised by its counsel that the issuance of such shares either (through book-entry form) by a credit to an account maintained on your behalf or by delivery of certificates representing such shares is in compliance with all applicable laws and regulations of governmental authority. The Company shall in no event be obliged to register any securities pursuant to the Securities Act of 1933 (as now in effect or as hereafter amended) or to take any other action in order to cause the issuance of such shares either (through book-entry form) by a credit to an account maintained on your behalf or by delivery of certificates representing such shares to comply with any such law or regulation. (b) If you are subject to Section 16 of the 1934 Act, transactions under the Plan and this Agreement are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the 1934 Act. To the extent any provision of the Plan, this Agreement or action by the Committee involving you is deemed not to comply with an applicable condition of Rule 16b-3, such provision or action shall be deemed null and void as to you, to the extent permitted by law and deemed advisable by the Committee. Moreover, in the event the Plan and/or this Agreement does not include a provision required by Rule 16b-3 to be stated therein, such provision (other than one relating to eligibility requirements or the price and amount of awards as applicable) shall be deemed automatically to be incorporated by reference into the Plan and/or this Agreement insofar as you are concerned, with such incorporation to be deemed effective as of the effective date of such Rule 16b-3 provision. WYETH By: ---------------------------------- Vice President and Treasurer Accepted and agreed to: Name (Please Print) Social Security Number Signature Date of Birth SCHEDULE A ELECTION FORM (To Be Completed in Conjunction with Your Restricted Stock Performance Award Agreement) I, , hereby make an election to defer distribution of all shares of Common Stock issuable to me pursuant to the Restricted Stock Performance Award Agreement (the "Agreement") less those shares necessary to satisfy any applicable withholding obligation under Paragraph 5(b) of the Agreement and to cause the Company to contribute such shares to the Restricted Stock Trust (with any dividends thereon to be reinvested under BuyDIRECT, a direct purchase and sale plan for Wyeth Common Stock). See Note Below I, , hereby make an election to receive a distribution of such number of shares in the Restricted Stock Trust under the Agreement to which I am entitled in substantially equal annual installments over a period not to exceed ten years as follows commencing, at the time indicated by my election as set forth below, subject to the provisions of the Agreement, including Paragraph 5, thereof (provided, however, that in the event of my death all remaining installments shall be accelerated and distributed promptly): Circle the number of annual installments: 2 3 4 5 6 7 9 10 Indicate your election: Commencing after: ___ Retirement (as defined in the Plan) ___ Specific date to commence distribution after my Retirement Date but in no event shall any annual installment be made after the tenth anniversary of my Normal Retirement Date (age 65). Indicate specific date: ____________________ month/day/year These elections shall be irrevocable upon execution of the Agreement. Signature of Executive Dated: ------------------------------------------------------- Witnessed: ---------------------------------------------------- NOTE:1. If you are or are expected to be a Named Executive Officer with respect to any year in which a Conversion Date or Determination Date occurs, you will be deemed to have elected deferred distribution hereunder. Beneficiary Designation In the event of my death, I designate the following beneficiary (ies) to receive any shares of the Company's Common Stock to be distributed to me or which have been deferred on my behalf to the Restricted Stock Trust under this Agreement together with any dividends thereon. Beneficiary (ies) Contingent Beneficiary (ies) Signature of Executive Dated: ---------------------------------------------------- ------------------------------------------------ Annex A Peer Group Abbott Laboratories Bristol-Myers Squibb Company Eli Lilly and Company Johnson & Johnson Merck & Co., Inc. Pfizer Inc. Schering-Plough Corporation EX-10.25 10 transessner.txt SPECIAL OPTION AGREEMENT (ESSNER) AMERICAN HOME PRODUCTS CORPORATION SPECIAL STOCK OPTION AGREEMENT (Transferable Option) UNDER: 1996 STOCK INCENTIVE PLAN ROBERT ESSNER DATED: 06/21/2001 [address] [address] OPTION PRICE: $62.40 INCENTIVE STOCK OPTION SHARES: NON-QUALIFIED STOCK OPTION SHARES: 630,000 1. Under the terms and conditions of this Agreement and of the American Home Products Corporation (the "Company") Stock Incentive Plan set forth above (the "Plan"), a copy of which is attached hereto and incorporated herein by reference, the Company hereby grants to the Optionee an option or options (together, the "Option") to purchase the number of shares of the Company's common stock as specified above ("Option Shares") at the option price also above specified. Capitalized terms not otherwise defined herein have the meanings assigned to them in the Plan. 2. This Option may be exercised, in whole or in part from time to time in any whole number of Option Shares, upon and after the earlier of (i) the date that is three years from the date of grant of this Option, or (ii) the date of the death, Disability or Retirement (each as defined in the Plan) of Optionee, subject to the provisions of Section 5 of the Plan which generally requires that at the time of exercise or the date of termination of Optionee's employment with the Company and its subsidiaries, the Optionee is or was employed by the Company or one or more of its subsidiaries and has been continuously employed by the Company or one or more of its subsidiaries for at least two years and since the date of grant. Once this Option becomes exercisable, it shall remain exercisable until its expiration as described in paragraph 3 below. To the extent Option Shares have been purchased pursuant to the exercise of this Option, such shares shall no longer be available for purchase hereunder. The date after which this Option may be exercised will be accelerated upon a Change in Control of the Company (as defined in the Plan) and upon such occurrence may be cashed out at the discretion of the Compensation and Benefits Committee on the terms described in Section 9 of the Plan. 3. This Option shall expire upon the date that is ten years from the date of grant or earlier as provided in Section 5 of the Plan which provides, among other things, that Options shall expire upon the first to occur of the following: (i) the date that is three months from the date of the termination of Optionee's employment with the Company and its subsidiaries by the Company or any of its subsidiaries for any reason other than death, Disability, Retirement or deliberate gross misconduct (as determined by the Compensation and Benefits Committee), or (ii) immediately upon the date of (A) the termination of Optionee's employment with the Company and its subsidiaries by the Company or any of its subsidiaries because of Optionee's deliberate gross misconduct (as determined by the Compensation and Benefits Committee), (B) Optionee's voluntary termination of employment with the Company and its subsidiaries other than for Disability or Retirement, or (C) Optionee's violation of (x) the noncompetition, or cooperation provisions of Section 5(g) of the Plan, or (y) the undertaking not to deliberately cause substantial harm to the Company as set forth in Section 5(g) of the Plan. 4. To the extent any Incentive Stock Option granted hereby becomes exercisable for the first time in the aggregate amount of more than $100,000 (fair market value at time of grant) during any calendar year (including for this purpose any other Incentive Stock Options previously granted to the Optionee by the Company), such excess will be treated as a non-qualified stock option under U.S. federal tax provisions, if applicable. In addition, any such incentive stock option exercised by Optionee after three months after separation from service to the Company (or after one year after total and permanent disability) will be treated as a non-qualified stock option under applicable U.S. federal tax provisions. 5. This Option may be exercised by sending the Treasurer of the Company an option exercise notice indicating the number of Option Shares for which the Option is to be exercised at that time and the form in which the certificates are to be registered for Option Shares purchased in the name of the Optionee (or a permitted Transferee (as defined in paragraph 7, below), or in Optionee's name and that of another person(s) as joint tenants with the right of survivorship). This notice shall be accompanied by payment of the Option Price for the Option Shares being purchased in the form of (i) personal or bank check in U.S. Dollars payable to American Home Products Corporation and drawn on or payable at a United States bank, and/or (ii) shares of the Company's common stock issued in the Optionee's (or permitted Transferee's) name and duly assigned to the Company, or (iii) by any other form of consideration which has been approved by the Compensation and Benefits Committee, as and to the extent provided and permitted by Section 5(d) of the Plan. Notwithstanding anything to the contrary herein, the Company or its subsidiaries, as appropriate, shall have the right to deduct from the number of Option Shares to be delivered upon exercise such number of Option Shares as may be necessary to satisfy all federal, state or local taxes or other deductions legally required to be withheld or in the alternative may require the Optionee to deliver to the Company or a subsidiary an amount of cash or number of shares of common stock of the Company to satisfy such withholding. 6. This Agreement and this Option as well as the Company's obligation to sell and deliver Option Shares covered by this Option is subject to all federal, state and other laws, rules and regulations of the United States and/or of the country wherein the Optionee resides or is employed. Compliance with any recording, protocolization or registration requirements and payment of any fees or taxes applicable to this Agreement or the transactions it contemplates are the exclusive responsibility of the Optionee. 7. This Option is not transferable or assignable other than by will or by the laws of descent and distribution and may be exercised during the Optionee's lifetime only by Optionee except that the Optionee may irrevocably transfer all or a portion of the non-qualified stock options represented hereby to (i) the spouse (current or former), children, stepchildren, grandchildren or step-grandchildren of the Optionee ("Immediate Family Members"), (ii) a trust or trusts for the exclusive benefit of such Immediate Family Members, or (iii) a general or limited partnership or other entity in which such Immediate Family Members are the only partners or beneficial owners, provided that (x) there may be no consideration for any such transfer, (y) the Optionee submits to the Company an Option Transfer Form duly completed and executed by the Optionee and Transferee in the form attached as Exhibit A hereto, and (z) subsequent transfers shall be prohibited except by will or the laws of descent and distribution. Following transfer, any such Option shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, provided that for purposes of the Plan the term "Optionee" shall be deemed to include a permitted transferee hereunder (the "Transferee"), provided, however, that (i) the events of death, Disability, Retirement or other termination of employment (and any other provision regarding employment) described in paragraphs 2 and 3 of this Agreement and Sections 5(f) and 5(g) of the Plan shall continue to be applied with respect to the Optionee, and following any such events, the transferred Option shall be exercisable by the Transferee only to the extent, and for the periods specified in the Plan, (ii) the cashless exercise program referred to in Section 5(d) of the Plan shall not apply to Transferee unless specifically permitted by the Compensation and Benefits Committee, and (iii) Section 6A of the Plan shall not apply to Transferee. If such Option is transferred to a Transferee, upon exercise of such Option, if any taxes are withheld from the proceeds remitted (in cash or stock) to Transferee or if the Transferee separately satisfies any withholding tax obligation, the amount of the withholding tax shall be deemed to be a loan from Transferee to Optionee. 8. After the Optionee's death, the Option may be exercised only by the Optionee's legal representative or legatee or such other person designated by an appropriate court as the person entitled to make such exercise or, subject to paragraph 7 above, by other Transferees. The Option may be exercised after the Optionee's death by any permitted distributee or Transferee only to the extent that he or she was entitled to exercise it at the time of Optionee's death. 9. In the event that this Agreement also contains a grant of a Stock Appreciation Right (an "SAR") in connection with the Option, the terms of the SAR shall be governed by the provisions of Section 6 of the Plan, provided, however, that any permitted transfer of an Option, in accordance with paragraph 7 hereof, shall result in the automatic termination of any SARs in tandem with such Option. 10. Subject to the express provisions of the Plan, this Agreement and the Plan are to be interpreted and administered by the Compensation and Benefits Committee, whose determination will be final. 11. This Agreement shall be governed by the laws of the State of Delaware and in accordance with such federal law as may be applicable. AMERICAN HOME PRODUCTS CORPORATION Vice President and Treasurer Accepted and agreed to: - --------------------------------------- Optionee's Signature - --------------------------------------- Optionee's Social Security Number EX-10.26 11 specessner.txt SPECIAL RSA AGREEMENT (ESSNER) AMERICAN HOME PRODUCTS CORPORATION RESTRICTED STOCK AWARD AGREEMENT UNDER THE 1996 STOCK INCENTIVE PLAN DATE: June 21, 2001 NUMBER OF SHARES UNDERLYING RESTRICTED STOCK UNITS: 33,624 ------------------------------ Robert Essner [address] [address] Under the terms and conditions of this Agreement and of the Company's 1996 Stock Incentive Plan (the "Plan"), a copy of which has been delivered to you and is made a part hereof, the Company hereby awards to you Restricted Stock units (the "Units") representing shares of the Company's common stock (the "Common Stock") subject to the restrictions set forth in this Agreement in the amount set forth above. Except as provided herein, the terms used in this Agreement shall have the same meanings as in the Plan. 1. No Rights as Stockholders. No shares of the Company's Common Stock represented by the Units will be earmarked for you or your account, you shall not have any of the rights of a stockholder with respect to such shares and you may not sell, transfer, assign, pledge, or otherwise encumber or dispose of any Units until actual conversion of Units to Common Stock pursuant to Paragraph 2 hereof. Upon issuance of shares of Common Stock as of the Conversion Date (as defined herein), you will be the owner of record of such shares of Common Stock and shall receive either (through book-entry form) a credit to an account maintained on your behalf or a stock certificate representing such shares of Common Stock and shall be entitled to all of the rights of a stockholder of the Company, including the right to vote and to receive dividends, subject to the provisions of Paragraph 4. 2. Conversion of Units to Common Stock. (a) Subject to Paragraph 3 hereof, on June 21, 2004 (the "Conversion Date") the Units shall be converted to Common Stock, and the Company shall promptly issue either (through book-entry form) a credit to an account maintained on your behalf or a stock certificate representing such shares in accordance with Paragraph 3 below free of any restrictive legend, other than as may be required by applicable state or federal securities law, and either (i) delivered to you promptly or (ii) if you have made or are deemed to have made the election under Paragraph 4, contributed to the Restricted Stock Trust, (as defined herein) in which case such shares shall be maintained in the Restricted Stock Trust and delivery shall be deferred until after your Retirement (as defined under the Company's 1999 Stock Incentive Plan) in accordance with the election set forth on Schedule A attached hereto, or if either (1) no such election is made or (2) your employment with the Company is terminated prior to Retirement for any reason (including death), delivery shall be made on the first business day of the calendar year following your termination of employment or as otherwise provided in the Trust Agreement. (b) Notwithstanding any other provisions hereof, the number of shares of Common Stock which shall be delivered to you pursuant to Paragraph 2(a) either directly or from the Restricted Stock Trust shall be (i) the number of such shares which would have been delivered in the absence of this Paragraph 2(b) minus (ii) the number of whole shares of Common Stock necessary to satisfy the minimum federal, state and/or local income tax withholding obligations which are imposed on the Company by applicable law in respect of the delivery of such award as well as other withholding obligations (e.g., Social Security and Medicare) which may be due and payable under applicable law on the Conversion Date whether or not delivery of such shares is deferred under Paragraph 4 (and which may be satisfied by the reduction effected hereby in the number of deliverable shares), it being understood that the value of the shares referred to in clause (ii) above shall be determined, for the purposes of satisfying such withholding obligations, on the basis of the average of the high and low per share prices for the Common Stock as reported on the Consolidated Transaction Reporting System on the designated date of delivery, or on such other reasonable basis for determining fair market value as the Committee may from time to time adopt. 3. Termination of Employment. (a) Subject to Section 7(f) of the Plan, in the event of termination of your employment during the term of this Agreement, except as provided in Paragraph 3(b) or 3(c) below, you shall forfeit all rights to all Units subject to this Agreement which have not been converted to Common Stock and this Agreement shall terminate with no further force and effect; provided, however, that the Committee may provide for a partial or complete exception to this requirement as it deems equitable in its sole discretion. (b) Notwithstanding Paragraph 3(a) above, in the event that your employment is terminated due to death, Disability (as defined under the Company's 1999 Stock Incentive Plan) or Retirement, conversion of all Units and delivery of the shares of Common Stock represented thereby (subject to any applicable tax withholding as described in Paragraph 2(b) above) will be made to you or your designated beneficiary or your legal representative, legatee or such other person designated by an appropriate court as entitled to receive the same, as the case may be, in accordance with Paragraph 2(a) and, subject to Paragraphs 2(a) and 4, such shares of Common Stock shall be free and clear of all restrictions, other than as may be required by applicable state or federal securities law. (c) Notwithstanding Paragraph 3(a) above, in the event that your employment is terminated either (i) by the Company without conduct by you constituting Cause (as defined herein) or (ii) by you under circumstances constituting Good Reason (as defined herein), conversion of all Units and delivery of the shares of Common Stock represented thereby will be made to you as soon as practicable and such shares of Common Stock shall be free and clear of all restrictions, other than as may be required by applicable state or federal securities law, and subject to any applicable tax withholding as described in Paragraph 2(b) above. As used herein, (A) "Cause" shall mean (1) the conviction of, or plea of guilty or nolo contendere to, a felony or (2) the willful engaging in gross misconduct which is materially and demonstrably injurious to the Company; and (B) "Good Reason" shall mean the occurrence, without your express written consent, of any of the following circumstances (not cured within a reasonable period of time after written notice thereof by you to the Company): (A) a reduction in your annual base salary; (B) a substantial diminution in the nature or status of your responsibilities from those in effect as of the date hereof; or (C) the relocation of your place of business to a location more than 100 miles from Madison, New Jersey without the benefit of the Company's standard relocation package. 4. Restricted Stock Trust. (a) Subject to Paragraph 4(b) below, you are eligible to make a one-time irrevocable election to cause the Company to contribute as of the Conversion Date the shares of Common Stock into which Units shall be converted on such date to the Restricted Stock Trust (as defined below) by completing the form set forth on Schedule A attached hereto wherein such shares of stock shall be held, subject to claims of the Company's creditors, until delivery to you in accordance with Schedule A attached hereto. Subject to Paragraph 4(b), below, if you do not make such election, such shares shall be delivered to you as provided in Paragraph 2 of this Agreement. (b) Notwithstanding anything to the contrary contained in this Agreement, if you are or, in the judgment of the Committee, are expected to be a Named Executive Officer (as herein defined) with respect to the year in which the Conversion Date occurs, then you will be deemed to have made the election under Paragraph 4(a) above to have the Common Stock into which Units shall be converted on such date contributed to the Restricted Stock Trust. (c) For purposes of this Agreement: (i) "Named Executive Officer" shall mean the Chief Executive Officer of the Company or any of the four highest compensated officers (other than the Chief Executive Officer of the Company) whose total compensation payable is required to be reported to shareholders under the Securities Exchange Act of 1934, as amended (the "1934 Act"); and (ii) "Restricted Stock Trust" means the trust fund established under the Restricted Stock Trust Agreement dated as of April 20, 1994 (the "Trust Agreement") to accommodate the deferral of delivery of shares of Common Stock represented by Units and/or Restricted Stock (and dividends paid thereon) as provided in Paragraph 2(a)(ii) of this Agreement, which trust fund is subject to the claims of the Company's general creditors under federal and state law in the event of insolvency of the Company as described in the Trust Agreement. 5. Miscellaneous. This Agreement may not be amended except in writing and neither the existence of the Plan nor this Agreement shall create any right to continue to be employed by the Company or its subsidiaries and your employment will continue to be at will and terminable at will by the Company. In the event of a conflict between this Agreement and the Plan, the Plan shall govern. 6. Compliance With Laws. (a) This Agreement shall be governed by the laws of the state of Delaware and any applicable laws of the United States. Notwithstanding anything herein to the contrary, the Company shall not be obligated to cause to be delivered any shares of Common Stock pursuant to this Agreement unless and until the Company is advised by its counsel that the issuance of such shares either (through book-entry form) by a credit to an account maintained on your behalf or by delivery of certificates representing such is in compliance with all applicable laws and regulations. The Company shall in no event be obliged to register any securities pursuant to the Securities Act of 1933 (as now in effect or as hereafter amended) or to take any other action in order to cause the issuance and delivery of such shares either (through book-entry form) by a credit to an account maintained on your behalf or by delivery of certificates representing such shares to comply with any such law or regulation. (b) If you are subject to Section 16 of the 1934 Act, transactions under the Plan and this Agreement are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the 1934 Act. To the extent any provision of the Plan, this Agreement or action by the Committee involving you is deemed not to comply with an applicable condition of Rule 16b-3, such provision or action shall be deemed null and void as to you, to the extent permitted by law and deemed advisable by the Committee. Moreover, in the event the Plan and/or this Agreement does not include a provision required by Rule 16b-3 to be stated therein, such provision (other than one relating to eligibility requirements or the price and amount of awards as applicable) shall be deemed automatically to be incorporated by reference into the Plan and/or this Agreement insofar as you are concerned, with such incorporation to be deemed effective as of the effective date of such Rule 16b-3 provision. AMERICAN HOME PRODUCTS CORPORATION By: ______________________________ Vice President and Treasurer Accepted and agreed to: ------------------------------------ ----------------------- Name (Please Print) Social Security Number ------------------------------------ ----------------------- Signature Date of Birth SCHEDULE A ELECTION FORM (To Be Completed in Conjunction with Your Restricted Stock Award Agreement) I, ___________________, hereby make an election to defer distribution of all shares of Common Stock less those shares necessary to satisfy any applicable withholding obligation under Paragraph 2(b) of the Restricted Stock Award Agreement (the "Agreement") and to cause the Company to contribute such shares to the Restricted Stock Trust (with any dividends thereon to be reinvested under the AHPC Investor Services Program). See Note Below I, , hereby make an election to receive a distribution of such number of shares in the Restricted Stock Trust under the Agreement to which I am entitled in substantially equal annual installments over a period not to exceed ten years as follows commencing, at the time indicated by my election as set forth below, subject to the provisions of the Agreement, including Paragraph 2, thereof (provided, however, that in the event of my death all remaining installments shall be accelerated and distributed promptly): Circle the number of annual installments: 2 3 4 5 6 7 9 10 Indicate your election: Commencing after: ___ Retirement (as defined in the 1999 Stock Incentive Plan) ___ Specific date to commence distribution after my Retirement Date but in no event shall any annual installment be made after the tenth anniversary of my Normal Retirement Date (age 65). Indicate specific date: ____________________ month/day/year These elections shall be irrevocable upon execution of the Agreement. Signature of Executive Dated: --------------------------------------------------------------- Witnessed: ------------------------------------------------------------ NOTE:1. If you are or are expected to be a Named Executive Officer with respect to the year in which the Conversion Date occurs, you will be deemed to have elected deferred distribution hereunder. Beneficiary Designation In the event of my death, I designate the following beneficiary (ies) to receive any shares of the Company's Common Stock to be distributed to me or which have been deferred on my behalf to the Restricted Stock Trust under this Agreement together with any dividends thereon. -------------------------------------------------- Beneficiary (ies) -------------------------------------------------- Contingent Beneficiary (ies) ---------------------------------- Signature of Executive Dated: ______________________________________________________ Witnessed: ___________________________________________________ EX-10.27 12 resagmt.txt RESTRICTED STOCK AWARD AGREEMENT (RUFFOLO) AMERICAN HOME PRODUCTS CORPORATION RESTRICTED STOCK AWARD AGREEMENT UNDER THE 1993 STOCK INCENTIVE PLAN DATE: JANUARY 23, 2001 NUMBER OF SHARES UNDERLYING RESTRICTED STOCK UNITS: 30,000 ------------------------------ Dr. Robert Ruffolo [address] [address] Under the terms and conditions of this Agreement and of the Company's 1993 Stock Incentive Plan (the "Plan"), a copy of which has been delivered to you and is made a part hereof, the Company hereby awards to you Restricted Stock units (the "Units") representing shares of the Company's common stock (the "Common Stock") subject to the restrictions set forth in this Agreement in the amount set forth above. Except as provided herein, the terms used in this Agreement shall have the same meanings as in the Plan. 1. No Rights as Stockholders. No shares of the Company's Common Stock represented by the Units will be earmarked for you or your account, you shall not have any of the rights of a stockholder with respect to such shares and you may not sell, transfer, assign, pledge, or otherwise encumber or dispose of any Units until actual conversion of Units to Common Stock pursuant to Paragraph 2 hereof. Upon issuance of shares of Common Stock as of each Anniversary Date (as defined herein), you will be the owner of record of such shares of Common Stock and shall receive either (through book-entry form) a credit to an account maintained on your behalf or a stock certificate representing such shares of Common Stock and shall be entitled to all of the rights of a stockholder of the Company, including the right to vote and to receive dividends, subject to the provisions of Paragraph 4. 2. Conversion of Units to Common Stock. (a) Subject to Paragraph 3 hereof, on each of the first, second, third and fourth anniversaries of November 17, 2000 (each, an "Anniversary Date") one-fourth of the Units shall be converted to Common Stock, and the Company shall promptly issue either (through book-entry form) a credit to an account maintained on your behalf or a stock certificate representing such shares in accordance with Paragraph 3 below free of any restrictive legend, other than as may be required by applicable state or federal securities law, and either (i) delivered to you promptly or (ii) if you have made or are deemed to have made the election under Paragraph 4, contributed to the Restricted Stock Trust, (as defined herein) in which case such shares shall be maintained in the Restricted Stock Trust and delivery shall be deferred until after your Retirement (as defined under the Company's 1999 Stock Incentive Plan) in accordance with the election set forth on Schedule A attached hereto, or if either (1) no such election is made or (2) your employment with the Company is terminated prior to Retirement for any reason (including death), delivery shall be made on the first business day of the calendar year following your termination of employment or as otherwise provided in the Trust Agreement. (b) Notwithstanding any other provisions hereof, the number of shares of Common Stock which shall be delivered to you pursuant to Paragraph 2(a) either directly or from the Restricted Stock Trust shall be (i) the number of such shares which would have been delivered in the absence of this Paragraph 2(b) minus (ii) the number of whole shares of Common Stock necessary to satisfy the minimum federal, state and/or local income tax withholding obligations which are imposed on the Company by applicable law in respect of the delivery of such award as well as other withholding obligations (e.g., Social Security and Medicare) which may be due and payable under applicable law on each Anniversary Date whether or not delivery of such shares is deferred under Paragraph 4 (and which may be satisfied by the reduction effected hereby in the number of deliverable shares), it being understood that the value of the shares referred to in clause (ii) above shall be determined, for the purposes of satisfying such withholding obligations, on the basis of the average of the high and low per share prices for the Common Stock as reported on the Consolidated Transaction Reporting System on the designated date of delivery, or on such other reasonable basis for determining fair market value as the Committee may from time to time adopt. 3. Termination of Employment. (a) Subject to Section 7(f) of the Plan, in the event of termination of your employment during the term of this Agreement, except as provided in Paragraph 3(b) or 3(c) below, you shall forfeit all rights to Units subject to this Agreement which have not been converted to Common Stock and this Agreement shall terminate with no further force and effect; provided, however, that the Committee may provide for a partial or complete exception to this requirement as it deems equitable in its sole discretion. (b) Notwithstanding Paragraph 3(a) above, in the event that your employment is terminated due to death, Disability (as defined under the Company's 1999 Stock Incentive Plan) or Retirement, conversion of the Units and delivery of the shares of Common Stock represented thereby (subject to any applicable tax withholding as described in Paragraph 2(b) above) will be made to you or your designated beneficiary or your legal representative, legatee or such other person designated by an appropriate court as entitled to receive the same, as the case may be, in accordance with Paragraph 2(a) and, subject to Paragraphs 2(a) and 4, such shares of Common Stock shall be free and clear of all restrictions, other than as may be required by applicable state or federal securities law. (c) Notwithstanding Paragraph 3(a) above, in the event that your employment is terminated either (i) by the Company without conduct by you constituting Cause (as defined herein) or (ii) by you under circumstances constituting Good Reason (as defined herein), conversion of the Units and delivery of the shares of Common Stock represented thereby will be made to you as soon as practicable and such shares of Common Stock shall be free and clear of all restrictions, other than as may be required by applicable state or federal securities law, and subject to any applicable tax withholding as described in Paragraph 2(b) above. As used herein, (A) "Cause" shall mean (1) the conviction of, or plea of guilty or nolo contendere to, a felony or (2) the willful engaging in gross misconduct which is materially and demonstrably injurious to the Company; and (B) "Good Reason" shall mean the occurrence, without your express written consent, of any of the following circumstances (not cured within a reasonable period of time after written notice thereof by you to the Company): (A) a reduction in your annual base salary; (B) a substantial diminution in the nature or status of your responsibilities from those in effect as of the date hereof; or (C) the relocation of your place of business to a location more than 100 miles from Radnor, Pennsylvania without the benefit of the Company's standard relocation package. 4. Restricted Stock Trust. (a) Subject to Paragraph 4(b) below, you are eligible to make a one-time irrevocable election to cause the Company to contribute as of each Anniversary Date the shares of Common Stock into which Units shall be converted on such date to the Restricted Stock Trust (as defined below) by completing the form set forth on Schedule A attached hereto wherein such shares of stock shall be held, subject to claims of the Company's creditors, until delivery to you in accordance with Schedule A attached hereto. Subject to Paragraph 4(b), below, if you do not make such election, such shares shall be delivered to you as provided in Paragraph 2 of this Agreement. (b) Notwithstanding anything to the contrary contained in this Agreement, if you are or, in the judgment of the Committee, are expected to be a Named Executive Officer (as herein defined) with respect to the year in which an Anniversary Date occurs, then you will be deemed to have made the election under Paragraph 4(a) above to have the Common Stock into which Units shall be converted on such date contributed to the Restricted Stock Trust. (c) For purposes of this Agreement: (i) "Named Executive Officer" shall mean the Chief Executive Officer of the Company or any of the four highest compensated officers (other than the Chief Executive Officer of the Company) whose total compensation payable is required to be reported to shareholders under the Securities Exchange Act of 1934, as amended (the "1934 Act"); and (ii) "Restricted Stock Trust" means the trust fund established under the Restricted Stock Trust Agreement dated as of April 20, 1994 (the "Trust Agreement") to accommodate the deferral of delivery of shares of Common Stock represented by Units and/or Restricted Stock (and dividends paid thereon) as provided in Paragraph 2(a)(ii) of this Agreement, which trust fund is subject to the claims of the Company's general creditors under federal and state law in the event of insolvency of the Company as described in the Trust Agreement. 5. Miscellaneous. This Agreement may not be amended except in writing and neither the existence of the Plan nor this Agreement shall create any right to continue to be employed by the Company or its subsidiaries and your employment will continue to be at will and terminable at will by the Company. In the event of a conflict between this Agreement and the Plan, the Plan shall govern. 6. Compliance With Laws. (a) This Agreement shall be governed by the laws of the state of Delaware and any applicable laws of the United States. Notwithstanding anything herein to the contrary, the Company shall not be obligated to cause to be delivered any shares of Common Stock pursuant to this Agreement unless and until the Company is advised by its counsel that the issuance of such shares either (through book-entry form) by a credit to an account maintained on your behalf or by delivery of certificates representing such is in compliance with all applicable laws and regulations. The Company shall in no event be obliged to register any securities pursuant to the Securities Act of 1933 (as now in effect or as hereafter amended) or to take any other action in order to cause the issuance and delivery of such shares either (through book-entry form) by a credit to an account maintained on your behalf or by delivery of certificates representing such shares to comply with any such law or regulation. (b) If you are subject to Section 16 of the 1934 Act, transactions under the Plan and this Agreement are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the 1934 Act. To the extent any provision of the Plan, this Agreement or action by the Committee involving you is deemed not to comply with an applicable condition of Rule 16b-3, such provision or action shall be deemed null and void as to you, to the extent permitted by law and deemed advisable by the Committee. Moreover, in the event the Plan and/or this Agreement does not include a provision required by Rule 16b-3 to be stated therein, such provision (other than one relating to eligibility requirements or the price and amount of awards as applicable) shall be deemed automatically to be incorporated by reference into the Plan and/or this Agreement insofar as you are concerned, with such incorporation to be deemed effective as of the effective date of such Rule 16b-3 provision. 7. Change-in-Control. Notwithstanding the foregoing, in the event that you become eligible to receive the "Cashout Value" of the Units under the terms of the Severance Agreement entered into between you and the Company in the form approved by the Board of Directors on January 29, 1998 (the "Severance Agreement"), you agree to accept in full satisfaction of the Company's obligation to pay you such amount: (a) a number of shares of Common Stock equal to the number of shares underlying the Units; or (b) a number of shares of capital stock of any successor to the Company equal to the number of shares of Common Stock referred to in subparagraph (a) above which would have been converted or exchanged in the transaction constituting the Change-in-Control (as defined in the Severance Agreement). AMERICAN HOME PRODUCTS CORPORATION By: _______________________________ Vice President and Treasurer Accepted and agreed to: ------------------------------------ ----------------------- Name (Please Print) Social Security Number ------------------------------------ ----------------------- Signature Date of Birth SCHEDULE A ELECTION FORM (To Be Completed in Conjunction with Your Restricted Stock Award Agreement) I, ___________________, hereby make an election to defer distribution of all shares of Common Stock less those shares necessary to satisfy any applicable withholding obligation under Paragraph 2(b) of the Restricted Stock Award Agreement (the "Agreement") and to cause the Company to contribute such shares to the Restricted Stock Trust (with any dividends thereon to be reinvested under the AHPC Master Investment Plan). See Note Below I, , hereby make an election to receive a distribution of such number of shares in the Restricted Stock Trust under the Agreement to which I am entitled in substantially equal annual installments over a period not to exceed ten years as follows commencing, at the time indicated by my election as set forth below, subject to the provisions of the Agreement, including Paragraph 2, thereof (provided, however, that in the event of my death all remaining installments shall be accelerated and distributed promptly): Circle the number of annual installments: 2 3 4 5 6 7 8 9 10 Indicate your election: Commencing after: ___ Retirement (as defined in the 1999 Stock Incentive Plan) ___ Specific date to commence distribution after my Retirement Date but in no event shall any annual installment be made after the tenth anniversary of my Normal Retirement Date (age 65). Indicate specific date: ____________________ month/day/year These elections shall be irrevocable upon execution of the Agreement. Signature of Executive Dated: ---------------------------------------------------------------------- Witnessed: ------------------------------------------------------------------- NOTE:1. If you are or are expected to be a Named Executive Officer with respect to any year in which an Anniversary Date occurs, you will be deemed to have elected deferred distribution hereunder. Beneficiary Designation In the event of my death, I designate the following beneficiary (ies) to receive any shares of the Company's Common Stock to be distributed to me or which have been deferred on my behalf to the Restricted Stock Trust under this Agreement together with any dividends thereon. -------------------------------------------------- Beneficiary (ies) -------------------------------------------------- Contingent Beneficiary (ies) ---------------------------------- Signature of Executive Dated: ______________________________________________________ Witnessed: ___________________________________________________ EX-10.35 13 dirdefer.txt DIRECTORS DEFERRAL PLAN WYETH DIRECTORS' DEFERRAL PLAN (as amended on November 21, 2002) SECTION 1. ESTABLISHMENT OF THE PLAN Effective May 1, 1997, there is hereby established a plan whereby Directors of the Company who are not current employees of the Company may voluntarily defer compensation (the "Deferred Compensation" portion of the Plan), and may share in the long-term growth of the Company (the "Deferred Stock" portion of the Plan). Prior to May 1, 1997, the Company maintained the Deferred Compensation portion of the Plan as a separate plan, The American Home Products Corporation Nonfunded Deferred Compensation Plan for Directors (the "Prior Plan"). The Plan is deemed to consist, in part, of the amounts held under the Prior Plan and any election made by a Director under the Prior Plan, unless and until amended by the Director in accordance with this Plan, shall remain in effect under this Plan. SECTION 2. DEFINITIONS When used in the Plan, the following terms shall have the definitions set forth in this Section 2: 2.1. Average Closing Price. The term "Average Closing Price" means the average closing market price of the Shares on the Consolidated Transaction Reporting System for the New York Stock Exchange for the last five (5) consecutive trading days on which at least one sale of Shares took place on such System up to and including the day prior to the date of determination (i.e., Deferral Allocation Date or Dividend Allocation Date). 2.2. Beneficiary. The term "Beneficiary" means the beneficiary or beneficiaries (including any contingent beneficiary or beneficiaries) designated by the Participant pursuant to Section 7.3 hereof. 2.3. Board of Directors. The term "Board of Directors" means the Board of Directors of the Company. 2.4. Company. The terms "Company" or "Wyeth" mean Wyeth, a Delaware corporation (as successor to American Home Products Corporation). 2.5. Company Credit. The term "Company Credit" means an amount computed and credited to a Participant's Deferred Compensation Account, as described in Section 6.3, at an annual rate equal to ten percent (10%) compounded quarterly. 2.6. Compensation. The term "Compensation" means the retainer and the aggregate of all fees for service and attendance at Board of Director and committee meetings to which a Director is entitled for services rendered to the Company as a Director. 2.7. Deferral Allocation Date. The term "Deferral Allocation Date" means the third Monday of any month, or if Shares are not traded on the New York Stock Exchange on such third Monday of the month, the last day before the third Monday of the month on which Shares are traded on the New York Stock Exchange, that follows the date on which an amount deferred under the Plan would have been paid in cash if a deferral election had not been made hereunder. 2.8. Deferred Amount. The term "Deferred Amount" means the amount of Compensation that a Deferred Compensation Participant elects to defer in accordance with Section 4 hereof. 2.9. Deferred Compensation Account. The term "Deferred Compensation Account" means the account described in Section 6.1. 2.10. Deferred Compensation Participant. The term "Deferred Compensation Participant" means a Director who is not a current employee of the Company and who has currently or previously elected to defer all or part of his/her Compensation pursuant to the Prior Plan or in accordance with Section 4 of this Plan, and for whom a Deferred Compensation Account is currently maintained. 2.11. Deferred Stock Participant. The term "Deferred Stock Participant" means a Director who is not a current employee of the Company and who becomes a Participant in the Plan in accordance with Section 3 hereof. 2.12. Director. The term "Director" means each member of the Board of Directors. 2.13. Disability. The term "Disability" means the complete and permanent inability of an individual, by reason of illness or accident, to perform the individual's duties as a Director. The determination whether a Director has suffered a Disability shall be made by the Board of Directors based upon such evidence as it deems appropriate. 2.14. Dividend Allocation Date. The term "Dividend Allocation Date" means the first Monday that (a) follows a Dividend Payment Date and (b) is the third Monday of a month. 2.15. Dividend Payment Date. The term "Dividend Payment Date" means the date as of which the Company pays a cash dividend on Shares. 2.16. Dividend Record Date. The term "Dividend Record Date" means, with respect to any Dividend Payment Date, the date established by the Board of Directors as the record date for determining shareholders entitled to receive payment of the dividend on such Dividend Payment Date. 2.17. Individual Accounts. The term "Individual Accounts" or "Accounts" means the separate Deferred Compensation Account and Share Accounts, described in Section 6 hereof, which are established under the Plan for each Participant. When used in the singular, the term shall refer to one of these accounts, as the context requires. 2.18. Participant. The term "Participant" means a Director who is a Deferred Stock Participant, a Deferred Compensation Participant, or both, as the case may be. 2.19. Plan. The term "Plan" means the Wyeth Directors' Deferral Plan, as set forth herein and as it may be amended from time to time. 2.20. Prior Plan. The term "Prior Plan" has the meaning set forth in Section 1 hereof. 2.21. Share. The term "Share" means a share of Common Stock, par value $.33-1/3 per share, of the Company. 2.22. Share Accounts. The term "Share Accounts" means a Participant's Vested Share Account and Unvested Share Account. 2.23. Share Equivalents. The term "Share Equivalents" means bookkeeping entries credited to a Participant's Share Accounts and denominated in Shares. 2.24. Unvested Share Account. The term "Unvested Share Account" means an account consisting of amounts transferred under Section 5.4 for which the vesting requirements of Section 5.5(ii) have not been satisfied, and which are denominated in Share Equivalents as described in Section 6.2. 2.25. Vested Share Account. The term "Vested Share Account" means an account consisting of amounts transferred under Section 5.4 for which the vesting requirements of Section 5.5(ii) have been satisfied together with amounts deferred hereunder, and which are denominated in Share Equivalents as described in Section 6.2, and including any amounts previously maintained in a Participant's Unvested Share Account which are transferred to such account following satisfaction of the vesting requirements described in Section 5.5(ii) and any cash accruing interest pending the next Quarterly Deferral Allocation Date (as hereinafter defined). 2.26. Year of Service. The term "Year of Service" means each full year and any partial year an individual served as a Director. For this purpose a "year" is the twelve-month period commencing with the first day of the individual's service as a Director of the Company both before and after the effective date of the Plan. SECTION 3. DEFERRED STOCK PARTICIPANT Each person who as of the effective date of this Plan is currently serving or who is hereafter elected or appointed to serve as a Director, as the case may be, who is not an employee of the Company, and who elects to become a Participant by making a deferral under Section 5.2, or for whom a transfer is made under Section 5.4, shall become a Deferred Stock Participant. A Deferred Stock Participant shall cease to participate in the Plan when the Participant ceases to be a Director. For purposes of the Plan, a Director shall be deemed to cease to be a Deferred Stock Participant on the first day of the month next following the month in which he/she last serves as a Director. SECTION 4. DEFERRED COMPENSATION PARTICIPANT Prior to the beginning of any calendar quarter in each calendar year, any Director who is not an employee of the Company may defer the receipt of Compensation to be earned by the Director during such calendar quarter and the ensuing calendar quarters by filing with the Company a written election that: (i) defers payment of a designated amount (of One Thousand Dollars ($1,000) or more) or a percentage of his/her Compensation for services attributable to such calendar quarters (the "Deferred Amount"); (ii) specifies the payment option selected by the Participant pursuant to Section 7.2 hereof for such Deferred Amount; and (iii) specifies the options selected by the Participant pursuant to Section 5 hereof for such Deferred Amount. The amount deferred may not exceed the Director's Compensation for the period of deferral. Notwithstanding the foregoing, any individual who is not an employee of the Company, and who is newly elected or appointed to serve as a Director may, not later than thirty (30) days after his/her election or appointment as a Director becomes effective, elect in accordance with the preceding provisions of this Section 4, to defer the receipt of Compensation earned during the portion of the current calendar quarter that follows his/her filing of the election with the Company. Any elections made pursuant to this Section 4 shall be irrevocable when made. Notwithstanding the foregoing, the Board of Directors in its sole discretion, may make a distribution to a Participant under either Section 7.2(i)(a) or 7.4. If a Participant fails to discontinue an election under Section 5 with respect to his/her Deferred Amount for a future period, the Participant's current election shall remain in effect, provided, however, that the Participant may thereafter make a new election with regard to a future period at any time in accordance with the first paragraph of this Section 4. SECTION 5. FORM OF DEFERRED COMPENSATION CREDITS 5.1. Deferred Compensation Account. Except with respect to the deferral of Compensation for a quarter in which a Deferred Compensation Participant elects to have all or a percentage of the Deferred Amount credited in Shares in accordance with Section 5.2 hereof, the Deferred Amount shall be denominated in U.S. dollars and credited to the Participant's Deferred Compensation Account pursuant to Section 6.1 hereof. 5.2. Shares. Prior to the beginning of any calendar quarter, a Deferred Compensation Participant may elect, by filing a written election with the Board of Directors, to have all or a percentage of the Deferred Amount for the following calendar quarter and/or ensuing calendar quarters credited in Share Equivalents and allocated to the Participant's Vested Share Account pursuant to Section 6.2 hereof. Any elections made pursuant to this Section 5.2 shall be irrevocable when made. If a Participant fails to discontinue an election under this Section 5 with respect to his/her Deferred Amount for a future period, his/her current election shall remain in effect, provided, however, that the Participant may thereafter make a new election with regard to a future period at any time. 5.3. Transfer of Deferred Compensation Account Balance to Share Account. Prior to the effective date of the Plan, a Deferred Compensation Participant may elect to have all or a portion of his/her final credited account balance in the Prior Plan ( i.e., the balance as of April 30, 1997) converted to Share Equivalents and credited to the Participant's Vested Share Account. Such conversion shall take place as of May 1, 1997, based on the Average Closing Price as of May 1, 1997. 5.4. Transfer of Present Value of Accrued Benefits Under Retirement Plan to Share Account Prior to the effective date of the Plan, a Deferred Compensation Participant shall have allocated to his/her Unvested Share Account, or if a Participant has satisfied the vesting requirements set forth in Section 5.5(ii) hereof, to his/her Vested Share Account, the number of Share Equivalents (maintained in fractions and rounded to three (3) decimal places) having a market value (calculated as set forth below) equal to the actuarial present value as of May 1, 1997, of the amount that would have been due to such Participant under the American Home Products Corporation Retirement Plan for Outside Directors at the time of his/her earliest retirement date assuming that the Participant has then satisfied the vesting requirements thereunder. Such actuarial present value calculation shall be performed by the Company in its discretion and shall be converted to Share Equivalents and credited to the Participant's Unvested or Vested Share Account, as the case may be. Such conversion shall take place as of May 1, 1997, based on the Average Closing Price as of that date. 5.5. Vesting of Unvested Share Account. (i) All amounts transferred pursuant to Section 5.4 shall be maintained in a Vested Share Account to the extent vested at the time of transfer. All amounts which are not vested will be held in an Unvested Share Account until the Participant shall have satisfied the vesting requirements set forth in Section 5.5(ii), at which time such amounts in the Participant's Unvested Share Account shall be transferred from such Unvested Share Account and shall become a part of or be added to the Participant's Vested Share Account. (ii) A Participant shall have satisfied the vesting requirements upon completion of at least ten (10) Years of Service and attainment of age sixty-five (65), provided, however, that a Participant who ceases to be a Director prior to attainment of age sixty-five (65) with at least ten (10) Years of Service shall be deemed to have satisfied the vesting requirements upon the first to occur of (1) attainment of age sixty-five (65), (2) death, or (3) Disability. SECTION 6. INDIVIDUAL ACCOUNTS The Company shall maintain Individual Accounts for Participants, as follows: 6.1. Deferred Compensation Account. The Company shall maintain a Deferred Compensation Account in the name of each Deferred Compensation Participant with respect to any amounts deferred under the Plan which the Deferred Compensation Participant does not elect to have credited in Share Equivalents pursuant to Section 5.2 or 5.3 hereof. The opening balance of each Participant's Deferred Compensation Account on the effective date of this Plan shall be equal to the closing balance on the immediately preceding date of the corresponding account maintained on the Participant's behalf under the Prior Plan, if any, less any portion of such account converted to Share Equivalents and allocated to the Participant's Vested Share Account pursuant to Section 5.3 hereof. The Deferred Compensation Account shall be denominated in U.S. dollars, rounded to the nearest whole cent. A Deferred Amount allocated to a Deferred Compensation Account pursuant to Section 5.1 hereof shall be credited to the Deferred Compensation Account as of the Deferral Allocation Date. 6.2. Share Accounts. The Company shall maintain Share Accounts consisting of (i) a Vested Share Account and (ii) an Unvested Share Account. The Share Accounts shall be denominated in Share Equivalents, and shall be maintained in fractions rounded to three (3) decimal places. Share Equivalents allocated to a Deferred Stock Participant's Vested Share Account in accordance with the Participant's election under Section 5.2 hereof, shall be credited to the Participant's Vested Share Account as of the Deferral Allocation Date next occurring in January, April, July or October (each a "Quarterly Deferral Allocation Date"), provided that a Deferred Amount so credited shall be credited with deemed interest at the Company Credit rate calculated in accordance with Section 6.3 from the actual Deferral Allocation Date, if different, until the day preceding the next Quarterly Deferral Allocation Date. Share Equivalents and, if necessary, fractional Share Equivalents, shall be credited to a Participant's Vested Share Account based on the Average Closing Price at the Deferral Allocation Date. 6.3. Accrual of Company Credit. The Treasurer of the Company shall determine the annual rate of Company Credit on or before December 31 of each calendar year. This rate shall be effective for the following calendar year. The Company Credit shall be compounded and credited to each Deferred Compensation Account as of the last day of each calendar quarter for each month (or part thereof) that the Participant serves as a Director during such calendar quarter. If a Participant elects the payment option under either Section 7.2(i)(b) or Section 7.2(i)(c) below, the Company Credit shall continue to be credited to the Participant's account until distributed. 6.4. Cash Dividends. Cash dividends paid on Shares shall be deemed to have been paid on the Share Equivalents allocated to each Participant's Share Accounts and shall be treated as if the allocated Share Equivalents were actual Shares issued and outstanding on the Dividend Record Date. An amount equal to the amount of such dividends shall be credited in Share Equivalents to each Share Account as of each Dividend Allocation Date based on the Average Closing Price at the Dividend Allocation Date. 6.5. Capital Adjustments. The number of Share Equivalents allocated to Share Accounts shall be adjusted by the Board of Directors, as it deems appropriate, to reflect stock dividends, stock splits, reclassifications, spinoffs, and other extraordinary distributions, as if those Share Equivalents were actual Shares. 6.6. Account Statements. Within a reasonable time following the end of each calendar year, the Company shall provide an annual statement to each Participant. The annual statement for each Participant shall report the number of Share Equivalents credited to each of the Participant's Share Accounts (together with the dollar amount of any cash accruing interest pending the next Quarterly Deferral Allocation Date) and shall report the dollar amount credited to the Participant's Deferred Compensation Account as of December 31 of that year. SECTION 7. PAYMENT PROVISIONS 7.l. Method of Payment. All payments to a Participant (or to a Participant's Beneficiary or estate, as the case may be) with respect to the Participant's Deferred Compensation Account and Vested Share Account shall be paid in cash only, with Share Equivalents valued as set forth in Section 7.2 below. 7.2. Payment Options (i) At the time each Director elects to make a deferral or, for Participants who are Directors on May 1, 1997, prior to the effective date of the Plan, the Participant shall select a payment option with respect to the payment of the Participant's Individual Accounts from the following payment options: (a) a lump sum paid on the first business day of the calendar quarter following the calendar quarter in which the Participant ceases to be a Director; (b) payments in substantially equal annual installments over a period of between two (2) to ten (10) years, as elected by the Participant at the time he/she makes his/her election under this paragraph (i)(b), commencing in January of the calendar year following the calendar year during which the Participant ceases to be a Director with Share Equivalents in the Participant's Vested Share Account treated as described in paragraph (iii) below; or (c) payments in annual installments over a period of between two (2) to ten (10) years as elected by the Participant at the time he/she makes his/her election under this paragraph (i)(c), commencing in January of the calendar year following the calendar year during which the Participant ceases to be a Director, with Share Equivalents in the Participant's Vested Share Account treated as described in paragraph (iv) below. (ii) If the payment option described in paragraph (i)(a) above has been elected, the amount of the lump sum with respect to the Participant's Deferred Compensation Account shall be equal to the amount credited to the Participant's Deferred Compensation Account as of the last business day of the calendar quarter preceding the date of payment, and the amount of the lump sum with respect to the Participant's Vested Share Account shall be equal to the Average Closing Price as of last business day of the calendar quarter preceding the date of payments multiplied by the number of Share Equivalents credited to the Participant's Vested Share Account as of such date plus any cash accruing interest pending the next Quarterly Deferral Allocation Date. (iii) If the payment option described in paragraph (i)(b) above has been elected, the value of the Participant's Vested Share Account shall be added to the amount in such Participant's Deferred Compensation Account based on the Average Closing Price at the date of the first payment and the amount of each installment with respect to the Participant's Deferred Compensation Account (including the amount transferred from the Participant's Vested Share Account and any cash accruing interest pending the next Quarterly Deferral Allocation Date) shall be paid annually, in substantially equal installment amounts. The determination of the amount of substantially equal installment payments shall be a fixed annuity computation determined based on the amount of the Participant's Deferred Compensation Account (including the amount transferred from the Participant's Vested Share Account) at the time of the first payment, the annual rate of the Company Credit at that time and the number of installments selected, assuming compounding of the Company Credit on a quarterly basis. (iv) If the payment option described in paragraph (i)(c) above has been elected, the amount of each installment with respect to the Participant's Deferred Compensation Account and Vested Share Account (and any cash accruing interest pending the next Quarterly Deferral Allocation Date) shall be paid annually, in installment amounts. The amount to be distributed annually with respect to Share Equivalents shall be computed by dividing the number of Share Equivalents in the Participant's Vested Share Account by the number of installment payments selected, with the resulting number of Share Equivalents paid in cash, based on the Average Closing Price as of the December 31 preceding each date of payment. Any additional amounts in respect of Share Equivalents relating to dividend equivalents during the duration of installment payments shall be included with and paid as part of the last installment. (v) If the Participant fails to elect a payment option, the amount credited to the Participant's Deferred Compensation Account and Vested Share Account shall be distributed in a lump sum in accordance with the payment option described in paragraph (i)(a) and paragraph (ii) above. If, at the time a Participant ceases to be a Director, the amount credited to a Participant's Deferred Compensation Account and the value of Share Equivalents credited to a Participant's Share Accounts is less than $25,000 in the aggregate, the Board of Directors, in its sole discretion, may pay out the amount credited to such Account in a lump sum as if such Participant elected distribution under paragraph (i)(a) above. (vi) Notwithstanding the foregoing, any amounts in a Participant's Unvested Share Account at the time the Participant ceases to be a Director shall be (a) forfeited if the Participant has not completed at least ten (10) Years of Service, or (b) if the Participant has completed at least ten (10) Years of Service, shall be paid to the Participant, in the manner selected in paragraph (i)(a), (i)(b), or (i)(c) above, upon the first to occur of (1) attainment of age sixty-five (65), or (2) Disability, provided, however, that if the payment option described in paragraph (i)(a) above has been selected, the value of such Unvested Share Account shall be determined based on the Average Closing Price as of the December 31 preceding the date of payment , and thereafter shall be treated as if it were part of the Participant's Deferred Compensation Account. If the payment option described in paragraph (i)(b) above has been selected, payment shall be made in accordance with Section 7.2(iii). If the payment option in paragraph (i)(c) above has been selected, payment shall be made in accordance with Section 7.2(iv). Notwithstanding the foregoing, any benefits in the Unvested Share Account at the date of a Participant's death shall be paid to the Participant's Beneficiary or estate, as the case may be, in accordance with Section 7.3. 7.3. Payment Upon Death. Notwithstanding any other provision of the Plan to the contrary, within a reasonable period of time following the death of a Participant, the amount credited to the Participant's Deferred Compensation Account and all of the Share Equivalents credited to the Participant's Share Accounts shall be paid by the Company in a lump sum to the Participant's Beneficiary. For purposes of this Section 7.3, the amount credited to the Participant's Deferred Compensation Account, and the number and value of Share Equivalents credited to the Participant's Share Accounts, shall be determined as of the date of payment using the Average Closing Price. A Participant may designate a Beneficiary, in writing, in a form acceptable to the Board of Directors. A Participant may revoke a prior designation of a Beneficiary and may also designate a new Beneficiary without the consent of the previously designated Beneficiary, provided, however, that such revocation and new designation (if any) are in writing, in a form acceptable to the Board of Directors, and filed with the Board of Directors before the Participant's death. If the Participant does not designate a Beneficiary, or if no designated Beneficiary survives the Participant, any amount not distributed to the Participant during the Participant's life shall be paid to the Participant's estate in a lump sum in accordance with this Section 7.3. 7.4. Payment on Unforeseeable Emergency. The Board of Directors may, in its sole discretion, direct payment to a Participant of all or of any portion of the vested portion of a Participant's Accounts, notwithstanding an election of a payment option under Section 7.2 above, at any time that the Board of Directors determines that such Participant has an unforeseeable emergency, and then only to the extent reasonably necessary to meet the emergency. For purposes of this section, "unforeseeable emergency" means severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or of a dependent of the Participant, loss of the Participant's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. SECTION 8. OWNERSHIP OF SHARES A Participant shall have no rights as a shareholder of the Company with respect to any Shares represented by the Share Equivalents described hereunder. SECTION 9. PROHIBITION AGAINST TRANSFER The right of a Participant to receive payments under the Plan may not be transferred except by will or applicable laws of descent and distribution. A Participant may not assign, sell, pledge, or otherwise transfer amounts to which he/she is entitled hereunder prior to payment thereof to the Participant. SECTION 10. GENERAL PROVISIONS 10.1. Director's Rights Unsecured. The Plan is unfunded. The right of any Participant to receive payments of cash under the provisions of the Plan shall be an unsecured claim against the general assets of the Company. 10.2. Administration. Except as otherwise provided in the Plan, the Plan shall be administered by the Board of Directors, which shall have the authority to adopt rules and regulations for carrying out the Plan, and which shall interpret, construe, and implement the provisions of the Plan. This Plan is intended to comply with Section 16 of the Securities Exchange Act of 1934, as amended (the "Act") and the rules promulgated thereunder. Any election by a Participant which would be in violation of the Act or the rules thereunder causing short-swing liability shall be deemed ineffective under the Plan, and such election shall be deemed to be null and void. 10.3. Legal Opinions. The Board of Directors may consult with legal counsel, who may be counsel for the Company or other counsel, with respect to its obligations and duties under the Plan, or with respect to any action, proceeding, or any questions of law, and shall not be liable with respect to any good faith action taken, or omitted, by it pursuant to the advice of such counsel. 10.4. Liability. Any decision made or action taken by the Board of Directors, or any employee of the Company or any of its subsidiaries, arising out of or in connection with the construction, administration, interpretation, or effect of the Plan, shall be absolutely discretionary, and shall be conclusive and binding on all parties. Neither the Board of Directors nor any employee of the Company or any of its subsidiaries shall be liable for any act or action hereunder, whether of omission or commission, by any other member or employee or by any agent to whom duties in connection with the administration of the Plan have been delegated or, except in circumstances involving bad faith, for anything done or omitted to be done. 10.5. Withholding. The Company shall have the right to deduct from all payments hereunder any taxes required by law to be withheld from such payments. The recipients of such payments shall bear all taxes on amounts paid under the Plan to the extent that no taxes are withheld thereon, irrespective of whether withholding is required. 10.6. Legal Holidays. If any day on (or on or before) which action under the Plan must be taken falls on a Saturday, Sunday, or legal holiday, such action may be taken on (or on or before) the next succeeding day that is not a Saturday, Sunday, or legal holiday; provided, however, that this Section 10.6 shall not permit any action that must be taken in one calendar year to be taken in any subsequent calendar year. SECTION 11. AMENDMENT, SUSPENSION, AND TERMINATION The Board of Directors shall have the right at any time, and for any reason, to amend, suspend, or terminate the Plan, provided, however, that no amendment, suspension, or termination shall reduce the number of Share Equivalents or the cash balance in an Individual Account. SECTION 12. APPLICABLE LAW The Plan shall be governed by, and construed in accordance with, the laws of the State of Delaware, except to the extent that such laws are preempted by federal law. SECTION 13. EFFECTIVE DATE The effective date of this Plan is May 1, 1997. Nothing herein shall invalidate or adversely affect any previous election, designation, deferral, or accrual in accordance with the terms of the Prior Plan that were in effect prior to the effective date of this Plan. SECTION 14. CHANGE IN CONTROL Upon the occurrence of a Change in Control, all Accounts under the Plan that are not fully vested as of the date of such occurrence (and which have not previously been forfeited) will become fully vested. Furthermore, notwithstanding any prior election by a Participant to the contrary, at any time following a Change in Control a Participant may elect to accelerate any or all payments due under the Plan to a single sum payment to be made on a date at least twelve (12) months subsequent to such election; provided, however, that such an election may be made for an immediate single sum payment, in which six percent (6%) of the amount of the accelerated payment shall be permanently forfeited to the Company. For purposes of this provision, a Change in Control will be deemed to have occurred if: (i) any person or persons acting in concert (excluding Company benefit plans) becomes the beneficial owner of securities of the Company having at least 20% of the voting power of the Company's then outstanding securities (unless the event causing the 20% threshold to be crossed is an acquisition of voting common securities directly from the Company); or (ii) the consummation of any merger or other business combination of the Company, sale or lease of the Company's assets or combination of the foregoing transactions (the "Transactions") other than a Transaction immediately following which the shareholders of the Company who owned shares immediately prior to the Transaction (including any trustee or fiduciary of any Company employee benefit plan) own, by virtue of their prior ownership of the Company's shares, at least 65% of the voting power, directly or indirectly, of (a) the surviving corporation in any such merger or other business combination; (b) the purchaser or lessee of the Company's assets; or (c) both the surviving corporation and the purchaser or lessee in the event of any combination of Transactions; or (iii) within any 24 month period, the persons who were directors immediately before the beginning of such period (the "Incumbent Directors") shall cease (for any reason other than death) to constitute at least a majority of the Board or the board of directors of a successor to the Company. For this purpose, any director who was not a director at the beginning of such period shall be deemed to be an Incumbent Director if such director was elected to the Board by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors (so long as such director was not nominated by a person who has expressed an intent to effect a Change in Control or engage in a proxy or other control contest). EX-10.50 14 ulfnote.txt ULF WIINBERG LOAN AGREEMENT Equity Loan Agreement and Promissory Note Employee Name: Ulf Wiinberg Loan Amount: $250,000.00 Dates Issued: (1) 4/4/02 Property Address: [Home Address] Basking Ridge, New Jersey 07920 For value received, the undersigned, Ulf and Gunilla Wiinberg (hereinafter "Makers"), jointly and severally, promise to pay to Wyeth (hereinafter "Lender"), or its order, at its designated office or at such other place within the United States of America that Lender may designate in writing to the undersigned, the principal sum of Two Hundred and Fifty Thousand Dollars ($250,000.00), payable as follows: (i) $145,000 payable on the date the Makers sign this Note (the "Downpayment") and (ii) the remainder payable in accordance with the contract dated March 13, 2002 (the "Contract") between the Makers and George and Diane Garrison). The principal sum together with interest at the rate of 2.88% per annum shall be payable in three installments, 25% on March 15, 2003, 25% on March 15, 2004 and 50% on March 15, 2005, provided, however, that if Mr. Wiinberg's employment with Wyeth terminates for any reason whatsoever such principal sum together with interest thereon shall be repaid within 90 days following such date of termination. If the Contract is not consummated, the Downpayment will be immediately due and payable to the Lender. In consideration of Lender's entering into this agreement and promissory note (hereinafter, collectively referred to as this "Note"): (a) The Makers represent that the loan will be used solely for the purpose of purchasing a new principal residence in connection with a transfer to a new principal place of employment and that neither the former nor the new principal residence is or will be located outside the United States. (b) The Makers represent that the Makers have no intention of converting Makers' new principal residence to business or investment use. (c) The Makers agree that the obligations and benefits under this Note are personal to the Makers and may not be transferred, assigned or otherwise disposed of to any person. (d) The Makers agree that their new principal residence will not be made subject to any further lien, indebtedness or encumbrance by either Makers' affirmative act or failure to act subsequent to signing this Note. (e) The Makers hereby represent that they intend to and will itemize their deductions on the Federal Income Tax returns. This Note shall be subordinate to the primary mortgage entered into by the Makers upon the closing of the Contract but shall be superior to any other indebtedness made by the Makers with respect to the property that is the collateral security for this Note. This Note may be prepaid in full or in part at any time without premium or penalty. All prepayments shall be applied first to the payment of any costs of collection that may be due hereunder, and the balance shall be applied to principal. If all or any portion of the indebtedness evidenced hereby is not paid when due (i) Lender or holder may immediately exercise any right of setoff and enforce any lien or security interest securing payment hereof and (ii) this Note shall accrue interest at a rate equal to the lower of seven percent (7%) per annum or the highest maximum rate permitted by applicable law. Time is of the essence. No delay or omission on the part of the holder in exercising any right hereunder shall operate as a waiver of such right or of any other remedy under this Note. A waiver on any occasion shall not be construed as a bar to or waiver of any such right or remedy on a future occasion. The Makers, endorsers, sureties, guarantors and all other persons liable for all or any part of the indebtedness evidenced by this Note jointly and severally waive valuation and appraisement, presentment for payment, protest, notice of protest, dishonor, notice of dishonor, demand, notice of non-payment, and the benefit of all laws now or hereafter enacted affording any right to a stay of execution or extension of time for payment or exempting any property of such person from levy and sale upon execution of any judgment obtained by the holder under this Note. Such parties hereby consent without affecting their liability to extension or alteration of the time or terms of payment hereof, any renewal, any release of any or all part of any security given for the payment hereof, any acceptance of additional security of any kind, and any release of, or resort to, any party liable for payment hereof, and such parties shall remain bound in the same capacities as prior thereto upon each such event. Makers agree that the obligation to pay all principal and other amounts owing hereunder is absolute and unconditional under all circumstances. In the event of any litigation in connection with this Note, Makers waive any right to trial by jury and agrees not to assert any counterclaim, defense, offset or abatement of any nature. Makers and any endorsers and guarantors hereof, and all others who may become liable for all or any part of this obligation, severally waive Makers agree to pay the holder hereof all out-of-pocket expenses and costs of collection including, but not limited to, reasonable attorneys' fees incurred by the holder hereof in enforcing or attempting to enforce this Note (whether or not a suit is commenced); and such costs, fees and expenses shall be added to the principal amount due under this Note. This Note may not be changed or modified in any way, nor may any provision hereof be waived, except by a written instrument duly executed by the holder hereof. This Note will inure to the benefit of the Lender, its legal representatives, successors, transferees and assigns. This Note may be transferred and assigned by Lender at any time. This Note shall be governed by the laws of the State of New Jersey. Maker: /s/ Ulf Wiinberg Date: April 9, 2002 ----------------------------------- Social Security No. XXX-XX-XXXX ---------------------------------------------------- Maker: /s/ Gunilla Wiinberg Date: April 9, 2002 -------------------------------------- Social Security No. XXX-XX-XXXX --------------------------------------------------- EX-12 15 ex12.txt Exhibit 12 Wyeth Computation of Ratio of Earnings to Fixed Charges (3) (in thousands, except ratio amounts)
Years Ended December 31, -------------------------------------------------------------------------- 2002 2001 2000 1999 1998 ---------- ---------- ----------- ----------- ---------- Earnings Income (loss) from continuing operations before federal and foreign taxes $6,097,245 $2,868,747 ($1,101,040) ($1,907,299) $3,089,936 Add: Fixed charges 430,449 439,058 324,887 403,694 371,986 Minority interests 27,993 20,841 26,784 30,301 620 Distributed equity income 0 0 0 0 771 Amortization of capitalized interest 8,866 2,497 1,917 1,803 1,487 Less: Equity income 20,766 70,372 55,991 2,122 473 Capitalized interest 88,008 94,257 43,303 15,375 9,497 ---------- ---------- ----------- ----------- ---------- Total earnings (loss) as defined $6,455,779 $3,166,514 ($846,746) ($1,488,998) $3,454,830 ========== ========== =========== =========== ========== Fixed Charges: Interest and amortization of debt expense $294,160 $301,145 $238,840 $343,271 $322,970 Capitalized interest 88,008 94,257 43,303 15,375 9,497 Interest factor of rental expense (1) 48,281 43,656 42,744 45,048 39,519 ---------- ---------- ----------- ----------- ---------- Total fixed charges as defined $430,449 $439,058 $324,887 $403,694 $371,986 ========== ========== =========== =========== ========== Ratio of earnings to fixed charges (2) 15.0 7.2 - - 9.3 (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 years ended December 31, 2000 and 1999 were inadequate to cover total fixed charges as defined. The coverage deficiency for the years ended December 31, 2000 and 1999 was $1,171,633 and $1,892,692, respectively. (3) Amounts have been restated to reflect the Cyanamid Agricultural Products business as a discontinued operation.
EX-13 16 ex13.txt 2002 ANNUAL REPORT TEN-YEAR SELECTED FINANCIAL DATA (Dollar amounts in thousands except per share amounts)
Years Ended December 31, 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------- SUMMARY OF NET REVENUE AND EARNINGS Net revenue(1)(2) $14,584,035 $13,983,745 $ 13,081,334 Income (loss) from continuing operations (2)(3)(5) 4,447,205 2,285,294 (901,040) Diluted earnings (loss) per share from continuing operations(2)(3)(4) 3.33 1.72 (0.69) Dividends per common share 0.9200 0.9200 0.9200 YEAR-END FINANCIAL POSITION Current assets(2)(5) $11,595,852 $ 9,766,753 $ 10,180,811 Current liabilities(2)(5) 5,475,659 7,257,181 9,742,059 Ratio of current assets to current liabilities(2)(5) 2.12 1.35 1.05 Total assets(2)(5) 25,994,949 22,967,922 21,092,466 Long-term debt(2)(6) 7,546,041 7,357,277 2,394,790 Average stockholders' equity 6,114,243 3,445,333 4,516,420 STOCKHOLDERS - OUTSTANDING SHARES Number of common stockholders 61,668 64,698 58,355 Weighted average common shares outstanding used for diluted earnings (loss) per share calculation (in thousands)(4) 1,334,127 1,330,809 1,306,474 EMPLOYMENT DATA(2) Number of employees at year-end 52,762 52,289 48,036 Wages and salaries $ 2,792,379 $ 2,536,220 $ 2,264,258 Benefits (including Social Security taxes) 842,177 691,018 602,816
(1) The Company adopted new authoritative accounting guidance as of January 1, 2002 reflecting the cost of certain vendor considerations (i.e., cooperative advertising payments) 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. (2) 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 with the net assets of the discontinued business held for sale related to the Cyanamid Agricultural Products business included in current assets. (3) See "Management's Discussion and Analysis of Financial Condition and Results of Operations" for discussion of: gains related to Immunex/Amgen common stock transactions, termination fee, litigation charges, goodwill impairment and special charges for the years ended December 31, 2002, 2001 and 2000. (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 $1,400,000, $950,000, $7,500,000 and $4,750,000 in 2002, 2001, 2000 and 1999, respectively, related to the litigation brought against the Company regarding the use of the diet drugs Redux or Pondimin, current liabilities increased substantially in 2000 and 1999 compared with prior years and unfavorably impacted the ratio of current assets to current liabilities in years subsequent to 1998. In 2002, the Company sold 67,050,400 shares of Amgen Inc. (Amgen) common stock received in connection with Amgen's acquisition of Immunex Corporation (Immunex) for net proceeds of $3,250,753. The Company used a portion of these proceeds to pay down commercial paper and substantially reduce current liabilities. Additionally, the remaining 31,235,958 shares of Amgen common stock owned by the Company as of December 31, 2002 had a fair value of $1,509,947. The fair value of these shares as well as the proceeds from the shares sold in 2002 substantially increased total assets. (6) In 2001, the Company obtained a $3,000,000 credit facility to support increased commercial paper borrowings and issued $3,000,000 of Senior Notes. The proceeds from these borrowings were 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. 26 Wyeth
1999 1998 1997 1996 1995 1994(7) 1993 - ------------------------------------------------------------------------------------------------------------ $ 11,695,061 $11,101,100 $11,916,623 $11,928,290 $11,274,927 $ 8,597,560 $8,035,277 (1,207,243) 2,152,344 1,747,638 1,651,617 1,472,525 1,525,517 1,469,300 (0.92) 1.61 1.33 1.28 1.18 1.24 1.17 0.9050 0.8700 0.8300 0.7825 0.7550 0.7350 0.7150 $ 12,384,778 $10,698,188 $10,025,512 $10,310,256 $11,084,841 $11,321,682 $4,807,684 6,480,383 3,478,119 3,476,322 3,584,256 3,929,940 4,291,452 1,584,411 1.91 3.08 2.88 2.88 2.82 2.64 3.03 23,123,756 20,224,231 19,851,517 19,924,666 20,721,093 21,328,267 7,687,353 3,606,423 3,839,402 5,007,610 6,010,297 7,806,717 9,972,444 859,278 7,914,772 8,895,024 7,568,672 6,252,545 4,898,550 4,065,295 3,719,539 62,482 65,124 64,313 67,545 68,763 71,223 72,664 1,308,876 1,336,641 1,312,975 1,287,790 1,250,902 1,234,100 1,252,990 46,815 47,446 54,921 54,194 58,957 70,300 51,399 $ 2,032,431 $ 2,175,517 $ 2,428,518 $ 2,439,604 $ 2,512,418 $ 1,811,402 $1,654,984 593,222 577,930 619,528 614,179 641,169 439,572 396,045
Wyeth 27 CONSOLIDATED BALANCE SHEETS (In thousands except share and per share amounts)
December 31, 2002 2001 - ----------------------------------------------------------------------------------- ASSETS Cash and cash equivalents $ 2,943,604 $ 1,744,734 Marketable securities 1,003,275 1,281,988 Amgen investment 1,509,947 -- Accounts receivable less allowances (2002 - $132,342 and 2001 - $130,734) 2,379,819 2,743,040 Inventories 1,992,724 1,754,971 Other current assets including deferred taxes 1,766,483 2,242,020 - ----------------------------------------------------------------------------------- TOTAL CURRENT ASSETS 11,595,852 9,766,753 Property, plant and equipment: Land 173,743 138,837 Buildings 3,401,490 3,294,004 Machinery and equipment 3,782,533 3,796,117 Construction in progress 2,477,219 1,715,493 - ----------------------------------------------------------------------------------- 9,834,985 8,944,451 Less accumulated depreciation 2,599,293 2,662,291 - ----------------------------------------------------------------------------------- 7,235,692 6,282,160 Goodwill 3,745,749 3,725,547 Other intangibles, net of accumulated amortization (2002 - $95,223 and 2001 - $71,070) 145,915 126,387 Other assets including deferred taxes 3,271,741 3,067,075 - ----------------------------------------------------------------------------------- TOTAL ASSETS $ 25,994,949 $ 22,967,922 =================================================================================== - ----------------------------------------------------------------------------------- LIABILITIES Loans payable $ 804,894 $ 2,097,354 Trade accounts payable 672,633 672,457 Accrued expenses 3,788,653 4,257,523 Accrued federal and foreign taxes 209,479 229,847 - ----------------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 5,475,659 7,257,181 Long-term debt 7,546,041 7,357,277 Accrued postretirement benefit obligations other than pensions 965,081 925,098 Other noncurrent liabilities 3,852,256 3,355,793 Contingencies and commitments (Note 14) - ----------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------- STOCKHOLDERS' EQUITY $2.00 convertible preferred stock, par value $2.50 per share; 5,000,000 shares authorized 46 51 Common stock, par value $0.331/3 per share; 2,400,000,000 shares authorized (outstanding shares: 2002 - 1,326,055,000 and 2001 - 1,320,570,000) 442,019 440,190 Additional paid-in capital 4,582,773 4,295,051 Retained earnings 3,286,645 170,309 Accumulated other comprehensive loss (155,571) (833,028) - ----------------------------------------------------------------------------------- TOTAL STOCKHOLDERS' EQUITY 8,155,912 4,072,573 - ----------------------------------------------------------------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 25,994,949 $ 22,967,922 ===================================================================================
The accompanying notes are an integral part of these consolidated financial statements. 28 Wyeth CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share amounts)
Years Ended December 31, 2002 2001 2000 - -------------------------------------------------------------------------------------------------------------- NET REVENUE $ 14,584,035 $ 13,983,745 $ 13,081,334 - -------------------------------------------------------------------------------------------------------------- Cost of goods sold 3,918,387 3,388,776 3,269,418 Selling, general and administrative expenses 5,010,507 5,034,516 4,851,128 Research and development expenses 2,080,191 1,869,679 1,687,889 Interest expense, net 202,052 146,358 57,562 Other income, net (382,931) (274,331) (161,039) Gains related to Immunex/Amgen common stock transactions (4,082,216) -- (2,061,204) Termination fee -- -- (1,709,380) Litigation charges 1,400,000 950,000 7,500,000 Goodwill impairment -- -- 401,000 Special charges 340,800 -- 347,000 - -------------------------------------------------------------------------------------------------------------- Income (loss) from continuing operations before federal and foreign taxes 6,097,245 2,868,747 (1,101,040) Provision (benefit) for federal and foreign taxes 1,650,040 583,453 (200,000) - -------------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM CONTINUING OPERATIONS 4,447,205 2,285,294 (901,040) Discontinued operations: Income from operations of discontinued agricultural products business (net of federal and foreign taxes of $57,289) -- -- 103,346 Loss on disposal of agricultural products business (net of federal and foreign taxes of $855,248) -- -- (1,572,993) - -------------------------------------------------------------------------------------------------------------- LOSS FROM DISCONTINUED OPERATIONS -- -- (1,469,647) - -------------------------------------------------------------------------------------------------------------- NET INCOME (LOSS) $ 4,447,205 $ 2,285,294 $ (2,370,687) ============================================================================================================== BASIC EARNINGS (LOSS) PER SHARE FROM CONTINUING OPERATIONS $ 3.35 $ 1.74 $ (0.69) BASIC LOSS PER SHARE FROM DISCONTINUED OPERATIONS -- -- (1.12) - -------------------------------------------------------------------------------------------------------------- BASIC EARNINGS (LOSS) PER SHARE $ 3.35 $ 1.74 $ (1.81) ============================================================================================================== DILUTED EARNINGS (LOSS) PER SHARE FROM CONTINUING OPERATIONS $ 3.33 $ 1.72 $ (0.69) DILUTED LOSS PER SHARE FROM DISCONTINUED OPERATIONS -- -- (1.12) - -------------------------------------------------------------------------------------------------------------- DILUTED EARNINGS (LOSS) PER SHARE $ 3.33 $ 1.72 $ (1.81) ==============================================================================================================
The accompanying notes are an integral part of these consolidated financial statements. Wyeth 29 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, 2000 $ 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, net of tax (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, net of tax 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 ================================================================================================================================== - ---------------------------------------------------------------------------------------------------------------------------------- Net income 4,447,205 4,447,205 Currency translation adjustments 226,797 226,797 Unrealized losses on derivative contracts (22,132) (22,132) Unrealized gains on marketable securities 520,483 520,483 Minimum pension liability adjustments (47,691) (47,691) ----------- Comprehensive income, net of tax 5,124,662 ----------- Cash dividends declared: Preferred stock (per share: $2.00) (38) (38) Common stock (per share: $0.92) (1,219,135) (1,219,135) Common stock acquired for treasury (667) (5,472) (107,788) (113,927) Common stock issued for stock options 2,349 213,021 215,370 Conversion of preferred stock and other exchanges (5) 147 80,173 (3,908) 76,407 - ---------------------------------------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 2002 $ 46 $ 442,019 $ 4,582,773 $ 3,286,645 $(155,571) $ 8,155,912 ==================================================================================================================================
The accompanying notes are an integral part of these consolidated financial statements. 30 Wyeth CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Years Ended December 31, 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Income (loss) from continuing operations $ 4,447,205 $ 2,285,294 $ (901,040) Adjustments to reconcile income (loss) from continuing operations to net cash provided by/(used for) operating activities of continuing operations: Litigation charges 1,400,000 950,000 7,500,000 Gains related to Immunex/ Amgen common stock transactions (4,082,216) -- (2,061,204) Goodwill impairment -- -- 401,000 Special charges 340,800 -- 347,000 Gains on sales of assets (329,364) (249,399) (159,430) Depreciation 461,554 426,590 336,239 Amortization 23,146 181,139 198,810 Deferred income taxes 1,109,535 267,820 (814,282) Diet drug litigation payments (1,307,013) (7,257,882) (3,966,845) Security fund deposit (405,000) -- -- Contributions to defined benefit pension plans (909,602) (429,710) (17,554) Deconsolidation of Immunex -- -- (236,768) Changes in working capital, net of businesses sold or deconsolidated: Accounts receivable 271,988 (68,984) (433,182) Inventories (185,611) (273,063) 31,188 Other current assets (124,738) (395,764) 179,817 Trade accounts payable and accrued expenses (250,887) 277,009 270,518 Accrued federal and foreign taxes (33,214) (14,654) (393,330) Other items, net (240,853) (145,231) 196,405 - ------------------------------------------------------------------------------------------------------------- Net cash provided by/(used for) continuing operations 185,730 (4,446,835) 477,342 Net cash provided by discontinued operations -- -- 77,600 - ------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY/(USED FOR) OPERATING ACTIVITIES 185,730 (4,446,835) 554,942 ============================================================================================================= - ------------------------------------------------------------------------------------------------------------- Investing Activities Purchases of property, plant and equipment (1,931,879) (1,924,265) (1,681,906) Proceeds from sale of agricultural products business -- -- 3,800,000 Proceeds from Amgen acquisition of Immunex 1,005,201 -- -- Proceeds from sales of Immunex/Amgen common stock 3,250,753 -- 2,404,875 Proceeds from sales of assets 798,274 408,230 256,192 Purchases of marketable securities (2,235,872) (2,703,252) (677,802) Proceeds from sales and maturities of marketable securities 2,532,538 1,762,295 384,292 - ------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY/(USED FOR) INVESTING ACTIVITIES 3,419,015 (2,456,992) 4,485,651 ============================================================================================================= - ------------------------------------------------------------------------------------------------------------- Financing Activities Net proceeds from/(repayments of) debt (1,293,857) 7,007,156 (3,080,381) Dividends paid (1,219,173) (1,211,054) (1,201,477) Purchases of common stock for treasury (113,927) -- (393,077) Exercises of stock options 215,370 224,631 410,882 - ------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY/(USED FOR) FINANCING ACTIVITIES (2,411,587) 6,020,733 (4,264,053) - ------------------------------------------------------------------------------------------------------------- Effect of exchange rate changes on cash balances 5,712 (16,478) (24,949) - ------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,198,870 (899,572) 751,591 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,744,734 2,644,306 1,892,715 - ------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, END OF YEAR $ 2,943,604 $ 1,744,734 $ 2,644,306 =============================================================================================================
The accompanying notes are an integral part of these consolidated financial statements. Wyeth 31 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies PRINCIPLES OF CONSOLIDATION: The accompanying consolidated financial statements include the accounts of Wyeth and subsidiaries (the Company). The financial statements have been prepared in accordance with accounting principles generally accepted in the United States, which require the use of judgments and estimates made by management. 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. During 2002, Amgen Inc. (Amgen) completed its acquisition of Immunex. As a result, the Company's investment in Immunex, which was previously accounted for on the equity method, was exchanged for an investment in Amgen and was accounted for on the cost method subsequent to July 15, 2002. See Note 2 for further description of Immunex/Amgen common stock transactions. 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 Healthcare. Pharmaceuticals include branded human ethical pharmaceuticals, biologicals, nutritionals, and animal biologicals and pharmaceuticals. Principal products include women's health care products, neuroscience therapies, cardiovascular products, nutritionals, gastroenterology drugs, anti-infectives, vaccines, oncology therapies, musculoskeletal therapies, hemophilia treatments and immunological products. Principal animal health products include vaccines, pharmaceuticals, endectocides and growth implants. Consumer Healthcare 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. Wholesale distributors and large retail establishments account for a large portion of the Company's consolidated net revenue and trade receivables, especially in the United States. The Company's top three customers in the United States accounted for 25% of the Company's consolidated net revenue in 2002, as is typical in the pharmaceutical industry. In light of this concentration, the Company continuously monitors the creditworthiness of its customers and has established internal policies regarding customer credit limits. 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, Effexor, Premarin family products and Protonix, each of which has sales in excess of $1,000.0 million, comprised approximately 14%, 13% and 7%, respectively, of the Company's consolidated net revenue in 2002. 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 method investment is included in Other assets including deferred taxes. In 2001 and 2000, Immunex was the Company's only material equity method investment. At December 31, 2002, the Company did not have any material equity method investments. See Note 2 for discussion of Immunex-related transactions. CASH EQUIVALENTS consist primarily of commercial paper, fixed-term 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 their short-term, highly liquid nature. MARKETABLE SECURITIES: The Company has marketable debt and equity securities which are classified as either available-for-sale or held-to-maturity, depending on management's investment intentions relating to these securities. Available-for-sale securities are marked-to-market based on quoted market values of the securities, with the unrealized gains and losses, net of tax, reported as a component of Accumulated other comprehensive loss. Realized gains and losses on sales of available-for-sale securities are computed based upon initial cost adjusted for any other-than-temporary declines in fair value. Investments categorized as held-to-maturity are carried at amortized cost because the Company has both the intent and ability to hold these investments until they mature. Impairment losses are charged to income for other-than-temporary declines in fair value. Premiums and discounts are amortized or accreted into earnings over the life of the related available-for-sale or held-to-maturity security. Dividend and interest income is recognized when earned. The Company owns no investments that are considered to be trading securities. INVENTORIES are valued at the lower of cost or market. Inventories valued under the last-in, first-out (LIFO) method amounted to $360.3 million and $319.9 million at December 31, 2002 and 2001, respectively. The current value exceeded the 32 Wyeth LIFO value by $90.0 million and $59.5 million at December 31, 2002 and 2001, respectively. The remaining inventories are valued primarily under the first-in, first-out (FIFO) method. Inventories at December 31 consisted of:
(In thousands) 2002 2001 - -------------------------------------------------------------------------------- Finished goods $ 736,360 $ 653,108 Work in progress 808,711 674,636 Materials and supplies 447,653 427,227 - -------------------------------------------------------------------------------- $1,992,724 $1,754,971 ================================================================================
PROPERTY, PLANT AND EQUIPMENT IS CARRIED AT COST. Depreciation is provided over the estimated useful lives of the related assets, principally on the straight-line method, as follows: Buildings 10 - 50 years Machinery and equipment 3 - 20 years
Depreciable assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable based on projected undiscounted cash flows associated with the affected assets. A loss is recognized for the difference between the fair value and carrying amount of the asset. Fair value is determined based on market quotes, if available, or is based on valuation techniques. GOODWILL AND OTHER INTANGIBLES: Goodwill is defined as the excess of cost over the fair value of net assets acquired. On January 1, 2002, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets. With the adoption of SFAS No. 142, goodwill and other intangibles with indefinite lives are no longer amortized but are subject to at least an annual assessment for impairment by applying a fair value-based test. Other intangibles with finite lives continue to be amortized. See Note 5 for further detail relating to the Company's goodwill and other intangibles balances. 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 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 9 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 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 deductions in determining Net revenue. Revenue under co-promotion agreements from the sale of products developed by other companies, such as the Company's arrangement with Amgen 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. Alliance revenue totaled $418.8 million, $322.4 million and $188.3 million for 2002, 2001 and 2000, respectively. 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 $227.5 million, $228.9 million and $212.5 million in 2002, 2001 and 2000, 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, government mandates, coupons and consumer discounts. These costs are recognized at the later of a) the date at which the related revenue is recorded or b) the date at which the incentives are offered. Rebates and sales incentives accruals included in Accrued expenses at December 31, 2002 and 2001 were $722.5 million and $615.0 million, respectively. STOCK-BASED COMPENSATION: The Company has five Stock Incentive Plans, which are described more fully in Note 12. The Company accounts for those plans using the intrinsic value method in accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees. No stock-based employee compensation cost is reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the Wyeth 33 underlying common stock on the date of grant. The following table illustrates the effect on net income (loss) and earnings (loss) per share if the Company had applied the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation: (In thousands except per share amounts)
Years Ended December 31, 2002 2001 2000 - -------------------------------------------------------------------------------- Net income (loss), as reported $ 4,447,205 $ 2,285,294 $(2,370,687) Deduct: total stock-based employee compensation expense determined under fair value-based method for all awards, net of tax 297,965 200,688 149,924 - -------------------------------------------------------------------------------- Pro forma net income (loss) $ 4,149,240 $ 2,084,606 $(2,520,611) ================================================================================ Earnings (loss) per share: Basic - as reported $ 3.35 $ 1.74 $ (1.81) ================================================================================ Basic - pro forma $ 3.13 $ 1.58 $ (1.93) ================================================================================ Diluted - as reported $ 3.33 $ 1.72 $ (1.81) ================================================================================ Diluted - pro forma $ 3.11 $ 1.57 $ (1.93) ================================================================================
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 2002, 2001 and 2000, respectively: expected volatility (the amount by which the stock price is expected to fluctuate) of 33.7%, 32.1% and 31.2%; expected dividend yield of 1.9%, 1.6% and 1.6%; risk-free interest rate of 4.1%, 4.8% and 6.3%; and expected life of five years. The weighted average fair value of stock options granted during 2002, 2001 and 2000 was $16.12, $17.76 and $18.76 per option share, respectively. RESEARCH AND DEVELOPMENT EXPENSES are expensed as incurred. Upfront and milestone payments made to third parties in connection with research and development collaborations are expensed as incurred up to the point of regulatory approval. Payments made to third parties subsequent to regulatory approval are capitalized and amortized over the remaining useful life. Amounts capitalized for such payments are included in Other intangibles, net of accumulated amortization. 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, 2002 2001 2000 - ---------------------------------------------------------------------------- Income (loss) from continuing operations less preferred dividends $ 4,447,167 $ 2,285,252 $ (901,086) Loss from discontinued operations -- -- (1,469,647) - ---------------------------------------------------------------------------- Net income (loss) less preferred dividends $ 4,447,167 $ 2,285,252 $(2,370,733) Denominator: Weighted average common shares outstanding 1,325,577 1,317,102 1,306,474 - ---------------------------------------------------------------------------- Basic earnings (loss) per share from continuing operations $ 3.35 $ 1.74 $ (0.69) Basic loss per share from discontinued operations -- -- (1.12) - ---------------------------------------------------------------------------- Basic earnings (loss) per share $ 3.35 $ 1.74 $ (1.81) ============================================================================ Income (loss) from continuing operations $ 4,447,205 $ 2,285,294 $ (901,040) Loss from discontinued operations -- -- (1,469,647) - ---------------------------------------------------------------------------- Net income (loss) $ 4,447,205 $ 2,285,294 $(2,370,687) Denominator: Weighted average common shares outstanding 1,325,577 1,317,102 1,306,474 Common stock equivalents of outstanding stock options and deferred contingent common stock awards(2) 8,550 13,707 -- - ---------------------------------------------------------------------------- Total shares(1)(2) 1,334,127 1,330,809 1,306,474 - ---------------------------------------------------------------------------- Diluted earnings (loss) per share from continuing operations(1)(2) $ 3.33 $ 1.72 $ (0.69) Diluted loss per share from discontinued operations(2) -- -- (1.12) - ---------------------------------------------------------------------------- Diluted earnings (loss) per share(1)(2) $ 3.33 $ 1.72 $ (1.81) ============================================================================
(1) At December 31, 2002 and 2001, the equivalent of 90,360,361 and 18,945,057 common shares, respectively, issuable under the Company's Stock Incentive Plans, was excluded from the computation of diluted earnings per share because their effect would have been antidilutive. (2) The total weighted average common shares outstanding for diluted loss per share for 2000 did not include common stock equivalents, as the effect would have been antidilutive. 34 Wyeth RECENTLY ISSUED ACCOUNTING STANDARDS: The Financial Accounting Standards Board (FASB) recently issued Statement Nos. 145, 146 and 148 as well as Interpretation Nos. 45 and 46, which require the following: - SFAS No. 145, Rescission of FASB Statement Nos. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections, primarily relates to the reporting of gains and losses from the extinguishment of debt. With the issuance of this Statement, extinguishment of debt is not to be considered extraordinary if it is part of an entity's risk management strategy. This Statement is effective beginning January 1, 2003, and the Company does not anticipate the adoption of this Statement to have any impact on its financial position or results of operations. - SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, requires that a liability for a cost associated with an exit or disposal activity, initiated after December 31, 2002, be recognized and measured initially at fair value only when the liability is incurred. This Statement nullifies Emerging Issues Task Force (EITF) No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring), which permitted recognition of a liability for an exit cost at the date of an entity's commitment to an exit plan. The Company recorded the restructuring component of its 2002 special charge in accordance with EITF No. 94-3 and did not early adopt SFAS No. 146. - SFAS No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure, Amendment of SFAS No. 123, provides alternative methods of transition for a voluntary change to fair value-based accounting for stock-based compensation. In addition, the Statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both interim and annual financial statements about the method of accounting for stock-based employee compensation and the effect the method used has on reported results. The Company will continue to account for stock-based compensation using the intrinsic value method but has adopted the disclosure requirements prescribed by SFAS No. 148 as of December 31, 2002. - FASB Interpretation No. 45 (FIN 45), Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, Interpretation of FASB Statement Nos. 5, 57, and 107 and Rescission of FIN 34, clarifies the requirements of SFAS No. 5, Accounting for Contingencies, relating to the guarantor's accounting for, and disclosure of, the issuance of certain types of guarantees. FIN 45 requires, that upon issuance of a guarantee, the entity must recognize a liability for the fair value of the obligation it assumes under the guarantee. The disclosure provisions of the Interpretation are effective for financial statements of interim or annual periods that end after December 15, 2002, while the initial recognition and measurement provisions are effective on a prospective basis for guarantees that are issued or modified after December 31, 2002. The Company does not anticipate that the adoption of this Interpretation will have a material impact on its financial position or results of operations. - FIN 46, Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51, provides guidance on: (1) the identification of entities for which control is achieved through means other than through voting rights and (2) how to determine when and which business enterprise should consolidate such entities. In addition, FIN 46 requires that any enterprises with a significant variable interest in these types of entities make additional disclosures in all financial statements initially issued after January 31, 2003. The Company does not anticipate the adoption of this Interpretation will have any impact on its financial position or results of operations. RECLASSIFICATIONS: Certain reclassifications have been made to the December 31, 2001 and 2000 consolidated financial statements to conform with the December 31, 2002 presentation. 2. Divestitures and Discontinued Operations IMMUNEX/AMGEN TRANSACTIONS Acquisition of Immunex by Amgen and Related Sales of Amgen Common Stock During 2002, the Company recorded gains totaling $4,082.2 million ($2,628.1 million after-tax or $1.97 per share-diluted) relating to the acquisition of Immunex by Amgen and the subsequent sales of Amgen common stock. Prior to July 15, 2002, the Company was the beneficial owner of 223,378,088 shares of Immunex common stock. On July 15, 2002, Amgen completed its acquisition of Immunex. Under the terms of the acquisition agreement, each share of Immunex common stock was exchanged for 0.44 shares of Amgen common stock and $4.50 in cash. Accordingly, the Company received 98,286,358 shares of Amgen common stock (representing approximately 7.7% of Amgen's outstanding common stock) and $1,005.2 million in cash in exchange for all of its shares of Immunex common stock. Pursuant to the terms of the acquisition, the Company and Amgen had agreed to certain standstill, voting, lock-up and sales volume limitation provisions with respect to the Amgen common stock received by the Company. These provisions prohibited the Company, without the consent of Amgen, from disposing of greater than an aggregate of 20,000,000 shares of Amgen common stock in any calendar quarter, with certain exceptions, including the right to request a limited number of underwritten offerings. The pre-tax gains of $4,082.2 million recorded in 2002 consisted of $2,627.6 million relating to the initial acquisition of Immunex by Amgen and $1,454.6 million relating to the subsequent sales of Amgen common stock and were determined as follows: 1. As of July 15, 2002, the Company had valued its shares of Amgen common stock at $2,500.1 million based on the quoted market price in effect as of July 15, 2002 reduced Wyeth 35 by an overall discount of approximately 18%. The discount rate was based on valuations provided by independent valuation consultants in light of the various restrictions on the stock's marketability referred to above. The book value of the Company's Immunex investment was $867.7 million at July 15, 2002. A gain of $2,627.6 million ($1,684.7 million after-tax or $1.26 per share-diluted) was recorded on the exchange during the 2002 third quarter and was calculated as follows:
(In thousands) - -------------------------------------------------------------------------------- Value received: Cash $1,005,201 Amgen common stock 2,500,100 - -------------------------------------------------------------------------------- 3,505,301 Less: Equity investment in Immunex 867,701 Transaction costs 10,000 - -------------------------------------------------------------------------------- 877,701 - -------------------------------------------------------------------------------- Gain before federal taxes 2,627,600 Provision for federal taxes 942,877 - -------------------------------------------------------------------------------- Net gain $1,684,723 ================================================================================
2. Following the expiration of the 90-day lock-up period, the Company commenced selling its shares of Amgen common stock and, in the fourth quarter, obtained the consent of Amgen to exceed the sale limitation for such quarter. As of December 31, 2002, the Company sold 67,050,400 shares of Amgen common stock generating net proceeds of $3,250.8 million. The net proceeds of $3,250.8 million generated a pre-tax gain of $1,454.6 million ($943.4 million after-tax or $0.71 per share-diluted). The gain was determined by comparing the basis of the shares sold of $1,782.7 million with the net proceeds received reduced by certain related expenses. The remaining 31,235,958 shares of Amgen common stock held by the Company at December 31, 2002 had a fair value of $1,509.9 million, which included a mark-to-market gain of $515.1 million, net of tax, recorded as a component of Accumulated other comprehensive loss. The Company completed the sales of its remaining Amgen shares by January 21, 2003. These remaining shares netted proceeds of $1,579.9 million and resulted in an after-tax gain of $558.7 million, which will be recorded in the 2003 first quarter. The Company and Amgen continue to co-promote Enbrel in the United States and Canada with the Company having exclusive international rights to Enbrel. 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 (subsequently acquired by Amgen) from approximately 53% to approximately 55% by converting a $450.0 million convertible subordinated note into 15,544,041 newly issued shares of Immunex common stock. 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. Sale of Rhode Island Facility During the first quarter of 2002, the Company completed the sale of a manufacturing plant located in West Greenwich, Rhode Island, to Immunex (subsequently acquired by Amgen) for $487.8 million. The Company received $189.2 million of these proceeds in 2001 and the remaining $298.6 million during the 2002 first quarter. The Company did not recognize a gain on this transaction because the facility was sold at net book value. In December 2002, the U.S. Food and Drug Administration (FDA) approved the Rhode Island facility, which will be dedicated to expanding the production capacity of Enbrel. SALE OF LEDERLE GENERIC INJECTABLES PRODUCT LINE In December 2002, the Company sold to Baxter Healthcare Corporation certain assets related to the Company's generic human injectables product line for $305.0 million in cash. This transaction resulted in a gain of $172.9 million ($108.9 million after-tax or $0.08 per share-diluted), which was recorded in Other income, net. DISCONTINUED OPERATIONS - CYANAMID AGRICULTURAL PRODUCTS 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 $3,800.0 million in cash and assumed certain debt. The Company recorded an after-tax loss on the sale of this business 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 determined based on the difference in the book value of the net assets sold compared with the price received for these net assets. The sale of the Cyanamid Agricultural Products business produced a gain for tax purposes and a loss for book purposes, as the Company did not get a step-up in cost basis for tax purposes. This divergence, primarily caused by goodwill, was included in the basis for book purposes but was not included in the basis for tax purposes. The lower tax basis created a taxable gain that 36 Wyeth required a tax provision of approximately $855.2 million. This tax provision was combined with the pre-tax book loss of approximately $717.8 million for a total after-tax loss on the sale of the business of $1,573.0 million or $1.20 per share-diluted. Operating results of discontinued operations as of December 31, 2000 were as follows:
STATEMENT OF (In thousands except per share amounts) OPERATIONS - -------------------------------------------------------------------------------- Net revenue $ 546,790 - -------------------------------------------------------------------------------- Income before federal and foreign taxes 160,635 Provision for federal and foreign taxes 57,289 - -------------------------------------------------------------------------------- Income from operations of discontinued agricultural products business 103,346 Loss on disposal of agricultural products business (net of federal and foreign taxes of $855,248) (1,572,993) - -------------------------------------------------------------------------------- Loss from discontinued operations $(1,469,647) ================================================================================ Diluted loss per share from discontinued operations $ (1.12) ================================================================================
3. Special Charges, Goodwill Impairment and Termination Fee SPECIAL CHARGES Restructuring Charge and Related Asset Impairments In December 2002, the Company recorded a special charge for restructuring and related asset impairments of $340.8 million ($233.5 million after-tax or $0.18 per share-diluted). The Company recorded its asset impairments in accordance with SFAS No. 144, Accounting for the Impairment and Disposal of Long-Lived Assets, and its restructuring charges, including personnel and other costs, in accordance with EITF No. 94-3. The Company has not early adopted SFAS No. 146. Any charges associated with future restructuring programs will be recorded in accordance with SFAS No. 146. This will spread the recognition of the restructuring expenses over a number of accounting periods as compared with EITF No. 94-3. The restructuring charge and related asset impairments were recorded to recognize the costs of closing certain manufacturing facilities and two research facilities, as well as the elimination of certain positions at the Company's facilities. The related asset impairments of $68.7 million were determined by comparing the carrying value of the long-lived assets to the discounted cash flows that are expected to be generated by these assets. The fixed assets that have remained in use have been categorized as held and used. The depreciation has been adjusted to reflect the reduced carrying values of the facilities, which will be recognized over the closure period. The closing of the manufacturing and research facilities and reduction of sales and administrative-related positions cover approximately 3,150 employees worldwide. The reductions in workforce are permanent and affected all of the Company's operating segments, including Corporate. Approximately 1,200 of these positions are located at the manufacturing and research facilities that will be closed. Of the 3,150 positions to be eliminated, 2,230 were located in North America, 370 in Europe, 300 in Latin America and 250 in Asia-Pacific. At December 31, 2002, approximately 2,250 positions had been eliminated. A majority of the personnel costs associated with these reductions will be paid in 2003. 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. The Company estimated the cost of exiting and terminating the facility leases based on the contractual terms of the agreements and real estate market conditions. Amounts related to the lease expense will be paid over the remaining lease terms through 2012. Activity in the reserves from the 2002 special charge was as follows:
PERSONNEL FIXED ASSET OTHER CLOSURE/ (In thousands) COSTS IMPAIRMENTS EXIT COSTS TOTAL - ------------------------------------------------------------------------------------------------------------------- 2002 special charge reserves at inception $ 194,600 $ 68,700 $ 77,500 $ 340,800 Cash expenditures (30,900) -- (4,500) (35,400) Impairments of fixed assets -- (68,700) -- (68,700) - ------------------------------------------------------------------------------------------------------------------- 2002 special charge reserves at December 31, 2002 $ 163,700 $ -- $ 73,000 $ 236,700 ===================================================================================================================
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 2002 and 2001, approximately $3.6 million and $7.8 million, respectively, of these costs were paid, leaving an accrual of $28.5 million at December 31, 2002. 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 Wyeth 37 potential market shortage for these products and the related medical necessity. As a result, the majority of the remaining costs will be expended in 2003. Voluntary Market Withdrawals In November 2000, the 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 those 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. GOODWILL IMPAIRMENT Based on projected profitability and future cash flows associated with the solid dose generic pharmaceuticals and the Solgar consumer healthcare product line, it was determined that goodwill related to 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. 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) in 2000 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. 4. Marketable Securities The cost, gross unrealized gains (losses) and fair value of available-for-sale and held-to-maturity securities by major security type at December 31, 2002 and 2001 were as follows:
GROSS GROSS (In thousands) UNREALIZED UNREALIZED FAIR At December 31, 2002 COST GAINS (LOSSES) VALUE - --------------------------------------------------------------------------------------------------- Available-for-sale: U.S. Treasury securities $ 105,583 $ 615 $ (15) $ 106,183 Commercial paper 57,397 -- -- 57,397 Certificates of deposit 29,218 77 -- 29,295 Corporate debt securities 214,127 1,202 (388) 214,941 Other debt securities 9,702 150 -- 9,852 Institutional fixed income fund 510,574 16,312 -- 526,886 - --------------------------------------------------------------------------------------------------- Total available-for-sale 926,601 18,356 (403) 944,554 - --------------------------------------------------------------------------------------------------- Held-to-maturity: Time/term deposits 30,002 -- -- 30,002 U.S. Treasury securities 1,996 -- -- 1,996 Commercial paper 10,473 -- -- 10,473 Certificates of deposit 15,251 -- -- 15,251 Other debt securities 999 -- -- 999 - --------------------------------------------------------------------------------------------------- Total held-to-maturity 58,721 -- -- 58,721 - --------------------------------------------------------------------------------------------------- $ 985,322 $ 18,356 $ (403) $ 1,003,275 ===================================================================================================
GROSS GROSS (In thousands) UNREALIZED UNREALIZED FAIR At December 31, 2001 COST GAINS (LOSSES) VALUE - --------------------------------------------------------------------------------------------------- Available-for-sale: Time/term deposits $ 900,900 $ -- $ -- $ 900,900 Commercial paper 363,665 -- -- 363,665 Certificates of deposit 7,469 -- -- 7,469 Government securities 7,949 -- -- 7,949 Other debt securities 2,005 -- -- 2,005 - --------------------------------------------------------------------------------------------------- Total available-for-sale $ 1,281,988 $ -- $ -- $ 1,281,988 ===================================================================================================
38 Wyeth The contractual maturities of debt securities classified as available-for-sale and held-to-maturity as of December 31, 2002 were as follows:
Fair (In thousands) Cost Value - -------------------------------------------------------------------------------- Available-for-sale: Due within one year $204,238 $204,207 Due after one year through five years 198,197 199,865 Due after five years through 10 years -- -- Due after 10 years 13,592 13,596 - -------------------------------------------------------------------------------- $416,027 $417,668 ================================================================================ Held-to-maturity: Due within one year $ 58,721 $ 58,721 Due after one year through five years -- -- Due after five years through 10 years -- -- Due after 10 years -- -- - -------------------------------------------------------------------------------- $ 58,721 $ 58,721 ================================================================================
5. Goodwill and Other Intangibles In accordance with SFAS No. 142, goodwill is required to be tested for impairment at the reporting unit level utilizing a two-step methodology. The initial step requires the Company to determine the fair value of each reporting unit and compare it with the carrying value, including goodwill, of such unit. If the fair value exceeds the carrying value, no impairment loss would be recognized. However, if the carrying value of this unit exceeds its fair value, the goodwill of the unit may be impaired. The amount, if any, of the impairment then would be measured in the second step. Goodwill in each reporting unit was tested for impairment as of the beginning of the fiscal year in which SFAS No. 142 was initially adopted (transitional impairment test). Thereafter, it is required that goodwill must be tested for impairment at least on an annual basis (annual impairment test). The Company completed step one of the transitional impairment test during the second quarter of 2002 and its annual impairment test in the fourth quarter and determined there was no impairment of the recorded goodwill for any of the reporting units. The Company's other intangibles, which all have finite lives, are being amortized over their estimated useful lives ranging from three to 10 years. The following table presents the transitional disclosures for income (loss) from continuing operations and basic and diluted earnings (loss) per share from continuing operations for the years ended December 31, 2002, 2001 and 2000, respectively, to reflect the adoption of SFAS No. 142 as of January 1, 2002. Such disclosures add back goodwill amortization to the 2001 and 2000 results to be comparable with the 2002 results, which do not include goodwill amortization in accordance with the adoption of SFAS No. 142: (In thousands except per share amounts)
2002 2001 2000 - -------------------------------------------------------------------------------- As-reported income (loss) from continuing operations $ 4,447,205 $ 2,285,294 $ (901,040) Add back: goodwill amortization -- 153,926 172,206 - -------------------------------------------------------------------------------- Adjusted income (loss) from continuing operations $ 4,447,205 $ 2,439,220 $ (728,834) ================================================================================ Basic earnings (loss) per share from continuing operations: As-reported $ 3.35 $ 1.74 $ (0.69) Add back: goodwill amortization -- 0.12 0.13 - -------------------------------------------------------------------------------- Adjusted $ 3.35 $ 1.86 $ (0.56) ================================================================================ Diluted earnings (loss) per share from continuing operations: As-reported $ 3.33 $ 1.72 $ (0.69) Add back: goodwill amortization -- 0.12 0.13 - -------------------------------------------------------------------------------- Adjusted $ 3.33 $ 1.84 $ (0.56) ================================================================================
The changes in the carrying amount of goodwill by segment for the year ended December 31, 2002 were as follows:
PHARMA- CONSUMER (In thousands) CEUTICALS HEALTHCARE TOTAL - -------------------------------------------------------------------------------- Balance at January 1, 2002 $ 3,136,543 $ 589,004 $ 3,725,547 Goodwill write-off* (10,035) -- (10,035) Currency translation adjustments 28,895 1,342 30,237 - -------------------------------------------------------------------------------- Balance as of December 31, 2002 $ 3,155,403 $ 590,346 $ 3,745,749 ================================================================================
* Write-off relates primarily to allocation of goodwill to the Company's generic human injectables product line, which was sold in the 2002 fourth quarter (see Note 2). 6. Debt and Financing Arrangements The Company's debt at December 31 consisted of:
(In thousands) 2002 2001 - -------------------------------------------------------------------------------- Commercial paper $3,787,145 $4,817,205 Notes payable: 6.50% Notes due 2002 -- 250,000 5.875% Notes due 2004 500,000 500,000 7.90% Notes due 2005 1,000,000 1,000,000 6.25% Notes due 2006 1,000,000 1,000,000 6.70% Notes due 2011 1,500,000 1,500,000 7.25% debentures due 2023 250,000 250,000 Pollution control and industrial revenue bonds: 2.1%-5.8% due 2006-2018 74,250 83,950 Other debt: 0.7%-17.0% due 2003-2009 38,760 40,674 Fair value of debt attributable to interest rate swaps 200,780 12,802 - -------------------------------------------------------------------------------- 8,350,935 9,454,631 Less current portion 804,894 2,097,354 - -------------------------------------------------------------------------------- $7,546,041 $7,357,277 ================================================================================
Wyeth 39 The fair value of the Company's outstanding debt was $8,471.8 million and $9,607.7 million at December 31, 2002 and 2001, 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, 2002 and 2001 was 1.87% and 2.09%, respectively. The commercial paper had original maturities that did not exceed 270 days and a weighted average remaining maturity of 25 days and 37 days at December 31, 2002 and 2001, respectively. REVOLVING CREDIT FACILITIES In March 2001, the Company obtained a $3,000.0 million, 364-day credit facility (which supported borrowings under the commercial paper program). In March 2002, the Company renewed this $3,000.0 million credit facility for an additional 364-day term. Any borrowings under the $3,000.0 million, 364-day credit facility that are outstanding upon its termination in March 2003 are extendible by the Company for an additional year. The portion of commercial paper outstanding at December 31, 2002 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 credit facility contains substantially identical financial and other covenants, representations, warranties, conditions and default provisions as the March 2001 credit facility. In March 2002, the Company reduced its $2,000.0 million credit facility to $1,000.0 million, which terminated on July 31, 2002. Subsequent to the termination, in August 2002, the Company obtained a new 364-day $2,000.0 million credit facility which supported borrowings under the commercial paper program. As a result of the proceeds received from the sales of the Company's Amgen common stock holdings, the committed amount available under the facility was reduced to zero on December 30, 2002, and the facility was terminated. 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. At December 31, 2002 and 2001, there were no borrowings outstanding under the facilities. NOTES On March 30, 2001, the Company issued $3,000.0 million of Senior Notes (the Notes). 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 almost 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. 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. 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 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 of interest on these Notes to a floating rate, which is based on LIBOR. See Note 9 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: - $1,000.0 million 7.90% Notes due February 2005 with interest payments due on February 15 and August 15 - $250.0 million 7.25% debentures due March 2023 with interest payments due on March 1 and September 1 The aggregate maturities of debt during the next five years and thereafter at December 31, 2002 are as follows:
(In thousands) - -------------------------------------------------------------------------------- 2003 $ 804,894 2004 506,476 2005 1,017,988 2006 1,012,487 2007 387 Thereafter 2,008,703 - -------------------------------------------------------------------------------- 5,350,935 Commercial paper classified as Long-term debt 3,000,000 - -------------------------------------------------------------------------------- Total debt $8,350,935 ================================================================================
Interest payments in connection with the Company's debt obligations for the years ended December 31, 2002, 2001 and 2000 amounted to $375.8 million, $331.7 million and $343.0 million, respectively. Interest expense, net included interest income of $92.1 million, $154.8 million and $181.3 million in 2002, 2001 and 2000, respectively. Interest capitalized in connection with capital projects was $88.0 million, $94.3 million and $43.3 million in 2002, 2001 and 2000, respectively. 40 Wyeth 7. Other Noncurrent Liabilities Other noncurrent liabilities includes reserves for the Redux and Pondimin litigation (see Note 14), 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. 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 $379.7 million and $364.2 million at December 31, 2002 and 2001, respectively. Environmental-related accruals have been recorded without giving effect to any possible future insurance proceeds or the timing of payments. See Note 14 for discussion of contingencies. In 2000, the Company introduced a new incentive program to employees, the Performance Incentive Award Program (PIA), which provides financial awards to 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 2002, 2001 and 2000 was $39.6 million, $117.3 million and $94.7 million, respectively. 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 798,304 and 875,206 shares were outstanding at December 31, 2002 and 2001, respectively. 8. 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 2002, 2001 and 2000 was $208.5 million, $141.9 million and $107.7 million, respectively. Pension expense from continuing operations for defined contribution plans for 2002, 2001 and 2000 totaled $71.1 million, $67.0 million and $62.9 million, respectively. Pension plan benefits for defined benefit plans are based primarily on participants' compensation and years of credited service. Pension plan assets to fund the Company's obligations are invested in accordance with certain asset allocation criteria and investment guidelines established by the Company. Investment responsibility for these assets is assigned to outside investment managers, and employees do not have the ability to direct these 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 U.S. locations and Canada. Most full-time employees become eligible for these benefits after attaining specified age and service requirements. 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 2002 and 2001 were as follows:
PENSIONS OTHER POSTRETIREMENT BENEFITS --------------------------- ----------------------------- CHANGE IN PROJECTED BENEFIT OBLIGATION (In thousands) 2002 2001 2002 2001 - -------------------------------------------------------------------------------------------------------------------- Projected benefit obligation at January 1 $ 3,316,032 $ 3,210,575 $ 1,270,085 $ 1,020,330 Service cost 95,695 78,634 31,764 24,179 Interest cost 233,169 226,786 87,681 76,966 Amendments and other adjustments 95,537 9,796 (38,331) -- Net actuarial loss 418,212 104,938 170,301 227,758 Benefits paid (302,082) (284,603) (88,707) (78,516) Currency translation adjustment 38,206 (30,094) 333 (632) - -------------------------------------------------------------------------------------------------------------------- Projected benefit obligation at December 31 $ 3,894,769 $ 3,316,032 $ 1,433,126 $ 1,270,085 ====================================================================================================================
Wyeth 41
PENSIONS OTHER POSTRETIREMENT BENEFITS --------------------------- ----------------------------- CHANGE IN PLAN ASSETS (In thousands) 2002 2001 2002 2001 - -------------------------------------------------------------------------------------------------------------------- Fair value of plan assets at January 1 $ 2,738,622 $ 2,816,016 $ -- $ -- Actual return on plan assets (215,402) (213,908) -- -- Amendments and other adjustments 67,175 6,754 -- -- Company contributions 909,602 429,710 88,707 78,516 Benefits paid (302,082) (284,603) (88,707) (78,516) Currency translation adjustment 17,113 (15,347) -- -- - -------------------------------------------------------------------------------------------------------------------- Fair value of plan assets at December 31 $ 3,215,028 $ 2,738,622 $ -- $ -- ====================================================================================================================
PENSIONS OTHER POSTRETIREMENT BENEFITS --------------------------- ----------------------------- RECONCILIATION OF FUNDED STATUS (In thousands) 2002 2001 2002 2001 - -------------------------------------------------------------------------------------------------------------------- Funded status $ 679,741 $ 577,410 $ 1,433,126 $ 1,270,085 Unrecognized net actuarial loss (1,459,416) (603,051) (406,684) (243,292) Unrecognized prior service cost (55,283) (57,193) 23,639 (16,695) Unrecognized net transition obligation (4,717) (5,301) -- -- - -------------------------------------------------------------------------------------------------------------------- Net amount recognized $ (839,675) $ (88,135) $ 1,050,081 $ 1,010,098 ====================================================================================================================
PENSIONS AMOUNT RECOGNIZED IN THE ---------------------------- CONSOLIDATED BALANCE SHEETS (In thousands) 2002 2001 - -------------------------------------------------------------------------------------------------------------------- Prepaid benefit cost $(1,084,072) $ (212,967) Accrued benefit liability 335,421 124,832 Intangible asset (19,943) -- Accumulated other comprehensive income (71,081) -- - -------------------------------------------------------------------------------------------------------------------- Net amount recognized $ (839,675) $ (88,135) ====================================================================================================================
At December 31, 2002 and 2001, the accumulated benefit obligations (ABO), which represent the obligations for benefits earned in the defined benefit plans before considering plan assets, were $3,449.3 million and $2,971.8 million, respectively. The ABO exceeded the plan assets by $234.3 million and $233.2 million at December 31, 2002 and 2001, respectively. This difference is primarily attributable to unfunded executive retirement plans and certain international plans. In December 2002 and 2001, the Company made contributions to the U.S. defined benefit pension plans of $875.0 million and $400.0 million, respectively, due primarily to the decrease in the plan assets and, as a result, the anticipation of future statutory funding requirements. The contributions made during the last two years fully funded the primary U.S. defined benefit pension plan. The decline in the global equity markets that occurred during the past three years contributed significantly to the decrease in the plan assets. The impact of the negative market returns caused most of the increase in the unrecognized net actuarial loss since most of the difference between the expected return and actual return on plan assets is deferred. The net actuarial loss for other postretirement benefits of $170.3 million in 2002 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, 2002 and 2001 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 at December 31, 2002 and 2001. Assumptions used in developing the projected benefit obligations at December 31 were as follows (the expected return on plan assets is used in the determination of the net periodic benefit cost in the following year):
PENSIONS OTHER POSTRETIREMENT BENEFITS WEIGHTED AVERAGE ASSUMPTIONS ----------------------------------- --------------------------------- AT DECEMBER 31, 2002 2001 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------------------- Discount rate 6.75% 7.25% 7.5% 6.75% 7.25% 7.5% Rate of compensation Increase 4.0% 4.0% 4.0% -- -- -- Expected return on plan assets 9.0% 9.25% 9.5% -- -- -- Increases in per capita cost of health care benefits that gradually decrease and are held constant after four years -- -- -- 9.5%-5.0% 9.5%-5.0% 7.0%-5.0% ===============================================================================================================================
42 Wyeth 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 $178.8 million and the total service and interest cost components by $16.8 million. A one percentage point decrease in the assumed health care cost trend rates would decrease the postretirement benefit obligation by $147.7 million and the total service and interest cost components by $13.6 million. Net periodic benefit cost from continuing operations of the Company's defined benefit plans for 2002, 2001 and 2000 (principally U.S. plans) was as follows:
COMPONENTS OF NET PERIODIC BENEFIT COST PENSIONS OTHER POSTRETIREMENT BENEFITS FROM CONTINUING OPERATIONS ----------------------------------- --------------------------------- (In thousands) 2002 2001 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------------------- Service cost $ 95,695 $ 78,634 $ 74,656 $ 31,764 $ 24,179 $ 20,460 Interest cost 233,169 226,786 225,248 87,681 76,966 77,666 Expected return on plan assets (236,490) (246,449) (270,131) -- -- -- Amortization of prior service cost 7,146 11,720 10,704 2,003 2,003 330 Amortization of transition obligation 1,057 1,999 2,184 -- -- -- Recognized net actuarial loss 36,798 2,250 2,091 7,164 127 134 - ------------------------------------------------------------------------------------------------------------------------------- Net periodic benefit cost from continuing operations $ 137,375 $ 74,940 $ 44,752 $ 128,612 $ 103,275 $ 98,590 ===============================================================================================================================
Net periodic pension benefit cost from continuing operations was higher in 2002 compared with 2001 due primarily to increases in the service cost and the recognized net actuarial loss of the U.S. pension plans. The recognized net actuarial loss increased as a result of amortizing the unrecognized net actuarial loss which represents actuarial losses accumulated through 2001, primarily resulting from the negative market returns discussed above. In 2000, 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. 9. 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) 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 or loss if settlement were to take place on December 31, 2002, with the fair value of option contracts reflecting the present value of future cash flows if the contracts were settled on December 31, 2002. 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 intercompany and third-party foreign currency risk. The two programs and the corresponding derivative contracts outstanding as of December 31, 2002 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. The Company recorded a loss of $88.1 million and a gain of $28.7 million in Other income, net relating to gains and losses on these foreign exchange forward contracts and swap contracts for 2002 and 2001, respectively. These amounts consist of gains and losses from contracts settled during 2002 and 2001, as well as contracts outstanding at December 31, 2002 and 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 on the balance sheet. As of December 31, 2002 and 2001, an after-tax loss of $17.6 million and an after-tax gain of $4.4 million, respectively, relating to these cash flow hedges were included in Accumulated other comprehensive loss with the corresponding assets/liabilities recorded in Other current assets including deferred taxes/Accrued expenses. The unrealized net losses in Accumulated other comprehensive loss will be reclassified into the Consolidated Statement of Operations when the inventory is sold to a third party. As such, the Company anticipates recognizing Wyeth 43 these net losses during the next six months. For the years ended December 31, 2002 and 2001, the Company had losses of $12.1 million and gains of $33.8 million, respectively, included in Other income, net relating to these cash flow hedges. Put option contracts outstanding as of December 31, 2002 expire no later than September 2003. Occasionally the Company purchases foreign currency put options outside of the cash flow hedging program to protect additional intercompany inventory sales. These put 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 for 2001, recognized in current period earnings. The Company did not purchase any foreign currency put options outside of the cash flow hedging program during 2002. 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, 2002 and 2001, the Company had recorded after-tax gains of $3.3 million and $3.5 million, respectively, 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, excluding accrued interest, were assets of $200.8 million and $12.8 million as of December 31, 2002 and 2001, respectively. The fair value of these swaps has been recorded in Other assets including deferred taxes with the corresponding adjustment recorded to the underlying 6.70% Notes in Long-term debt. 10. Income Taxes The provision (benefit) for federal and foreign income taxes from continuing operations consisted of:
(In thousands) Years Ended December 31, 2002 2001 2000 - -------------------------------------------------------------------------------- Current: Federal $ 159,487 $ (96,805) $ 321,484 Foreign 381,018 412,438 292,798 - -------------------------------------------------------------------------------- 540,505 315,633 614,282 Deferred: Federal 1,126,839 270,144 (836,883) Foreign (17,304) (2,324) 22,601 - -------------------------------------------------------------------------------- 1,109,535 267,820 (814,282) - -------------------------------------------------------------------------------- $ 1,650,040 $ 583,453 $(200,000) ================================================================================
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) 2002 2001 - -------------------------------------------------------------------------------- Net current deferred tax assets $1,187,451 $1,526,690 Net noncurrent deferred tax assets 802,581 1,583,599 - -------------------------------------------------------------------------------- Net deferred tax assets $1,990,032 $3,110,289 ================================================================================
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 litigation. Deferred tax liabilities result principally from tax on earnings expected to be remitted to the United States, the use of accelerated depreciation for tax purposes, contributions made to the Company's pension plans and taxes to be paid on expected gains to be realized on selling the remaining shares of Amgen common stock the Company held at December 31, 2002. 44 Wyeth The components of the Company's deferred tax assets and liabilities at December 31 were as follows:
(In thousands) 2002 2001 - -------------------------------------------------------------------------------- Deferred tax assets: Diet drug product litigation accruals $ 682,927 $ 650,192 Product litigation and environmental liabilities and other accruals 590,087 660,282 Postretirement, pension and other employee benefits 579,547 536,676 Net operating loss and other tax credit carryforwards 1,228,939 1,756,522 Goodwill impairment 48,836 52,837 Restructuring and product discontinuations 128,509 113,638 Inventory reserves 163,936 127,175 Investments and advances 27,685 31,869 Research and development costs 493,303 554,521 Intangibles 63,288 58,538 Other 57,991 40,375 - -------------------------------------------------------------------------------- Total deferred tax assets 4,065,048 4,582,625 ================================================================================ Deferred tax liabilities: Tax on earnings expected to be remitted to the United States (700,000) (700,000) Depreciation (343,762) (370,916) Pension benefits and other employee benefits (345,606) (140,004) Investments (478,441) -- Equity investments -- (110,204) Other (158,570) (101,630) - -------------------------------------------------------------------------------- Total deferred tax liabilities (2,026,379) (1,422,754) - -------------------------------------------------------------------------------- Deferred tax asset valuation allowances (48,637) (49,582) - -------------------------------------------------------------------------------- Net deferred tax assets $ 1,990,032 $ 3,110,289 ================================================================================
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. 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 $930.0 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 2002, 2001 and 2000 (see Note 14), gains relating to Immunex/Amgen common stock transactions (see Note 2), the effect of the termination fee in 2000 (see Note 3), goodwill impairment in 2000 (see Note 3) and special charges in 2002 and 2000 (see Note 3), were as follows:
TAX RATE Years Ended December 31, 2002 2001 2000 - ------------------------------------------------------------------------------ U.S. statutory rate 35.0% 35.0% 35.0% Effect of Puerto Rico and Ireland manufacturing operations (10.3) (9.1) (8.6) Research credits (1.9) (2.1) (1.7) Goodwill amortization -- 1.2 1.5 Other, net (1.7) (0.9) (0.7) - ------------------------------------------------------------------------------ Effective tax rate from continuing operations 21.1% 24.1% 25.5% ==============================================================================
Including the effect of the 2002 litigation charge and special charge (which had tax benefits of 35.0% and 31.5%, respectively) and gains relating to Immunex/Amgen common stock transactions (which had a tax provision of 35.6%), the overall effective tax rate from continuing operations in 2002 was 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. Total income tax payments, net of tax refunds, for continuing and discontinued operations in 2002, 2001 and 2000 amounted to $535.8 million, $493.6 million and $1,038.3 million, respectively. 11. Capital Stock There were 2,400,000,000 shares of common stock and 5,000,000 shares of preferred stock authorized at December 31, 2002 and 2001. Of the authorized preferred shares, there is a series of shares (18,318 and 20,486 outstanding at December 31, 2002 and 2001, 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 Wyeth 45 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 as 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 no longer are 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 2002, 2001 and 2000 were as follows:
(In thousands except shares of preferred stock) 2002 2001 2000 - -------------------------------------------------------------------------------- Balance at January 1 1,320,570 1,311,774 1,303,916 Issued for stock options 7,233 8,550 15,123 Purchases of common stock for treasury (2,000) -- (7,414) Conversions of preferred stock (2,168, 1,462 and 2,293 shares in 2002, 2001 and 2000, respectively) and other exchanges 252 246 149 - -------------------------------------------------------------------------------- Balance at December 31 1,326,055 1,320,570 1,311,774 ================================================================================
The Company has a common stock repurchase program under which the Company is authorized to repurchase common shares. During 2002, the Company repurchased 2,000,000 shares of common stock. At December 31, 2002, the Company was authorized to repurchase 4,492,460 common shares in the future. Shares of common stock held in treasury at December 31, 2002 and 2001 were 96,276,705 and 101,684,219, respectively. The Company has not retired any shares held in treasury during 2002 and 2001. 12. Stock Options The Company has five Stock Incentive Plans. Under the Stock Incentive Plans, options and restricted stock may be granted to purchase a maximum of 246,000,000 shares 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, 2002, there were 54,626,772 shares available for future grants under the Stock Incentive Plans. No further grants may be made under the Stock Incentive Plan approved in 1990. The plans provide for the granting of incentive stock options as defined under the Internal Revenue Code. Under the plans, grants of non-qualified stock options with a 10-year term or incentive stock options with a term not exceeding 10 years may be made to selected officers and employees. All stock option grants vest ratably over a three-year term. 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, 2002, there were no outstanding SARs. The Stock Incentive Plans allow for, among other things, the issuance of up to 32,000,000 shares, in the aggregate, as restricted stock awards. Restricted stock awards representing 326,510, 290,995 and 148,900 units were granted in 2002, 2001 and 2000, respectively, 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 2000 through 2006. 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. Under this plan, each director who is not a current or former employee receives a grant of stock options (currently 4,000 options per year) on the day of each annual meeting, which generally become exercisable on the next annual meeting date. Stock options granted to non-employee directors were 36,000, 36,000 and 21,000 in 2002, 2001 and 2000, respectively. Shares available for future grants at December 31, 2002 were 136,000. 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, 2002, 63,200 shares were available for future grants. 46 Wyeth Stock option information related to the plans was as follows:
WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE STOCK OPTIONS 2002 PRICE 2001 PRICE 2000 PRICE - ----------------------------------------------------------------------------------------------------------------------- Outstanding at January 1 100,003,072 $48.57 82,751,313 $43.74 85,244,130 $39.13 Granted 32,907,776 52.29 28,360,196 56.89 16,496,678 56.51 Canceled/forfeited (2,866,185) 56.67 (2,558,655) 57.36 (3,866,134) 58.32 Exercised (2002-$14.52 to $65.16 per share) (7,232,908) 30.09 (8,549,782) 26.74 (15,123,361) 27.90 - ----------------------------------------------------------------------------------------------------------------------- Outstanding at December 31 122,811,755 50.47 100,003,072 48.57 82,751,313 43.74 ======================================================================================================================= Exercisable at December 31 68,484,510 47.57 57,205,798 41.93 51,830,094 35.31 =======================================================================================================================
The following table summarizes information regarding stock options outstanding at December 31, 2002:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE - ----------------------------------------------------------------------- ----------------------------- WEIGHTED AVERAGE WEIGHTED WEIGHTED RANGE OF NUMBER REMAINING AVERAGE NUMBER AVERAGE EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE - ----------------------------------------------------------------------------------------------------------- $14.52 to 19.99 8,687,206 1.6 years $17.96 8,687,206 $17.96 20.00 to 29.99 3,208,270 3.2 years 26.35 3,208,270 26.35 30.00 to 39.99 20,886,087 6.8 years 35.48 10,414,279 36.18 40.00 to 49.99 665,280 6.7 years 45.35 466,985 46.15 50.00 to 59.99 49,863,882 7.4 years 55.27 28,739,122 54.34 60.00 to 65.32 39,501,030 8.0 years 61.51 16,968,648 62.29 - ----------------------------------------------------------------------------------------------------------- 122,811,755 68,484,510 ===========================================================================================================
13. Accumulated Other Comprehensive Loss Accumulated other comprehensive loss consists of changes in foreign currency translation adjustments, net unrealized gains (losses) on derivative contracts, net unrealized gains on marketable securities and minimum pension liability adjustments. The following table sets forth the changes in each component of Accumulated other comprehensive loss:
FOREIGN NET UNREALIZED NET UNREALIZED MINIMUM ACCUMULATED CURRENCY GAINS (LOSSES) GAINS ON PENSION OTHER TRANSLATION ON DERIVATIVE MARKETABLE LIABILITY COMPREHENSIVE (In thousands) ADJUSTMENTS(1) CONTRACTS(2) SECURITIES(2) ADJUSTMENTS(2) LOSS - ---------------------------------------------------------------------------------------------------------------------------------- Balance January 1, 2000 $(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) Period change 226,797 (22,132) 520,483 (47,691) 677,457 - ---------------------------------------------------------------------------------------------------------------------------------- Balance December 31, 2002 $(624,866) $(14,267) $ 531,253 $(47,691) $(155,571) ==================================================================================================================================
(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 assets (liabilities) provided for net unrealized (losses) gains on derivative contracts in 2002 and 2001 were $9,500 and $(1,000), respectively; for net unrealized gains on marketable securities in 2002 were $(279,200); and for minimum pension liability adjustments in 2002 were $23,390. Wyeth 47 14. Contingencies and Commitments The Company is involved in various legal proceedings, including product liability and environmental matters of a nature considered normal to its business (see Note 7 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 Pondimin (which in combination with phentermine, a product that was not manufactured, distributed or sold by the Company, was commonly referred to as "fen-phen") or Redux, which the Company estimated were used in the United States, prior to their 1997 voluntary market withdrawal, by approximately 5.8 million people. These actions allege, among other things, that the use of Redux and/or Pondimin, independently or in combination with phentermine, 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. 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. Under the terms of the nationwide class action settlement, the period during which class members could register to receive a screening echocardiogram from the settlement trust ended on August 2, 2002. Those echocardiograms must be completed by July 3, 2003 unless that date is further extended by the court. Class members whose trust-supplied echocardiograms demonstrate FDA-positive levels of heart valve regurgitation (mild or greater aortic valve regurgitation or moderate or greater mitral valve regurgitation) will have 120 days to elect either to remain in the settlement or to withdraw from the settlement and proceed as an intermediate opt out (with specific rights and limitations defined in the settlement). Class members who chose to obtain their own echocardiogram outside of the settlement were required to have completed those echocardiograms by January 3, 2003; the date by which any of those class members whose echocardiograms show FDA-positive levels of regurgitation must make such an election is May 3, 2003. As originally designed, the settlement was composed of two settlement funds. Fund A (with a present value at the time of settlement of $1,000.0 million) was created to cover refunds, medical screening costs, additional medical services and cash payments, education and research costs, and administration costs. Fund A has been fully funded by contributions by the Company. Fund B (which was to be funded by the Company on an as-needed basis up to a total of $2,550.0 million) would compensate claimants with significant heart valve disease. Any funds remaining in Fund A after all Fund A obligations were met were to be added to Fund B to be available to pay Fund B injury claims. In December 2002, following a joint motion by the Company and plaintiffs' counsel, the Court approved an amendment to the settlement agreement which provided for the merger of Funds A and B into a combined fund which now will cover all expenses and injury claims in connection with the settlement. The effect of the merger is to accelerate the spillover of the expected remainder in Fund A, which now will be available to pay Fund B claims. The merger of the two funds took place in January 2003. Payments into the settlement fund may continue, if needed, until 2018. Payments to the settlement funds in 2002, 2001 and 2000 were $822.7 million, $936.7 million and $383.0 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 all but a small percentage of these initial opt outs and continues to work toward resolving those that remain. 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. In April 2002, pursuant to an agreement among the Company, class counsel and representatives of the settlement trust, an additional $45.0 million (later reduced to $35.0 million), also included in Other assets including deferred taxes, was added to the security fund, bringing the total amount in the security fund to $405.0 million. The amounts in the security fund are owned by the Company and will earn interest income for the Company while 48 Wyeth 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) 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), a third litigation charge of $950.0 million ($615.0 million after-tax or $0.46 per share-diluted) in 2001 and a fourth charge of $1,400.0 million ($910.0 million after-tax or $0.68 per share-diluted) in the 2002 third quarter. The principal reason for the charge taken in the 2002 third quarter was that the volume and size of the claims filed in the nationwide diet drug settlement were greater than anticipated. These charges are intended to cover the total amount required to resolve all diet drug litigation, including anticipated funding requirements for the nationwide class action settlement, 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, 2002, $1,950.7 million of the litigation accrual remained; $925.0 million and $1,025.7 million were included in Accrued expenses and Other noncurrent liabilities, respectively. At December 31, 2001, $1,857.7 million of the then-existing litigation accrual remained; $1,150.0 million and $707.7 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 $1,307.0 million, $7,257.9 million and $3,966.8 million for 2002, 2001 and 2000, respectively. Based upon the information available at this time, the Company believes that its reserves will be adequate to cover the remaining obligations relating to the diet drug litigation. However, in light of the inherent uncertainty in estimating litigation exposure and the fact that substantial additional information will become available in the coming months, it is possible that additional reserves will be required. 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 or cash flows in any one accounting period. COMMITMENTS: The Company leases certain property and equipment for varying periods under operating leases. Future minimum rental payments under non-cancelable operating leases with terms in excess of one year in effect at December 31, 2002 are as follows:
(In thousands) - -------------------------------------------------------------------------------- 2003 $ 89,698 2004 69,271 2005 64,051 2006 55,355 2007 52,429 Thereafter 60,307 - -------------------------------------------------------------------------------- Total rental commitments $391,111 ================================================================================
Rental expense from continuing operations for all operating leases was $156.0 million, $133.7 million and $128.2 million in 2002, 2001 and 2000, respectively. 15. Company Data by Segment The Company has three reportable segments: Pharmaceuticals, Consumer Healthcare and Corporate. The Company's Pharmaceuticals and Consumer Healthcare 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 Pharmaceuticals segment manufactures, distributes and sells branded human ethical pharmaceuticals, biologicals, nutritionals, and animal biologicals and pharmaceuticals. Principal products include women's health care products, neuroscience therapies, cardiovascular products, nutritionals, gastroenterology drugs, anti-infectives, vaccines, oncology therapies, musculoskeletal therapies, hemophilia treatments and immunological products. Principal animal health products include vaccines, pharmaceuticals, endectocides and growth implants. The Consumer Healthcare segment manufactures, distributes and sells over-the-counter health care products that 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, income, 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 Healthcare reportable segments based on income from continuing operations before taxes, which includes gains on the sales of non-corporate assets and certain other items. Corporate includes interest expense and interest income, gains on the sales of investments and other corporate assets, gains Wyeth 49 relating to Immunex/Amgen common stock transactions, the Warner-Lambert Company termination fee, certain litigation provisions, including the Redux and Pondimin litigation charges, goodwill impairment, special charges and other miscellaneous items. COMPANY DATA BY REPORTABLE SEGMENT
(Dollar amounts in millions) YEARS ENDED DECEMBER 31, 2002 2001 2000 - -------------------------------------------------------------------------------- NET REVENUE FROM CUSTOMERS(1) Pharmaceuticals $12,386.6 $11,716.5 $10,772.6 Consumer Healthcare 2,197.4 2,267.2 2,308.7 - -------------------------------------------------------------------------------- Consolidated Total $14,584.0 $13,983.7 $13,081.3 ================================================================================ INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE TAXES(2) Pharmaceuticals $ 3,505.5 $ 3,503.5 $ 2,919.5 Consumer Healthcare 608.0 592.1 626.6 Corporate(3) 1,983.7 (1,226.9) (4,647.1) - -------------------------------------------------------------------------------- Consolidated Total $ 6,097.2 $ 2,868.7 $(1,101.0) ================================================================================ DEPRECIATION AND AMORTIZATION EXPENSE(2) Pharmaceuticals $ 434.8 $ 539.1 $ 458.8 Consumer Healthcare 32.1 53.1 61.0 Corporate 17.8 15.5 15.2 - -------------------------------------------------------------------------------- Consolidated Total $ 484.7 $ 607.7 $ 535.0 ================================================================================ EXPENDITURES FOR LONG-LIVED ASSETS(5) Pharmaceuticals $ 1,789.4 $ 1,827.7 $ 1,720.1 Consumer Healthcare 40.1 67.8 38.4 Corporate 126.3 137.1 55.0 - -------------------------------------------------------------------------------- Consolidated Total $ 1,955.8 $ 2,032.6 $ 1,813.5 ================================================================================ TOTAL ASSETS AT DECEMBER 31, Pharmaceuticals(4) $14,169.8 $13,820.3 $12,388.6 Consumer Healthcare 1,709.8 1,736.3 1,697.2 Corporate 10,115.3 7,411.3 7,006.7 - -------------------------------------------------------------------------------- Consolidated Total $25,994.9 $22,967.9 $21,092.5 ================================================================================
COMPANY DATA BY GEOGRAPHIC SEGMENT
(Dollar amounts in millions) YEARS ENDED DECEMBER 31, 2002 2001 2000 - -------------------------------------------------------------------------------- NET REVENUE FROM CUSTOMERS(1)(5) United States $ 9,233.8 $ 8,903.2 $ 7,912.8 United Kingdom 750.6 680.2 896.3 Other International 4,599.6 4,400.3 4,272.2 - -------------------------------------------------------------------------------- Consolidated Total $14,584.0 $13,983.7 $13,081.3 ================================================================================ LONG-LIVED ASSETS AT DECEMBER 31,(5) United States $ 7,737.7 $ 7,332.1 $ 6,228.8 Ireland 1,341.0 652.7 386.2 Other International 2,670.2 2,482.6 2,688.6 - -------------------------------------------------------------------------------- Consolidated Total $11,748.9 $10,467.4 $ 9,303.6 ================================================================================
(1) The Company adopted new authoritative accounting guidance as of January 1, 2002 reflecting the cost of certain vendor considerations (i.e., cooperative advertising payments) 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. (2) Income (loss) from continuing operations before taxes included goodwill amortization for 2001 and 2000 as follows: Pharmaceuticals - $136.8 and $147.8, respectively, and Consumer Healthcare - $23.7 and $31.8, respectively. The Company ceased amortizing goodwill in accordance with SFAS No. 142 effective January 1, 2002. (3) 2002, 2001 and 2000 Corporate included litigation charges of $1,400.0, $950.0 and $7,500.0, respectively, relating to the litigation brought against the Company regarding the use of the diet drug products Redux or Pondimin. The charges are intended to cover all anticipated payments in connection with the nationwide class action settlement, 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 (see Note 14). The charges related to the Pharmaceuticals operating segment. 2002 Corporate also included: - - A gain of $2,627.6 relating to the acquisition of Immunex by Amgen. The gain represents the excess of $1,005.2 in cash plus the fair value of 98,286,358 Amgen shares received, $2,500.1, over the Company's book basis of its investment in Immunex and certain transaction costs (see Note 2). The gain related to the Pharmaceuticals operating segment. - - A gain of $1,454.6 on the sale of a portion of the Company's Amgen common stock holdings. The gain was determined by comparing the basis of the shares sold, $1,782.7, with the net proceeds received, $3,250.8, reduced by certain related expenses (see Note 2). The gain related to the Pharmaceuticals operating segment. - - A special charge of $340.8 for restructuring and related asset impairments (see Note 3). The charge related to the reportable segments as follows: Pharmaceuticals - $307.6, Consumer Healthcare - $17.1 and Corporate - $16.1. 2000 Corporate also included: - - Income of $1,709.4 resulting from the receipt of an $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 healthcare product line. The charge related to the operating segments as follows: Pharmaceuticals - $231.0 and Consumer Healthcare - $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 Healthcare 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. 50 Wyeth (4) 2001 and 2000 included an equity method investment in Immunex of $845.4 and $759.2, respectively. The Company did not retain an equity method investment in Immunex subsequent to July 15, 2002 (see Note 2). (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, other intangibles, and other assets, excluding deferred taxes, net investments in equity companies and other investments. 16. Subsequent Events ISSUANCE OF $1,800.0 MILLION OF NOTES On February 11, 2003, the Company issued $1,800.0 million of Notes. The issuance consisted of two tranches of Notes, each of which pay interest semiannually as follows: - $300.0 million 4.125% Notes due March 1, 2008 with interest payments due on March 1 and September 1 - $1,500.0 million 5.25% Notes due March 15, 2013 with interest payments due on March 15 and September 15 The interest rate payable on both tranches 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 either series of Notes cannot exceed two percentage points. There is no adjustment to the interest rate payable on either series of Notes for the first single-level downgrade in the Company's credit rating by S&P. The Company would incur a total of approximately $4.5 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 both series of Notes cannot be reduced below the original coupon rate of either series of Notes. In the case of both series of Notes, the interest rate in effect on March 15, 2006 for such Notes will, thereafter, become the effective interest rate until maturity. The Company entered into two interest rate swaps with an aggregate notional amount of $300.0 million relating to the $300.0 million 4.125% Notes and two interest rate swaps with an aggregate notional amount of $1,500.0 million relating to the $1,500.0 million 5.25% Notes whereby the Company effectively converted the fixed rate of interest on these Notes to a floating rate, which is based on LIBOR. NEW CREDIT FACILITY In March 2003, the Company's $3,000.0 million credit facility matured. Concurrent with this maturity, the Company entered into new credit facilities totaling $2,700.0 million. These facilities are composed of a $1,350.0 million, 364-day credit facility and a $1,350.0 million three-year credit facility. The maturity date of any borrowings under the $1,350.0 million, 364-day credit facility that are outstanding upon its termination in March 2004 is extendible by the Company for an additional year. The credit facilities contain substantially identical financial and other covenants, representations, warranties, conditions and default provisions as the matured facility. SECURITY FUND DEPOSIT In February 2003, as required by the amendment to the settlement agreement merging the two settlement funds (see Note 14), an additional $535.2 million was added by the Company to the security fund. Wyeth 51 REPORTS OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Wyeth: In our opinion, the accompanying consolidated balance sheets as of December 31, 2002 and 2001, and the related consolidated statements of operations, of changes in stockholders' equity and of cash flows present fairly, in all material respects, the financial position of Wyeth and its subsidiaries at December 31, 2002 and 2001, and the results of their operations and their cash flows for each of the years then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. The financial statements of the Company for the year ended December 31, 2000 were audited by other independent accountants who have ceased operations. Those independent accountants expressed an unqualified opinion on those statements in their report dated January 24, 2002. As discussed in Notes 1 and 5 to the financial statements, on January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets." As discussed above, the financial statements of Wyeth, for the year ended December 31, 2000, were audited by other independent accountants who have ceased operations. As described in Note 5, these financial statements have been revised to include the transitional disclosures required by Statement of Financial Accounting Standards No. 142. We audited the transitional disclosures described in Note 5. In our opinion, the transitional disclosures for 2000 in Note 5 are appropriate. However, we were not engaged to audit, review, or apply any procedures to the 2000 financial statements of the Company other than with respect to such disclosures and, accordingly, we do not express an opinion or any other form of assurance on the 2000 financial statements taken as a whole. PricewaterhouseCoopers LLP Florham Park, NJ January 27, 2003 except for Note 16 which is as of March 3, 2003 The following is a copy of a report issued by Arthur Andersen LLP and included in the 2001 Form 10-K report filed on March 29, 2002. This report has not been reissued by Arthur Andersen LLP and Arthur Andersen LLP has not consented to its use in this Annual Report on Form 10-K. 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 * Subsequent to the date of this report, the consolidated balance sheet as of December 31, 2001 and the related consolidated statements of operations, changes in stockholders' equity and cash flows for the year then ended were audited by PricewaterhouseCoopers LLP, whose report appears above. 52 Wyeth 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 consolidated 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 consolidated 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 consolidated financial statements have been audited by independent 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 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. Robert Essner Kenneth J. Martin Chairman, President and Executive Vice President and Chief Executive Officer Chief Financial Officer Wyeth 53 QUARTERLY FINANCIAL DATA (UNAUDITED)
First Quarter Second Quarter Third Quarter Fourth Quarter (In thousands except per share amounts) 2002 2002 2002 2002 - --------------------------------------------------------------------------------------------------------------- Net revenue $3,643,521 $3,502,848 $3,623,672 $3,813,994 Gross profit 2,841,342 2,615,633 2,565,550 2,643,123 Net income(1) 871,920 599,859 1,401,399 1,574,027 Diluted earnings per share(1) 0.65 0.45 1.05 1.18
First Quarter Second Quarter Third Quarter Fourth Quarter (In thousands except per share amounts) 2001 2001 2001 2001 - --------------------------------------------------------------------------------------------------------------- Net revenue(3) $3,417,284 $3,183,393 $3,699,600 $3,683,468 Gross profit(3) 2,618,681 2,392,352 2,819,678 2,764,258 Net income(2) 733,554 476,996 252,072 822,672 Diluted earnings per share(2) 0.55 0.36 0.19 0.62
(1) Third Quarter 2002 included a gain of $1,684,700 after-tax or $1.26 per share-diluted relating to the acquisition of Immunex by Amgen and a litigation charge of $910,000 after-tax or $0.68 per share-diluted to increase the reserve relating to the litigation brought against the Company regarding the use of the diet drugs Redux or Pondimin. Fourth Quarter 2002 included a gain of $943,401 after-tax or $0.71 per share-diluted on the sales of 67,050,400 shares of Amgen common stock and a special charge of $233,500 after-tax or $0.18 per share-diluted for restructuring and related asset impairments. (2) Third Quarter 2001 included a litigation charge of $615,000 after-tax or $0.46 per share-diluted in connection with the litigation brought against the Company regarding the use of the diet drugs Redux or Pondimin. (3) First, Second, Third and Fourth Quarters 2001 were restated to reflect the adoption of new authoritative accounting guidance as of January 1, 2002 recognizing the cost of certain vendor considerations (i.e., cooperative advertising payments) as reductions of revenues instead of selling and marketing expenses. MARKET PRICES OF COMMON STOCK AND DIVIDENDS
2002 Range of Prices* 2001 Range of Prices* ---------------------------------- ---------------------------------- Dividends Dividends High Low per Share High Low per Share - -------------------------------------------------------------------------------------------------- First quarter $66.51 $60.48 $ 0.23 $62.50 $52.00 $ 0.23 Second quarter 66.49 49.00 0.23 63.80 54.06 0.23 Third quarter 52.24 28.25 0.23 62.31 53.20 0.23 Fourth quarter 39.39 31.25 0.23 62.25 55.70 0.23
* Prices are those of the New York Stock Exchange-- Composite Transactions. 54 Wyeth 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 28 to 51. RESULTS OF OPERATIONS The Company adopted new authoritative accounting guidance as of January 1, 2002 reflecting the cost of certain vendor considerations (i.e., cooperative advertising payments) 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. NET REVENUE Worldwide net revenue increased 4% to $14.6 billion for 2002. Worldwide net revenue increased 7% to $14.0 billion for 2001. The following table sets forth 2002, 2001 and 2000 worldwide net revenue by operating segment together with the percentage changes in worldwide net revenue from prior years:
YEARS ENDED DECEMBER 31, 2002 VS. 2001 2001 VS. 2000 (In millions) ------------------------------------------- % INCREASE % INCREASE Net Revenue 2002 2001 2000 (DECREASE) (DECREASE) - ----------------------------------------------------------------------------------------------------------------- Operating Segment: Pharmaceuticals $12,386.6 $11,716.5 $10,772.6 6% 9% Consumer Healthcare 2,197.4 2,267.2 2,308.7 (3)% (2)% - ----------------------------------------------------------------------------------------------------------------- Consolidated Net Revenue $14,584.0 $13,983.7 $13,081.3 4% 7% =================================================================================================================
2002 vs. 2001 Worldwide pharmaceutical net revenue increased 6% (7% for human pharmaceuticals) for 2002. There was no foreign exchange impact on worldwide pharmaceutical net revenue for 2002. U.S. pharmaceutical net revenue increased 5% for 2002 due primarily to higher sales of Protonix, Effexor, Rapamune and ReFacto and alliance revenue offset, in part, by lower sales of Premarin family products, Prevnar, animal health products and generic products (due to the discontinuance of certain oral generics). The decline in animal health products revenues was due primarily to lower sales and higher-than-projected returns of ProHeart 6, a single dose, canine heartworm preventative product, offset, in part, by higher sales of the Company's West Nile virus biological vaccine for horses, which was introduced in the 2001 third quarter. Refer to "Certain Factors That May Affect Future Results" herein for additional discussion relating to Premarin family products and Prevnar. International pharmaceutical net revenue increased 6% for 2002 due primarily to higher sales of Effexor, Prevnar, Enbrel (for which the Company has exclusive marketing rights outside of North America), Rapamune and ReFacto offset, in part, by lower sales of Premarin family products. Worldwide consumer healthcare net revenue decreased 3% for 2002. There was no foreign exchange impact on worldwide consumer healthcare net revenue for 2002. U.S. consumer healthcare net revenue decreased 5% for 2002 as a result of lower sales of cough/cold/allergy products, Advil and Denorex, which was divested in February 2002, partially offset by higher sales of Centrum and initial sales of Alavert, which was introduced in the 2002 fourth quarter. International consumer healthcare net revenue was flat for 2002 as lower sales of cough/cold/allergy products and Caltrate were offset by higher sales of Advil. Wyeth 55 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 (as a result of higher volume and market share of new prescriptions as well as expanded indications), Premarin family products, Cordarone I.V. and alliance revenue offset, in part, by lower sales of Ziac (due to generic competition) and generic products (due to the 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 (as a result of higher volume and market share of new prescriptions as well as expanded indications), Enbrel, Zoton and 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 decline in animal health products 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 healthcare net revenue decreased 2% for 2001. Excluding the negative impact of foreign exchange, worldwide consumer healthcare net revenue was unchanged for 2001. U.S. consumer healthcare net revenue decreased 1% for 2001 as a result of lower sales of cough/ cold/allergy products and Flexagen offset by higher sales of Chap Stick, Caltrate and Advil. International consumer healthcare 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. The following table sets forth the significant 2002, 2001 and 2000 pharmaceutical and consumer healthcare worldwide net revenue by product:
PHARMACEUTICALS - ---------------------------------------------------------------------------------- (In millions) PRODUCTS 2002 2001 2000 - ---------------------------------------------------------------------------------- Effexor $ 2,072.3 $ 1,542.0 $ 1,159.1 Premarin family 1,879.9 2,073.5 1,870.2 Protonix 1,070.8 561.3 145.0 Nutritionals 834.7 823.5 776.0 Prevnar 647.5 798.2 460.6 Oral contraceptives 576.3 703.4 738.5 Zosyn/Tazocin 406.1 439.8 384.5 Zoton 309.4 284.1 233.9 Cordarone 283.2 269.6 203.2 BenFIX 219.2 212.8 180.0 Ativan 217.2 232.7 246.1 Synvisc 212.5 188.3 179.3 ReFacto 197.5 147.3 91.1 Generics 187.4 309.8 444.6 Enbrel 158.8 93.9 37.6 Rapamune 129.7 70.2 26.5 Minocin 117.1 122.1 147.2 Meningitec 90.1 78.6 322.6 Ziac/Zebeta 64.1 70.0 283.7 Animal health 653.3 776.2 793.0 Alliance revenue 418.8 322.4 188.3 Other 1,640.7 1,596.8 1,861.6 - ---------------------------------------------------------------------------------- Total pharmaceuticals $12,386.6 $11,716.5 $10,772.6 ==================================================================================
CONSUMER HEALTHCARE - ---------------------------------------------------------------------------------- (In millions) PRODUCTS 2002 2001 2000 - ---------------------------------------------------------------------------------- Centrum $ 516.2 $ 503.3 $ 486.8 Advil* 442.7 453.7 451.4 Cough/cold/allergy products 463.9 529.7 538.0 Caltrate 142.4 148.3 133.8 Chap Stick 111.3 110.0 98.3 Alavert 8.5 -- -- Denorex 0.8 16.9 18.0 Other 511.6 505.3 582.4 - ---------------------------------------------------------------------------------- Total consumer healthcare $ 2,197.4 $ 2,267.2 $ 2,308.7 ==================================================================================
* Advil Cold & Sinus family and Children's Advil family are included within the cough/cold/allergy product line. 56 Wyeth The following table sets forth the percentage changes in 2002 and 2001 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) YEAR ENDED DECEMBER 31, 2002 YEAR ENDED DECEMBER 31, 2001(1) ------------------------------------------- ---------------------------------------------- FOREIGN TOTAL NET FOREIGN TOTAL NET VOLUME PRICE EXCHANGE REVENUE VOLUME PRICE EXCHANGE REVENUE - -------------------------------------------------------------------- ---------------------------------------------- PHARMACEUTICALS United States (2)% 7% -- 5% 10% 5% -- 15% International 5% 1% -- 6% 4% 1% (6)% (1)% - -------------------------------------------------------------------- ---------------------------------------------- Total 1% 5% -- 6% 8% 3% (2)% 9% ==================================================================== ============================================== CONSUMER HEALTHCARE United States (6)% 1% -- (5)% (3)% 2% -- (1)% International (1)% 2% (1)% -- (1)% 3% (5)% (3)% - -------------------------------------------------------------------- ---------------------------------------------- Total (4)% 1% -- (3)% (2)% 2% (2)% (2)% ==================================================================== ============================================== TOTAL United States (2)% 6% -- 4% 8% 4% -- 12% International 4% 1% -- 5% 4% 1% (6)% (1)% - -------------------------------------------------------------------- ---------------------------------------------- Total -- 4% -- 4% 6% 3% (2)% 7% ==================================================================== ==============================================
(1) 2001 was restated to reflect the adoption of new authoritative accounting guidance as of January 1, 2002 recognizing the cost of certain vendor considerations (i.e., cooperative advertising payments) as reductions of revenues instead of selling and marketing expenses. OPERATING EXPENSES 2002 vs. 2001 COST OF GOODS SOLD, as a percentage of Net revenue, increased to 26.9% for 2002 compared with 24.2% for 2001. Excluding alliance revenue, cost of goods sold, as a percentage of net sales, for 2002 was 27.7%, a 2.9% increase from 24.8% in 2001. The decline in margin was due primarily to a less profitable product mix as a result of lower sales of higher margin products (e.g., Premarin family and Prevnar) and higher sales of lower margin products (e.g., Protonix, ReFacto, Centrum products) in both the pharmaceuticals and consumer healthcare segments, combined with increased costs associated with addressing various manufacturing issues. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES, as a percentage of Net revenue, decreased to 34.4% for 2002 compared with 34.9% for 2001 (excluding the effect of goodwill amortization from 2001). The slightly lower ratio of selling, general and administrative expenses resulted from significant cost-containment efforts directed specifically at marketing expenses in the pharmaceuticals and consumer healthcare segments offset, in part, by higher selling expenses related to an expansion in the global sales force. RESEARCH AND DEVELOPMENT EXPENSES increased 11% for 2002 due primarily to increased head count, clinical grant spending, cost-sharing expenditures relating to pharmaceutical collaborations and other research operating expenses (including higher chemical and material costs) offset, in part, by lower payments under licensing agreements. Pharmaceutical research and development expenditures accounted for 95%, 96% and 96% of total research and development expenditures in 2002, 2001 and 2000, respectively. Pharmaceutical research and development expenses, as a percentage of worldwide pharmaceutical net revenue, exclusive of nutritional sales and alliance revenue, were 18%, 17% and 16% in 2002, 2001 and 2000, respectively. 2001 vs. 2000 COST OF GOODS SOLD, as a percentage of Net revenue, decreased to 24.2% for 2001 compared with 25.0% for 2000. Excluding alliance revenue, cost of goods sold, as a percentage of net sales, for 2001 was 24.8%, a 0.6% decrease from 25.4% in 2000. The margin improvement resulted from a more profitable mix as a result of increased sales of higher margin products in both the pharmaceuticals and consumer healthcare segments and lower royalty expenses offset, in part, by increased costs associated with improving the U.S. technical operations and product supply processes. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES, as a percentage of Net revenue, decreased to 36.0% for 2001 compared with 37.1% 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 head count, ongoing clinical trials of pharmaceuticals in several therapeutic categories and other research operating expenses (including higher chemical and material costs). 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. INTEREST EXPENSE AND OTHER INCOME 2002 vs. 2001 Interest expense, net increased 38% for 2002 due primarily to lower interest income as compared with 2001. Weighted Wyeth 57 average debt outstanding during 2002 and 2001 was $10,155.2 million and $7,283.7 million, respectively. However, the impact of higher weighted average debt outstanding was offset by lower interest rates on outstanding commercial paper and capitalized interest relating to capital projects. OTHER INCOME, NET increased 40% for 2002 primarily as a result of the Company completing the sale of certain of its assets relating to the generic human injectables product line, which resulted in a gain of $172.9 million ($108.9 million after-tax or $0.08 per share-diluted). In addition, the Company received proceeds from a settlement regarding price fixing by certain vitamin suppliers offset, in part, by lower equity income and the non-recurrence of income received in 2001 related to the divestiture of certain product rights. 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 $7,283.7 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 compared with 2000 (including payments for access to various pharmaceutical collaborations, costs associated with a consent decree entered into with the U.S. Food and Drug Administration (FDA) and costs related to a product discontinuation), higher gains on the sales of non-strategic assets and higher equity income. 2002, 2001 AND 2000 UNUSUAL TRANSACTIONS GAINS RELATED TO IMMUNEX/AMGEN COMMON STOCK TRANSACTIONS In the 2002 fourth quarter, the Company recorded a gain of $1,454.6 million ($943.4 million after-tax or $0.71 per share-diluted) from the sales of 67,050,400 shares of Amgen Inc.'s (Amgen) common stock, received in connection with Amgen's acquisition of Immunex Corporation (Immunex), resulting in net proceeds of $3,250.8 million. The gain was determined by comparing the basis of the shares sold of $1,782.7 million with the net proceeds received reduced by certain related expenses (see Note 2 to the consolidated financial statements). In the 2002 third quarter, the Company recorded a gain of $2,627.6 million ($1,684.7 million after-tax or $1.26 per share-diluted) relating to the acquisition of Immunex by Amgen. The gain represents the excess of $1,005.2 million in cash plus the fair value of 98,286,358 Amgen shares received, $2,500.1 million, over the Company's book basis of its investment in Immunex and certain transaction costs. The gain on the shares exchanged is based on the quoted market price of Amgen common stock on July 15, 2002 (the closing date) reduced by a discount for certain stock marketability restrictions (see Note 2 to the consolidated financial statements). In November 2000, the Company and Immunex completed a public equity offering in which the Company sold 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 this sale to reduce outstanding commercial paper and for other general corporate purposes (see Note 2 to the consolidated financial statements). LITIGATION CHARGES In the 2002 third quarter, the Company recorded a charge of $1,400.0 million ($910.0 million after-tax or $0.68 per share-diluted) to increase the reserve relating to the Pondimin (which in combination with phentermine, a product that was not manufactured, distributed or sold by the Company, was commonly referred to as "fen-phen") and Redux diet drug litigation. The principal reason for this charge was that the volume and size of the claims filed in the nationwide diet drug settlement were greater than anticipated. 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 and a third litigation charge of $950.0 million ($615.0 million after-tax or $0.46 per share-diluted) recorded during the 2001 third quarter. These charges are intended to cover the total amount required to resolve all diet drug litigation, including 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 remaining initial opt outs and primary pulmonary hypertension (PPH) claimants (see Note 14 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). SPECIAL CHARGES In the 2002 fourth quarter, the Company recorded a special charge for restructuring and related asset impairments of $340.8 million ($233.5 million after-tax or $0.18 per share-diluted). The restructuring charge and related asset impairments were recorded to recognize the costs of closing certain manufacturing facilities and two research facilities, as well as the elimination of certain positions at the Company's facilities. The closing of the manufacturing and research facilities and reduction of sales and administrative-related positions cover approximately 3,150 employees worldwide (see Note 3 to the consolidated financial statements). 58 Wyeth In November 2000, in accordance with an FDA request, the Company immediately ceased global production and shipments of any products containing phenylpropanolamine (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 healthcare product line would not be sufficient to recover the remaining goodwill related to these product lines. As a result, the Company recorded a special 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). TERMINATION FEE 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) resulting from the receipt of an $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). 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:
2002 VS. 2001 2001 VS. 2000 (Dollar amounts in millions) YEARS ENDED DECEMBER 31, ------------- ------------- Income (Loss) from Continuing --------------------------------------------- % INCREASE Operations before Taxes(1) 2002 2001 2000 % INCREASE (DECREASE) - ------------------------------------------------------------------------------------------------------------------- Operating Segment: Pharmaceuticals $3,505.5 $3,503.5 $2,919.5 -- 20% Consumer Healthcare 608.0 592.1 626.6 3% (6)% - ------------------------------------------------------------------------------------------------------------------- 4,113.5 4,095.6 3,546.1 -- 15% Corporate(2) 1,983.7 (1,226.9) (4,647.1) -- (74)% - ------------------------------------------------------------------------------------------------------------------- Total(3) $6,097.2 $2,868.7 $(1,101.0) -- -- ===================================================================================================================
(1) Income (loss) from continuing operations before taxes included goodwill amortization for 2001 and 2000 as follows: Pharmaceuticals--$136.8 and $147.8, respectively, and Consumer Healthcare--$23.7 and $31.8, respectively. The Company ceased amortizing goodwill in accordance with SFAS No. 142 effective January 1, 2002. Excluding goodwill amortization from the 2001 and 2000 results, Pharmaceuticals and Consumer Healthcare income (loss) from continuing operations before taxes decreased 4% and 1%, respectively, for 2002 and increased 19% and decreased 6%, respectively, for 2001. (2) 2002, 2001 and 2000 Corporate included litigation charges of $1,400.0, $950.0 and $7,500.0, respectively, relating to the litigation brought against the Company regarding the use of the diet drugs Redux or Pondimin. These charges are intended to cover all anticipated payments in connection with the nationwide class action settlement, 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. 2002 Corporate also included: - A gain of $2,627.6 relating to the acquisition of Immunex by Amgen. The gain represents the excess of $1,005.2 in cash plus the fair value of 98,286,358 Amgen shares received, $2,500.1, over the Company's book basis of its investment in Immunex and certain transaction costs. - A gain of $1,454.6 from the sales of 67,050,400 shares of Amgen common stock. The gain was determined by comparing the basis of the shares sold, $1,782.7, with the net proceeds received, $3,250.8, reduced by certain related expenses. - A special charge of $340.8 for restructuring and related asset impairments. 2000 Corporate also included: - Income of $1,709.4 resulting from the receipt of an $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 healthcare 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. Excluding the 2002, 2001 and 2000 litigation charges, 2002 and 2000 gains relating to Immunex/Amgen common stock transactions, 2000 termination fee, 2000 goodwill impairment, and 2002 and 2000 special charges, Corporate expenses, net increased 29% and 63% for 2002 and 2001, respectively. (3) Excluding the 2002, 2001 and 2000 litigation charges, 2002 and 2000 gains relating to Immunex/Amgen common stock transactions, 2000 termination fee, 2000 goodwill impairment, and 2002 and 2000 special charges, total income (loss) from continuing operations before taxes decreased 2% for 2002 and increased 13% for 2001. Wyeth 59 The following explanations of changes in income (loss) from continuing operations before taxes, by operating segment, for 2002 compared with 2001 and 2001 compared with 2000, exclude items listed in footnote (2) to the table above. PHARMACEUTICALS Worldwide pharmaceutical income from continuing operations before taxes decreased 4% (less than 1% for human pharmaceuticals) for 2002, excluding 2001 goodwill amortization, due to higher cost of goods sold, as a percentage of net revenue, and higher research and development expenses offset, in part, by higher worldwide net revenue. Higher research and development expenses were primarily due to increased head count, clinical grant spending, cost-sharing expenditures relating to pharmaceutical collaborations and other research operating expenses (including higher chemical and material costs) offset, in part, by lower payments under licensing agreements. Worldwide pharmaceutical income from continuing operations before taxes increased 19% (20% for human pharmaceuticals) for 2001, excluding goodwill amortization from the 2001 and 2000 results, 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. CONSUMER HEALTHCARE Worldwide consumer healthcare income from continuing operations before taxes decreased 1% for 2002, excluding 2001 goodwill amortization, due primarily to lower U.S. sales and higher research and development expenses offset, in part, by higher other income, net (primarily attributable to the proceeds received from a settlement regarding price fixing by certain vitamin suppliers). Worldwide consumer healthcare income from continuing operations before taxes decreased 6% for 2001, excluding goodwill amortization from the 2001 and 2000 results, due primarily to lower worldwide sales and lower other income, net (primarily lower gains on sales of non-strategic assets). CORPORATE Corporate expenses, net increased 29% for 2002 due primarily to higher general and administrative expenses and interest expense, net resulting from lower interest income during 2002. Corporate expenses, net increased 63% for 2001 due primarily to higher interest expense, net and lower other income, net related to an insurance recovery of environmental costs recorded in 2000 offset, in part, by lower general and administrative expenses. EFFECTIVE TAX RATE The effective tax rates for 2002, 2001 and 2000 were 21.1%, 23.3% and 24.4%, respectively (excluding the effect of goodwill amortization in 2001 and 2000 and the unusual items identified below). The downward trend in the effective tax rates was due primarily to an increased benefit from manufacturing in lower tax jurisdictions. 60 Wyeth INCOME (LOSS) AND DILUTED EARNINGS (LOSS) PER SHARE FROM CONTINUING OPERATIONS Income and diluted earnings per share from continuing operations in 2002 increased to $4,447.2 million and $3.33 compared with $2,285.3 million and $1.72 for 2001, respectively. Loss and diluted loss per share from continuing operations in 2000 were $901.0 million and $0.69, respectively. Income (loss) from continuing operations for 2002, 2001 and 2000 included the following unusual items:
DILUTED EARNINGS (LOSS) (Dollar amounts in millions INCOME (LOSS) PER SHARE FROM except per share amounts) FROM CONTINUING OPERATIONS CONTINUING OPERATIONS ----------------------------------------- ------------------------------------------ Years Ended December 31, 2002 2001 2000 2002 2001 2000 - ----------------------------------------------------------------------------------------------------------------------------------- Income from continuing operations before unusual items and including the dilutive effect of common stock equivalents (CSE) $ 2,962.6 $ 2,900.3 $ 2,514.0 $ 2.22 $ 2.18 $ 1.90 Dilutive effect of CSE(1) -- -- -- -- -- 0.02 - ----------------------------------------------------------------------------------------------------------------------------------- $ 2,962.6 $ 2,900.3 $ 2,514.0 $ 2.22 $ 2.18 $ 1.92 Warner-Lambert Company termination fee -- -- 1,111.1 -- -- 0.85 Gains related to Immunex/Amgen common stock transactions(2) 2,628.1 -- 1,414.9 1.97 -- 1.08 Redux and Pondimin diet drug litigation charges (910.0) (615.0) (5,375.0) (0.68) (0.46) (4.11) Goodwill impairment -- -- (341.0) -- -- (0.26) Special charges: Restructuring charge and related asset impairments (233.5) -- -- (0.18) -- -- Voluntary market withdrawals -- -- (52.0) -- -- (0.04) Product discontinuations -- -- (173.0) -- -- (0.13) - ----------------------------------------------------------------------------------------------------------------------------------- $ 4,447.2 $ 2,285.3 $ (901.0) $ 3.33 $ 1.72 $ (0.69) ===================================================================================================================================
(1) 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. (2) The gains related to the Immunex/Amgen common stock transactions consist of the following: - $2,627.6 ($1,684.7 after-tax or $1.26 per share-diluted) recorded during the 2002 third quarter relating to the acquisition of Immunex by Amgen. The gain represents the excess of $1,005.2 in cash plus the fair value of 98,286,358 Amgen shares received, $2,500.1, over the Company's book basis of its investment in Immunex and certain transaction costs. - $1,454.6 ($943.4 after-tax or $0.71 per share-diluted) recorded during the 2002 fourth quarter relating to the gain on the sales of 67,050,400 shares of Amgen common stock. The gain was determined by comparing the basis of the shares sold, $1,782.7, with the net proceeds received, $3,250.8, reduced by certain related expenses. For further details related to the items listed in the table above, refer to the discussion of "2002, 2001 and 2000 Unusual Transactions" herein. On January 1, 2002, the Company adopted SFAS No. 142, which eliminated the amortization of goodwill. Excluding the after-tax goodwill amortization of $153.9 million or $0.12 per share-diluted from the 2001 results, as well as the 2002 and 2001 unusual items listed in the table above, income and diluted earnings per share from continuing operations in 2002 each decreased 3% to $2,962.6 million and $2.22, respectively, compared with $3,054.2 million and $2.30 in 2001, respectively. The decreases were due primarily to higher cost of goods sold, as a percentage of net revenue, and higher research and development expenses, offset by lower selling, general and administrative expenses and higher other income, net. The higher cost of goods sold, as a percentage of net revenue, is attributable to a change in product mix and the costs of addressing various manufacturing issues. The less profitable product mix was primarily a result of decreased sales of higher margin products, including the Premarin family and Prevnar, and higher sales of lower margin products such as Protonix and ReFacto. The lower selling, general and administrative expenses were due to cost-containment efforts. Higher other income, net was primarily a result of the Company completing the sale of certain of its assets relating to the generic human injectables product line, which resulted in a pre-tax gain of $172.9 million ($108.9 million after-tax or $0.08 per share-diluted). In addition, the Company received proceeds from a settlement regarding price fixing by certain vitamin suppliers offset, in part, by lower equity income and the non-recurrence of income received in 2001 related to the divestiture of certain product rights. Wyeth 61 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. DISCONTINUED OPERATIONS On June 30, 2000, the Company announced that it had completed the sale of the Cyanamid Agricultural Products business to BASF Aktiengesellschaft (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 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). CRITICAL ACCOUNTING POLICIES AND ESTIMATES The consolidated financial statements are presented in accordance with accounting principles that are generally accepted in the United States. All professional accounting standards effective as of December 31, 2002 have been taken into consideration in preparing the consolidated financial statements. The preparation of the consolidated financial statements requires estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. Some of those estimates are subjective and complex, and, consequently, actual results could differ from those estimates. The following accounting policies have been highlighted as significant because changes to certain judgments and assumptions inherent in these policies could affect the Company's consolidated financial statements. - 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, government mandates, coupons and consumer discounts. Rebates and sales incentives accruals, included in accrued expenses, are established at the later of a) the date at which the related revenue is recorded or b) the date at which the incentives are offered. The Company continually monitors the adequacy of the accruals by comparing the actual payments to the estimates used in establishing the accrual. - The Company is involved in various legal proceedings, including product liability and environmental matters that arise from time to time in the ordinary course of business. These include allegations of injuries caused by drugs and other over-the-counter products, including Pondimin, Redux, Dimetapp and Prempro, among others. The estimated costs the Company expects to pay in these cases are accrued when the liability is considered probable and the amount can be reasonably estimated. In assessing the estimated costs, the Company considers many factors, including past litigation experience, scientific evidence and the specifics of each matter. 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. Product liability accruals are not reduced for expected insurance recoveries. In addition, 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. In many cases, future environmental-related expenditures cannot be quantified with a reasonable degree of accuracy. As investigations and cleanups proceed, environmental-related liabilities are reviewed and adjusted as additional information becomes available. - The Company applies an asset and liability approach to accounting for income taxes. Deferred tax liabilities and assets are recognized for the future tax consequences of temporary differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The recoverability of deferred tax assets is dependent upon the Company's assessment that it is more likely than not that sufficient future taxable income will be generated in the relevant tax jurisdiction to realize the deferred tax asset. In the event the Company determines future taxable income will not be sufficient to utilize the deferred tax asset, a valuation allowance is recorded. As of December 31, 2002, valuation allowances have been established for certain environmental liabilities and operating accruals in certain foreign jurisdictions with little or no history of generating taxable income. In addition, the Company records deferred income taxes on foreign subsidiaries' earnings that are not considered to be permanently invested in those subsidiaries. - 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 plans. The Company's pension plans' 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 contributions of $875.0 million to the U.S. pension plans in December 2002. Despite the contributions, the market value decline is expected to negatively impact pension expense in 2003. In addition, based on an annual internal study of actuarial assumptions, the expected long-term rate of return on plan assets has been decreased by 25 basis points to 9.00%, and the discount rate has been decreased by 50 basis points to 6.75%. As a result of these developments, the 2003 net periodic benefit cost for pensions is anticipated to be approximately $45.0 million to $55.0 million higher than in 2002. 62 Wyeth The Company also has reviewed the principal actuarial assumptions relating to its other postretirement plans. In response to the recent increase in health care costs in the United States, the Company has kept the health care cost trend rate for 2002 and 2003 at 9.5%. This rate, ultimately, is expected to decrease to 5% for 2006 and remain constant thereafter. In reviewing postretirement claims data and other related assumptions, the Company believes that this trend rate appropriately reflects the trend aspects of the Company's postretirement plans as of December 31, 2002. As a result of the selection of the health care cost trend rate, the 2003 net periodic benefit cost for other postretirement benefits is anticipated to be approximately $15.0 million to $25.0 million higher than in 2002. Management has discussed the development and selection of these critical accounting policies and estimates with the Audit Committee of the Board of Directors, and the Audit Committee has reviewed the Company's disclosure presented above. The Company has not participated 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 has not entered 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. LIQUIDITY, FINANCIAL CONDITION AND CAPITAL RESOURCES CASH AND CASH EQUIVALENTS increased $1,198.9 million, while total debt decreased by $1,103.7 million in 2002, including the fair value change of the interest rate swaps. The activity of these cash flows during 2002 related primarily to the following items: - Proceeds of $1,005.2 million received as partial consideration for the Company's Immunex shares in connection with the acquisition of Immunex by Amgen. The $1,005.2 million relates to the $4.50 per share the Company received for each Immunex share owned at closing. Additionally, the Company received 98,286,358 Amgen shares as additional consideration for the acquisition of Immunex. The Company sold 67,050,400 of these shares as of December 31, 2002, receiving proceeds of $3,250.8 million. - Proceeds of $272.0 million due primarily to improved collections on outstanding accounts receivables. - Net marketable securities proceeds of $296.7 million, proceeds from sales of assets of $798.3 million and proceeds from the exercise of stock options of $215.4 million. These proceeds were partially offset by the following cash uses: - Payments of $1,307.0 million related to the Pondimin (which in combination with phentermine, a product that was not manufactured, distributed or sold by the Company, was commonly referred to as "fen-phen") and Redux litigation. These payments were financed primarily from borrowing activities. As discussed in Note 14 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 of $405.0 million were made to establish a security fund as required by the settlement. 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 and additional commercial paper borrowings, as well as term debt financings and international earnings remitted back to the United States, if necessary. - Capital expenditures of $1,931.9 million due primarily to new production capacity expansion worldwide, including biotechnology facilities, research and development facilities, and the improvement of compliance of U.S. technical operations and product supply processes. The Company expects capital expenditures in 2003 to be slightly lower compared with 2002 spending levels. - Dividends totaling $1,219.2 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 2.5%. - Contributions to fund the Company's defined benefit pension plans totaling $909.6 million. - An increase in inventories of $185.6 million primarily related to improved manufacturing output. - Purchases of common stock for treasury of $113.9 million. Total debt: At December 31, 2002, the Company had outstanding $8,350.9 million in total debt. The Company's total debt consisted of commercial paper of $3,787.1 million and notes payable and other debt of $4,563.8 million. Current debt at December 31, 2002, classified as Loans payable, consisted of: - $787.1 million of commercial paper that is in excess of the $3,000.0 million credit facility and is supported by $3,946.9 million of cash, cash equivalents and marketable securities, and - $17.8 million of other debt that is due within one year. The portion of commercial paper outstanding at December 31, 2002 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. ADDITIONAL LIQUIDITY, FINANCIAL CONDITION AND CAPITAL RESOURCE INFORMATION At December 31, 2002, 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. In August 2002, following the July 31, 2002 termination of the Company's $1,000.0 million credit facility (originally a $2,000.0 million credit facility reduced to $1,000.0 million in March 2002), the Company obtained a new 364-day, $2,000.0 million credit facility. As a result of the proceeds received from Wyeth 63 the sales of the Company's Amgen common stock, the committed amount available under the facility was reduced to zero on December 30, 2002, and the facility was terminated. In March 2003, the Company's $3,000.0 million credit facility matured. Concurrent with this maturity, the Company entered into new credit facilities totaling $2,700.0 million. These facilities are composed of a $1,350.0 million, 364-day credit facility and a $1,350.0 million three-year credit facility. The maturity date of any borrowings under the $1,350.0 million, 364-day credit facility that are outstanding upon its termination in March 2004 is extendible by the Company for an additional year. The credit facilities contain substantially identical financial and other covenants, representations, warranties, conditions and default provisions as the matured facility. On February 11, 2003, the Company issued $1,800.0 million of Notes. The issuance consisted of two tranches of Notes, each of which pay interest semiannually as follows: - $300.0 million 4.125% Notes due March 1, 2008 with interest payments on March 1 and September 1 - $1,500.0 million 5.25% Notes due March 15, 2013 with interest payments on March 15 and September 15 Previously, 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 described above 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. The Company would incur a total of approximately $12.0 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 the case of the $300.0 million 4.125% Notes, the $1,500.0 million 5.25% Notes and $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 1, 2008, March 15, 2013 and March 15, 2011, respectively. In addition to the Notes issued in February 2003 and March 2001, the Company has outstanding: $1,000.0 million 7.90% Notes due February 2005 and $250.0 million 7.25% debentures due March 2023. As of December 31, 2002, the Company had net debt of $2,489.1 million which was calculated as total debt of $8,350.9 million reduced by liquid assets totaling $5,861.8 million which consisted of cash and cash equivalents, marketable securities, the fair value of the Amgen investment and the security fund deposit included in Other assets including deferred taxes. As of December 31, 2002, the Company was in compliance with all debt covenants. In addition, the Company has not triggered any incremental contractual obligations in connection with its financial condition or results of operations. The Company has a common stock repurchase program under which the Company is authorized, at December 31, 2002, to repurchase 4,492,460 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 2003. Management remains confident that cash flows from operating activities and existing and prospective financing resources will be adequate to fund the Company's operations, pay opt out settlement payments and fund the nationwide class action settlement relating 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, 2002 of $823.7 million, and repay both the principal and interest on its outstanding obligations, without requiring the disposition of any significant strategic core assets or businesses. The following chart discloses contractual cash obligations at December 31, 2002:
(In millions) LESS THAN Contractual Cash Obligations TOTAL 1 YEAR 1 - 3 YEARS 4 - 5 YEARS OVER 5 YEARS - -------------------------------------------------------------------------------------------------------------------------- Total debt $8,350.9 $ 804.9 $4,524.4 $1,012.9 $2,008.7 Operating leases 391.1 89.7 133.3 107.8 60.3 - -------------------------------------------------------------------------------------------------------------------------- Total contractual cash obligations $8,742.0 $ 894.6 $4,657.7 $1,120.7 $2,069.0 ==========================================================================================================================
64 Wyeth 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. 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 2002 and 2001 worldwide Net revenue. Additionally, the British Pound Sterling accounted for 5% of both 2002 and 2001 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 and strives to maintain a fixed-to-variable ratio of approximately 1 to 1 on its net debt position, consistent with the Company's debt management philosophy. At December 31, 2002, the notional/contract amounts, carrying values and fair values of the Company's financial instruments were as follows:
CARRYING NOTIONAL/ VALUE FAIR VALUE (In millions) CONTRACT ------------------------- DESCRIPTION AMOUNT ASSETS (LIABILITIES) - -------------------------------------------------------------------------------- Forward contracts(1) $ 697.9 $ 9.3 $ 9.3 Option contracts(1) 1,177.1 (12.2) (12.2) Interest rate swaps 1,500.0 200.8 200.8 Outstanding debt(2) 8,155.1 (8,350.9) (8,471.8) ================================================================================
(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 $87.6. (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 $193.3. 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 present value of the future potential gain if settlement were to take place on December 31, 2002; the fair value of option contracts reflects the present value of future cash flows if the contracts were settled on December 31, 2002; and the fair value of outstanding debt instruments reflects a current yield valuation based on observed market prices as of December 31, 2002. Wyeth 65 CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS PREMPRO/PREMARIN - HRT STUDIES Two subsets of the Women's Health Initiative (WHI) enrolled a total of 27,000 predominantly healthy postmenopausal women to assess the risks and benefits of either long-term estrogen replacement therapy (ERT) or long-term hormone replacement therapy (HRT). The primary endpoint of the WHI study was coronary heart disease, with invasive breast cancer as the primary adverse outcome studied. The HRT subset of the WHI study, involving women who received a combination of conjugated estrogens and medroxyprogesterone acetate (Prempro), was stopped early (after the patients were followed in the study for an average of 5.2 years) because, according to the predefined stopping rule, increased risks of breast cancer and cardiovascular events exceeded the specified long-term benefits. The study observed an increased incidence of cardiovascular disease and, over time, breast cancer among women on HRT compared with those on placebo. The study also observed a reduction in the incidence of hip, vertebral and other osteoporotic fractures and of colon cancer among women on HRT compared with those on placebo. The study did not evaluate the use of HRT for the treatment of menopausal symptoms, the main indications of the product. These findings provide additional information about the risks of breast cancer and cardiovascular disease which were identified as potential adverse events in the labeling for the Company's HRT products. The labeling for Prempro and Premarin has been revised to reflect this additional information obtained from the WHI study. As a result, sales of Prempro and other Premarin family products have been and will continue to be adversely affected even though the study subset that was terminated focused on the long-term use of Prempro and did not involve Premarin (ERT). Based on the most recent available market data, average weekly prescriptions written for Prempro and Premarin decreased approximately 60% and 30%, respectively, compared with the total weekly prescriptions written during the eight-week period preceding the termination of the study subset. Prempro sales (including Premphase) for the year ended December 31, 2002 represented approximately 4% of consolidated net revenue. Set forth below are individual product operating results for Prempro/Premphase and Premarin for the years ended December 31, 2002 and 2001. The Company also has received two draft manuscripts for review concerning data from one arm of the Women's Health Initiative Memory Study (WHIMS). This arm of WHIMS evaluated the use of estrogen plus progestin therapy on the development of dementia and mild cognitive impairment in a subset of women age 65 and older from the WHI study. In contrast to previous work that suggested a beneficial effect on memory and cognition, the preliminary analyses of this arm of WHIMS suggest certain negative findings in a small percentage of the study participants. Participants in the study were at least 15 years older than the typical newly menopausal woman. The authors have not yet submitted either manuscript to a medical journal for peer review and publication. Such peer review is an essential next step that normally precedes publication of studies to enhance the reliability from a clinical and scientific perspective. The peer review process includes verification and additional analyses of the data as well as modifications and/or clarifications of conclusions. The Company respects this process and awaits its outcome to better understand this study and its context. Nevertheless, because there have been public reports about these preliminary data, the Company believes it is appropriate to disclose this information. Until the full review process has been completed, it is impossible to determine what impact these preliminary findings will have on the use of postmenopausal estrogen plus progestin products. As a result of earlier WHI findings and changes to product labeling, prescribing patterns have evolved. Most usage of hormone therapy is in newly menopausal women who are seeking relief of menopausal symptoms, with more than 90 percent of new prescriptions for these products written for women younger than 65 years of age. A separate study arm evaluating the effect of estrogen alone on cognitive function continues. The Company supports the appropriate use of hormone therapy and will work with the FDA and other regulatory bodies to determine what implications these studies have for labeling. Hormone therapy is not indicated for the prevention or treatment of dementia or mild cognitive impairment.
PREMPRO/PREMPHASE PREMARIN ----------------- ----------------- YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, (In millions) 2002 2001 2002 2001 - -------------------------------------------------------------------------------- Net revenue $ 636.7 $ 887.9 $1,243.2 $1,185.6 Gross profit 546.3 762.9 1,132.1 1,080.8 ================================================================================
66 Wyeth COMPETITION The Company operates in the highly competitive pharmaceutical and consumer health care industries. 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 the Company's net revenue and results of operations. Premarin's natural composition is not subject to patent protection (although Prempro has patent protection). The principal indications 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. During the past several years, other manufacturers have introduced products for the treatment and/or prevention of osteoporosis. New products containing different estrogens and/or different progestins than those found in Prempro and Premphase, utilizing various forms of delivery and having one or more 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 marketing exclusivity for Cordarone I.V. ended on October 11, 2002, and, accordingly, sales of Cordarone I.V. materially decreased due to the introduction of generic products, several of which have been approved by the FDA. Cordarone I.V. had net sales of $265.2 million during the year ended December 31, 2002. The Company received notification from Teva Pharmaceuticals, USA (Teva) that it has filed an Abbreviated New Drug Application (ANDA) with the FDA seeking approval to market generic 37.5 mg, 75 mg and 150 mg venlafaxine extended release capsules, which is the generic name for the Company's product, Effexor XR. Teva asserts that certain of the Company's patents relating to venlafaxine extended release capsules, which expire in 2013 and 2017, are either invalid or not infringed. Teva did not make any allegations as to the Company's patent covering venlafaxine itself, which expires in June 2008. The Company intends to vigorously enforce and defend the patents at issue. The Company also has been informed that Cobalt Pharmaceuticals, Inc. (Cobalt) has filed an ANDA with the FDA pertaining to ramipril, the generic name for Altace, which the Company co-promotes with King Pharmaceuticals, Inc. (King). The allegations in Cobalt's notice relate to a composition of matter patent for ramipril, which does not expire until October 2008. The allegations do not relate to a second patent covering ramipril, which expires in January 2005. Cobalt has stated that it is not seeking FDA approval until this second patent expires in January 2005. The Company has been informed that King and Aventis, which owns the pertinent patent, intend to vigorously enforce and defend this patent. PRODUCT SUPPLY Enbrel Supply Market demand for Enbrel is strong; however the sales growth had been constrained by limits on the existing source of supply. In December 2002, the retrofitted Rhode Island facility owned by Amgen was completed, and manufacturing production was approved by the FDA. Consequently, manufacturing capacity for Enbrel will significantly increase in 2003. Market demand is expected to continue to grow, and additional manufacturing supply is projected to be required. In April 2002, Immunex (prior to being acquired by Amgen) announced it entered into a manufacturing agreement with Genentech, Inc. to produce Enbrel beginning in 2004, subject to FDA approval. The current plan for the longer term includes an additional manufacturing facility, which is being constructed by the Company in Ireland and expansion of the Rhode Island facility, both of which are expected to be completed during 2005. Premarin Supply The Company continues to experience inconsistent results on dissolution testing of certain dosage forms 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 continue to occur. Although these shortages may adversely affect Premarin sales in one or more accounting periods, the Company believes that, as a result of current inventory levels and the Company's enhanced process controls, testing protocols and the ongoing formulation improvement project, as well as reduced demand (see also "Prempro/Premarin-HRT Studies"), overall Premarin family sales will not be significantly impacted by the dissolution issues. Prevnar Supply Sales of Prevnar have been affected by manufacturing-related constraints on product availability. The Company is continuing to implement manufacturing improvements and has allocated additional personnel and equipment to increase the production of Prevnar. Additional manufacturing capacity, principally in fill/finish capacity, also will become available in 2003 and beyond. While the Company's efforts are expected to significantly increase the available supply for the market in 2003, the manufacturing processes for this product are very complex, and there can be no assurance that unanticipated manufacturing-related difficulties will not constrain Prevnar sales in 2003 or beyond. Wyeth 67 LITIGATION AND CONTINGENT LIABILITIES The Company is involved in various legal proceedings, including product liability and environmental matters that arise from time to time in the ordinary course of business, the most significant of which are described in the Company's Annual Report on Form 10-K for the year ended December 31, 2001, Quarterly Reports on Form 10-Q for the quarters ended March 31, 2002, June 30, 2002 and September 30, 2002, as well as in the 2002 Annual Report on Form 10-K, which will be filed by March 31, 2003. These include allegations of injuries caused by drugs, vaccines and over-the-counter products, including Pondimin (which in combination with phentermine, a product that was not manufactured, distributed or sold by the Company, was commonly referred to as "fen-phen"), Redux, Dimetapp and Prempro, among others. In addition, 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. The estimated costs that the Company expects to pay in these cases are accrued when the liability is considered probable and the amount can be reasonably estimated. In many cases, future environmental-related expenditures cannot be quantified with a reasonable degree of accuracy. As investigations and cleanups proceed, environmental-related liabilities are reviewed and adjusted as additional information becomes available. In addition, 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. It is the opinion of the Company that any potential liability that might exceed amounts already accrued will not have a material adverse effect on the Company's financial position but could be material to the results of operations or cash flows in any one accounting period. CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. This Annual Report, including management's discussion and analysis set forth herein, as well as our quarterly and special reports, proxy statements and other information filed with the Securities and Exchange Commission and other written or oral statements made by us or on our behalf may include forward-looking statements reflecting our current views at the time these statements were made with respect to future events and financial performance. 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: - our anticipated results of operations, liquidity position, financial condition and capital resources; - the benefits that we expect will result from our business activities and certain transactions we announced or completed, such as increased revenues, decreased expenses, and avoided expenses and expenditures; - statements of our expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts; - the future impact of presently known trends, including those with respect to product performance and competition; - anticipated developments related to Prevnar sales; Prempro/Premarin performance; competitor ANDA filings for Effexor XR and Altace; and Enbrel, Premarin and Prevnar product supply; and - expectations regarding the impact of potential litigation relating to Prempro; the nationwide class action settlement relating to Redux and Pondimin; and additional litigation charges related to Redux and Pondimin, including those for opt outs from the national settlement. All forward-looking statements address matters involving numerous assumptions, risks and uncertainties, which may cause actual results to differ materially from those expressed or implied by us in those statements. Accordingly, we caution you not to place undue reliance on these forward-looking statements, which speak only as of the date on which they were made. From time to time, we also may provide oral or written forward-looking statements in other materials we release to the public. Additionally, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise. Wyeth 68 EX-21 17 ex21.txt EXHIBIT 21 SUBSIDIARIES OF THE COMPANY --------------------------- DECEMBER 31, 2002 ----------------- State or Country Name of Incorporation - ------------------------------------------------- ----------------------- Domestic - -------- A H Investments LTD. Delaware Ayerst-Wyeth Pharmaceuticals Incorporated Delaware CICL Corporation Delaware MDP Holdings, Inc. Delaware Route 24 Holdings, Inc. Delaware Wyeth Pharmaceuticals, Inc. Delaware Scientific Protein Laboratories Inc. Illinois Wyeth Holdings Corporation Maine Wyeth-Ayerst International Inc. New York Wyeth-Ayerst Lederle, Inc. Puerto Rico Wyeth-Whitehall Pharmaceuticals, Inc. Puerto Rico Wyeth Pharmaceuticals Company, Inc. Puerto Rico Berdan Insurance Company Vermont Foreign - ------- Laboratorios Wyeth-Whitehall Ltda. Brazil Wyeth 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 Wyeth Taiwan Corporation Taiwan There have been omitted from the above list the names of the subsidiaries which, considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary. EX-23 18 ex23.txt EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS ---------------------------------- We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 33-45324 and No. 33-57339), S-4 (No. 333-59642), and S-8 (No. 2-96127, No. 33-24068, No. 33-41434, No. 33-53733, No. 33-55449, 33-45970, No. 33-14458, No. 33-50149, No. 33-55456, No. 333-15509, No. 333-76939, No. 333-67008, No. 333-64154, No. 333-59668, No. 333-89318, No. 333-98619 and No. 333-98623) of Wyeth of our report dated January 27, 2003, except for Note 16 which is as of March 3, 2003, relating to the financial statements, which appears in Wyeth's 2002 Annual Report to Stockholders, which is incorporated by reference in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report dated January 27, 2003 relating to the financial statement schedule, which appears in this Annual Report on Form 10-K. PricewaterhouseCoopers LLP Florham Park, NJ March 28, 2003 EX-99 19 ex99.txt FORWARD LOOKING STATEMENT EXHIBIT 99 Exhibit 99 to the Annual Report on Form 10-K for the Fiscal Year Ended December 31, 2002 Cautionary Statements Regarding "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995 The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. 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: o our anticipated results of operations, liquidity position, financial condition and capital resources; o the benefits that we expect will result from our business activities and certain transactions we announced or completed, such as increased revenues, decreased expenses and avoided expenses and expenditures; o statements of our expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts; o the future impact of presently known trends, including those with respect to product performance and competition; o anticipated developments relating to PREVNAR sales; PREMPRO/PREMARIN performance; competitor ANDA filings for EFFEXOR XR and ALTACE; and ENBREL, PREMARIN and PREVNAR product supply; o expectations regarding the impact of potential litigation relating to PREMPRO; the nationwide class action settlement relating to REDUX and PONDIMIN; and additional litigation charges related to REDUX and PONDIMIN, including those for opt outs from the national settlement. All forward-looking statements address matters involving numerous assumptions, risks and uncertainties, which may cause actual results to differ materially from those expressed or implied by us in those statements. Accordingly, we caution you not to place undue reliance on these forward-looking statements, which speak only as of the date on which they were made. From time to time, we also may provide oral or written forward-looking statements in other materials we release to the public. Additionally, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise. 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: Economic factors over which we have no control such as changes in business and economic conditions, including, but not limited to, inflation and fluctuations in interest rates and foreign currency exchange rates; Increasing pricing pressures, both in and outside the United States, resulting from continued consolidation among health care providers, rules and practices of managed care groups and institutional and governmental purchasers, judicial decisions and governmental laws and regulations relating to Medicare, Medicaid and health care reform, pharmaceutical reimbursement and pricing in general; Competitive factors, such as (i) new products developed by our competitors that have lower prices or superior performance features or that are otherwise competitive with our current products; (ii) technological advances and patents attained by our competitors; (iii) changes in promotional regulations or practices; (iv) development of alternative therapies; (v) potential generic competition for PREMARIN and for other health care products as such products mature and patents or marketing exclusivity expire on such products; (vi) problems with licensors, suppliers and distributors; (vii) business combinations among our competitors and major customers; and (viii) ability to attract and retain management and other key employees; Government laws and regulations affecting U.S. and international operations, including (i) trade, monetary and fiscal policies and taxes; (ii) price controls; (iii) changes in governments and legal systems; and (iv) regulatory approval processes affecting approvals of products and licensing, including, without limitation, uncertainties of the FDA approval process that may delay or prevent the approval of new products and result in lost market opportunity; Difficulties and delays inherent in pharmaceutical research, product development, manufacturing and commercialization, such as, (i) failure of new product candidates to reach market due to efficacy or safety concerns, inability to obtain necessary regulatory approvals and the difficulty or excessive cost to manufacture; (ii) the inability to identify viable new chemical compounds; (iii) difficulties in successfully completing clinical trials; (iv) difficulties in manufacturing complex products, particularly biological products, on a commercial scale; (v) difficulty in gaining and maintaining market acceptance of approved products; (vi) seizure or recall of products; (vii) the failure to obtain, the imposition of limitations on the use of, or loss of patent and other intellectual property rights; (viii) failure to comply with current Good Manufacturing Practices and other applicable regulations and quality assurance guidelines that could lead to temporary manufacturing shutdowns, products shortages and delays in product manufacturing; and (ix) other manufacturing or distribution problems; Difficulties or delays in product manufacturing or marketing, including but not limited to, the inability to build up production capacity commensurate with demand, such as supply shortages of ENBREL, PREMARIN and PREVNAR, the inability of our suppliers to provide raw material, or the failure to predict market demand for or to gain market acceptance of approved products; Unexpected safety or efficacy concerns arising with respect to marketed products, whether or not scientifically justified, leading to product recalls, withdrawals, regulatory action on the part of the FDA (or foreign counterparts) or declining sales, including a continuing adverse effect on sales of PREMPRO and other PREMARIN family products as a result of the findings from the Women's Health Initiative study evaluating hormone replacement therapy released in July 2002, the related new prescribing information for those products approved by the FDA in January 2003, and the findings from the Woman's Health Initiative study evaluating the use of estrogen plus progestin therapy on the development of dementia and mild cognitive impairment released in February 2003; Growth in costs and expenses, changes in product mix, and the impact of any acquisitions or divestitures, restructuring and other unusual items that could result from evolving business strategies, evaluation of asset realization and organizational restructuring; Legal difficulties, any of which can preclude or delay commercialization of products or adversely affect profitability, such as (i) product liability litigation related to our products including, without limitation, litigation associated with DIMETAPP, ROBITUSSIN, PREMPRO, thimerosal and our former diet drug products, REDUX and PONDIMIN; (ii) claims asserting violations of antitrust, securities, or other laws; (iii) tax matters; (iv) intellectual property disputes or changes in intellectual property legal protections and remedies; (v) environmental matters, including obligations under the Comprehensive Environmental Response, Compensation and Liability Act, commonly known as Superfund; and (vi) complying with the consent decree with the FDA; Fluctuations in buying patterns of major distributors, retail chains and other trade buyers which may result from seasonality, pricing, wholesaler buying decisions or other factors; and 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 may require adjustments to our financial statements. This list should not be considered an exhaustive statement of all potential risks and uncertainties. EX-99.3 20 diet5th.txt FIFTH AMENDMENT TO CLASS ACTION SETTLEMENT IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA - ------------------------------------ ) IN RE DIET DRUGS ) (PHENTERMINE/FENFLURAMINE/ ) MDL NO. 1203 DEXFENFLURAMINE) PRODUCTS ) LIABILITY LITIGATION ) ) - ------------------------------------) ) THIS DOCUMENT RELATES TO: ) ALL ACTIONS ) ) - ------------------------------------) SHEILA BROWN, et al. v. WYETH ) CIVIL ACTION NO. 99-20593 (formerly American Home Products ) Corporation) ) REVISED FIFTH AMENDMENT TO NATIONWIDE CLASS ACTION SETTLEMENT AGREEMENT WITH AMERICAN HOME PRODUCTS CORPORATION Dated: November 21, 2002 To facilitate the implementation of the Parties' intentions underlying the November 18, 1999 Nationwide Class Action Settlement Agreement with American Home Products Corporation, ("Settlement Agreement"), to aid in the prompt payment of benefits to Class Members who are entitled to receive them, and to clarify various matters and streamline certain procedures to enhance the efficiency of claims administration, all for the benefit of the Settlement Class, it is hereby stipulated and agreed among the Parties that, subject to the approval of the Trial Court, the Settlement Agreement is amended as follows: 1. Disposition of Fund A Residual. In light of the passage of the Date 1 registration deadline on August 1, 2002, information regarding processing of claims for Fund A benefits to date, and the number of claims filed, the Parties acknowledge and agree that the Trust will have sufficient funds in Fund A to pay Fund A benefits to eligible Class Members and that it is highly unlikely that the total payments to be made by the Trust for Fund A benefits and the costs of administering them will exceed the $1 billion deposited into Fund A by AHP pursuant to Section III.B.1 of the Settlement Agreement. Accordingly, to establish a fixed date for the transfer of Fund A to Fund B, to expedite the payment of certain Fund A benefits, and to simplify the Trust's accounting responsibilities, Section III.B.4 and Section III.B.5 [ASA p. 20] are deleted and replaced in their entirety by the following: 4. Funds remaining in Fund A shall be transferred to Fund B as follows: a. On the later of (i) January 31, 2003 or (ii) thirty days after the date on which the Trial Court enters an Order approving the Fifth Amendment to the Settlement Agreement, the Trust shall transfer to Fund B all funds remaining in Fund A at such time. The Date of this transfer shall be referred to as the "Merger Date." After the Merger Date, Fund A shall be considered merged into Fund B and the resulting fund shall be referred to as the "Settlement Fund." Before making such transfer, the Trust shall pay refunds under Section IV.A.1.d and reimbursements for privately-obtained echocardiograms under Section IV.A.3.d to those Diet Drug Recipients (or their associated Representative Claimants) that the Trust has determined to be eligible for such benefits by that time and any other benefits from Fund A as are ready for payment at such time. The resulting amount transferred from Fund A to Fund B pursuant to this Section III.B.4.a shall be referred to as the "Fund A Transfer Amount." b. After the Merger Date, all payments that otherwise would have been properly payable out of Fund A for the payment or provision of Fund A benefits under Section IV.A shall be made out of the Settlement Fund. The Trust shall make all such payments as soon as reasonably practicable after the Merger Date. If the balance in the Settlement Fund at the time any such amounts are payable is inadequate to fund the payments, AHP shall, within five Business Days after receipt of a written request from the Trust, deposit the necessary funds into the Settlement Fund. Amounts deposited by AHP into the Settlement Fund for this purpose shall not reduce the Maximum Available Fund B Amount or the Adjusted Maximum Available Fund B Amount under Section I.1. AHP's obligation for Fund A benefits and the cost of administering such benefits shall not exceed $1 billion plus the amounts necessary, if any, to pay or provide the additional medical services or cash benefits under Section IV.A.1.c and Section IV.A.2.c to eligible Class Members, provided that any amounts deposited by AHP into the Settlement Fund for such purpose shall not reduce the Maximum Available Fund B Amount. c. As of the date on which the Trial Court enters an Order approving the Fifth Amendment to the Settlement Agreement, the Trust and the Settlement Fund shall be deemed to possess sufficient funds to pay refunds under Section IV.A.1.d and reimbursements for privately-obtained echocardiograms under Section IV.A.3.d, and the Trustees shall pay such benefits to eligible Diet Drug Recipients (or their associated Representative Claimants) within forty-five days after the date on which the Trustees receive a completed claim for such benefit, or within such other period as the Trial Court may direct. After the Merger Date, the provisions of this Section III.B.4.c shall supercede the provisions of Section VI.C.3.l and Section VI.C.3.n regarding the time of payment of such benefits. d. After the Merger Date, the Fund A Transfer Amount also shall be used by the Trust to pay Matrix Compensation Benefits under Section IV.B. and administrative expenses of the Trust, in addition to the payment and provision of Fund A benefits under Section IV.A, until the balance in the Settlement Fund reaches the Administrative Reserve to be maintained in the Settlement Fund pursuant to Section III.C.3.b or Section III.C.4.e, whereupon the Trust may resume funding the payment of Matrix Compensation Benefits to eligible Class Members pursuant to Settlement Fund Quarterly Notices or such other requests as agreed upon by the Parties. The Fund A Transfer Amount will not reduce the maximum obligation of AHP to make payments to Fund B under Section III.C. Section I.1 [ASA p. 2] is deleted and replaced in its entirety by the following: 1. "Adjusted Maximum Available Fund B Amount" shall mean the amount determined by adding the Fund A Transfer Amount to the Maximum Available Fund B Amount as defined in this Section, and by then subtracting from the resulting sum all amounts paid by the Trust out of the Fund A Transfer Amount for any purpose. The "Maximum Available Fund B Amount" shall mean the amount determined by adding $2,550,000,000 and the Fund B Accretions and by then subtracting from the resulting sum: (i) the Fund B Initial Payment under Section III.C.2; (ii) all amounts paid or transferred by AHP to the Trustees for deposit into Fund B or the Settlement Fund pursuant to Fund B Quarterly Notices under Section III.C.3, pursuant to Requests for Fund B AIO Payments under Section V.F.2, or pursuant to other payment or deposit requests from the Trust for deposits into Fund B; and (iii) Credits to which AHP is entitled under Section VII.A (Opt-Out Credits) and Section VII.C.1.g (Cross-Claim Credits), provided that Initial Opt-Out Credits (as defined in Section VII.A.2) and Back-End Opt-Out Credits (as defined in Section VII.A.3) shall be applied to reduce the Maximum Available Fund B Amount only when and as provided in Section VII.A. "Fund B Accretions" shall be determined as follows: On the first day of the first AIO Fiscal Quarter or Fiscal Quarter (whichever is applicable) after the Final Judicial Approval Date or the date on which it is determined that Final Judicial Approval will not be obtained, the Trustees shall calculate a quarterly accretion to the Maximum Available Fund B Amount which will be one and one-half percent (1.5%) of the Maximum Available Fund B Amount determined as of the close of the preceding AIO Fiscal Quarter or Fiscal Quarter, whichever is applicable. Such accretions shall be added to the Maximum Available Fund B Amount as of the day on which the accretion is calculated. 2. Conclusion of the Screening Program. To ensure that the benefits of the Screening Program are delivered to all eligible Class Members and to clarify the status of Class Members who receive an Echocardiogram after the close of the Screening Period, Section I.49 [ASA p. 12] is deleted and replaced in its entirety by the following: 49. "Screening Period" refers to the 12-month period beginning on the Final Judicial Approval Date during which benefits shall be available in the Screening Program. Class Members who have timely registered for benefits by Date 1 and who are otherwise eligible for Screening Program benefits may receive the Echocardiogram and associated interpretative physician visit benefits after the end of this Screening Period, provided that: (i) all such Echocardiograms must be conducted no later than July 3, 2003, unless the Court, upon a showing of good cause and due diligence by or on behalf of a Class Member or group of Class Members, allows the Class Member or group of Class Members to receive an Echocardiogram and associated interpretative physician visit after such date; and (ii) any Class Member who receives an Echocardiogram provided by the Trust after the end of the Screening Period shall be considered to have been diagnosed during the Screening Period for all purposes under this Settlement Agreement, and shall have a period of 120 days after the date of the Echocardiogram to exercise, if otherwise eligible, a right of Intermediate Opt-Out under Section IV.D.3.b. 3. Maintenance of the Fund B Administrative Reserve. To clarify the level of the Administrative Reserve to be maintained in Fund B, the following is added to the end of Section III.C.3 [ASA p. 21]: At any time that the total value of the Security Fund under Section III.E.2 is equal to or greater than the Maximum Available Fund B Amount, the Trustees shall limit requests for deposits for purposes of maintaining the Administrative Reserve in Fund B to those sums that the Trustees believe will be necessary to satisfy the reasonably anticipated administrative expenses of the Trust for the Fiscal Quarter in which the request is made. 4. Conformance of Fund B Sections to Merger Provisions. To provide for the disposition of monies held by Fund B in conformance with amendments effecting the merger of Fund A and Fund B, Section III.C.4.d [ASA p. 23] is deleted and replaced in its entirety by the following: d. After the Merger Date, Fund B shall be referred to as the Settlement Fund, all references in this Settlement Agreement to Fund B shall be read as referring to the "Settlement Fund" rather than to "Fund B", and Fund B Quarterly Notices shall be known as "Settlement Fund Quarterly Notices." After the Merger Date, the Trust shall continue to maintain accurate records of the Maximum Available Fund B Amount and the Adjusted Maximum Available Fund B Amount for purposes of determining AHP's payment obligations to Fund B and the Settlement Fund under Section III.C.4 and the total amount available to the Trust to pay benefits to Class Members and for the costs of administration of such benefits. 5. Timing of Deposits into Fund B or the Settlement Fund. To allow the Parties to accelerate the payment of benefits to Class Members, the following is added as new Section III.C.4.e [ASA p. 23]: e. The Parties may agree in writing to a more frequent schedule for the Fund B Quarterly Notices, Settlement Fund Quarterly Notices (or such other notices as agreed upon by the Parties), and Fund B Deposit Amounts paid by AHP into Fund B or the Settlement Fund than the schedule provided in Section III.C.3, to eliminate or reduce the administrative reserve in Fund B under Section III.C.3.b, and to increase the principal value of the Security Fund under Section III.E.2 to accommodate such adjustments. The Parties shall report all such agreements to the Court. At any time during which AHP is timely making deposits into Fund B on a schedule at least as often as every two weeks, the Administrative Reserve under Section III.C.3.b shall be no greater than $5 million. Funds held in the Administrative Reserve shall be considered available for the payment of Matrix Compensation Benefits as and when the Maximum Available Fund B Amount is $50 million or less, and/or in the Trust's calculation of the Final Projected Amount under Section III.C.4. 6. Revisions to Security Fund Provisions. To accommodate any additions to the Security Fund under the above amendment to Section III.C.4 of the Settlement Agreement, and to provide additional security for the Settlement Class, Section III.E.2 and Section III.E.3 [ASA pp. 24-25] are deleted and replaced in their entirety by the following: 2. Fifteen days after the Final Judicial Approval Date, or the first Business Day thereafter if such fifteenth day is not a Business Day, AHP shall establish and thereafter maintain, subject to all the provisions of this Section III.E, a fund (the "Security Fund") consisting of cash and high-grade marketable commercial securities (which shall consist of the "Permitted Investments," defined herein) selected by AHP having a principal value equal to $370 million. If at any time the Administrative Reserve in Fund B under Section III.C.3 is required to be no greater than $5 million, AHP shall deposit into and maintain in the Security Fund cash and/or Permitted Investments having a principal value equal to $45 million and if, after such deposit, AHP deposits funds to increase the Administrative Reserve above $5 million, AHP shall be entitled to withdraw from the Security Fund assets and/or cash equal in value to such Administrative Reserve deposits, not to exceed $45 million. Fifteen days after the Merger Date, or the first Business Day thereafter if the fifteenth day is not a Business Day, AHP shall deposit cash and/or Permitted Investments into the Security Fund having a principal value equal to 80% of the Fund A Transfer Amount, less any amounts deposited into the Security Fund by AHP before such time (other than the original $370 million deposit and the $45 million deposit referred to above) (the "Merger Security Deposit"). AHP may satisfy its obligation to make the Merger Security Deposit by causing a wholly-owned subsidiary of AHP to deposit assets of the subsidiary consisting of cash and/or Permitted Investments into the Security Fund, provided that (i) such subsidiary becomes a primary obligor together with AHP for AHP's funding obligations under the Settlement Agreement to the extent of 110% of the Merger Security Deposit; and (ii) AHP provides to Class Counsel a written opinion satisfactory to Class Counsel that the Merger Security Deposit by the subsidiary is a bona fide transaction supported by good and valuable consideration, is a valid and enforceable obligation of the subsidiary under applicable law, and that the transfer will afford the Trust a valid and enforceable security interest in the Merger Security Deposit to secure to that extent AHP's payment obligations to the Trust under the Settlement Agreement. Any other deposits agreed upon by the Parties and approved by the Court under Section III.C.4.e shall be added to the Security Fund. If the credit rating for AHP as reported by both Moody's Investors Service and Standard & Poor's Rating Services is below investment grade at any time during which the Security Fund must be maintained hereunder, AHP shall deposit additional cash and/or Permitted Investments selected by AHP having an aggregate principal value of an additional $180 million. For purposes of this Section III.E, the term "Permitted Investments" shall mean any of the following: (a) readily marketable direct obligations of the United States or any agency or instrumentality thereof or obligations unconditionally guaranteed by the full faith and credit of the United States, maturing within 365 days of purchase (in the case of all such obligations other than direct obligations of the United States Treasury); (b) certificates of deposit or time deposits maturing within 365 days of purchase with any commercial bank that (1) has deposits insured by the Federal Deposit Insurance Corporation, (2) is organized under the laws of the United States or any state thereof, (3) has a minimum long-term rating of "A-3" (or the then equivalent) by Moody's Investors Service and a long-term rating of "A-" (or the then equivalent) by Standard & Poor's Rating Services, and (4) has combined capital and surplus of at least $10 billion; (c) commercial paper issued by any corporation organized under the laws of any state of the United States and rated at least "Prime-1" short-term (or the then equivalent grade) and "A-1" long-term (or the then equivalent grade) by Standard & Poor's Rating Services, in each case with a maturity of not more than 180 days from the date of acquisition thereof; or (d) investments, classified as current assets of AHP or any of its subsidiaries under generally accepted accounting principles, in money market investment programs registered under the Investment Company Act of 1940, as amended, which are administered by financial institutions that have the highest rating obtainable from either Moody's Investors Service or Standard & Poor's Rating Services, and the portfolios of which are limited solely to investments of the character, quality and maturity described in clauses (a), (b) or (c) of this definition. 3. If at any time the Security Fund Amount is greater than 110% of the Maximum Available Fund B Amount, AHP may withdraw, at its option, free of any lien under Section III.E.5, cash and/or Permitted Investments from the Security Fund, provided that: (i) the Security Fund Amount must at all times equal or exceed 110% of the Maximum Available Fund B Amount; and (ii) AHP may make such withdrawals from the Security Fund no more frequently than once monthly. The Security Fund and the lien under Section III.E.5 shall be terminated completely upon AHP's making the Final Payment provided for in Section III.C.4.a. In addition, Section III.E.5 [ASA p. 25] is deleted and replaced in its entirety by the following: 5. AHP shall grant to the Trustees a perfected security interest in the Security Fund as collateral for AHP's obligations under the Settlement Agreement pursuant to the terms of a Security Fund and Escrow Agreement in the form appended hereto as "Revised Exhibit 3." No later than the date of the Merger Security Deposit, AHP (or its subsidiary as applicable) shall grant to the Trustees a perfected security interest in the Merger Security Deposit in the Security Fund as collateral for AHP's obligations under the Settlement Agreement pursuant to the terms of the Security Fund and Escrow Agreement attached hereto as "Revised Exhibit 3" or such other Security Fund and Escrow Agreement as is agreed upon by the Parties and approved by the Trial Court. The "Revised Exhibit 3" is attached hereto as Exhibit A. 7. Settlement Fund Payment Obligations. To reflect the proper treatment of the Fund A Transfer Amount as it relates to AHP's payment obligations to Fund B, Section III.C.3.b [ASA pp.20-21], Section III.C.4.a [ASA p.21], Section III.C.4.b(iv) [ASA pp. 22-23], Section V.F.2 [ASA p. 60], Section VI.A.10.a(3)(v),(vii) [ASA p.70], Section VII.A.2.b,c [ASA p. 119], Section VII.A.3 [ASA pp.119-20], Section VII.C.1.g [ASA pp. 126-27], and Section VIII.E.1.b [ASA pp. 137-38] are amended so that all references to "Adjusted Maximum Available Fund B Amount" in such Sections shall be replaced with "Maximum Available Fund B Amount" instead. 8. Revised Articles and By-Laws of the Medical Research and Education Fund. To update the Articles and By-Laws of the Medical Research and Education Fund, "Exhibit 4", referred to in Section IV.A.3.a [ASA p. 31], is replaced with the revised "Exhibit 4" attached to this Fifth Amendment as Exhibit B. 9. Timing of Requests for Credits. To clarify the time by which Wyeth shall submit Requests for Credits, the following is added to Section VI.D [ASA p. 111]: 3. The RED FORM for a Request for a Credit for Initial Opt-Out Credits and for Back-End Opt-Out Credits shall be submitted by AHP to the Trustees and/or Claims Administrator(s) postmarked on or before the later of: (i) 180 days after the date that is five calendar years after the Final Judicial Approval Date; or (ii) 180 days after the date of the payment by AHP to or for the benefit of the Class Member for which AHP seeks the Credit. 4. Within thirty days after the close of each calendar quarter after December 31, 2002, through the quarter that includes the date that is five calendar years after the Final Judicial Approval Date, AHP shall provide a written report to Class Counsel and the AHP Settlement Trust of the approximate total dollar amount of Back-End Opt-Out Credits under Section VII.A.3 that it reasonably believes would arise from payments made by AHP during the preceding calendar quarter to Class Members. 10. Deferral of Back-End Opt-Out Credits. To maximize the funds available to Class Members for the payment of Matrix Compensation Benefits and to defer the administrative costs and delay associated with the processing of applications for Credits, the last sentence of Section VII.A.3 [ASA p. 120] is deleted and replaced in its entirety by the following: Back-End Opt-Out Credits shall be applied to reduce the Adjusted Maximum Available Fund B Amount upon the later of: (i) the date that is five calendar years after the Final Judicial Approval Date; or (ii) the date on which the determination of the Back-End Opt-Out Credit becomes final under Section VI.D.1. 11. Settlement of Subrogation Claims. To reflect the parties' understanding that Matrix benefit payments should not be reduced on account of claims by subrogees who have entered into settlement agreements with the parties, the following is added as new Section VII.D.3 [ASA p.130]: 3. In the event that AHP and Class Counsel enter into a settlement agreement with any subrogee in which the subrogee releases its subrogation claims against AHP and the Settlement Class, then after the effective date of the Fifth Amendment to the Settlement Agreement, notwithstanding any other provision of the Settlement Agreement or any previous agreement relating to the settlement of subrogation claims, no amount shall be deducted from any Matrix Compensation Benefits payment due to any Class Member on account of any subrogation claim that has been or could be made by any such subrogee with respect to the recovery of any Class Member, and the Trust shall refund to a Class Member any amount deducted from the Class Member's Matrix Compensation Benefits for such purpose before the effective date of the Fifth Amendment to the Settlement Agreement. 12. Name Change to Wyeth. To update the Settlement Agreement to account for the change of corporate name from American Home Products Corporation to Wyeth, effective March 11, 2002, the following is added as new Section VIII.F.12 [ASA p. 143]: 12. Beginning on March 11, 2002, all references in this Settlement Agreement to "AHP" and "American Home Products" (except for the references to AHP in "AHP Settlement Trust") shall be deemed to refer to Wyeth. This name change does not affect the implementation of this Settlement Agreement or the AHP Settlement Trust. 13. Approval of this Amendment. The Parties promptly shall seek approval of this Fifth Amendment by the Trial Court. This Fifth Amendment shall not become effective unless and until the date of the entry of an Order by the Trial Court approving of this Fifth Amendment. IN WITNESS WHEREOF, the Parties have duly executed this Revised Fifth Amendment to Nationwide Class Action Settlement Agreement between AHP and the Class Representatives, by their respective counsel as set forth below, on November 21, 2002. (Signature Pages Follow) WYETH (formerly AMERICAN HOME PRODUCTS CORPORATION) BY:_________________________________________ Louis L. Hoynes, Jr. Executive Vice President and General Counsel Date: ___________________________ CLASS COUNSEL FOR THE PLAINTIFFS' MANAGEMENT COMMITTEE: - ------------------------------------ ----------------------------------- Arnold Levin, Esquire Gene Locks, Esquire LEVIN, FISHBEIN, SEDRAN & BERMAN GREITZER & LOCKS 510 Walnut Street, Suite 500 1500 Walnut Street, 20th Floor Philadelphia, PA 19106 Philadelphia, PA 19102 215-592-1500 800-828-3489 Date: ___________________________ Date: ___________________________ - ----------------------------------- ----------------------------------- Michael D. Fishbein, Esquire Sol H. Weiss, Esquire LEVIN, FISHBEIN, SEDRAN & BERMAN ANAPOL SCHWARTZ WEISS COHAN 510 Walnut Street, Suite 500 FELDMAN & SMALLEY, P.C. Philadelphia, PA 19106 1900 Delancey Place 215-592-1500 Philadelphia, PA 19103 215-735-2098 Date: ___________________________ Date: ___________________________ - ------------------------------------- ----------------------------------- Stanley Chesley, Esquire Charles R. Parker, Esquire WAITE, SCHNEIDER, BAILESS & CHESLEY HILL & PARKER 1513 Central Trust Tower 5300 Memorial, Suite 700 Fourth & Vine Streets Houston, TX 77007-8292 Cincinnati, OH 45202 713-868-5581 513-621-0267 Date: ___________________________ Date: ___________________________ - ------------------------------------- John J. Cummings, Esquire CUMMINGS, CUMMINGS & DUDENHEFER 416 Gravier Street New Orleans, LA 70130 504-586-0000 Date: ___________________________ FOR SUBCLASS 1(a): FOR SUBCLASS 1(b): - --------------------------------------- ----------------------------- Diane Nast, Esquire Richard Lewis, Esquire ROD & NAST COHEN, MILSTEIN, HAUSFELD 801 Estelle Drive & TOLL Lancaster, PA 17601 1100 New York Avenue, N.W. 712-892-3000 Suite 500, West Tower Washington, D.C. 2005-3934 (202) 408-4600 Date: ___________________________ Date: ___________________________ FOR SUBCLASS 2(a): FOR SUBCLASS 2(b): - ------------------------------------ ----------------------------------- Mark W. Tanner, Esquire R. Eric Kennedy, Esquire FELDMAN, SHEPHERD & WOHLGELERNTER WEISMAN, GOLDBERG, WEISMAN & 1845 Walnut Street, 25th Street KAUFMAN Philadelphia, PA 19103 1600 Midland Building 215-567-8300 101 Prospect Avenue West Cleveland, OH 44115 216-781-1111 Date: ___________________________ Date: ___________________________ FOR SUBCLASS 3: - ------------------------------------ Richard Wayne, Esquire STRAUSS & TROY The Federal Reserve Building 150 East 4th Cincinnati, OH 45202-4018 513-621-2120 Date: ___________________________ EX-99.4 21 diet6th.txt SIXTH AMENDMENT TO CLASS ACTION SETTLEMENT IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA - ------------------------------------ ) IN RE DIET DRUGS ) (PHENTERMINE/FENFLURAMINE/ ) MDL NO. 1203 DEXFENFLURAMINE) PRODUCTS ) LIABILITY LITIGATION ) ) - ------------------------------------) ) THIS DOCUMENT RELATES TO: ) ALL ACTIONS ) ) - ------------------------------------) SHEILA BROWN, et al. v. WYETH ) CIVIL ACTION NO. 99-20593 (formerly American Home Products ) Corporation) ) SIXTH AMENDMENT TO NATIONWIDE CLASS ACTION SETTLEMENT AGREEMENT WITH AMERICAN HOME PRODUCTS CORPORATION Dated: January 10, 2003 To facilitate the implementation of the Parties' intentions underlying the November 18, 1999 Nationwide Class Action Settlement Agreement with American Home Products Corporation, ("Settlement Agreement"), and to clarify various matters arising under the Settlement Agreement, all for the benefit of the Settlement Class, it is hereby stipulated and agreed among the Parties that, subject to the approval of the Trial Court, the Settlement Agreement is amended as follows: 1. Clarification of "Claiming" Matrix Compensation Benefits. To clarify the impact of the submission of a GREEN FORM to the Interim Claims Administrators or the AHP Settlement Trust, the last sentence of Section IV.D.4.b [ASA p. 56] is deleted and replaced in its entirety by the following: A Class Member may not exercise a Back-End Opt-Out right after claiming any Matrix Compensation Benefits. For this purpose, a Class Member is claiming Matrix Compensation Benefits if the Interim Claims Administrators and/or the Trust receive: (i) Part I of a GREEN FORM signed by the Class Member (or Representative Claimant of such Class Member); and/or (ii) Part II of a GREEN FORM signed by a physician relating to the Class Member and a BLUE FORM signed by that Class Member (or Representative Claimant of such Class Member) in which the Class Member (or Representative Claimant of such Class Member) indicated a belief or assertion of a Matrix-Level condition. 2. Creation of the Sixth Amendment Opt-Out. To address the issue of the status of Class Members who have claimed Matrix Compensation Benefits by May 3, 2003, if the Maximum Available Fund B Amount is reduced to $255 million or less, the following is added to the Settlement Agreement as Section IV.D.5 [ASA p. 58]: 5. SIXTH AMENDMENT OPT-OUT a. ELIGIBILITY: A Class Member (a Diet Drug Recipient or Representative Claimant of such Diet Drug Recipient) who would otherwise qualify to exercise a right of Back-End Opt-Out under Section IV.D.4 if the Class Member had not claimed Matrix Compensation Benefits, and who has claimed Matrix Compensation Benefits (within the meaning of Section IV.D.4.b) on or before May 3, 2003, is eligible to exercise a Sixth Amendment Opt-Out if: (i) the Trust has determined, after audit of the claim, that the Class Member qualifies for Matrix Compensation Benefits, including without limitation that the Class Member satisfies the requirements of the Settlement Agreement for medical eligibility for Matrix Compensation Benefits; (ii) the Class Member has not received any Matrix Compensation Benefits from the Trust or received payment of any settlement amount from Wyeth; (iii) the Maximum Available Fund B Amount at such time is $255 million or less, the Class Member's claim for Matrix Compensation Benefits was included in a Fund B Level Notice (as defined below), a Fund B Quarterly Notice, or Settlement Fund Quarterly Notice, and a Fund B Suspension (as defined below) has occurred; (iv) AHP has elected not to deposit additional funds into Fund B to pay such Class Member's Matrix Compensation Benefits; and (v) the Class Member agrees in writing that if the Class Member files any action as a Sixth Amendment Opt-Out, the Class Member will name only AHP as the defendant and no other defendants, the Class Member (and any Derivative Claimants of such Class Member) will be the sole plaintiff(s) in such action, and the Class Member will not agree to or cause consolidation of such action with any other claims or actions (other than consolidation for purposes of pretrial discovery pursuant to 28 U.S.C.ss. 1407 or a similar state statute) and will dismiss such action if consolidation is nonetheless ordered by any court, subject to the right to re-file the action in conformity with this Section IV.D.4.c within 120 days of any such dismissal. b. METHOD OF EXERCISE: Each Class Member who wants to exercise a Sixth Amendment Opt-Out must do so by completing, signing, and timely submitting an ORANGE FORM #4 (in the form to be adopted by the Trust and the Parties if the conditions giving rise to a Sixth Amendment Opt-Out should occur) to the Trust and AHP postmarked no later than 120 days after the date of a notice from the Trust to the Class Member that the Class Member is eligible for the exercise of a Sixth Amendment Opt-Out. c. EFFECT OF EXERCISE: The Sixth Amendment Opt-Out is subject to all the provisions of Section IV.D.4.c relating to the Back-End Opt-Out and to the additional provisions imposed pursuant to Section IV.D.5.a(v) above. d. IMPLEMENTATION OF THE SIXTH AMENDMENT OPT-OUT: To effectuate this Section IV.D.5, if deposit by AHP into the Trust of the amount requested in a Fund B Quarterly Notice or Settlement Fund Quarterly Notice would reduce the Maximum Available Fund B amount to $255 million or less, the Trust shall notify AHP in writing of this circumstance at the time that it issues such Fund B Quarterly Notice or Settlement Fund Quarterly Notice and set forth the amount that if deposited would cause the Maximum Available Fund B Amount to be reduced below $255 million (a "Fund B Level Notice"), and shall identify the Class Members whose claims form the basis of the Notice and the gross amount of Matrix Compensation Benefits that the Trust finally determined each Class Member was entitled to be paid. Within fifteen days after receipt of a Fund B Quarterly Notice or Settlement Fund Quarterly Notice accompanied by a Fund B Level Notice, AHP shall advise the Trust as to whether it intends to deposit the full amount requested in the Fund B Level Notice. Any deposits by AHP of amounts described in a Fund B Level Notice shall not reduce the Maximum Available Fund B Amount below $255 million. If AHP fails to respond timely to a Notice of Fund B Level or notifies the Trust that it does not intend to pay the full amount requested in the Notice of Fund B Level, then a "Fund B Suspension" has occurred. If a Fund B Suspension has occurred: (i) AHP shall not be entitled to claim or receive any Credits under Section VII.A unless such Credits have been claimed and applied to reduce the Maximum Available Fund B Amount before the date of the Notice of Fund B Level that results in a Fund B Suspension; (ii) Subject to Section III.C.4 and the Settlement Trust Agreement, within ten Business Days after the date of the Fund B Suspension, and in subsequent Fiscal Quarters within ten Business Days after the date of a Fund B Quarterly Notice or Settlement Fund Quarterly Notice, AHP shall deposit into Fund B the portion of the amount requested in the Fund B Quarterly Notice or Settlement Fund Quarterly Notice attributable to supplemental claims by eligible Class Members for Matrix Compensation Benefits pursuant to Section IV.C.3 ("Supplemental Matrix Claims") as identified by the Trust in the Fund B Quarterly Notice or Settlement Fund Quarterly Notice and to maintain the Administrative Reserve in Fund B pursuant to Section III.C.3, with such deposit applied to reduce the Maximum Available Fund B Amount, and the Trust shall pay such Supplemental Claims in accordance with this Settlement Agreement; (iii)Within ten Business Days after the date of the Fund B Suspension, and in subsequent Fiscal Quarters within ten Business Days after the date of a Fund B Quarterly Notice or Settlement Fund Quarterly Notice, AHP shall elect in writing to the Trust which, if any, of the claims for Matrix Compensation Benefits identified in the Fund B Quarterly Notice or Settlement Fund Quarterly Notice as ready for payment shall be paid by the Trust, and with such election AHP shall deposit into Fund B the amounts necessary for such payments. Deposits for this purpose shall not reduce the Maximum Available Fund B Amount. e. PROCESSING OF CLAIMS IF A FUND B SUSPENSION OCCURS: If a Fund B Suspension occurs, the Trust shall continue to process claims for Matrix Compensation Benefits to a Final Determination for each Class Member who has filed a GREEN FORM with the Trust, and shall continue to provide AHP with Fund B Quarterly Notices or Settlement Fund Quarterly Notices stating the amount of Matrix Compensation Benefits subject to Final Determination by the Trust as of the close of the Fiscal Quarter preceding the Fund B Quarterly Notice. Each such Fund B Quarterly Notice or Settlement Fund Quarterly Notice issued by the Trust to AHP shall identify each Class Member whose claim for Matrix Compensation Benefits was subject to a Final Determination by the Trust during the Fiscal Quarter preceding the date of the Fund B Quarterly Notice and shall state the gross amount of Matrix Compensation Benefits that the Trust finally determines each Class Member was entitled to be paid. The provisions of Sections IV.D.5.d(ii) through (iii) above shall apply to each such Fund B Quarterly Notice or Settlement Fund Quarterly Notice. 3. Notice of this Amendment. After approval of this Sixth Amendment by the Trial Court, the Trust may transmit a written notice of its terms to all individuals whose names and addresses are contained in the Notice List (as defined in Section VI.B.2 of the Settlement Agreement), and shall post such notice on the official settlement website, www.settlementdietdrugs.com. This notice must be approved by the Parties and the Trial Court before its transmission or posting. Before approval of this Sixth Amendment by the Trial Court, the Trust and the Parties may provide such notice of the pendency of the Sixth Amendment as approved by the Trial Court. 4. Approval of this Amendment. The Parties shall promptly seek approval of this Sixth Amendment by the Trial Court. This Sixth Amendment shall not become effective unless and until the Trial Court enters an Order approving this Sixth Amendment in its entirety. If such approval does occur, then this Sixth Amendment shall be binding on the Parties and shall remain in full force and effect; provided, however, that if Pretrial Order No. 2662, entered by the Trial Court on November 26, 2002, is at any time modified or subject to a stay that causes a material reduction in the number of claims for Matrix Compensation Benefits subject to audit, then this Sixth Amendment at Wyeth's option (which shall be exercised by Wyeth in writing within thirty days after any event triggering this section) shall become void and have no further force or effect. IN WITNESS WHEREOF, the Parties have duly executed this Sixth Amendment to Nationwide Class Action Settlement Agreement between AHP and the Class Representatives, by their respective counsel as set forth below, effective on January 10, 2003. WYETH (formerly AMERICAN HOME PRODUCTS CORPORATION) BY:_________________________________________ Louis L. Hoynes, Jr. Executive Vice President and General Counsel Date: ________________________________ CLASS COUNSEL FOR THE PLAINTIFFS' MANAGEMENT COMMITTEE: - ------------------------------------ ----------------------------------- Arnold Levin, Esquire Gene Locks, Esquire LEVIN, FISHBEIN, SEDRAN & BERMAN GREITZER & LOCKS 510 Walnut Street, Suite 500 1500 Walnut Street, 20th Floor Philadelphia, PA 19106 Philadelphia, PA 19102 215-592-1500 800-828-3489 Date: ___________________________ Date: ___________________________ - ----------------------------------- ----------------------------------- Michael D. Fishbein, Esquire Sol H. Weiss, Esquire LEVIN, FISHBEIN, SEDRAN & BERMAN ANAPOL SCHWARTZ WEISS COHAN 510 Walnut Street, Suite 500 FELDMAN & SMALLEY, P.C. Philadelphia, PA 19106 1900 Delancey Place 215-592-1500 Philadelphia, PA 19103 215-735-2098 Date: ___________________________ Date: ___________________________ - ------------------------------------- ----------------------------------- Stanley Chesley, Esquire Charles R. Parker, Esquire WAITE, SCHNEIDER, BAILESS & CHESLEY HILL & PARKER 1513 Central Trust Tower 5300 Memorial, Suite 700 Fourth & Vine Streets Houston, TX 77007-8292 Cincinnati, OH 45202 713-868-5581 513-621-0267 Date: ___________________________ Date: ___________________________ - ------------------------------------- John J. Cummings, Esquire CUMMINGS, CUMMINGS & DUDENHEFER 416 Gravier Street New Orleans, LA 70130 504-586-0000 Date: ___________________________ FOR SUBCLASS 1(a): FOR SUBCLASS 1(b): - --------------------------------------- ----------------------------- Diane Nast, Esquire Richard Lewis, Esquire ROD & NAST COHEN, MILSTEIN, HAUSFELD 801 Estelle Drive & TOLL Lancaster, PA 17601 1100 New York Avenue, N.W. 712-892-3000 Suite 500, West Tower Washington, D.C. 2005-3934 (202) 408-4600 Date: ___________________________ Date: ___________________________ FOR SUBCLASS 2(a): FOR SUBCLASS 2(b): - ------------------------------------ ----------------------------------- Mark W. Tanner, Esquire R. Eric Kennedy, Esquire FELDMAN, SHEPHERD & WOHLGELERNTER WEISMAN, GOLDBERG, WEISMAN & 1845 Walnut Street, 25th Street KAUFMAN Philadelphia, PA 19103 1600 Midland Building 215-567-8300 101 Prospect Avenue West Cleveland, OH 44115 216-781-1111 Date: ___________________________ Date: ___________________________ FOR SUBCLASS 3: - ------------------------------------ Richard Wayne, Esquire STRAUSS & TROY The Federal Reserve Building 150 East 4th Cincinnati, OH 45202-4018 513-621-2120 Date: ___________________________ EX-99.13 22 ex99-13.txt 906 CERTIFICATION (ESSNER) Exhibit 99.13 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Wyeth (the "Company") on Form 10-K for the fiscal year ended December 31, 2002, as filed with the Securities and Exchange Commission on March 12, 2003 (the "Report"), I, Robert Essner, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: March 31, 2003 By /s/ Robert Essner --------------------------------- Robert Essner Chairman, President and Chief Executive Officer EX-99.14 23 ex99-14.txt 906 CERTIFICATION (MARTIN) Exhibit 99.14 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Wyeth (the "Company") on Form 10-K for the fiscal year ended December 31, 2002, as filed with the Securities and Exchange Commission on March 12, 2003 (the "Report"), I, Kenneth J. Martin, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: March 31, 2003 By /s/ Kenneth J. Martin ------------------------------- Kenneth J. Martin Executive Vice President and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----