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, 2003 1-1225
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Delaware 13-2526821
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
Five Giralda Farms, Madison, NJ 07940-0874
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including
area code (973) 660-5000
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Securities registered pursuant to
Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
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$2 Convertible Preferred Stock, $2.50
par value New York Stock Exchange
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Common Stock, $0.33 - 1/3 par value New York Stock Exchange
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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. [ ]
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, 2003 $60,628,530,512
Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date.
Common Stock, $0.33 - 1/3 par value 1,333,071,684
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.
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, is currently engaged in the discovery, development, manufacture, distribution and sale of a diversified line of products in three primary businesses: Wyeth Pharmaceuticals ("Pharmaceuticals"), Wyeth Consumer Healthcare ("Consumer Healthcare") and Fort Dodge Animal Health ("Animal Health"). Pharmaceuticals include branded human ethical pharmaceuticals, biologicals and nutritionals. Principal products include neuroscience therapies, cardiovascular products, nutritionals, gastroenterology drugs, anti-infectives, vaccines, oncology therapies, musculoskeletal therapies, hemophilia treatments, immunological products and women's health care products. Consumer Healthcare products include analgesics, cough/cold/allergy remedies, nutritional supplements, and hemorrhoidal, asthma and other relief items sold over-the-counter. Principal Animal Health products include vaccines, pharmaceuticals, parasite control and growth implants.
Prior to July 15, 2002, the Company was the beneficial owner of 223,378,088 shares of Immunex Corporation ("Immunex") common stock. On July 15, 2002, Amgen Inc. ("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 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 substantially 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.
Additional information relating to Immunex/Amgen common stock transactions is set forth in Note 2 of the Notes to Consolidated Financial Statements in the Company's 2003 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 2003, 2002 and 2001 net gains on sales of assets including the 2002 fourth quarter sale of the Company's generic human injectables product line to Baxter Healthcare Corporation.
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 $3.800 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 billion.
Financial information, by reportable segment, for each of the three years ended December 31, 2003 is set forth in Note 15 of the Notes to Consolidated Financial Statements in the Company's 2003 Annual Report to Stockholders and is incorporated herein by reference.
The Company has four reportable segments: Pharmaceuticals, Consumer Healthcare, Animal Health and Corporate. The Company's Pharmaceuticals, Consumer Healthcare and Animal Health reportable segments are strategic business units that offer different products and services. Beginning in the 2003 fourth quarter, the Company changed its reporting structure to include the Animal Health business as a separate reportable segment. The Animal Health business was previously reported within the Pharmaceuticals segment. Prior period information presented in Note 15 of the Notes to Consolidated Financial Statements in the Company's 2003 Annual Report to Stockholders was restated to be on a comparable basis. 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 consolidated net revenue and trade receivables, especially in the United States. The Company's top three customers accounted for 23% and 25% of the Company's consolidated net revenue in 2003 and 2002, respectively. The Company's largest customer accounted for 10% of consolidated net revenue in 2003 and 2002. 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 and nutritionals.
These products are promoted and sold worldwide primarily to
wholesalers, pharmacies, hospitals, physicians, retailers, and other
human health care institutions. Some of these sales are made to
large buying groups representing certain of these customers.
Principal product categories and their respective products are:
neuroscience therapies including EFFEXOR (marketed as EFEXOR
internationally) and EFFEXOR XR; cardiovascular products including
ALTACE (co-marketed with King Pharmaceuticals, Inc.) and INDERAL;
nutritionals including S-26, 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 and SYNVISC; hemophilia treatments including
BENEFIX Coagulation Factor IX (Recombinant) and REFACTO albumin-free
formulated Factor VIII (Recombinant); immunological products
including RAPAMUNE; and women's health care products including
PREMARIN, PREMPRO, PREMPHASE, and ALESSE (marketed as LOETTE
internationally). The Company manufactures these products in the
United States and Puerto Rico, and in 16 foreign countries.
Accounting for more than 10% of consolidated net revenue in 2003, 2002 and 2001 were sales of neuroscience therapies of $2.923 billion, $2.290 billion and $1.775 billion, respectively. Neuroscience therapies include 2003, 2002 and 2001 sales related to the EFFEXOR family of products of $2.712 billion, $2.072 billion and $1.542 billion, respectively. In addition, sales of women's health care products totaling $1.865 billion, $2.456 billion and $2.777 billion accounted for more than 10% of consolidated net revenue in 2003, 2002 and 2001, respectively, which include sales of the PREMARIN family products of $1.275 billion, $1.880 billion and $2.074 billion, respectively. Sales of gastroenterology drugs of $1.857 billion, which include sales of $1.493 billion related to PROTONIX also exceeded 10% of consolidated net revenue in 2003. Except as noted above, no other single pharmaceutical product or category of products accounted for more than 10% of consolidated net revenue in 2003, 2002 or 2001.
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 including ROBITUSSIN, DIMETAPP and ALAVERT; nutritional supplements including CENTRUM products, CALTRATE and SOLGAR products; and hemorrhoidal, asthma and other relief items including CHAPSTICK. 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 nine foreign countries.
No single Consumer Healthcare product or category of products accounted for more than 10% of consolidated net revenue in 2003, 2002 or 2001.
ANIMAL HEALTH SEGMENT
The Animal Health segment manufactures, distributes and sells animal biological and pharmaceutical products. Principal Animal Health product categories include pharmaceuticals, vaccines including WEST NILE - Innovator and parasite control including CYDECTIN, and growth implants. These products are sold to wholesalers, veterinarians and other animal health care providers. The Company manufactures these products in the United States and in seven foreign countries.
No single Animal Health product or category of products accounted for more than 10% of consolidated net revenue in 2003, 2002 or 2001.
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, gains relating to Immunex/Amgen common stock transactions, certain litigation provisions, including the REDUX and PONDIMIN litigation charges, special charges and other miscellaneous items. See Note 15 of the Notes to Consolidated Financial Statements in the Company's 2003 Annual Report to Stockholders for Corporate segment information, as well as additional disclosure relating to certain significant items listed above.
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 are produced by a single third-party manufacturer, and certain raw materials for REFACTO, RAPAMUNE, ZOTON, ZOSYN and oral contraceptives are sourced from sole third-party suppliers.
Patent protection is, in the aggregate, considered to be of material importance in the Company's marketing of pharmaceutical products in the United States and in most major foreign markets. Patents may cover 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, 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 the Company's 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 has patent protection until at least 2014. The anti-depressants EFFEXOR and EFFEXOR XR have patent protection until at least 2008. (Refer herein for a discussion of a lawsuit filed by the Company against Teva Pharmaceuticals USA ("Teva") in connection with Teva's filing of an Abbreviated New Drug Application ("ANDA") 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 7-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, has patent protection until at least 2010. PROHEART and CYDECTIN, the Company's Animal Health parasite control products, have patent protection until at least 2007 and patent extension has been applied for which would extend exclusivity until 2012.
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, 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 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 administered by the World Trade Organization, 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.
The Company has filed a suit against 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 HCl is the
active ingredient used in EFFEXOR XR. This matter is more fully described in Item 3. Legal Proceedings, which discussion is incorporated herein by reference.
Aventis Pharma Deutschland ("Aventis") and King Pharmaceuticals, Inc. ("King") have filed suit against Cobalt Pharmaceuticals ("Cobalt"). The amended complaint alleges 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 two Aventis patents. 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 operation.
Sales of Consumer Healthcare products are affected by seasonal demand for cough/cold products and, as a result, second quarter results for these products tend to be lower than results in other quarters.
PHARMACEUTICALS SEGMENT
The Company operates in the highly competitive pharmaceutical industry. The Company has many major multinational competitors and numerous smaller U.S. and foreign competitors. Based on net revenue, the Company believes it ranks within the top 10 competitors in the global pharmaceutical industry.
The Company's competitive position is affected by many factors including prices; costs and resources available to develop, enhance and promote products; customer acceptance; product quality and efficacy; patent protection; development of alternative therapies by competitors; scientific and technological advances; the availability of generic substitutes; and governmental actions affecting drug importation, pricing and generic substitutes. In the United States, the growth of managed care organizations, such as health maintenance organizations and pharmaceutical benefit management companies, has resulted in increased competitive pressures. Moreover, the continued growth of generic substitutes is further promoted by legislation, regulation and various incentives enacted and promulgated in both the public and private sectors.
PREMARIN, the Company's principal conjugated estrogens product manufactured from pregnant mare's urine, and related products PREMPRO and PREMPHASE (which are single tablet combinations of the conjugated estrogens in PREMARIN and the progestin
medroxyprogesterone acetate) are the leaders in their categories and contribute significantly to net revenue and results of operations. PREMARIN's natural composition is not subject to patent protection (although PREMPRO has patent protection). PREMARIN, PREMPRO and PREMPHASE are indicated for the treatment of certain menopausal symptoms. They also are approved for the prevention of osteoporosis, a condition involving a loss of bone mass in postmenopausal women. Their use for that purpose in women without symptoms should be limited to cases where non-hormonal treatments have been seriously considered and rejected. 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 many forms of the same indications, also have been introduced. Some companies have also 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. One other company has announced that it has applied for FDA approval of a generic version of PREMARIN derived from the same natural source. Following a bench trial in November 2002, a federal court found, in an order issued on October 2, 2003, that the company which had developed the estrogens to be used in this product, Natural Biologics, Inc., had misappropriated certain of the Company's trade secrets relating to the manufacture of PREMARIN. The court has entered a permanent injunction that, inter alia, bars Natural Biologics, Inc. from using the misappropriated trade secrets and from engaging in the research, development, production or manufacture of estrogens from urine. Wyeth v. Natural Biologics, Inc., et al., No. 98-2469 (JNE/JGL), U.S.D.C., D. Minn. Natural Biologics, Inc. has filed an appeal from the court's injunction. The Company cannot predict the timing or outcome of the appeal or of any other effort by any other company along these lines.
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 significantly increased in 2003. Market demand has continued 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.
Worldwide demand for PREVNAR continues to grow. The manufacturing-related constraints that led to backorders throughout 2002 were resolved early in 2003. By April 2003, demand in the United States and other markets where PREVNAR was available was met, and this continued through October 2003. More than 20 million doses of PREVNAR were produced in 2003. However, a late 2003 shutdown of the filling lines at the Company's Pearl River, New York facility was extended by six weeks beyond the original plan. As a result of this shutdown and other manufacturing issues, delays in product availability are anticipated throughout the first half of 2004 in all markets. As a result of delays in product availability, the Centers for Disease Control and Prevention and the European Agency for the Evaluation of Medicinal Products have issued interim dosing recommendations to reduce usage during the supply-constrained period. Capacity should be enhanced throughout 2004 due to internal improvements and third-party capacity. Although production issues are not yet fully resolved, the Company believes 2004 production will exceed the 2003 level.
Refer to "Patents and Trademarks" section, herein for discussion of ANDA filings being submitted by generic competitors relating to EFFEXOR XR and ALTACE.
CONSUMER HEALTHCARE SEGMENT
The Consumer Healthcare business has many competitors. Based on net sales, the Company believes it ranks within the top five major competitors in the consumer health care industry. The Company's competitive position is affected by several factors including resources available to develop, enhance and promote products; customer acceptance; product quality; development of alternative therapies by competitors; growth of generic store brands; and scientific and technological advances.
ANIMAL HEALTH SEGMENT
The Company competes with many major multinational competitors and numerous other producers of animal health products worldwide. Based on net revenue, the Company believes it ranks within the top five competitors in the worldwide animal health marketplace.
Important competitive factors include price and cost effectiveness; development of new products and processes; customer acceptance; quality and efficacy; patent protection; innovation; development of new products by competitors; scientific and technological advances; and effective promotion to veterinary professionals and consumers.
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 2003, several major collaborative research and development arrangements were initiated or continued with other pharmaceutical and biotechnology companies. Research and development expenditures totaled approximately $2.094 billion in 2003, $2.080 billion in 2002 and $1.870 billion in 2001
with approximately 93%, 93% and 94% of these expenditures in the Pharmaceuticals segment in 2003, 2002 and 2001, respectively.
At December 31, 2003, the Company's significant new product opportunities included two New Drug Applications, one preliminary market approval application and 12 biologics license applications filed with the FDA for review, and 60 active Investigational New Drug Applications. Additionally, the Company has filed six Supplemental Drug Applications seeking approval for significant new uses of existing products.
During 2003, FDA approval was granted for ENBREL to reduce the signs and symptoms in patients with active ankylosing spondylitis ("AS"); in early 2004, the European Commission also approved ENBREL for adults with severe active AS. Additionally, ENBREL received FDA approval for an expanded indication to inhibit the progression of structural damage of active arthritis in patients with psoriatic arthritis and an indication to improve physical functions in patients with moderately-to-severely active rheumatoid arthritis. Finally, in August 2003 the FDA approved a once-weekly dosing schedule for ENBREL.
New low-dose formulations of PREMPRO gained FDA approval in March and June 2003 and also received approval for expanded uses to include the prevention of postmenopausal osteoporosis. In April and July 2003, the FDA approved a new low-dose strength of PREMARIN for treatment of vasomotor symptoms and postmenopausal osteoporosis. Also in April, the FDA approved RAPAMUNE for a new indication that provides for withdrawal of cyclosporine from the immunosuppressive regimen two to four months after renal transplantation in patients at low to moderate immunologic risk.
During 2003, the Company launched over-the-counter products
ROBITUSSIN COUGHGELS and CHILDREN'S DIMETAPP ND NON-DROWSY ALLERGY.
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 U.S. Department of Agriculture regulates the Company's domestic animal vaccine products. The FDA's enforcement powers include the imposition of criminal and civil sanctions against companies, including seizures of regulated products, and criminal sanctions against individuals. The FDA's enforcement powers also include its inspection of the numerous facilities operated by the Company. To facilitate compliance, the Company from time to time may institute voluntary compliance actions such as product recalls when it believes it is appropriate to do so. In addition, many states have similar regulatory requirements. Most of the Company's pharmaceutical products, and an
increasing number of its consumer health care products, are regulated under the FDA's new drug approval processes, which mandate pre-market approval of all new drugs. Such processes require extensive time, testing and documentation for approval, resulting in significant costs for new product introductions. The Company's U.S. Pharmaceuticals 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 the 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 Pharmaceuticals 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. 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. The consent decree allows the continued manufacture of all of the products that the Company intends to manufacture at its Marietta, Pennsylvania facility, as well as the Company's Pearl River, New York facility, subject to review by independent consultants of manufacturing records prior to distribution of individual lots. In addition, as provided in the consent decree, an expert consultant has conducted a comprehensive inspection of the Marietta and Pearl River facilities and the Company has identified various actions to address the consultant's observations. The Company is in an ongoing process of completing these actions and obtaining verification of the Company's actions by the expert consultant. The verification process is subject to review by the FDA.
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. The Company cannot predict whether future health care initiatives will be adopted or the extent to which the Company's business may be affected by these initiatives or other potential future legislative or regulatory developments.
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 (now known as Wyeth Holdings Corporation) ("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 2003 Annual Report to Stockholders and is incorporated herein by reference.
At December 31, 2003, the Company had 52,385 employees worldwide, with 28,500 employed in the United States including Puerto Rico. Approximately 15% of the Company's worldwide employees are represented by various collective bargaining groups. Relations with most organized labor groups remain relatively stable.
Financial information about U.S. and international operations for each of the three years ended December 31, 2003 is set forth in Note 15 of the Notes to Consolidated Financial Statements in the Company's 2003 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 2003 amounted to 40% of the Company's total worldwide net revenue.
The Company's international businesses are subject to risks of currency fluctuations, governmental actions and other governmental proceedings, which are inherent in conducting business outside of the United States. The Company does not regard these factors as deterrents to maintaining or expanding its non-U.S. operations. Additional information about international operations is set forth under the caption "Quantitative and Qualitative Disclosures about Market Risk" in Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's 2003 Annual Report to Stockholders and is incorporated herein by reference.
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 ("SEC") on the Company's Internet website at www.wyeth.com. Copies are also available, without charge, by contacting Wyeth Investor Relations at (973) 660-5000.
The Company's corporate headquarters and the headquarters of its Consumer Healthcare business are located in Madison, New Jersey. The Company's U.S. and international Pharmaceuticals operations are headquartered in owned facilities in Collegeville and Great Valley, Pennsylvania. 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 17 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, 2003, 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 (P), Consumer Healthcare (C) and Animal Health (A):
United States: Reportable Segment -------------- ------------------ Charles City, Iowa (M) (A) Fort Dodge, Iowa (M, R) (A) Andover, Massachusetts (M, R) (P) Cambridge, Massachusetts (R) (P) Princeton, New Jersey (R) (P) Chazy, New York (R) (P) Pearl River, New York (M, R) (P) (C) Rouses Point, New York (M, R) (P) (C) Sanford, North Carolina (M, R) (P) Collegeville, Pennsylvania (R) (P) |
United States: Reportable Segment -------------- ------------------ Carolina, Puerto Rico (M) (P) Guayama, Puerto Rico (M) (P) (C) Richmond, Virginia (M, R) (P) (C) International: Reportable Segment -------------- ------------------ St. Laurent, Canada (M, R) (P) (C) Suzhou, China (M) (P) (C) Havant, England (M, R) (P) (C) Ghatkopar, India (M) (P) Askeaton, Ireland (M, R) (P) Newbridge, Ireland (M) (P) Catania, Italy (M, R) (P) (A) Shiki, Japan (M, R) (P) Vallejo, Mexico (M) (P) (C) Cabuyao, Philippines (M) (P) Tuas, Singapore (M) (P) Gerona, Spain (M, R) (A) Hsin-Chu Hsien, Taiwan (M) (P) (C) (A) |
The Company has pharmaceutical manufacturing facilities under construction in Grange Castle, Ireland. Further, the Company is working to support larger scale manufacturing in Sanford, North Carolina, Guayama, Puerto Rico and Newbridge, Ireland.
The Company believes its properties to be adequately maintained and suitable for their intended use. The facilities generally have sufficient capacity for existing needs and expected near-term growth and expansion projects are undertaken as necessary to meet future needs.
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.
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 covered all claims arising out of the use of REDUX or PONDIMIN, except for claims of primary pulmonary hypertension ("PPH"), and was 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.
As originally designed, the settlement was comprised of two settlement funds. Fund A (with a value at the time of settlement of $1 billion, plus $200.0 million for legal fees) 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 billion) 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. Payments into the fund may continue, if necessary, until 2018.
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 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 is now available to pay Fund B claims. The merger of the two funds took place in January 2003.
Diet drug users choosing to opt out of the settlement class were required to do so by March 30, 2000. The settlement agreement also gave class members who participate in the settlement the opportunity to opt out of the settlement at two later stages, although they remain members of the class and there are restrictions on the nature of claims they can pursue outside of the settlement. Class members who were diagnosed with certain levels of valvular regurgitation within a specified time frame could opt out following their diagnosis and prior to receiving any further benefits under the settlement ("Intermediate opt outs"). Class members who were 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. The Sixth Amendment to the settlement agreement also gave certain class members an additional opt out right, which is discussed below.
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. 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) was added to the security fund. In February 2003, as required by the amendment to the settlement agreement merging the two settlement funds discussed above, an additional $535.2 million was added by the Company to the security fund bringing the total amount in the security fund to $940.2 million at December 31, 2003. The amounts in the security fund are owned by the Company and will earn interest income for the Company while residing in the security fund. The Company will be required to deposit an additional $180.0 million in the security fund if the Company's credit rating, as reported by both Moody's and Standard & Poor's, falls below investment grade.
The Company recorded an initial litigation charge of $4.750 billion in connection with the REDUX and PONDIMIN litigation in 1999, an additional charge of $7.500 billion in 2000, a third litigation charge of $950.0 million in 2001, a fourth charge of $1.400 billion in 2002 and a fifth litigation charge of $2 billion in the 2003 third quarter. The remaining accrual at December 31, 2003 was $3.517 billion.
The number of individuals who have filed claims within the settlement that allege significant heart valve disease (known as "matrix" claims) has been higher than had been anticipated. The settlement agreement grants the Company access to claims data maintained by the settlement trust (the "Trust"). Based on its review of that data, the Company understands that, as of February 25, 2004, the Trust had recorded approximately 113,000 matrix-level claim forms. Approximately 28,400 of these forms were so deficient, incomplete or duplicative of other forms filed by the same claimant that, in the Company's view, it is unlikely that a significant number of these forms will result in further claims processing.
The Company's understanding of the status of the remaining approximately 84,600 forms, based on its analysis of data received from the Trust through February 25, 2004, is as follows. Approximately 12,240 of the matrix claims had been processed to completion, with those claims either paid (approximately 3,100 claims, with payments of $1.168 billion), denied (approximately 8,200) or withdrawn. Approximately 2,800 claims were in some stage of the 100% audit process ordered in late 2002 by the federal court overseeing the national settlement. Approximately 20,600 claims alleged conditions that, if true, would entitle the claimant to receive a matrix award; these claims had not yet entered the audit process. Another approximately 20,000 claims with similar allegations have been purportedly substantiated by physicians whose claims are now subject to the outcome of the Trust's Integrity Program, discussed below. Approximately 28,800 claim forms did not contain sufficient information even to assert a matrix claim, although some of those claim forms could be made complete by the submission of additional information and could therefore become eligible to proceed to audit in the future. The remaining approximately 160 claims were in the data entry process and could not be assessed.
In addition to the approximately 113,000 matrix claims filed as of February 25, 2004, additional matrix claims may be filed through 2015 by class members who develop a matrix condition in the future if they have registered with the Trust by May 3, 2003, and have demonstrated FDA+ regurgitation (i.e., mild or greater aortic regurgitation, or moderate or greater mitral regurgitation) or mild mitral regurgitation on an echocardiogram conducted after diet drug use and obtained either outside of the Trust by January 3, 2003 or within the Trust's screening program.
The Company's understanding, based on data received from the Trust through February 25, 2004, is that audits had produced preliminary or final results on 3,224 of the claims that had begun the 100% audit process since its inception. Of these, 1,156 were found to be payable at the amount claimed and 70 were found to be payable at a lower amount than had been claimed. The remaining claims were found ineligible for a matrix payment, although the claimants may appeal that determination to the federal court overseeing the settlement. Because it remains unclear whether the claims audited to date are a representative sample of the claims that might proceed to audit, the Company cannot predict the ultimate outcome of the audit process.
Both the volume and types of claims seeking matrix benefits received by the Trust to date differ materially from the epidemiological projections on which the court's approval of the settlement agreement was predicated. Based upon data received from the Trust, approximately 94% of the 20,700 matrix claimants who allege conditions that, if true, would entitle them to an award (and approximately 99% of the approximately 20,000 claims certified by physicians currently subject to the Trust's Integrity Program) seek an award under Level II of the five-level settlement matrix. (Level II covers claims for moderate or severe mitral or aortic valve regurgitation with complicating factors; depending upon the claimant's age at the time of diagnosis, and assuming no factors are present that would place the claim on one of the settlement's reduced payment matrices, awards under Level II ranged from $192,111 to $643,500 on the settlement agreement's payment matrix.)
An ongoing investigation which the Company understands is being conducted by counsel for the Trust and discovery conducted to date by the Company in connection with certain Intermediate and Back-End opt out cases (brought by some of the same lawyers who have filed these Level II claims and supported by some of the same cardiologists who have certified the Level II claims) cast substantial doubt on the merits of many of these matrix claims and their eligibility for a matrix payment from the Trust. Therefore, in addition to the 100% audit process, the Trust has embarked upon an Integrity Program, which is designed to protect the Trust from paying illegitimate or fraudulent claims.
Pursuant to the Integrity Program, the Trust has required additional information concerning matrix claims purportedly substantiated by 17 identified physicians in order to determine whether to permit those claims to proceed to audit. Based upon data obtained from the Trust, the Company believes that approximately 20,000 matrix claims were purportedly substantiated by the 17 physicians covered by the Integrity Program as of February 25, 2004. It is the Company's understanding that additional claims substantiated by additional physicians might be subjected to the same requirements of the Integrity Program in the future. As an initial step in the integrity review process, each of the identified physicians has been asked to complete a comprehensive questionnaire regarding each claim and the method by which the physician reached the conclusion that it was valid. The ultimate disposition of any or all claims that are subject to the Integrity Program is at this time uncertain. Counsel for certain claimants affected by the program have challenged the Trust's authority to implement the Integrity Program and to require completion of the questionnaire before determining whether to permit those claims to proceed to audit. While that motion was denied by the court, additional challenges to the Integrity Program are possible.
The Trust has also adopted a program to prioritize the handling of those matrix claims that it believes are least likely to be illegitimate. Under the program, claims under Levels III, IV and V will be processed and audited on an expedited basis. (Level III covers claims for heart valve disease requiring surgery to repair or replace the valve, or conditions of equal severity. Levels IV and V cover complications from, or more serious conditions than, heart valve surgery.) The program will also prioritize the auditing of, inter alia, Level I claims, all claims filed by a claimant without counsel (i.e., on a pro se basis) and Level II claims substantiated by physicians who have attested to fewer than 20 matrix claims.
The Trust has indicated that one of the goals of the Integrity Program is to recoup funds from those entities that caused the Trust to pay illegitimate claims and the Trust has filed several lawsuits to that end. The Trust has filed a suit alleging violations of the Racketeer Influenced and Corrupt Organizations ("RICO") Act against a Kansas City cardiologist who attested under oath to the validity of over 2,500 matrix claims. The suit alleges that the cardiologist intentionally engaged in a pattern of racketeering activity to defraud the Trust. The Trust has also filed a lawsuit against a New York cardiologist who attested under oath to the validity of 83 matrix claims, alleging that the cardiologist engaged in, among other things, misrepresentation, fraud, conspiracy to commit fraud, and gross negligence.
Finally, the Trust has filed a number of motions directed at the conduct of the companies that performed the echocardiograms on which many matrix claims are based. In a pair of motions related to the activities of a company known as EchoMotion, the Trust has asked the court to stay payment of claims already audited and found payable in whole or in part if the echocardiogram was performed by EchoMotion and to disqualify all echocardiograms by EchoMotion that have been used to support matrix claims that have not yet been audited. In addition, the Trust has filed a motion seeking discovery of 14 specific companies whose echocardiograms support a large number of claims to determine whether their practices violate the settlement. The Trust has also sent letters to matrix claimants' lawyers requesting information about additional unidentified companies and has asked the Court's permission to subpoena the claimants' lawyers for this information if necessary. The Company has joined in certain of these motions. The Company does not currently have information about the number of matrix claims potentially affected by these motions.
The Company continues to monitor the progress of the Trust's audit process and its Integrity Program and has brought and will continue to bring to the attention of the Trust and the court overseeing the settlement any additional irregularities that it uncovers in the matrix claim process. Even if substantial progress is made by the Trust, through its Integrity Program or other means, in reducing the number of illegitimate matrix claims, a significant number of the claims which proceed to audit might be interpreted as satisfying the matrix eligibility criteria, notwithstanding the possibility that the claimants may not in fact have serious heart valve disease. If so, matrix claims found eligible for payment after audit may cause total payments to exceed the $3.750 billion cap of the settlement fund.
Should the settlement fund be exhausted, most of the matrix claimants who filed their matrix claim on or before May 3, 2003 and who pass the audit process at a time when there are insufficient funds to pay their claim may pursue an additional opt out right created by the Sixth Amendment to the settlement agreement, unless the Company first elects, in its sole discretion, to pay the matrix benefit after audit. Sixth Amendment opt out claimants may then sue the Company in the tort system, subject to the settlement's limitations on such claims. In addition to the limitations on all Intermediate and Back-End opt outs (such as the prohibition on seeking punitive damages and the requirement that the claimant sue only on the valve condition that gave rise to the claim), a Sixth Amendment opt out may not sue any defendant other than the Company and may not join his or her claim with the claim of any other opt out. The Company cannot predict the ultimate number of individuals who might be in a position to elect a Sixth Amendment opt out or who may in fact elect to do so, but that number could be substantial.
If the settlement fund were to be exhausted, some individuals who registered to participate in the settlement by May 3, 2003, who had demonstrated either FDA+ level regurgitation or mild mitral regurgitation on an echocardiogram completed after diet drug use and conducted either outside of the settlement prior to January 3, 2003 or within the settlement's screening program, and who subsequently develop (at any time before the end of 2015) a valvular condition that would qualify for a matrix payment might elect to pursue a Back-End opt out. Such individuals may pursue a Back-End opt out within 120 days of the date on which they first discover or should have discovered their matrix condition. The Company cannot predict the ultimate number of individuals who may be
in a position to elect a Back-End opt out or who may in fact elect to do so, but that number could also be substantial.
The Company's current understanding is that approximately 76,000 Intermediate opt out forms were submitted by May 3, 2003, the applicable deadline for most class members (other than qualified class members receiving echocardiograms through the Trust after January 3, 2003, who may exercise Intermediate opt out rights within 120 days after the date of their echocardiogram). The number of Back-End opt out forms received as of February 25, 2004 is estimated to be approximately 20,000, although certain additional class members may elect to exercise Back-End opt out rights in the future (under the same procedure as described above) even if the settlement fund is not exhausted. After eliminating forms that are duplicative of other filings, forms that are filed on behalf of individuals who have already either received payments from the Trust or settlements from the Company, and forms that are otherwise invalid on their face, it appears that approximately 78,000 individuals had filed Intermediate or Back-End opt out forms as of February 25, 2004.
Purported Intermediate or Back-End opt outs (as well as Sixth Amendment opt outs) who meet the settlement's medical eligibility requirements may pursue lawsuits against the Company, but must prove all elements of their claims - including liability, causation and damages - without relying on verdicts, judgments or factual findings made in other lawsuits. They also may not seek or recover punitive, exemplary or multiple damages and may sue only for the valvular condition giving rise to their opt out right. To effectuate these provisions of the settlement, the federal court overseeing the settlement has issued orders limiting the evidence that may be used by plaintiffs in such cases. Those orders, however, are being challenged on appeal. The appeal has been fully briefed and was heard by a panel of the U.S. Court of Appeals for the Third Circuit in December 2003. The panel has asked for supplemental briefing, which has also been filed. The Company cannot predict the timing or outcome of the appeal.
In addition to the specific matters discussed herein, the federal court overseeing the national settlement has issued a number of rulings concerning the processing of matrix claims and the rights of, and limitations placed on, class members by the terms of the settlement. Several of those rulings are being challenged on appeal. Certain class members have also filed a number of motions, as well as a lawsuit, attacking both the binding effect of the settlement and the administration of the Trust. The Company cannot predict the outcome of any of these motions or of the lawsuit.
As of February 25, 2004, approximately 28,000 individuals who had filed Intermediate or Back-End opt out forms had filed lawsuits. The claims of most of these 28,000 plaintiffs are now pending in federal courts and have been or will be transferred for pretrial proceedings to the federal court overseeing the national settlement. The Company expects to challenge vigorously all Intermediate and Back-End opt out claims of questionable validity or medical eligibility and the number of such claims that meet the settlement's opt out criteria will not be known for some time. As a result, the Company cannot predict the ultimate number of purported Intermediate or Back-End opt outs that will satisfy the settlement's opt out requirements, but that number could be substantial.
As to those opt outs who are found eligible to pursue a lawsuit, the Company also intends to vigorously defend these cases.
The Company has resolved the claims of all but a small percentage of the "initial" opt outs (i.e., those individuals who exercised their right to opt out of the settlement class) and continues to work toward resolving the rest. It also continues to work toward resolving the claims of individuals who allege that they have developed PPH as a result of their use of the diet drugs. The Company intends vigorously to defend those initial opt out and PPH cases that cannot be resolved prior to trial.
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., New Mexico, an initial opt out case, rendered a verdict in favor of the Company. Judgment was subsequently entered in favor of the Company, and the plaintiff has filed an appeal.
On November 6, 2003, a jury in the District Court of Texas, 60th Judicial District, Jefferson County, returned a verdict in favor of the plaintiff in the case of Hayes v. American Home Products, et al., No. B-165,374, the first Intermediate opt out case to go to trial. The jury in the Hayes case awarded the plaintiff $1.36 million in compensatory damages for injuries allegedly sustained by the plaintiff due to her use of REDUX and PONDIMIN. The court subsequently entered judgment in the amount of $588,480, based upon a filing by the plaintiff conceding there was insufficient evidence to support the jury's award of future medical expenses. The Company has filed post-trial motions for judgment notwithstanding the verdict or for a new trial and intends to pursue an appeal, if necessary.
On November 26, 2003, a jury in Georgia Superior Court, Fulton County, Atlanta Judicial Circuit, returned a verdict in favor of Wyeth in the case of Eichmiller et al. v. American Home Products, et al., Civ. A. No. 2002-CV-52077, the first Back-End opt out case to go to trial. Judgment was subsequently entered in favor of the Company, and the plaintiff has filed an appeal.
As noted above, in 2003, the Company increased its reserves in connection with the REDUX and PONDIMIN diet drug matters by $2 billion, bringing the total of the charges taken to date to $16.600 billion. The $3.517 billion reserve at December 31, 2003 represents management's best estimate of the minimum aggregate amount anticipated to cover payments in connection with the Trust, up to its cap, initial opt outs, PPH claims, Intermediate, Back-End or Sixth Amendment opt outs (collectively, the "downstream" opt outs), and the Company's legal fees related to the diet drug litigation. Due to its inability to estimate the ultimate number of valid downstream opt outs, and the merits and value of their claims, as well as the inherent uncertainty surrounding any litigation, the Company is unable to estimate the amount of any additional financial exposure represented by the downstream opt out litigation. However, the amount of financial exposure beyond that which has been recorded could be significant.
The Company intends to defend itself vigorously in the diet drug litigation and believes it can marshal significant resources and legal defenses to limit its ultimate liability.
However, in light of the circumstances discussed above, including the unknown number of valid matrix claims and the unknown number and merits of valid downstream opt outs, it is not possible to predict the ultimate liability of the Company in connection with its diet drug legal proceedings. It is therefore not possible to predict whether, and if so when, such proceedings will have a material adverse effect on the Company's financial condition, results of operations and/or cash flows and whether cash flows from operating activities and existing and prospective financing resources will be adequate to fund the Company's operations, pay all liabilities related to the diet drug litigation, pay dividends, maintain the ongoing programs of capital expenditures, and repay both the principal and interest on its outstanding obligations without the disposition of significant strategic core assets and/or reductions in certain cash outflows.
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 above MDL). Eighteen plaintiffs appealed this judgment to the United States Court of Appeals for the Fifth Circuit, which has now affirmed Judge Schell's ruling.
The Louisiana Court of Appeals for the Fourth Circuit affirmed a lower court's certification of a statewide class of Louisiana NORPLANT users and the Louisiana Supreme Court has refused to hear a further appeal. Davis v. American Home Products Corporation, No. CDC 94-11684, Orleans Parish. The matter has returned to the trial court level for further proceedings. The Company continues to believe that it has compelling 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 therapy ("HT") 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 arm of the study relating to the Company's PREMARIN conjugated estrogens product continued through March 2004 when the National Institutes of Health ("NIH") announced preliminary findings from the estrogen-only arm of the WHI study
and that it had decided to stop the study. NIH concluded that estrogen alone does not appear to affect (either increase or decrease) coronary heart disease and did not increase the risk of breast cancer. In addition, NIH found an association with a decrease in the risk of hip fracture and an increased risk of stroke similar to the increase seen in the HT subset of the WHI study. NIH also stated that analysis of preliminary data from the separate Women's Health Initiative Memory Study ("WHIMS") showed a trend toward increased risk of probable dementia and/or mild cognitive impairment in women age 65 and older.
The Company is currently defending twenty-three class action lawsuits relating to PREMPRO: Albertson, et al. v. Wyeth, No. 002944, Ct. Comm. Pleas, Phil. Cty., PA; Alexander, et al. v. Wyeth, No. 03-WM-0160, U.S.D.C., Col.; Brown, et al. v. Wyeth, No. CV03-0138 S, U.S.D.C., W.D. La.; Cook, et al. v. Wyeth, No. 4-02-CV-00529WRW, U.S.D.C., E.D. Ark.; Crosby, et al. v. Wyeth, No. 03C2359, 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.; Favela et al. v. Wyeth, No. 02-5893DT, U.S.D.C., C.D. Cal.; Gallo, et al. v. Wyeth, No. 02857, Ct. Comm. Pleas, Phil. Cty., PA; Jenkins, et al. v. Wyeth, No. 03-2250, U.S.D.C., E.D., Pa.; Katzman, et al. v. Wyeth, No. L-1285-03, Sup. Ct., Morris Cty., NJ; Koenig, et al. v. Wyeth, No. 02-18165 CA 27, U.S.D.C., S.D. Fla.; Krueger, et al. v. Wyeth, Inc., No. 03 CV 2496, U.S.D.C., S.D. Cal.; Krznaric, et al. v. Wyeth, No. EDCV 02-953 VAP SGL, U.S.D.C., C.D. Ga.; Kuhn, et al. v. Wyeth, No. 02C4970, Cir. Ct., Brooke Cty., WV; Leone, et al. v. Wyeth, No. 03CV0588, U.S.D.C., S.D., NY; Lewers, et al. v. Wyeth, No. 02C 4970, U.S.D.C., N.D. Ill.; Moradkhani, et al. v. Wyeth, No. LACV03-7425, U.S.D.C., C.D., Ca.; Paul, et al. v. Wyeth, No. 03-2-17002-0 SEA, Super. Ct., King Cty., WA; Phelps, et al. v. Wyeth, No. 03-80063, U.S.D.C., S.D., Fla.; Phillips, et al. v. Wyeth, No. CV-03-005, Cir. Ct., Jefferson Cty., AL; Slater, et al. v. Wyeth, No. 03-4016-CV-C-NKL, U.S.D.C., W.D. Mo.; and Szabo, et al. v. Wyeth, No. SA02-757, U.S.D.C., C.D. Cal.
Plaintiffs in thirteen of the cases (Alexander, Crosby, Cyrus,
Dooley, Favela, Krueger, Krznaric, Leone, Lewers, Moradkhani,
Phelps, Slater, and Szabo) 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) medical monitoring expenses and 3) 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 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 Brown and Jenkins cases seek similar
relief on behalf of putative classes of Louisiana users of PREMPRO.
Plaintiffs in the Cook, Katzman, Koenig, Kuhn, Paul, and Phillips
cases are seeking similar relief on behalf of putative classes of
Arkansas, New Jersey, Florida, West Virginia, Washington, and
Alabama users of PREMPRO, respectively. There are no class actions
pending relating to PREMARIN.
In addition to the class actions, the Company is defending approximately 300 individual actions and approximately 55 multi-plaintiff actions in various courts for personal injuries allegedly arising out of the use of PREMARIN or PREMPRO, including breast cancer, stroke and heart disease. Together, these cases assert claims on behalf of approximately 800 women allegedly injured by PREMPRO or PREMARIN.
The federal Judicial Panel on Multidistrict Litigation ("JPML") has ordered that all federal PREMPRO cases (including the federal putative class actions described above) 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. Since entry of that order, the JPML has also begun transferring cases involving PREMARIN to the same court.
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 allegedly 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 six individual lawsuits pending involving approximately 150 former DURACT users alleging various injuries, including kidney failure, hepatitis, liver transplant and death and one economic damages case involving breach of contract and unjust enrichment claims.
The Company is a defendant in three lawsuits in which plaintiffs purport to represent statewide classes 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 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 health care 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. Similar actions brought in Alabama, California, New Jersey, New York, 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 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. Plaintiffs have indicated that they intend to dismiss the lawsuit, but have not yet done so. 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 Benner v. AHPC, et al., 99 Civ. 4785 (WHP), U.S.D.C., S.D.N.Y., the putative New York class action, and plaintiff subsequently dismissed the case without prejudice.
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 is
currently a named defendant in approximately 800 lawsuits (on
behalf of a total of approximately 1,550 plaintiffs) filed in
federal and state courts throughout the United States, including
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). Three of the approximately 800 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 two 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. Guinta, et
al. v. American Home Products Corporation, No. MID-L-010277-01,
Super. Ct., Middlesex Cty., NJ; 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 three cases. In every instance to date in which
class certification has been decided in a PPA case (in 15 cases
in federal and state courts), certification has been denied. In
one putative non-personal injury class action where class
certification has been denied, the plaintiffs have filed a
petition for permission to appeal, which is still pending.
Twenty-two of the non-class personal injury PPA cases are
currently scheduled for trial during 2004.
The Company has been served with approximately 350 lawsuits, ten of which are putative class actions, alleging that the cumulative effect of thimerosal, a preservative used in certain vaccines manufactured and distributed by the Company as well as by other vaccine manufacturers, causes severe neurological damage, including autism in children. The class actions 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 children 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 generally files 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. Nineteen claimants who have not elected to participate in the Omnibus Autism Proceeding have filed lawsuits against the Company following the expiration of the 240-day period. Approximately 260 other claimants are eligible to withdraw, but have not as yet done so.
In addition to the claims brought by or on behalf of children allegedly injured by exposure to thimerosal, certain of the approximately 350 thimerosal cases have been brought by parents in their individual capacities, for loss of services and loss of 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.
Four thimerosal cases are currently scheduled for trial, with the first scheduled for spring 2005.
The Company is unable at the present time to estimate a range of potential exposure, if any, with respect to the NORPLANT, PREMPRO, PREMARIN, 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.
In September 2003, the U.S. Court of Appeals for the Federal Circuit affirmed the District Court's holding of liability that the University of Colorado employees are the sole inventors of the MATERNA formulation patent and the awards of $55.7 million in compensatory damages, together with $1.0 million in exemplary damages and post-judgment interest. The Company's petition for a rehearing en banc has been denied. University of Colorado et al. v. American Cyanamid Company, No. 93-K-1657, U.S.D.C., D.Col.
The Company paid the outstanding judgment and the accrued post-judgment interest in the amount of $58.13 million in January 2004. The Company has filed a petition to the U.S. Supreme Court seeking a writ of certiorari.
In September 2002, Israel Bio-Engineering Project ("IBEP") filed an action against Amgen, Immunex, the Company and one of the Company's subsidiaries (Docket No. C02-6880 ER, 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 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. 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. Yeda Research and Development Co., Ltd., the assignee of record of the patent, intervened in the case and filed a summary judgment motion seeking a ruling that it is the owner of the patent. On February 18, 2004, the Court granted summary judgment in favor of the defendants that IBEP does not own the `701 Patent. The Company expects IBEP to appeal. The Company intends, and Amgen has advised the Company that it intends, to vigorously oppose any appeal.
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 HC1 extended-release capsules infringes certain of the Company's patents. Venlafaxine HCl is the active ingredient used in EFFEXOR XR. 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. The Company intends to pursue the causes of actions under this litigation vigorously.
On March 14, 2003, Aventis Pharma Deutschland 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 composition of matter patents for ramipril, 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. 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. Aventis and King have also asserted infringement of an additional patent which expires in 2012 and which relates to a method of treating cardiac insufficiency with ramipril. Cobalt contends that the latter patent is invalid and/or not infringed. This patent is not subject to the 30-month stay provision of the Hatch-Waxman Act.
In August 2003, the U.S. Court of Appeals for the Federal Circuit affirmed the decision in favor of the Company by the U.S. District Court for the District of New Jersey that claims 1 and 3 of the Schering's patent claiming a metabolite of loratadine were invalid. Schering Corp. v. Geneva Pharmaceuticals, Inc., et al., Nos. 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 to market generic and over-the-counter loratadine products. Schering's petition seeking rehearing in the U.S. Court of Appeals for the Federal Circuit was denied on October 28, 2003. The deadline for Schering to seek certiorari from the U.S. Supreme Court passed without the filing of a petition. The decision in favor of the Company by the lower court remains unchanged.
Boston Scientific brought a patent infringement lawsuit against Cordis, seeking to enforce a patent on stent coatings against Cordis' CYPHER sirolimus drug-eluting stent, Boston Scientific Scimed v. Cordis, Docket No. 03-283, U.S.D.C., D. Del. In an earlier filed action, Cordis sued Boston Scientific seeking to enforce Cordis' stent architecture patent. In the respective actions, both Boston Scientific and Cordis sought a preliminary injunction against the other. On November 21, 2003, both motions for preliminary injunction were denied. Although the Company is not a party to this litigation, if Cordis were to be enjoined from selling the CYPHER Stent, the Company could lose licensing
income. Cordis has advised the Company that it intends to vigorously defend this litigation.
In November 2003, the U.S. Patent and Trademark Office Board of Patent Appeals ruled for the Company in the interference concerning a Genentech patent application and a Company patent, which claims a truncated Factor VIII protein, which expires in February 2010. Wyeth markets a truncated Factor VIII protein covered by the claims of the patents as REFACTO. The Board's decision in November 2003 concluded that the Company was the first to invent the claimed protein. Genentech and Bayer Healthcare LLC have challenged the Board's decision by filing an action pursuant to 35 U.S.C. Section 146 in the United States District Court for the District of Delaware on December 23, 2003.
The Company is currently 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". While not one of the eight cases, the Company was originally named as a defendant in a leading case entitled Citizens for Consumer Justice, et al. v. Abbott Laboratories, Inc., et al., No. OICV-12257, U.S.D.C., E.D. Mass. This case was a putative class action filed in December 2001 by several consumer public interest groups and named as defendants the Company and 27 other pharmaceutical manufacturers. Each of the companies was 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 alleged that it is often significantly higher than the actual price paid by the practitioner. Plaintiffs claimed 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 alleged that defendants have engaged in a civil conspiracy under the RICO Act and also alleged 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 was, however, subsequently named as a defendant, and is a party in eight similar cases, as described below. The federal JPML has ordered that these cases be transferred to the Honorable Patti Saris, U.S.D.J., in the United States District Court for the District of Massachusetts, the judge handling the Citizens for Consumer Justice case. Turner, et al. v. Wyeth, et al., No. C02-5006BZ, U.S.D.C., N.D. Cal. and Thompson v. Abbott Laboratories, Inc., et al., No. C-02-4450-B2, U.S.D.C., N.D. Cal. are 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. 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. (This matter was pending before Judge Saris, but has recently been remanded to Arizona state court.) International Union of Operating Engineers, et al. v. Astra Zeneca, et al., No. 03-3226 JEI, U.S.D.C., D.N.J., seeks relief similar to that requested in Swanston, but on behalf of a putative class of New Jersey residents. In addition, the Company is a defendant in four lawsuits instituted by governmental entities claiming injuries on behalf of both the governmental entity and its citizens: State of California, et al. v. Wyeth, et al., CV 03-2238, U.S.D.C., C.D., Cal.; County of Suffolk v. Wyeth, et al., No. CV 03 229, U.S.D.C., E.D.N.Y.;
County of Westchester v. Wyeth, et al., CV 03 6178,U.S.D.C., S.D.N.Y.; and County of Rockland v. Wyeth, et al., CV 03 7055, U.S.D.C., S.D.N.Y. All four of these governmental entity cases are now pending in federal court and are in the process of being transferred to Judge Saris pursuant to order of the JPML.
The SEC is conducting an investigation into allegations raised by a former employee of the Company in a lawsuit, which had claimed retaliation and constructive discharge. These allegations related, among other things, to certain compensation-related tax issues in several foreign jurisdictions. The Company has cooperated fully with the SEC and believes that these matters will not result in material liability to the Company.
In September 2000, Duramed Pharmaceuticals, Inc. (that has since
been acquired by Barr Laboratories, Inc. ("Barr")), a manufacturer
of a hormone therapy called Cenestin(R) filed a complaint against
the Company, alleging that the Company violated the antitrust laws
through the use of alleged exclusive contracts and "disguised"
exclusive contracts with managed care organizations and pharmacy
benefit managers concerning PREMARIN, Duramed Pharmaceuticals, Inc.
v. Wyeth Ayerst Labs., Inc., No. C 1 00 735, U.S.D.C., S.D. Oh.
The complaint also alleged that the Company attempted to monopolize
and monopolized the hormone therapy market in violation of the
antitrust laws through the use of such alleged exclusive contracts.
The Company and Barr settled this litigation in June 2003 and the
action has since been dismissed with prejudice.
Following the filing of the Duramed case, seven putative class actions were filed on behalf of "end-payors" (defined as the last persons and entities in the chain of distribution) and direct purchasers in Ohio and New Jersey federal district courts and in California state courts. These plaintiffs allege that the Company's alleged anticompetitive exclusive contracts with managed care organizations and pharmacy benefit managers violated federal and state antitrust laws and thereby allowed the Company to charge higher prices for PREMARIN than the Company would have charged in the absence of the alleged anticompetitive exclusive agreements. The complaints seek injunctive relief, damages and/or disgorgement of profits. Due to certain consolidations in the Ohio federal district court, three putative class actions and one certified class action are presently pending against the Company. One indirect-purchaser putative class action is pending in Ohio federal district court (Ferrell v. Wyeth-Ayerst Laboratories, Inc., Civ. A. No. C-1-01-447, U.S.D.C., S.D. Oh.), and two putative indirect-purchaser class actions are pending in California state courts (Blevins v. Wyeth-Ayerst Laboratories, Inc., et al., Case No. 324380, Cal. Sup. Ct., San Francisco Cty., Cal.; Sullivan v. Wyeth-Ayerst Laboratories, Inc., Case No. GIC796997, Cal. Sup. Ct., San Diego Cty., Cal.). In the Ferrell action, the plaintiffs' motion for class certification and the Company's motion to dismiss certain claims are pending and have yet to be addressed by the federal court. A certified class consisting of direct purchasers is currently pending in the Ohio federal district court, J.B.D.L. Corp. v. Wyeth-Ayerst Pharmaceuticals, Inc., Civ. A. No. C-1-01-704, U.S.D.C., S.D. Oh. Additionally, two direct purchasers of PREMARIN during the relevant time period (CVS Meridian, Inc. and Rite Aid Corporation) have opted out of the federal direct-purchaser class action and have filed a separate action, CVS Meridian, Inc. et al. v. Wyeth, Civil A. No. C-1-03-781, U.S.D.C., S.D. Oh. The Company believes that its contracts involving PREMARIN did not violate state or federal laws.
The Company has been named a defendant, along with other pharmaceutical manufacturers and other defendants, in lawsuits brought on behalf of retail pharmacies and retail drug and grocery chains, which were filed in various federal and state courts. These cases allege that the Company and other defendants provided discriminatory prices and allowances to managed care organizations and others in violation of the Robinson-Patman Act engaged in collusive conduct related to the alleged discriminatory pricing in violation of the Sherman Act and various state laws. Many of these cases have been settled by the Company, including a class action suit settled in 1996, In re Brand Name Prescription Drugs Antitrust Litigation, MDL 997, U.S.D.C., N.D. Ill. Three cases remain pending in federal court against the Company and other defendants. These cases involve plaintiffs that had opted out of the federal class action. The Company believes that its pricing practices did not violate antitrust or other laws and is defending the remaining cases.
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 20 potassium chloride product. These actions followed the issuance of an administrative complaint by the Federal Trade Commission, which challenged the Company's patent litigation settlement as anticompetitive. The Company settled with the FTC in April 2002. The settlement was not an admission of liability and was entered to avoid the costs and risks of litigation in light of the Company's previously announced exit from the oral generics business.
Generally, plaintiffs claim that a 1998 settlement agreement between the Company and Schering-Plough that resolved the patent infringement action unlawfully delayed the market entry of generic competition for K-Dur 20, 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.
The Company is aware of approximately forty-five such lawsuits that have been filed against the Company. Forty of these lawsuits are currently pending in federal court and have been consolidated or are being coordinated as part of multi-district federal litigation being conducted in the United States District Court for the District of New Jersey, In re K-Dur Antitrust Litigation, MDL 1419, U.S.D.C., D. N.J. One of these cases is brought as a purported class action on behalf of direct purchasers of K-Dur 20 nationwide. In forty-two cases, plaintiffs claim to be indirect purchasers or end-payors of K-Dur 20 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. One case is brought by the Commonwealth of Pennsylvania, through its Attorney General, on behalf of all departments, agencies and bureaus of the Commonwealth that purchased K-Dur 20 or reimbursed such purchases. One direct-purchaser action (representing approximately 23% of direct purchases) has been dismissed as a result of a settlement with the Company. The pending complaints seek various forms of relief under
federal and state laws, including damages in excess of $100 million, treble damages, restitution, disgorgement, declaratory and injunctive relief and attorneys' fees.
The Florida Attorney General's Office has initiated an inquiry into whether the Company's settlement with Schering-Plough violated Florida's antitrust laws. The Company has provided documents and information sought by the attorney general's office.
In 1999, the Brazilian Administrative Economic Defense Agency ("SDE") and local police authorities initiated investigations of Laboratories Wyeth-Whitehall Ltda. ("LWWL") 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 competition 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.
In 2003, the SDE concluded that LWWL and other pharmaceutical companies violated Brazilian competition laws by agreeing to refuse to sell products to wholesalers that distributed generic products. The SDE, however, recommended the imposition of the minimum penalty of 1% of LWWL's annual gross sales (approximately $1 million). This recommendation does not become final until the Economic Defense Administrative Council decides whether to adopt the recommendation and impose the suggested penalty. The other SDE administrative proceedings are still pending.
Following a 1999 application from certain drug wholesalers, the Competition Commission in South Africa filed a referral with the Competition Tribunal, which alleges that International Health Distributors ("IHD") violated South Africa's competition law. IHD, which is a joint venture of pharmaceutical companies (including Wyeth South Africa ("WSA")), provides distribution services for the joint venture members. The Commission's referral alleges that IHD and its pharmaceutical company shareholders have fixed various terms and conditions of sale in violation of South Africa's competition law. Certain wholesalers in South Africa also sued IHD and its members based on similar allegations.
In 2002, WSA reached an agreement to settle the claims alleged by the wholesalers. Additionally, WSA has recently reached a settlement with the Competition Commission that requires WSA to divest its shareholding interest in IHD and make a settlement payment to the Commission to cover a portion of the Commission's costs incurred in prosecuting this action. WSA's settlement with the Commission is not an admission of liability and was entered to avoid the various costs associated with litigation.
The United Kingdom's Competition Commission has commenced an investigation into the pricing and distribution practices of Fort Dodge Animal Health and other animal health suppliers in the United Kingdom. The inquiry focused on the rebate practices of
animal health suppliers, the price differential between certain animal health products sold in the United Kingdom, as opposed to other European countries, and the industry practice of selling to wholesalers but not directly to pharmacists or veterinarians. The inquiry also examined transfer pricing for animal health products.
In April 2003, the Competition Commission issued its report on the investigation into the supply of prescription-only veterinary medicines and concluded that three monopoly situations exist in the United Kingdom for such medicines. According to the report, one such monopoly situation arises from the failure of eight animal-health manufacturers, including Fort Dodge Animal Health U.K., to enable pharmacies to obtain supplies of prescription-only veterinary medicines on terms that would enable them to compete with veterinary surgeons. The report recommended two remedies for the situation, applicable to all of the relevant manufacturers, which are designed to allow the pharmacies to obtain prescription-only veterinary medicines on competitive terms with the veterinary surgeons. The U.K. Office of Fair Trading is in the process of drafting terms of orders to implement the Commission's remedies.
The Antitrust Division of the United States Department of Justice has impaneled a grand jury that has issued a subpoena to the Company in connection with the Division's 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.
On January 21, 2004, the Company was served with a subpoena from the U.S. Office of Personnel Management, Office of the Inspector General, requesting certain documents related to EFFEXOR. The subpoena requests documents related principally to educating or consulting with physicians, as well as marketing or promotion of EFFEXOR to physicians or pharmacists from January 1, 1997 to September 30, 2003. Other manufacturers of psychopharmacologic products have also received subpoenas. The Company intends to cooperate in responding to the subpoena.
As discussed in Item I (under the caption "Environmental"), 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 Statement of Claim filed in the Irish High Court in Dublin by Schuurmans & Van Ginneken ("SvG"), a Netherlands-based molasses and liquid storage concern. SvG seeks compensation for the
contamination and disposal of up to 26,000 tons of molasses allegedly contaminated with medroxyprogesterone acetate ("MPA"). SvG allegedly purchased sugar recovered from a sugar water process stream disposed of by WMI for use in its molasses refining operations. 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. SvG seeks damages in excess of (euro)160 million. In July and August of 2003, formal claim letters on behalf of various Dutch claimants, including the Dutch Association for the Animal Feed Industry, the Dutch Trade Union for Stock-Breeders, the Central Organization for the Meat Sector, the Dutch Union of Traders in Cattle and Rined Fourages BV, a distributor of animal feed, were served upon the Company's AHP Manufacturing BV subsidiary. The damages alleged in the claim letters amount to several million Euros and are akin to the claims for which SvG seeks indemnification, i.e., claims for loss of inventory and livestock due to contaminated animal feed. In connection with its formal Statement of Claim, SvG levied prejudgment attachments in the District Courts of Haarlem and Amsterdam in the Netherlands on certain assets of WMI. SvG lifted these attachments on December 18, 2003, after WMI provided SvG a bank guarantee for (euro)135 million as security for the amounts claimed by SvG in its Statement of Claim. SvG has agreed to refrain from levying further attachments.
On July 26, 2002, a Brazilian Federal Public Attorney filed a public civil action against the Federal Government of Brazil, 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 health care 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, as stated in current U.S. dollars, was approximately $99.0 million. The Company believes that this action is without merit.
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. Following the U.S. Supreme Court's denial of the Company's writ of certiorari and remand to the District Court, the District Court entered judgment in favor of the United States in December 2003. The Company has filed a motion for reconsideration of the District Court's order.
The Office of Federal Contract Compliance Programs served a Notice of Violation on the Company dated September 9, 1998. The Company subsequently received, on November 30, 1998, an Order to Show Cause why proceedings should not be commenced. The Order
cites alleged disparities in pay between men and women in certain job classifications and further cites alleged inadequate systems to check for such disparities. The Company consented to the agency's request to participate in a conciliation process before the Office of the Solicitor within the Department of Labor. An administrative complaint was served on July 25, 2003 and a hearing has been scheduled for May 3, 2004.
The Company intends to defend vigorously all of the foregoing litigation.
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 discussed above (other than the litigation involving REDUX and PONDIMIN, the potential effects of which are discussed 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.
None.
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 as
Executive
Name Age Offices and Positions Officer
---- --- --------------------- -------
Robert Essner 56 Chairman of the Board, President September 1997
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 Laboratories
Division
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
Elected as
Executive
Name Age Offices and Positions Officer
---- --- --------------------- -------
Kenneth J. Martin 49 Executive Vice President and Chief February 2000
Financial Officer
Member of Management,
Law/Regulatory Review,
Operations, Human Resources and
Benefits and Retirement
Committees
Business Experience: To October 1996,
President, American Home Foods
November 1996 to February 1997,
President, International Home
Foods, Inc.
February 1997 to March 1997,
Executive Vice President,
Wyeth-Ayerst 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 52 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-37
|
Elected as
Executive
Name Age Offices and Positions Officer
---- --- --------------------- -------
Lawrence V. Stein 54 Senior Vice President and General June 2001
Counsel
Member of Management,
Law/Regulatory Review,
Operations, Human Resources and
Benefits and Retirement
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 July 2003, Senior Vice
President and Deputy General
Counsel
July 2003 to date, Senior Vice
President and General Counsel
Paul J. Jones 58 Vice President and Controller May 1995
Member of Law/Regulatory Review
and Operations Committees
Business Experience: May 1995 to date, Vice President
and Controller
Rene R. Lewin 57 Vice President - Human Resources June 1994
Member of Management,
Law/Regulatory Review,
Operations, Human Resources and
Benefits and Retirement
Committees
Business Experience: June 1994 to date, Vice President -
Human Resources
I-38
|
Elected as
Executive
Name Age Offices and Positions Officer
---- --- --------------------- -------
Marily H. Rhudy 56 Vice President - Public Affairs June 2001
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
Laboratories Division
September 1997 to date, Vice
President - Public Affairs
E. Thomas Corcoran 56 President, Fort Dodge Animal Health June 2001
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 45 President, Wyeth Consumer Healthcare March 2002
Member of Management,
Law/Regulatory Review,
Operations, and Human Resources
and Benefits Committees
Business Experience: To May 1997, Area Vice President
for Africa and the Middle East,
Wyeth-Ayerst
May 1997 to February 2002, Managing
Director of the United Kingdom
subsidiary of Wyeth-Ayerst
Pharmaceuticals
February 2002 to date, President,
Wyeth Consumer Healthcare
I-39
|
Elected as
Executive
Name Age Offices and Positions Officer
---- --- --------------------- -------
Joseph M. Mahady 50 Senior Vice President and June 2001
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. 53 Senior Vice President and June 2001
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 47 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
|
(a) Market Information and Dividends
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 58 of the Company's 2003 Annual Report to Stockholders, are incorporated herein by reference.
(b) Holders
There were 57,354 holders of record of the Company's Common Stock as of the close of business on March 1, 2004.
(c) Issuance of Unregistered Securities
In December 2003, the Company completed a private placement of $1.020 billion aggregate principal amount of Floating Rate Convertible Senior Debentures due 2024 to Citigroup Global Markets Inc., J.P. Morgan Securities Inc., UBS Securities LLC, Commerzbank Aktiengesellschaft, Grand Cayman Branch and Scotia Capital (USA) Inc. (the "Initial Purchasers") under the exemption from registration provided in Rule 144A of the Securities Act of 1933. The debentures are convertible prior to maturity into shares of the Company's Common Stock only under any of the following circumstances:
o during any calendar quarter commencing after March 31, 2004 and prior to December 31, 2022 (and only during such calendar quarter) if the last reported sale price of the Company's Common Stock for at least 20 trading days during the period of 30 consecutive trading days ending on the last trading day of the previous calendar quarter, is greater than or equal to 130% of the applicable conversion price,
o at any time after December 31, 2022 and prior to maturity, if the last reported sale price of the Company's Common Stock is greater than or equal to 130% of the applicable conversion price on any day after December 31, 2022,
o if the debentures have been called for redemption,
o upon the occurrence of specified corporate transactions, and
o during any period in which the credit rating assigned to the debentures by either Moody's Investor Services, Inc. and its successors ("Moody's") or Standard & Poor's
II-1
Ratings Services, a division of the McGraw-Hill Companies, Inc. and its successors ("S&P") is lower than Baa3 or BBB-, respectively, or the debentures are no longer rated by at least one of S&P or Moody's.
The initial conversion price is $60.39 per share, subject to adjustment for certain events. The conversion price is equivalent to a conversion rate of 16.559 shares per $1,000 principal amount of debentures. Upon conversion, the Company will have the right to deliver, in lieu of the Company's Common Stock, cash or a combination of cash and shares of the Company's Common Stock, in the Company's sole discretion.
The Company originally issued the debentures to the Initial Purchasers at a price of 100% of their principal amount. Proceeds from the offering (after deducting related expenses) of approximately $1.001 billion were utilized, together with existing cash, to redeem in full the $1 billion outstanding aggregate principal amount of the Company's 6.250% notes due 2006 and pay any related premiums of approximately $92.3 million.
(d) Use of Proceeds from Registered Securities
On December 16, 2003, the Company completed a registered offering under the Securities Act of 1933 of $1.750 billion of the Company's 5.500% notes due 2014, $500.0 million of the Company's 6.450% notes due 2024 and $750.0 million of the Company's 6.500% notes due 2034. The securities were registered under Registration Statement File No. 333-108312 (effective date November 24, 2003) and Registration Statement File No. 333-111093 (effective date December 11, 2003). Citigroup Global Markets Inc., J.P. Morgan Securities Inc., UBS Securities LLC and Scotia Capital (USA) Inc. acted as underwriters in the transaction. Proceeds from the offering (after deducting related expenses) were approximately $2.960 billion. A portion of such proceeds were utilized to repurchase approximately $691.0 million of the Company's 7.90% notes due 2005 pursuant to a tender offer.
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 2003 Annual Report to Stockholders, are incorporated herein by reference.
Management's Discussion and Analysis of Financial Condition and Results of Operations, appearing on pages 59 through 72 of the Company's 2003 Annual Report to Stockholders, is incorporated herein by reference.
II-2
The Market Risk Disclosures as set forth in Management's Discussion and Analysis of Financial Condition and Results of Operations, appearing on page 70 of the Company's 2003 Annual Report to Stockholders, are incorporated herein by reference.
The Consolidated Financial Statements and Notes to Consolidated Financial Statements on pages 28 through 55 of the Company's 2003 Annual Report to Stockholders, the Report of Independent Auditors on page 56, and Quarterly Financial Data (Unaudited) on page 58, are incorporated herein by reference.
None.
As of December 31, 2003, 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-15. 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. During the 2003 fourth quarter, there were no significant changes in the Company's internal control over financial reporting or in other factors that could materially affect the Company's internal control over financial reporting, nor were any corrective actions required to be taken by the Company with regard to significant deficiencies or material weaknesses in internal control over financial reporting.
II-3
(a) Information relating to the Company's directors is incorporated herein by reference to pages 3 through 5 of a definitive proxy statement to be filed with the Securities and Exchange Commission on or about March 17, 2004 ("the 2004 Proxy Statement").
(b) Information relating to the Company's audit committee, including designation of "Financial Expert" under applicable Securities and Exchange Commission rules, is incorporated herein by reference to page 7 of the 2004 Proxy Statement.
(c) Information relating to the Company's executive officers as of March 8, 2004 is furnished in Part I hereof under a separate unnumbered caption ("Executive Officers of the Registrant as of March 8, 2004").
(d) Information relating to certain filing obligations of directors and executive officers of the Company under the federal securities laws set forth on page 11 of the 2004 Proxy Statement under the caption "Section 16(a) Beneficial Ownership Reporting Compliance" is incorporated herein by reference.
(e) Information relating to the Company's code of ethics, included within the Wyeth Code of Conduct, is available on the Wyeth Internet website at www.wyeth.com. Copies of the Wyeth Code of Conduct are also available, without charge, by contacting Wyeth Investor Relations at (973) 660-5000.
(f) The Charters for the Company's Audit, Compensation and Benefits, Nominating and Governance and Corporate Issues Committees, the Nominating and Governance Committee Criteria and Procedures for Board Candidate Selection and Wyeth's Corporate Governance Guidelines are available on the Wyeth Internet website at www.wyeth.com. Copies of these documents are also available, without charge, by contacting Wyeth Investor Relations at (973) 660-5000.
Information relating to executive compensation is incorporated herein by reference to pages 15 through 22 and the section titled "Change in Control Severance Agreements" on pages 24 through 26 of the 2004 Proxy Statement. Information with respect to compensation of directors is incorporated herein by reference to pages 5 and 6 of the 2004 Proxy Statement.
III-1
(a) Information relating to security ownership is incorporated herein by reference to pages 11 and 12 of the 2004 Proxy Statement.
(b) Information regarding the Company's equity compensation plans is incorporated herein by reference to page 24 of the 2004 Proxy Statement.
Information regarding transactions with management and others and indebtedness of management is incorporated herein by reference to page 26 of the 2004 Proxy Statement.
Information relating to principal accountant fees and services is incorporated herein by reference to pages 36 and 37 of the 2004 Proxy Statement.
III-2
The following Consolidated Financial Statements, Notes to Consolidated Financial Statements and Report of Independent Auditors, included on pages 28 through 56 of the Company's 2003 Annual Report to Stockholders, are incorporated herein by reference.
Pages
-----
Consolidated Balance Sheets as of
December 31, 2003 and 2002 28
Consolidated Statements of Operations
for the years ended December 31,
2003, 2002 and 2001 29
Consolidated Statements of Changes in
Stockholders' Equity for the years ended
December 31, 2003, 2002 and 2001 30
Consolidated Statements of Cash Flows
for the years ended December 31, 2003,
2002 and 2001 31
Notes to Consolidated Financial Statements 32-55
Report of Independent Auditors 56
(a)2. Financial Statement Schedule
----------------------------
Schedules are omitted because they are not applicable.
IV-1
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ITEM 15. (Continued)
(a)3. Exhibits
--------
Exhibit No. Description
----------- -----------
(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 Quarterly Report on Form 10-Q for the quarter
ended March 31, 2003.
(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) is incorporated by reference
to Exhibit 4.4 of the Company's Annual Report on Form 10-K for the
year ended December 31, 2002.
(4.5) Fourth Supplemental Indenture, dated as of December 16, 2003,
between the Company and JPMorgan Chase Bank (as successor to
Manufacturers Hanover Trust Company) is incorporated by reference
to Exhibit 4.3 of the Registration Statement on Form S-3 for the
Company filed on February 3, 2004.
(4.6) Fifth Supplemental Indenture, dated as of December 16, 2003,
between the Company and JPMorgan Chase Bank (as successor to The
Chase Manhattan Bank).
(4.7) 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).
IV-2
|
(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) Registration Rights Agreement, dated December 16, 2003, between
Wyeth, Citigroup Global Markets Inc. and J.P. Morgan Securities
Inc., as Representatives of the several Initial Purchasers, is
incorporated herein by reference to Exhibit 4.4 of the
Registration Statement on Form S-3 of the Company filed on
February 3, 2004.
(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 is incorporated by reference to
Exhibit 10.5 of the Company's Annual Report on Form 10-K for the
year ended December 31, 2002.
(10.6) First Amendment to 3-Year Credit Agreement, dated as of February
11, 2004, 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) 5-Year Credit Agreement, dated as of February 11, 2004, 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.
(10.8) Master Guarantee and Letter of Credit Agreement, dated as of
December 16, 2003, between the Company and ABN AMRO BANK, N.V.
(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).
|
*Denotes management contract or compensatory plan or arrangement required to be filed as an exhibit hereto.
IV-3
(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 (File 1-1225).
(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 (File 1-1225).
(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
(File 1-1225).
(10.18)* Amendment to the 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) is incorporated by
reference to Exhibit 10.19 of the Company's Annual Report on Form
10-K for the year ended December 31, 2002.
(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).
(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) is incorporated by reference
to Exhibit 10.23 of the Company's Annual Report on Form 10-K for
the year ended December 31, 2002.
|
*Denotes management contract or compensatory plan or arrangement required to be filed as an exhibit hereto.
IV-4
(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) is incorporated by
reference to Exhibit 10.24 of the Company's Annual Report on Form
10-K for the year ended December 31, 2002.
(10.25)* Form of Special Stock Option Agreement with Robert Essner dated
June 21, 2001 (transferable option) is incorporated by reference
to Exhibit 10.25 of the Company's Annual Report on Form 10-K for
the year ended December 31, 2002.
(10.26)* Form of Restricted Stock Award Agreement with Robert Essner dated
June 21, 2001 (cliff vesting) is incorporated by reference to
Exhibit 10.26 of the Company's Annual Report on Form 10-K for the
year ended December 31, 2002.
(10.27)* Form of Restricted Stock Award Agreement with Robert Ruffolo dated
January 23, 2001 (phased vesting) is incorporated by reference to
Exhibit 10.27 of the Company's Annual Report on Form 10-K for the
year ended December 31, 2002.
(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 to date, is incorporated by reference to
Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 2003.
(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, is incorporated by
reference to Exhibit 10.35 of the Company's Annual Report on Form
10-K for the year ended December 31, 2002.
|
*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, as amended to date.
(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, 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 March 31,
2003.
(10.40)* Supplemental Executive Retirement Plan, as amended to date, 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)* Supplemental Employee Retirement Plan is incorporated by reference
to Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 2003.
(10.42)* 2002 Stock Incentive Plan is incorporated by reference to Appendix
C of the Company's definitive Proxy Statement filed March 20,
2002.
(10.43)* 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).
(10.44)* 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).
(10.45)* 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).
(10.46)* 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).
(10.47)* 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
(10.48)* 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.
(10.49)* 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.
(10.50)* Union Savings Plan, as amended to date, is incorporated by
reference to Exhibit 10.4 of the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 2003.
(12) Computation of Ratio of Earnings to Fixed Charges.
(13) 2003 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 16 to the Company's Current Report on Form 8-K, dated
March 18, 2002.
(21) Subsidiaries of the Company.
(23) Consent of Independent Accountants, PricewaterhouseCoopers LLP,
relating to their report dated January 22, 2004, except for Note
16 which is as of February 11, 2004, consenting to the
incorporation thereof in Registration Statements on Form S-3 (File
Nos. 33-45324, 33-57339, 333-108312, 333-111093 and 333-112450),
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,
2003.
(31.1) Certification of disclosure as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
(31.2) Certification of disclosure as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
(32.1) Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(32.2) Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
*Denotes management contract or compensatory plan or arrangement required to be filed as an exhibit hereto.
IV-7
(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.
(99.3) Fifth Amendment, dated November 21, 2002, to Final Nationwide
Class Action Settlement Agreement, dated November 18, 1999, as
amended, is incorporated by reference to Exhibit 99.3 to the
Company's Annual Report on Form 10-K for the year ended December
31, 2002.
(99.4) Sixth Amendment, dated January 10, 2003, to Final Nationwide Class
Action Settlement Agreement, dated November 18, 1999, as amended,
is incorporated by reference to Exhibit 99.4 to the Company's
Annual Report on Form 10-K for the year ended December 31, 2002.
(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) 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 were filed by the
Company:
o October 22, 2003 relating to furnishing information on
Wyeth's diet drug litigation and Wyeth's results for
the 2003 third quarter and first nine months (Items 9 and
12 disclosure).
o January 22, 2004 relating to furnishing Wyeth's earnings
results for the 2003 fourth quarter and full year (Item 12
disclosure).
|
IV-8
March 12, 2004 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 12, 2004
------------------------------------ President and
Robert Essner Chief Executive Officer
Principal Financial Officer:
/s/ Kenneth J. Martin Executive Vice President March 12, 2004
------------------------------------ and Chief Financial Officer
Kenneth J. Martin
Principal Accounting Officer:
/s/ Paul J. Jones Vice President and March 12, 2004
------------------------------------ Controller
Paul J. Jones
Directors:
/s/ Clifford L. Alexander, Jr. Director March 12, 2004
------------------------------------
Clifford L. Alexander, Jr.
/s/ Frank A. Bennack, Jr. Director March 12, 2004
------------------------------------
Frank A. Bennack, Jr.
/s/ Richard L. Carrion Director March 12, 2004
------------------------------------
Richard L. Carrion
/s/ John D. Feerick Director March 12, 2004
------------------------------------
John D. Feerick
/s/ Robert S. Langer, Sc.D. Director March 12, 2004
------------------------------------
Robert S. Langer, Sc.D.
IV-9
|
Signatures Title Date
---------- ----- ----
Director
------------------------------------
John P. Mascotte
/s/ Mary Lake Polan, M.D., Ph.D., Director March 12, 2004
M.P.H.
------------------------------------
Mary Lake Polan, M.D., Ph.D.,
M.P.H.
/s/ Ivan G. Seidenberg Director March 12, 2004
------------------------------------
Ivan G. Seidenberg
/s/ Walter V. Shipley Director March 12, 2004
------------------------------------
Walter V. Shipley
/s/ John R. Torell III Director March 12, 2004
------------------------------------
John R. Torell III
|
IV-10
Exhibit No. Description
(4.6) Fifth Supplemental Indenture, dated as of December 16, 2003,
between the Company and JPMorgan Chase Bank (as successor to The
Chase Manhattan Bank).
(10.6) First Amendment to 3-Year Credit Agreement, dated as of February
11, 2004, 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) 5-Year Credit Agreement, dated as of February 11, 2004, 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.
(10.8) Master Guarantee and Letter of Credit Agreement, dated as of
December 16, 2003, between the Company and ABN AMRO BANK, N.V.
(10.22)* Form of Stock Option Agreement (transferable options).
(10.37)* Deferred Compensation Plan, as amended to date.
(12) Computation of Ratio of Earnings to Fixed Charges.
(13) 2003 Annual Report to Stockholders. Such report, except for those
portions thereof which are expressly incorporated by reference
herein, is furnished solely for the information of the Commission
and is not to be deemed "filed" as part of this filing.
(21) Subsidiaries of the Company.
(23) Consent of Independent Accountants, PricewaterhouseCoopers LLP,
relating to their report dated January 22, 2004, except for Note
16 which is as of February 11, 2004, consenting to the
incorporation thereof in Registration Statements on Form S-3
(File Nos. 33-45324, 33-57339, 333-108312, 333-111093 and
333-112450), 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, 2003.
(31.1) Certification of disclosure as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
(31.2) Certification of disclosure as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
|
*Denotes management contract or compensatory plan or arrangement required to be filed as an exhibit hereto.
(32.1) Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(32.2) Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(99) Cautionary Statements regarding "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995.
|
EXECUTION COPY
FIFTH SUPPLEMENTAL INDENTURE, dated as of December 16, 2003 (this "Fifth 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 $3,000,000,000, 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 Fifth Supplemental Indenture; and
WHEREAS, all conditions and requirements necessary to make this Fifth 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 Fifth 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 Fifth 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 5.500% Notes due 2014.
(a) A new series of senior unsecured notes is hereby authorized and designated as the "5.500% Notes due 2014".
(b) The 5.500% Notes due 2014 shall be limited in aggregate principal amount to $1,750,000,000 and, subject to adjustment as described in the form of Note attached hereto as Exhibit A, shall bear interest at a rate of 5.500% per annum, shall mature on February 1, 2014 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 6.450% Notes due 2024.
(a) A new series of senior unsecured notes is hereby authorized and designated as the "6.450 % Notes due 2024".
(b) The 6.450% Notes due 2024 shall be limited in aggregate principal amount to $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 6.450% per annum, shall mature on February 1, 2024 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 6.500% Notes due 2034.
(a) A new series of senior unsecured notes is hereby authorized and designated as the "6.500 % Notes due 2034".
(b) The 6.500% Notes due 2034 shall be limited in aggregate principal amount to $750,000,000 and, subject to adjustment as described in the form of Note attached hereto as Exhibit A, shall bear interest at a rate of 6.500% per annum, shall mature on February 1, 2034 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.
2.4 Issuance of Additional Securities. The Issuer shall be permitted to amend this Fifth 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.
2.5 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 Fifth Supplemental Indenture, is in all respects ratified and confirmed, and this Fifth 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 FIFTH SUPPLEMENTAL INDENTURE, EACH NOTE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS FIFTH 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 Fifth 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 Fifth 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 Fifth Supplemental Indenture to be executed as of the date first above written.
WYETH, as Issuer
Title:
JPMORGAN CHASE BANK, as Trustee
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 supplemented by the Fifth Supplemental Indenture dated as of December 16, 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 December 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 ------ ---------- Baa2............................................... .25% Baa3............................................... .50% Bal................................................ .75% |
(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 rate set forth on the face of this Note plus the applicable 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 1.75% per annum.
Any interest rate increase or decrease, as described herein, will take effect from the first day of the interest period during 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 (the "Remaining Life"), 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 [ ] 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.
"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 Citigroup Global Markets Inc. and J.P. Morgan Securities 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.)
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
=================
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EXECUTION COPY
FIRST AMENDMENT TO CREDIT AGREEMENT
FIRST AMENDMENT TO CREDIT AGREEMENT (this "First Amendment"), dated as of February 11, 2004, among WYETH, a Delaware corporation (the "Company"), various lenders from time to time party to the Credit Agreement referred to below (the "Lenders"), and JPMORGAN CHASE BANK, as Administrative Agent (in such capacity, the "Administrative Agent"). Unless otherwise indicated, all capitalized terms used herein and not otherwise defined shall have the respective meanings provided such terms in the Credit Agreement referred to below.
W I T N E S S E T H :
WHEREAS, the Company, the Lenders, J.P. Morgan Securities Inc. and Citigroup Global Markets Inc. (f/k/a 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, Cayman Islands Branch, as Co- Documentation Agents, and the Administrative Agent are parties to a Credit Agreement, dated as of March 3, 2003 (the "Credit Agreement"); and
WHEREAS, subject to the terms and conditions of this First Amendment, the parties hereto wish to amend the Credit Agreement as herein provided;
NOW, THEREFORE, it is agreed:
I. Amendments to Credit Agreement.
1. Subsection 1.1 of the Credit Agreement is hereby amended by deleting the text "364-Day Credit Agreement" appearing in each of the definitions of "Aggregate Facilities Commitment" and "Significant Usage Period" in said Section and inserting the text "5-Year Credit Agreement" in lieu thereof.
2. The definition of "Applicable Margin" appearing in subsection 1.1 of the Credit Agreement is hereby amended by deleting the table appearing in said definition and inserting the following table in lieu thereof:
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%
Category F Period 1.500%".
|
3. The definition of "Category E Period" appearing in subsection 1.1 of the Credit Agreement is hereby amended by deleting the text "or lower" in each instance where it appears in said definition.
4. The definition of "Category Rules" appearing in subsection 1.1 of the Credit Agreement is hereby amended by deleting each reference to "Category E Period" appearing in said definition and inserting the text "Category F Period" in lieu thereof.
5. The definition of "Facility Fee Percentage" appearing in subsection 1.1 of the Credit Agreement is hereby amended by (i) deleting the word "and" appearing at the end of clause (iv) of said definition and inserting a comma in lieu thereof and (ii) inserting the text "and (vi) during a Category F Period, 0.250%" immediately preceding the period at the end of said definition.
6. The definition of "Rating Period" appearing in subsection 1.1 of the Credit Agreement is hereby amended by (i) changing the reference to "Category E Period" appearing in said definition to "Category F Period" and (ii) inserting the text ", the Category E Period" immediately following the text "Category D Period" appearing in said definition.
7. Subsection 1.1 of the Credit Agreement is hereby further amended by inserting the following definitions in the appropriate alphabetical order:
"Category F Period": subject to the Category Rules, at any time either
(i) the S&P Credit Rating is BB+ or lower or (ii) the Moody's Credit Rating
is Ba1 or lower.
"5-Year Credit Agreement": the Credit Agreement, dated as of February 11, 2004, among the Company, the lenders party thereto, JPMCB, as administrative agent, and Citicorp North America, Inc., as syndication agent, as in effect from time to time.
8. Subsection 2.18 of the Credit Agreement is hereby amended by deleting each reference to "364-Day Credit Agreement" appearing therein and inserting the text "5-Year Credit Agreement" in lieu thereof.
9. Subsection 8.14(a) of the Credit Agreement is hereby amended by deleting said subsection in its entirety and inserting the text "(a) [Intentionally deleted]" in lieu thereof.
II. Miscellaneous Provisions.
1. In order to induce the Lenders to enter into this First Amendment, the Company hereby represents and warrants that (i) no Default or Event of Default exists as of the Amendment Effective Date, both before and after giving effect to this First Amendment and (ii) all of the representations and warranties contained in the Credit Agreement are true and correct in all material respects on the Amendment Effective Date, both before and after giving effect to this First Amendment, with the same effect as though such representations and warranties had been made on and as of the Amendment Effective Date (it being understood that any representation or warranty made as of a specific date shall be true and correct in all material respects as of such specific date).
2. This First Amendment is limited as specified and shall not constitute a modification, acceptance or waiver of any other provision of the Credit Agreement.
3. This First Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which counterparts when executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A complete set of counterparts shall be lodged with the Company and the Administrative Agent.
4. THIS FIRST AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
5. This First Amendment shall become effective on the date (the "Amendment Effective Date") when (i) the Company and Lenders constituting the Majority Lenders shall have signed a counterpart hereof (whether the same or different counterparts) and shall have delivered (including by way of facsimile transmission) the same to White & Case LLP, 1155 Avenue of the Americas, New York, NY 10036 Attention: May Yip (facsimile number 212-354-8113) and (ii) the 5-Year Credit Agreement shall have become effective in accordance with its terms.
6. From and after the Amendment Effective Date, all references in the Credit Agreement shall be deemed to be references to the Credit Agreement as modified hereby.
* * *
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Amendment as of the date first written above.
WYETH
By: /s/ Kenneth J. Martin
-------------------------------------
Title: Executive Vice President and
Chief Financial Officer
|
JPMORGAN CHASE BANK,
Individually and as Administrative
Agent
By: /s/ Robert Anastasio ------------------------------------- Title: Vice President |
CITIBANK N.A.,
Individually and as Syndication
Agent
By: /s/ Wajeeh Faheen ------------------------------------- Title: Vice President |
THE BANK OF NOVA SCOTIA
By: /s/ Carolyn A. Calloway ------------------------------------- Title: Managing Director |
COMMERZBANK AG, NEW YORK AND GRAND
CAYMAN BRANCHES, Individually and
as Co-Documentation Agent
By: /s/ Robert S. Taylor, Jr. ------------------------------------- Title: Senior Vice President By: /s/ Andrew P, Lusk ------------------------------------- Title: Vice President |
UBS AG, Cayman Island Branch
By: /s/ Thomas R. Salzano
-------------------------------------
Title: Director
Banking Products Services, US
By: /s/ Barbara Ezell-McMichael
-------------------------------------
Title: Associate Director
Banking Products Services, US
|
ABN AMRO BANK N.V.
By: /s/ Eric Oppenheimer ------------------------------------- Title: Vice President By: /s/ Todd J. Miller ------------------------------------- Title: Assistant Vice President |
SAN PAOLO IMI S.P.A.
By: /s/ Renato Carducci ------------------------------------- Title: General Manager By: /s/ Luca Sacchi ------------------------------------- Title: Vice President |
U.S. BANK N.A.
By: /s/ Michael P. Dickman ------------------------------------- Title: Assistant Vice President |
WACHOVIA BANK, N.A.
By: /s/ Joseph C. Bossong, Jr. ------------------------------------- Title: Director |
THE NORTHERN TRUST COMPANY
By: /s/ John Konstantos ------------------------------------- Title: Vice President |
BANCA NAZIONALE DEL LAVORO, S.P.A.,
NEW YORK BRANCH
By: /s/ Francesco Di Mario ------------------------------------- Title: Vice President By: /s/ Juan Cortes ------------------------------------- Title: Vice President |
THE BANK OF NEW YORK
By: /s/ Thomas J. McCormack ------------------------------------- Title: Vice President |
MELLON BANK, N.A.
By: /s/ Marla A. DeYulis ------------------------------------- Title: Assistant Vice President |
BANCO POPULAR DE PUERTO RICO, NEW YORK
BRANCH
By: /s/ Hector J. Gonzalez ------------------------------------- Title: Vice President |
THE GOVERNOR AND COMPANY OF THE BANK
OF IRELAND
By: /s/ F. McDonald ------------------------------------- Title: Director |
BANCO BILBAO VIZCAYA ARGENTARIA, S.A.,
NEW YORK BRANCH
By: /s/ Jay Levit ------------------------------------- Title: Vice President, Global Corporate Banking By: /s/ John Martini ------------------------------------- Title: Vice President, Corporate Banking |
[CONFORMED COPY]
[5-Year Credit Facility]
CREDIT AGREEMENT
among
WYETH,
THE LENDERS PARTIES HERETO,
J.P. MORGAN SECURITIES INC.
AND
CITIGROUP GLOBAL MARKETS INC.,
as Co-Lead Arrangers and Joint Bookrunners,
CITICORP NORTH AMERICA, INC.,
as Syndication Agent,
THE BANK OF NOVA SCOTIA,
COMMERZBANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES AND
UBS AG, CAYMAN ISLANDS BRANCH,
as Co-Documentation Agents
and
JPMORGAN CHASE BANK,
as Administrative Agent
CREDIT AGREEMENT, dated as of February 11, 2004, 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"), J.P. MORGAN SECURITIES INC. and CITIGROUP GLOBAL MARKETS INC., as co-lead arrangers and joint bookrunners (in such capacity, the "Co-Lead Arrangers"), CITICORP NORTH AMERICA, INC., a New York 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, CAYMAN ISLANDS 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").
WHEREAS, the Company has requested the Lenders to make loans to it in an amount up to $1,747,500,000 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
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 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%
Category F Period 1.500%
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"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 (ii) the Moody's Credit Rating is Baa3.
"Category F Period": subject to the Category Rules, at any time either
(i) the S&P Credit Rating is BB+ or lower or (ii) the Moody's Credit Rating
is Ba1 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 F Period and the other Credit Rating falls in a higher Rating Period, a Category F 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 F 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.
"Co-Lead Arrangers": 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 3, 2003, 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%, (v) during a Category E Period, .225% and (vi) during a Category F
Period, 0.250%.
"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, the Category E Period or the Category F Period as then in effect.
"Reference Lenders": JPMCB and Citicorp North America, Inc.
"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 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 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 fifth anniversary of the Effective Date and (b) the date on which the Commitments shall terminate in accordance with the provisions of 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.
"3-Year Credit Agreement Amendment": the First Amendment to the 3-Year Credit Agreement, dated as of February 11, 2004, among the Company, the lenders party thereto, JPMCB, as administrative agent and Citibank, N.A., as syndication agent.
"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.
(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
(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.
(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).
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.
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.
(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.
(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.
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.
(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.
(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.
(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.
(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).
(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.
(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.
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.
(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.
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.
(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.
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:
The consolidated balance sheet of the Company and its consolidated Subsidiaries as at December 31, 2002 and as at September 30, 2003 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, 2003 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.
Since December 31, 2002, there has been no development or event which has had a Material Adverse Effect.
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, limited liability company 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, limited liability company 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.
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).
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.
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) except as previously disclosed in filings with the SEC, which would reasonably be expected to have a Material Adverse Effect.
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.
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.
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.
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.
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.
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
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 William M. Haskel, Vice President and Associate 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) Amendment to 3-Year Credit Agreement. The Amendment Effective Date under, and as defined in, the 3-Year Credit Agreement Amendment 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.
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:
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).
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.
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.
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.
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.
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.
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.
(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.
Not permit the ratio of (i) Consolidated Adjusted Indebtedness to (ii) Adjusted Capitalization at any time to exceed .60 to 1:00.
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 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 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
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. None of the Syndication Agent, the Co-Documentation Agent or the Co-Lead Arrangers shall have any duties under this Agreement.
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.
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.
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.
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.
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.
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.
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.
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
Neither this Agreement nor any terms hereof may be amended,
supplemented, waived 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.
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
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with a copy to: Senior Vice President and General Counsel
Telecopier: (973) 660-7050
Telephone: (973) 660-6138
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
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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
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.
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.
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.
(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.
(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.
The table of contents and the Section and subsection headings herein are intended for convenience only and shall be ignored in construing this Agreement.
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.
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.
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.
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.
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.
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.
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.
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: /s/ Jack M. O'Connor ------------------------------------- Title: Vice President & Treasurer |
JPMORGAN CHASE BANK,
Individually and as Administrative
Agent
By: /s/ Robert Anastasio ------------------------------------- Title: Vice President |
CITICORP NORTH AMERICA, INC.,
Individually and as Syndication
Agent
By: /s/ Wajeeh Faheen ------------------------------------- Title: Vice President |
THE BANK OF NOVA SCOTIA, Individually and as Co-Documentation Agent
By: /s/ Carolyn A. Calloway ------------------------------------- Title: Managing Director |
COMMERZBANK AG, NEW YORK AND GRAND
CAYMAN BRANCHES, Individually and
as Co-Documentation Agent
By: /s/ Robert S. Taylor, Jr. ------------------------------------- Title: Senior Vice President By: /s/ Andrew P, Lusk ------------------------------------- Title: Vice President |
UBS LOAN FINANCE, Individually and as Co-Documentation Agent
By: /s/ Joselin Fernandes
-------------------------------------
Title: Associate Director
Banking Products Services
|
By: /s/ Barbara Ezell-McMichael
-------------------------------------
Title: Associate Director
Banking Products Services, US
|
ABN AMRO BANK N.V.
By: /s/ Eric Oppenheimer ------------------------------------- Title: Vice President By: /s/ Todd J. Miller ------------------------------------- Title: Assistant Vice President |
SAN PAOLO IMI S.P.A.
By: /s/ Renato Carducci ------------------------------------- Title: General Manager By: /s/ Luca Sacchi ------------------------------------- Title: Vice President |
U.S. BANK N.A.
By: /s/ Michael P. Dickman ------------------------------------- Title: Assistant Vice President |
WACHOVIA BANK, N.A.
By: /s/ Joseph C. Bossong, Jr. ------------------------------------- Title: Director |
THE NORTHERN TRUST COMPANY
By: /s/ John Konstantos ------------------------------------- Title: Vice President |
BANCA NAZIONALE DEL LAVORO, S.P.A.,
NEW YORK BRANCH
By: /s/ Francesco Di Mario ------------------------------------- Title: Vice President By: /s/ Juan Cortes ------------------------------------- Title: Vice President |
THE BANK OF NEW YORK
By: /s/ Thomas J. McCormack ------------------------------------- Title: Vice President |
MELLON BANK, N.A.
By: /s/ Marla A. DeYulis ------------------------------------- Title: Assistant Vice President |
BANCO POPULAR DE PUERTO RICO, NEW YORK
BRANCH
By: /s/ Hector J. Gonzalez ------------------------------------- Title: Vice President |
THE GOVERNOR AND COMPANY OF THE BANK
OF IRELAND
By: /s/ F. McDonald ------------------------------------- Title: Director |
BANCO BILBAO VIZCAYA ARGENTARIA, S.A.,
NEW YORK BRANCH
By: /s/ Jay Levit ------------------------------------- Title: Vice President, Global Corporate Banking By: /s/ John Martini ------------------------------------- Title: Vice President, Corporate Banking |
Lender Commitment ------ --------------- JPMorgan Chase Bank $375,000,000.00 Citicorp North America, Inc. $375,000,000.00 The Bank of Nova Scotia $200,000,000.00 Commerzbank AG, New York and Grand $200,000,000.00 Cayman Branches UBS Loan Finance $200,000,000.00 ABN Amro Bank, N.V. $50,000,000.00 SANPAOLO IMI S.p.A. $50,000,000.00 U.S. Bank N.A. $50,000,000.00 Wachovia Bank, N.A. $50,000,000.00 The Northern Trust Company $37,500,000.00 Banca Nazionale del Lavoro, S.P.A., $35,000,000.00 New York Branch The Bank of New York $35,000,000.00 Mellon Bank, N.A. $25,000,000.00 Banco Popular de Puerto Rico, $25,000,000.00 New York Branch The Governor and Company of the $25,000,000.00 Bank of Ireland Banco Bilbao Vizcaya Argentaria, $15,000,000.00 S.A., New York Branch Total $1,747,500,000.00 |
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
Citicorp North America, Inc. 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, Georgia 30308
Attention: Patrick M. Brown
Telephone: (404) 877-1506
Facsimile: (404) 888-8982
Commerzbank AG, New York and Grand 2 World Financial Center
Cayman Branches 34th Floor
New York, New York 10281
Attention: Robert Taylor
Telephone: (212) 266-7708
Facsimile: (212) 266-7594
UBS Loan Finance 677 Washington Boulevard
Stamford, Connecticut 06901
Attention: Marie Haddad
Telephone: (203) 719-5609
Facsimile: (203) 719-3888
|
Schedule III
------------
ABN Amro Bank N.V. 500 Park Avenue
New York, New York 10022
Attention: Pam Del Vecchio
Telephone: (212) 446-4289
Facsimile: (212) 832-7129
San Paolo IMI S.P.A. 245 Park Avenue
35th Floor
New York, New York 10167
Attention: Luca Sacchi
Telephone: (212) 692-3130
Facsimile: (212) 692-3178
U.S. Bank N.A. 918 17th Street Denver,
Colorado 80202 Attention: Richard
Nolter Telephone: (513) 632-4073
Facsimile: (513) 632-2068
Wachovia Bank, N.A. One South Penn Square
Philadelphia, Pennsylvania 19101
Attention: William F. Fox
Telephone: (267) 321-6612
Facsimile: (267) 321-6700
The Northern Trust Company 50 South LaSalle Street, B-9
Chicago, Illinois 60675
Attention: Alfred A. Armengol
Telephone: (312) 557-1498
Facsimile: (312) 444-4906
Banca Nazionale Del Lavoro, S.P.A., New 25 West 51st Street
York Branch New York, New York 10019
Attention: Francesco DiMario
Telephone: (212) 314-0239
Facsimile: (212) 765-2978
The Bank of New York One Wall Street
21st Floor
New York, New York 10286
Attention: Tom McCormack
Telephone: (212) 635-7901
Facsimile: (212) 635-1481
|
Mellon Bank, N.A. One Penn Plaza
29th Floor
New York, New York 10119
Attention: Marla A. DeYulis
Telephone: (412) 234-9141
Facsimile: (412) 234-9047
Banco Popular De Puerto Rico, New York 7 West 51st Street
Branch New York, New York 10019
Attention: Hector J. Gonzalez
Telephone: (212) 445-1988
Facsimile: (212) 245-4677
The Governor and Company of the Bank of Lower Baggot St.
Ireland Dublin 2 Ireland 99999
Attention: Ciaran Doyle
Telephone: (353) 1 604-4142
Facsimile: (353) 1 604-4240
Banco Bilbao Vizcaya Argentaria, S.A., 1345 Avenue of the Americas
New York Branch 45th Floor
New York, New York 10105
Attention: Hector Villegas
Telephone: (212) 728-1513
Facsimile: (212) 333-2904
|
Table of Contents
-----------------
Page
----
SECTION 1. DEFINITIONS......................................................1
1.1 Defined Terms.....................................................1
1.2 Other Definitional Provisions....................................15
SECTION 2. THE COMMITTED RATE LOANS; THE BID LOANS; AMOUNT AND TERMS.......15
2.1 The Committed Rate Loans........................................15
2.2 The Bid Loans...................................................16
2.3 Denomination of Committed Rate Loans............................19
2.4 Fees............................................................19
2.5 Changes of Commitments..........................................19
2.6 Optional Prepayments............................................19
2.7 Minimum Principal Amount of Tranches............................20
2.8 Committed Rate Loan Interest Rates and Payment Dates............20
2.9 Conversion Options..............................................20
2.10 Computation of Interest and Fees................................21
2.11 Pro Rata Treatment, Payments and Evidence of Debt...............21
2.12 Non-Receipt of Funds by the Administrative Agent................23
2.13 Inability to Determine Interest Rate............................24
2.14 Illegality......................................................24
2.15 Requirements of Law.............................................25
2.16 Indemnity.......................................................26
2.17 Taxes...........................................................27
2.18 Replacement of Lenders..........................................29
SECTION 3. REPRESENTATIONS AND WARRANTIES..................................30
3.1 Financial Condition.............................................30
3.2 No Change.......................................................30
3.3 Existence; Compliance with Law..................................30
3.4 Power; Authorization; Enforceable Obligations...................31
3.5 No Legal Bar; No Default........................................31
3.6 No Material Litigation..........................................31
3.7 Investment Company Act..........................................31
3.8 Federal Regulations.............................................31
3.9 ERISA...........................................................31
3.10 Environmental Matters...........................................32
3.11 Purpose of Loans................................................33
3.12 Restrictions on Subsidiaries....................................33
|
Table of Contents
-----------------
(continued)
Page
----
SECTION 4. CONDITIONS PRECEDENT............................................33
4.1 Conditions to Effective Date....................................33
4.2 Conditions to All Loans.........................................34
SECTION 5. COVENANTS.......................................................34
5.1 Financial Statements............................................34
5.2 Certificates; Other Information.................................35
5.3 Payment of Obligations..........................................36
5.4 Conduct of Business and Maintenance of Existence................36
5.5 Maintenance of Property; Insurance..............................36
5.6 Inspection of Property; Books and Records; Discussions..........36
5.7 Notices.........................................................37
5.8 Environmental Laws..............................................37
5.9 Consolidated Adjusted Indebtedness to Adjusted Capitalization...38
5.10 Liens, Etc......................................................38
SECTION 6. EVENTS OF DEFAULT...............................................38
SECTION 7. THE ADMINISTRATIVE AGENT........................................41
7.1 Appointment.....................................................41
7.2 Delegation of Duties............................................41
7.3 Exculpatory Provisions..........................................41
7.4 Reliance by Administrative Agent................................42
7.5 Notice of Default...............................................42
7.6 Non-Reliance on Administrative Agent and Other Lenders..........42
7.7 Indemnification.................................................43
7.8 Administrative Agent in Its Individual Capacity.................43
7.9 Successor Administrative Agent..................................43
SECTION 8. MISCELLANEOUS...................................................44
8.1 Amendments and Waivers..........................................44
8.2 Notices.........................................................44
8.3 No Waiver; Cumulative Remedies..................................45
8.4 Survival of Representations and Warranties......................45
8.5 Payment of Expenses and Taxes...................................45
8.6 Successors and Assigns; Participations; Purchasing Lenders......46
8.7 Adjustments; Set-off............................................48
8.8 Table of Contents and Section Headings..........................49
8.9 Counterparts....................................................49
8.10 Severability....................................................49
8.11 Integration.....................................................49
8.12 Governing Law...................................................50
|
Table of Contents
-----------------
(continued)
Page
----
8.13 Consent to Jurisdiction and Service of Process..................50
8.14 Confidentiality.................................................50
8.15 Acknowledgments.................................................50
8.16 Waivers Of Jury Trial...........................................51
SCHEDULES
Schedule I Commitments
Schedule II Lender Addresses and Lending Offices
EXHIBITS
Exhibit A Form of Borrowing Notice
Exhibit B Form of Bid Loan Request
Exhibit C Form of 2.17 Certificate
Exhibit D Form of Bid Loan Offer - Absolute Rate Bid Loans
Exhibit E Form of Bid Loan Offer - Index Rate Bid Loans
Exhibit F Form of Bid Loan Confirmation
Exhibit G Form of Commitment Transfer Supplement
Exhibit H Form of Certificate of Secretary of the Company
Exhibit I Form of Opinion of Counsel to the Company
|
Dated as of December 16, 2003
THIS MASTER GUARANTEE AND LETTER OF CREDIT AGREEMENT (this "Agreement") is entered into by and between WYETH (the "Applicant"), a Delaware corporation, and ABN AMRO Bank N.V. (together with its affiliates as set forth in Section 13.8, the "Bank").
The Applicant may from time to time request that the Bank issue bank guarantees in favor of third parties and one letter of credit for the account of the Applicant. It is understood and agreed that, without affecting the obligations of the Applicant hereunder, such guarantees will be issued to support potential claims against the Applicant's wholly owned subsidiary AHP Manufacturing B.V. ("AHP"). The Applicant agrees that, except as provided below, any such bank guarantee and such letter of credit shall be subject to the terms and provisions of this Agreement, and the Applicant further agrees with and for the benefit of the Bank as follows:
SECTION 1 CERTAIN DEFINITIONS. When used herein the following terms shall have the following meanings (such definitions to be applicable to both the singular and plural forms of such terms):
Acceptable Letter of Credit means a direct-pay letter of credit (i) issued in
the name of the Bank by a bank organized under the laws of a member state of the
Organisation for Economic Co-Operation and Development if such bank has a
long-term debt rating equal to or higher than A1 by Moody's and A+ by S&P, (ii)
drawable upon presentation by the Bank to the issuing bank of a sight draft
within five Business Days of its expiration date and payable on such expiration
date, (iii) with a term no longer than 90 days from the date of its issuance and
(iv) the terms of which shall include provisions permitting the Bank to draw on
such letter of credit at any time after the long-term debt rating of the issuing
bank shall fall below any one of the ratings referred to in clause (i) above and
such other terms as the Bank shall reasonably require.
Authorized Representative is defined in Section 6(g).
Business Day means any day on which the Bank is open for commercial banking business at its office in New York, New York.
Cash Collateral Account is defined in Section 5.1.
Cash Collateralization Event is defined in Section 11.1.
Collateralization Date is defined in Section 4.7.
Collateralization Request Deadline is defined in Section 4.7.
Credits means, collectively, the Guarantees and the Letter of Credit.
Event of Default means any of the events described in Section 12.1.
Financing Lease means any lease of property, real or personal, the obligations of the lessee in respect of which are required in accordance with generally accepted accounting principles in effect in the United States of America from time to time to be capitalized on a balance sheet of the lessee.
Fee Rate is defined in Section 7(a).
Guarantee Obligation means, 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) 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 Applicant in good faith.
Guarantees means, collectively, the SVG Guarantee and all Third Party Guarantees.
Indebtedness of any Person at any date means (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.
Item means any draft, order, instrument, demand or other document drawn or
presented, or to be drawn or presented, under any Credit.
ISP means at any time the most recent International Standby Practices issued by the Institute for International Banking Law & Practice, Inc.
Letter of Credit means the letter of credit issued by the Bank for the account of the Applicant pursuant to Section 3.1, as amended or otherwise modified from time to time.
Liabilities means all obligations of the Applicant to the Bank and its successors and assigns, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing or due or to become due, arising out of or in connection with this Agreement, any Guarantee, any Letter of Credit or any instrument or document delivered in connection herewith or therewith.
Lien means 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).
Material Adverse Effect means a material adverse effect on the business, operations, property or condition (financial or otherwise) of the Applicant, or the ability of the Applicant to perform its obligations under this Agreement, or the validity or enforceability of this Agreement or the rights or remedies of the Bank.
Moody's means Moody's Investors Service, Inc.
Moody's Rating means, 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 Applicant's senior unsecured long-term debt.
Permitted Investments means investments satisfying the requirements of Annex 1 hereto.
Person means any natural person, corporation, partnership, trust, limited liability company, association, governmental authority or unit, or any other entity, whether acting in an individual, fiduciary or other capacity.
Prime Rate means the rate per annum established by the Bank from time to time as its "Prime Rate" for loans to its commercial customers. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer.
Request means, at any time, a request (which shall be in writing, including by
facsimile) for a Third Party Guarantee to be issued by the Bank, which request
shall consist of (i) a letter from the Applicant (signed by an Authorized
Representative of the Applicant), specifying (a) the requested issuance date,
(b) the name and contact information of the Person to whom such Third Party
Guarantee is to be delivered and (c) the manner of such delivery, and (ii) a
joint letter from the Applicant (signed by an Authorized Representative of the
Applicant) and SVG authorizing or consenting to such issuance and specifying (a)
the name of each third party in favor of which the respective Third Party
Guarantee is requested to be issued and (b) the maximum amount covered by such
Third Party Guarantee.
S&P means Standard & Poor's Ratings Services, a division of McGraw-Hill, Inc.
S&P Rating means, 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 Applicant's senior unsecured long-term debt.
Significant Subsidiary means any subsidiary of the Applicant that satisfies the requirements of Rule 1-02(w) of Regulation S-X as adopted by the Securities and Exchange Commission under the provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934 as in force on the date of this Agreement.
SVG means Schuurmans & Van Ginneken B.V.
SVG Guarantee means (i) initially, a bank guarantee in substantially the form of Exhibit A hereto and (ii) after the issuance of the first Third Party Guarantee, a bank guarantee in substantially the form of Exhibit B hereto, in each case issued by the Bank in favor of SVG.
Third Party Guarantee means a bank guarantee in substantially the form of Exhibit C hereto (with such changes as the Applicant, the third party, SVG and the Bank shall reasonably agree to) issued by the Bank in favor of the third party or parties specified in the Request therefor.
UCC means at any time the Uniform Commercial Code as then in effect in the State of New York.
UCP means at any time the most recent Uniform Customs and Practice for Documentary Credits issued by the International Chamber of Commerce.
Unmatured Event of Default means any event which if it continues uncured will, with lapse of time or notice or both, constitute an Event of Default.
SECTION 2 GUARANTEES
2.1 Issuance of Guarantees. Subject to the terms and conditions of this Agreement, (i) not later than close of business, Rotterdam, The Netherlands time, on December 18, 2003 the Bank shall issue the SVG Guarantee and, provided that the Bank has received a written notice from SVG indicating the contact information of the Person who should receive the SVG Guarantee, deliver the SVG Guarantee by courier to such Person and (ii) following receipt by the Bank at its office in Rotterdam, The Netherlands of any Request, the Bank shall issue a Third Party Guarantee in favor of the third party or parties specified in such Request.
2.2 Certain Terms of Guarantees. The aggregate maximum amount covered by the SVG Guarantee and all Third Party Guarantees issued by the Bank hereunder shall not exceed EUR135,000,000 at any time outstanding. No Guarantee shall expire later than December 10, 2018.
2.3 Procedure for Issuance of Third Party Guarantees. Subject to receipt by the Bank at its office in Rotterdam, The Netherlands, not later than three Business Days prior to the date of a proposed issuance of any Third Party Guarantee (or such later date as the Bank shall agree) of a Request for the issuance of such Third Party Guarantee and subject to receipt (at the time such Third Party Guarantee is to be issued) by the Bank at its office in Rotterdam, The Netherlands, of the original of the then outstanding SVG Guarantee for replacement, the Bank shall (i) deliver to the Person indicated in the Request the new Third Party Guarantee and (ii) replace the then outstanding SVG Guarantee with a new SVG Guarantee in substantially the form of Exhibit B hereto, which shall specify the name of each third party to whom Third Party Guarantees have theretofore been issued and the maximum amount covered by each such Third Party Guarantee. A Request may be sent by facsimile, by United States mail, by overnight courier, by personal delivery or by any other means acceptable to the Bank. If a Third Party Guarantee is to have changes from, or is to be in a different form from, Exhibit C hereto, such changes or other form shall be agreed upon between the Applicant, the third party, SVG, and both branches of the Bank before the Request is furnished.
SECTION 3 ISSUANCE OF LETTER OF CREDIT. Subject to the terms and conditions of this Agreement, the Bank shall issue a Letter of Credit substantially in the form of Exhibit D hereto in the amount of EUR135,000,000 not later than December 17, 2003.
SECTION 4 REIMBURSEMENT OBLIGATIONS; RESPONSIBILITIES, ETC.
4.1 Reimbursement Obligations. The Applicant hereby agrees to reimburse the Bank forthwith upon demand in an amount equal to any payment or disbursement made by the Bank under any Guarantee, any Letter of Credit or any time draft issued pursuant thereto, together with interest on the amount so paid or disbursed by the Bank from and including the date of payment or disbursement to but not including the date the Bank is reimbursed by the Applicant at a rate equal to the Prime Rate from time to time in effect plus 2% per annum (or, if less, the maximum rate permitted by applicable law). Without limiting the obligations of the Applicant hereunder to reimburse the Bank for any payments or disbursements by the Bank under the Letter of Credit, it is acknowledged and agreed that if any such payment or disbursement under the Letter of Credit is made to reimburse the Bank for a payment or disbursement under a Guarantee, then the obligation of the Applicant to reimburse the Bank for such payment or disbursement under the Guarantee shall be discharged to the extent of such payment or disbursement under the Letter of Credit. The obligation of the Applicant to reimburse the Bank under this Section 4 for payments and disbursements made by the Bank under any Guarantee, any Letter of Credit or any time draft issued pursuant thereto shall be absolute and unconditional under any and all circumstances, including, without limitation, the following:
(a) any failure of any Item presented under any Credit to comply strictly with the terms of such Credit;
(b) the legality, validity, regularity or enforceability of any Credit or of any Item presented thereunder;
(c) any defense based on the identity of the transferee of any Credit or the sufficiency of the transfer if such Credit is transferable;
(d) the existence of any claim, set-off, defense or other right that the Applicant may have at any time against any beneficiary or transferee of any Credit, the Bank or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or any unrelated transaction;
(e) any Item presented under any Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect;
(f) honor of a demand for payment presented electronically even if any Credit requires that demand be in the form of a draft;
(g) waiver by the Bank of any requirement that exists for the Bank's protection and not the protection of the Applicant or any waiver by the Bank which does not in fact materially prejudice the Applicant;
(h) any payment made by the Bank in respect of an Item presented after the date specified as the expiration date of, or the date by which documents must be received under, any Credit if payment after such date is authorized by the ISP, the UCC or the UCP, as applicable; or
(i) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing;
provided that the Applicant shall not be obligated to reimburse the Bank for any wrongful payment or disbursement made by the Bank under any Guarantee, any Letter of Credit as a result of any act or omission constituting gross negligence, bad faith or willful misconduct on the part of the Bank.
4.2 Discrepancies. (a) The Applicant agrees that it will promptly examine any and all instruments and documents delivered to it from time to time in connection with any Credit, and if the Applicant has any claim of non-compliance with its instructions or of discrepancies or other irregularity, the Applicant will immediately (and, in any event, within three Business Days after delivery thereof) notify the Bank thereof in writing, and the Applicant shall be deemed to have waived any claim against the Bank unless such notice is given within such time period. Without limiting the foregoing, if the Bank makes any payment or disbursement under a Credit and the Applicant does not send a notice to the Bank within three Business Days objecting to such payment or disbursement and specifying in reasonable detail the discrepancy or irregularity which is the basis for such objection, then the Applicant shall be precluded from making any objection to the Bank's honor of the presentation with respect to which such payment or disbursement was made (but shall not be precluded from asserting any objection to any different presentation under the same or a different Credit).
(b) The Applicant's acceptance or retention of any documents presented under or in connection with a Credit (including originals or copies of documents sent directly to the Applicant) or of any property for which payment is supported by a Credit shall ratify the Bank's honor of the documents and absolutely preclude the Applicant from raising a defense or claim with respect to the Bank's honor of the relevant presentation.
4.3 Documents. The Applicant agrees that the Bank and its correspondents: (a) may accept as complying with the applicable Credit any Item drawn, issued or presented under such Credit which is issued or purportedly issued by an agent, executor, trustee in bankruptcy, receiver or other representative of the party identified in such Credit as the party permitted to draw, issue or present such Item; and (b) may in its or their discretion, but shall not be obligated to, accept or honor (i) any Item which substantially complies with the terms of the applicable Credit; (ii) any Item which substantially complies under the laws, rules, regulations and general banking or trade customs and usages of the place of presentation, negotiation or payment; (iii) drafts which fail to bear any or adequate reference to the applicable Credit; (iv) any Item presented to the Bank after the stated expiration date of a Credit but within any applicable time period during which such Credit may be honored in accordance with the UCP, the UCC and/or the ISP, as applicable (and, in any event, any Item presented to the Bank on the Business Day immediately following the stated expiration date of any Credit, if such stated expiration date falls on a day which is not a Business Day); or (v) any Item which substantially complies with the requirements of the UCP, the UCC and/or the ISP, as applicable. In determining whether to pay under any Credit, the Bank shall have no obligation to the Applicant or any other Person except to confirm that the Items required to be delivered under such Credit appear to have been delivered and appear on their face to substantially comply with the requirements of such Credit. For purposes of the foregoing, an Item "substantially complies" unless there are discrepancies in the presentation which appear to be substantial and which reflect corresponding defects in the beneficiary's performance in the underlying transaction. A discrepancy is not substantial if it is unrelated or immaterial to the nature or amount of the Applicant's loss. For example, documents honored by the Bank that do not comply with the timing requirements of the Credit for presenting or dating any required beneficiary statement nonetheless substantially comply if those timing requirements are not material in determining whether the underlying agreement has been substantially performed or violated.
4.4 Exculpation. In addition to the exculpatory provisions contained in the UCP, the UCC and/or the ISP, as applicable, the Bank and its correspondents shall not be responsible for, and the Applicant's obligation to reimburse the Bank shall not be affected by, (a) compliance with any law, custom or regulation in effect in the country of issuance, presentation, negotiation or payment of any Letter of Credit, (b) any refusal by the Bank to honor any Item because of an applicable law, regulation or ruling of any governmental agency, whether now or hereafter in effect, (c) any action or inaction required or permitted under the UCC, the UCP, the ISP or the United Nations Convention on Independent Guarantees and Stand-by Letters of Credit, in each case as applicable, or (d) any act or the failure to act of any agent or correspondent of the Bank, including, without limitation, failure of any such agent or correspondent to pay any Item because of any law, decree, regulation, ruling or interpretation of any governmental agency, unless due to the gross negligence, bad faith or willful misconduct of the Bank.
4.5 Risks. The Applicant assumes all risks of the acts or omissions of any beneficiary or transferee of any Credit (it being understood that such assumption is not intended to, and shall not, preclude the Applicant from pursuing any right or remedy it may have against any such beneficiary or transferee). The Applicant further agrees that any action or omission by the Bank under or in connection with any Credit or any related Item, document or property shall, unless in breach of good faith or in the event of gross negligence or willful misconduct, be binding on the Applicant and shall not put the Bank under any resulting liability to the Applicant. Without limiting the foregoing, the Applicant agrees that in no event shall the Bank be liable for incidental, consequential, punitive, exemplary or special damages.
4.6 Limitation on Bank's Obligations. Without limiting any other provision herein, the Bank is expressly authorized and directed to honor any request for payment which is made under and in compliance with the terms of any Credit without regard to, and without any duty on the part of the Bank to inquire into, the existence of any dispute or controversy between any of the Applicant, the beneficiary of any Credit or any other Person, or the respective rights, duties or liabilities of any of them, or whether any facts represented in any Item presented under a Credit are true or correct. Furthermore, the Applicant agrees that the Bank's obligation to the Applicant shall be limited to honoring requests for payment made under and in compliance with the terms of any Credit, and the Bank's obligation remains so limited even if the Bank has prepared or assisted in the preparation of the wording of any Credit or any Item required to be presented thereunder and even if the Bank is otherwise aware of the underlying transaction giving rise to any Credit.
4.7 Collateralization Date. If on or prior to October 1, 2005 (the "Collateralization Request Deadline") the Bank delivers written notice to the Applicant requesting cash collateralization of the Letter of Credit, then, by not later than December 15, 2005 (the "Collateralization Date") the Applicant shall either (i) deliver to the Bank cash collateral in an amount equal to the maximum amount available to be drawn under the Letter of Credit or such lesser amount as the Bank may specify in its demand, such cash collateral to be held, invested, administered and applied as provided in Section 5 hereof or (ii) deliver to the Bank an Acceptable Letter of Credit in an amount equal to the maximum amount available to be drawn under the Letter of Credit. If the notice referred to in the foregoing sentence is not delivered to the Applicant on or prior to the Collateralization Request Deadline, the Collateralization Date shall automatically be extended to December 15, 2006, provided that the obligation described in the preceding sentence of the Applicant to deliver to the Bank cash collateral or an Acceptable Letter of Credit not later than such extended Collateralization Date shall not be subject to the Bank's delivery of any notice to the Applicant. For the avoidance of doubt, the Bank may present a sight draft to the issuing bank of any such Acceptable Letter of Credit delivered pursuant to this Section 4.7 at any time within five Business Days prior to its expiration date.
SECTION 5 CASH COLLATERAL ACCOUNT
5.1 Cash Collateral Account. If the Applicant becomes obligated to deliver to the Bank cash collateral in accordance with Section 4.7, Section 11.2 or Section 12.2, the Applicant shall deposit such cash collateral into an account to be called "Wyeth Cash Collateral Account" (the "Cash Collateral Account") established in the name of the Applicant and maintained at the principal London office of the Bank.
5.2 Grant of Security Interest. As security for the prompt payment in full when
due of the Liabilities, the Applicant hereby charges in favor of the Bank all of
the Applicant's right, title and interest in, to and under (i) the Cash
Collateral Account, (ii) all cash from time to time on deposit in the Cash
Collateral Account and (iii) the products and proceeds thereof (together with
the cash from time to time on deposit in the Cash Collateral Account, the
"Deposit"), all with full title guarantee and by way of first fixed charge. This
Agreement shall constitute notice to the Bank of the charge constituted by this
Section 5.2.
5.3 Set-Off. The Bank shall be entitled, without prior notice to the Applicant, to set-off or transfer all or part of the Deposit in or towards satisfaction of any of the Liabilities when they are due and payable but unpaid.
5.4 The Deposit. Unless the Bank otherwise agrees in writing, the Deposit will be maintained on the basis that it will mature on the first date on which (a) there are no Liabilities and (b) the Bank is under no obligation (actual or contingent) to issue any Guarantees or provide other financial accommodation which, if issued or provided, would give rise to any Liabilities, provided, however, that if at the close of business in London on any date on which any of the Liabilities shall have become due and payable any of them remain unpaid, the Deposit shall then mature to the extent of an amount equal to the amount of such Liabilities remaining unpaid (or, if less, the amount of the Deposit). The Bank shall be entitled, when the Deposit matures and at any time thereafter, to exercise in relation thereto any rights of set-off, combination or consolidation to which it is entitled under this Agreement or by law.
5.5 Restrictions on Assignment. The Applicant's rights in relation to the Cash Collateral Account and the Deposit are incapable of assignment or other disposal and of being made the subject of any encumbrance or other security interest save one in favor of the Bank, and the Applicant agrees that it will not purport to assign or otherwise dispose thereof, or create or permit to subsist any encumbrance or other security interest on or in relation thereto, save with the prior written consent of the Bank.
5.6 Miscellaneous. This Agreement shall remain in full force and effect as a continuing arrangement until it terminates in accordance with Section 13.12. All payments made by the Applicant to the Bank at any time after the Bank receives notice of the purported creation of any subsequent mortgage, assignment, charge or other interest affecting the Cash Collateral Account or the Deposit shall be treated as having been credited to a new account of the Applicant and not as having been applied in reduction of the Liabilities as at the time of that notice.
5.7 Investment of Balance in Cash Collateral Account. The cash balance standing to the credit of the Cash Collateral Account may be invested from time to time in such Permitted Investments as the Applicant shall determine, which Permitted Investments shall be held in the name of the Applicant or the Bank and be under the control of the Bank, if the Applicant and the Bank have entered into a charge agreement pursuant to which (i) the Bank has a valid and perfected security interest subject to no equal or prior lien in such Permitted Investments and (ii) the Bank is entitled, at any time and from time to time after the occurrence and during the continuance of an Event of Default or Unmatured Event of Default, in its sole discretion to elect to liquidate any such Permitted Investments and exercise, with respect to the proceeds of any such liquidation, any rights of set-off, combination or consolidation to which it is entitled under this Agreement or by law with respect to the Deposit, provided that the Bank shall incur no liability toward the Applicant or any of its affiliates merely by reason of obtaining a rate of return on such Permitted Investments which is lower than the rate the Applicant or such affiliates might otherwise have obtained.
5.8 No Waiver. It is understood and agreed that no delay on the part of the Bank in demanding cash collateral pursuant to Section 11.2 or Section 12.2, and no demand for an amount of cash collateral which is less than the maximum amount thereby authorized, shall be deemed a waiver of the Bank's right to make subsequent demand in accordance therewith.
5.9 Return of Cash Collateral. Unless an Event of Default or Unmatured Event of Default shall have occurred and be continuing, the Bank shall (i) promptly return to the Applicant cash collateral received by the Bank pursuant to Section 4.7 if and to the extent that the Letter of Credit expires unpaid, is returned to the Bank for cancellation or is reduced, (ii) promptly return to the Applicant cash collateral received by the Bank pursuant to Section 11.2 upon the Moody's Rating and the S&P Rating rising to a rating level equal or higher than the rating level in effect immediately prior to the first occurrence of a Cash Collateralization Event and (iii) within five Business Days after the end of each fiscal quarter of the Applicant, remit to the Applicant any amounts on deposit in the Cash Collateral Account which exceed the maximum amount available to be drawn under the Letter of Credit.
5.10 Top-Up Events. If at any time (i) the Applicant is required hereunder to make Deposits in the Cash Collateral Account and (ii) the aggregate amount of such Deposits is less than the maximum amount available to be drawn under the Letter of Credit, then the Bank may demand that the Applicant deliver to the Bank, within five Business Days of such demand, cash collateral in an amount sufficient so that the aggregate amount of the Deposits equals the maximum amount available to be drawn under the Letter of Credit, such cash collateral to be held, invested, administered and applied as provided in this Section 5.
5.11 Further Assurances. The Applicant agrees that, from time to time upon the written request of the Bank, the Applicant will execute and deliver such further documents and do such other acts and things as the Bank may reasonably request in order to fully effect the purposes of this Section.
SECTION 6 REPRESENTATIONS AND WARRANTIES. The Applicant represents and warrants to the Bank that:
(a) Organization, etc. The Applicant is duly organized or formed, validly existing and (to the extent applicable under the laws of the relevant jurisdiction) in good standing under the laws of the jurisdiction of its organization or formation, and the Applicant is duly qualified and in good standing as a foreign entity authorized to do business in each other jurisdiction where, because of the nature of its activities or properties, such qualification is required, except for such qualifications the absence of which would not reasonably be expected to have a Material Adverse Effect.
(b) Authorization; No Conflict. The Applicant's execution and delivery of this Agreement and each Request, the Applicant's procurement of the issuance of Guarantees in favor of third parties and Letter of Credit for its account hereunder and the Applicant's performance of its obligations under this Agreement and each Request are within the organizational powers of the Applicant, have been duly authorized by all necessary organizational action, have received all necessary governmental approval (if any shall be required), and do not and will not contravene or conflict with, or result in or require the imposition of any lien or security interest under, any provision of law or of the charter or by-laws of the Applicant or of any indenture, loan agreement or other contract, or any judgment, order or decree which is binding upon the Applicant.
(c) Validity and Binding Nature. This Agreement is, and upon delivery to the Bank each Request will be, the legal, valid and binding obligation of the Applicant, enforceable against the Applicant in accordance with its terms, subject to bankruptcy, insolvency and similar laws of general application affecting the rights of creditors generally, and to general principles of equity.
(d) Approvals. No material authorization, approval or consent of, or notice to or filing with, any governmental or regulatory authority is required to be made in connection with the execution and delivery by the Applicant of this Agreement or the issuance of any Guarantee in favor of third parties or any Letter of Credit for the account of the Applicant pursuant hereto.
(e) Existing Revolver. Each of the Representations and Warranties contained in the 3-Year Credit Agreement dated as of March 3, 2003, among the Applicant, the Lenders party thereto (including the Bank), the Co-Lead Arrangers and Joint Book Managers party thereto, the Syndication Agent party thereto, the Co-Documentation Agents party thereto and JPMorgan Chase Bank, as Administrative Agent, as in effect on the date hereof, is true and correct in all material respects as if made on the date of this Agreement.
(f) No Default. No Event of Default or Unmatured Event of Default has occurred and is continuing.
(g) Incumbency Certificate. The Applicant shall provide to the Bank on the date
hereof a certificate (an "Incumbency Certificate") specifying the name and
title, and including a specimen signature, of each representative of the
Applicant who is authorized to execute a Request on behalf of the Applicant
(each, an "Authorized Representative"). The Applicant agrees that (i)
unless previously notified in writing to the contrary by the Applicant, the
Bank may rely on such certificate for purposes of determining whether any
Request delivered to the Bank has been authorized by the Applicant and (ii)
at any time the Applicant wishes to designate a new Authorized
Representative, the Applicant shall deliver to the Bank a new Incumbency
Certificate including the names, titles and specimen signatures of all
Authorized Representatives. Any determination by the Bank based on an
Incumbency Certificate that a Request has been authorized by the Applicant
shall be conclusive absent manifest error, regardless of a change in title
of the Authorized Representative executing such Request.
SECTION 7 FEES. (a) The Applicant shall pay to the Bank a fee for the issuance
and maintenance of the Letter of Credit at a rate per annum (the "Fee Rate")
calculated on the maximum amount available from time to time to be drawn under
the Letter of Credit in accordance with the following schedule (provided that,
at any time the Applicant delivers to the Bank (i) pursuant to Section 4.7, an
Acceptable Letter of Credit, or (ii) pursuant to Section 4.7, Section 11.2 or
Section 12.2 cash collateral in an amount equal to the maximum amount available
to be drawn under the Letter of Credit, the Fee Rate shall be the applicable
rate indicated in the column labeled "Cash Collateralized Fee Rate"):
--------------------------------------------------------------------------------
Moody's Rating S&P Rating Fee Rate Cash Collateralized Fee
Rate
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A 2 or above A or above 0.500% p.a. 0.125% p.a.
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A 3 A- 0.750% p.a. 0.150% p.a.
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Baa 1 BBB+ 1.000% p.a. 0.175% p.a.
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Baa 2 BBB 1.250% p.a. 0.200% p.a.
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Baa 3 or below BBB- or below 1.500% p.a. 0.225% p.a.
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Such fees shall be payable on the last Business Day of each consecutive calendar quarter, commencing on the first such day to occur after the date hereof. In case of a split Moody's and S&P Rating, the higher rating shall prevail, unless the difference is two levels or more, in which case a rating which is one level above the lower rating shall prevail. The Fee Rate shall change as and when a relevant change shall occur in the Moody's Rating or the S&P Rating.
(b) The Applicant agrees to pay the Bank all other reasonable fees of the Bank (at the rates specified by the Bank from time to time in schedules delivered by the Bank to the Applicant) with respect to each Letter of Credit (including, without limitation, all fees associated with any amendment to, drawing under, banker's acceptance pursuant to, or transfer of a Letter of Credit), such fees to be payable on demand by the Bank therefor.
(c) Without limiting the obligations of the Applicant hereunder, the Applicant hereby requests that the Bank, and the Bank agrees to, send invoices for fees directly to AHP.
SECTION 8 COMPUTATION OF INTEREST AND FEES. All interest and fees hereunder shall be computed for the actual number of days for which such interest or fees are due elapsed on the basis of a year of 365 days (in the case of interest) or 360 days (in the case of fees). The interest rate applicable to Guarantee and Letter of Credit reimbursement obligations shall change simultaneously with each change in the Prime Rate.
SECTION 9 MAKING OF PAYMENTS. (a) All payments of principal of, or interest on, letter of credit reimbursement obligations, all payments of fees and all other payments hereunder shall be made by the Applicant in Euros and in immediately available funds to the Bank at its principal office in Chicago not later than 12:30 P.M., Chicago time, on the date due, and funds received after that time shall be deemed to have been received by the Bank on the next Business Day. If any payment of principal, interest or fees falls due on a day which is not a Business Day, then such due date shall be extended to the next Business Day, and additional interest shall accrue and be payable for the period of such extension.
(b) The Applicant irrevocably agrees that the Bank or any affiliate thereof may (but neither the Bank nor any such affiliate shall be obligated to) debit any deposit account of the Applicant in an amount sufficient to pay any fee, reimbursement obligation or other amount that is due and payable hereunder. The Bank or the applicable affiliate shall promptly notify the Applicant of any such debit (but failure of the Bank or any such affiliate to do so shall not impair the effectiveness thereof or impose any liability on the Bank or such affiliate).
(c) The Applicant shall reimburse the Bank for each payment under a Letter of Credit in the same currency in which such payment was made; provided that, if the Bank so requests (in its sole discretion), the Applicant shall reimburse the Bank in United States dollars for any payment under a Letter of Credit made in a foreign currency at the rate at which the Bank could sell such foreign currency in exchange for United States dollars for transfer to the place of payment of such payment or, if there is no such rate, the United States dollar equivalent of the Bank's actual cost of settlement. The Applicant agrees to pay the Bank on demand in United States dollars such amounts as the Bank may be required to expend to comply with any and all governmental exchange regulations now or hereafter applicable to the purchase of foreign currency.
(d) All payments by the Applicant hereunder shall be made free and clear of and without deduction for any present or future taxes, fees, duties, withholdings or other charges of any nature whatsoever imposed by any taxing authority, but excluding franchise taxes and taxes imposed on or measured by the Bank's net income or receipts (such non-excluded items being called "Taxes"). If any withholding or deduction from any payment to be made by the Bank hereunder is required in respect of any Taxes pursuant to any applicable law, rule or regulation, then the Applicant will
(i) pay directly to the relevant authority the full amount required to be so withheld or deducted;
(ii) promptly forward to the Bank an official receipt or other documentation reasonably satisfactory to the Bank evidencing such payment to such authority; and
(iii) pay to the Bank such additional amount as is necessary to ensure that the net amount actually received by the Bank will equal the full amount the Bank would have received had no such withholding or deduction been required.
Moreover, if any Taxes are directly asserted against the Bank or on any payment received by the Bank hereunder, the Bank may pay such Taxes and the Applicant shall promptly pay such additional amount (including any penalty, interest or expense) as is necessary in order that the net amount received by the Bank after the payment of such Taxes (including any Taxes on such additional amount) shall equal the amount the Bank would have received had no such Taxes been asserted.
If the Applicant fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Bank the required receipts or other required documentary evidence, the Applicant shall indemnify the Bank for any incremental Tax, interest, penalty or expense that may become payable by the Bank as a result of such failure.
SECTION 10 INCREASED COSTS. If, after the date hereof, the adoption of, or any change in, any applicable law, rule or regulation, or any change in the interpretation or administration of any applicable law, rule or regulation by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by the Bank with any request, guideline or directive (whether or not having the force of law) of any such authority, central bank or comparable agency,
(a) affects or would affect the amount of capital required or expected to be maintained by the Bank or any corporation controlling the Bank and (taking into consideration the Bank's or such controlling corporation's policies with respect to capital adequacy) the Bank determines that the amount of such capital is increased as a consequence of this Agreement or the Credits; or
(b) imposes, modifies or deems applicable any reserve (including, without limitation, any reserve imposed by the Board of Governors of the Federal Reserve System), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by the Bank with respect to letters of credit or guarantees, or imposes on the Bank any other condition affecting this Agreement or any Credit, and the Bank determines that the result of any of the foregoing is to increase the cost to, or to impose a cost on, the Bank of issuing or maintaining any Credit or of making any payment or disbursement under any Credit, or to reduce the amount of any sum receivable by the Bank under this Agreement;
then within ten Business Days after demand by the Bank (which demand shall be accompanied by a statement setting forth in reasonable detail the basis of such demand and a calculation thereof in reasonable detail), the Applicant shall pay directly to the Bank such additional amount as will compensate the Bank for such increased capital requirement, such increased cost or such reduction, as the case may be. Determinations and statements of the Bank pursuant to this Section 10 shall be conclusive absent manifest error, and the provisions of this Section 10 shall survive termination of this Agreement.
SECTION 11 CASH COLLATERALIZATION EVENTS AND THEIR EFFECT.
11.1 Cash Collateralization Events. Each of the following shall constitute a Cash Collateralization Event under this Agreement:
11.1.1 the Moody's Rating shall fall below Baa 1 and the S&P Rating shall fall below BBB+; or
11.1.2 either the Moody's Rating or the S&P Rating shall, in a single event, fall two or more rating levels to a level below Baa 1 or BBB+ (as the case may be).
11.2 Effect of Cash Collateralization Event. If any Cash Collateralization Event shall occur and be continuing, the Bank may demand that the Applicant deliver to the Bank, within ten Business Days of such demand, cash collateral in an amount equal to the maximum amount available to be drawn under the Letter of Credit, whereupon the Applicant shall immediately become obligated to deliver to the Bank within ten Business Days cash collateral in an amount equal to the maximum amount available to be drawn under Letter of Credit, such cash collateral to be held, invested, administered and applied as provided in Section 5 hereof.
SECTION 12 EVENTS OF DEFAULT AND THEIR EFFECT.
12.1 Events of Default. Each of the following shall constitute an Event of Default under this Agreement:
12.1.1 Non-Payment of Liabilities, etc. Default in the payment when due of any principal of any Liabilities; or default, and continuance thereof for five days after notice thereof from the Bank, in the payment when due of any interest on any Liabilities, fees or other amounts payable by the Applicant hereunder.
12.1.2 Bankruptcy, etc. The Applicant or any guarantor of the Liabilities shall become insolvent or admit in writing its inability to pay debts as they mature, or the Applicant or any such guarantor shall apply for, consent to or acquiesce in the appointment of a trustee or receiver, or in the absence of such application, consent or acquiescence, a trustee or receiver is appointed for the Applicant or any such guarantor, or any proceeding under any bankruptcy or insolvency law or any dissolution or liquidation proceeding is instituted by or against the Applicant or any such guarantor and, if instituted against the Applicant or such guarantor, remains for 60 days undismissed, or any writ of attachment is issued against any substantial portion of the Applicant's or any such guarantor's property and is not released within 60 days of service, or the Applicant or any such guarantor takes any action to authorize, or in furtherance of, any of the foregoing.
12.1.3 Cross Default. The Applicant or any of its Significant Subsidiaries shall (i) default in any payment of principal of or interest on any Indebtedness (other than the Liabilities) in a principal amount outstanding of at least $100,000,000 in the aggregate for the Applicant 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 Applicant 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 Applicant and its Significant Subsidiaries or Guarantee Obligation in a principal amount outstanding of at least $100,000,000 in the aggregate for the Applicant 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.
12.1.4 Representations and Warranties. Any representation or warranty made by the Applicant herein or in any writing furnished in connection with or pursuant to this Agreement shall be false or misleading in any material respect on or as of the date made.
12.1.5 Cash Collateralization Event. A Cash Collateralization Event shall have occurred and be continuing and the Applicant, after being demanded therefor by the Bank, shall have failed to deliver to the Bank within ten Business Days cash collateral in an amount equal to the maximum amount available to be drawn under the Letter of Credit.
12.1.6 Top-Up Events. An event described in Section 5.10 shall occur and the Applicant, after being demanded therefor by the Bank, shall have failed to deliver to the Bank, within five Business Days of such demand, cash collateral in an amount sufficient so that the aggregate amount of the Deposits equals the maximum amount available to be drawn under the Letter of Credit.
12.2 Effect of Event of Default. If any Event of Default described in
Section 12.1.2 shall occur, all outstanding Liabilities shall immediately become
due and payable and the Applicant shall immediately become obligated to deliver
to the Bank cash collateral in an amount equal to the maximum amount available
to be drawn under the Letter of Credit; and if any other Event of Default shall
occur, the Bank may declare all outstanding Liabilities to be due and payable
and may demand that the Applicant immediately deliver to the Bank cash
collateral in an amount equal to the maximum amount available to be drawn under
the Letter of Credit, whereupon all outstanding Liabilities shall become
immediately due and payable and the Applicant shall immediately become obligated
to deliver to the Bank cash collateral in an amount equal to the maximum amount
available to be drawn under the Letter of Credit. All cash collateral required
to be delivered pursuant to this Section 12.2 shall be held, invested,
administered and applied as provided in Section 5 hereof. The Bank shall
promptly advise the Applicant of any such declaration, but failure to do so
shall not impair the effect of such declaration.
SECTION 13 GENERAL.
13.1 Waiver; Amendments. No delay on the part of the Bank in the exercise of any right, power or remedy shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or remedy preclude other or further exercise thereof, or the exercise of any other right, power or remedy. No amendment, modification or waiver of, or consent with respect to, any provision of this Agreement or any Credit issued hereunder shall be effective unless the same shall be in writing and signed and delivered by the Bank and the Applicant, and then any such amendment, modification, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.
13.2 Notices. (a) Except as otherwise expressly provided herein, all notices hereunder shall be in writing (including facsimile and electronic transmission, which shall be considered original writings). Notices given by mail shall be deemed to have been given three Business Days after the date sent if sent by registered or certified mail, postage prepaid, to the applicable party at its address shown below its signature hereto or at such other address as such party may, by written notice received by the other party to this Agreement, have designated as its address for notices. Notices given by facsimile or electronic transmission shall be deemed to have been given when sent. Notices sent by any other means shall be deemed to have been given when received (or when delivery is refused).
(b) The Bank may rely on any writing (including any facsimile, any electronic transmission or any information on a computer disk or similar medium which may be reduced to writing), that the Bank believes in good faith to have been received from an authorized officer, employee or representative of the Applicant, and the Bank shall not be liable for any action taken in good faith with respect to any writing, message or instruction from an unauthorized person. The Bank shall not be under any duty to verify the identity of any person submitting any Request or other writing or making any other communication hereunder. Notwithstanding the foregoing, the Bank is not obligated to recognize the authenticity of any request to issue, amend, honor or otherwise act on any Credit issued hereunder that is not evidenced to the Bank's satisfaction by a writing originally signed by a person the Applicant has certified is authorized to act for the Applicant hereunder or by a message or instruction authenticated to the Bank's satisfaction.
13.3 Costs, Expenses and Taxes; Indemnification. (a) The Applicant agrees to pay on demand all reasonable out-of-pocket costs and expenses of the Bank (including the reasonable fees and charges of counsel for the Bank) in connection with (i) the enforcement of this Agreement and the Liabilities and (ii) the creation, perfection, maintenance, termination and release of the Bank's security interest in the Cash Collateral Account and the Deposit. In addition, the Applicant agrees to pay, and to save the Bank harmless from all liability for, any stamp or other taxes which may be payable in connection with the execution, delivery or enforcement of this Agreement, the issuance of Credits hereunder, or the issuance of any other instrument or document provided for herein or delivered or to be delivered hereunder or in connection herewith.
(b) The Applicant agrees to indemnify the Bank and each of its affiliates and each of their respective officers, directors, employees and agents (each an "Indemnified Party") against, and to hold each Indemnified Party harmless from, any and all actions, causes of action, suits, losses, costs, damages, expenses (including reasonable attorneys' fees and charges, expert witness fees and other dispute resolution expenses) and other liabilities (collectively the "Indemnified Liabilities") incurred by any Indemnified Party as a result of, or arising out of, or relating to, this Agreement or any Credit (and without regard to whether the applicable Indemnified Party is a party to any proceeding out of which such Indemnified Liabilities arise), except to the extent that a court of competent jurisdiction determines in a final, non-appealable order that any Indemnified Liability resulted directly from the gross negligence or willful misconduct of such Indemnified Party. Without limiting the generality of the foregoing sentence, the term "Indemnified Liabilities" includes any claim or liability in which an advising, confirming or other nominated bank, or a beneficiary requested to issue its own undertaking, seeks to be reimbursed, indemnified or compensated. If and to the extent the foregoing undertaking may be unenforceable for any reason, the Applicant agrees to make the maximum contribution to the payment of each of the Indemnified Liabilities which is permitted under applicable law.
(c) Without limiting clause (b), the Applicant agrees to indemnify the Bank, and to hold the Bank harmless from, any loss or expense incurred by the Bank as a result of any judgment or order being given or made for the payment of any amount due hereunder in a particular currency (the "Currency of Account") and such judgment or order being expressed in a currency (the "Judgment Currency") other than the Currency of Account and as a result of any variation having occurred in the rate of exchange between the date which such amount is converted into the Judgment Currency and the date of actual payment pursuant thereto. The foregoing indemnity shall constitute a separate and independent obligation of the Applicant.
(d) All obligations provided for in this Section 13.3 shall survive any termination of this Agreement.
13.4 Captions. Section captions used in this Agreement are for convenience only and shall not affect the construction of this Agreement.
13.5 Governing Law. This Agreement shall be a contract made under and governed by the laws of the State of New York applicable to contracts made and to be performed entirely within such State, provided that Sections 5.2 through 5.6 shall be governed by and construed in accordance with English law. Except to the extent inconsistent with such state law or otherwise expressly stated in the Letter of Credit, the Letter of Credit and this Agreement also are subject to the terms of the ISP. Whenever possible each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. All obligations of the Applicant and rights of the Bank expressed herein shall be in addition to and not in limitation of those provided by applicable law.
13.6 Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Agreement.
13.7 Successors and Assigns. This Agreement shall be binding upon the Applicant and its successors and assigns, provided that the Applicant may not assign any of its rights or obligations hereunder without the prior written consent of the Bank.
13.8 Right of Bank to Act through Branches and Affiliates. The Bank may cause any Letter of Credit requested by the Applicant to be issued by a branch or affiliate of the Bank, and all references to the "Bank" herein or in any related document shall include each applicable branch or affiliate.
13.9 Confidentiality. Each party agrees not to disclose, not to make any public announcements, or to issue any press release or any other form of communication regarding this Agreement or the transactions contemplated hereby ("Disclosure") without the prior written consent of the other party, except if Disclosure is required by law or by governmental authority or any other regulatory body, in which case the relevant party shall use all reasonable efforts to timely consult the other party in advance of any Disclosure and use its best efforts to avoid Disclosure. Notwithstanding the foregoing and any other provision herein, the Bank and the Applicant (and each employee, representative or other agent of the Bank and the Applicant) may disclose to any and all persons, without limitation of any kind, the U.S. federal income tax treatment and tax structure, if any, of the transactions contemplated by this Agreement, other than information for which nondisclosure is reasonably necessary in order to comply with applicable securities laws.
13.10 Mitigation; Limitation of Liability. The Applicant agrees to take reasonable action to avoid or reduce the amount of any damages which may be claimed against the Bank. For example, (a) in the case of wrongful honor, the Applicant agrees to enforce its rights arising out of the underlying transaction (except to the extent that enforcement is impractical due to the insolvency of the beneficiary or other Person from whom the Applicant might otherwise recover), and (b) in the case of wrongful dishonor, the Applicant agrees to act specifically and timely to authorize the Bank to effect a cure and give written assurances to the beneficiary that a cure is being arranged. The Applicant's aggregate remedies against the Bank for honoring a presentation or retaining honored documents in breach of the Bank's obligations to the Applicant (whether arising under this Agreement, applicable letter of credit practice or law, or any other agreement or law) are limited to the aggregate amount paid by the Applicant to the Bank with respect to the honored presentation.
13.11 Subrogation. The Bank shall be subrogated (for purposes of defending against the Applicant's claims and proceeding against others to the extent of any liability of the Bank to the Applicant) to the Applicant's rights against any Person who may be liable to the Applicant on any underlying transaction, to the rights of any holder in due course or Person with similar status against the Applicant and to the rights of the beneficiary of any Letter of Credit or its assignee or any Person with similar status against the Applicant.
13.12 Termination; Reduction. This Agreement shall terminate when all the Credits shall have expired or been terminated and all outstanding Liabilities shall have been paid in full. If the Bank receives evidence satisfactory to it that the aggregate amount of all outstanding Guarantees is permanently reduced with the consent of SVG and all affected beneficiaries of Third Party Guarantees, the Bank shall promptly reduce the maximum amount available to be drawn under the Letter of Credit by an amount equal to the amount of such permanent reduction. If the Bank receives evidence satisfactory to it that all outstanding Guarantees have been terminated with the consent of SVG and all beneficiaries of Third Party Guarantees, the Bank shall promptly terminate the Letter of Credit.
13.13 Jurisdiction. ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY REQUEST, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF NEW YORK COUNTY, NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE BANK'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE APPLICANT HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF NEW YORK COUNTY, NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION. THE APPLICANT FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, TO THE ADDRESS SET FORTH BENEATH ITS SIGNATURE HERETO (OR SUCH OTHER ADDRESS AS IT SHALL HAVE SPECIFIED IN WRITING TO THE BANK AS ITS ADDRESS FOR NOTICES HEREUNDER) OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. THE APPLICANT AND THE BANK EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
13.14 Waiver of Jury Trial. EACH OF THE APPLICANT AND, BY ISSUING ANY CREDIT, THE BANK HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR ANY REQUEST, INSTRUMENT, DOCUMENT, AMENDMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written.
WYETH ABN AMRO BANK N.V.
--------------------------------------- ---------------------------------------
[Name of Applicant] [Name of Bank]
By: /s/ Jack M. O'Connor /s/ Eric Oppenheimer
--------------------------------------- ---------------------------------------
Title: Vice President and Treasurer By: Eric Oppenheimer
Title: Vice President
By: /s/ Jack M. O'Connor
---------------------------------
Title: /s/ Todd J. Miller
--------------------------------- ---------------------------------------
Address: Wyeth By: Todd J. Miller
Five Giralda Farms Title: Assistant Vice President
Madison, New Jersey 07940
Attention: Vice President and Treasurer
Address: 55 East 52nd Street, 7th Floor
New York, New York 10055
Attention:Joel Krikston (VP Healthcare)
Facsimile:212-409-1641
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This Agreement has been re-executed by the Applicant and the Bank on the 16th day of January, 2004 for the purpose of the recreation by the Applicant of the charge under Section 5.1 hereof in consideration of the payment by the Bank to the Applicant of the sum of one dollar (the receipt and sufficiency of which is hereby acknowledged by the Applicant).
WYETH ABN AMRO BANK N.V.
------------------------------- ---------------------------------------
[Name of Applicant] [Name of Bank]
By: By:/s/ Eric Oppenheimer
-------------------------- --------------------------
Title: Vice President and Treasurer Name: Eric Oppenheimer
Title: Vice President
By:/s/ Todd J. Miller
--------------------------
Name: Todd J. Miller
Title: Assistant Vice President
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ANNEX 1
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PERMITTED INVESTMENTS
o Ratings: Minimum ratings as shown below by any two of the NRSROs (nationally recognized statistical rating organizations); at least one of the two ratings must be from either Standard & Poor's or Moody's.
------------------------------------------------
Standard & Moody's Fitch
Poor's
------------------------------------------------
Short-Term A-1 P-1 F-1
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Long-Term * A- A3 A-
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* Commercial Paper investments are permitted if issuer has no long-term ratings, provided short-term ratings for S&P and/or Fitch are A-1+/F-1+ (Moody's highest rating is already shown in chart above)[See "Allowable Investments-Commercial Paper"].
Note regarding allowable investments within Money Market Funds ("MMFs"): MMF investments are permitted in funds which hold only First Tier Securities, as defined under SEC Rule 2a-7 of the Investment Company Act of 1940. First Tier Securities refer to securities that are rated in the highest rating category for short-term debt obligations, by any two NRSROs. There are currently three NRSROs, including Standard & Poor's Corp., Moody's Investors Service, Inc., and Fitch Investors Services, Inc. It should also be noted that the definition also allows securities that are rated in the highest category by one NRSRO; securities that are unrated but are of comparable quality to a security rated in the highest category, as determined by the fund's board of directors, and; government securities (issued or guaranteed by the U.S. or its instrumentalities).
o Maturity: Maximum maturity of portfolio investments - up to one year.
o Country exposure1 is limited to those countries with risk rankings of
1-20 as published on a semi-annual basis (March and September) by
Euromoney2.
o Currency - investments can be denominated in dollars or foreign
currency provided it does not create any foreign exchange exposure
with a notional value in excess of $5 million (i.e. currency is
hedged).
(1) U. S. Treasury Direct Obligations - no limit. U. S. Government Agency/Government-Sponsored Enterprise (GSE) Obligations - no limit.
(2) Certificates of Deposit, Time Deposits, Bankers Acceptances, and Bank
Notes
o Domestic, Eurodollar and Yankee.
o Issued by commercial banks/bank holding companies or their
guaranteed affiliates with assets of $10 billion or more on a
consolidated basis.
(3) Commercial Paper
o Issued by financial institutions and corporations (including
their financing divisions), domestic and foreign.
o If issuer has no long-term rating, the short-term ratings must be
A-1+/P-1/F-1 by any two NRSROs (at least one of the two ratings
must be from either Standard & Poor's or Moody's) and the maximum
investment is $50 MM. o No asset-backed or Letter of Credit -
enhanced paper.
(4) Repurchase Agreements (including Tri-Party Repurchase Agreements)
o Restricted to dealing with the primary U. S. Government
Securities dealers or their affiliates, as accessed through
Bloomberg (sample listing is attached for reference as Attachment
2), or commercial banks/bank holding companies or their
guaranteed affiliates with assets of $10 billion or more on a
consolidated basis.
o Overnight and term Repurchase Agreements collateralized by U. S.
Treasury direct obligations, regardless of the maturity of the
underlying collateral - no limit on investment amount.
o Overnight and term Repurchase Agreements collateralized by U. S.
Government Agency/GSE obligations, regardless of the maturity of
the underlying collateral - no limit on investment amount.
o Overnight and term Repurchase Agreements collateralized by
Commercial Paper, Certificates of Deposit, Time Deposits, Bankers
Acceptances, and Bank Notes: maximum maturity of the underlying
collateral - one year; investment limit must meet the criteria
set forth in (2) and (3) above.
(5) Money Market Funds
o Funds must be regulated by Rule 2a-7 of the Investment Company
Act of 1940. In accordance with Rule 2a-7, the fund will maintain
a dollar-weighted average portfolio maturity of 90 days or less,
purchasing only securities with remaining maturities of 397 days
(13 months) or less.
o Funds must invest only in First Tier Securities as defined above
[See "Overall Guidelines"].
o As set forth in Rule 2a-7, funds may invest in asset-backed
securities.
o Funds must have at least $1 billion in assets.
(6) Tax Advantaged Products
o Tax exempt notes and commercial paper
- Rating of both A-1+ (S&P) and MIG-1 (Moody's Investment
Grade - I).
EXHIBIT A
The undersigned,
ABN AMRO Bank N.V., established at Amsterdam, the Netherlands, also having an office at ......................., hereinafter called the "Bank",
WHEREAS:
A. Schuurmans & Van Ginneken B.V., established at Weesp (hereinafter:
"Beneficiary") alleges to have a claim against AHP Manufacturing B.V.,
trading under the name of "Wyeth Medica Ireland", established at Hoofddorp,
the Netherlands, (hereinafter: "Debtor"), as specified in the statement of
claim, dated 17 June 2003 which the Beneficiary has filed in the legal
proceedings between the Debtor and theBeneficiary before the High Court in
Dublin, Ireland with No. 12082 P, which is currently calculated at EUR
135,000,000.00 (in writing: one hundred and thirty-five million euros)
(hereinafter called "the Claim");
B. in relation to the Claim, the Beneficiary has started proceedings against the Debtor before the High Court in Dublin, Ireland with No. 12082 P, which proceedings together with the following proceedings in appeal are defined as: the "Proceedings";
C. the Beneficiary has levied prejudgement attachments in the District Courts of Haarlem and Amsterdam in the Netherlands on the Debtor in respect of the Claim;
D. the Debtor has requested the Bank to issue a bank guarantee for the benefit of the Beneficiary for the purpose of the lifting of such attachments and to prevent any further conservatory attachments in respect of the Claim;
STATES THE FOLLOWING:
1. The Bank hereby confirms that it will irrevocably be a guarantor vis-a-vis the Beneficiary for the payment of all that becomes due to the Beneficiary by the Debtor in respect of the Claim as demonstrated in the pieces of documentary evidence specified under 2., or in the preamble of 3. or in paragraphs a. and b., subject to the provisions set out below, nevertheless such payment shall not exceed the Maximum Amount as defined in article 4. hereof.
2. At the Beneficiary's first written demand and upon the simultaneous surrendering of copy of a decision of an Irish court rendered in the Proceedings, accompanied by a statement of a solicitor registered to practice in Ireland, to the effect that the decision is final and not or no longer open to appeal, the Bank undertakes to pay to the Beneficiary the sum which the Beneficiary declares in writing to be due and payable by the Debtor in respect of the Claim, it being understood that the Bank shall neither be bound to pay more than the sum which the Beneficiary can claim from the Debtor as shown by the above-mentioned documentary evidence, nor be bound to pay more than the Maximum Amount as defined in article 4.
3. If the Debtor is declared bankrupt the Bank, after the expiry of a period of four (4) months after the day on which the Beneficiary has informed the Bank by registered mail that the Debtor has been declared bankrupt accompanied by written confirmation of the receiver that the Debtor has been declared bankrupt, shall pay the Beneficiary the sum (not exceeding the Maximum Amount as defined in article 4) which the Beneficiary declares in writing to be due and payable by the Debtor in respect of the Claim unless:
a)the Bank served a writ of summons on the Beneficiary within the aforementioned four (4) months period with a view to causing the validity and the amount of the claim to be determined in legal proceedings and to cause the Beneficiary to be barred from invoking this guarantee, in which case the Bank will effect payment (not exceeding the Maximum Amount as defined in article 4) to the Beneficiary against surrender of a copy of a decision of a Dutch court, which is not or no longer subject to appeal or cassation , rendered in proceedings between the Beneficiary and the Bank; or
b)the receiver in the bankruptcy served a writ on the Beneficiary, within the aforementioned four (4) months period, to appear in court with a view to causing the validity and amount of the Claim to be determined in legal proceedings in the Dutch court and to bar the Beneficiary from invoking this guarantee, and the receiver notified the Bank of this by registered mail within the aforementioned period, in which case the Bank will effect payment to the Beneficiary against surrender of a copy of a decision of a Dutch court rendered in proceedings between the Beneficiary and the receiver, accompanied by a statement of a solicitor registered to practise in the Netherlands to the effect that no notice of appeal, cassation or opposition was received within the legal term laid down for this, and that to his knowledge no notice of appeal or cassation was given against the aforementioned decision within this term, or that no objection to a default judgement was made within 6 (six) weeks after service of the judgement to the Bank,
it being understood that the Bank (in the cases described under a and b) shall not be bound to pay more than the sum which the Beneficiary can claim from the Debtor as shown by any of the aforementioned pieces of documentary evidence, nor be bound to pay more than the Maximum Amount as defined in article 4.
The provisions laid down in this article 3 shall not prejudice the Beneficiary's rights to demand payment pursuant to article 2, however: if the Beneficiary demands payment according to the terms and provisions laid down in article 2, the Beneficiary, in doing so, waives the right to demand payment according to the terms and provisions as laid down in article 3, and vice versa.
4. This guarantee covers a maximum amount of EUR 135,000,000,= (in words: one hundred and thirty-five million euros), defined as the "Maximum Amount".
If, in the event of a written demand for payment in respect of this guarantee, the Beneficiary explicitly states that such demand concerns a partial payment, the guarantee will continue to remain in force for the balance.
5. This guarantee shall expire
a)upon payment by the Bank of the Maximum Amount or the amount awarded to
the Beneficiary as specified in the pieces of documentary evidence
specified under 2., or in the preamble of 3., or in paragraphs a. and
b. of 3.; or
b)upon the receipt by the Bank of a legal opinion of a solicitor registered
to practise in Ireland stating that either one of the following events
occurred: 1)The Proceedings have been finally withdrawn by the
Beneficiary, or 2)The Proceedings have lead to a final and irrevocable
judgement that
i) the High or Supreme court does not have jurisdiction to hear this
action, or
ii)the Beneficiary has no claim on the Debtor, or
iii)the claim of the Beneficiary against the Debtor has been dismissed,
or
iv)The Proceedings have been cancelled for want of prosecution; or
c)on December 10, 2013, unless one month before that date, the Bank has
received a written statement from a solicitor, registered to practice in
Ireland and acting on behalf of the Beneficiary, to the effect that the
Proceedings are still pending, or that, pursuant to article 3,
proceedings between the Beneficiary and the Bank or the receiver are
pending, in which case this guarantee will expire on December 10, 2018.
Upon expiry of this guarantee, the Beneficiary will no longer be entitled to lodge any claim in respect of this guarantee.
7. Any claim under this guarantee has to be served exclusively to notaris Mr. C. Boodt or his successor................(address) quoting................ as a reference..............
8. This guarantee shall be governed exclusively by Dutch law. Any disputes between the Bank and the Beneficiary concerning this guarantee, as well as the proceedings as meant in article 3., paragraph a., shall in the first instance be submitted exclusively to the competent Court at Amsterdam.
Thus made and signed in ...........................on #
ABN AMRO Bank N.V.
EXHIBIT B
The undersigned,
ABN AMRO Bank N.V., established at Amsterdam, the Netherlands, also having an office at ......................., hereinafter called the "Bank",
WHEREAS:
A. Schuurmans & Van Ginneken B.V., established at Weesp (hereinafter:
"Beneficiary"), alleges to have a claim against AHP Manufacturing B.V.,
trading under the name of "Wyeth Medica Ireland", established at Hoofddorp,
the Netherlands, (hereinafter: "Debtor"), as specified in the statement of
claim, dated 17 June 2003 which the Beneficiary has filed in the legal
proceedings between the Debtor and the Beneficiary before the High Court in
Dublin, Ireland with No. 12082 P, which is currently calculated at EUR
135,000,000.00 (in writing: one hundred and thirty-five million euros)
(hereinafter called "the Claim");
B. in relation to the Claim, the Beneficiary has started proceedings against the Debtor before the High Court in Dublin, Ireland with No. 12082 P, which proceedings together with the following proceedings in appeal are defined as: the "Proceedings";
C. the Beneficiary has levied prejudgement attachments in the District Courts of Haarlem and Amsterdam in the Netherlands on the Debtor in respect of the Claim;
D. the Debtor has requested the Bank to issue a bank guarantee for the benefit of the Beneficiary for the purpose of the lifting of such attachments and to prevent any further conservatory attachments in respect of the Claim;
E. the Claim also includes damages of third parties for which the Beneficiary is held liable by these third parties and for which the Beneficiary seeks recourse against the Debtor;
F. besides, (some of these) third parties (jointly or separately) seek recourse against the Debtor directly and will start or have started legal proceedings against the Debtor in order to seek to recover their alleged losses directly from the Debtor;
G. at the joint request of the Debtor and the Beneficiary, the Bank has issued in relation thereto the following separate bank guarantee(s):
no. GAR/........in favour of........to the maximum amount of EUR ......... no. GAR/........in favour of........to the maximum amount of EUR ......... no. GAR/........in favour of........to the maximum amount of EUR ......... etc... |
which beneficiaries (both jointly and separately) are defined as "Third Parties" and which guarantees (both jointly and separately) are defined as "Third Party Guarantees";
H. each time the Bank issues a Third Party Guarantee, this guarantee shall be replaced by a guarantee which is identical to this guarantee apart from the fact that it will specify i)the name of each of the Third Parties to whom a Third Party Guarantee is issued and ii) the maximum amount of the Third Party Guarantees.
I. the Debtor wishes the Beneficiary to refrain from claiming under this guarantee in respect of the alleged claims of the Third Parties as long as and to the extent that the Maximum Amount of this guarantee has been decreased in accordance with article 4 below.
STATES THE FOLLOWING:
1. The Bank hereby confirms that it will irrevocably be a guarantor vis-a-vis the Beneficiary for the payment of all that becomes due to the Beneficiary by the Debtor in respect of the Claim as demonstrated in the pieces of documentary evidence specified under 2., or in the preamble of 3. or in paragraphs a. and b., subject to the provisions set out below, nevertheless such payment shall not exceed the Maximum Amount as defined in article 4. hereof
2. At the Beneficiary's first written demand and upon the simultaneous surrendering of a copy of a decision of an Irish court rendered in the Proceedings , accompanied by a statement of a solicitor registered to practice in Ireland, to the effect that the decision is final and not or no longer open to appeal, the Bank undertakes to pay to the Beneficiary the sum which the Beneficiary declares in writing to be due and payable by the Debtor in respect of the Claim, it being understood that the Bank shall neither be bound to pay more than the sum which the Beneficiary can claim from the Debtor as shown by the above-mentioned documentary evidence, nor be bound to pay more than the Maximum Amount as defined in article 4.
3. If the Debtor is declared bankrupt the Bank, after the expiry of a period of four (4) months after the day on which the Beneficiary has informed the Bank by registered mail that the Debtor has been declared bankrupt accompanied by written confirmation of the receiver that the Debtor has been declared bankrupt, shall pay the Beneficiary the sum (not exceeding the Maximum Amount as defined in article 4) which the Beneficiary declares in writing to be due and payable by the Debtor in respect of the Claim unless:
a)the Bank served a writ of summons on the Beneficiary within the
aforementioned four (4) months period with a view to causing the validity
and the amount of the claim to be determined in legal proceedings and to
cause the Beneficiary to be barred from invoking this guarantee, in which
case the Bank will effect payment (not exceeding the Maximum Amount as
defined in article 4) to the Beneficiary against surrender of a copy of a
decision of a Dutch court, which is not or no longer subject to appeal or
cassation , rendered in proceedings between the Beneficiary and the Bank;
or
b)the receiver in the bankruptcy served a writ on the Beneficiary, within
the aforementioned four (4) months period, to appear in court with a view
to causing the validity and amount of the Claim to be determined in legal
proceedings in the Dutch court and to bar the Beneficiary from invoking
this guarantee, and the receiver notified the Bank of this by registered
mail within the aforementioned period, in which case the Bank will effect
payment to the Beneficiary against surrender of a copy of a decision of a
Dutch court rendered in proceedings between the Beneficiary and the
receiver, accompanied by a statement of a solicitor registered to
practise in the Netherlands to the effect that no notice of appeal,
cassation or opposition was received within the legal term laid down for
this, and that to his knowledge no notice of appeal or cassation was
given against the aforementioned decision within this term, or that no
objection to a default judgement was made within 6 (six) weeks after
service of the judgement to the Bank,
it being understood that the Bank (in the cases described under a and b) shall not be bound to pay more than the sum which the Beneficiary can claim from the Debtor as shown by any of the aforementioned pieces of documentary evidence, nor be bound to pay more than the Maximum Amount as defined in article 4.
The provisions laid down in this article 3 shall not prejudice the Beneficiary's rights to demand payment pursuant to article 2, however: if the Beneficiary demands payment according to the terms and provisions laid down in article 2, the Beneficiary, in doing so, waives the right to demand payment according to the terms and provisions as laid down in article 3, and vice versa.
4. The amount covered by this guarantee, pursuant to this provision defined as the "Maximum Amount", will be decreased by the total sum of the maximum amounts of the Third Party Guarantees as long as the Third Parties have, in the reasonable opinion of the Bank, which shall be binding, the right to claim under the Third Party Guarantees and will in no circumstances exceed the amount of EUR 135,000,000 (in words: one hundred and thirty five million Euros). In the event and as far as (one or more of) the Third Parties explicitly, irrevocably and unconditionally waive their rights in writing under (one or more of) the Third Party Guarantees by issuing a written statement to that effect to the Bank, the Maximum Amount will be raised accordingly, however, in no circumstances will the Maximum Amount exceed the amount of EUR 135,000,000 (in words: one hundred and thirty five million euros). Notwithstanding the aforesaid, the total amount of EUR 135,000,000.= will be decreased definitely by (all) the sum(s) that will be paid by the Bank under this guarantee and under (one or more of ) the Third Party Guarantees
If, in the event of a written demand for payment in respect of this guarantee, the Beneficiary explicitly states that such demand concerns a partial payment, the guarantee will continue to remain in force for the balance.
5. This guarantee shall expire
a)upon payment by the Bank of the amount awarded to the Beneficiary as
specified in the pieces of documentary evidence specified under 2., or
in the preamble of 3., or in paragraphs a. and b. of 3.;or
b)upon the receipt by the Bank of a legal opinion of a solicitor registered
to practise in Ireland stating that either one of the following events
occurred: 1)the Proceedings have been finally withdrawn by the
Beneficiary, or 2)the Proceedings have lead to a final and irrevocable
judgement that
i) the High or Supreme Court does not have jurisdiction to hear this
action,
ii) the Beneficiary has no claim on the Debtor,
iii)the claim of the Beneficiary against the Debtor has been dismissed,
or
iv) the Proceedings have been cancelled for want of prosecution; or
c)on December 10, 2013, unless one month before that date, the Bank has
received a written statement from a solicitor, registered to practice in
Ireland and acting on behalf of the Beneficiary, to the effect that the
Proceedings are still pending, or that, pursuant to article 3,
proceedings between the Beneficiary and the Bank or the receiver are
pending, in which case this guarantee will expire on December 10, 2018.
Upon expiry of this guarantee, the Beneficiary will no longer be entitled to lodge any claim in respect of this guarantee.
7. Any claim under this guarantee has to be served exclusively to notaris Mr. C. Boodt or his successor................(address) quoting................ as a reference..............
8. This guarantee shall be governed exclusively by Dutch law. Any disputes between the Bank and the Beneficiary concerning this guarantee, as well as the proceedings as meant in article 3., paragraph a., shall in the first instance be submitted exclusively to the competent Court at Amsterdam.
Thus made and signed in ...........................on #
ABN AMRO Bank N.V.
EXHIBIT C
The undersigned,
ABN AMRO Bank N.V., established at Amsterdam, the Netherlands, also having an office at Rotterdam, Coolsingel 119, hereinafter called the "Bank",
WHEREAS:
A. #, established at #, hereinafter called the "Beneficiary", alleges to have a claim against #, hereinafter called the "Debtor", on account of #, currently calculated at #, hereinafter called: the "Claim";
B. The Beneficiary has caused or intends to cause (a) conservatory attachment(s) to be made against the Debtor in respect of the Claim;
C. The Debtor has requested the Bank to issue a bank guarantee for the benefit of the Beneficiary for the purpose of the withdrawal or prevention of such attachment(s) and to prevent any further conservatory attachment in respect of the Claim;
STATES THE FOLLOWING:
1. The Bank hereby confirms that it will irrevocably be a guarantor vis-a-vis the Beneficiary for the payment of all that will be due to the Beneficiary by the Debtor in respect of the Claim as shown by the pieces of documentary evidence specified in 2., paragraphs a. to c. inclusive, or in the preamble of 3. or in paragraphs a. and b., subject to the provisions set out below.
2. At the Beneficiary's first written demand and on the simultaneous production of:
a.a copy of a decision of a Dutch court rendered in proceedings between the
Beneficiary and the Debtor, accompanied by a statement of a solicitor,
registered to practice in the Netherlands, to the effect that no notice
of appeal, cassation or opposition was received within the legal term
laid down for this and that, to his knowledge, no notice of appeal or
cassation was given against the decision within this term, or that
objection to a default judgment was made within six weeks after service
of the judgment to the Bank; or
b.an original copy of an arbitration award rendered in proceedings between
the Beneficiary and the Debtor in connection with the Claim; or
c.a copy, certified by the parties, of a deed containing an amicable
settlement between the Beneficiary and the Debtor in respect of the
Claim,
the Bank undertakes to pay to the Beneficiary the sum which the Beneficiary declares in writing to be due and payable by the Debtor in respect of the Claim, it being understood that the Bank shall not be bound to pay more than the sum which the Beneficiary can claim from the Debtor, as shown by one or more of the above-mentioned pieces of documentary evidence.
PAGE 2 ATTACHMENT GUARANTEE NO. GAR/#
3. If the Debtor is declared bankrupt or if the Debtor falls under the scope of a statutory debt rescheduling regulation, the Bank, after the expiry of a period of four (4) months after the day on which the Beneficiary informed the Bank by registered mail that the Debtor has been declared bankrupt or falls under the scope of a statutory debt rescheduling regulation, accompanied by written confirmation of the receiver or the administrator that the Debtor has been declared bankrupt or that he falls under the scope of a statutory debt rescheduling regulation, shall pay the Beneficiary the sum which the Beneficiary declares in writing to be due and payable by the Debtor in respect of the Claim unless:
a.the Bank served a writ of summons on the Beneficiary within the
aforementioned four (4) months period with a view to causing the validity
and the amount of the claim to be determined in legal proceedings and to
cause the Beneficiary to be barred from invoking this guarantee, in which
case the Bank will effect payment to the Beneficiary against surrender of
a copy of a decision of a Dutch court, which is not or no longer subject
to appeal, rendered in proceedings between the Beneficiary and the Bank;
or
b.the receiver in the bankruptcy or the administrator served a writ on the
Beneficiary within the aforementioned four (4) months period to appear in
court with a view to causing the validity and amount of the Claim to be
determined or to bar the Beneficiary from invoking this guarantee and the
receiver or the administrator notified the Bank of this by registered
mail within the aforementioned period, in which case the Bank will effect
payment to the Beneficiary against surrender of a copy of a decision of a
Dutch court, which is not or no longer subject to appeal, rendered in
proceedings between the Beneficiary and the receiver or the
administrator, and furthermore against surrender of a statement in
accordance with article 2., paragraph a., or a deed as referred to in
article 2., paragraph c., it being understood that the Bank shall not be
bound to pay more than the sum which the Beneficiary can claim from the
Debtor as shown by any of the aforementioned pieces of documentary
evidence.
The provisions laid down in this article do not prejudice the Beneficiary's rights to demand payment pursuant to article 2.
4. This guarantee covers a maximum sum of # (in words: #).
If the Beneficiary, in the event of a written demand for payment in respect of this guarantee, states that such demand concerns a partial payment, the guarantee will continue to remain in force for the balance.
PAGE 3 ATTACHMENT GUARANTEE NO. GAR/#
5. This guarantee expires on December 10, 2013, unless one month before that
date, the Bank has received a written statement from a solicitor,
registered to practice in the Netherlands and acting on behalf of the
Beneficiary, to the effect that proceedings between the Beneficiary and the
Debtor concerning the Claim are still pending or that, pursuant to article
3., proceedings between the Beneficiary and the receiver or the Bank are
still pending, in which case the guarantee will expire on December 10,
2018.
6. After expiry of this guarantee the Beneficiary will no longer be entitled to lodge any claim in respect of this guarantee and the Beneficiary will be obliged to return this guarantee to the Bank / release the Bank from its obligations.
7. Any claim under this guarantee has to be served exclusively to notaris Mr. C. Boodt or his successor (address) quoting as a reference ....
8. This guarantee shall be governed exclusively by Dutch law. Any disputes between the Bank and the Beneficiary concerning this guarantee, as well as the proceedings as meant in article 3., paragraph a., shall in first instance be submitted exclusively to the competent Court in Amsterdam.
Thus made and signed in Rotterdam, on #
ABN AMRO Bank N.V.
EXHIBIT D
STANDBY LETTER OF CREDIT NUMBER:...........
.
AMOUNT:...............................
.
WE, ABN AMRO BANK N.V. CHICAGO BRANCH,
.
TAKING INTO CONSIDERATION,
.
A) THAT, AT OUR REQUEST, UNDER OUR FULL RESPONSIBILITY AND FOR OUR ACCOUNT AND
RISK, YOU WILL ESTABLISH ONE GUARANTEE IN THE FORM OF EXHIBIT A ATTACHED HERETO
UNDER YOUR REFERENCE NUMBER GAR/............, FOR A TOTAL AMOUNT OF EUR
135,000,000.00 (IN WORDS: ONE HUNDRED AND THIRTY-FIVE MILLION EURO), IN FAVOUR
OF SCHUURMANS EN VAN GINNEKEN B.V. (`SVG' OR `THE BENEFICIARY'), THE WORDING OF
WHICH HAS ALREADY BEEN AGREED UPON BETWEEN THE BENEFICIARY, YOURSELVES, AND OUR
CLIENT, WYETH (A DELAWARE CORPORATION, AND REFERRED TO HEREIN AS `WYETH') AND
HAS BEEN RECEIVED AND AGREED UPON BY US,
B) THAT UPON RECEIPT OF INSTRUCTIONS FROM WYETH BY MEANS SPECIFIED IN ANNEX I
ATTACHED HERETO-, YOU WILL ISSUE, UNDER OUR FULL RESPONSIBILITY AND FOR OUR
ACCOUNT AND RISK, AND IN ACCORDANCE WITH THE PROCEDURES SPECIFIED IN ANNEX I
ATTACHED HERETO, ONE OR MORE SEPARATE BANK GUARANTEES AS `THIRD PARTY
GUARANTEE(S)', SUBSTANTIALLY IN THE FORM OF THE TEMPLATE REFERRED TO AS EXHIBIT
C ATTACHED HERETO (WITH SUCH CHANGES FROM THAT FORM, OR IN SUCH DIFFERENT FORM
AS YOU, WYETH, SVG, AND WE SHALL AGREE), PROVIDED, HOWEVER, THAT AT THE SAME
TIME YOU RECEIVE FROM THE BENEFICIARY THE GUARANTEE IN THE FORM OF EXHIBIT A
ATTACHED HERETO TO BE REPLACED BY A GUARANTEE IN THE FORM OF EXHIBIT B ATTACHED
HERETO AS STIPULATED UNDER C HEREINAFTER. . C) THAT UPON RECEIPT OF INSTRUCTIONS
FROM WYETH TO ISSUE SUCH A THIRD PARTY GUARANTEE, UNDER OUR FULL RESPONSIBILITY
AND FOR OUR ACCOUNT AND RISK, AND CONCURRENTLY WITH YOUR ISSUANCE OF SUCH THIRD
PARTY GUARANTEE IN ACCORDANCE WITH THE PROCEDURES SPECIFIED IN ANNEX I ATTACHED
HERETO, YOU WILL REPLACE THE GUARANTEE IN THE FORM OF EXHIBIT A ATTACHED HERETO
BY A GUARANTEE IN THE FORM OF EXHIBIT B ATTACHED HERETO. A GUARANTEE THAT IS IN
THE FORM OF EITHER EXHIBIT A ATTACHED HERETO OR EXHIBIT B ATTACHED HERETO IS
REFERRED TO HEREIN AS A `SVG GUARANTEE.' EACH TIME WYETH SUBSEQUENTLY INSTRUCTS
YOU TO ISSUE A THIRD PARTY GUARANTEE, THE REPLACEMENT SVG GUARANTEE WILL BE
IDENTICAL TO THE REPLACED SVG GUARANTEE APART FROM THE FACT THAT IT WILL
SPECIFY:
.
I)THE NAME OF EACH OF THE THIRD PARTIES IN WHOSE FAVOUR A THIRD PARTY
GUARANTEE IS ISSUED
AND
II) THE MAXIMUM AMOUNT OF THE THIRD PARTY GUARANTEES,
D) THAT THE MAXIMUM AMOUNT OF THE SVG GUARANTEE IN THE FORM OF EXHIBIT A
ATTACHED HERETO AND ALL SUBSEQUENT SVG GUARANTEES IN THE FORM OF EXHIBIT B
ATTACHED HERETO WILL BE DECREASED BY THE TOTAL MAXIMUM AMOUNT(S) OF THE THIRD
PARTY GUARANTEE(S), AND WILL BE INCREASED UNDER THE CIRCUMSTANCES AS MENTIONED
IN ARTICLE 4 OF THE SVG GUARANTEE, IT BEING UNDERSTOOD, HOWEVER, THAT THE
MAXIMUM AMOUNT OF THIS STANDBY LETTER OF CREDIT WILL REMAIN UNALTERED,
.
E) THAT YOU ARE ONLY PREPARED TO ISSUE THE SVG GUARANTEES AND ANY SUBSEQUENT
THIRD PARTY GUARANTEE(S), IF YOU ARE COVERED FOR ALL YOUR LIABILITIES ON THE
STRENGTH OF THESE GUARANTEES,
.
DECLARE AS FOLLOWS:
.
WE HEREBY ESTABLISH OUR IRREVOCABLE STANDBY LETTER OF CREDIT
NO. ........................
IN YOUR FAVOUR FOR ACCOUNT OF: ..................................
.
IN THE AMOUNT OF EUR 135,000,000.00, (IN WORDS: ONE HUNDRED AND THIRTY-FIVE
MILLION EURO), EXPIRING ON DECEMBER 31, 2018, AVAILABLE AT OUR COUNTERS WITH
............ AGAINST YOUR AUTHENTICATED SWIFT STATING THE AMOUNT CLAIMED AND
CERTIFYING EITHER:
.
QUOTE
WE HAVE BEEN DRAWN UPON FOR SAME AMOUNT UNDER AND IN COMPLIANCE WITH THE (THIRD
PARTY) GUARANTEE ISSUED BY US WITH THE SUPPORT OF AND IN ACCORDANCE WITH YOUR
STANDBY LC NO. ..........
UNQUOTE
OR
QUOTE
WE HAVE BEEN DRAWN UPON FOR SAME AMOUNT UNDER AND IN COMPLIANCE WITH THE SVG
GUARANTEE ISSUED BY US WITH THE SUPPORT OF AND IN ACCORDANCE WITH YOUR STANDBY
LC NO. ........
UNQUOTE
.
WE UNDERTAKE THAT CLAIMS RECEIVED UNDER AND IN COMPLIANCE WITH THE TERMS AND
CONDITIONS OF THIS STANDBY LETTER OF CREDIT WILL BE DULY HONORED IF RECEIVED BY
US ON OR BEFORE THE EXPIRATION DATE.
.
WE FURTHER UNDERTAKE TO HOLD YOU HARMLESS AND INDEMNIFIED FROM ANY ADVERSE
CONSEQUENCES WHATSOEVER, RESULTING FROM YOUR ACCEPTANCE OF THE INSTRUCTIONS FROM
WYETH IN ACCORDANCE WITH ANNEX I ATTACHED HERETO, IN WHATEVER WAY THEY MAY HAVE
BEEN ISSUED, SPECIFICALLY, BUT NOT LIMITED TO CONSEQUENCES RELATING TO CREDIT
DOCUMENTATION AND THE VALIDITY OF THE SIGNATURES ON THE INSTRUCTIONS.
.
THE MAXIMUM AMOUNT OF THIS STANDBY LETTER OF CREDIT WILL BE DECREASED BY ANY
PAYMENTS MADE UNDER IT, AND WILL REMAIN IN FORCE FOR THE BALANCE.
.
THIS STANDBY LETTER OF CREDIT IS SUBJECT TO ICC UCP FOR DOCUMENTARY CREDITS, ICC
PUBLICATION NO. 500.
.
THIS IS THE OPERATIVE CREDIT INSTRUMENT.
NO CONFIRMATION WILL FOLLOW.
ANNEX I TO LETTER OF CREDIT
SUBJECT TO RECEIPT BY THE BANK AT ITS OFFICE IN ROTTERDAM, THE NETHERLANDS, NOT LATER THAN THREE BUSINESS DAYS PRIOR TO THE DATE OF A PROPOSED ISSUANCE OF ANY THIRD PARTY GUARANTEE (OR SUCH LATER DATE AS THE BANK SHALL AGREE), OF A REQUEST FOR THE ISSUANCE OF SUCH THIRD PARTY GUARANTEE AND SUBJECT TO RECEIPT (AT THE TIME SUCH THIRD PARTY GUARANTEE IS TO BE ISSUED) BY THE BANK AT ITS OFFICE IN ROTTERDAM, THE NETHERLANDS, OF THE ORIGINAL OF THE THEN OUTSTANDING SVG GUARANTEE FOR REPLACEMENT, THE BANK SHALL (I) DELIVER TO THE PERSON INDICATED IN THE REQUEST THE NEW THIRD PARTY GUARANTEE AND (II) REPLACE THE THEN OUTSTANDING SVG GUARANTEE WITH A NEW SVG GUARANTEE IN THE FORM OF EXHIBIT B HERETO, WHICH SHALL SPECIFY THE NAME OF EACH THIRD PARTY TO WHOM THIRD PARTY GUARANTEES HAVE THERETOFORE BEEN ISSUED AND THE MAXIMUM AMOUNT COVERED BY EACH SUCH THIRD PARTY GUARANTEE. A REQUEST MAY BE SENT BY FACSIMILE, BY UNITED STATES MAIL, BY OVERNIGHT COURIER, BY PERSONAL DELIVERY OR BY ANY OTHER MEANS ACCEPTABLE TO THE BANK. IF A THIRD PARTY GUARANTEE IS TO HAVE CHANGES FROM, OR IS TO BE IN A DIFFERENT FORM FROM, EXHIBIT C ATTACHED HERETO, SUCH CHANGES OR OTHER FORM SHALL BE AGREED UPON BETWEEN WYETH, THE THIRD PARTY, SVG, AND BOTH BRANCHES OF THE BANK BEFORE THE REQUEST IS FURNISHED.
FOR PURPOSES OF THIS ANNEX, THE FOLLOWING TERMS HAVE THE FOLLOWING MEANINGS:
AUTHORIZED REPRESENTATIVE MEANS EACH REPRESENTATIVE OF WYETH WHO IS AUTHORIZED TO EXECUTE A REQUEST ON BEHALF OF WYETH, AS EVIDENCED IN AN INCUMBENCY CERTIFICATE DELIVERED TO YOU BY US (AS THE SAME MAY BE MODIFIED OR SUPPLEMENTED FROM TIME TO TIME BY NOTICE TO YOU BY US).
BANK MEANS ABN AMRO BANK N.V.
REQUEST MEANS, AT ANY TIME, A REQUEST (WHICH SHALL BE IN WRITING, INCLUDING BY FACSIMILE) FOR A THIRD PARTY GUARANTEE TO BE ISSUED BY THE BANK, WHICH REQUEST SHALL CONSIST OF (I) A LETTER FROM WYETH (SIGNED BY AN AUTHORIZED REPRESENTATIVE OF WYETH), SPECIFYING (A) THE REQUESTED ISSUANCE DATE, (B) THE NAME AND CONTACT INFORMATION OF THE PERSON TO WHOM SUCH THIRD PARTY GUARANTEE IS TO BE DELIVERED AND (C) THE MANNER OF SUCH DELIVERY, AND (II) A JOINT LETTER FROM WYETH (SIGNED BY AN AUTHORIZED REPRESENTATIVE OF WYETH) AND SVG AUTHORIZING OR CONSENTING TO SUCH ISSUANCE AND SPECIFYING (A) THE NAME OF EACH THIRD PARTY IN FAVOR OF WHICH THE RESPECTIVE THIRD PARTY GUARANTEE IS REQUESTED TO BE ISSUED AND (B) THE MAXIMUM AMOUNT COVERED BY SUCH THIRD PARTY GUARANTEE.
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 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. 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 Chairman, President and Chief Executive Officer |
Accepted and agreed to:
Optionee's Signature
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"):
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:
Deferred Compensation Plan
Wyeth
PLAN DOCUMENT
Wyeth
DEFERRED COMPENSATION PLAN
PLAN DOCUMENT
PURPOSE
The Plan is an unfunded deferred compensation plan that provides certain key employees of the Company with the opportunity to voluntarily defer receipt of a portion of their compensation. Wyeth adopted the Plan to enable the Company to attract and retain a select group of management and highly compensated Employees.
Section One - DEFINITIONS
Whenever used in the Plan, unless clearly apparent from the context, the following terms shall have the following meanings:
(a) "Administrator" means the Committee or such entity or person to whom the Committee may delegate responsibility for administration of the Plan.
(b) "Amended and Restated Effective Date" means November 20, 2003.
(c) "Base Salary" means, except as set forth in the next sentence, for purposes of deferrals under the Plan, the annual base cash compensation to be paid during a Plan Year by the Company to an Eligible Employee for services rendered during such Plan Year. Notwithstanding the foregoing, solely for purposes of determining whether an Employee is an Eligible Employee, "Base Salary" means the annual base compensation from all sources (i.e., regardless of whether United States source or foreign source) to be paid during a Plan Year by Wyeth and its Subsidiaries to an Employee for services rendered during such Plan Year.
(d) "Beneficiary" means one or more persons or entities (including a trust or estate) designated by a Participant to receive payment of any unpaid balance in the Participant's Deferral Account under the Plan in the event of the Participant's death. Such designation shall be made on a form provided by the Recordkeeper and approved by the Administrator in accordance with its rules as provided in Section 9(i).
(e) "Board of Directors" means the Board of Directors of Wyeth.
(f) "Bonus Compensation" means cash compensation to be paid during a Plan Year to an Eligible Employee by the Company for services rendered under any
incentive compensation or bonus plan, program or arrangement which is maintained or which may be adopted by the Company.
(g) "Change in Control" means the first to occur of any of the following events:
(i) any person or persons acting in concert (excluding Wyeth benefit plans) becomes the beneficial owner of securities of Wyeth having at least twenty percent (20%) of the voting power of Wyeth's then outstanding securities (unless the event causing the twenty percent (20%) threshold to be crossed is an acquisition of voting common securities directly from Wyeth); or
(ii) the consummation of any merger or other business combination of Wyeth, sale or lease of Wyeth's assets, or combination of the foregoing transactions (the "Transactions"), other than a Transaction immediately following which the shareholders of Wyeth who owned shares immediately prior to the Transaction (including any trustee or fiduciary of any Wyeth employee benefit plan) own, by virtue of their prior ownership of Wyeth's shares, at least sixty-five percent (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 Wyeth'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 twenty-four (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 of Directors or the board of directors of a successor to Wyeth. 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 of Directors 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).
(h) "Code" means the Internal Revenue Code of 1986, as amended from time to time.
(i) "Committee" means the Compensation and Benefits Committee of the Board of Directors.
(j) "Company" means Wyeth, a Delaware corporation ("Wyeth"), together with its wholly owned Subsidiaries in the United States, including Puerto Rico.
(k) "Deemed Interest" means the amount of interest that would have been earned had an amount deferred hereunder been invested at the Deemed Rate of Interest.
(l) "Deemed Rate of Interest" means (i) prior to June 1, 1999, the average of the quarter end yields for a ten (10) year period ending September 30 of the prior year of the ten (10) year U.S. Treasury notes plus two percent (2%); and (ii) thereafter, ten percent (10%) per annum, compounded quarterly. No portion of a Participant's Deferral Account that is not allocated to the Deemed Interest Investment Option as of the DRI Closing Date may be allocated to the Deemed Interest Investment Option on or after the DRI Closing Date. No portion of a Participant's Deferral Account that is allocated to the Deemed Interest Investment Option following the DRI Election Date may be subsequently allocated to another Investment Option. No portion of a Participant's Deferral Account allocated to the Deemed Interest Investment Option as of the Amended and Restated Effective Date may be allocated, on or prior to the DRI Election Date, to another Investment Option unless the Participant irrevocably waives any right to reallocate such transferred amount back to the Deemed Interest Investment Option at any time after the DRI Election Date.
(m) "Deferral Account" means a bookkeeping account (including all subaccounts) maintained by the Recordkeeper for each Participant to record his or her balance under the Plan. A Participant's Deferral Account shall consist of the sum of: (i) all of a Participant's deferrals under the Plan, whether made before or after the Amended and Restated Effective Date, including amounts rolled into the Predecessor Plan as of the Original Effective Date, plus or minus (ii) Investment Earnings/Losses on those amounts in accordance with the applicable crediting provisions of the Plan that relate to the Participant's Deferral Account, minus (iii) all distributions or withdrawals made to a Participant or his or her Beneficiary pursuant to the Plan that relate to his or her Deferral Account.
(n) "Disability" means a period of disability during which a Participant qualifies for permanent disability benefits under the Company's long-term disability plan, or, if a Participant does not participate in such a plan, a period of disability during which the Participant would have qualified for permanent disability benefits under such a plan had the Participant been a Participant in such a plan, as determined in the sole discretion of the Administrator. If the Company does not sponsor such a plan, or discontinues to sponsor such a plan, Disability shall be determined by the Administrator in its sole discretion.
(o) "DRI Closing Date" means April 1, 2004.
(p) "DRI Election Date" means December 19, 2003.
(q) "Election Form" means the form or forms established from time to time by the Administrator, that a Participant completes, signs and returns to the Recordkeeper to make an election under the Plan.
(r) "Eligible Employee" means an active Employee of the Company who at any time during the Plan Year is eligible to receive Base Salary for the Plan Year on an annualized basis of not less than one hundred fifty-five thousand dollars
($155,000) or such other amount as may be determined from time to time by the Administrator. The determination of whether an Employee is an Eligible Employee shall be made at the sole discretion of the Administrator.
(s) "Employee" means any employee of the Company.
(t) "Executive Retirement Payments" means the payments an Eligible Employee is eligible to receive from the Wyeth ERP, the Wyeth SERP, and the Wyeth SESP.
(u) "Investment Earnings/Losses" means the income, gains and losses that would have been realized had an amount deferred hereunder actually been invested in the Investment Option or Options selected by a Participant.
(v) "Investment Options" means the investment options as listed in
Appendix A, which is attached hereto and incorporated herein by this
reference, that are used as hypothetical investment options among
which the Participant may allocate all or a portion of his or her
Deferral Account. The Administrator may amend or change available
Investment Options (other than the Deemed Interest Investment Option)
from time to time as it deems appropriate in its sole discretion, as
provided for in Section 7(f); it being understood that the Deemed Rate
of Interest may be amended only by the Committee in accordance with
Section 1(o) above.
(w) "Market Interest Option" means the Investment Option described in
Section 5(b).
(x) "Market Rate" means, for a particular calendar year, (i) 120% of the long-term applicable federal rate, with quarterly compounding, for the month of January of such calendar year, as published under Section 1274(d) of the Code for such year or (ii) such other rate as shall be specified from time to time by the Committee, except that any rate specified under clause (ii) shall only apply to amounts in a Deferral Account on a prospective basis and following reasonable notice of such rate to Participants.
(y) "Normal Retirement Date" shall have the same meaning as set forth in the Wyeth Retirement Plan - United States.
(z) "Original Effective Date" means the original effective date for the Predecessor Plan, which was July 31, 1997.
(aa) "Partial Termination Date" means December 20, 2004, or such earlier date as determined in the sole discretion of the Committee.
(bb) "Partial Termination Election Form" means the Election Form(s)
established for the purposes of making the election described in
Section 8(h).
(cc) "Participant" means an Employee or Retiree (for so long as he or she retains a Deferral Account under the Plan): (i) who at the time of commencement of his or her participation in the Plan was an Eligible Employee, (ii) who elects to participate in the Plan, (iii) who signs and returns all enrollment forms required by
the Recordkeeper, and (iv) whose signed form(s) are accepted by the Recordkeeper. The term "Participant" shall include an individual, including a Retiree, who is not making deferrals but retains a Deferral Account in the Plan (including through the Predecessor Plan).
(dd) "Plan" means the Wyeth Deferred Compensation Plan as set forth herein and as it may be amended and/or restated from time to time.
(ee) "Plan Year" means the calendar year.
(ff) "Predecessor Plan" means the American Home Products Corporation Deferred Compensation Plan, which was effective as of July 31, 1997, and which replaced and subsumed all Company sponsored deferral plans or programs that existed for members of a select group of management Employees prior to July 31, 1997.
(gg) "Recordkeeper" means the entity selected by the Administrator from time to time to maintain records of the Deferral Accounts of Participants and provide administrative services.
(hh) "Retiree" means an individual who is Retired.
(ii) "Retirement", "Retire(s)" or "Retired" means separation from employment from the Company for any reason other than a leave of absence, death or Disability on or after the earlier of the attainment of (i) age sixty-five (65) or (ii) age fifty-five (55) with five (5) Years of Service.
(jj) "Retirement Benefit" means the type and form of payments available to a Participant upon Retirement as described in Section 8(b).
(kk) "Retirement Benefit Installment Payout Dates" means, with respect to a deferral made by a Participant, the first day of the calendar quarter elected (initially or upon re-deferral pursuant to Section 8(b)(3)) by the Participant for the commencement of installment payments and, in the case of annual installments, the anniversary dates thereof and, in the case of quarterly installments, the first day of each calendar quarter thereafter, in each case through the final installment payout date elected by the Participant with respect to such deferral; provided that the first of such dates shall be (A) with respect to Executive Retirement Payments, not less than twelve (12) months after the Participant's Retirement date and (B) with respect to all other Retirement Benefit payments, on or after the Participant's Retirement date; and provided, further, that the final installment payout date with respect to such deferral occurs (X) no earlier than the second anniversary of the first installment payment and (Y) no later than the earlier of (I) the quarter prior to the fifteenth anniversary of the first installment payment and (II) the fifteenth anniversary of the Participant's Normal Retirement Date.
(ll) "Retirement Benefit Lump Sum Payout Date" means, with respect to a deferral made by a Participant, the first day of the calendar quarter elected (initially or upon re-deferral pursuant to Section 8(b)(3)) by the Participant for a lump sum
payout of a Retirement Benefit; provided that such date shall be (A)
with respect to Executive Retirement Payments, not less than twelve
(12) months after the Participant's Retirement date and (B) with
respect to all other Retirement Benefit payments, on or after the
Participant's Retirement date; and provided, further, that such date
shall be no later than the fifteenth anniversary of the Participant's
Normal Retirement Date.
(mm) "Retirement Eligible" means a Participant who is an Employee and who has attained the earlier of (i) age sixty-five (65), or (ii) age fifty-five (55) with five (5) Years of Service.
(nn) "Severance Payments" means severance payments (including pension enhancements) payable pursuant to Change in Control severance agreements entered into between Wyeth and members of the Finance Committee, Operations Committee, and other principal elected corporate officers and key Employees of Wyeth, which provide for severance benefits to such Employees in the event of their termination of employment following a Change in Control.
(oo) "Short-Term Payout" means the type of payout available to a Participant as described in Section 8(a).
(pp) "Short-Term Payout Date" means, with respect to a deferral made by a
Participant, the first day of the calendar quarter elected by the
Participant for payment of a Short-Term Payout; provided that such
date shall be in a Plan Year which, in the case of an initial
election, is at least three (3) but no more than fifteen (15) years
after the end of the Plan Year in which the deferral occurs and in the
case of a re-deferral pursuant to Section 8(a)(2), is at least three
(3) but not more than fifteen (15) years after the date on which the
Short-Term Payout, but for the re-deferral, would have been paid; and
provided, further, that in each case such date shall be no later than
the fifteenth anniversary of the Participant's Normal Retirement Date.
(qq) "Subsidiary(ies)" means, as to any person, any corporation, partnership or joint venture, of which (or in which) such person, together with one or more of its subsidiaries, directly or indirectly owns more than fifty percent (50%) of the interest in the capital or profits of such corporation, partnership or joint venture.
(rr) "Trust Agreement" means an agreement between the Trustee and Wyeth covering a grantor trust which Wyeth may, in its sole discretion, establish in connection with the Plan as described in Section 9(g).
(ss) "Trustee" means the trustee named by Wyeth from time to time as the trustee for the Trust Agreement.
(tt) "Wyeth ERP" means the Wyeth Executive Retirement Plan, as amended from time to time.
(uu) "Wyeth SERP" means the Wyeth Supplemental Executive Retirement Plan, as amended from time to time.
(vv) "Wyeth SESP" means the Wyeth Supplemental Employee Savings Plan, as amended from time to time.
(ww) "Year of Service" shall have the same meaning as in the Wyeth Retirement Plan.
(xx) "Yearly or Quarterly Installment Method" means a yearly (or quarterly)
installment payment over the number of years (or quarters) selected by
the Participant in accordance with the Plan, calculated as follows:
the Deferral Account of the Participant shall be calculated as of the
close of business on the date of reference (or, if the date of
reference is not a business day, on the immediately following business
day). The date of reference with respect to the first yearly (or
quarterly) installment payment dates shall be as provided in Section
1(kk), and the date of reference with respect to subsequent yearly (or
quarterly) installment payment dates shall be the anniversary date or
dates thereof in the applicable year. The yearly (or quarterly)
installment shall be calculated by multiplying the portion of the
Deferral Account not allocated to the Deemed Interest Investment
Option or the Market Interest Option by a fraction, the numerator of
which is one (1), and the denominator of which is the remaining number
of yearly (or quarterly) payments due the Participant. By way of
example, if the Participant elects ten (10) yearly (or forty (40)
quarterly) installment payments, the first payment shall be one-tenth
(1/10) (or one-fortieth (1/40)) of the Deferral Account, calculated as
described in this definition. For the following payment, the payment
shall be one-ninth (1/9) (or one thirty-ninth (1/39)) of the Deferral
Account, calculated as described in this definition.
Section Two - DEFERRALS UNDER THE PREDECESSOR PLAN
Prior to April 1, 2001, Wyeth maintained the Predecessor Plan, which allowed members of a select group of management or highly compensated employees to defer receipt of various types of compensation. In addition, some of those employees had separate non-qualified plan balances consolidated into the Predecessor Plan as of the Original Effective Date. Except as otherwise provided herein, any Participant who has a Deferral Account as of April 1, 2001 shall continue to have that portion of his or her Deferral Account that is in existence as of that date governed under the Plan by the distribution provisions of the Predecessor Plan as elected by the Participant prior to April 1, 2001.
Section Three - PARTICIPATION IN THE PLAN
(a) Participation on the Amended and Restated Effective Date. A Participant in the Plan on the Amended and Restated Effective Date shall continue to be a Participant in the Plan.
(b) Participation after the Amended and Restated Effective Date. An Employee who is an Eligible Employee on the Amended and Restated Effective Date but not a Participant, or an Employee who first becomes an Eligible Employee after the
Amended and Restated Effective Date during a Plan Year, may commence participation in the Plan as set forth in Section 3(c) and (d) below.
(c) Enrollment Requirements. As a condition to participation, each Eligible Employee who elects to participate in the Plan shall complete, execute, and return to the Recordkeeper such forms as are required from time to time by the Administrator, and all such forms must be submitted to the Recordkeeper within thirty (30) days (or such other time period as the Administrator determines in its sole discretion) of the date that an Employee is first notified that he or she is an Eligible Employee. In addition, the Administrator may establish from time to time such other enrollment requirements as it determines in its sole discretion are appropriate.
(d) Commencement of Participation. Except as provided in Section 3(a) above, once an Eligible Employee has met all of the enrollment requirements set forth in the Plan, including returning all required documents within the specified time period, the Eligible Employee shall commence participation in the Plan on the first day of the month following the month in which the Eligible Employee completes all enrollment requirements; provided, however, that the Administrator may designate, in its sole discretion, another commencement date that is administratively reasonable. If an Eligible Employee fails to meet all of the enrollment requirements within the period required in accordance with Section 3(c), that Employee shall not be eligible to participate in the Plan again until the first day of the following Plan Year, again subject to timely delivery to and acceptance by the Recordkeeper of the required forms.
Section Four - DEFERRALS UNDER THE PLAN
(a) Deferral of Base Salary and/or Bonus Compensation.
(1) Subject to the following sentence, for each Plan Year, a Participant may designate a percentage of his or her Base Salary and/or Bonus Compensation that is payable in a Plan Year to be deferred in accordance with Section 6. To be eligible to make a deferral of Base Salary (but not Bonus Compensation) into the Plan, six percent (6%) of the amount of Base Salary elected must be deferred in accordance with the Plan for a Plan Year to be deferred under the Wyeth SESP for the same Plan Year in accordance with the Wyeth SESP's rules. The remaining elected deferral amount under the Plan shall then be deferred into the Plan.
(2) For each Base Salary and/or Bonus Compensation deferral (adjusted to reflect Investment Earnings/Losses with respect thereto), a Participant shall make appropriate distribution elections in accordance with Section 8 below with respect to such deferral amounts. Notwithstanding any provision of the Plan to the contrary, all elections shall be required to provide for the same Short-Term Payout Date, Retirement Benefit Lump Sum Payout Date or Retirement Benefit
Installment Payout Dates, as the case may be, for all deferrals of Base Salary and Bonus Compensation in the same Plan Year.
(3) A deferral election described above in this Section 4(a) with respect to any Plan Year may not be revoked by a Participant.
(b) Deferral of Severance Payments.
(1) A Participant may designate a percentage of any Severance Payment
that is payable in a Plan Year to be deferred in accordance with
Section 6; provided, however, that such designation shall be
given effect only if the Participant is Retirement Eligible at
the time of his or her termination of employment.
(2) For any Severance Payment deferral (adjusted to reflect
Investment Earnings/Losses with respect thereto), a Participant
shall make appropriate distribution elections in accordance with
Section 8 below with respect to each such deferral.
(c) Deferral of Executive Retirement Payments.
(1) A Participant may designate a percentage of his or her Executive Retirement Payments to be deferred in accordance with Section 6; provided, however, that such designation may not be revoked by the Participant but shall be given effect only if the Participant is Retirement Eligible at the time of his or her termination of employment.
(2) For each Executive Retirement Payment deferral (adjusted to reflect Investment Earnings/Losses with respect thereto), a Participant shall make appropriate distribution elections in accordance with Section 8 below. A Participant shall be permitted to make a separate deferral election with respect to amounts transferred to the Plan from the Wyeth SERP, the Wyeth ERP and the Wyeth SESP.
(d) Minimum/Maximum Amount of Deferral. For each Plan Year, a Participant may elect to defer Base Salary, Bonus Compensation, Severance Payments and Executive Retirement Payments, if applicable, under Sections 4(a), 4(b) and 4(c) in increments of at least one percent (1%) (unless the Administrator determines otherwise in its sole discretion) up to a maximum deferral of one hundred percent (100%) of each type of deferral the Participant elects to make with respect to that Plan Year.
Section Five - INVESTMENT EARNINGS/LOSSES
(a) Investment Earnings/Losses. Amounts allocated to a Deferral Account shall be deemed to have realized Investment Earnings/Losses based on the Investment Option or Options selected from time to time by the respective Participants. Such Investment Earnings/Losses shall be credited and debited to the Deferral
Accounts of Participants in accordance with the debiting and crediting provisions of Section 7(g).
(b) Market Interest Option. Unless the Committee determines otherwise, the Investment Options shall include the "Market Interest Option." The Market Interest Option shall credit Investment Earnings as follows:
(1) For amounts allocated to the Market Interest Option on or after
the Amended and Restated Effective Date and prior to the DRI
Closing Date, (I) at the rate of 10% per annum, compounded
quarterly until the day prior to the Partial Termination Date and
(II) at the Market Rate thereafter.
(2) For amounts allocated to the Market Interest Option on or after the DRI Closing Date, at the Market Rate.
Section Six - DEFERRAL ELECTIONS
(a) Deferral Elections. All deferrals made in accordance with Section 4 shall be evidenced by the Participant's properly executing and submitting such Election Forms and other forms as may be required by the Recordkeeper in accordance with its rules and the rules set forth in this Section 6.
(b) Deferrals of Base Salary and/or Bonus Compensation. Except for a
Participant's first year of Plan participation, a Participant's
election to defer Base Salary and/or Bonus Compensation in accordance
with Section 4(a) with respect to a particular Plan Year must be
received by the Recordkeeper no later than the last day of the
preceding Plan Year. For a Participant's first year of Plan
participation, deferral elections must be made in accordance with
Section 3(c) and shall only apply to Base Salary earned and Bonus
Compensation first determined after the election. Each Participant
must designate on the Election Form the timing and form of
distribution of such Base Salary and/or Bonus Compensation (adjusted
to reflect Investment Earnings/Losses with respect thereto) in
accordance with the distribution options described in Section 8.
(c) Deferrals of Severance Payments. A Participant's election to defer a Severance Payment in accordance with Section 4(b) must be received by the Recordkeeper prior to the date the applicable Change in Control following which a Participant becomes entitled to receive such Severance Payment. The Participant must designate on the Election Form the timing and form of distribution of the Severance Payment (adjusted to reflect Investment Earnings/Losses with respect thereto) in accordance with the options described in Section 8.
(d) Deferrals of Executive Retirement Payments. A Participant's election to defer Executive Retirement Payments in accordance with Section 4(c) must be received by the Recordkeeper prior to the date of the Participant's Retirement. The Participant must designate on the Election Form the timing and form of such distribution of Executive Retirement Payments (adjusted to reflect Investment Earnings/Losses with respect thereto) in accordance with the options described in
Section 8. Notwithstanding any other provision of the Plan to the contrary, an election to defer such payments shall not apply to any payment scheduled to commence within twelve (12) months of such election.
Section Seven - DEFERRAL ACCOUNTS
(a) Establishment of Deferral Accounts. The Recordkeeper shall establish and maintain an individual Deferral Account under the Plan on behalf of each Participant by or on behalf of whom deferrals have been made under Section 4 to track the Investment Earnings/Losses or other elections applicable to the Deferral Account of the Participant. The Deferral Account of each Participant may have subaccounts established and maintained as appropriate to reflect the Investment Option(s) and/or distribution elections selected by the Participant.
(b) Crediting of Amounts Deferred. A Participant's Deferral Account shall be credited by the Recordkeeper for deferral amounts after such amounts are withheld and deferred pursuant to a Participant's elections on the appropriate Election Form with an amount equal to the amounts deferred by the Participant in accordance with Section 7(g). Such amounts shall be allocated among the available Investment Options in accordance with the selections made by the Participant among the Investment Options pursuant to Section 7(f).
(c) Crediting/ Debiting of Deferral Account. In accordance with Section 7(g) and subject to the rules and procedures that are established from time to time by the Administrator and/or the Recordkeeper (which may or may not be in writing), Investment Earnings/Losses shall be credited or debited to a Participant's Deferral Account.
(d) Election of Investment Options. A Participant, in connection with his
or her initial deferral election under the Plan or in connection with
the amendment and restatement of the Plan, shall elect, on the
Election Form(s), one or more Investment Option(s) as described in
Section 7(f) below to be used to determine the additional amounts to
be credited or debited to his or her Deferral Account. Such elections
shall continue to apply to his or her Deferral Account unless changed
in accordance with the next sentence. The Participant may (but is not
required to) elect on any business day, by submitting an Election
Form(s) to the Recordkeeper that is accepted by the Recordkeeper
(which submission may take the form of an electronic or telephonic
transmission, if required or permitted by the Administrator), to add
or delete one or more Investment Option(s) to be used to determine the
additional amounts to be credited or debited to his or her Deferral
Account, or to change the portion of his or her Deferral Account
allocated to each previously or newly elected Investment Option(s). If
an election is made in accordance with the previous sentence, it shall
apply the next business day (unless otherwise determined by the
Administrator) and shall continue until the Participant makes any
changes to those elections in accordance with the previous sentence.
Notwithstanding the foregoing, except in accordance with Section 8(h),
in no event may a Participant elect to add or delete the Deemed Rate
of Interest as
an Investment Option or add amounts to or transfer amounts from that
Investment Option, once any Retirement Benefit payment as described in
Section 8(b) has commenced. In addition to the blackout periods and
other restrictions set forth in the Company's Securities Transactions
Policy, as amended from time to time, the Company may impose such
additional restrictions on transfers by Participants in the Company
Stock Fund as it deems necessary or advisable in order to comply with
federal or state securities laws (including, but not limited to Rule
16b-3 of the Securities Exchange Act of 1934, as amended). Any
Participant subject to such restrictions shall be notified by the
Administrator or its delegate.
(e) Proportionate Allocation. In making any election described in Section 7(d) above, the Participant shall specify on the Election Form(s), in percentage increments of at least one percent (1%) (unless the Administrator determines otherwise in its sole discretion) the percentage of his or her Deferral Account to be allocated to an Investment Option.
(f) Investment Options. The Administrator may, in its sole discretion, amend or change available Investment Options. Any discontinuation of an Investment Option shall not take effect prior to the first day of the calendar quarter that follows by at least thirty (30) days the day on which the Administrator generally gives Participants written notice of such change. If any Investment Option is discontinued, Participants having selected such Investment Option must designate another Investment Option for the portion by his or her Deferral Account allocated thereto within the timeframe designated by the Administrator. A Participant may elect any new Investment Option added by the Administrator ten (10) business days after being notified that the Investment Option was added. If the Recordkeeper receives an initial Election Form that it deems to be incomplete, unclear or improper, the Participant shall be deemed to have filed no direction with respect thereto. If the Recordkeeper receives a revised Election Form that it deems to be incomplete, unclear or improper, or fails to receive a revised Election Form when one is required to be filed, the Participant's Investment Option election then in effect shall remain in effect, except in the case of a discontinued Investment Option, in which case the Participant shall be deemed to have filed no direction with respect thereto. Effective as of the Amended and Restated Effective Date, if the Recordkeeper possesses (or is deemed to possess as provided in the previous sentence) at any time directions as to Investment Options of less than all of the Participant's Deferral Account, the Participant shall be deemed to have elected for the undesignated portion of his or her Deferral Account the Market Interest Option or such other Investment Option as determined by the Administrator in its sole discretion. Each Participant hereunder, as a condition to his or her participation hereunder, agrees to indemnify and hold harmless the Committee, the Administrator, and the Company, and their agents and representatives, from any losses or damages of any kind relating to the Investment Options made available hereunder.
(g) Crediting or Debiting Method. The performance of each elected Investment Option (either positive or negative) will be determined by the Recordkeeper, in
accordance with the rules established by the Administrator in its sole discretion, based on the performance of the actual Investment Options themselves. A Participant's Deferral Account shall be credited or debited on each business day, or as otherwise determined by the Recordkeeper in accordance with the rules established by the Administrator in its sole discretion, as though: (i) the amounts of the Participant's deferral election were actually deferred no later than the close of business on the third business day after the day on which (x) such amounts were otherwise payable to the Participant as Base Salary, Bonus Compensation, or a Severance Payment and (y) in the case of Executive Retirement Payments the date of the Participant's Retirement; (ii) a Participant's Deferral Account was actually invested in the Investment Options(s) selected by the Participant, in the percentages elected by the Participant as of such date, at the closing price on such date; and (iii) any distribution made to a Participant that decreases such Participant's Deferral Account ceased being invested in the Investment Options(s), in the percentages applicable to such day, no earlier than three (3) business days prior to the distribution, at the closing price on such date.
(h) No Actual Investment. Notwithstanding any other provision of the Plan, the Investment Options are to be used for measurement purposes only, and a Participant's election of any such Investment Options, the allocation to his or her Deferral Account thereto, the calculation of additional amounts and the crediting or debiting of such amounts to a Participant's Deferral Account shall not be considered or construed in any manner as an actual investment of his or her Deferral Account in any such Investment Options. In the event that Wyeth, in its discretion, decides to invest funds in any or all of the Investment Options, no Participant shall have any rights in or to such investments themselves. Without limiting the foregoing, a Participant's Deferral Account shall at all times be a bookkeeping entry only and shall not represent any investment made on his or her behalf by Wyeth or the Trust. The Participant shall at all times remain an unsecured creditor of Wyeth.
Section Eight - DISTRIBUTIONS
(a) Short-Term Payouts.
(1) Commencement of Payment of Short-Term Payouts. In connection with each election to defer Base Salary and/or Bonus Compensation, a Participant may elect to receive a "Short-Term Payout" with respect to each such elected deferral. Each Short-Term Payout shall be a lump-sum payment equal to the deferred amount, plus or minus Investment Earnings/Losses debited or credited thereto in the manner provided in Section 7(g), determined at the time the Short-Term Payout becomes payable. Each Short-Term Payout elected shall be payable on the Short-Term Payout Date designated by the Participant on the Election Form with respect thereto. Short-Term Payouts shall be made as soon as practicable after the applicable Short-Term Payout Date elected by the Participant on the applicable Election Form; provided, however, that in no event shall such payment be made later than thirty (30) days after the relevant elected date.
(2) Re-Deferral of Short Term Payout. Notwithstanding anything in the
Plan to the contrary, a Participant who is an active Employee,
may, with respect to each elected Short-Term Payout, on a form
designated by the Recordkeeper, elect (on one or more occasions)
to re-defer such Short-Term Payout to another allowable
Short-Term Payout Date; provided, however, that any such
re-deferral election shall not apply (i) unless it is accepted by
the Recordkeeper in accordance with the rules established by the
Administrator in its sole discretion, and (ii) to any payment
that would have been made under a prior election within twelve
(12) months of the date of such new election. In the event that a
scheduled Short-Term Payout, if paid, would (or in the judgment
of the Administrator, acting in its sole discretion, would be
reasonably likely to) result in the loss of deductibility for
federal income tax purposes of any compensation paid by the
Company due to the limitations of Section 162(m) of the Code in
any given year, then the scheduled Short-Term Payout shall be
automatically re-deferred for a period of three (3) years.
Subject to the foregoing, the last Election Form accepted by the
Recordkeeper shall govern the Short-Term Payout Date of that
Short-Term Payout (adjusted to reflect Investment Earnings/Losses
with respect thereto).
(3) Changing a Short-Term Payout to a Retirement Benefit. A Participant may change any Short-Term Payout election up to the date of Retirement to an allowable Retirement Benefit payout by submitting a new Election Form to the Recordkeeper; provided, however, that any such Election Form is (i) submitted at least twelve (12) months prior to the Retirement Benefit Lump Sum Payout Date or the initial Retirement Benefit Installment Payout Date, as the case may be, elected by the Participant, and (ii) accepted by the Recordkeeper in accordance with the rules established by the Administrator in its sole discretion; provided, further, however, that such election shall not apply to any payment that would have been made under a prior election within twelve (12) months of the date of such new election.
(4) Re-Deferral or Changing a Short-Term Payout on or after the Amended and Restated Effective Date. Notwithstanding anything to the contrary in the Plan, on and after the Amended and Restated Effective Date, a Short-Term Payout election made in accordance with Sections 8(a)(2) or 8(a)(3) shall not apply unless (i) no portion of the Participant's Deferral Account subject to such Short-Term Payout is allocated to the Deemed Interest Investment Option at the time of the election and (ii) the Participant waives the right to allocate any portion of such amount to the Deemed Interest Investment Option at any time on or after such election.
(b) Retirement Benefit Payout.
(1) Commencement of Retirement Benefit. A Participant who Retires shall receive, as a "Retirement Benefit", the portion of his or her Deferral Account that he or she has not elected to be distributed in the form of a Short-Term Payout, or that is not distributed in accordance with another provision of the Plan as a result
of the Participant's death, Disability or termination of employment prior to Retirement.
(2) Time of Payment of Retirement Benefit. An active Participant, in connection with each type of deferral of Retirement Benefits, shall elect to receive that deferral (adjusted to reflect Investment Earnings/Losses with respect thereto) on either a Retirement Benefit Lump Sum Payout Date or on Retirement Benefit Installment Payout Dates elected by such Participant. A Participant may change any Retirement Benefit payout election up to the date of Retirement to an allowable alternative Retirement Benefit payout date or dates by submitting a new Election Form to the Recordkeeper; provided that any such Election Form is (i) submitted at least twelve (12) months prior to the Retirement Benefit Lump Sum Payout Date or the initial Retirement Benefit Installment Payout Date, as the case may be, elected by the Participant, and (ii) accepted by the Recordkeeper in accordance with rules established by the Administrator in its sole discretion; and provided, further, that such election shall not apply to any payments that would have been made under a prior election or the terms of any other plan within twelve (12) months of the date of such new election. The last Election Form accepted by the Recordkeeper shall govern the payout date or dates of that Retirement Benefit (adjusted to reflect Investment Earnings/Losses with respect thereto).
(3) Re-deferral of Retirement Benefits. A Retired Participant may elect to re-defer Retirement Benefits prior to the commencement of any payments thereof to another allowable Retirement Benefit Lump Sum Payout Date or other allowable Retirement Benefit Installment Payout Dates; provided, however, that such re-deferral election shall not apply (i) to any Retiree to whom payment of any Retirement Benefit has already commenced and (ii) unless it is accepted by the Recordkeeper in accordance with the rules established by the Administrator in its sole discretion; provided, further, however, that such re-deferral election shall not apply to any payments that would have been made under a prior election or the terms of any other plan within twelve (12) months of the date of such new election.
(4) Form of Distribution of Retirement Benefits. A Participant, in connection with each deferral of Retirement Benefits, shall elect to receive the deferral (adjusted to reflect Investment Earnings/Losses with respect thereto) in a lump sum on a Retirement Benefit Lump Sum Payout Date elected by the Participant or in quarterly or yearly installment payments on Retirement Benefit Installment Payout Dates elected by the Participant. A Participant may change his or her election up to the date of Retirement to an allowable alternative form of payout by submitting a new Election Form to the Recordkeeper; provided, however, that any such Election Form is (i) submitted at least twelve (12) months prior to the Retirement Benefit Lump Sum Payout Date or the initial Retirement Benefit Installment Payout Date, as the case may be, elected by the Participant, and (ii) accepted by the Recordkeeper in accordance with rules established by the Administrator in its sole discretion; provided, further, however, that such election
shall not apply to any payments that would have been made under a prior election or the terms of any other plan within twelve (12) months of the date of such new election. (Changes may not be made after Retirement except in accordance with Section 8(b)(3).) The Election Form last accepted by the Recordkeeper shall govern the form of a Retirement Benefit (adjusted to reflect Investment Earnings/Losses with respect thereto). Retirement Benefit payments shall be made as soon as practicable after the applicable Retirement Benefit Lump Sum Payout Date or Retirement Benefit Installment Payout Dates elected by the Participant on the applicable Election Form; provided, however, that in no event shall such payments be made later than thirty (30) days after the relevant elected dates.
(5) Installment Payments for Retirement Benefits Allocated to Investment Options (Other than the Deemed Interest Investment Option or the Market Interest Option). The amount of each installment payment with respect to the portion of a Deferral Account that is allocated to an Investment Option (other than the Deemed Interest Investment Option or the Market Interest Option) shall be determined by the Yearly Installment Method, if the Participant elected to receive annual installments or the Quarterly Installment Method, if the Participant elected to receive quarterly installments.
(6) Installment Payments for Retirement Benefits Allocated to the Market Interest Option. The amount of each installment payment with respect to the portion of a Deferral Account that is allocated to the Market Interest Option shall be determined by the following annuity methodology. The amount of each installment payment shall be calculated by the Recordkeeper as an annuity at the beginning of the installment payout period elected by the Participant and shall be recalculated each time there is a change in the Market Rate or the Participant transfers an amount into or out of the Market Interest Option, based on: (i) the balance of the applicable portion of the Participant's Deferral Account that is allocated to the Market Interest Option (adjusted to reflect interest at the Market Rate then in effect in accordance with clause (iii)) immediately following the date of the change in the Market Rate or the Participant's transfer as applicable, (ii) the number of remaining installments, (iii) the Market Rate in effect at the time of the calculation (assuming that the Market Rate will remain unchanged throughout the payout period), and (iv) a final value of the portion of the Participant's Deferral Account allocated to the Market Interest Option of zero dollars ($0).
(7) Installment Payments for Retirement Benefits Allocated to the Deemed Interest Investment Option. Subject to Section 8(h), the amount of each installment payment with respect to the portion of a Deferral Account that is allocated to the Deemed Interest Investment Option shall be determined by the following annuity methodology. The amount of each installment payment shall be calculated by the Recordkeeper as an annuity at the beginning of the installment payout period elected by the Participant, based on: (i) the balance of the applicable portion of the Deferral Account that is allocated to the Deemed Interest Investment Option (adjusted to reflect Deemed Interest with respect
thereto) on the business day prior to the payout date of each
installment, (ii) the number of remaining installments, (iii) the
Deemed Rate of Interest then in effect, and (iv) a final value of
zero dollars ($0). All amounts allocated to the Deemed Interest
Investment Option will be distributed to Participants as soon as
practicable following the Partial Termination Date pursuant to
Section 8(h), and this Section 8(b)(7) will cease to be
applicable on or after the Partial Termination Date.
(c) Payment Upon Separation From Service. Notwithstanding anything in the Plan to the contrary, in the event a Participant terminates employment with the Company for reasons other than Retirement, death or Disability, or in the event that any Subsidiary that employs a Participant ceases to be a wholly-owned Subsidiary of Wyeth, the entire balance of the Participant's Deferral Account (adjusted to reflect Investment Earnings/Losses with respect thereto) shall be distributed to the Participant in a single lump sum within ninety (90) days thereafter. The foregoing shall not apply in the case of a Participant who is Retirement Eligible as of his or her date of termination of employment or the date on which such Subsidiary ceases to be a wholly-owned Subsidiary of Wyeth, as the case may be.
(d) Payment Upon Death. Notwithstanding anything in the Plan to the contrary, in the event a Participant dies prior to the receipt of any or all of his or her Deferral Account, the balance of such account shall be distributed in a single lump sum to the Participant's Beneficiary(ies) within ninety (90) days following the date the Administrator is notified of his or her death.
(e) Acceleration of Payments.
(1) Acceleration of Payments Following a Change in Control. Notwithstanding anything in the Plan to the contrary, during the twenty-four (24) month period following a Change in Control, a Participant may elect to accelerate any or all payments not currently due under the Plan to a single sum payment to be made on (i) a date that is at least twelve (12) months subsequent to such election, without a penalty or forfeiture, or (ii) with the imposition of a withdrawal penalty equal to six percent (6%) of the accelerated payment, any date within twelve (12) months of such election. Payments shall be made as soon as practicable after the date elected for payment; provided, however, that in no event shall payment be made later than thirty (30) days thereafter.
(2) Acceleration of Payments with a Ten Percent Penalty. Notwithstanding anything in the Plan to the contrary, a Participant may elect at any time to accelerate any or all payments not currently due under the Plan to a single sum payment with the imposition of a withdrawal penalty equal to ten percent (10%) of the Participant's entire Deferral Account calculated immediately prior to the withdrawal. As of the date of the withdrawal, and for the remainder of the Plan Year, any Base Salary or Bonus Compensation deferral elections made by the Participant for the Plan Year in which the withdrawal occurs in accordance with Section 6(b) then in effect shall be cancelled with respect to any amounts not
credited to the Participant's Deferral Account as of the date of the withdrawal. Payment of the withdrawn amount shall be made as soon as practicable after the date of the Participant's election; provided, however, that in no event shall payment be made later than thirty (30) days thereafter.
(f) Disability Waiver.
(1) Waiver of Deferral. A Participant who is determined by the Administrator to be suffering from a Disability shall be excused from fulfilling that portion of any current deferral election that would otherwise have been withheld for the Plan Year during which the Participant first suffers a Disability. During the period of Disability, the Participant shall not be allowed to make any additional deferral elections, but will continue to be considered a Participant for all other purposes of the Plan.
(2) Return to Work. If a Participant returns to employment with the Company after a Disability ceases, the Participant may elect to defer additional amounts in accordance with the Plan for the Plan Year following his or her return to employment or service and for every Plan Year thereafter while an Eligible Employee and Participant, provided such deferral elections are otherwise allowed and an Election Form is delivered to and accepted by the Recordkeeper.
(3) Continued Eligibility; Disability Benefit. A Participant suffering a Disability shall, for benefit purposes under the Plan, continue to be considered to remain a Participant to be eligible for the benefits provided for in this Section 8 in accordance with its provisions. Notwithstanding the above, the Administrator shall have the right to, in its sole discretion and for purposes of the Plan only, with respect to a Participant who has been determined to have suffered a Disability, pay out his or her Deferral Account balance in a lump sum.
(g) Other Distributions. Subject to Section 8(h), any distributions that are required to be made due to the provisions of the Predecessor Plan with respect to a type of deferral no longer eligible to be deferred as of the Amended and Restated Effective Date, shall be made in accordance with Section 2.
(h) Distribution on Partial Termination of Deemed Interest Investment Option. Notwithstanding anything to the contrary in the Plan, the Plan will partially terminate on the Partial Termination Date with respect to all amounts allocated to the Deemed Interest Investment Option on such date and each Participant will receive a cash lump sum payment as soon as practicable following the Partial Termination Date equal to the portion of his or her Deferral Account, if any, allocated to the Deemed Interest Investment Option on the Partial Termination Date. The provisions of this Section 8(h) shall supersede and replace any Plan election by a Participant to the contrary. Each Participant may elect on or before the DRI Election Date, by submitting a Partial Termination Election Form to the Recordkeeper that is accepted by the Recordkeeper, to transfer all or a part of the portion of his or her Deferral Account that is allocated to the Deemed Interest
Investment Option to another Investment Option(s). The last Partial Termination Election Form accepted by the Recordkeeper by the DRI Election Date from a Participant shall revoke any and all prior Partial Termination Election Forms received by the Recordkeeper from such Participant and shall govern the Participant's election in accordance with this Section 8(h). No Partial Termination Election Form will be accepted by the Recordkeeper after the DRI Election Date and no Participant may revoke or amend a Partial Termination Election Form after the DRI Election Date. Any Base Salary deferrals that are credited to a Participant's Deferral Account after the DRI Election Date and on or before December 31, 2003 will be allocated proportionately in accordance with the Participant's election under this Section 8(h).
Section Nine - MISCELLANEOUS
(a) Funding of the Plan. The Plan is unfunded and Wyeth has no obligation to set aside, earmark, or place in trust any funds with which to pay its obligations under the Plan. Wyeth's obligation under the Plan shall not be secured in any way and a Participant's rights shall not be secured in any way and a Participant's rights shall in no way be preferred over the general creditors of Wyeth.
(b) Employment. Neither the Plan nor any agreement, document, form or instrument delivered or entered into pursuant hereto constitutes an employment contract between the Company and a Participant. Nothing herein or therein shall be construed to give a Participant the right to be retained in the service of the Company, nor interfere with the right of the Company to terminate or discipline a Participant at any time.
(c) Governing Law. The Plan shall be construed and interpreted under the laws of the State of New Jersey and applicable provisions of federal law.
(d) Taxes. The Company shall have the right to deduct from distributions otherwise payable from any deferral under the Plan any taxes required to be withheld under federal, state, or local law. For each Plan Year in which a deferral is being deducted for a Participant, the Company shall withhold from that portion of the Participant's Base Salary and/or Bonus Compensation that is not being deferred, in a manner determined by the Company, the Participant's share of FICA and other employment taxes on such deferral amounts. If necessary, the Company may reduce any amount deferred in order to comply with this Section.
(e) Non-Assignable. A Participant's right to receive the amounts in his or her Deferral Account under the Plan may not be anticipated, assigned (either at law or equity), alienated, pledged, encumbered, or subjected to attachment, garnishment, levy, execution, or other legal process, and any attempt to effect any of the foregoing shall be void.
(f) Minors and Incompetents. If the Administrator determines that any person to whom a payment is due hereunder is a minor or incompetent by reason of
physical or mental disability, the Administrator shall have the power to cause the payments then due to such person to be made to another for the benefit of the minor or incompetent, without responsibility of the Company, the Committee, the Administrator or the Recordkeeper to see to the application of such payment, unless claim prior to such payment is made therefor by a duly appointed legal representative. Payments made pursuant to such power shall operate as a complete discharge of the Company, the Committee, and the Administrator.
(g) Trust Fund. In connection with the Plan, Wyeth may, but shall not be required to, establish a grantor trust for the purpose of accumulating funds to satisfy the obligations incurred by Wyeth under the Plan. At any time, Wyeth may transfer assets to the trust to satisfy all or part of the obligations incurred by Wyeth, subject to the return of such assets at a time as determined in accordance with the terms of such trust. Any assets of the trust shall remain at all times subject to the claims of creditors of Wyeth in the event of Wyeth's insolvency, and no asset or other funding medium used to pay benefits accrued under the Plan shall result in the Plan not being considered as "unfunded" under ERISA. Notwithstanding the establishment of the trust, the right of any Participant to receive future payments under the Plan shall remain an unsecured claim against the general assets of Wyeth.
(h) Severability. In the event any provision of the Plan shall be held illegal or invalid for any reason or the Committee shall determine that any provision of the Plan would cause any Participant to be in constructive receipt for federal or state income tax purposes of any portion of his or her Deferral Account, then such provision will be considered null and void and the Plan shall be constructed and enforced as if the provision had not been included in the Plan as of the date such provision was determined to be illegal, invalid or to have the potential to cause a Participant to be in constructive receipt of a portion of his or her Deferral Account. Notwithstanding anything in the Plan to the contrary, the Committee reserves the right to amend, modify, cancel or rescind any Participant election or other action taken under the Plan by a Participant with respect to such Participant's Deferral Account in the event the Committee determines that such election or other action is or would be prohibited by any applicable law or that such election or other action would cause any Participant to be in constructive receipt for federal or state income tax purposes of any portion of his or her Deferral Account under any such law.
(i) Beneficiary. Each Participant shall have the right, at any time, to designate his or her Beneficiary(ies) (both primary as well as contingent) to receive any benefits payable under the Plan upon the death of a Participant. The Beneficiary(ies) designated under the Plan may be the same as or different from the Beneficiary designation under any other plan of Wyeth in which the Participant participates. A Participant shall designate his or her Beneficiary(ies) by completing and signing the beneficiary designation form, and returning it to the Administrator or its designated agent. A Participant shall have the right to change his or her Beneficiary(ies) by completing, signing and otherwise complying with the terms
of the beneficiary designation form and the Administrator's rules and procedures, as in effect from time to time. Upon the acceptance by the Administrator of a new beneficiary designation form, all Beneficiary designations previously filed shall be canceled. The Administrator shall be entitled to rely on the last beneficiary designation form filed by the Participant and accepted by the Administrator prior to his or her death. No designation or change in designation of a Beneficiary shall be effective until received and acknowledged in writing by the Administrator or its designated agent. If a Participant fails to designate a Beneficiary(ies) as provided above or, if all designated Beneficiaries predecease the Participant or die prior to complete distribution of the Participant's benefits, then the benefits remaining under the Plan to be paid to a Beneficiary shall be payable to the executor or personal representative of the Participant's estate.
(j) Insurance. Wyeth, on its own behalf or on behalf of the Trustee of the trust, and, in its sole discretion, may apply for and procure insurance on the life of some or all Participants, in such amounts and in such forms as Wyeth may choose. Wyeth or the Trustee of the trust, as the case may be, shall be the sole owner and beneficiary of any such insurance. The Participant shall have no interest whatsoever in any such policy or policies, and at the request of Wyeth shall submit to medical examinations and supply such information and execute such documents as may be required by the insurance company or companies to whom Wyeth has applied for insurance.
Section Ten - EMERGENCY BENEFIT
In the event that the Administrator, upon the written request of the Participant, determines that the Participant has suffered an unforeseeable financial emergency, the Administrator shall in accordance with the request of the Participant (i) pay to the Participant as soon as possible following such determination, an amount not in excess of the amount needed to satisfy the emergency and any taxes payable on those amounts, and/or (ii) suspend any deferrals required to be made to the Plan by the Participant. The Participant making the request must document to the satisfaction of the Administrator that the distribution of the amount requested is necessary to satisfy the financial emergency and the amount requested is not in excess of the amount needed to satisfy the emergency and the taxes payable on those amounts. For this purpose, an "unforeseeable financial emergency" means an unanticipated emergency that is caused by an event beyond the control of the Employee that would result in severe financial hardship if the emergency distribution were not permitted and would include (i) a sudden and unexpected illness or accident of the Participant or a dependent of the Participant, (ii) a loss of the Participant's property due to casualty, or (iii) such other extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, all as determined in the sole discretion of the Administrator.
Section Eleven - ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Administrator which shall have full discretionary authority to interpret the Plan; to make all determinations as may be necessary or advisable; and to adopt, amend or rescind any rules, regulations, and procedures as it deems necessary or appropriate for
the administration of the Plan. The interpretations, determinations, actions, and decisions of the Administrator shall be binding and conclusive for all purposes and upon all persons. The Administrator may delegate part or all of its responsibilities under the Plan to such party or parties as it may deem necessary or appropriate.
Section Twelve - AMENDMENT AND TERMINATION
The Board of Directors may amend or revise the terms of the Plan from time to time, or may discontinue the Plan, in whole or in part, at any time. However, such amendment, revision or discontinuance of the Plan may not adversely affect a Participant's benefit(s) accrued under the Plan prior to the date of such action.
Section Thirteen - CLAIMS PROCEDURE
If a Participant does not receive the timely payment of the benefits that he or she believes are due under the Plan, the Participant may make a claim for benefits in the manner hereinafter provided.
All claims for benefits under the Plan shall be made in writing and shall be
signed by the Participant. Claims shall be submitted to the Administrator. If
the Participant does not furnish sufficient information with the claim for the
Administrator to determine the validity of the claim, the Administrator shall
indicate to the Participant any additional information, which is necessary for
the Administrator to determine the validity of the claim. Each claim hereunder
shall be acted on and approved or disapproved by the Administrator within ninety
(90) days following the receipt by the Administrator of the information
necessary to process the claim. In the event the Administrator denies a claim
for benefits in whole or in part, the Administrator shall notify the Participant
in writing of the denial of the claim and notify the Participant of his right to
a review of the Administrator's decision by the Committee or such entity or
person delegated such authority by the Committee. Such notice by the
Administrator shall also set forth, in a manner calculated to be understood by
the Participant, the specific reason for such denial, the specific provisions of
the Plan on which the denial is based, and a description of any additional
material or information necessary to perfect the claim, with an explanation of
the Plan's appeals procedure as set forth in this Section 13. If the
Administrator takes no action on a Participant's claim within ninety (90) days
after receipt by the Administrator, such claim shall be deemed to be denied for
purposes of the following appeals procedure. Any Participant whose claim for
benefits is denied in whole or in part may appeal for a review of the decision
by the Administrator. Such appeal must be made within three (3) months after the
applicant has received actual or constructive notice of the denial as provided
above. An appeal must be submitted in writing within such period and must:
(a) request a review by the Administrator of the claim for benefits under the Plan;
(b) set forth all of the grounds upon which the Participant's request for review is based or any facts in support thereof; and
(c) set forth any issues or comments that the Participant deems pertinent to the appeal.
The Administrator shall act upon each appeal within sixty (60) days after receipt thereof unless special circumstances require an extension of the time for processing, in which case a decision shall be rendered by the Administrator as soon as possible but not later than one hundred and twenty (120) days after the appeal is received. The Administrator may require the Participant to submit such additional facts, documents or other evidence as the Administrator in its discretion deems necessary or advisable in making its review. The Participant shall be given the opportunity to review pertinent documents or materials upon submission of a written request to the Administrator, provided the Administrator finds the requested documents or materials are pertinent to the appeal. On the basis of its review, the Administrator shall make an independent determination of the Participant's eligibility for benefits under the Plan. The decision of the Administrator on any appeal of a claim for benefits shall be final and conclusive upon all parties thereto. In the event the Administrator denies an appeal in whole or in part, it shall give written notice of the decision to the Participant, which notice shall set forth, in a manner calculated to be understood by the Participant, the specific reasons for such denial and which shall make specific reference to the pertinent provisions of the Plan on which the Administrator's decision is based.
Wyeth
DEFERRED COMPENSATION PLAN
APPENDIX A
INVESTMENT OPTIONS
1. Balanced Portfolio
2. S&P 500 Index Portfolio or Total Stock Market Index Portfolio
3. International Equity Portfolio
4. Deemed Interest Option " a hypothetical investment option which earns interest at the Deemed Rate of Interest
5. Company Stock Fund
6. Market Interest Option
7. Large Cap Value Portfolio
8. Large Cap Portfolio
9. Small Cap Value Portfolio
EXHIBIT 12
Wyeth
Computation of Ratio of Earnings to Fixed Charges (3)
(in thousands, except ratio amounts)
Year Ended December 31,
-------------------------------------------------------------------------
2003 2002 2001 2000 1999
---------- ---------- ---------- ----------- -----------
Earnings (loss):
----------------
Income (loss) from continuing operations
before federal and foreign taxes $2,361,612 $6,097,245 $2,868,747 $(1,101,040) $(1,907,299)
Add:
----
Fixed charges 346,564 430,449 439,058 324,887 403,694
Minority interests 32,352 27,993 20,841 26,784 30,301
Amortization of capitalized interest 8,772 8,866 2,497 1,917 1,803
Less:
-----
Equity income (loss) (468) 20,766 70,372 55,991 2,122
Capitalized interest 115,800 88,008 94,257 43,303 15,375
---------- ---------- ---------- ----------- -----------
Total earnings (loss) as defined $2,633,968 $6,455,779 $3,166,514 $(846,746) $(1,488,998)
========== ========== ========== =========== ===========
Fixed Charges:
--------------
Interest and amortization of debt expense $182,503 $294,160 $301,145 $238,840 $343,271
Capitalized interest 115,800 88,008 94,257 43,303 15,375
Interest factor of rental expense (1) 48,261 48,281 43,656 42,744 45,048
---------- ---------- ---------- ----------- -----------
Total fixed charges as defined $346,564 $430,449 $439,058 $324,887 $403,694
========== ========== ========== =========== ===========
Ratio of earnings to fixed charges (2) 7.6 15.0 7.2 - -
(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.
|
Financial Review
26 Ten-Year Selected Financial Data
28 Consolidated Balance Sheets
29 Consolidated Statements of Operations
30 Consolidated Statements of Changes in Stockholders' Equity
31 Consolidated Statements of Cash Flows
32 Notes to Consolidated Financial Statements
56 Report of Independent Auditors
57 Management Report on Consolidated Financial Statements
58 Quarterly Financial Data (Unaudited)
58 Market Prices of Common Stock and Dividends
59 Management's Discussion and Analysis of Financial Condition and Results of Operations
Ten-Year Selected Financial Data
(Dollar amounts in thousands except per share amounts)
Year Ended December 31, 2003 2002 2001 2000 1999 ----------------------- ------------ ------------ ------------ ------------- ------------- Summary of Net Revenue and Earnings Net revenue(1) $ 15,850,632 $ 14,584,035 $ 13,983,745 $ 13,081,334 $ 11,695,061 Income (loss) from continuing operations(1)(2)(3) 2,051,192 4,447,205 2,285,294 (901,040) (1,207,243) Diluted earnings (loss) per share from continuing operations(1)(2) 1.54 3.33 1.72 (0.69) (0.92) Dividends per common share 0.9200 0.9200 0.9200 0.9200 0.9050 Year-End Financial Position Current assets(1)(3) $ 14,962,242 $ 11,605,699 $ 9,766,753 $ 10,180,811 $ 12,384,778 Current liabilities(1)(3) 8,429,510 5,485,506 7,257,181 9,742,059 6,480,383 Ratio of current assets to current liabilities(1)(3) 1.77 2.12 1.35 1.05 1.91 Total assets(1)(3) 31,031,922 26,042,592 22,967,922 21,092,466 23,123,756 Long-term debt(1)(4) 8,076,429 7,546,041 7,357,277 2,394,790 3,606,423 Average stockholders' equity 8,725,147 6,114,243 3,445,333 4,516,420 7,914,772 Stockholders -- Outstanding Shares Number of common stockholders 59,181 61,668 64,698 58,355 62,482 Weighted average common shares outstanding used for diluted earnings (loss) per share calculation (in thousands) 1,335,910 1,334,127 1,330,809 1,306,474 1,308,876 Employment Data(1) Number of employees at year-end 52,385 52,762 52,289 48,036 46,815 Wages and salaries $ 3,003,555 $ 2,792,379 $ 2,536,220 $ 2,264,258 $ 2,032,431 Benefits (including Social Security taxes) 933,448 842,177 691,018 602,816 593,222 |
(1) As a result of the sale of the Cyanamid Agricultural Products business on June 30, 2000, amounts for the years 1994 through 1999 were restated to reflect this business as a discontinued operation with the net assets of the discontinued business held for sale related to the Cyanamid Agricultural Products business included in current assets.
(2) See "Management's Discussion and Analysis of Financial Condition and Results of Operations" for discussion of the gains related to Immunex/Amgen common stock transactions, diet drug litigation charges and special charges for the years ended December 31, 2003, 2002 and 2001.
(3) As a result of charges of $2,000,000, $1,400,000, $950,000, $7,500,000 and $4,750,000 in 2003, 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 beginning in 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. In 2003, the Company completed the sales of the remaining 31,235,958 shares of its Amgen common stock holdings for net proceeds of $1,579,917.
(4) In 2001, the Company issued $3,000,000 of Senior Notes. In 2003, the Company issued $4,800,000 of Senior Notes and $1,020,000 of Convertible Senior Debentures. A portion of the proceeds from the 2003 borrowings was used to repurchase approximately $1,700,000 in previously issued Senior Notes.
(5) The 1994 information reflects the acquisition of American Cyanamid Company for the one-month period ended December 31, 1994.
26 Wyeth
1998 1997 1996 1995 1994(5)
---------- ------------ ------------ ------------ ------------
$ 11,101,100 $ 11,916,623 $ 11,928,290 $ 11,274,927 $ 8,597,560
2,152,344 1,747,638 1,651,617 1,472,525 1,525,517
1.61 1.33 1.28 1.18 1.24
0.8700 0.8300 0.7825 0.7550 0.7350
$ 10,698,188 $ 10,025,512 $ 10,310,256 $ 11,084,841 $ 11,321,682
3,478,119 3,476,322 3,584,256 3,929,940 4,291,452
3.08 2.88 2.88 2.82 2.64
20,224,231 19,851,517 19,924,666 20,721,093 21,328,267
3,839,402 5,007,610 6,010,297 7,806,717 9,972,444
8,895,024 7,568,672 6,252,545 4,898,550 4,065,295
65,124 64,313 67,545 68,763 71,223
1,336,641 1,312,975 1,287,790 1,250,902 1,234,100
47,446 54,921 54,194 58,957 70,300
$ 2,175,517 $ 2,428,518 $ 2,439,604 $ 2,512,418 $ 1,811,402
577,930 619,528 614,179 641,169 439,572
|
Wyeth 27
Consolidated Balance Sheets
(In thousands except share and per share amounts)
December 31, 2003 2002
-------------------------------------------------------------------------------------------------------------------
Assets
Cash and cash equivalents $ 6,069,794 $ 2,943,604
Marketable securities 1,110,297 1,003,275
Amgen investment -- 1,509,947
Accounts receivable less allowances (2003 - $149,795 and 2002 - $132,342) 2,529,613 2,379,819
Inventories 2,412,184 1,992,724
Other current assets including deferred taxes 2,840,354 1,776,330
-------------------------------------------------------------------------------------------------------------------
Total Current Assets 14,962,242 11,605,699
Property, plant and equipment:
Land 182,849 173,743
Buildings 4,130,838 3,401,490
Machinery and equipment 4,184,292 3,782,533
Construction in progress 3,188,273 2,477,219
-------------------------------------------------------------------------------------------------------------------
11,686,252 9,834,985
Less accumulated depreciation 3,025,201 2,599,293
-------------------------------------------------------------------------------------------------------------------
8,661,051 7,235,692
Goodwill 3,817,993 3,745,749
Other intangibles, net of accumulated amortization
(2003 - $128,137 and 2002 - $95,223) 133,134 145,915
Other assets including deferred taxes 3,457,502 3,309,537
-------------------------------------------------------------------------------------------------------------------
Total Assets $ 31,031,922 $ 26,042,592
===================================================================================================================
Liabilities
Loans payable $ 1,512,845 $ 804,894
Trade accounts payable 1,010,749 672,633
Accrued expenses 5,461,835 3,798,500
Accrued federal and foreign taxes 444,081 209,479
-------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 8,429,510 5,485,506
Long-term debt 8,076,429 7,546,041
Accrued postretirement benefit obligations other than pensions 1,007,540 965,081
Other noncurrent liabilities 4,224,062 3,890,052
Contingencies and commitments (Note 14)
-------------------------------------------------------------------------------------------------------------------
Stockholders' Equity
$2.00 convertible preferred stock, par value $2.50 per share; 5,000,000
shares authorized 42 46
Common stock, par value $0.331/3 per share; 2,400,000,000 shares authorized
(1,332,451,733 and 1,326,055,415 issued and outstanding, net of 89,930,211 and
96,276,705 treasury shares at par, for 2003 and 2002, respectively) 444,151 442,019
Additional paid-in capital 4,764,390 4,582,773
Retained earnings 4,112,285 3,286,645
Accumulated other comprehensive loss (26,487) (155,571)
-------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 9,294,381 8,155,912
-------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 31,031,922 $ 26,042,592
===================================================================================================================
|
The accompanying notes are an integral part of these consolidated financial statements.
28 Wyeth
Consolidated Statements of Operations
(In thousands except per share amounts)
Year Ended December 31, 2003 2002 2001 ---------------------------------------------------------------------------------------------------------- Net Revenue $ 15,850,632 $ 14,584,035 $ 13,983,745 ---------------------------------------------------------------------------------------------------------- Cost of goods sold 4,377,086 3,918,387 3,388,776 Selling, general and administrative expenses 5,468,174 5,010,507 5,034,516 Research and development expenses 2,093,533 2,080,191 1,869,679 Interest expense, net 103,140 202,052 146,358 Other income, net (332,264) (382,931) (274,331) Gains related to Immunex/Amgen common stock transactions (860,554) (4,082,216) -- Diet drug litigation charges 2,000,000 1,400,000 950,000 Special charges 639,905 340,800 -- ---------------------------------------------------------------------------------------------------------- Income before federal and foreign taxes 2,361,612 6,097,245 2,868,747 Provision for federal and foreign taxes 310,420 1,650,040 583,453 ---------------------------------------------------------------------------------------------------------- Net Income $ 2,051,192 $ 4,447,205 $ 2,285,294 ========================================================================================================== Basic Earnings per Share $ 1.54 $ 3.35 $ 1.74 ========================================================================================================== Diluted Earnings per Share $ 1.54 $ 3.33 $ 1.72 ========================================================================================================== |
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, 2001 $ 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, net 7,865 7,865
Unrealized losses on marketable securities, net (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
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, net (22,132) (22,132)
Unrealized gains on marketable securities, net 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
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
================================================================================================================================
Net income 2,051,192 2,051,192
Currency translation adjustments 691,362 691,362
Unrealized losses on derivative contracts, net (32,887) (32,887)
Unrealized gains on marketable securities, net 7,780 7,780
Realized gain on sales of Amgen stock
reclassified to net income (515,114) (515,114)
Minimum pension liability adjustments (22,057) (22,057)
---------
Comprehensive income, net of tax 2,180,276
Cash dividends declared: ---------
Preferred stock (per share: $2.00) (35) (35)
Common stock (per share: $0.92) (1,223,123) (1,223,123)
Common stock issued for stock options 2,058 124,837 126,895
Other exchanges (4) 74 56,780 (2,394) 54,456
--------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2003 $ 42 $444,151 $4,764,390 $ 4,112,285 $ (26,487) $ 9,294,381
================================================================================================================================
|
The accompanying notes are an integral part of these consolidated financial statements.
30 Wyeth
Consolidated Statements of Cash Flows
(In thousands)
Year Ended December 31, 2003 2002 2001
--------------------------------------------------------------------------------------------------------
Operating Activities
Net income $ 2,051,192 $ 4,447,205 $ 2,285,294
Adjustments to reconcile net income to net cash provided
by/(used for) operating activities:
Diet drug litigation charges 2,000,000 1,400,000 950,000
Gains related to Immunex/Amgen common stock transactions (860,554) (4,082,216) --
Special charges 639,905 340,800 --
Net gains on sales of assets (343,064) (329,364) (249,399)
Depreciation 505,702 461,554 426,590
Amortization 32,181 23,146 181,139
Change in deferred income taxes (433,994) 1,109,535 267,820
Diet drug litigation payments (434,167) (1,307,013) (7,257,882)
Security fund deposits (535,215) (405,000) --
Contributions to defined benefit pension plans (230,787) (909,602) (429,710)
Changes in working capital, net:
Accounts receivable 69,628 271,988 (68,984)
Inventories (245,453) (185,611) (273,063)
Other current assets 48,870 (124,738) (395,764)
Trade accounts payable and accrued expenses 469,661 (250,887) 277,009
Accrued federal and foreign taxes 115,990 (33,214) (14,654)
Other items, net 61,208 (240,853) (145,231)
--------------------------------------------------------------------------------------------------------
Net Cash Provided by/(Used for) Operating Activities 2,911,103 185,730 (4,446,835)
========================================================================================================
--------------------------------------------------------------------------------------------------------
Investing Activities
Purchases of property, plant and equipment (1,908,661) (1,931,879) (1,924,265)
Proceeds from Amgen acquisition of Immunex -- 1,005,201 --
Proceeds from sales of Amgen common stock 1,579,917 3,250,753 --
Proceeds from sales of assets 402,692 798,274 408,230
Purchases of marketable securities (1,272,995) (2,235,872) (2,703,252)
Proceeds from sales and maturities of marketable securities 1,217,114 2,532,538 1,762,295
--------------------------------------------------------------------------------------------------------
Net Cash Provided by/(Used for) Investing Activities 18,067 3,419,015 (2,456,992)
========================================================================================================
--------------------------------------------------------------------------------------------------------
Financing Activities
Proceeds from (repayments of) commercial paper, net (3,787,145) (1,030,060) 4,019,176
Proceeds from issuance of long-term debt 5,820,000 -- 3,000,000
Repayments of long-term debt (691,087) (250,000) --
Other borrowing transactions, net (76,522) (13,797) (12,020)
Dividends paid (1,223,158) (1,219,173) (1,211,054)
Purchases of common stock for treasury -- (113,927) --
Exercises of stock options 126,895 215,370 224,631
--------------------------------------------------------------------------------------------------------
Net Cash Provided by/(Used for) Financing Activities 168,983 (2,411,587) 6,020,733
--------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents 28,037 5,712 (16,478)
--------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents 3,126,190 1,198,870 (899,572)
Cash and Cash Equivalents, Beginning of Year 2,943,604 1,744,734 2,644,306
--------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents, End of Year $ 6,069,794 $ 2,943,604 $ 1,744,734
========================================================================================================
|
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
Basis of Presentation: The accompanying consolidated financial statements include the accounts of Wyeth and subsidiaries (the Company). All per share amounts, unless otherwise noted in the footnotes and quarterly financial data, are presented on a diluted basis; that is, based on the weighted average number of outstanding common shares and the effect of all potentially dilutive common shares (primarily unexercised stock options).
Use of Estimates: 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. Actual results may differ from those estimates.
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 three primary businesses: Wyeth Pharmaceuticals (Pharmaceuticals), Wyeth Consumer Healthcare (Consumer Healthcare) and Fort Dodge Animal Health (Animal Health). Pharmaceuticals include branded human ethical pharmaceuticals, biologicals and nutritionals. Principal products include neuroscience therapies, cardiovascular products, nutritionals, gastroenterology drugs, anti-infectives, vaccines, oncology therapies, musculoskeletal therapies, hemophilia treatments, immunological products and women's health care products. Consumer Healthcare products include analgesics, cough/cold/allergy remedies, nutritional supplements, and hemorrhoidal, asthma and other relief items sold over-the-counter. Principal Animal Health products include vaccines, pharmaceuticals, parasite control and growth implants. 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 accounted for approximately 23% and 25% of the Company's consolidated net revenue in 2003 and 2002, respectively. The Company's largest customer accounted for 10% of consolidated net revenue in 2003 and 2002. 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 product or line of products for a substantial portion of its net revenue or results of operations other than Effexor, Protonix and the Premarin family products, each of which had sales in excess of $1,000.0 million, and comprised approximately 17%, 9% and 8%, respectively, of the Company's consolidated net revenue in 2003.
Equity Method of Accounting: The Company accounts for 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, Immunex Corporation (Immunex) was the Company's only material equity method investment. 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. The Company liquidated all of its Amgen common stock holdings by the end of the 2003 first quarter. As of December 31, 2003, the Company no longer holds an investment in Amgen. See Note 2 for further description of Immunex/Amgen-related common stock transactions. At December 31, 2003 and 2002, the Company did not have any material equity method investments.
Cash Equivalents consist primarily of commercial paper, fixed-term deposits and other short-term, highly liquid securities with maturities of three months or less when purchased 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 $429.5 million and $360.3 million at December 31, 2003 and 2002, respectively. The current value exceeded the LIFO value by $74.0 million and $90.0 million at December 31, 2003 and 2002, respectively. The remaining inventories are valued primarily under the first-in, first-out (FIFO) method.
32 Wyeth
Inventories at December 31 consisted of:
(In thousands) 2003 2002
-------------- ---------- ----------
Finished goods $ 821,637 $ 736,360
Work in progress 1,141,916 808,711
Materials and supplies 448,631 447,653
---------- ----------
$2,412,184 $1,992,724
========== ==========
|
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 |
Long-lived 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 other 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 no longer are 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, 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities and 149, Amendment of Statement 133 on Derivative Instruments and 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 certain 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 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 cash flows from each of the Company's derivative contracts are reflected as operating activities in the consolidated statements of cash flows. 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. 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, chargebacks, 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. Additionally, alliance revenue includes revenue earned related to Rapamune. Its active ingredient, sirolimus, coats the coronary stent made by a subsidiary of Johnson & Johnson. Selling and marketing expenses related to alliance revenue are included in Selling, general and administrative expenses. Alliance revenue totaled $654.4 million, $418.8 million and $322.4 million for 2003, 2002 and 2001, 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 $234.3 million, $227.5 million and $228.9 million in 2003, 2002 and 2001, 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, 2003 and 2002 were $801.4 million and $722.5 million, respectively.
Stock-Based Compensation: As of December 31, 2003, the Company has three 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 Accounting
Wyeth 33
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. No stock-based employee compensation cost is reflected in net income, other than for the Company's restricted stock awards, as options granted under all other plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The Company's restricted stock awards are issued under the Company's Stock Incentive Plans (see Note 12). The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure, Amendment of SFAS No. 123, to stock-based employee compensation:
(In thousands except per share amounts)
Year Ended December 31, 2003 2002 2001
----------------------- ----------- ----------- -----------
Net income, as reported $2,051,192 $4,447,205 $2,285,294
Add: Stock-based employee
compensation expense
included in reported net
income, net of tax 13,396 3,999 8,009
Deduct: Total stock-based
employee compensation
expense determined under
fair value-based method for
all awards, net of tax (335,082) (301,964) (208,697)
---------- ---------- ----------
Adjusted net income $1,729,506 $4,149,240 $2,084,606
========== ========== ==========
Earnings per share:
Basic - as reported $ 1.54 $ 3.35 $ 1.74
Basic - adjusted $ 1.30 $ 3.13 $ 1.58
========== ========== ==========
Diluted - as reported $ 1.54 $ 3.33 $ 1.72
Diluted - adjusted $ 1.29 $ 3.11 $ 1.57
========== ========== ==========
|
The fair value of issued stock options is estimated on the date of grant using the Black-Scholes option-pricing model incorporating the following assumptions for stock options granted:
Year Ended December 31, 2003 2002 2001 ----------------------- ------- ------- ------- Expected volatility of stock price 35.6% 33.7% 32.1% Expected dividend yield 2.2% 1.9% 1.6% Risk-free interest rate 3.0% 4.1% 4.8% Expected life of options 5 years 5 years 5 years |
The weighted average fair value of stock options granted during 2003, 2002 and 2001 was $11.86, $16.12 and $17.76 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 of the respective intangible asset. Amounts capitalized for such payments are included in Other intangibles, net of accumulated amortization.
Earnings per Share: The following table sets forth the computations of basic earnings per share and diluted earnings per share:
(In thousands except per share amounts)
Year Ended December 31, 2003 2002 2001
----------------------- ---------- ---------- ----------
Net income less
preferred dividends $2,051,157 $4,447,167 $2,285,252
Denominator:
Weighted average common
shares outstanding 1,330,276 1,325,577 1,317,102
---------- ---------- ----------
Basic earnings per share $ 1.54 $ 3.35 $ 1.74
========== ========== ==========
Net income $2,051,192 $4,447,205 $2,285,294
Denominator:
Weighted average common
shares outstanding 1,330,276 1,325,577 1,317,102
Common stock equivalents
of outstanding stock
options and deferred
contingent common
stock awards 5,634 8,550 13,707
---------- ---------- ----------
Total shares* 1,335,910 1,334,127 1,330,809
---------- ---------- ----------
Diluted earnings per share* $ 1.54 $ 3.33 $ 1.72
========== ========== ==========
|
* At December 31, 2003, 2002 and 2001, 106,967,641, 90,360,361 and 18,945,057, respectively, of common shares related to options outstanding under the Company's Stock Incentive Plans were excluded from the computation of diluted earnings per share, as the effect would have been antidilutive.
Recently Issued Accounting Standards: The Financial Accounting Standards Board (FASB) recently issued SFAS Nos. 149 and 150, revised SFAS No. 132 and FASB Interpretation No. 46, and issued Staff Position No. 106-1, which are summarized below.
- SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities, amends and clarifies the accounting guidance on derivative instruments, including certain derivative instruments embedded in other contracts, and hedging activities that fall within the scope of SFAS No. 133. With certain exceptions, SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The adoption of SFAS No. 149 did not have a material impact on the Company's consolidated financial position or results of operations.
- SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. Financial instruments within the scope of SFAS No. 150 will now be required to be classified as liabilities. This Statement also requires enhanced disclosures regarding alternative methods of settling the instruments and the capital structure of entities. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003 and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS No. 150 had no impact on the Company's consolidated financial position or results of operations.
34 Wyeth
- SFAS No. 132 (revised 2003), Employers' Disclosures about Pensions and Other Postretirement Benefits, an amendment of FASB Statement Nos. 87, 88, and 106, revises employers' disclosures about pension plans and other postretirement benefit plans but does not change the measurement or recognition of those plans required by SFAS Nos. 87, Employers' Accounting for Pensions, 88, Employers' Accounting for Settlements and Curtailments of Defined Benefit Plans and for Termination Benefits, and 106, Employers' Accounting for Postretirement Benefits. This revised Statement retains the disclosures required by SFAS No. 132 and requires additional disclosures about the assets, obligations, cash flows and net periodic benefit cost of defined benefit pension plans and other defined postretirement plans. Companies are required to segregate plan assets by category and to provide certain additional informational disclosures. In addition, this Statement requires companies to disclose various elements of pension and postretirement costs in interim financial statements. With certain exceptions, this Statement is effective for financial statements with fiscal quarters and years ending after December 15, 2003. The Company has adopted the effective disclosure requirements prescribed by SFAS No. 132 (revised 2003) as of December 31, 2003 (see Note 8).
- FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities, an interpretation of ARB No. 51 (FIN 46R), replaces FIN 46, Consolidation of Variable Interest Entities, an interpretation of ARB No. 51, which had been issued in January 2003. FIN 46R clarifies some of the provisions of FIN 46 relating to variable interest entities (VIE) and exempts certain entities from its requirements. FIN 46R addresses consolidation of VIEs which have one or more of the following characteristics: the equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support provided by any parties, the equity investors lack some essential characteristics of a controlling financial interest and the equity investors have voting rights that are not proportionate to their economic interests. Application of FIN 46R is required in financial statements of companies that have interests in structures that are commonly referred to as special-purpose entities for periods ending after December 15, 2003. Application by public entities for all other types of VIEs is required in financial statements for periods ending after March 15, 2004; however, early adoption is allowed. The Company has elected to early adopt the provisions of FIN 46R effective December 31, 2003. The adoption of this Statement had no impact on the Company's consolidated financial position or results of operations.
- FASB Staff Position (FSP) No. 106-1, Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003, was issued to permit a sponsor of a postretirement health care plan that provides prescription drug benefits to make a one-time election to defer accounting for the effects of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act). The Act introduces a prescription drug benefit under Medicare Part D as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. The federal subsidy is based on 28% of an individual beneficiary's annual prescription drug costs between $250 and $5,000 (subject to indexing and the provisions of the Act as to "allowable retiree costs"). FSP No. 106-1 requires certain disclosures effective for fiscal years ending after December 7, 2003 regardless of whether a sponsor elects to defer accounting for the Act. In accordance with FSP No. 106-1, the Company has elected not to reflect the effects of the Act on its accumulated postretirement benefit obligation or net periodic postretirement benefit cost in its 2003 consolidated financial statements or accompanying notes to consolidated financial statements. The Company acknowledges that specific authoritative guidance on the accounting for the federal subsidy portion of the Act is pending and that guidance, when issued, could require the Company to change certain previously reported information.
Reclassifications: Certain reclassifications have been made to the December 31, 2002 and 2001 consolidated financial statements and accompanying notes to conform with the December 31, 2003 presentation.
2. Divestitures
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) 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.
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 by an overall discount of approximately 18%. The discount rate was based on valuations provided by independent valuation consultants. 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
Wyeth 35
$1.26 per share) 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. 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 resulted in a gain of $1,454.6 million ($943.4 million after-tax or $0.71 per share). 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 in January 2003 and netted proceeds of $1,579.9 million, which resulted in a gain of $860.6 million ($558.7 million after-tax or $0.42 per share).
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.
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 has been dedicated to expanding the production capacity of Enbrel.
Net Gains on Sales of Assets
As of December 31, 2003, 2002 and 2001, net gains on sales of assets of $343.1 million, $329.4 million and $249.4 million, respectively, were included in Other income, net. The gains recorded in 2003 included sales of product rights in some or all territories to Ativan, Isordil, Diamox, Ziac, Zebeta, Aygestin, Anacin and Sonata. These divestitures resulted in pre-tax gains of approximately $265.8 million. Gains recorded during 2002 primarily resulted from the sale of certain assets related to the Company's generic human injectables product line to Baxter Healthcare Corporation for $305.0 million in cash. This transaction resulted in a pre-tax gain of $172.9 million. The net assets, sales and profits of these divested assets, individually or in the aggregate, were not material to any business segment or the Company's consolidated financial position or results of operations as of December 31, 2003, 2002 and 2001.
3. Special Charges
2003 Special Charges
The Company recorded a special charge of $639.9 million ($466.4 million after-tax or $0.35 per share) in the 2003 fourth quarter for manufacturing restructurings, asset impairments and the cost of debt extinguishment.
2003 Restructuring Charge and Related Asset Impairments
In December 2003, the Company recorded a special charge for manufacturing restructurings and related asset impairments of $487.9 million ($367.6 million after-tax or $0.28 per share). The Company recorded its 2003 restructuring charges, including personnel and other costs, in accordance with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, and its asset impairments in accordance with SFAS No. 144, Accounting for the Impairment of Long-Lived Assets. The Company expects total charges related to its 2003 restructuring program to approximate $493.9 million and plans to record the majority of the remaining $6.0 million in personnel charges during 2004, in accordance with SFAS No. 146. The restructuring and related asset impairments impacted only the Pharmaceuticals segment and were recorded to recognize the costs of closing certain manufacturing facilities, as well as the elimination of certain positions at the Company's facilities.
Specifically, the Company has decided to close its pharmaceutical plant in Singapore and rationalize its network of collection sites for Premarin-related raw materials as a result of lower volume in the Premarin family products. In addition, as a result of declining demand for ReFacto, the Company's treatment for hemophilia A, manufacturing operations at its St. Louis, Missouri biopharmaceutical facility will be discontinued. The Company also has recorded fixed and intangible asset impairment charges related to rhBMP-2 and FluMist as a result of reduced demand projections.
The following table summarizes the total charges for restructuring and asset impairments discussed above, payments made and the reserve balance at December 31, 2003:
Payments/ Reserve at
(In thousands) Total Non-cash December 31,
2003 Restructuring Charges Charges 2003
------------------ --------- --------- ------------
Personnel costs $ 3,400 $ -- $ 3,400
Asset impairments 419,400 (419,400) --
Contract settlement costs 47,900 (2,700) 45,200
Other closure/exit costs 17,200 -- 17,200
--------- --------- ---------
$ 487,900 $(422,100) $ 65,800
========= ========= =========
|
36 Wyeth
The personnel costs relate to the termination of approximately 190 employees primarily engaged in manufacturing activities in Singapore. The charge for asset impairments includes $396.6 million for fixed asset impairments and $22.8 million for the write-down of certain intangible assets. The asset impairments 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 for the St. Louis and Singapore facilities have been categorized as held for sale. The contract settlement costs and other closure/exit costs are a direct result of the restructuring plan and include settlements of purchase commitments, other obligations with suppliers and other related exit costs necessary to properly close the facilities. The personnel costs, contract settlement costs and other closure/exit costs require the outlay of cash, while the fixed and intangible asset impairments represent non-cash items. The Company expects the majority of the remaining costs will be expended in 2004.
Debt Extinguishment Costs
In December 2003, the Company recorded a special charge of $152.0 million ($98.8 million after-tax or $0.07 per share) related to the early extinguishment of debt in connection with the repurchase of certain Senior Notes. The costs relate primarily to the excess of prepayment premiums and principal over the carrying value of the debt retired and the related write-off of debt issuance costs. See Note 6 for further discussion of debt extinguishment.
2002 Special Charge
2002 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). The Company recorded its asset impairments in accordance with SFAS No. 144 and its restructuring charges, including personnel and other costs, in accordance with Emerging Issues Task Force No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).
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. Depreciation was 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 covered approximately 3,150 employees worldwide. The reductions in workforce were permanent and affected all of the Company's reportable segments, including Corporate. Approximately 1,200 of these positions were located at the manufacturing and research facilities that were identified to 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, 2003, approximately 95 positions have yet to be eliminated. During 2003 and 2002, approximately $126.9 million and $30.9 million, respectively, of these personnel costs were paid, leaving an accrual of $36.8 million at December 31, 2003. The timing of the remaining costs to be paid has been delayed since, in many instances, the terminated employees elected or were required to receive their severance payments over an extended period of time. However, substantially all of the payments are expected to be made during 2004.
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. During 2003 and 2002, approximately $45.1 million and $4.5 million, respectively, of these costs were paid, leaving an accrual of $27.9 million at December 31, 2003. Most of the remaining other closure/exit costs reserve represents long-term lease payments which will be paid over the remaining lease terms through 2012, as well as certain facility closure and decommissioning costs which have been delayed as the Company continued to produce certain products due to manufacturing commitments and in response to a potential market shortage and related medical necessity. The Company expects the majority of the remaining facility costs will be expended in 2004.
The following table summarizes the total charges for restructuring and asset impairments discussed above, payments made and the reserve balance at December 31, 2003 and 2002:
Payments/ Reserve at Payments/ Reserve at
(In thousands) Total Non-cash December 31, Non-cash December 31,
2002 Restructuring Charges Charges in 2002 2002 Charges in 2003 2003
------------------ --------- --------------- ------------ --------------- ------------
Personnel costs $ 194,600 $ (30,900) $ 163,700 $(126,900) $ 36,800
Asset impairments 68,700 (68,700) -- -- --
Other closure/exit costs 77,500 (4,500) 73,000 (45,100) 27,900
--------- ---------- ---------- --------- ---------
$ 340,800 $ (104,100) $ 236,700 $(172,000) $ 64,700
========= ========== ========== ========= =========
|
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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, 2003 and 2002 were as follows:
Gross Gross
(In thousands) Unrealized Unrealized Fair
At December 31, 2003 Cost Gains (Losses) Value
-------------------- ---------- ---------- ---------- -----------
Available-for-sale:
U.S. Treasury securities $ 152,851 $ 44 $ (23) $ 152,872
Commercial paper 42,964 4 (4) 42,964
Certificates of deposit 63,643 22 (27) 63,638
Corporate debt securities 212,198 252 (32) 212,418
Other debt securities 4,296 -- (11) 4,285
Equity securities 21,078 13,158 (188) 34,048
Institutional fixed income fund 522,847 16,868 -- 539,715
---------- ---------- --------- -----------
Total available-for-sale 1,019,877 30,348 (285) 1,049,940
---------- ---------- --------- -----------
Held-to-maturity:
Commercial paper 60,107 -- -- 60,107
Certificates of deposit 250 -- -- 250
---------- ---------- --------- -----------
Total held-to-maturity 60,357 -- -- 60,357
---------- ---------- --------- -----------
$1,080,234 $ 30,348 $ (285) $ 1,110,297
========== ========== ========= ===========
|
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
========== ========== ========= ===========
|
38 Wyeth
The contractual maturities of debt securities classified as available-for-sale at December 31, 2003 were as follows:
Fair
(In thousands) Cost Value
-------------- ---- -----
Available-for-sale:
Due within one year $276,522 $276,578
Due after one year through five years 190,696 190,872
Due after five years through 10 years -- --
Due after 10 years 8,734 8,727
-------- --------
$475,952 $476,177
======== ========
|
All held-to-maturity debt securities are due within one year and had aggregate fair values of $60.4 million at December 31, 2003.
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 2002, the fiscal year in which SFAS No. 142 was initially adopted (transitional impairment test). Thereafter, goodwill must be tested for impairment at least annually. The Company completed step one of the transitional impairment test during the second quarter of 2002 and performed its annual impairment test during the fourth quarter of 2003 and 2002. As a result, the Company determined there was no impairment of the recorded goodwill for any of its reporting units as of December 31, 2003 and 2002.
The Company's other intangibles, the majority of which are license agreements having finite lives, are being amortized over their estimated useful lives ranging from three to 10 years. As of December 31, 2003, there is one trade name with a carrying value of approximately $16.9 million, which is deemed to have an indefinite life because it is expected to generate cash flows indefinitely.
The following table presents the transitional disclosures for net income and basic and diluted earnings per share for the years ended December 31, 2003, 2002 and 2001 to reflect the adoption of SFAS No. 142 as of January 1, 2002. Such disclosures add back goodwill amortization to the 2001 results to be comparable with the 2003 and 2002 results, which do not include goodwill amortization in accordance with the adoption of SFAS No. 142:
(In thousands except per share amounts)
Year ended December 31, 2003 2002 2001
----------------------- ---------- ---------- ----------
Net income, as reported $2,051,192 $4,447,205 $2,285,294
Add back: Goodwill amortization -- -- 153,926
---------- ---------- ----------
Adjusted net income $2,051,192 $4,447,205 $2,439,220
========== ========== ==========
Basic earnings per share:
As reported $ 1.54 $ 3.35 $ 1.74
Add back: Goodwill amortization -- -- 0.12
---------- ---------- ----------
Adjusted $ 1.54 $ 3.35 $ 1.86
========== ========== ==========
Diluted earnings per share:
As reported $ 1.54 $ 3.33 $ 1.72
Add back: Goodwill amortization -- -- 0.12
---------- ---------- ----------
Adjusted $ 1.54 $ 3.33 $ 1.84
========== ========== ==========
|
The changes in the carrying value of goodwill by reportable segment for the years ended December 31, 2003 and 2002 were as follows:
Consumer Animal
(In thousands) Pharmaceuticals Healthcare Health Total
-------------- --------------- ---------- ---------- ------------
Balance at January 1, 2002 $ 2,604,694 $ 589,004 $ 531,849 $ 3,725,547
Goodwill write-off* (10,035) -- -- (10,035)
Currency translation adjustments 28,290 1,342 605 30,237
------------ ---------- ---------- -----------
Balance at December 31, 2002 2,622,949 590,346 532,454 3,745,749
Currency translation adjustments 68,823 2,180 1,241 72,244
------------ ---------- ---------- -----------
Balance at December 31, 2003 $ 2,691,772 $ 592,526 $ 533,695 $ 3,817,993
============ ========== ========== ===========
|
* 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).
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6. Debt and Financing Arrangements
The Company's debt at December 31 consisted of:
(In thousands) 2003 2002
-------------- ---------- ----------
Commercial paper $ -- $3,787,145
Notes payable:
5.875% Notes due 2004 500,000 500,000
7.900% Notes due 2005 308,913 1,000,000
6.250% Notes due 2006* 1,000,000 1,000,000
4.125% Notes due 2008 300,000 --
6.700% Notes due 2011 1,500,000 1,500,000
5.250% Notes due 2013 1,500,000 --
5.500% Notes due 2014 1,750,000 --
7.250% Notes due 2023 250,000 250,000
6.450% Notes due 2024 500,000 --
6.500% Notes due 2034 750,000 --
Floating rate convertible debentures
due 2024 1,020,000 --
Pollution control and industrial
revenue bonds:
1.75% - 5.8% due 2006 - 2018 71,250 74,250
Other debt:
0.74% - 10.25% due 2004 - 2009 32,832 38,760
Fair value of debt attributable to
interest rate swaps 106,279 200,780
---------- ----------
9,589,274 8,350,935
Less current portion 1,512,845 804,894
---------- ----------
$8,076,429 $7,546,041
========== ==========
|
* At December 31, 2003, these Notes were classified as Loans payable due to the exercise of a make-whole call option, which was completed in January 2004.
Other debt-related information at December 31 was as follows:
(Dollars in thousands) 2003 2002 ---------------------- ----------- ---------- Fair value of outstanding debt $10,084,809 $8,471,800 Weighted average interest rate on outstanding commercial paper -- 1.87% Weighted average remaining maturity on outstanding commercial paper -- 25 days |
Revolving Credit Facilities
In March 2002, the Company renewed its $3,000.0 million, 364-day credit facility (which supported borrowings under the commercial paper program) for an additional 364-day term. The portion of commercial paper outstanding at December 31, 2002 supported by this credit facility was classified as Long-term debt since the Company intended, and had the ability, to refinance these obligations through either the issuance of additional commercial paper or the extension of its credit facility for an additional year upon its termination in March 2003.
In March 2003, the Company replaced its $3,000.0 million, 364-day facility with credit facilities totaling $2,700.0 million. These credit facilities are composed of a $1,350.0 million, 364-day facility and a $1,350.0 million, three-year facility. The credit facilities contain substantially identical financial and other covenants, representations, warranties, conditions and default provisions as the March 2002 credit facility. The Company had no commercial paper outstanding as of December 31, 2003.
The proceeds from the credit facilities may be used to support commercial paper and the Company's general corporate and working capital requirements. At December 31, 2003 and 2002, there were no borrowings outstanding under the facilities.
Notes and Debentures
During the past three years, the Company issued Senior Notes (Notes) and Convertible Senior Debentures (Debentures) totaling $8,820.0 million. The transactions were completed as follows:
- $3,000.0 million of Notes and $1,020.0 million of Debentures issued in December 2003
- $1,800.0 million of Notes issued February 11, 2003
- $3,000.0 million of Notes issued March 30, 2001
December 2003 Issuance
On December 11, 2003, the Company issued $3,000.0 million of Notes through a registered public offering. These Notes consisted of three tranches, which pay interest semiannually on February 1 and August 1, as follows:
- $1,750.0 million 5.500% Notes due February 1, 2014
- $500.0 million 6.450% Notes due February 1, 2024
- $750.0 million 6.500% Notes due February 1, 2034
Concurrent with the above-noted issuance of Notes, on December 16, 2003, the Company completed the private placement of $1,020.0 million aggregate principal amount of Debentures due January 15, 2024 through an offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the Securities Act). Interest on the Debentures will accrue at the rate of six-month London Interbank Offering Rate (LIBOR) minus 0.50% (but in no event less than 0%) and is payable semiannually on January 15 and July 15.
The Debentures contain a number of conversion features that include substantive contingencies. The Debentures are convertible by the holders at an initial conversion rate of 16.559 shares of the Company's common stock for each $1,000 principal amount of the Debentures, which is equal to an initial conversion price of $60.39 per share. The holders may convert their Debentures, in whole or in part, into shares of the Company's common stock under any of the following circumstances: (1) during any calendar quarter commencing after March 31, 2004 and prior to December 31, 2022 (and only during such calendar quarter) if the price of the Company's common stock is greater than or equal to 130% of the applicable conversion price for at least 20 trading days during a 30-consecutive trading day period; (2) at any time after December 31, 2022 and prior to maturity if the price of the Company's common stock is greater than or equal to 130% of the applicable conversion price on any day after December 31, 2022; (3) if the Company has called the Debentures for redemption; (4) upon the occurrence of specified corporate transactions such as a consolidation, merger or binding share exchange pursuant to which the Company's common stock would be converted into cash, property or securities; and (5) if the credit rating assigned to the Debentures by either Moody's or Standard & Poor's (S&P) is lower than Baa3 or BBB - , respectively, or if the Debentures no longer are rated by at least one of these agencies or their successors (the Credit Rating Clause). Since the contingencies surrounding the conversion features of the Debentures are considered substantive, the shares to be potentially issued upon the occurrence of a conversion event will be excluded from the earnings per share calculation
40 Wyeth
until such time as a contingency lapses and the effect of issuing such shares is dilutive.
Upon conversion, the Company has the right to deliver, in lieu of shares of its common stock, cash or a combination of cash and shares of its common stock. The Company may redeem some or all of the Debentures at any time on or after July 20, 2009 at a purchase price equal to 100% of the principal amount of the Debentures plus any accrued interest. Upon a call for redemption by the Company, the holder of each $1,000 Debenture may convert such note to shares of the Company's common stock. The holders have the right to require the Company to purchase their Debentures for cash at a purchase price equal to 100% of the principal amount of the Debentures plus any accrued interest on July 15, 2009, January 15, 2014 and January 15, 2019 or upon a fundamental change as described in the offering memorandum issued in conjunction with the private placement of the Debentures.
The Credit Rating Clause described above has been determined to be an embedded derivative as defined by SFAS No. 133. In accordance with SFAS No. 133, embedded derivatives are required to be recorded at their fair value. Based upon an external valuation, the Credit Rating Clause had a zero fair value at December 31, 2003.
February 11, 2003 Issuance
On February 11, 2003, the Company issued $1,800.0 million of Notes through a registered public offering. The issuance consisted of two tranches of Notes, 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
March 30, 2001 Issuance
On March 30, 2001, the Company issued $3,000.0 million of 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, 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 (subsequently repurchased through the exercise of a make-whole call option discussed below)
- $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 of the Notes had been exchanged for new Notes, which have almost identical terms and which have been registered under the Securities Act.
Other
In addition to the $7,800.0 million of Notes described above and the $1,020.0 million of Debentures, the Company has outstanding the following non-callable, unsecured and unsubordinated debt instruments at December 31, 2003:
- $308.9 million 7.90% Notes due February 2005 with interest payments due on February 15 and August 15 (originally $1,000.0 million in principal issued of which $691.1 million was repurchased through the December 2003 redemption discussed below)
- $250.0 million 7.25% Notes due March 2023 with interest payments due on March 1 and September 1
At December 31, 2003, the aggregate maturities of debt during the next five years and thereafter are as follows:
(In thousands)
---------------
2004 $1,512,845
2005 329,088
2006 12,553
2007 453
2008 312,546
Thereafter 7,421,789
----------
Total debt $9,589,274
==========
|
Interest Rate Swaps
The Company entered into the following interest rate swaps, whereby the Company effectively converted the fixed rate of interest on its Notes to a floating rate, which is based on LIBOR. See Note 9 for further discussion of the interest rate swaps.
Notional Amount
(In thousands)
-------------------
Hedged Notes Payable Swap Rate 2003 2002
-------------------- --------- -------- --------
$1,750.0 million, 5.500% due 2014 6-month LIBOR in arrears + 0.6110% $750,000 $ --
6-month LIBOR in arrears + 0.6085% 650,000 --
6-month LIBOR in arrears + 0.6085% 350,000 --
1,500.0 million, 6.700% due 2011 3-month LIBOR + 0.8392% 750,000 750,000
3-month LIBOR + 0.8267% 750,000 750,000
1,500.0 million, 5.250% due 2013 6-month LIBOR + 0.8210% 800,000 --
6-month LIBOR + 0.8210% 700,000 --
500.0 million, 6.450% due 2024 6-month LIBOR in arrears + 1.0370% 250,000 --
300.0 million, 4.125% due 2008 6-month LIBOR + 0.6430% 150,000 --
6-month LIBOR + 0.6430% 150,000 --
|
Wyeth 41
Credit Rating Trigger and Interest Expense Impact
The interest rate payable on each of the tranches of $7,800.0 million of Notes is subject to a 0.25-percentage-point increase per level of downgrade in the Company's credit rating by Moody's or S&P. There is no adjustment to the interest rate payable on these Notes for the first single-level downgrade in the Company's credit rating by S&P. If Moody's or S&P subsequently were to increase the Company's credit rating, the interest rate payable on these Notes is subject to a 0.25-percentage-point decrease for each level of credit rating increase. The interest rate payable for these Notes cannot be reduced below the original coupon rate of the Notes, and the interest rate in effect on March 15, 2006 for these Notes, thereafter, will become the effective interest rate until maturity. The following table summarizes, by respective Note, the maximum interest rate adjustment and the additional annual interest expense for every 0.25-percentage-point increase in the interest rate as of December 31, 2003:
Maximum Incremental Annual
Interest Interest Expense per
Rate 0.25% Adjustment
Notes Payable Adjustment (In thousands)
------------- ---------- --------------------
$1,750.0 million, 5.500% 1.75% $ 4,375
1,500.0 million, 6.700%* 2.00% 3,750
1,500.0 million, 5.250%* 2.00% 3,750
1,000.0 million, 6.250%* 2.00% 2,500
750.0 million, 6.500% 1.75% 1,875
500.0 million, 6.450% 1.75% 1,250
500.0 million, 5.875%* 2.00% 1,250
300.0 million, 4.125%* 2.00% 750
---------
$ 19,500
=========
|
* As of December 31, 2003, interest rates on these Notes increased 0.25% due to Moody's credit rating downgrade discussed below. As a result, the Company will incur incremental annual interest expense of $9.5 million, which excludes additional interest expense on the $1,000.0 million, 6.250% Notes due to the exercise of a make-whole call option completed in January 2004, discussed herein.
On October 22, 2003, Moody's placed the Company's A3 senior unsecured credit rating (long-term rating) under review for possible downgrade pending discussions with the Company; on the same day, Moody's confirmed the Company's Prime-2 (P-2) short-term rating. In addition, on October 24, 2003, Fitch Ratings (Fitch) downgraded the Company's senior unsecured credit rating (long-term rating) to A- from A, its commercial paper credit rating (short-term rating) to F-2 from F-1 and placed both ratings on "Rating Watch Negative" pending further discussions with the Company. As a result of the short-term credit rating downgrade by Fitch, the Company's commercial paper, which previously traded in the Tier 1 commercial paper market, would trade in the Tier 2 commercial paper market. Finally, on November 10, 2003, S&P placed the Company's A long-term and A-1 short-term corporate credit ratings on "CreditWatch" with negative implications pending discussions with the Company.
Subsequent to meeting with the Company, on December 4, 2003, Moody's affirmed the Company's P-2 short-term rating and downgraded the Company's long-term rating to Baa1. In addition, on December 4, 2003, Fitch affirmed the Company's F-2 short-term and A- long-term ratings. Finally, on December 8, 2003, S&P affirmed the Company's A-1 short-term and A long-term ratings. As a result of Moody's long-term credit rating downgrade, the Company will incur incremental annual interest expense of $9.5 million in 2004 and thereafter on $3,800.0 million of Notes.
Interest Expense, net
The components of Interest expense, net are as follows:
(In thousands)
Year Ended December 31, 2003 2002 2001
----------------------- ---------- ---------- ----------
Interest expense $ 298,303 $ 382,168 $ 395,402
Interest income (79,363) (92,108) (154,787)
Less: Amount capitalized for
capital projects (115,800) (88,008) (94,257)
--------- --------- ---------
Interest expense, net $ 103,140 $ 202,052 $ 146,358
========== ========= =========
|
Interest payments in connection with the Company's debt obligations for the years ended December 31, 2003, 2002 and 2001 amounted to $299.7 million, $375.8 million and $331.7 million, respectively.
Debt Extinguishment
In December 2003, the Company completed the redemption of $691.1 million of its $1,000.0 million aggregate principal amount of 7.90% Notes due 2005, resulting in $308.9 million in remaining Notes due 2005 outstanding at December 31, 2003, which were classified as Long-term debt. In addition, the Company exercised a make-whole call option on its $1,000.0 million aggregate principal amount of 6.25% Notes due 2006. The redemption period for the make-whole call option ended on January 12, 2004, and as a result, as of December 31, 2003, the $1,000.0 million aggregate principal amount of 6.25% Notes due 2006 were classified as Loans payable. On January 12, 2004, the $1,000.0 million 6.25% Notes due 2006 were redeemed in full.
In order to fund the Note repurchases, and for other general purposes, the Company issued $3,000.0 million of Notes and $1,020.0 million of Debentures in December 2003 as further discussed above. In connection with the Note repurchases, the Company incurred early debt extinguishment costs of $152.0 million that primarily relate to the excess of prepayment premiums and principal over the carrying value of the debt retired and the related write-off of debt issuance costs. The Company recorded its debt extinguishment costs as a component of results from continuing operations within Special charges on the consolidated statement of operations for the year ended December 31, 2003. See Note 3 for further discussion of special charges.
7. Other Noncurrent Liabilities
Other noncurrent liabilities includes reserves for the Redux and Pondimin diet drug litigation (see Note 14), reserves relating to income taxes, environmental matters, product liability and other litigation, 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
42 Wyeth
costs if it is probable that a liability has been incurred and the
amount can be reasonably estimated. 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 $325.8 million and
$379.7 million at December 31, 2003 and 2002, respectively.
Environmental-related accruals have been recorded without giving effect to any
possible future insurance proceeds. See Note 14 for discussion of contingencies.
The Company provides an 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 2003, 2002 and 2001 was $150.7 million, $39.6 million and $117.3 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 651,287 and 798,304 shares were outstanding at December 31, 2003 and 2002, respectively.
8. Pensions and Other Postretirement Benefits
Plan Descriptions
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 for both defined benefit and defined contribution plans for 2003, 2002 and 2001 was $302.4 million, $208.5 million and $141.9 million, respectively. Pension expense for defined contribution plans for 2003, 2002 and 2001 totaled $73.4 million, $71.1 million and $67.0 million, respectively.
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 base pay. The Company provides a matching contribution to eligible participants of 50% on the first 6% of base pay contributed to the plan, or a maximum of 3% of base 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.
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. The Company's U.S. pension plan asset allocation, by broad asset class, was as follows at December 31, 2003 and 2002, respectively:
Percentage of Plan Assets
as of December 31,
-------------------------
Asset Class 2003 2002
----------- ---- ----
U.S. Equity 49% 48%
Non-U.S. Equity 21% 20%
U.S. Fixed Income and Cash 30% 32%
|
U.S. pension plan (the Plan) assets totaled $3,261.6 million and $2,916.8 million at December 31, 2003 and 2002, respectively. Investment responsibility for these assets is assigned to outside investment managers, and employees do not have the ability to direct these assets. Each of the Plan's asset classes are broadly diversified by security type, market capitalization (e.g., exposure to "large cap" and "small cap") and investment style (e.g., exposure to "growth" and "value"). Every attempt is made to maintain asset class exposure closely in line with prevailing target asset allocation percentages - U.S. Equity (50%), Non-U.S. Equity (20%) and U.S. Fixed Income (30%) - through monthly rebalancing toward those targets.
Within U.S. Equity, the Company uses a combination of passive index, enhanced index and active investment strategies. Investment vehicles utilized within these classes include both separately managed accounts and diversified funds. The Plan's enhanced index and active investment managers are prohibited from investing in the Company's common stock.
The Company's Non-U.S. Equity composite is invested almost entirely in mature or developed markets (i.e., minimal exposure to emerging markets) using a combination of passive and active investment strategies. Investment vehicles used include separately managed accounts and diversified funds.
The U.S. Fixed Income investment class is invested almost exclusively in securities categorized as "investment grade" using active investment strategies. Investment vehicles utilized for U.S. Fixed Income also include separately managed accounts and diversified funds. The Plan's separate account managers are prohibited from investing in debt securities issued by the Company.
The Plan's assets are managed with the objective of minimizing pension expense and cash contributions over the long term. With the assistance of the Company's outside pension consultant, asset-liability studies are performed every three to five years, and the Plan's target asset allocation percentages are adjusted accordingly. The investment managers of each separately managed account in which the Plan invests are prohibited from investing in derivative securities. With respect to the diversified funds in which the Plan invests, the existing investment guidelines permit derivative securities in the portfolio, but the use of leverage (i.e., margin borrowing) is strictly prohibited.
Investment performance by total Plan, asset class and individual manager is reviewed on a monthly basis, relative to one or more appropriate benchmarks. On a quarterly basis, the pension consultant performs a detailed statistical analysis of both investment performance and portfolio holdings. Formal meetings are held with each investment manager approximately twice per year
Wyeth 43
to review investment performance and to ascertain whether any changes in process or turnover in professional personnel have occurred at the management firm.
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.
Plan Obligations, Plan Assets, Funded Status and Periodic Cost
The Company uses a December 31 measurement date for the majority of its defined benefit plans. The change in the projected benefit obligation for the Company's defined benefit plans (principally U.S.) for 2003 and 2002 was as follows:
Pensions Other Postretirement Benefits
--------------------------- -----------------------------
Change in Projected Benefit Obligation (In thousands) 2003 2002 2003 2002
----------------------------------------------------- ------------ ------------ ------------ ------------
Projected benefit obligation at January 1 $ 3,894,769 $ 3,316,032 $ 1,433,126 $ 1,270,085
Service cost 119,446 95,695 38,093 31,764
Interest cost 249,031 233,169 94,281 87,681
Amendments and other adjustments (2,436) 95,537 (132,301) (38,331)
Net actuarial loss 338,845 418,212 213,722 170,301
Settlements (31,537) -- -- --
Benefits paid (433,072) (302,082) (97,370) (88,707)
Currency translation adjustment 76,270 38,206 3,241 333
----------- ----------- ----------- -----------
Projected benefit obligation at December 31 $ 4,211,316 $ 3,894,769 $ 1,552,792 $ 1,433,126
=========== =========== =========== ===========
|
Amendments to the other postretirement benefit plans, effective December 31, 2003, consisted of an increase in prescription drug copayment charges for all retirees and an increase in the medical plan deductible for post-2002 retirees. The increase of $131.0 million in pension benefits paid related to lump sum pension payments for employees whose positions were eliminated in connection with the Company's restructuring programs. The increase in the net actuarial loss for other postretirement benefits of $43.4 million 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.
At December 31, 2003 and 2002, the accumulated benefit obligation (ABO) for the Company's defined benefit pension plans was $3,670.0 million and $3,449.3 million, respectively. Projected benefit obligation, ABO and fair value of plan assets for defined benefit pension plans with an ABO in excess of plan assets were as follows:
December 31,
---------------------
(In thousands) 2003 2002
-------------- -------- --------
Projected benefit obligation $706,035 $614,736
Accumulated benefit obligation 624,972 548,724
Fair value of plan assets 239,362 218,904
======== ========
|
The change in plan assets for the Company's defined benefit plans (principally U.S.) for 2003 and 2002 was as follows:
Pensions Other Postretirement Benefits
--------------------------- -----------------------------
Change in Plan Assets (In thousands) 2003 2002 2003 2002
------------------------------------ ------------ ------------ -------- --------
Fair value of plan assets at January 1 $ 3,215,028 $ 2,738,622 $ -- $ --
Actual return on plan assets 583,366 (215,402) -- --
Amendments and other adjustments -- 67,175 -- --
Settlements (31,537) -- -- --
Company contributions 230,787 909,602 97,370 88,707
Benefits paid (433,072) (302,082) (97,370) (88,707)
Currency translation adjustment 38,698 17,113 -- --
----------- ----------- ------- -------
Fair value of plan assets at December 31 $ 3,603,270 $ 3,215,028 $ -- $ --
=========== =========== ======= =======
|
In December 2003, the Company made a contribution to the U.S. qualified defined benefit pension plans of $162.0 million. The 2003 contribution was made to fund current pension expense for the U.S. qualified defined benefit pension plans. The decline in the global equity markets that occurred during 2001 and 2002 contributed significantly to the decrease in the plan assets for those years. As such, the Company made a contribution to the U.S. qualified defined benefit pension plans of $875.0 million in 2002 in anticipation of future statutory funding requirements. The contributions made during the last two years fully funded the primary U.S. defined benefit pension plan on an ABO basis.
There were no plan assets for the Company's other postretirement benefit plans at December 31, 2003 and 2002 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 approximately $96.0 million and $85.0 million at December 31, 2003 and 2002, respectively.
The Company expects to contribute approximately $135.0 million to the U.S. qualified and non-qualified defined benefit pension plans and approximately $96.0 million to its other postretirement benefit plans in 2004.
44 Wyeth
The reconciliation of funded status and the amounts recognized in the consolidated balance sheets for the Company's defined benefit plans (principally U.S.) for 2003 and 2002 were as follows:
Pensions Other Postretirement Benefits
--------------------------- -----------------------------
Reconciliation of Funded Status (In thousands) 2003 2002 2003 2002
---------------------------------------------- ------------ ------------ ------------- -------------
Funded status $ (608,046) $ (679,741) $ (1,552,792) $ (1,433,126)
Unrecognized net actuarial loss 1,383,581 1,459,416 603,346 406,684
Unrecognized prior service cost 38,834 55,283 (153,691) (23,639)
Unrecognized net transition obligation 4,269 4,717 -- --
----------- ----------- ------------ ------------
Net amount recognized $ 818,638 $ 839,675 $ (1,103,137) $ (1,050,081)
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
|
The unrecognized net actuarial loss for pensions was impacted by the decline in the global equity markets discussed above and will be amortized through the net periodic benefit cost over the remaining estimated service life of employees to the extent the unrecognized net actuarial loss exceeds 10% of the greater of the projected benefit obligation and the fair value of plan assets.
Pensions
Amount Recognized in the ---------------------------
Consolidated Balance Sheets (In thousands) 2003 2002
------------------------------------------ ------------ ------------
Prepaid benefit cost $ 1,096,563 $ 1,084,072
Accrued benefit liability (390,385) (335,421)
Intangible asset 11,371 19,943
Accumulated other comprehensive loss 101,089 71,081
----------- -----------
Net amount recognized $ 818,638 $ 839,675
----------- -----------
----------- -----------
|
Net periodic benefit cost for the Company's defined benefit plans (principally U.S.) for 2003, 2002 and 2001 was as follows:
Pensions Other Postretirement Benefits
Components of Net Periodic Benefit Cost ------------------------------------ ----------------------------------
(In thousands) 2003 2002 2001 2003 2002 2001
--------------------------------------- ---------- ---------- ---------- ---------- --------- ---------
Service cost $ 119,446 $ 95,695 $ 78,634 $ 38,093 $ 31,764 $ 24,179
Interest cost 249,031 233,169 226,786 94,281 87,681 76,966
Expected return on plan assets (270,502) (236,490) (246,449) -- -- --
Amortization of prior service cost 8,399 7,146 11,720 (2,249) 2,003 2,003
Amortization of transition obligation 1,098 1,057 1,999 -- -- --
Recognized net actuarial loss 104,367 36,798 2,250 18,703 7,164 127
Settlement loss 17,155 -- -- -- -- --
--------- --------- --------- --------- --------- ---------
Net periodic benefit cost $ 228,994 $ 137,375 $ 74,940 $ 148,828 $ 128,612 $ 103,275
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
|
Net periodic pension benefit cost was higher in 2003 as compared with 2002 due primarily to increases in the service cost and the recognized net actuarial loss. The increase in service cost arose primarily from changes in assumptions used to estimate expected lump sum distributions as well as a decrease in the discount rate associated with determining net periodic benefit cost as described in the Plan Assumptions section herein. The recognized net actuarial loss increased as a result of amortizing deferred actuarial losses from prior periods as discussed above.
Plan Assumptions
Weighted average assumptions used in developing the benefit obligations and net periodic benefit cost at December 31 were as follows:
Pensions Other Postretirement Benefits
--------------------- -----------------------------
Benefit Obligations 2003 2002 2001 2003 2002 2001
------------------- ----- ----- ----- ----- ----- -----
Discount rate 6.25% 6.75% 7.25% 6.25% 6.75% 7.25%
Rate of compensation increase 4.00% 4.00% 4.00% -- -- --
|
Pensions Other Postretirement Benefits
--------------------- -----------------------------
Net Periodic Benefit Cost 2003 2002 2001 2003 2002 2001
------------------------- ----- ----- ----- ----- ----- -----
Discount rate 6.75% 7.25% 7.50% 6.75% 7.25% 7.50%
Rate of compensation increase 4.00% 4.00% 4.00% -- -- --
Expected return on plan assets 9.00% 9.00% 9.25% -- -- --
|
Wyeth 45
The expected return on plan assets is determined on an annual basis, with input from the Company as well as an outside pension consultant. Every attempt is made to maintain a long-term investment horizon (e.g., 10 years or more) in developing the expected rate of return assumption, and the impact of current/short-term market factors is not permitted to exert a disproportionate influence on the process. While long-term historical returns are a factor in this process, consideration also is given to forward-looking factors, including, but not limited to, the following:
- expected economic growth and inflation;
- the forecasted statistical relationship (i.e., degree of correlation, or co-movement) between the various asset classes in which the Plan invests;
- forecasted volatility for each of the component asset classes;
- current yields on debt securities; and
- the likelihood of price-earnings ratio expansion or contraction.
Finally, the expected return on plan assets does not represent the forecasted return for the near term; rather, it represents a best estimate of normalized capital market returns over the next decade or more, based on the target asset allocation in effect.
The change in assumed health care cost trend for the Company's other postretirement benefit plans for 2003, 2002 and 2001 was as follows:
Other Postretirement Benefits
-----------------------------
Assumed Health Care Cost Trend 2003 2002 2001
------------------------------ ------- ----- -----
Health care cost trend rate
assumed for next year 11.00% 9.50% 9.50%
Rate to which the cost trend rate is
assumed to decline (the ultimate
trend rate) 5.00% 5.00% 5.00%
Year that the rate reaches the
ultimate trend rate 2008 2006 2005
|
Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects:
1-Percentage- 1-Percentage-
(In thousands) Point Increase Point Decrease
-------------- -------------- --------------
Effect on total service and interest cost $ 20,211 $ (16,218)
Effect on postretirement benefit obligation 201,413 (165,659)
|
9. Derivative Instruments and Foreign Currency Risk Management Programs
Derivative financial instruments are measured at fair value and are recognized as assets or liabilities on the balance sheet with changes in the fair value of the derivatives recognized in either net 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, 2003. The fair value of option contracts reflects the present value of future cash flows if the contracts were settled on December 31, 2003.
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 are 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. The Company recorded net losses of $92.6 million and $88.1 million for 2003 and 2002, respectively, and a net gain of $28.7 million for 2001 in Other income, net related to gains and losses on these foreign exchange forward contracts and swap contracts. These amounts consist of gains and losses from contracts settled during 2003, 2002 and 2001, as well as contracts outstanding at December 31, 2003, 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 partially cover foreign currency risk related to international intercompany inventory sales. These instruments are designated as cash flow hedges; and, accordingly, any unrealized gains or losses are included in Accumulated other comprehensive loss with the corresponding asset or liability recorded on the balance sheet. The Company recorded after-tax net losses of $47.2 million and $17.6 million for 2003 and 2002, respectively, and an after-tax net gain of $4.4 million for 2001 in Accumulated other comprehensive loss with the corresponding assets/liabilities recorded in Other current assets including deferred taxes/Accrued expenses related to these cash flow hedges. 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 these net losses during the next 12 months. The Company recognized net losses of $41.2 million and $12.1 million for 2003 and 2002, respectively, and net gains of $33.8 million for 2001 included in Other income, net related to these cash flow hedges. Put option contracts outstanding as of December 31, 2003 expire no later than September 2004.
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 and were recorded at fair value with all gains or losses, which were not significant for 2003, recognized in current period earnings. The Company did not purchase any foreign currency put options outside of the cash flow hedging program during 2002.
46 Wyeth
In addition to the programs identified above, the Company had 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. This forward contract had been designated as and qualified 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 the unrealized gains on this foreign exchange forward contract. As of December 31, 2003, this foreign exchange forward contract had matured, resulting in a realized gain of $6.4 million included in Other income, net.
The Company also has entered into the following effective fair value interest rate swaps to manage interest rate exposures:
(In thousands) Fair Value
Hedged Notes Notional Assets (Liabilities)* Maturity
Payable Amount 2003 2002 Date
------------ -------- --------- --------- --------
$1,750,000, 5.500% $750,000 $ (4,776) $ -- 2014
650,000 (5,954) -- 2014
350,000 (2,224) -- 2014
1,500,000, 6.700% 750,000 79,077 100,938 2011
750,000 78,624 99,842 2011
1,500,000, 5.250% 800,000 (17,104) -- 2013
700,000 (16,360) -- 2013
500,000, 6.450% 250,000 (2,912) -- 2024
300,000, 4.125% 150,000 (1,452) -- 2008
150,000 (640) -- 2008
-------- ---------
$106,279 $ 200,780
======== =========
|
* Fair value amounts exclude accrued interest.
These interest rate swaps effectively convert the fixed rate of interest on these Notes to a floating rate. Interest expense on these Notes is adjusted to include the payments made or received under the interest rate swap agreements. The fair value of these swaps has been recorded in Other assets including deferred taxes with the corresponding adjustment recorded to the respective underlying Notes in Long-term debt.
10. Income Taxes
The provision (benefit) for federal and foreign income taxes consisted of:
(In thousands)
Year Ended December 31, 2003 2002 2001
----------------------- ------------ ------------ ------------
Current:
Federal $ 239,006 $ 159,487 $ (96,805)
Foreign 488,419 381,018 412,438
----------- ----------- -----------
727,425 540,505 315,633
Deferred:
Federal (405,587) 1,126,839 270,144
Foreign (11,418) (17,304) (2,324)
----------- ----------- -----------
(417,005) 1,109,535 267,820
----------- ----------- -----------
$ 310,420 $ 1,650,040 $ 583,453
=========== =========== ===========
|
Net deferred tax assets inclusive of valuation allowances were reflected on the consolidated balance sheets at December 31 as follows:
(In thousands) 2003 2002
-------------- ------------ ------------
Net current deferred tax assets $ 1,474,664 $ 1,197,298
Net noncurrent deferred tax assets 1,304,593 840,377
Net current deferred tax liabilities (17,163) (9,847)
Net noncurrent deferred tax liabilities (31,036) (37,796)
----------- -----------
Net deferred tax assets $ 2,731,058 $ 1,990,032
=========== ===========
|
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. Deferred tax liabilities result principally from the use of accelerated depreciation for tax purposes and contributions made to the Company's pension plans.
Wyeth 47
The components of the Company's deferred tax assets and liabilities at December 31 were as follows:
(In thousands) 2003 2002
-------------- ------------ ------------
Deferred tax assets:
Diet drug product litigation accruals $ 1,230,779 $ 682,927
Product litigation and environmental
liabilities and other accruals 641,082 581,478
Postretirement, pension and other
employee benefits 651,357 579,547
Net operating loss and other tax
credit carryforwards 353,635 1,228,939
Goodwill impairment 44,853 48,836
Restructuring 39,630 74,551
Inventory reserves 241,968 163,936
Investments and advances 22,570 27,685
Property, plant and equipment 133,164 62,567
Research and development costs 431,294 493,303
Intangibles 76,383 63,288
Other 59,591 57,991
----------- -----------
Total deferred tax assets 3,926,306 4,065,048
----------- -----------
Deferred tax liabilities:
Tax on earnings which may be remitted
to the United States (205,530) (700,000)
Depreciation (419,923) (343,762)
Pension and other employee benefits (380,504) (345,606)
Investments (6,791) (478,441)
Other (151,293) (158,570)
----------- -----------
Total deferred tax liabilities (1,164,041) (2,026,379)
----------- -----------
Deferred tax asset valuation allowances (31,207) (48,637)
----------- -----------
Net deferred tax assets $ 2,731,058 $ 1,990,032
=========== ===========
|
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 had previously provided $700.0 million of income taxes on unremitted earnings from its international subsidiaries that may be remitted to the United States. In 2003, $494.5 million of that provision was utilized as the Company repatriated foreign earnings leaving a $205.5 million balance of deferred taxes related to foreign earnings, which may be remitted. As of December 31, 2003, income taxes were not provided on unremitted earnings of $6,435.3 million expected to be permanently reinvested internationally. If income taxes were provided on those earnings, they would approximate $1,523.1 million.
Reconciliations between the Company's effective tax rate and the U.S. statutory rate, excluding the diet drug litigation charges in 2003, 2002 and 2001 (see Note 14), gains relating to Immunex/Amgen common stock transactions (see Note 2), and special charges in 2003 and 2002 (see Note 3), were as follows:
Tax Rate
Year Ended December 31, 2003 2002 2001
----------------------- ------ ------ ------
U.S. statutory rate 35.0% 35.0% 35.0%
Effect of Puerto Rico and Ireland
manufacturing operations (11.0) (10.3) (9.1)
Research credits (1.7) (1.9) (2.1)
Goodwill amortization -- -- 1.2
Other, net (1.0) (1.7) (0.9)
----- ---- ----
Effective tax rate 21.3% 21.1% 24.1%
===== ==== ====
|
Including the effect of the 2003 diet drug litigation charge and special charge (which had tax benefits of 35.0% and 27.1%, respectively) and gains relating to Immunex/Amgen common stock transactions (which had a tax provision of 35.1%), the overall effective tax rate in 2003 was 13.1%. Including the effect of the 2002 diet drug 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 in 2002 was 27.1%. Including the effect of the 2001 diet drug litigation charge (which had a 35.3% tax benefit), the overall effective tax rate in 2001 was 20.3%.
Total income tax payments, net of tax refunds, in 2003, 2002 and 2001 amounted to $576.9 million, $535.8 million and $493.6 million, respectively.
The U.S. Internal Revenue Service (IRS) has completed its examination of the Company's tax returns for all years through 1993, and there are no material unresolved issues outstanding for those years. The IRS currently is examining the Company's returns for the years 1994 through 1997.
There were no material revisions to prior year taxes in the years presented.
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, 2003 and 2002. Of the authorized preferred shares, there is a series of shares (16,934 and 18,318 outstanding at December 31, 2003 and 2002, 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.
Changes in outstanding common shares during 2003, 2002 and 2001 were as follows:
(In thousands except
shares of preferred stock) 2003 2002 2001
-------------------------- --------- ---------- ---------
Balance at January 1 1,326,055 1,320,570 1,311,774
Issued for stock options 6,310 7,233 8,550
Purchases of common stock
for treasury -- (2,000) --
Conversions of preferred stock
(1,384, 2,168 and 1,462 shares in
2003, 2002 and 2001, respectively)
and other exchanges 87 252 246
--------- --------- ---------
Balance at December 31 1,332,452 1,326,055 1,320,570
========== ========= =========
|
The Company has a common stock repurchase program under which the Company is authorized to repurchase common shares. The Company made no repurchases during 2003 but did repurchase 2,000,000 shares in 2002. At December 31, 2003, the Company was authorized to repurchase 4,492,460 common shares in the future.
Treasury stock is accounted for using the par value method. Shares of common stock held in treasury at December 31, 2003 and 2002 were 89,930,211 and 96,276,705, respectively. The Company has not retired any shares held in treasury during 2003 and 2002.
48 Wyeth
In 2003, the Board of Directors terminated the Company's Series A Junior Participating Preferred Stock Shareholder Rights Plan effective December 15, 2003.
12. Stock Options
As of December 31, 2003, the Company has three Stock Incentive Plans, a Stock Option Plan for Non-Employee Directors and a Restricted Stock Plan for Non-Employee Directors. Under the Stock Incentive Plans, options may be granted to purchase a maximum of 190,000,000 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. Restricted stock also may be granted under the plans. At December 31, 2003, there were 34,842,456 shares available for future grants under the Stock Incentive Plans.
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, 2003, there were no outstanding SARs.
The Stock Incentive Plans allow for, among other things, the issuance of up to 24,000,000 shares, in the aggregate, as restricted stock awards. Restricted stock awards representing 978,990, 326,510 and 290,995 units were granted in 2003, 2002 and 2001, respectively, to certain employees, including key executives. The increase in 2003 awards was due to a substantial increase in the number of executives receiving restricted stock awards and an increase in the size of individual awards due to a reallocation of value to restricted stock in total long-term incentive compensation. Most of these units are converted to shares of restricted stock based on the achievement of certain performance criteria related to performance years 2001 through 2005. The remaining units are converted generally at the end of four years.
Under the Stock Option Plan for Non-Employee Directors, a maximum of 250,000 shares may be granted to non-employee directors at 100% of the fair market value of the Company's common stock on the date of the grant. Under this plan, each continuing 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 of stockholders, which generally become exercisable on the next annual meeting date. During each of the years ended December 31, 2003, 2002 and 2001, 36,000 stock options were granted to non-employee directors. Shares available for future grants at December 31, 2003 were 100,000.
Under the 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, 2003, 61,600 shares were available for future grants.
Stock option information related to the plans was as follows:
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Stock Options 2003 Price 2002 Price 2001 Price
------------- ------------ -------- ------------ -------- ------------ --------
Outstanding at January 1 122,811,755 $50.47 100,003,072 $48.57 82,751,313 $43.74
Granted 22,903,370 41.08 32,907,776 52.29 28,360,196 56.89
Canceled/forfeited (6,263,646) 53.13 (2,866,185) 56.67 (2,558,655) 57.36
Exercised (2003 - $14.52 to
$46.81 per share) (6,309,540) 22.47 (7,232,908) 30.09 (8,549,782) 26.74
----------- ------ ----------- ------ ----------- ------
Outstanding at December 31 133,141,939 50.05 122,811,755 50.47 100,003,072 48.57
----------- ------ ----------- ------ ----------- ------
Exercisable at December 31 83,798,898 51.31 68,484,510 47.57 57,205,798 41.93
=========== ====== =========== ====== =========== ======
|
The following table summarizes information regarding stock options outstanding at December 31, 2003:
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 4,609,722 1.3 years $ 18.85 4,609,722 $ 18.85
20.00 to 29.99 2,299,487 2.3 years 26.28 2,299,487 26.28
30.00 to 39.99 19,292,001 6.2 years 35.52 12,106,147 35.80
40.00 to 49.99 22,278,010 9.2 years 41.28 725,791 44.20
50.00 to 59.99 47,249,956 6.4 years 55.24 40,128,401 55.02
60.00 to 65.32 37,412,763 7.0 years 61.51 23,929,350 61.80
----------- ----------
133,141,939 83,798,898
=========== ==========
|
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13. Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss consists of foreign currency translation adjustments, net unrealized gains (losses) on derivative contracts, net unrealized gains (losses) 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 (Losses) Pension Other
Translation on Derivative on Marketable Liability Comprehensive
(In thousands) Adjustments (1) Contracts (2) Securities (2) Adjustments (2) Loss
-------------- --------------- -------------- --------------- --------------- -------------
Balance January 1, 2001 $ (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)
Period change(3) 691,362 (32,887) (507,334) (22,057) 129,084
---------- ---------- ----------- ---------- ----------
Balance December 31, 2003 $ 66,496 $ (47,154) $ 23,919 $ (69,748) $ (26,487)
========== ========== =========== =========== ==========
|
(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 at December 31, 2003, 2002 and 2001 were $24,300, $9,500 and $(1,000), respectively; for net unrealized gains on marketable securities at December 31, 2003 and 2002 were $(6,144) and $(279,200), respectively; and for minimum pension liability adjustments at December 31, 2003 and 2002 were $31,341 and $23,390, respectively.
(3) 2003 period change for net unrealized gains (losses) on marketable securities includes a realized gain on the sales of Amgen common stock reclassified to net income of $515,114.
14. Contingencies and Commitments
Contingencies
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.
Prior to November 2003, the Company was self-insured for product liability risks with excess coverage on a claims-made basis from various insurance carriers in excess of the self-insured amounts and subject to certain policy limits. Effective November 2003, the Company became completely self-insured for product liability risks.
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 (other than the diet drug litigation discussed immediately below) 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.
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 covered all claims arising out of the use of Redux or Pondimin, except for claims of primary pulmonary hypertension (PPH), and was 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 were 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.
As originally designed, the settlement was comprised of two settlement funds. Fund A (with a value at the time of settlement of $1,000.0 million plus $200.0 million for legal fees) 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 is available to pay Fund B claims. The merger of the two funds took place in January 2003.
50 Wyeth
Payments into the settlement fund were $822.7 million and $936.7 million in 2002 and 2001, respectively. There were no payments made in 2003. Payments into the fund may continue, if necessary, until 2018.
Diet drug users choosing to opt out of the settlement class were required to do so by March 30, 2000. The settlement agreement also gave class members who participate in the settlement the opportunity to opt out of the settlement at two later stages, although they remain members of the class and there are restrictions on the nature of claims they can pursue outside of the settlement. Class members who were diagnosed with certain levels of valvular regurgitation within a specified time frame could opt out following their diagnosis and prior to receiving any further benefits under the settlement (Intermediate opt outs). Class members who were 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. The Sixth Amendment to the settlement agreement also gave certain class members an additional opt out right, which is discussed below.
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. 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) was added to the security fund. In February 2003, as required by the amendment to the settlement agreement merging the two settlement funds discussed above, an additional $535.2 million was added by the Company to the security fund, bringing the total amount in the security fund to $940.2 million, which is primarily included in Other current assets including deferred taxes, at December 31, 2003. The amounts in the security fund are owned by the Company and will earn interest income for the Company while residing in the security fund. The Company will be required to deposit an additional $180.0 million in the security fund if the Company's credit rating, as reported by both Moody's and S&P, falls below investment grade.
The Company recorded an initial litigation charge of $4,750.0 million ($3,287.5 million after-tax or $2.51 per share) in connection with the Redux and Pondimin litigation in 1999, an additional charge of $7,500.0 million ($5,375.0 million after-tax or $4.11 per share) in 2000, a third litigation charge of $950.0 million ($615.0 million after-tax or $0.46 per share) in 2001, a fourth charge of $1,400.0 million ($910.0 million after-tax or $0.68 per share) in 2002 and a fifth litigation charge of $2,000.0 million ($1,300.0 million after-tax or $0.97 per share) in the 2003 third quarter.
Payments to the nationwide class action settlement funds, individual settlement payments, legal fees and other items were $434.2 million, $1,307.0 million and $7,257.9 million for 2003, 2002 and 2001, respectively.
The remaining litigation accrual is classified as follows at December 31:
(In thousands) 2003 2002
-------------- ---------- ----------
Accrued expenses $2,000,000 $ 925,000
Other noncurrent liabilities 1,516,500 1,025,700
---------- ----------
Total litigation accrual $3,516,500 $1,950,700
========== ==========
|
The number of individuals who have filed claims within the settlement that allege significant heart valve disease (known as matrix claims) has been higher than had been anticipated. The settlement agreement grants the Company access to claims data maintained by the settlement trust (the Trust). Based on its review of those data, the Company understands that, as of December 31, 2003, the Trust had recorded approximately 111,700 matrix-level claim forms. Approximately 27,200 of these forms were so deficient, incomplete or duplicative of other forms filed by the same claimant that they are, in the Company's view, unlikely to result in a significant number of matrix claims to be processed further.
The Company's understanding of the status of the approximately 84,500 forms, remaining at December 31, 2003, based on its analysis of data received from the Trust, is as follows. Approximately 11,200 of the matrix claims had been processed to completion, with those claims either paid (approximately 3,000 claims, with payments of $1,105.5 million), denied (approximately 7,600) or withdrawn. Approximately 3,000 claims had begun the 100% audit process ordered in late 2002 by the federal court overseeing the national settlement. Approximately 21,000 claims alleged conditions that, if true, would entitle the claimant to receive a matrix award; these claims had not yet entered the audit process. Another approximately 20,000 claims with similar allegations have been purportedly substantiated by physicians whose claims now are subject to the outcome of the Trust's Integrity Program, discussed below. Approximately 29,100 claim forms did not contain sufficient information even to assert a matrix claim, although some of those claim forms could be made complete by the submission of additional information and therefore could become eligible to proceed to audit in the future. The remaining approximately 200 claims were in the data entry process and could not be assessed.
In addition to the approximately 111,700 matrix claims filed as of December 31, 2003, additional matrix claims may be filed through 2015 by class members who develop a matrix condition in the future if they have registered with the Trust by May 3, 2003 and have demonstrated FDA+ regurgitation (i.e., mild or greater aortic regurgitation, or moderate or greater mitral regurgitation) or mild mitral regurgitation on an echocardiogram conducted after diet drug use and obtained either outside of the Trust by January 3, 2003 or within the Trust's screening program.
The Company's understanding, based on data received from the Trust, is that as of December 31, 2003, audits had been completed on 1,963 of the approximately 3,000 claims that had begun the 100% audit process. Of these, 697 were found to be payable at the amount claimed, and 38 were found to be payable at a lower amount than had been claimed. The remaining claims were found ineligible for a matrix payment, although the
Wyeth 51
claimants may appeal that determination to the federal court overseeing the settlement. Because it remains unclear whether the claims audited to date are a representative sample of the claims that might proceed to audit, the Company cannot predict the ultimate outcome of the audit process.
Both the volume and types of claims seeking matrix benefits received by the Trust to date differ materially from the epidemiological projections on which the court's approval of the settlement agreement was predicated. Based upon data received from the Trust, approximately 94% of the 21,000 matrix claimants who allege conditions that, if true, would entitle them to an award (and approximately 99% of the approximately 20,000 claims certified by physicians currently subject to the Trust's Integrity Program) seek an award under Level II of the five-level settlement matrix. (Level II covers claims for moderate or severe mitral or aortic valve regurgitation with complicating factors; depending upon the claimant's age at the time of diagnosis, and assuming no factors are present that would place the claim on one of the settlement's reduced payment matrices, awards under Level II ranged from $192,111 to $643,500 on the settlement agreement's payment matrix.)
An ongoing investigation which the Company understands is being conducted by counsel for the Trust and discovery conducted to date by the Company in connection with certain Intermediate and Back-End opt out cases (brought by some of the same lawyers who have filed these Level II claims and supported by some of the same cardiologists who have certified the Level II claims) cast substantial doubt on the merits of many of these matrix claims and their eligibility for a matrix payment from the Trust. Therefore, in addition to the 100% audit process, the Trust has embarked upon an Integrity Program, which is designed to protect the Trust from paying illegitimate or fraudulent claims.
Pursuant to the Integrity Program, the Trust has required additional information concerning matrix claims purportedly substantiated by 17 identified physicians in order to determine whether to permit those claims to proceed to audit. Based upon data obtained from the Trust, the Company believes that approximately 20,000 matrix claims were purportedly substantiated by the 17 physicians covered by the Integrity Program as of December 31, 2003. It is the Company's understanding that additional claims substantiated by additional physicians might be subjected to the same requirements of the Integrity Program in the future. As an initial step in the integrity review process, each of the identified physicians has been asked to complete a comprehensive questionnaire regarding each claim and the method by which the physician reached the conclusion that it was valid. The ultimate disposition of any or all claims that are subject to the Integrity Program is at this time uncertain. Counsel for certain claimants affected by the program have challenged the Trust's authority to implement the Integrity Program and to require completion of the questionnaire before determining whether to permit those claims to proceed to audit. While that motion was denied by the court, additional challenges to the Integrity Program are possible.
The Trust also has adopted a program to prioritize the handling of those matrix claims that it believes are least likely to be illegitimate. Under the plan, claims under Levels III, IV and V will be processed and audited on an expedited basis. (Level III covers claims for heart valve disease requiring surgery to repair or replace the valve or conditions of equal severity. Levels IV and V cover complications from, or more serious conditions than, heart valve surgery.) The policy will also prioritize the auditing of, inter alia, Level I claims, all claims filed by a claimant without counsel (i.e., on a pro se basis) and Level II claims substantiated by physicians who have attested to fewer than 20 matrix claims.
The Trust has indicated that one of the goals of the Integrity Program is to recoup funds from those entities that caused the Trust to pay illegitimate claims, and the Trust has filed several lawsuits to that end. The Trust has filed a suit alleging violations of the Racketeer Influenced and Corrupt Organizations (RICO) Act against a Kansas City cardiologist who attested under oath to the validity of over 2,500 matrix claims. The suit alleges that the cardiologist intentionally engaged in a pattern of racketeering activity to defraud the Trust. The Trust also has filed a lawsuit against a New York cardiologist who attested under oath to the validity of 83 matrix claims, alleging that the cardiologist engaged in, among other things, misrepresentation, fraud, conspiracy to commit fraud and gross negligence.
Finally, the Trust has filed a number of motions directed at the conduct of the companies that performed the echocardiograms on which many matrix claims are based. In a pair of motions related to the activities of a company known as EchoMotion, the Trust has asked the court to stay payment of claims already audited and found payable in whole or in part if the echocardiogram was performed by EchoMotion and to disqualify all echocardiograms by EchoMotion that have been used to support matrix claims that have not yet been audited. In addition, the Trust has filed a motion seeking discovery of 14 specific companies whose echocardiograms support a large number of claims to determine whether their practices violate the settlement. The Trust also has sent letters to matrix claimants' lawyers requesting information about additional unidentified companies and has asked the Court's permission to subpoena the claimants' lawyers for this information if necessary. The Company does not currently have information about the number of matrix claims potentially affected by these motions.
The Company continues to monitor the progress of the Trust's audit process and its Integrity Program and has brought and will continue to bring to the attention of the Trust and the court overseeing the settlement any additional irregularities that it uncovers in the matrix claim process. Even if substantial progress is made by the Trust, through its Integrity Program or other means, in reducing the number of illegitimate matrix claims, a significant number of the claims which proceed to audit might be interpreted as satisfying the matrix eligibility criteria, notwithstanding the possibility that the claimants may not, in fact, have serious heart valve disease. If so, matrix claims found eligible for payment after audit may cause total payments to exceed the $3,750.0 million cap of the settlement fund.
Should the settlement fund be exhausted, most of the matrix claimants who filed their matrix claim on or before May 3, 2003 and who pass the audit process at a time when there are insufficient funds to pay their claim may pursue an additional opt out right created by the Sixth Amendment to the settlement agreement unless the Company first elects, in its sole discretion, to pay the matrix benefit after audit. Sixth Amendment opt out
52 Wyeth
claimants may then sue the Company in the tort system, subject to the settlement's limitations on such claims. In addition to the limitations on all Intermediate and Back-End opt outs (such as the prohibition on seeking punitive damages and the requirement that the claimant sue only on the valve condition that gave rise to the claim), a Sixth Amendment opt out may not sue any defendant other than the Company and may not join his or her claim with the claim of any other opt out. The Company cannot predict the ultimate number of individuals who might be in a position to elect a Sixth Amendment opt out or who may, in fact, elect to do so, but that number could be substantial.
If the settlement fund were to be exhausted, some individuals who registered to participate in the settlement by May 3, 2003, who had demonstrated either FDA+ level regurgitation or mild mitral regurgitation on an echocardiogram completed after diet drug use and conducted either outside of the settlement prior to January 3, 2003 or within the settlement's screening program, and who subsequently develop (at any time before the end of 2015) a valvular condition that would qualify for a matrix payment might elect to pursue a Back-End opt out. Such individuals may pursue a Back-End opt out within 120 days of the date on which they first discover or should have discovered their matrix condition. The Company cannot predict the ultimate number of individuals who may be in a position to elect a Back-End opt out or who may, in fact, elect to do so, but that number also could be substantial.
The Company's current understanding is that approximately 76,000 Intermediate opt out forms were submitted by May 3, 2003, the applicable deadline for most class members (other than qualified class members receiving echocardiograms through the Trust after January 3, 2003, who may exercise Intermediate opt out rights within 120 days after the date of their echocardiogram). The number of Back-End opt out forms received as of December 31, 2003 is estimated to be approximately 20,000, although certain additional class members may elect to exercise Back-End opt out rights in the future (under the same procedure as described above) even if the settlement fund is not exhausted. After eliminating forms that are duplicative of other filings, forms that are filed on behalf of individuals who already have either received payments from the Trust or settlements from the Company, and forms that are otherwise invalid on their face, it appears that approximately 78,000 individuals had filed Intermediate or Back-End opt out forms as of December 31, 2003.
Purported Intermediate or Back-End opt outs (as well as Sixth Amendment opt outs) who meet the settlement's medical eligibility requirements may pursue lawsuits against the Company but must prove all elements of their claims - including liability, causation and damages - without relying on verdicts, judgments or factual findings made in other lawsuits. They also may not seek or recover punitive, exemplary or multiple damages and may sue only for the valvular condition giving rise to their opt out right. To effectuate these provisions of the settlement, the federal court overseeing the settlement has issued orders limiting the evidence that may be used by plaintiffs in such cases. Those orders, however, are being challenged on appeal. The appeal has been fully briefed and was heard by a panel of the U.S. Court of Appeals for the Third Circuit in December 2003. The panel has asked for supplemental briefing, which also has been filed. The Company cannot predict the timing or outcome of the appeal.
In addition to the specific matters discussed herein, the federal court overseeing the national settlement has issued a number of rulings concerning the processing of matrix claims and the rights of, and limitations placed on, class members by the terms of the settlement. Several of those rulings are being challenged on appeal. Certain class members also have filed a number of motions, as well as a lawsuit, attacking both the binding effect of the settlement and the administration of the Trust. The Company cannot predict the outcome of any of these motions or of the lawsuit.
As of December 31, 2003, approximately 27,000 individuals who had filed Intermediate or Back-End opt out forms had filed lawsuits. The claims of most of these 27,000 plaintiffs now are pending in federal courts and have been or will be transferred for pretrial proceedings to the federal court overseeing the national settlement. The Company expects to challenge vigorously all Intermediate and Back-End opt out claims of questionable validity or medical eligibility, and the number of such claims that meet the settlement's opt out criteria will not be known for some time. As a result, the Company cannot predict the ultimate number of purported Intermediate or Back-End opt outs that will satisfy the settlement's opt out requirements, but that number could be substantial. As to those opt outs who are found eligible to pursue a lawsuit, the Company also intends vigorously to defend these cases on their merits.
The Company has resolved the claims of all but a small percentage of the "initial" opt outs (i.e., those individuals who exercised their right to opt out of the settlement class) and continues to work toward resolving the rest. It also continues to work toward resolving the claims of individuals who allege that they have developed PPH as a result of their use of the diet drugs. The Company intends vigorously to defend those initial opt out and PPH cases that cannot be resolved prior to trial.
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., New Mexico, an initial opt out case, rendered a verdict in favor of the Company.
On November 6, 2003, a jury in the District Court of Texas, 60th Judicial District, Jefferson County, returned a verdict in favor of the plaintiff in the case of Hayes v. American Home Products, et al., No. B-165,374, the first Intermediate opt out case to go to trial. The jury in the Hayes case awarded the plaintiff $1.36 million in compensatory damages for injuries allegedly sustained by the plaintiff due to her use of Redux and Pondimin. The court subsequently entered judgment in the amount of $588,480, based upon a filing by the plaintiff conceding there was insufficient evidence to support the jury's award of future medical expenses. The Company has filed post-trial motions for judgment notwithstanding the verdict or for a new trial and intends to pursue an appeal, if necessary.
On November 26, 2003, a jury in Georgia Superior Court, Fulton County, Atlanta Judicial Circuit, returned a verdict in favor of the Company in the case of Eichmiller et al. v. American
Wyeth 53
Home Products, et al., Civ. A. No. 2002-CV-52077, the first Back-End opt out case to go to trial.
As noted above, in 2003, the Company increased its reserves in connection with the Redux and Pondimin diet drug matters by $2,000.0 million, bringing the total of the charges taken to date to $16,600.0 million. The $3,516.5 million reserve at December 31, 2003 represents management's best estimate of the minimum aggregate amount anticipated to cover payments in connection with the Trust, up to its cap, initial opt outs, PPH claims, Intermediate, Back-End or Sixth Amendment opt outs (collectively, the "downstream" opt outs), and the Company's legal fees related to the diet drug litigation. Due to its inability to estimate the ultimate number of valid downstream opt outs, and the merits and value of their claims, as well as the inherent uncertainty surrounding any litigation, the Company is unable to estimate the amount of any additional financial exposure represented by the downstream opt out litigation. However, the amount of financial exposure beyond that which has been recorded could be significant.
The Company intends to defend itself vigorously and believes it can marshal significant resources and legal defenses to limit its ultimate liability in the diet drug litigation. However, in light of the circumstances discussed above, including the unknown number of valid matrix claims and the unknown number and merits of valid downstream opt outs, it is not possible to predict the ultimate liability of the Company in connection with its diet drug legal proceedings. It is therefore not possible to predict whether, and if so when, such proceedings will have a material adverse effect on the Company's financial condition, results of operations and/or cash flows and whether cash flows from operating activities and existing and prospective financing resources will be adequate to fund the Company's operations, pay all liabilities related to the diet drug litigation, pay dividends, maintain the ongoing programs of capital expenditures, and repay both the principal and interest on its outstanding obligations without the disposition of significant strategic core assets and/or reductions in certain cash outflows.
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, 2003 are as follows:
(In thousands)
-----------------
2004 $ 69,774
2005 64,794
2006 55,835
2007 47,540
2008 44,289
Thereafter 68,000
--------
Total rental commitments $350,232
========
|
Rental expense for all operating leases was $133.6 million, $156.0 million and $133.7 million in 2003, 2002 and 2001, respectively.
15. Company Data by Segment
The Company has four reportable segments: Pharmaceuticals, Consumer Healthcare, Animal Health and Corporate. The Company's Pharmaceuticals, Consumer Healthcare and Animal Health reportable segments are strategic business units that offer different products and services. Beginning in the 2003 fourth quarter, the Company changed its reporting structure to include the Animal Health business as a separate reportable segment. The Animal Health business was previously reported within the Pharmaceuticals segment. Prior period information presented herein has been restated to be on a comparable basis. The reportable segments are managed separately because they manufacture, distribute and sell distinct products and provide services that require various technologies and marketing strategies.
The Pharmaceuticals segment manufactures, distributes and sells branded human ethical pharmaceuticals, biologicals and nutritionals. Principal products include neuroscience therapies, cardiovascular products, nutritionals, gastroenterology drugs, anti-infectives, vaccines, oncology therapies, musculoskeletal therapies, hemophilia treatments, immunological products and women's health care products.
The Consumer Healthcare segment manufactures, distributes and sells over-the-counter health care products that include analgesics, cough/cold/allergy remedies, nutritional supplements, and hemorrhoidal, asthma and other relief items.
The Animal Health segment manufactures, distributes and sells animal biological and pharmaceutical products that include vaccines, pharmaceuticals, parasite control and growth implants.
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, Consumer Healthcare and Animal Health reportable segments based on income 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 relating to Immunex/Amgen common stock transactions, certain litigation provisions, including the Redux and Pondimin litigation charges, special charges and other miscellaneous items.
54 Wyeth
Company Data by Reportable Segment
(In millions)
Year Ended December 31, 2003 2002 2001
----------------------- ------------ ----------- ------------
Net Revenue from Customers
Pharmaceuticals $ 12,622.7 $ 11,733.3 $ 10,940.3
Consumer Healthcare 2,434.5 2,197.4 2,267.2
Animal Health 793.4 653.3 776.2
----------- ----------- -----------
Consolidated Total $ 15,850.6 $ 14,584.0 $ 13,983.7
=========== =========== ===========
Income before Taxes(1)
Pharmaceuticals $ 3,798.5 $ 3,441.4 $ 3,340.2
Consumer Healthcare 592.4 608.0 592.1
Animal Health 127.4 64.1 163.3
Corporate(2) (2,156.7) 1,983.7 (1,226.9)
----------- ----------- -----------
Consolidated Total $ 2,361.6 $ 6,097.2 $ 2,868.7
=========== =========== ===========
Depreciation and
Amortization Expense(1)
Pharmaceuticals $ 458.0 $ 409.6 $ 486.5
Consumer Healthcare 34.9 32.1 53.1
Animal Health 25.9 25.2 52.6
Corporate 19.1 17.8 15.5
----------- ----------- -----------
Consolidated Total $ 537.9 $ 484.7 $ 607.7
=========== =========== ===========
Expenditures for
Long-Lived Assets(4)(5)
Pharmaceuticals $ 1,742.1 $ 1,758.2 $ 1,796.2
Consumer Healthcare 53.8 40.1 67.8
Animal Health 28.4 31.2 31.5
Corporate 126.3 126.3 137.1
----------- ----------- -----------
Consolidated Total $ 1,950.6 $ 1,955.8 $ 2,032.6
=========== =========== ===========
Total Assets at December 31,
Pharmaceuticals(3) $ 14,513.7 $ 12,608.7 $ 12,348.0
Consumer Healthcare 1,742.8 1,709.8 1,736.3
Animal Health 1,328.4 1,293.1 1,472.3
Corporate 13,447.0 10,431.0 7,411.3
----------- ----------- -----------
Consolidated Total $ 31,031.9 $ 26,042.6 $ 22,967.9
=========== =========== ===========
|
Company Data by Geographic Segment
(In millions)
Year Ended December 31, 2003 2002 2001
----------------------- ----------- ----------- ------------
Net Revenue from Customers(4)
United States $ 9,581.0 $ 9,233.8 $ 8,903.2
United Kingdom 863.0 750.6 680.2
Other International 5,406.6 4,599.6 4,400.3
----------- ----------- ------------
Consolidated Total $ 15,850.6 $ 14,584.0 $ 13,983.7
=========== =========== ===========
|
Long-Lived Assets at
December 31,(4)(5)
United States $ 7,256.1 $ 7,468.9 $ 7,087.3
Ireland 2,472.0 1,341.0 652.7
Other International 2,996.6 2,939.0 2,727.4
----------- ----------- -----------
Consolidated Total $ 12,724.7 $ 11,748.9 $ 10,467.4
=========== =========== ===========
|
(1) Income before taxes included goodwill amortization for 2001 as follows:
Pharmaceuticals - $105.5, Consumer Healthcare - $23.7 and Animal Health -
$31.3. The Company ceased amortizing goodwill in accordance with SFAS No.
142 effective January 1, 2002.
(2) 2003, 2002 and 2001 Corporate included litigation charges of $2,000.0, $1,400.0 and $950.0, respectively, relating to the litigation brought against the Company regarding the use of the diet drug products Redux or Pondimin (see Note 14). The charges related to the Pharmaceuticals reportable segment.
2003 Corporate also included:
- A gain of $860.6 relating to the sales of the Company's remaining Amgen common stock holdings (see Note 2). The gain related to the Pharmaceuticals reportable segment.
- A special charge of $639.9 for manufacturing restructurings and
related asset impairments and the cost of debt extinguishment (see
Note 3). The charge related to the reportable segments as follows:
Pharmaceuticals - $487.9 and Corporate - $152.0.
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 reportable segment.
- A gain of $1,454.6 on the sales 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 reportable 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 - $291.5, Consumer Healthcare - $17.1, Animal Health - $16.1 and Corporate - $16.1.
(3) 2001 included an equity method investment in Immunex of $845.4. The Company did not retain an equity method investment in Immunex subsequent to July 15, 2002 (see Note 2).
(4) 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.
(5) Long-lived assets consist primarily of property, plant and equipment, goodwill, other intangibles and other assets, excluding deferred taxes, net investments in equity companies and various financial assets.
16. Subsequent Event
New Credit Facility
In February 2004, the Company replaced its $1,350.0 million, 364-day credit facility entered into in March 2003 with a $1,747.5 million, five-year facility. The new facility contains substantially identical financial and other covenants, representations, warranties, conditions and default provisions as the replaced facility (see Note 6).
Wyeth 55
Report of Independent Auditors
To the Board of Directors and Stockholders of Wyeth:
In our opinion, the accompanying consolidated balance sheets 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, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2003 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.
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."
PricewaterhouseCoopers LLP
Florham Park, NJ
January 22, 2004
except for Note 16
which is as of February 11, 2004
56 Wyeth
Management Report on Consolidated 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 auditors who have expressed their opinion with respect to the fairness of these statements. In addition, we have personally executed all certifications required to be filed with the Securities and Exchange Commission pursuant to the Sarbanes-Oxley Act of 2002 and the regulations thereunder regarding the accuracy and completeness of the consolidated financial statements.
Our Audit Committee is composed of non-employee members of the Board of Directors, all of whom are independent from our Company. The Committee charter, which is published in the proxy statement and on our Internet website (www.wyeth.com), outlines the members' roles and responsibilities and is consistent with the newly enacted corporate reform laws, regulations and New York Stock Exchange guidelines. It is the Audit Committee's responsibility to appoint independent auditors subject to shareholder ratification, approve audit, audit-related, tax and other services performed by the independent auditors, and review the reports submitted by them. The Audit Committee meets several times during the year with management, the internal auditors and the independent auditors to discuss audit activities, internal controls and financial reporting matters, including reviews of our externally published financial results. The internal auditors and the independent auditors have full and free access to the Committee.
We are dedicated to ensuring that we maintain the high standards of financial accounting and reporting that we have established. We are committed to providing financial information that is transparent, timely, complete, relevant and accurate. Our culture demands integrity and an unyielding commitment to strong internal practices and policies. Finally, we have the highest confidence in our financial reporting, our underlying system of internal controls and our people, who are expected to operate at the highest level of ethical standards pursuant to our code of conduct.
Robert Essner Kenneth J. Martin
------------------------------- ----------------------------
Chairman, President and Executive Vice President and
Chief Executive Officer Chief Financial Officer
Wyeth 57
|
Quarterly Financial Data (Unaudited)
First Quarter Second Quarter Third Quarter Fourth Quarter
(In thousands except per share amounts) 2003 2003 2003 2003
--------------------------------------- ------------- -------------- ------------- --------------
Net revenue $ 3,689,057 $ 3,746,556 $ 4,081,609 $ 4,333,410
Gross profit 2,760,753 2,726,661 2,955,253 3,030,879
Net income (loss)(1) 1,277,882 864,405 (426,358) 335,263
Diluted earnings (loss) per share(1) 0.96 0.65 (0.32) 0.25
----------- ------------ ----------- ------------
|
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(2) 871,920 599,859 1,401,399 1,574,027
Diluted earnings per share(2) 0.65 0.45 1.05 1.18
----------- ------------ ----------- ------------
|
(1) First Quarter 2003 included a gain of $558,694 after-tax or $0.42 per share on the sales of the remaining 31,235,958 shares of Amgen common stock.
Third Quarter 2003 included a charge of $1,300,000 after-tax or $0.98 per share to increase the reserve relating to the litigation brought against the Company regarding the use of the diet drugs Redux or Pondimin.
Fourth Quarter 2003 included a special charge of $466,441 after-tax or $0.35 per share for manufacturing restructurings, asset impairments and the cost of debt extinguishment.
(2) Third Quarter 2002 included a gain of $1,684,723 after-tax or $1.26 per share relating to the acquisition of Immunex by Amgen and a charge of $910,000 after-tax or $0.68 per share 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 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 for restructuring and related asset impairments.
Market Prices of Common Stock and Dividends
2003 Range of Prices* 2002 Range of Prices*
----------------------------- -----------------------------
Dividends Dividends
Paid Paid
High Low per Share High Low per Share
------ ------ --------- ------ ------ ---------
First quarter $40.00 $32.75 $ 0.23 $66.51 $60.48 $ 0.23
Second quarter 49.95 34.46 0.23 66.49 49.00 0.23
Third quarter 49.29 41.32 0.23 52.24 28.25 0.23
Fourth quarter 48.32 36.81 0.23 39.39 31.25 0.23
|
* Prices are those of the New York Stock Exchange - Composite Transactions.
58 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 55.
Overview
Wyeth is one of the world's largest research-based pharmaceutical and health care products companies. We are a leader in the discovery, development, manufacturing and marketing of pharmaceuticals, vaccines, biopharmaceuticals, non-prescription medicines and animal health care.
We have four reportable segments: Wyeth Pharmaceuticals (Pharmaceuticals), Wyeth Consumer Healthcare (Consumer Healthcare), Fort Dodge Animal Health (Animal Health) and Corporate, which are managed separately because they manufacture, distribute and sell distinct products and provide services which require various technologies and marketing strategies. These segments reflect how senior management reviews the business, makes investing and resource allocation decisions, and assesses operating performance.
Our Pharmaceuticals segment, which provided 80% of our consolidated net revenue for both 2003 and 2002, manufactures, distributes and sells branded human ethical pharmaceuticals, biologicals and nutritionals. Principal products include neuroscience therapies, cardiovascular products, nutritionals, gastroenterology drugs, anti-infectives, vaccines, oncology therapies, musculoskeletal therapies, hemophilia treatments, immunological products and women's health care products. These products are promoted and sold worldwide primarily to wholesalers, pharmacies, hospitals, physicians, retailers and other human health care institutions.
The Consumer Healthcare segment, which provided 15% of our consolidated net revenue for both 2003 and 2002, manufactures, distributes and sells over-the-counter health care products which include analgesics, cough/cold/allergy remedies, nutritional supplements, and hemorrhoidal, asthma and other relief items. These products generally are sold to wholesalers and retailers and are promoted primarily to consumers worldwide through advertising.
Our Animal Health segment, which provided 5% of our consolidated net revenue for both 2003 and 2002, manufactures, distributes, and sells animal biological and pharmaceutical products, including vaccines, pharmaceuticals, parasite control and growth implants. These products are sold to wholesalers, retailers, veterinarians and other animal health care institutions.
The Corporate segment is responsible for the treasury, tax and legal operations of the Company's businesses. It maintains and/or incurs certain assets, liabilities, income, expenses, gains and losses related to the overall management of the Company that are not allocated to the other reportable segments.
All of Wyeth's divisions exhibited strong revenue growth in 2003 compared with 2002. Pharmaceuticals had revenue growth of 8% to $12,622.7 million, Consumer Healthcare rose 11% to $2,434.5 million and Animal Health had revenue growth of 21% to $793.4 million.
Pharmaceuticals sales growth was spurred by the strong performance of several key products:
- Effexor (neuroscience therapies)-up 31% compared with 2002 to $2,711.7 million
- Protonix (gastroenterology drugs)-up 39% to $1,493.3 million
- Prevnar (vaccines)- up 46% to $945.6 million
Other areas of growth for the Pharmaceuticals segment included the Zosyn/Tazocin family of products, Rapamune and alliance revenue from sales of Enbrel, Altace and the CYPHER Stent.
The gains from these products more than offset the loss of revenue from the decline in sales of the Premarin family products, the 2002 sale of the Company's generic human injectables product line and decreases in sales of Cordarone I.V., which lost its market exclusivity in October 2002.
Both Consumer Healthcare and Animal Health posted strong results in 2003 after disappointing results in 2002. The increase in Consumer Healthcare sales resulted primarily from the introduction of Alavert late in 2002 and stronger international performance as a result of product globalization strategies and the favorable impact of foreign exchange. Strong sales of its West Nile-Innovator vaccine helped boost Animal Health's growth.
During 2003, the Company worked to strengthen its capital structure by reducing its reliance on short-term debt and controlling costs. The capital structure improvements were advanced by the sales of Amgen Inc. (Amgen) stock, the issuance of approximately $1,020.0 million of convertible debentures and $4,800.0 million of long-term debt, the proceeds of which were used to pay down commercial paper, reducing the Company's reliance on short-term debt, increasing liquidity and taking advantage of lower interest rates. While we have been reducing our short-term debt and focusing on cost controls, the Company has continued to make substantial investments in research and development (R&D) and in capital investments to expand manufacturing capacity for key Company products.
Despite the successes of 2003, in order to continue to succeed, the Company must overcome some significant challenges over the next few years. One of the biggest challenges is to defend the Company in the ongoing diet drug litigation (see Note 14 to the consolidated financial statements). In this regard, we continue to support the appropriate handling of valid claims under the national class action settlement. At the same time, we are committed to vigorously defending the Company and aggressively eliminating fraud and abuse in the settlement.
In order for us to sustain the growth of our core group of products, we must continue to meet the global demand of our customers. Two of our important core products are Prevnar and Enbrel, both biopharmaceutical products that are extremely complicated and difficult to manufacture. While our Company
Wyeth 59
made significant improvements in the production capabilities of Prevnar in 2003, we continue to seek to improve manufacturing processes and overcome production issues. The Company will continue to experience temporary supply limitations of Prevnar throughout the first half of 2004 due to strong demand and supply constraints. In 2003, we supplied more than 18 million doses of Prevnar, an increase of 33% over the previous year. Overall, despite our challenges, supply in 2004 again is expected to exceed last year's supply.
The production capability of Enbrel nearly doubled in 2003 with the December 2002 U.S. Food and Drug Administration (FDA) approval of the Amgen manufacturing facility in Rhode Island. The construction of the Company's Grange Castle facility in Ireland, which remains on schedule to begin production in 2005, is critical to further expand the production of Enbrel and enable this important product to reach even more patients throughout the world.
In July 2002, the National Institutes of Health announced that it was discontinuing a portion of its Women's Health Initiative (WHI) study assessing the value of combination estrogen plus progestin therapy, and in early March 2004, the portion of the study addressing estrogen-only therapy also was discontinued. Refer to "Certain Factors That May Affect Future Results" herein for additional discussion. The Company remains committed to women's health care and stands behind the Premarin family products as the standard of therapy to help women address serious menopausal symptoms. We have continued our efforts to inform physicians and patients of the appropriate role of hormone therapy (HT) for the short-term treatment of menopausal symptoms and have introduced new, low-dose versions of Premarin and Prempro in 2003. Despite these efforts, sales of the Premarin family products have declined from approximately $2,073.5 million in 2001 to $1,275.3 million in 2003. While the launch of low-dose Premarin and Prempro has helped to moderate the decrease, sales are expected to decline again in 2004.
Another challenge facing the Company is a near-term shortage of significant new product introductions. To meet this challenge, we are focusing on maximizing the strong growth potential and patent protection of our core group of innovative products that we have introduced in recent years as well as actively pursuing in-licensing opportunities.
Generally, the Company faces the same difficult challenges that all research-based pharmaceutical companies are confronting, including political pressures in countries around the world to reduce prescription drug prices; increasingly stringent regulatory requirements that are raising the cost of drug development and manufacturing; and uncertainties about the out-come of key political issues in the United States regarding drug importation.
The Company's principal strategy for success, notwithstanding these challenges, is based on R&D innovations. The Company intends to leverage its unique breadth of knowledge and resources across three development platforms to produce first-in-class and best-in-class therapies for significant unmet medical needs around the world.
Results of Operations
Net Revenue
Worldwide net revenue increased 9% to $15,850.6 million for 2003. U.S. and international consolidated net revenue increased 4% and 17%, respectively, for 2003. Worldwide net revenue increased 4% to $14,584.0 million for 2002. U.S. and international consolidated net revenue increased 4% and 5%, respectively, for 2002.
The following table sets forth 2003, 2002 and 2001 worldwide net revenue by reportable segment together with the percentage changes in worldwide net revenue from prior years:
(Dollar amounts in millions) Year Ended December 31, % Increase (Decrease)
---------------------------- --------------------------------------------- ------------------------------
Net Revenue 2003 2002 2001 2003 vs. 2002 2002 vs. 2001
----------- ---- ---- ---- ------------- -------------
Pharmaceuticals $ 12,622.7 $ 11,733.3 $ 10,940.3 8% 7 %
Consumer Healthcare 2,434.5 2,197.4 2,267.2 11% (3)%
Animal Health 793.4 653.3 776.2 21% (16)%
------------- ------------- ------------- ------ -----
Consolidated Net Revenue $ 15,850.6 $ 14,584.0 $ 13,983.7 9% 4 %
============= ============= ============= ====== =====
|
2003 vs. 2002
Worldwide Pharmaceuticals net revenue increased 8% for 2003. Excluding the favorable impact of foreign exchange, worldwide Pharmaceuticals net revenue increased 4% for 2003. U.S. Pharmaceuticals net revenue increased 2% for 2003 due primarily to higher sales of Effexor, Protonix, Prevnar and Zosyn and increased alliance revenue offset, in part, by lower sales of the Premarin family products and Cordarone I.V. (market exclusivity ended October 2002). Refer to "Certain Factors That May Affect Future Results" herein for additional discussion relating to the Premarin family products.
International Pharmaceuticals net revenue increased 17% for 2003 due primarily to higher sales of Effexor, Prevnar, Enbrel (for which the Company has exclusive marketing rights outside of North America) and Zosyn offset, in part, by lower sales of the Premarin family products.
Worldwide Consumer Healthcare net revenue increased 11% for 2003. Excluding the favorable impact of foreign exchange, worldwide Consumer Healthcare net revenue increased 8% for 2003. U.S. Consumer Healthcare net revenue increased 5% for 2003 due primarily to higher sales of Alavert, which was introduced in the 2002 fourth quarter, and cough/cold/allergy products partially offset by lower sales of Centrum.
60 Wyeth
International Consumer Healthcare net revenue increased 22% for 2003 due primarily to higher sales of Centrum, Advil, Caltrate and cough/cold/allergy products.
Worldwide Animal Health net revenue increased 21% for 2003. Excluding the favorable impact of foreign exchange, worldwide Animal Health net revenue increased 16% for 2003. U.S. Animal Health net revenue increased 29% for 2003 due primarily to higher sales of ProHeart 6 compared with 2002, which was impacted by significant ProHeart 6 product returns, as well as higher sales of the Company's West Nile-Innovator biological vaccine for horses.
International Animal Health net revenue increased 15% for 2003 due to higher sales of pharmaceutical and biological products.
2002 vs. 2001
Worldwide Pharmaceuticals net revenue increased 7% for 2002. There was no foreign exchange impact on worldwide Pharmaceuticals net revenue for 2002. U.S. Pharmaceuticals net revenue increased 7% for 2002 due primarily to higher sales of Protonix, Effexor, Rapamune and ReFacto and increased alliance revenue offset, in part, by lower sales of the Premarin family products, Prevnar and generic products (due to the discontinuance of certain oral generics).
International Pharmaceuticals net revenue increased 8% 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 the 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.
Worldwide Animal Health net revenue decreased 16% for 2002. Excluding the negative impact of foreign exchange, worldwide Animal Health net revenue decreased 15% for 2002. U.S. Animal Health net revenue decreased 20% due primarily to lower sales and higher-than-projected returns of ProHeart 6 offset, in part, by higher sales of West Nile-Innovator, which was introduced in the 2001 third quarter.
International Animal Health net revenue decreased 12% for 2002 due primarily to lower sales of companion animal products as a result of various manufacturing issues.
The following table sets forth significant 2003, 2002 and 2001 Pharmaceuticals, Consumer Healthcare and Animal Health worldwide net revenue by product:
Pharmaceuticals
(In millions) 2003 2002 2001
------------- ---- ---- ----
Effexor $ 2,711.7 $ 2,072.3 $ 1,542.0
Protonix 1,493.3 1,070.8 561.3
Premarin family 1,275.3 1,879.9 2,073.5
Prevnar 945.6 647.5 798.2
Nutritionals 857.6 834.7 823.5
Zosyn/Tazocin 638.7 406.1 439.8
Oral contraceptives 589.2 576.3 703.4
Zoton 363.2 309.4 284.1
Enbrel 298.9 158.8 93.9
BeneFIX 248.1 219.2 212.8
ReFacto 224.2 197.5 147.3
Synvisc 222.6 212.5 188.3
Ativan 211.5 217.2 232.7
Rapamune 169.8 129.7 70.2
Minocin 97.4 117.1 122.1
Meningitec 63.5 90.1 78.6
Ziac/Zebeta 44.1 64.1 70.0
Cordarone 15.0 283.2 269.6
Generics -- 187.4 309.8
Alliance revenue 654.4 418.8 322.4
Other 1,498.6 1,640.7 1,596.8
------------- ------------- -------------
Total Pharmaceuticals $ 12,622.7 $ 11,733.3 $ 10,940.3
============= ============= =============
|
Consumer Healthcare
(In millions) 2003 2002 2001
------------- ---- ---- ----
Centrum $ 545.6 $ 516.2 $ 503.3
Advil 450.9 442.7 453.7
Other cough/cold/allergy products 390.3 352.3 420.6
Caltrate 153.4 142.4 148.3
Advil Cold & Sinus 134.7 111.6 109.1
ChapStick 113.9 111.3 110.0
Solgar 105.1 100.1 100.3
Alavert 81.6 8.5 --
Other 459.0 412.3 421.9
------------- ------------- -----------
Total Consumer Healthcare $ 2,434.5 $ 2,197.4 $ 2,267.2
============= ============= ===========
|
Animal Health
(In millions) 2003 2002 2001
------------- ---- ---- ----
Livestock products $ 329.2 $ 293.7 $ 311.1
Companion animal products(1) 226.7 158.0 321.1
Equine products(2) 147.2 117.7 59.0
Poultry products 90.3 83.9 85.0
---------- ---------- ----------
Total Animal Health $ 793.4 $ 653.3 $ 776.2
========== ========== ==========
|
(1) Companion animal products include net revenue from ProHeart products of $38.1, $(18.8) and $88.9 for 2003, 2002 and 2001, respectively. Negative net revenue in 2002 resulted from significant ProHeart returns.
(2) Equine products include West Nile-Innovator net revenue of $64.3, $51.5 and $8.4 for 2003, 2002 and 2001, respectively.
Wyeth 61
The following table sets forth the percentage changes in 2003 and 2002 worldwide net revenue by reportable 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, 2003 Year Ended December 31, 2002
---------------------------------------- ----------------------------------------
Foreign Total Net Foreign Total Net
Volume Price Exchange Revenue Volume Price Exchange Revenue
------ ----- -------- --------- ------ ----- -------- ---------
Pharmaceuticals
United States (5)% 7% -- 2% (1)% 8% -- 7%
International 4% 2% 11% 17% 6% 2% -- 8%
----- ----- ----- ----- ----- ----- ----- -----
Total (1)% 5% 4% 8% 2% 5% -- 7%
Consumer Healthcare
United States 3% 2% -- 5% (6)% 1% -- (5)%
International 9% 3% 10% 22% (1)% 2% (1)% --
----- ----- ----- ----- ----- ----- ----- -----
Total 6% 2% 3% 11% (4)% 1% -- (3)%
Animal Health
United States 24% 5% -- 29% (22)% 2% -- (20)%
International 5% 1% 9% 15% (8)% (2)% (2)% (12)%
----- ----- ----- ----- ----- ----- ----- -----
Total 14% 2% 5% 21% (15)% -- (1)% (16)%
Total
United States (2)% 6% -- 4% (2)% 6% -- 4%
International 4% 2% 11% 17% 4% 1% -- 5%
----- ----- ----- ----- ----- ----- ----- -----
Total -- 5% 4% 9% -- 4% -- 4%
===== ===== ===== ===== ===== ===== ===== =====
|
Operating Expenses
2003 vs. 2002
Cost of goods sold, as a percentage of Net revenue, increased to 27.6% for 2003 compared with 26.9% for 2002. Excluding alliance revenue, cost of goods sold, as a percentage of net sales, for 2003 was 28.8%, a 1.1% increase from 27.7% in 2002. 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 Cordarone I.V.) and higher sales of lower margin products (e.g., Protonix, Zosyn and Enbrel) offset, in part, by increased sales of higher margin Effexor and Prevnar in the Pharmaceuticals segment. Gross margin also was negatively impacted by higher royalty costs associated with the launch of Alavert in the Consumer Healthcare segment and inventory write-offs related to ReFacto, the Premarin family products and FluMist in the Pharmaceuticals segment, combined with increased costs associated with addressing various manufacturing issues. The Animal Health segment margin improved due primarily to a more profitable product mix as a result of higher domestic sales of West Nile-Innovator combined with the non-recurrence of significant ProHeart 6 product returns which occurred during 2002.
Selling, general and administrative expenses, as a percentage of Net revenue, increased to 34.5% for 2003 compared with 34.4% for 2002. The slightly higher ratio of selling, general and administrative expenses resulted from higher marketing expenses in the Pharmaceuticals and Consumer Healthcare segments and higher expenses associated with increased general insurance and employee benefit costs.
Research and development expenses increased 1% for 2003. The increase was partially due to higher clinical grant spending, primarily in the field of women's health care and infectious diseases, and higher cost-sharing expenditures relating to pharmaceutical collaborations offset, in part, by lower other research operating expenses (including lower chemical and material costs). Pharmaceuticals research and development expenditures accounted for 93% of total research and development expenditures in both 2003 and 2002. Pharmaceuticals research and development expenses, as a percentage of worldwide Pharmaceuticals net revenue, exclusive of nutritional sales and alliance revenue, were 17% and 19% in 2003 and 2002, respectively. The increase in research and development expenses also was due to higher expenditures relating to Animal Health line extensions and combination product projects.
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 and Centrum products) in both the Pharmaceuticals and Consumer Healthcare segments, combined with increased costs associated with addressing various manufacturing issues, as well as significant product returns in the Animal Health segment related to ProHeart 6.
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, Consumer Healthcare and Animal Health segments offset, in part, by higher selling expenses related to an expansion in the global sales force.
62 Wyeth
Research and development expenses increased 11% for 2002 due primarily to increased headcount, 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. Pharmaceuticals research and development expenditures accounted for 93% and 94% of total research and development expenditures in 2002 and 2001, respectively. Pharmaceuticals research and development expenses, as a percentage of worldwide Pharmaceuticals net revenue, exclusive of nutritional sales and alliance revenue, were 19% and 18% in 2002 and 2001, respectively.
Interest Expense and Other Income
2003 vs. 2002
Interest expense, net decreased 49% for 2003 due primarily to lower weighted average debt outstanding compared with 2002 levels. Weighted average debt outstanding during 2003 and 2002 was $7,346.7 million and $10,155.2 million, respectively. The decrease in interest expense, net also was affected by higher capitalized interest resulting from spending for long-term capital projects in process. These projects include a new biopharmaceutical and vaccine manufacturing facility in Ireland, as well as the expansion of an existing manufacturing facility in Ireland.
Other income, net decreased 13% for 2003 due primarily to the non-recurrence of income received in 2002 in connection with the sale of certain assets relating to the generic human injectables product line, which resulted in a gain of $172.9 million; the non-recurrence of a 2002 settlement regarding price fixing by certain vitamin suppliers; and higher foreign exchange losses offset, in part, by higher gains on sales of other non-strategic Pharmaceuticals and Consumer Healthcare product rights.
2002 vs. 2001
Interest expense, net increased 38% for 2002 due primarily to lower interest income compared with 2001. Weighted 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. 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.
2003, 2002 and 2001 Significant Items
Gains Related to Immunex/Amgen Common Stock Transactions
During the first quarter of 2003, the Company completed the sales of the remaining 31,235,958 shares of Amgen common stock held by the Company at December 31, 2002. These remaining shares netted proceeds of $1,579.9 million and resulted in a gain of $860.6 million ($558.7 million after-tax or $0.42 per share-diluted).
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 common stock, received in connection with Amgen's acquisition of Immunex Corporation (Immunex), which generated net proceeds of $3,250.8 million.
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) related to the initial acquisition of Immunex by Amgen. The gain represented 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 was based on the quoted market price of Amgen common stock on July 15, 2002 (the closing date) reduced by an overall discount rate based on valuations provided by independent valuation consultants (see Note 2 to the consolidated financial statements).
Diet Drug Litigation Charges
The Company recorded a charge of $2,000.0 million ($1,300.0 million after-tax or $0.97 per share-diluted) in 2003, a charge of $1,400.0 million ($910.0 million after-tax or $0.68 per share-diluted) in 2002 and a charge of $950.0 million ($615.0 million after-tax or $0.46 per share-diluted) in 2001 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, bringing the total of the charges taken to date to $16,600.0 million. The $3,516.5 million reserve at December 31, 2003 represents management's best estimate of the minimum aggregate amount anticipated to cover payments in connection with the settlement trust (the Trust), up to its cap, initial opt outs, primary pulmonary hypertension (PPH) claims, Intermediate, Back-End or Sixth Amendment opt outs (collectively, the "downstream" opt outs), and the Company's legal fees related to the diet drug litigation. Due to its inability to estimate the ultimate number of valid downstream opt outs, and the merits and value of their claims, as well as the inherent uncertainty surrounding any litigation, the Company is unable to estimate the amount of any additional financial exposure represented by the downstream opt out litigation. However, the amount of financial exposure beyond that which has been recorded could be significant (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 future diet drug litigation exposure).
Special Charges
2003 Restructuring and Related Asset Impairments
In December 2003, the Company recorded a special charge for manufacturing restructurings and related asset impairments of $487.9 million ($367.6 million after-tax or $0.28 per share-diluted). The restructuring and related asset impairments impacted only the Pharmaceuticals segment and were recorded to recognize the costs of closing certain manufacturing facilities, as well as the elimination of certain positions at the Company's facilities. These restructuring initiatives were designed to achieve
Wyeth 63
optimal efficiencies and reduce production costs in response to changes in demand projections for certain products.
Specifically, the Company has decided to close its pharmaceutical plant in
Singapore and rationalize its network of collection sites for Premarin-related
raw materials as a result of lower volume in the Premarin family products.
Restructuring charges of $208.2 million were recorded to recognize the costs of
closing the Singapore manufacturing facility, the elimination of certain
positions at the facility and contract settlement costs related to purchase
commitments with suppliers. Approximately 190 positions were identified for
elimination at the Singapore facility. Substantially all of the employee
terminations are expected to be completed during the 2004 first quarter. Also in
December 2003, the Company recorded fixed and intangible asset impairment
charges of $108.6 million related to rhBMP-2 and FluMist as a result of reduced
demand projections and announced that manufacturing operations at its St. Louis,
Missouri biopharmaceutical facility would be discontinued due to a decline in
current and projected demand for ReFacto, the Company's treatment for hemophilia
A. Total charges of $171.1 million for restructuring and asset impairments
relate to the closure of the St. Louis facility (see Note 3 to the consolidated
financial statements).
Debt Extinguishment Costs
In December 2003, the Company recorded a special charge of $152.0 million ($98.8 million after-tax or $0.07 per share-diluted) related to the early extinguishment of debt in connection with the repurchase of certain Senior Notes. The costs relate primarily to the excess of prepayment premiums and principal over the carrying value of the debt retired and the related write-off of debt issuance costs (see Note 6 to the consolidated financial statements).
2002 Restructuring and Related Asset Impairments
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).
Income before Taxes
The following table sets forth 2003, 2002 and 2001 worldwide income before taxes by reportable segment together with the percentage changes in worldwide income before taxes from prior years:
(Dollar amounts in millions) Year Ended December 31, % Increase (Decrease)
---------------------------- -------------------------------------- -----------------------------
Income before Taxes(1) 2003 2002 2001 2003 vs. 2002 2002 vs. 2001
--------------------------- ---- ---- ---- ------------- -------------
Pharmaceuticals $ 3,798.5 $ 3,441.4 $ 3,340.2 10% 3%
Consumer Healthcare 592.4 608.0 592.1 (3)% 3%
Animal Health 127.4 64.1 163.3 99% (61)%
Corporate(2) (2,156.7) 1,983.7 (1,226.9) -- --
---------- ----------- ----------- ---- ----
Total(3) $ 2,361.6 $ 6,097.2 $ 2,868.7 (61)% --
========== =========== =========== ==== ====
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(1) Income before taxes included goodwill amortization for 2001 as follows:
Pharmaceuticals-$105.5, Consumer Healthcare-$23.7 and Animal Health-$31.3.
The Company ceased amortizing goodwill in accordance with SFAS No. 142
effective January 1, 2002. Excluding goodwill amortization from the 2001
results, Pharmaceuticals, Consumer Healthcare and Animal Health income
before taxes decreased less than 1%, 1% and 67%, respectively, for 2002.
(2) 2003, 2002 and 2001 Corporate included litigation charges of $2,000.0, $1,400.0 and $950.0, respectively, relating to the litigation brought against the Company regarding the use of the diet drugs Redux or Pondimin (see Note 14 to the consolidated financial statements). The charges related to the Pharmaceuticals reportable segment.
2003 Corporate also included:
- A gain of $860.6 relating to the sales of the Company's remaining Amgen common stock holdings (see Note 2 to the consolidated financial statements). The gain related to the Pharmaceuticals reportable segment.
- A special charge of $639.9 for manufacturing restructurings and related asset impairments and the cost of debt extinguishment (see Note 3 to the consolidated financial statements). The charge related to the reportable segments as follows: Pharmaceuticals-$487.9 and Corporate-$152.0.
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 to the consolidated financial statements). The gain related to the Pharmaceuticals reportable segment.
- 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 (see Note 2 to the consolidated financial statements). The gain related to the Pharmaceuticals reportable segment.
- A special charge of $340.8 for restructuring and related asset
impairments (see Note 3 to the consolidated financial statements). The
charge related to the reportable segments as follows:
Pharmaceuticals-$291.5, Consumer Healthcare-$17.1, Animal Health-$16.1
and Corporate-$16.1.
Excluding the 2003, 2002 and 2001 litigation charges, 2003 and 2002 gains relating to Immunex/Amgen common stock transactions and 2003 and 2002 special charges, Corporate expenses, net increased 6% and 29% for 2003 and 2002, respectively.
(3) Excluding the 2003, 2002 and 2001 litigation charges, 2003 and 2002 gains relating to Immunex/Amgen common stock transactions and 2003 and 2002 special charges, total income before taxes increased 10% for 2003 and decreased 2% for 2002.
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The following explanations of changes in income before taxes, by reportable segment, for 2003 compared with 2002 and 2002 compared with 2001, exclude items listed in footnote (2) to the table above.
Pharmaceuticals
Worldwide Pharmaceuticals income before taxes increased 10% for 2003 due primarily to higher worldwide net revenue offset, in part, by lower gross margins earned on worldwide net revenue, slightly higher research and development expenses, higher selling, general and administrative expenses and lower other income, net. Lower gross margins were due primarily to a less profitable product mix and inventory write-offs.
Worldwide Pharmaceuticals income before taxes decreased less than 1% for 2002, excluding goodwill amortization from the 2001 results, 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.
Consumer Healthcare
Worldwide Consumer Healthcare income before taxes decreased 3% for 2003 due primarily to lower gross profit margins earned on worldwide sales, lower other income, net and higher selling, general and administrative expenses as a result of increased marketing expenses associated with the launch of Alavert. Lower other income, net was due primarily to the non-recurrence of income received in 2002 in connection with a class action settlement gain related to price fixing by certain vitamin suppliers.
Worldwide Consumer Healthcare income before taxes decreased 1% for 2002, excluding goodwill amortization from the 2001 results, 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).
Animal Health
Worldwide Animal Health income before taxes increased 99% for 2003 due primarily to higher worldwide sales and higher gross margins earned on worldwide sales offset, in part, by higher selling, general and administrative expenses. Gross margins improved during 2003 due primarily to a more profitable product mix as a result of higher domestic sales of West Nile-Innovator combined with the non-recurrence of significant ProHeart 6 product returns in 2002.
Worldwide Animal Health income before taxes decreased 67% for 2002, excluding goodwill amortization from the 2001 results, due primarily to lower worldwide sales, significant ProHeart 6 product returns, lower gross margins and higher selling, general and administrative expenses. Lower gross margins were due primarily to unfavorable product mix and unfavorable manufacturing variances as a result of reduced sales volume worldwide.
Corporate
Corporate expenses, net increased 6% for 2003 due primarily to higher general and administrative expenses offset, in part, by lower interest expense due primarily to lower weighted average debt outstanding compared with 2002 levels. 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.
Effective Tax Rate
The effective tax rates for 2003, 2002 and 2001 were 21.3%, 21.1% and 23.3%, respectively (excluding the significant items identified above and the effect of goodwill amortization in 2001). The downward trend in the effective tax rates from 2001 compared with 2002 and 2003 was due primarily to an increased benefit from manufacturing in lower tax jurisdictions.
Net Income and Diluted Earnings per Share
As Reported
Net income and diluted earnings per share in 2003 decreased to $2,051.2 million and $1.54, respectively, compared with $4,447.2 million and $3.33 for 2002.
Before Certain Significant Items
Net income before certain significant items and diluted earnings per share before certain significant items exclude from net income and diluted earnings per share, respectively, the impact of additional charges recorded 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 gains related to the receipt and subsequent liquidation of Amgen shares received in connection with Amgen's acquisition of Immunex, restructuring and asset impairment charges and debt extinguishment costs.
The Company's management uses both generally accepted accounting principles (GAAP) and non-GAAP measures to manage and evaluate the Company's performance. The Company's management believes it is appropriate to disclose these non-GAAP measures to assist investors with analyzing business performance and trends. However, these measures should not be considered in isolation or as a substitute for the results of operations and diluted earnings per share prepared in accordance with GAAP. The additional diet drug charges increase the reserve balance for a continuing legal matter that first resulted in a charge in 1999 and have been excluded due to their nature and magnitude. The gains related to the Immunex/Amgen common stock transactions have been excluded due to the fact that the Company had not previously nor does it currently hold a position for investment purposes in an entity that, if acquired by another entity, would impact the Company's financial position or results of operations to the significant extent of the Immunex/Amgen common stock transactions. The special charges, which include costs related to restructurings, asset impairments and debt extinguishment have been excluded as the Company's management does not consider these charges to be indicative of continuing operating results.
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A reconciliation of net income before certain significant items and diluted earnings per share before certain significant items to net income and diluted earnings per share as reported under GAAP is presented in the following table:
(Dollar amounts in millions except per share amounts) Net Income Diluted Earnings per Share
---------- --------------------------
Year Ended December 31, 2003 2002 2001 2003 2002 2001
----------------------------------------------------- ---- ---- ---- ---- ---- ----
Net income and diluted earnings per share before certain
significant items $ 3,258.9 $ 2,962.6 $ 2,900.3 $ 2.44 $ 2.22 $ 2.18
Gains related to Immunex/Amgen
common stock transactions 558.7 2,628.1 -- 0.42 1.97 --
Redux and Pondimin diet drug
litigation charges (1,300.0) (910.0) (615.0) (0.97) (0.68) (0.46)
Special charges:
Restructuring charges and related
asset impairments (367.6) (233.5) -- (0.28) (0.18) --
Debt extinguishment costs (98.8) -- -- (0.07) -- --
--------- --------- --------- ------ -------- -------
Net income and diluted earnings per share, as reported $ 2,051.2 $ 4,447.2 $ 2,285.3 $ 1.54 $ 3.33 $ 1.72
========= ========= ========= ====== ======== =======
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Net income and diluted earnings per share, before certain significant items presented above, each increased 10% in 2003 to $3,258.9 million and $2.44, respectively, compared with $2,962.6 million and $2.22 in 2002. The increases were due primarily to higher net revenue and lower interest expense offset, in part, by higher cost of goods sold, as a percentage of net revenue, higher selling, general and administrative expenses and lower other income, net.
The higher cost of goods sold, as a percentage of net revenue, was due to a less profitable product mix and inventory write-offs related to ReFacto, the Premarin family products and FluMist. The less profitable product mix was primarily a result of lower sales of higher margin products, including the Premarin family products and Cordarone I.V. and higher sales of lower margin products such as Protonix, Zosyn and Enbrel. The higher selling, general and administrative expenses were due primarily to higher marketing expenses, higher expenses associated with increased general insurance and employee benefit costs. Lower other income, net was primarily due to the non-recurrence of income received in 2002 in connection with the sale of certain assets related 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) and the non-recurrence of proceeds received from a 2002 settlement regarding price fixing by certain vitamin suppliers.
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 certain significant items listed in the table above, net income and diluted earnings per share 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. 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.
For further details related to the items listed in the table above, refer to the discussion of "2003, 2002 and 2001 Significant Items" herein.
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, 2003 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, therefore, actual results could differ from those estimates. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the financial statements. Management believes the following critical accounting policies reflect its more significant estimates and assumptions used in the preparation of 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
66 Wyeth
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, Robitussin, Dimetapp and Prempro, among others. The estimated costs the Company expects to pay in these cases (excluding costs associated with the Redux and Pondimin diet drug litigation, see Note 14 to the consolidated financial statements) 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. Prior to November 2003, the Company was self-insured for product liability risks with excess coverage on a claims-made basis from various insurance carriers in excess of the self-insured amounts and subject to certain policy limits. Effective November 2003, the Company became completely self-insured for product liability risks.
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, 2003, 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.
- On an annual basis, the Company performs an internal study of actuarial assumptions. Based on this study, the Company determines the appropriate discount rate and expected long-term rate of return on plan assets for its pension plans. In 2003, the discount rate used to determine the Company's benefit obligation was decreased by 50 basis points to 6.25%, while the expected rate of return on plan assets was maintained at 9.00%, consistent with the prior year. The net periodic benefit cost for the Company's U.S. pension plans is expected to decrease by approximately $30.0 million to $40.0 million in 2004 compared with 2003 due to positive returns on plan assets and contributions to the pension trust partially offset by the increase in net periodic benefit cost associated with the decrease in the discount rate.
The Company also reviews the principal actuarial assumptions relating to its other postretirement benefit plans on an annual basis. In response to the recent increase in health care costs in the United States, the Company has increased the health care cost trend rate for 2003 to 11.0% from 9.5% for 2002. This growth rate, ultimately, is expected to decrease to 5% for 2008 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 other postretirement benefit plans as of December 31, 2003. Similar to the pension plans discussed above, in 2003, the discount rate used to determine the Company's benefit obligation was decreased by 50 basis points to 6.25%. 2004 net periodic benefit cost for other postretirement benefit plans is expected to increase by approximately $5.0 million to $10.0 million compared with 2003 primarily due to the selection of the health care cost trend rate and the increase in net periodic benefit cost associated with the decrease in the discount rate offset, in part, by changes the Company has made to its other postretirement benefit plans.
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.
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.
Liquidity, Financial Condition and Capital Resources
Cash and cash equivalents increased $3,126.2 million, and total debt increased by $1,238.3 million in 2003, including the fair value change of interest rate swaps. The activity of these cash flows during 2003 related primarily to the following items:
- Proceeds of $1,579.9 million related to the sales of the Company's remaining 31,235,958 shares of Amgen common stock.
- Proceeds of $5,820.0 million related to the issuances of $1,800.0 million and $3,000.0 million of Senior Notes (Notes) during February and December 2003, respectively,
Wyeth 67
and the issuance of $1,020.0 million of Convertible Senior Debentures (Debentures) during December 2003.
- An increase in accounts payable and accrued expenses of $469.7 million (excluding the 2003 diet drug provision and the effect of foreign exchange) primarily related to timing of payments and increased employee benefit accruals.
These proceeds were partially offset by the following cash uses:
- Payments of $434.2 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. 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 into the Trust may continue, if necessary, until 2018. Additionally, payments of $535.2 million were added to the security fund in 2003, which was established during 2002 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 commercial paper borrowings (if available), as well as term debt financings and international earnings remitted back to the United States, if necessary.
- Capital expenditures of $1,908.7 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 2004 to be slightly lower compared with 2003 spending levels.
- Repayments of $3,787.1 million of commercial paper and $691.1 million of long-term debt related to the partial redemption of the Company's $1,000.0 million aggregate principal amount of 7.90% Notes due 2005. These repayments were made using a portion of the proceeds received in connection with the above noted 2003 debt issuances.
- Dividends totaling $1,223.2 million consisting primarily of the Company's annual common stock dividend of $0.92 per share.
- Contributions to fund the Company's defined benefit pension plans totaling $230.8 million.
- An increase in inventories of $245.5 million (excluding the effect of foreign exchange) primarily related to improved manufacturing output for products, which had supply constraints throughout 2003.
Total debt: At December 31, 2003, the Company had outstanding $9,589.3 million in total debt, which consisted of notes payable and other debt. The Company had no commercial paper outstanding as of December 31, 2003. Current debt at December 31, 2003, classified as Loans payable, consisted of $1,512.8 million of notes payable and other debt that are due within one year. The Company was in compliance with all debt covenants as of December 31, 2003.
As of December 31, 2003, the Company had net debt of $1,469.0 million that was calculated as total debt of $9,589.3 million reduced by liquid assets totaling $8,120.3 million, which consisted of cash and cash equivalents, marketable securities and the security fund deposits primarily included in Other current assets including deferred taxes.
On October 24, 2003, Fitch downgraded the Company's long-term rating to A- from A and its short-term rating to F-2 from F-1. As a result of the short-term credit rating downgrade by Fitch, the Company's commercial paper, which previously traded in the Tier 1 commercial paper market, would trade in the Tier 2 commercial paper market. Subsequently, on December 4, 2003, Fitch affirmed the Company's new ratings. In addition, on December 4, 2003, Moody's affirmed the Company's P-2 short-term rating and downgraded the Company's long-term rating to Baa1. Finally, on December 8, 2003, Standard & Poor's (S&P) affirmed the Company's A-1 short-term and A long-term ratings. As a result of Moody's long-term credit rating downgrade, the Company will incur incremental annual interest expense of $9.5 million beginning in 2004 on $3,800.0 million of Notes. The following represents the Company's credit ratings as of December 31, 2003:
Moody's S&P Fitch
------- --- -----
Short-term debt P-2 A-1 F-2
Long-term debt Baa1 A A-
Outlook Negative Negative Negative
Last rating update December 4,2003 December 8,2003 December 4, 2003
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Additional Liquidity, Financial Condition and Capital Resource Information
At December 31, 2003, the carrying value of cash equivalents approximated fair value due to the short-term, highly liquid nature of cash equivalents, which have maturities of three months or less when purchased. Interest rate fluctuations would not have a significant effect on the fair value of cash equivalents held by the Company.
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 facility. The credit facilities contain substantially identical financial and other covenants, representations, warranties, conditions and default provisions as the matured facility. In February 2004, the Company replaced its $1,350.0 million, 364-day credit facility entered into in March 2003 with a $1,747.5 million, five-year facility.
In December 2003, the Company completed the redemption of $691.1 million of its $1,000.0 million aggregate principal amount of 7.90% Notes due 2005, resulting in $308.9 million in remaining Notes due 2005 outstanding at December 31, 2003, which were classified as Long-term debt. In addition, the Company exercised a make-whole call option on its $1,000.0 million aggregate principal amount of 6.25% Notes due 2006. The redemption period for the make-whole call option ended on January 12, 2004, and, as a result, as of December 31, 2003 the $1,000.0 million aggregate principal amount of the 6.25% Notes due 2006 were classified as Loans payable. On January 12, 2004,
68 Wyeth
the $1,000.0 million Notes due 2006 were redeemed in full. In connection with the Note repurchases, the Company incurred early debt extinguishment costs of $152.0 million, which primarily relate to the excess of prepayment premiums and principal over the carrying value of the debt retired and the related write-off of debt issuance costs.
In order to fund the Note repurchases, and for other general purposes, the Company issued $3,000.0 million of Notes in December 2003 as follows:
- $1,750.0 million 5.500% Notes due February 1, 2014
- $500.0 million 6.450% Notes due February 1, 2024
- $750.0 million 6.500% Notes due February 1, 2034
Concurrent with the offering of Notes described above, on December 16, 2003, the Company completed the private placement of $1,020.0 million aggregate principal amount of Debentures due January 15, 2024 through an offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.
Also during February 2003, the Company issued $1,800.0 million of Notes. The issuance consisted of two tranches of Notes, as follows:
- $300.0 million 4.125% Notes due March 1, 2008
- $1,500.0 million 5.25% Notes due March 15, 2013
The Company refinanced its debt to allow for greater financial flexibility by obtaining lower interest rates and moving debt maturities out generally 10 or more years. As such, the Company expects to be less reliant on the commercial paper markets in the near term.
The interest rate payable on each series of Notes described above, including the Notes issued in March 2001 (see Note 6 to the consolidated financial statements) is subject to a 0.25-percentage-point increase per level of downgrade in the Company's credit rating by Moody's or S&P. 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 $19.5 million of additional annual interest expense for every 0.25-percentage-point increase in the interest rate. If Moody's or S&P subsequently were to increase the Company's credit rating, the interest rate payable on each series of Notes would be subject to a 0.25-percentage-point decrease for each level of credit rating increase. The interest rate payable for these Notes cannot be reduced below the original coupon rate of the Notes, and the interest rate in effect on March 15, 2006 for these Notes will, thereafter, become the effective interest rate until maturity.
The Company has a common stock repurchase program under which the Company is authorized, at December 31, 2003, 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 2004.
In light of the circumstances discussed in Note 14 to the consolidated financial statements, including the unknown number of valid matrix claims and the unknown number and merits of valid downstream opt outs, it is not possible to predict the ultimate liability of the Company in connection with its diet drug legal proceedings. It is therefore not possible to predict whether, and if so when, such proceedings will have a material adverse effect on the Company's financial condition, results of operations and/or cash flows and whether cash flows from operating activities and existing and prospective financing resources will be adequate to fund the Company's operations, pay all liabilities related to the diet drug litigation, pay dividends, maintain the ongoing programs of capital expenditures, and repay both the principal and interest on its outstanding obligations without the disposition of significant strategic core assets and/or reductions in certain cash outflows.
The following chart discloses contractual obligations at December 31, 2003:
Payments Due by Period
(In millions) 2005 2007
Contractual Obligations Total 2004 and 2006 and 2008 Thereafter
----------------------- ----- ---- -------- -------- ----------
Total debt obligations $ 9,589.3 $ 1,512.9 $ 341.6 $ 313.0 $ 7,421.8
Purchase obligations(1) 1,359.4 791.6 390.2 157.5 20.1
Retirement-related obligations(2) 1,217.6 274.2 457.0 430.1 56.3
Capital commitments 1,108.7 736.5 372.2 -- --
Operating lease obligations 350.2 69.8 120.6 91.8 68.0
---------- --------- --------- --------- ----------
Total $ 13,625.2 $ 3,385.0 $ 1,681.6 $ 992.4 $ 7,566.2
========== ========= ========= ========= ==========
|
(1) Purchase obligations consist of agreements to purchase goods or services that are enforceable and legally binding on the Company and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. These include obligations for minimum inventory purchase contracts, clinical data management, research and development, co-development and media/market research contracts.
(2) This category includes pension and postretirement benefit payments through 2008. The Company believes that external factors, including, but not limited to, investment performance of pension plan assets, interest rates, increases in medical care costs and Medicare subsidies preclude reasonable estimates beyond 2008.
It also includes deferred compensation principal payments for retirees and certain active employees who have elected payment before retirement as of December 31, 2003 and guaranteed interest to be paid to those individuals through December 2004. All other active employees as of December 31, 2003 are excluded for years subsequent to 2004 since the Company does not believe it can predict factors such as employee retirement date and elected payout period.
Wyeth 69
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. The Company currently operates in 11 of the member countries of the European Union, which have adopted the Euro as their local currency. Collectively, these countries accounted for 14% of 2003 and 11% of both 2002 and 2001 worldwide net revenue. Additionally, the British pound sterling accounted for 5% of each 2003, 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 a portion of this exposure to interest rate changes primarily through the use of fair value interest rate swaps.
At December 31, 2003, 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) $ 1,547.7 $ (6.1) $ (6.1)
Option contracts(1) 1,704.3 (44.8) (44.8)
Interest rate swaps 5,300.0 106.3 106.3
Outstanding debt(2) 10,182.0 (9,589.3) (10,084.8)
|
(1) If the value of the U.S. dollar were to strengthen or weaken by 10%, in relation to all hedged foreign currencies, the net payable on the forward and option contracts would decrease or increase by approximately $190.6.
(2) If the interest rates were to increase or decrease by one percentage point, the fair value of the outstanding debt would decrease or increase by approximately $597.0.
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 or loss if settlement were to take place on December 31, 2003; the fair value of option contracts reflects the present value of future cash flows if the contracts were settled on December 31, 2003; and the fair value of outstanding debt instruments reflects a current yield valuation based on observed market prices as of December 31, 2003.
Certain Factors That May Affect Future Results
Prempro/Premarin-HT Studies
In July 2002, the HT 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, certain increased risks exceeded the specified long-term benefits. Additional analyses of data from the HT subset of the WHI study have been released during 2003, and further analyses of WHI data are expected to be released in the future.
In early March 2004, the National Institutes of Health (NIH) announced preliminary findings from the estrogen-only arm of the WHI study and that it had decided to stop the study. NIH concluded that estrogen alone does not appear to affect (either increase or decrease) coronary heart disease and did not increase the risk of breast cancer. In addition, NIH found an association with a decrease in the risk of hip fracture and an increased risk of stroke similar to the increase seen in the HT subset of the WHI study. NIH also stated that analysis of preliminary data from the separate Women's Health Initiative Memory Study (WHIMS) showed a trend toward increased risk of probable dementia and/or mild cognitive impairment in women age 65 and older. The Company has not had the opportunity to review final study data in order to analyze these preliminary findings.
Sales of Prempro and other Premarin family products have been and will continue to be adversely affected by the WHI results. Based on the most recent available market data, average
70 Wyeth
weekly prescriptions written for Prempro and Premarin decreased approximately 76% and 47%, respectively, compared with the average weekly prescriptions written during the eight-week period preceding the 2002 termination of the study subset.
Set forth below are individual product operating results for Prempro/Premphase and Premarin for the years ended December 31, 2003 and 2002:
Prempro/Premphase Premarin
----------------- --------
(In millions) 2003 2002 2003 2002
------------- ------ ------ ------ ------
Net revenue $ 291.6 $ 636.7 $ 983.7 $ 1,243.2
Gross profit* 203.2 546.3 850.8 1,132.1
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* The Company recorded a $60.0 reserve in the 2003 second quarter for anticipated returns in connection with a projected shift in prescriptions toward the approved lower dosage forms of Prempro. This $60.0 reserve was calculated by reviewing wholesalers' inventory levels as of June 30, 2003, after deducting projected Prempro sales by wholesalers using the first-in, first-out (FIFO) method and excluding "out of date" inventory (it is the Company's policy to accept returns of product with expiration dates of six months or less). The Company fully reserved for the value of this remaining inventory, which approximated $60.0.
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). Premarin, Prempro and Premphase are indicated for the treatment of certain menopausal symptoms. They also are approved for the prevention of osteoporosis, a condition involving a loss of bone mass in postmenopausal women. Their use for that purpose in women without symptoms should be limited to cases where non-hormonal treatments have been seriously considered and rejected. 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. One other company has announced that it has applied for FDA approval of a generic version of Premarin derived from the same natural source. Following a bench trial in November 2002, a federal court found, in an order issued on October 2, 2003, that the company which had developed the estrogens to be used in this product, Natural Biologics, Inc., had misappropriated certain of the Company's trade secrets relating to the manufacture of Premarin. The court has entered a permanent injunction that, inter alia, bars Natural Biologics, Inc. from using the misappropriated trade secrets and from engaging in the research, development, production or manufacture of estrogens from urine. Wyeth v. Natural Biologics, Inc., et al., No. 98-2469 (JNE/JGL), U.S.D.C., D. Minn. Natural Biologics, Inc. has filed an appeal from the court's injunction. The Company cannot predict the timing or outcome of the appeal or of any other effort by any other company along these lines.
Product Supply
Prevnar Supply
Worldwide demand for Prevnar continues to grow. The manufacturing-related constraints that led to backorders throughout 2002 were resolved early in 2003. By April 2003, demand in the United States and other markets where Prevnar was available was met, and this continued through October 2003. More than 20 million doses of Prevnar were produced in 2003. However, a late 2003 shutdown of the filling lines at the Pearl River, New York facility was extended by six weeks beyond the original plan. As a result of this shutdown and other manufacturing issues, delays in product availability are anticipated throughout the first half of 2004 in all markets. As a result of delays in product availability, the Centers for Disease Control and Prevention and the European Agency for the Evaluation of Medicinal Products have issued interim dosing recommendations to reduce usage during the supply-constrained period. Capacity should be enhanced throughout 2004 due to internal improvements and third-party capacity. Although production issues are not yet fully resolved, we believe 2004 production will exceed the 2003 level.
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 significantly increased in 2003. Market demand has continued 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.
Supply Chain
Management continually reviews the Company's supply chain structure with respect to utilization of production capacities as well as manufacturing efficiencies. Changes in product demand periodically create capacity imbalances within the manufacturing network. When such imbalances result in overcapacity, which
Wyeth 71
management considers to be other than temporary, the network is restructured to gain optimal efficiency and to reduce production costs. As a result, additional restructuring charges may occur in future periods.
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, 2002, Quarterly Reports on Form 10-Q for the quarters ended March 31, 2003, June 30, 2003 and September 30, 2003, as well as in the 2003 Annual Report on Form 10-K, which will be filed by March 15, 2004. 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, Robitussin, Prempro and Premarin, 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 (excluding costs associated with the Redux and Pondimin diet drug litigation, see Note 14 to the consolidated financial statements) 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. Prior to November 2003, the Company was self-insured for product liability risks with excess coverage on a claims-made basis from various insurance carriers in excess of the self-insured amounts and subject to certain policy limits. Effective November 2003, the Company became completely self-insured for product liability risks. It is not possible to predict whether any potential liability that might exceed amounts already accrued will have a material adverse effect on the Company's financial condition, results of operations and/or cash flows. This is discussed in greater detail in Note 14 to the consolidated financial statements.
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, current 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 accuracy of our estimates and assumptions utilized in our critical accounting policies;
- the timing and successfulness of research and development activities;
- trade buying patterns;
- the impact of competitive or generic products;
- economic conditions, including interest rate and foreign currency exchange rate fluctuation;
- changes in generally accepted accounting principles;
- any changes in political or economic conditions due to the threat of terrorist activity worldwide and related U.S. military action internationally;
- costs related to product liability, patent protection, government investigations and other legal proceedings;
- our ability to protect our intellectual property, including patents;
- the impact of legislation or regulation affecting pricing, reimbursement or access, both in the United States and internationally;
- impact of managed care or health care cost-containment;
- governmental laws and regulations affecting our U.S. and international businesses, including tax obligations;
- environmental liabilities;
- the future impact of presently known trends, including those with respect to product performance and competition;
- changes in product mix;
- anticipated amounts of future contractual obligations;
- anticipated developments related to sales of Prempro/ Premarin family products and Enbrel and Prevnar product supply; and
- expectations regarding the impact of potential litigation relating to Prempro, Premarin, Robitussin and Dimetapp; 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.
72 Wyeth
Directors and Officers
Board of Directors
Robert Essner 1
Chairman, President and
Chief Executive Officer
Clifford L.
Alexander, Jr. 2,4
President, Alexander & Associates, Inc.
Frank A.
Bennack, Jr. 1,3,5
Vice Chairman
The Hearst Corporation
Richard L. Carrion 2,3
Chairman, President and
Chief Executive Officer,
Popular, Inc. and
Banco Popular de Puerto Rico
John D. Feerick 2,4,5
Professor of Law,
Fordham University
School of Law
Robert Langer, Sc.D.
Kenneth J. Germeshausen
Professor of Chemical and
Biomedical Engineering,
Massachusetts Institute of Technology
John P. Mascotte 2,3,5,11
Retired President and
Chief Executive Officer,
Blue Cross and Blue Shield
of Kansas City, Inc.
Mary Lake Polan, M.D., Ph.D., M.P.H. 4,5
Professor and Chairman
Department of Obstetrics and Gynecology,
Stanford University School of Medicine
Ivan G. Seidenberg 1,3,4
Chairman and Chief Executive Officer,
Verizon Communications Inc.
Walter V. Shipley 2,3
Retired Chairman of the Board,
The Chase Manhattan Corporation
John R. Torell III 4,5
Partner
Core Capital Group
Director Emeritus
John W. Culligan
Retired - Former Chairman of the Board
Principal Corporate Officers
Robert Essner 6,7,8,9,10
Chairman, President and
Chief Executive Officer
Kenneth J. Martin 6,7,8,9,10
Executive Vice President and Chief Financial Officer
Bernard J. Poussot 6,7,8,9
Executive Vice President
Joseph M. Mahady 6,8
Senior Vice President
Robert R.
Ruffolo, Jr., Ph.D. 6,7,8,9
Senior Vice President
Lawrence V. Stein 6,7,8,9,10
Senior Vice President and General Counsel
Douglas A. Dworkin 7
Vice President and
Deputy General Counsel
Bruce Fadem
Vice President -
Corporate Information Services
and Chief Information Officer
Leo C. Jardot
Vice President -
Government Relations
Paul J. Jones 7,8
Vice President
and Controller
John C. Kelly
Vice President -
Finance Operations
Eileen M. Lach 7
Vice President,
Corporate Secretary and
Associate General Counsel
Rene R. Lewin 6,7,8,9,10
Vice President -
Human Resources
David A. Manspeizer 7
Vice President -
Intellectual Property and
Associate General Counsel
Jack M. O'Connor 9,10
Vice President
and Treasurer
Marily H. Rhudy 6,8
Vice President -
Public Affairs
Steven A. Tasher 7
Vice President -
Environmental Affairs and
Facilities Operations and
Associate General Counsel
Justin R. Victoria
Vice President -
Investor Relations
Mary Katherine Wold 9,10
Vice President - Taxes
Principal Division and Subsidiary Officers
Fort Dodge Animal Health Division
E. Thomas Corcoran 6,8,9
President
Wyeth Consumer Healthcare
Ulf Wiinberg 6,7,8,9
President
Wyeth Consumer Healthcare U.S.
Douglas A. Rogers 8
President
Wyeth Pharmaceuticals
Bernard J. Poussot 6,7,8,9
President
Wyeth
Pharmaceuticals -
Europe/Middle East/Africa
Mark M. Larsen 8
President
Wyeth
Pharmaceuticals -
International
Robert N. Power 6,8
President
Wyeth
Pharmaceuticals -
North America and Global Businesses
Joseph M. Mahady 6,8
President
Wyeth Research
Robert R. Ruffolo, Jr.,
Ph.D. 6,7,8,9
President
1 Executive Committee
2 Audit Committee
3 Compensation and Benefits Committee
4 Corporate Issues Committee
5 Nominating and Governance Committee
6 Management Committee
7 Law/Regulatory Review Committee
8 Operations Committee
9 Human Resources and Benefits Committee
10 Retirement Committee
11 Designated to be a "Financial Expert" as defined in applicable SEC rules
Wyeth 73
Corporate Data
Executive Offices
Wyeth
Five Giralda Farms
Madison, NJ 07940
(973) 660-5000
Stock Trading Information
Wyeth stock is listed on the
New York Stock Exchange (ticker symbol: WYE).
Independent Auditors
PricewaterhouseCoopers LLP
400 Campus Drive
Florham Park, NJ 07932
Annual Meeting
The Annual Meeting of Stockholders will be held on Thursday, April 22, 2004
at the Headquarters Plaza Hotel in Morristown, New Jersey.
Stockholder Account Information
The Bank of New York is the transfer agent, registrar, dividend disbursing
agent and dividend reinvestment agent for the Company. Stockholders of record
with questions about lost certificates, lost or missing dividend checks, or
notification of change of address should contact:
The Bank of New York
P.O. Box 11002
Church Street Station
New York, NY 10286
(800) 565-2067 (Inside the United States and Canada)
(610) 312-5238 (Outside the United States and Canada)
For the hearing impaired: (888) 269-5221 (TDD)
Via e-mail: shareowners@bankofny.com
Internet address: www.stockbny.com
BuyDIRECT Stock Purchase and Sale Plan The BuyDIRECT plan provides stockholders of record and new investors with a convenient way to make cash purchases of the Company's common stock and to automatically reinvest dividends. Inquiries should be directed to The Bank of New York.
Reports Available
A copy of the Company's Annual Report on Form 10-K may be obtained by any
stockholder without charge through The Bank of New York. Additionally, a copy
of this Annual Report and all Company filings with the Securities and
Exchange Commission can be accessed on our website at www.wyeth.com.
Equal Employment Opportunity
Our established affirmative action and equal employment programs demonstrate
our long-standing commitment to provide job and promotional opportunities for
all qualified persons regardless of age, color, disability, national origin,
race, religion, sex, sexual orientation, status as a Vietnam-era veteran or a
special disabled veteran, or any military uniformed services obligation.
Environmental Health and Safety Policy Copies of the Company's "Environmental Health and Safety Policy" and "2002 Environmental and Safety Report" may be obtained upon written request to:
Wyeth
Department of Environment and Safety
Five Giralda Farms
Madison, NJ 07940
Wyeth on the Internet
Wyeth's Internet address is:
www.wyeth.com
Trademarks
Product designations appearing in differentiated type are trademarks.
Design: Arnold Saks Associates Major Photography: Mark Tuschman Text: Fulton Communications
74 Wyeth
EXHIBIT 21
State or Country
Name of Incorporation
------------------------------------------------- -----------------------
United States
-------------
A H Investments LTD. Delaware
Ayerst-Wyeth Pharmaceuticals Incorporated Delaware
CICL Corporation Delaware
Genetics Institute, LLC Delaware
MDP Holdings, Inc. Delaware
Route 24 Holdings, Inc. Delaware
Wyeth Pharmaceuticals, Inc. Delaware
Scientific Protein Laboratories Inc. (1) 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
-------
Wyeth Australia Pty. Limited Australia
Laboratorios Wyeth-Whitehall Ltda. Brazil
Wyeth Canada (2) 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 KK Japan
Wyeth S.A. de C.V. Mexico
AHP Manufacturing B.V. Netherlands
Wyeth Philippines, Inc. Philippines
Wyeth Nutritionals (Singapore) Pte. Ltd. Singapore
Wyeth Farma S.A. Spain
Wyeth Lederle Nordiska A.B. Sweden
Dimminaco AG Switzerland
Wyeth Taiwan Corporation Taiwan
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(1) The operating assets of Scientific Protein Laboratories Inc. were sold
to Arsenal Capital Partners on February 9, 2004.
(2) Wyeth Canada is a partnership between two affiliates of the Company.
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.
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, No. 33-57339, No. 333-108312, No. 333-111093 and No. 333-112450), 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 22, 2004, except for Note 16 which is as of February 11, 2004, relating to the financial statements, which appears in the Annual Report to Stockholders, which is incorporated in this Annual Report on Form 10-K.
/s/ PricewaterhouseCoopers LLP
Florham Park, NJ
March 12, 2004
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EXHIBIT 31.1
CERTIFICATION OF DISCLOSURE
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
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 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 report;
3. Based on my knowledge, the financial statements, and other financial information included in this 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 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-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, 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 and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; 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 over financial reporting.
By /s/ Robert Essner
---------------------------------------------
Robert Essner
Chairman, President and Chief Executive Officer
Date: March 12, 2004
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EXHIBIT 31.2
CERTIFICATION OF DISCLOSURE
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
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 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 report;
3. Based on my knowledge, the financial statements, and other financial information included in this 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 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-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, 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 and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; 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 over financial reporting.
By /s/ Kenneth J. Martin
--------------------------------------------------
Kenneth J. Martin
Executive Vice President and Chief Financial Officer
Date: March 12, 2004
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EXHIBIT 32.1
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, 2003, as filed with the Securities and Exchange Commission on March 12, 2004 (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 12, 2004
By /s/ Robert Essner
-----------------------------------------------
Robert Essner
Chairman, President and Chief Executive Officer
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EXHIBIT 32.2
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, 2003, as filed with the Securities and Exchange Commission on March 12, 2004 (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 12, 2004
By /s/ Kenneth J. Martin
----------------------------------------
Kenneth J. Martin
Executive Vice President and
Chief Financial Officer
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EXHIBIT 99
Exhibit 99 to the Annual Report on Form 10-K for the Fiscal Year Ended December 31, 2003
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 timing and successfulness of research and development activities;
o trade buying patterns;
o the impact of competitive or generic products;
o economic conditions, including interest rate and foreign currency exchange rate fluctuation;
o changes in generally accepted accounting principles;
o any changes in political or economic conditions due to the threat of terrorist activity worldwide and related U.S. military action internationally;
o costs related to product liability, patent protection, government investigations and other legal proceedings;
o our ability to protect our intellectual property, including patents;
o the impact of legislation or regulation affecting pricing, reimbursement or access, both in the United States and internationally;
o impact of managed care or health care cost-containment;
o governmental laws and regulations affecting our U.S. and international businesses, including tax obligations;
o environmental liabilities;
o the accuracy of our estimates and assumptions utilized in our critical accounting policies;
o the future impact of presently known trends, including those with respect to product performance and competition;
o change in product mix;
o anticipated developments relating to sales of PREMPRO/PREMARIN family products and ENBREL and PREVNAR product supply;
o anticipated amounts of future contractual obligations; and
o expectations regarding the impact of potential litigation including litigation, inter alia, relating to PREMPRO, PREMARIN, ROBITUSSIN and DIMETAPP; 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, foreign currency exchange rates and market value of our equity investments and any impacts of war or terrorist acts;
Interruptions of computer and communication systems including computer viruses, that could impair the Company's ability to conduct business and communicate internally with its customers;
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, or reimbursement or access policies; (iii) drug importation legislation; (iv) changes in governments and legal systems; and (v) 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, product 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, 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;
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, PREMARIN, 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.