-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PUHYnQIlG1Y+7+PPSw+hhmF29nka7J2E30PTrXtS3UB0SVP9V8cOLkvWd9klQfeK iMRgWz+ZFJq/RL1P1ciycg== 0000912057-96-004748.txt : 19960320 0000912057-96-004748.hdr.sgml : 19960320 ACCESSION NUMBER: 0000912057-96-004748 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960425 FILED AS OF DATE: 19960319 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: PFIZER INC CENTRAL INDEX KEY: 0000078003 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 135315170 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 001-03619 FILM NUMBER: 96536212 BUSINESS ADDRESS: STREET 1: 235 E 42ND ST CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2125732323 MAIL ADDRESS: STREET 1: 235 E 42ND ST CITY: NEW YORK STATE: NY ZIP: 10017 FORMER COMPANY: FORMER CONFORMED NAME: PFIZER CHARLES & CO INC DATE OF NAME CHANGE: 19710908 DEF 14A 1 DEF 14A Pfizer Inc 235 East 42nd Street New York, NY 10017-5755 --------------------------------------- [LOGO] WILLIAM C. STEERE, JR. Chairman of the Board and Chief Executive Officer March 19, 1996 Dear Fellow Shareholder: You are cordially invited to attend the Annual Meeting of Shareholders of Pfizer Inc. which will be held on Thursday, April 25, 1996 at 10:00 a.m. in the Empire State Ballroom of the Grand Hyatt Hotel, 42nd Street and Lexington Avenue, New York, NY. Directions to the meeting site and a map of the meeting site area can be found at the end of the attached Proxy Statement. This booklet includes the Notice of the Annual Meeting of Shareholders and the Proxy Statement. The Proxy Statement describes the business that will be transacted at the Annual Meeting and also provides important information about the Company and the items to be voted upon that you should consider when you vote your shares. At this year's meeting, among other things, you will be asked to consider and to vote upon the election of three directors. All three nominees currently are directors of the Company. Their diversified experience and backgrounds have enabled them to contribute significantly to the success of the Company. Accordingly, your Board of Directors recommends that you vote FOR all of the nominees. You also will be asked to approve the Board of Director's appointment of KPMG Peat Marwick LLP as the Company's independent auditors for the 1996 fiscal year. Your Board of Directors considers the firm well qualified for this position and therefore recommends that you vote FOR this proposal. In addition, you will be asked to approve amendments to the Pfizer Inc. Stock and Incentive Plan to increase the number of shares of Pfizer Inc. common stock authorized for issuance under the Plan and to extend the term of the Plan through the year 2005. This Plan initially was approved by the Company's shareholders in 1965 and awards made under the Plan since then have been an important part of the Company's employee compensation program. The availability of additional shares for use pursuant to the Plan will allow the Company greater flexibility in its employee compensation and performance incentive program. The Board therefore recommends that you vote FOR this proposal. EACH OF THE ITEMS UPON WHICH YOU WILL BE ASKED TO VOTE IS DISCUSSED MORE FULLY IN THE ATTACHED PROXY STATEMENT. WE URGE YOU TO READ THE PROXY STATEMENT COMPLETELY AND CAREFULLY SO THAT YOU CAN VOTE YOUR SHARES ON AN INFORMED BASIS. Your vote is important! We look forward to receiving your proxy form and hope that you will be able to join us at the Annual Meeting. Sincerely yours, [SIGNATURE] William C. Steere, Jr. PFIZER INC. 235 EAST 42ND STREET, NEW YORK, NY 10017 NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS APRIL 25, 1996 ------------------ The Annual Meeting of Shareholders of Pfizer Inc., a Delaware corporation (the "Company"), will be held in the Empire State Ballroom of the Grand Hyatt Hotel, 42nd Street and Lexington Avenue, New York, NY. Directions to the meeting site and a map of the meeting site area can be found at the end of the attached Proxy Statement. The Annual Meeting of Shareholders will be held on Thursday, April 25, 1996, at 10:00 a.m., to consider and take action upon the following items: (1)the election of three directors (page 2); (2)a proposal to approve the appointment of KPMG Peat Marwick LLP as independent auditors of the Company for the 1996 fiscal year (page 23); (3)a proposal to approve amendments to the Pfizer Inc. Stock and Incentive Plan to increase the number of shares of Pfizer Inc. common stock authorized to be issued under the Plan and to extend the term of the Plan to December 31, 2005 (page 24); and (4)such other business as may properly come before the Annual Meeting, or any adjournment thereof. Only shareholders of record as of the close of business on February 26, 1996 are entitled to notice of and to vote at the Annual Meeting of Shareholders. Beneficial owners of Company common stock who are not shareholders of record, but instead hold their shares in nominee names, must bring evidence of such ownership (such as a brokerage account statement showing ownership of Company common stock) to be admitted to the Annual Meeting of Shareholders. By order of the Board of Directors, [SIGNATURE] C. L. Clemente SECRETARY New York, NY March 19, 1996 IMPORTANT WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING OF SHAREHOLDERS IN PERSON, PLEASE VOTE BY MEANS OF THE ENCLOSED PROXY FORM. WE ASK YOU TO MARK YOUR CHOICES, SIGN, DATE AND RETURN THE PROXY FORM AS SOON AS POSSIBLE IN THE ENCLOSED BUSINESS REPLY ENVELOPE. IF YOU RETURN A SIGNED PROXY FORM WITHOUT MARKING IT, IT WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS. BY PROMPTLY SIGNING AND RETURNING YOUR PROXY FORM YOU WILL ASSIST THE COMPANY BY REDUCING EXPENSES RELATING TO ADDITIONAL PROXY SOLICITATIONS. PFIZER INC. 235 EAST 42ND STREET, NEW YORK, NY 10017 PROXY STATEMENT March 19, 1996 This Proxy Statement is furnished in connection with the solicitation by the Board of Directors of Pfizer Inc. (the "Company") of proxies for use at the Company's Annual Meeting of Shareholders to be held on April 25, 1996 ("Annual Meeting"), or any adjournment thereof. Holders of record of shares of Company common stock ("Common Stock") at the close of business on February 26, 1996 (the "Record Date") are entitled to vote at the Annual Meeting and each shareholder will have one vote for each share of Common Stock registered in his or her name. On the Record Date, there were issued and outstanding and entitled to vote at the Annual Meeting 639,181,479 shares of Common Stock. As of the Record Date, to the Company's knowledge, no person owned beneficially five percent or more of the outstanding shares of Common Stock. This Proxy Statement and enclosed proxy form are first being mailed to the Company's shareholders on or about March 19, 1996. QUORUM AND TABULATION OF VOTES The By-laws of the Company (the "By-laws") provide that a majority of the shares of Common Stock issued and outstanding and entitled to vote, present in person or by proxy, shall constitute a quorum at a meeting of shareholders of the Company. Votes at the Annual Meeting will be tabulated by two independent judges of election appointed by the Company. Shares of Common Stock represented by a properly signed and returned proxy are considered as present at the Annual Meeting for purposes of determining a quorum. Pursuant to the By-laws, directors of the Company must be elected by a plurality vote. In the event that more than two candidates run for the same office, a plurality vote ensures that the person elected will be the one who receives the greatest number of votes, even if that number does not constitute a majority of the votes cast. Pursuant to the By-laws, all other questions shall be determined by a majority of the votes cast thereon, except as may otherwise be provided in the Certificate of Incorporation of the Company, by the rules of the New York Stock Exchange, or by law. Brokers holding shares of Common Stock for beneficial owners must vote those shares according to the specific instructions they receive from the owners. If specific instructions are not received, however, brokers may vote those shares at their discretion, depending on the type of proposal involved. The rules of the New York Stock Exchange preclude brokers from exercising their voting discretion on certain proposals. Absent specific instructions from the beneficial owner in such a case, the broker may not vote on that proposal. This results in what is known as a "broker non-vote" on such a proposal. When a majority of the shares of Common Stock issued and outstanding is required for approval of a proposal, a "broker non-vote" has the effect of a negative vote. When a majority of the shares of Common Stock present and entitled to vote or a majority of the votes cast is required for the approval of a proposal a "broker non-vote" has the effect of reducing the number of required affirmative votes. Directors will be elected by a favorable vote of a plurality of the shares of Common Stock cast with respect to the election of directors (Item 1) at the Annual Meeting. Votes "withheld" from director-nominee(s) will not count against the election of such nominee(s). Brokers have discretionary authority to vote on this proposal. Passage of the proposal to approve the appointment of KPMG Peat Marwick LLP (Item 2) requires the approval of a majority of the votes cast on this proposal. Abstentions as to this proposal will not count as votes cast "for" or "against" this proposal and will not be included in calculating the number of votes necessary for approval of this proposal. Passage of the proposal to approve amendments to the Company's Stock and Incentive Plan to increase the number of shares of Common Stock authorized to be issued under the Plan and to extend the term of the Plan to December 31, 2005 (Item 3) requires the approval of a majority of the shares of Common Stock issued and outstanding. Abstentions and broker non-votes as to this proposal will have the same effect as a vote cast "against" the proposal. The New York Stock Exchange determines whether brokers have discretionary authority to vote on a given proposal. If a properly signed proxy form is returned to the Company by a shareholder of record and is not marked, it will be voted in accordance with the recommendations of the Board on all proposals. A shareholder of record may revoke a vote at any time before the Annual Meeting by the submission of a written revocation of the proxy to the Company, by the return of a subsequently-dated proxy form to the Company, or by the shareholder's personal vote at the Annual Meeting. ITEM 1 -- ELECTION OF THREE DIRECTORS During 1995, the Company's Board of Directors ("Board") met eleven times. All of the Company's directors attended seventy-five percent or more of the meetings of the Board and Board committees on which they served in 1995. The Board is divided into three classes. One class is elected each year for a three-year term. This year the Board has nominated three individuals, all of whom are now directors of the Company, to serve for three-year terms. Biographies of the nominees and the other members of the Board are set forth below. The Board unanimously recommends that shareholders vote "FOR" the three nominees for directors. The Board expects that all of the nominees will be available for election. In the event that any nominee should become unavailable, however, the Proxy Committee (as noted on the proxy form) shall vote for a nominee or nominees who would be designated by the Board, unless the Board chooses to reduce the number of directors serving on the Board. SECURITY OWNERSHIP OF MANAGEMENT As of February 22, 1996, the nominees, other directors, and certain executive officers of the Company who are not directors of the Company, as named in the following table, according to information confirmed by them, owned beneficially, directly or indirectly, the number of shares of Common Stock indicated; held options, exercisable within 60 days after that date, to purchase the number of shares of Common Stock indicated pursuant to the Company's Stock and Incentive Plan; and held the number of units indicated pursuant to the Company's Nonfunded Deferred Compensation and Unit Award Plan for Non-Employee Directors. As of such date, no such person beneficially owned more than .13 percent of the outstanding Common Stock; all directors and executive officers as a group owned 1,889,697 shares of Common Stock, and options, exercisable within 60 days after that date, to purchase 2,329,621 shares of Common Stock, which together amounted to less than one percent of the outstanding Common Stock. As of February 22, 1996, no director or executive officer owned any of the Company's convertible debentures. 2
AMOUNT OF BENEFICIAL OWNERSHIP OF SHARES OF NAME AND AGE AS OF THE POSITION, PRINCIPAL OCCUPATION, COMMON STOCK, (1) APRIL 25, 1996 MEETING DATE BUSINESS EXPERIENCE AND DIRECTORSHIPS OPTIONS AND UNITS (2) - --------------------------------- ------------------------------------------------------- --------------------- NOMINEES FOR DIRECTORS WHOSE TERMS EXPIRE IN 1999 Constance J. Horner............54 Guest Scholar since 1993 at The Brookings Institution, Shares: 2,992 an organization devoted to nonpartisan research, Units: 609 education and publication in economics, government and foreign policy and the social sciences. Commissioner, U.S. Commission on Civil Rights since 1993. Served at the White House as [PHOTO] Assistant to the President and as Director of Presi- dential Personnel from August 1991 to January 1993. Deputy Secretary, U.S. Department of Health and Human Services, from 1989 to 1991. Director of the U.S. Office of Personnel Management from 1985 to 1989. Director of Ingersoll-Rand and The Prudential Insurance Co. of America. Director of the Company since 1993. Member of the Company's Corporate Governance Committee. Thomas G. Labrecque............57 Chairman and Chief Executive Officer and a Director of Shares: 3,400 The Chase Manhattan Corporation, a bank holding Units: 609 company, and The Chase Manhattan Bank, N.A. since 1990. President of The Chase Manhattan Corporation and The Chase Manhattan Bank, N.A. from 1981 to 1990. Member of the Business [PHOTO] Roundtable, the Council on Foreign Relations, the Council on Competitiveness and the Trilateral Commission. President of The Bankers Roundtable and the International Monetary Conference. Director of the Company since 1993. Member of the Company's Executive Compensation Committee. Jean-Paul Valles...............59 Chairman of Minerals Technologies Inc. ("MTI"), a Shares: 131,530 resource and technology-based company that develops, Options: 66,000 produces and markets specialty mineral, mineral-based Units: 5,338 and synthetic mineral products, since 1989. Chief Executive Officer of MTI since 1992. Formerly Vice Chairman of the Company from March [PHOTO] to October 1992. Executive Vice President of the Company from 1991 to 1992. Senior Vice President of the Company from 1989 through 1991. Senior Vice President -- Finance of the Company from 1989 to 1990 and Vice President -- Finance of the Company from 1980 to 1989. Director of the Company since 1980.
- -------------------------- (1) This table does not include the following number of shares held in the names of family members, as to which beneficial ownership is disclaimed: Dr. Valles -- 29,020. (2) As of February 22, 1996, these units are held under the Pfizer Inc. Nonfunded Deferred Compensation and Unit Award Plan for Non-Employee Directors. The value of a director's unit account is measured by the price of the Common Stock. The Plan is further described in this Proxy Statement under the sub-heading "Benefit Plans for Non-Employee Directors." 3
AMOUNT OF BENEFICIAL OWNERSHIP OF SHARES OF NAME AND AGE AS OF THE POSITION, PRINCIPAL OCCUPATION, COMMON STOCK, (1) APRIL 25, 1996 MEETING DATE BUSINESS EXPERIENCE AND DIRECTORSHIPS OPTIONS AND UNITS (2) - --------------------------------- ------------------------------------------------------- --------------------- DIRECTORS WHOSE TERMS EXPIRE IN 1997 M. Anthony Burns...............53 Chairman of the Board since 1985, Chief Executive Shares: 3,400 Officer since 1983, President and Director since 1979, Units: 609 of Ryder System, Inc., a provider of transportation and logistics services in the Americas and Western Europe. Director of The Chase Manhattan Bank, N.A., The Chase Manhattan Corporation and J.C. [PHOTO] Penney Company, Inc. Member of the Business Roundtable and the Business Roundtable's Policy Committee and Chairman of its Health, Welfare and Retirement Income Task Force. Director of the Company since 1988. Chair of the Company's Executive Compensation Committee. George B. Harvey...............65 Chairman, President, and Chief Executive Officer since Shares: 3,081 1983 and Director since 1980 of Pitney Bowes, a Units: 3,039 provider of mailing and office systems and management and financial services. Director of Connecticut Mutual Life Insurance Company, McGraw-Hill, Inc., and Merrill Lynch & Co., Inc. [PHOTO] Director of the Company since 1994. Member of the Company's Executive Compensation Committee. Stanley O. Ikenberry...........61 President Emeritus and Regent Professor of the Shares: 6,496 University of Illinois, a comprehensive public re- Units: 14,857 search university with campuses at Urbana-Champaign and Chicago. President of the University from 1979 through July 1995. Director of Harris Bank, Utilicorp United Inc. and the Chairman of the [PHOTO] Board of Carnegie Foundation for the Advancement of Teaching. Director of the Company since 1982. Chair of the Company's Audit Committee. Franklin D. Raines.............47 Vice Chairman since 1991 of Fannie Mae (Federal Shares: 1,200 National Mortgage Association), a company that provides Units: 4,271 a secondary market for residential mortgages through portfolio purchases, issuance of mortgage-backed securities, and other services. General Partner in municipal finance at the investment [PHOTO] banking firm of Lazard Freres & Co. LLC from 1985-1990. Director of Fannie Mae and The Boeing Company. Director of the Company since 1993. Member of the Company's Audit Committee.
- -------------------------- (1) This table does not include the following number of shares held in the names of family members, as to which beneficial ownership is disclaimed: Dr. Ikenberry -- 3,000. (2) As of February 22, 1996, these units are held under the Pfizer Inc. Nonfunded Deferred Compensation and Unit Award Plan for Non-Employee Directors. The value of a director's unit account is measured by the price of the Common Stock. The Plan is further described in this Proxy Statement under the sub-heading "Benefit Plans for Non-Employee Directors." 4
AMOUNT OF BENEFICIAL OWNERSHIP OF SHARES OF NAME AND AGE AS OF THE POSITION, PRINCIPAL OCCUPATION, COMMON STOCK, APRIL 25, 1996 MEETING DATE BUSINESS EXPERIENCE AND DIRECTORSHIPS OPTIONS AND UNITS (1) - --------------------------------- ------------------------------------------------------- --------------------- DIRECTORS WHOSE TERMS EXPIRE IN 1998 Grace J. Fippinger.............68 Vice President, Secretary and Treasurer from 1984 Shares: 8,282 through 1990 of NYNEX Corporation, an exchange Units: 600 telecommunications and exchange access services company. Director of the Bear Stearns Compa- nies, Inc. Director of the Company since 1976. Member [PHOTO] of the Company's Executive Committee and Corporate Governance Committee. James T. Lynn..................69 Senior Advisor to Lazard Freres & Co. LLC, Investment Shares: 7,000 Bankers, since 1992. Chairman and Chief Executive Units: 609 Officer of Aetna Life and Casualty Company from 1984 to 1992 and Director from 1979 to 1992. Director of TRW Inc. Director of the Compa- [PHOTO] ny since 1979. Member of the Company's Corporate Governance Committee. Chair of that Committee from 1986 through January 1995. Paul A. Marks..................69 President and Chief Executive Officer since 1980 of Shares: 5,462 Memorial Sloan-Kettering Cancer Center, a private Units: 44,960 health care institution devoted to cancer prevention, patient care, research and education. Di- rector of several Dreyfus Mutual Funds, Life Tech- [PHOTO] nologies, Inc. and Tularik Inc. Director of the Com- pany since 1978. Chair of the Company's Corporate Governance Committee and member of the Company's Executive Committee.
- -------------------------- (1) As of February 22, 1996, these units are held under the Pfizer Inc. Nonfunded Deferred Compensation and Unit Award Plan for Non-Employee Directors. The value of a director's unit account is measured by the price of the Common Stock. The Plan is further described in this Proxy Statement under the sub-heading "Benefit Plans for Non-Employee Directors." 5
AMOUNT OF BENEFICIAL OWNERSHIP OF SHARES OF NAME AND AGE AS OF THE POSITION, PRINCIPAL OCCUPATION, COMMON STOCK, (1) APRIL 25, 1996 MEETING DATE BUSINESS EXPERIENCE AND DIRECTORSHIPS OPTIONS AND UNITS (2) - --------------------------------- ------------------------------------------------------- --------------------- DIRECTORS WHOSE TERMS EXPIRE IN 1998 Edmund T. Pratt, Jr............69 Chairman Emeritus of the Company since 1992. Chairman Shares: 771,506 of the Board of the Company from 1972 to 1992. Chief Units: 6,084 Executive Officer of the Company from 1972 until April 1991. Director of The Chase Manhattan Bank, N.A., The Chase Manhattan Corporation, [PHOTO] General Motors Corporation, International Paper Company, AEA Investors Inc., Hughes Electronics Corporation and Minerals Technologies Inc. Director of the Company since 1969. Member of the Company's Executive Committee. Felix G. Rohatyn...............67 Managing Director of Lazard Freres & Co. LLC, Shares: 11,000 Investment Bankers, since 1960. Director of General Units: 13,539 Instrument Corporation. Former Chairman of the Municipal Assistance Corporation for the City of New York, serving from 1975 to 1993. Director of the [PHOTO] Company since 1971. Member of the Company's Executive Committee and Audit Committee. William C. Steere, Jr..........59 Chairman of the Board of the Company since 1992. Chief Shares: 188,797 Executive Officer of the Company since April 1991. Options: 390,780 President of the Company from 1991 to 1992. Senior Vice President of the Company from 1989 to 1991. Vice President of the Company from 1983 [PHOTO] to 1989, and President -- Pharmaceuticals Group from 1986 through January 1991. Director of the Federal Reserve Bank of New York, Minerals Technologies Inc., Pharmaceutical Research and Manufacturers of America (PhRMA) and Texaco Inc. Member of the Business Roundtable. Director of the Company since 1987. Chair of the Company's Executive Committee.
- -------------------------- (1) As of February 22, 1996, includes shares credited under the Savings and Investment Plan to employees of the Company included in this table. The Plan is further described in this Proxy Statement under the heading "Employee Benefit and Long-Term Compensation Plans." This table does not include the following number of shares held in the names of family members, as to which beneficial ownership is disclaimed: Mr. Pratt -- 60,000. (2) As of February 22, 1996, these units are held under the Pfizer Inc. Nonfunded Deferred Compensation and Unit Award Plan for Non-Employee Directors. The value of a director's unit account is measured by the price of the Common Stock. The Plan is further described in this Proxy Statement under the sub-heading "Benefit Plans for Non-Employee Directors." 6
AMOUNT OF BENEFICIAL OWNERSHIP OF SHARES OF NAME AND AGE AS OF THE POSITION, PRINCIPAL OCCUPATION, COMMON STOCK, (1) APRIL 25, 1996 MEETING DATE BUSINESS EXPERIENCE AND DIRECTORSHIPS OPTIONS AND UNITS - --------------------------------- ------------------------------------------------------- --------------------- NAMED EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS Edward C. Bessey...............61 Vice Chairman of the Company from 1992 through 1995.(2) Shares: 92,156 President, U.S. Pharmaceuticals Group from 1992 through Options: 211,504 1995. Executive Vice President of the Company from 1991 to 1992. Senior Vice President of the Company from 1989 to 1991. Vice President of the Company from 1983 to 1989, and President -- Hospital Products Group from 1982 through 1991. Responsible for the Consumer Health Care Group from 1991 through 1995. Director of The Green Point Savings Bank. Director of the Company from 1987 through 1995. Henry A. McKinnell, Jr.........53 Executive Vice President of the Company. Responsible Shares: 50,330 for the Company's U.S. Pharmaceuticals Group, Consumer Options: 185,504 Health Care Group, Corporate Finance Division, and Corporate Strategic Planning and Policy. Director of Aviall, Inc. Robert Neimeth.................60 Executive Vice President of the Company; President of Shares: 112,312 the Company's International Pharmaceuticals Group. Also Options: 199,524 responsible for the Company's Animal Health Group and the Hospital Products Group. John F. Niblack................57 Executive Vice President -- Research and Development. Shares: 37,473 Responsible for the Company's Central Research, Drug Options: 121,920 Regulatory Affairs, Licensing and Development and Quality Control Divisions.
- -------------------------- (1) As of February 22, 1996, includes shares credited under the Savings and Investment Plan to employees of the Company included in this table. The Plan is further described in this Proxy Statement under the heading "Employee Benefit and Long-Term Compensation Plans." (2) Mr. Bessey retired as an employee and resigned as a director of the Company as of January 1, 1996. 7 COMPENSATION OF EXECUTIVE OFFICERS The following table sets forth information concerning the compensation during the last three fiscal years of the Company's Chief Executive Officer and its next four most highly compensated executive officers serving at the end of 1995 (hereafter referred to collectively as the "Named Executive Officers") for all services rendered by them to the Company. SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION --------------------------------------- ----------------------------------- AWARDS PAYMENTS ------------------------ --------- OTHER RESTRICTED SECURITIES ANNUAL STOCK UNDERLYING LTIP NAME AND SALARY BONUS(1) COMPENSATION(2) AWARDS(3) OPTIONS(4) PAYOUTS(5) PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) - --------------------------------------------------------------------------------- ----------------------------------- W. C. Steere, Jr. ........... 1995 1,030,000 2,060,000 24,560 0 150,000 2,036,250 Chairman/CEO `` `` `` ............... 1994 1,016,667 1,925,000 20,511 0 78,600 641,000 `` `` `` ............... 1993 1,100,000 800,000 9,614 600,023 75,000 0 - ---------------------------------------------------------------------------------------------------------------------- E. C. Bessey ................ 1995 625,000 620,000 20,236 0 0 733,050 Vice Chairman; President, U.S. Pharmaceuticals Group `` `` `` ............... 1994 600,000 606,000 25,800 0 21,750 230,760 `` `` `` ............... 1993 600,000 275,000 16,170 100,023 16,500 0 - ---------------------------------------------------------------------------------------------------------------------- H. McKinnell, Jr. ........... 1995 608,000 720,000 17,350 0 60,000 733,050 Executive V.P. H. McKinnell, Jr. ........... 1994 528,333 521,000 23,749 0 26,630 230,760 Executive V.P. & CFO; President -- HPG `` `` `` ............... 1993 505,000 290,000 16,233 135,020 30,000 0 - ---------------------------------------------------------------------------------------------------------------------- R. Neimeth .................. 1995 574,917 626,000 14,970 0 50,000 610,875 Executive V.P.; President -- International Pharmaceuticals Group `` `` `` ............... 1994 497,500 449,000 14,141 0 21,490 192,300 `` `` `` ............... 1993 485,000 245,000 9,427 105,048 15,000 0 - ---------------------------------------------------------------------------------------------------------------------- J. F. Niblack ............... 1995 569,833 615,000 4,123 0 50,000 610,875 Executive V.P. -- Research and Development `` `` `` ............... 1994 515,000 432,000 3,701 0 21,450 192,300 `` `` `` ............... 1993 500,000 225,000 0 75,018 25,000 0 ALL OTHER NAME AND COMPENSATION(6) PRINCIPAL POSITION ($) - ----------------------------- --------------- W. C. Steere, Jr. ........... 119,015 Chairman/CEO `` `` `` ............... 73,253 `` `` `` ............... 64,000 - ----------------------------- E. C. Bessey ................ 206,345 Vice Chairman; President, U.S. Pharmaceuticals Group `` `` `` ............... 35,098 `` `` `` ............... 32,600 - ----------------------------- H. McKinnell, Jr. ........... 45,373 Executive V.P. H. McKinnell, Jr. ........... 32,865 Executive V.P. & CFO; President -- HPG `` `` `` ............... 26,600 - ----------------------------- R. Neimeth .................. 41,120 Executive V.P.; President -- International Pharmaceuticals Group `` `` `` ............... 29,803 `` `` `` ............... 25,400 - ----------------------------- J. F. Niblack ............... 40,204 Executive V.P. -- Research and Development `` `` `` ............... 29,673 `` `` `` ............... 24,000
- ------------------------------ (1) The amounts shown in this column for 1995 constitute the Annual Incentive Awards made to each officer based on the Board's evaluation of each officer's performance. These awards are discussed in further detail in the Executive Compensation Committee Report on page 11 of this Proxy Statement. (FOOTNOTES CONTINUED ON NEXT PAGE) 8 (2) The amounts shown in this column represent tax payments made by the Company on behalf of the Named Executive Officers relating to their use of Company automobiles and for personal financial counseling. These payments in 1995 were as follows: relating to use of the Company automobiles -- Mr. Steere -- $19,757; Mr. Bessey -- $15,491; Dr. McKinnell -- $11,787; and Mr. Neimeth -- $11,201; relating to receipt of personal financial counseling -- Mr. Steere -- $4,803; Mr. Bessey -- $4,745; Dr. McKinnell -- $5,563; Mr. Neimeth -- $3,769; and Dr. Niblack -- $4,123. (3) The amounts shown in this column represent the dollar values on the date of grant (February 17, 1994) of the following number of restricted shares of the Company's Common Stock awarded as part of 1993 compensation: Mr. Steere -- 10,390 shares; Mr. Bessey -- 1,732 shares; Dr. McKinnell -- 2,338 shares; Mr. Neimeth -- 1,819 shares; and Dr. Niblack -- 1,299 shares. All such shares of restricted stock have vested or will vest as follows: one-third on February 17, 1995, one-third on February 17, 1996, and one-third on February 17, 1997. Dividends will be paid during the restricted period. The market value of these shares (including those shares that vested on February 17, 1995 and on February 17, 1996) as of December 31, 1995, using a market value of $63 per share, was as follows: Mr. Steere -- $654,570; Mr. Bessey -- $109,116; Dr. McKinnell -- $147,294; Mr. Neimeth -- $114,597; and Dr. Niblack -- $81,837. (4) The 1994 and 1993 amounts shown in this column have not been adjusted for the Company's June 1995 two-for-one stock split. (5) The 1995 amounts shown in this column represent the dollar market value of shares of the Company's Common Stock on February 22, 1996 (the payment date) earned by the Named Executive Officers pursuant to the Company's Performance-Contingent Share Award Program using the closing sales price of the Company's Common Stock ($67.875) on the New York Stock Exchange on that date. The number of Performance-Contingent Shares awarded to each executive officer was as follows: Mr. Steere -- 30,000; Mr. Bessey -- 10,800; Dr. McKinnell -- 10,800; Mr. Neimeth -- 9,000; and Dr. Niblack -- 9,000. This Program is discussed in greater detail in the report of the Executive Compensation Committee on page 11 of this Proxy Statement and also under the heading "Employee Benefit and Long-Term Compensation Plans," which begins on page 17. (6) The amounts shown in this column constitute Company matching funds under the Company's Savings and Investment Plan (a retirement savings plan) and related supplemental plan. These plans are described in this Proxy Statement under the heading "Employee Benefit and Long-Term Compensation Plans," which begins on page 17. In the case of Mr. Bessey, this amount also includes $156,937 paid to Mr. Bessey in consideration of the forfeiture, upon his retirement on January 1, 1996, of 2,310 restricted shares of the Company's common stock, awarded as part of his 1993 compensation. For purposes of this cash payment, Mr. Bessey's restricted shares were valued using the average of the high and low trading price of the Company's common stock ($67.938) on the New York Stock Exchange on February 16, 1996. OPTION GRANTS IN 1995 The following table shows all options to purchase the Company's Common Stock granted to each of the Named Executive Officers of the Company in 1995 and the potential value of such grants at stock price appreciation rates of 0%, 5% and 10%, compounded annually over the maximum ten-year term of the options. Also shown is the potential gain of all outstanding shares of Common Stock held by the Company's shareholders as of December 31, 1995 using the same base price and appreciation rates and compounded over the same ten-year period. The 5% and 10% rates of appreciation are required to be disclosed by the rules of the Securities and Exchange Commission ("SEC") and are not intended to forecast possible future actual appreciation, if any, in the Company's stock prices. The Company did not use an alternative present value formula permitted by the rules of the SEC because, in the Company's view, potential future unknown or volatile factors result in there being no such formula that can determine with reasonable accuracy the present value of such option grants.
INDIVIDUAL GRANTS ---------------------------------------------------------------- PERCENT OF POTENTIAL REALIZABLE VALUE AT ASSUMED NUMBER OF TOTAL OPTIONS ANNUAL RATES OF STOCK PRICE APPRECIATION SECURITIES GRANTED TO EXERCISE OR FOR OPTION TERM ($) UNDERLYING OPTIONS EMPLOYEES IN BASE PRICE ----------------------------------------- NAME GRANTED (#) FISCAL YEAR ($/SH)(2) EXPIRATION DATE 0% 5% 10% - ------------------- ------------------- ------------- ----------- --------------- --- -------------- -------------- W. C. Steere, Jr................ 150,000(1) 2.15 49.00 08/23/05 0 4,622,376 11,714,007 E. C. Bessey....... N/A N/A N/A N/A N/A N/A N/A H. McKinnell, Jr................ 60,000(1) 0.86 49.00 08/23/05 0 1,848,950 4,685,603 R. Neimeth......... 50,000 (1) 0.72 49.00 08/23/05 0 1,540,792 3,904,669 J. F. Niblack...... 50,000 (1) 0.72 49.00 08/23/05 0 1,540,792 3,904,669 All Shareholders... N/A N/A N/A N/A 0 19,637,908,299 49,766,315,207
- ------------------------------ (1) Option grants for each Named Executive Officer in 1995 consisted of a Key Grant that is exercisable as follows: One-fifth each on 8/24/96, 8/24/97, 8/24/98, 8/24/99 and 8/24/2000. (2) The exercise price for all stock option grants shown in this column is the market price of the Company's Common Stock on the date of the grant. 9 AGGREGATED OPTION EXERCISES IN 1995 AND OPTION VALUES AT DECEMBER 31, 1995 The following table provides information as to options exercised by each of the Named Executive Officers in 1995, and the value of the remaining options held by each such executive officer at year-end, measured using the mean of the high and the low trading price ($62.3125) of the Company's Common Stock on December 29, 1995 (the last business day of 1995).
NUMBER OF SECURITIES VALUE OF UNEXERCISED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS OPTIONS HELD AT 12/31/95 AT 12/31/95 VALUE -------------------------- --------------------------- SHARES ACQUIRED REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE NAME ON EXERCISE (#) ($) (#) (#) ($) ($) - -------------------------- --------------- ----------- ----------- ------------- ------------ ------------- W. C. Steere, Jr.......... 139,472 3,373,234 390,780 430,000 10,939,360 9,754,375 E. C. Bessey.............. 70,964 1,658,994 163,004 48,500 4,295,320 1,406,406 H. McKinnell, Jr.......... 18,840 582,796 193,964 140,000 6,373,395 3,153,750 R. Neimeth................ 39,020 1,686,079 199,524 97,000 6,652,242 2,025,813 J. F. Niblack............. 18,552 530,362 121,920 117,000 3,130,085 2,642,063
LONG-TERM INCENTIVE PLAN -- AWARDS IN 1995 The following table provides information concerning the participation of the Named Executive Officers in a long-term compensation plan called the Performance-Contingent Share Award Program pursuant to which they were awarded the right to earn shares of the Company's Common Stock ("Performance-Contingent Shares"). Actual payouts of these Performance-Contingent Shares, if any, will be determined in accordance with a non-discretionary formula which measures the Company's performance over a five-year period using certain performance goals that were determined by the Company's Executive Compensation Committee and approved by the Board. The formula is comprised of two performance criteria -- growth in total shareholder return and growth in earnings per share -- over the performance period relative to the industry peer group ("Peer Group") referred to in the Performance Graph shown on page 16 of this Proxy Statement. To the extent that the Company's performance exceeds the low end of the range of the Peer Group's performance for either or both of the performance criteria, a varying amount of shares up to the maximum will be earned. Details regarding these awards are discussed in the Executive Compensation Committee Report beginning on page 11 of this Proxy Statement.
ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK PRICE-BASED PLANS ------------------------------------ PERFORMANCE PERIOD (OR OTHER PERIOD UNTIL THRESHOLD(2) TARGET NAME NUMBER OF SHARES(1) MATURATION OR PAYOUT) (#) (#) MAXIMUM (#) - ------------------------------ -------------------- ---------------------- ------------ --------- ----------- W. C. Steere, Jr.............. * 1/1/96-12/31/2000 5,000 30,000 50,000 E. C. Bessey.................. None N/A N/A N/A N/A H. McKinnell, Jr.............. * 1/1/96-12/31/2000 2,100 12,600 21,000 R. Neimeth.................... * 1/1/96-12/31/2000 1,800 10,800 18,000 J. F. Niblack................. * 1/1/96-12/31/2000 1,800 10,800 18,000
- ------------------------------ (1) The actual number of Performance-Contingent Shares that will be paid out at the end of the applicable period, if any, is not yet determinable because the shares earned by the Named Executive Officers will be based upon the Company's future performance compared to the future performance of the Peer Group. (2) If the minimum performance of the Company in both performance measures is at the low end of the range relative to the Peer Group, then no Performance-Contingent Shares will be earned by the Named Executive Officers. To the extent that the Company's performance exceeds the low end of the range of Peer Group performance, the minimum shares that will be awarded is shown in the "Threshold" column. 10 EXECUTIVE COMPENSATION COMMITTEE REPORT The last section of this report is a glossary containing definitions of the capitalized terms used in this report, unless such terms previously have been defined in this Proxy Statement. OVERVIEW OF COMPENSATION PHILOSOPHY AND PROGRAM The Committee establishes the salaries and other compensation of the executive officers of the Company, including its Chairman and CEO and other Named Executive Officers. The Committee consists entirely of independent directors who are not officers or employees of the Company. The Company's executive compensation program is designed to: -retain executive officers by paying them competitively, motivate them to contribute to the Company's success, and reward them for their performance; -link a substantial part of each executive officer's compensation to the performance of both the Company and the individual executive officer; and -encourage ownership of Company common stock by executive officers. As discussed below, the program consists of, and is intended to balance, three elements -- base salaries, Annual Incentive Awards and long-term incentive compensation. Salaries are based on the Committee's evaluation of individual job performance and an assessment of the salaries and total compensation mix paid by the Company's Peer Group to executive officers holding equivalent positions. Annual Incentive Awards are based on an evaluation of both individual and Company performance against both qualitative and quantitative measures. Long-term incentive awards, which consist of stock options and a Performance-Contingent Share Award Program, are designed to insure that incentive compensation is linked to the long-term performance of the Company and its Common Stock. In addition, the Named Executive Officers and other members of senior management are expected to own a minimum amount of Common Stock under the Company's stock ownership program, which is intended to further tie the interests of management to the interests of shareholders. EVALUATION OF EXECUTIVE PERFORMANCE Except as is otherwise specifically noted in this report, the Committee does not rely solely on predetermined formulae or a limited set of criteria when it evaluates the performance of the Chairman and CEO and the Company's other executive officers, including the Named Executive Officers. Instead, the Committee considers management's overall accomplishments, as well as those of the individual executives, the Company's financial performance, and other criteria discussed below. In 1995, management continued to effectively implement its long-term strategies, which included: improving operating margins, continuing the implementation of reengineering projects and a restructuring program, integrating key acquisitions into its business segments, divesting non-core businesses, maintaining the flow of new product candidates in the Company's research pipeline and augmenting the Company's research and marketing abilities with key external collaborations. The Committee believes that the success of these strategies is evidenced by the Company's strong financial performance from ongoing operations in 1995, the Company's operating margins, the breadth of the Company's current product portfolio which resulted in considerable sales growth in 1995, the acceptance of the Company's products in the current marketplace, and the number of promising product candidates under development by the Company. The Committee also considered management's responses to the changes occurring within the U.S. marketplace for health care products and services. The impact of the evolution to managed care in the health care market continues to be of particular importance to the Company and its shareholders. It is the Committee's opinion that, in this uncertain environment, management continues to develop effectively and implement strategies that position the Company to remain a leader in the health care industry. In addition, Mr. Steere and his senior management team are undertaking significant actions to communicate the Company's position on health care issues to its shareholders, the public and the government. The success of these efforts and their benefits to the Company cannot, of course, be quantifiably measured, but the Committee believes they are vital to the Company's continuing success. 11 TOTAL COMPENSATION Target total compensation levels of Company executives are established with consideration given to an analysis of competitive market total compensation. The total compensation package for each executive is then broken down into the three basic components indicated above and discussed in more detail below. In recent years, the Committee has been directing a shift in the mix of the Company's executive compensation towards incentive compensation, with proportionately lesser emphasis on salaries. This strategy is intended to increase the performance orientation of the Company's executive compensation. Consequently, salary levels of the Company's executives have been increasing more slowly than other elements of their total compensation. The Committee intends to continue this emphasis in 1996. For 1995, based on available public data and the analysis of its outside compensation advisors, the total compensation of Mr. Steere and the other Named Executive Officers generally exceeded the total compensation paid by the Peer Group to their executives holding equivalent positions, but the Committee believes it was consistent with the outstanding performance of the Company compared to the Peer Group. SALARY In setting salaries, the Committee did not use a predetermined formula. Instead, the 1995 salaries of the Chairman and CEO and the other executive officers were based on the Committee's evaluation of each officer's individual job performance, an assessment of the Company's performance, and a desire to shift the mix of compensation towards performance-based categories, and took into consideration salaries paid by the Peer Group to executive officers holding equivalent positions. The salaries of Drs. McKinnell and Niblack and Mr. Neimeth were subsequently increased to reflect their additional responsibilities assumed following the announcement of Mr. Bessey's intended retirement. Mr. Steere's salary in 1995 totaled $1,030,000. For 1996, it has been set at $1,190,000 which represents a 15.5% increase from his 1995 salary. The 1995 salaries of the other Named Executive Officers are shown in the "Salary" column of the Summary Compensation Table on page 8 of this Proxy Statement. ANNUAL INCENTIVE AWARDS The second element of the executive compensation program is the Annual Incentive Award Program. For Mr. Steere, the Annual Incentive Award can range from 0 percent to 200 percent of his salary, depending upon the Board's evaluation of Mr. Steere's performance. In evaluating his performance, the Committee used the performance indicators referred to above under "Evaluation of Executive Performance" and other confidential qualitative and quantitative performance indicators that were recommended by Mr. Steere, adopted by the Committee and confirmed by the Board in February 1995. After reviewing actual results in 1995 against the performance indicators, the Committee approved, and the Board confirmed, an Annual Incentive Award for 1995 to Mr. Steere of $2,060,000. The 1995 Annual Incentive Awards for other executive officers were based, in part, on the same performance indicators used to determine Mr. Steere's annual award. In addition, the executive officers were required to achieve certain individual goals relating to their positions, plus confidential goals contained in the Operating Plans of the businesses for which they are responsible, as well as Company performance criteria. The Annual Incentive Awards for 1995 paid to each of the Named Executive Officers are shown in the "Bonus" column of the Summary Compensation Table on page 8 of this Proxy Statement. LONG-TERM INCENTIVE AWARDS In 1995, Mr. Steere and the other executive officers participated in the Company's long-term incentive compensation program. As discussed below, the program consisted of stock option grants made under the Company's Stock and Incentive Plan, and awards made under the Company's Performance-Contingent Share Award Program. In 1995, in respect of Mr. Bessey's retirement, the Committee determined to make a cash payment to Mr. Bessey equal to the value of 2,310 restricted shares of the Company's Common Stock, awarded as part of his 1993 compensation, which he forfeited by reason of his retirement. By his retirement, Mr. Bessey also gave up additional Common Stock awards made to him in past years under the Company's Performance- 12 Contingent Share Award Program. The number of shares he would have earned from those contingent awards will not be determined until 1997 and 1998. In respect of his retirement, the Committee has agreed to pay to Mr. Bessey the pro-rated cash value of those shares after their number has been determined. (A) STOCK OPTIONS The Committee granted Key-Employee Stock Options to each executive officer in 1995 under the Company's Stock and Incentive Plan. In selecting the size of the Key-Employee Stock Option grants, the Committee reviewed competitive data relating to similar grants made by the Peer Group to executive officers holding comparable positions at those companies, the individual stock ownership of the Company's executive officers and the interrelationship with the 1995 Performance-Contingent Share Awards made to such officers. Based upon this data, Mr. Steere was awarded Key-Employee Stock Options for 150,000 shares of Common Stock and the other Named Executive Officers were awarded the number of Key- Employee Stock Options shown in the table headed "Option Grants in 1995" on page 9 of this Proxy Statement. The Key-Employee Stock Options of the Named Executive Officers and all other executive officers will vest over a five-year period, with 20 percent of the options vesting each year. Key-Employee Stock Options granted to Mr. Steere and the other Named Executive Officers, when combined with the value of the Performance-Contingent Shares that these officers may potentially earn, are targeted by the Committee to fall at the median range of the value of long-term incentives granted by the Peer Group to executive officers holding comparable positions at those companies, assuming that the Company's performance also falls at the median of the Peer Group's performance. If the Company's actual performance exceeds the median performance of the Peer Group, however, the total value of long-term incentive awards (which would include Performance-Contingent Share awards discussed below) will be higher than the median awards made by the Peer Group. Similarly, if the Company's performance falls below the median performance of the Peer Group, the total value of the long-term incentive awards would fall below the median awards of the Peer Group. (B) PERFORMANCE-CONTINGENT SHARE AWARDS The Committee also made awards to Mr. Steere and other executive officers in 1995, including the Named Executive Officers, under the Company's Performance-Contingent Share Award Program (the "Program"). The potential size of each award, including the maximum number of shares of Common Stock that may be earned by each executive officer, was established by the Committee after examining similar awards made by the Peer Group to executive officers holding comparable positions at those companies. Payments pursuant to the awards are determined by using a non-discretionary formula comprised of two performance criteria measured over the applicable performance period: total shareholder return and earnings per share growth over the performance period relative to the performance of the Peer Group. The performance formula weighs each criterion equally. To the extent that the Company's performance exceeds the low end of the range of the performance of the Peer Group in either or both of the performance criteria, a varying amount of shares of Common Stock up to the maximum will be earned. Except for the 1993 Program awards, which provide for shorter performance periods, the performance period for all awards made under the Program is five years. Based on the Company's performance during the 1993-95 performance period, Mr. Steere and the other Named Executive Officers earned the maximum number of Performance-Contingent Shares possible under the 1993 Program award formula previously approved by the Committee. The total number of such shares earned by Mr. Steere was 30,000. The total number of shares earned by each of the Named Executive Officers is shown on page 9 of this Proxy Statement in footnote 5 to the "LTIP Payouts" column of the Summary Compensation Table. In connection with the 1995 Program award for Mr. Steere, the number of Performance-Contingent Shares that he may earn at the end of the five-year performance period (1/1/96-12/31/2000) will range from 0 to 50,000. As for the other Named Executive Officers, the number of Performance-Contingent Shares that Dr. McKinnell may earn at the end of the same five-year performance period will range from 0 to 21,000, while the number of such shares that Mr. Neimeth and Dr. Niblack may earn will range from 0 to 18,000. The maximum number of Performance-Contingent Shares that may be earned by Mr. Steere and the other Named Executive Officers under the Program is shown in the table headed "Long-Term Incentive Plan -- Awards in 1995" on page 10 of this Proxy Statement. 13 TAX POLICY In 1993, the Internal Revenue Code ("Code") was amended with respect to the tax deductibility of executive compensation. Under the Code, publicly-held companies such as the Company may not deduct compensation paid to certain executive officers to the extent that such compensation exceeds $1 million in any one year for each such officer. The law, however, includes an exception for "performance-based" compensation, including stock options granted under a stock option plan that has been previously approved by shareholders, provided that such options are not issued below the fair market value of the stock on the date of the grant. The Company's Stock and Incentive Plan meets these requirements so stock options awarded to the Company's executive officers in 1995 are eligible for the performance-based compensation exception to the deduction limitation. Compensation other than stock options, however, must meet other requirements in order to qualify as tax deductible "performance-based" compensation. Under the Code, compensation is deemed "performance-based", and not subject to the $1 million deduction limitation, if it meets the following requirements: (1) it is paid solely on account of the attainment of one or more preestablished objective performance goals; (2) the performance goals under which the compensation is to be paid are established by a committee comprised solely of two or more outside directors who satisfy certain requirements; (3) the committee certifies in writing prior to payment of the compensation that the performance goals and any other material terms of payment were, in fact, satisfied; and (4) the material terms of the performance goals under which the compensation is to be paid has been approved by a vote of the majority of the outstanding shares of the Company. The Performance-Contingent Share Awards granted in 1995 to Mr. Steere and the other executive officers qualify as "performance-based" compensation under the requirements of the Code as set forth above. Accordingly, the eventual payouts of these awards will be fully deductible by the Company. The Annual Incentive Awards granted to the Company's executive officers in 1995 are not eligible for the performance-based exception under the Code because they were awarded based, in part, on certain goals (such as responding to changes occurring within the U.S. health care marketplace) and performance evaluations that would not be deemed solely "objective" as required for deductions by the tax law. The Committee and the Board believe that it is not in the best interests of the Company and its shareholders, however, to limit itself to goals that are exclusively objective in connection with the Annual Incentive Award Program. The Committee and the Board will continue to evaluate their position on this issue, however, as the regulations under the law are finalized. STOCK OWNERSHIP PROGRAM A stock ownership program was adopted by the Board upon this Committee's recommendation in August 1993. Under the guidelines of this program, employee directors (currently Mr. Steere) are expected to own by December 1998 Company Common Stock equal in value to at least three times their annual salaries. The program also extends to the other Named Executive Officers and certain other executive officers who, as of the same time, are expected to own Company Common Stock equal in value to at least two times their annual salaries. All other executive officers are expected to own stock with a value equivalent to their annual salaries. Under the program, "stock ownership" is defined as stock owned by the executive officer directly or through the Company's Savings and Investment Plan. While the Named Executive Officers and other participants in this program have been given five years to achieve compliance with this program, the Committee monitors the participation of the executive officers and expects that incremental progress will be made each year by each officer during the five-year phase-in period. The Committee has determined that, as of the end of 1995, full compliance had already been achieved by most executive officers, and good- progress toward their goals had been made by all others. GLOSSARY ANNUAL INCENTIVE AWARDS. These awards are annual cash payments which may be awarded by the Committee to executive officers on the basis of both Company performance and individual performance 14 over the prior year. Qualitative and quantitative performance indicators used to serve as the basis for an assessment of the performance of the executive officers are established by the Committee (and approved by the Board in the case of the CEO) at the beginning of the performance period. COMMITTEE. The Executive Compensation Committee of the Board of Directors. KEY-EMPLOYEE STOCK OPTIONS. Stock options granted under the Company's Stock and Incentive Plan to a select group of management employees in the U.S. and overseas who are considered to have a substantial impact on the Company's operations. NAMED EXECUTIVE OFFICERS. This refers to the five most highly compensated executive officers of the Company -- Messrs. Steere, Bessey and Neimeth and Drs. McKinnell and Niblack. PEER GROUP. This group consists of the eleven health care companies referred to in the Performance Graph that follows this report. PERFORMANCE-CONTINGENT SHARES. These are shares of Pfizer Inc. Common Stock that may be awarded by the Committee to the Named Executive Officers and certain other employees of the Company under the Performance-Contingent Share Award Program. For shares to be issued to any such officer or employee, however, certain preestablished Company performance criteria must be met over a preestablished performance period. This program is described in further detail on page 18 of this Proxy Statement. STOCK AND INCENTIVE PLAN. This refers to the Pfizer Inc. Stock and Incentive Plan which is described in further detail on page 19 of this Proxy Statement. THE EXECUTIVE COMPENSATION COMMITTEE: Mr. Burns (Chair) Mr. Harvey Mr. Labrecque 15 PERFORMANCE GRAPH Set forth below is a graph comparing the total shareholder returns (assuming reinvestment of dividends) of the Company, the Standard & Poor's ("S&P") 500 Composite Stock Index ("S&P 500"), and an industry peer index compiled by the Company that consists of the following companies: Abbott Laboratories, American Home Products Corp., Baxter International Inc., Bristol-Myers Squibb Company, Colgate-Palmolive Co., Johnson & Johnson, Eli Lilly and Company, Merck and Co., Inc., Pharmacia & Upjohn Inc., Schering-Plough Corp., and Warner-Lambert Company (together the "Peer Group"). The Peer Group consolidation was done on a weighted average basis (market capitalization basis, adjusted at the beginning of each year). The graph assumes $100 invested at the per share closing price of the Common Stock on the New York Stock Exchange Composite Tape on December 31, 1990 in the Company and each of the other indices. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
CUMULATIVE TOTAL RETURNS* 1991 through 1995 Pfizer Peer Group S&P 500 1990 100 100 100 1991 217.5 151.5 130.5 1992 191.5 127.9 140.4 1993 187.1 119.8 154.5 1994 215.8 135.5 156.6 1995 359.7 213.1 215.4
16 EMPLOYEE BENEFIT AND LONG-TERM COMPENSATION PLANS RETIREMENT ANNUITY PLAN The Retirement Annuity Plan (the "Retirement Plan") is a funded, tax qualified, noncontributory defined benefit pension plan that covers certain employees, including the Named Executive Officers. Benefits under the Retirement Plan are based upon the employee's earnings during service with the Company and/or its "Associate Companies" and are payable after retirement generally in the form of an annuity. Earnings covered by the Retirement Plan are base pay, bonus, long-term incentive pay and vested shares of restricted stock. The amount of annual earnings that may be considered in calculating benefits under the Retirement Plan is limited by law. For 1996, the current annual limitation is $150,000. The value of benefits, such as stock options, is not considered earnings for the purposes of the Retirement Plan. Benefits under the Company's Retirement Plan are calculated as an annuity equal to the greater of (i) 1.4 percent of the average earnings for the five highest consecutive calendar years prior to January 1, 1995 multiplied by years of service, or (ii) 1.75 percent of such earnings less 1.5 percent of Primary Social Security benefits multiplied by years of service. The total years of service under these formulas cannot exceed 35 years. Actual earnings are used in benefit calculations for the period after December 31, 1994 under both formulas. Contributions to the Retirement Plan are made entirely by the Company and are paid into a trust fund from which the benefits of participants will be paid. In accordance with the requirements of the Code, the Retirement Plan currently limits pensions paid under the Plan to an annual maximum of $120,000, payable at age 65. The Company also has an unfunded supplemental plan that provides that the Company will pay out of its general assets an amount substantially equal to the difference between the amount that would have been payable under the Retirement Plan, in the absence of legislation limiting pension benefits and earnings that may be considered in calculating pension benefits, and the amount actually payable under the Retirement Plan. In certain circumstances, the Company is obligated to fund trusts established to secure its obligations to make payments under the supplemental plan. PENSION PLAN TABLE The following table shows, for the final compensation and years of service indicated, the annual pension benefit, payable commencing upon retirement at age 65 under the present benefit formula of the Retirement Plan and its related supplemental plan. The estimated retirement benefits have been computed on the assumptions that (i) payments will be made in the form of a 50 percent joint and survivor annuity (and both the Plan member and spouse are age 65), (ii) during the period of employment the employee received annual compensation increases of six percent and (iii) the employee retired as of December 31, 1995.
YEARS OF SERVICE ------------------------------------------------------------------------- REMUNERATION 15 20 25 30 35 - -------------------------------------- ------------- ------------- ------------- ------------- ------------- $ 250,000............................. $ 47,046 $ 62,523 $ 78,000 $ 93,478 $ 108,955 400,000............................. 77,008 102,350 127,691 153,033 178,374 500,000............................. 96,983 128,901 160,818 192,736 224,654 700,000............................. 136,932 182,002 227,072 272,143 317,213 950,000 ............................ 186,869 248,379 309,890 371,401 432,912 1,000,000............................ 196,856 261,655 326,454 391,253 456,052 1,200,000............................ 236,805 314,757 392,708 470,659 548,611 1,800,000............................ 356,653 474,062 591,471 708,879 826,288 2,000,000............................ 396,602 527,164 657,725 788,286 918,847 2,100,000............................ 416,577 553,715 690,852 827,990 965,127 3,000,000............................ 596,349 792,672 988,996 1,185,320 1,381,643 3,500,000............................ 696,222 925,427 1,154,632 1,383,836 1,613,041 4,000,000............................ 796,095 1,058,181 1,320,267 1,582,353 1,844,439 5,000,000............................ 995,842 1,323,690 1,651,538 1,979,387 2,307,235 6,000,000............................ 1,195,588 1,589,199 1,982,809 2,376,420 2,770,031 6,500,000............................ 1,295,461 1,721,953 2,148,445 2,574,937 3,001,429
17 As of December 31, 1995, the period of service covered by the Retirement Plan and the supplemental plan are, for Mr. Steere -- 35 years; Mr. Bessey -- 31 years, 8 months; Dr. Niblack -- 28 years, 1 month; Mr. Neimeth -- 33 years, 4 months; and Dr. McKinnell -- 24 years, 10 months. Compensation covered by the Retirement Plan and its related supplemental plan for the Named Executive Officers equals the amounts set forth in the 1995 "Salary," "Bonus" and "LTIP Payouts" columns of the Summary Compensation Table and the value of the restricted stock that vested on February 17, 1995 as described in Footnote 3 to that table. The basis upon which benefits are calculated under the Company's Retirement Plan is described in the "Retirement Annuity Plan" section on page 17 of this Proxy Statement. PERFORMANCE-CONTINGENT SHARE AWARD PROGRAM Under the Performance-Contingent Share Award Program, participating employees may be granted an opportunity by the Company's Executive Compensation Committee to earn shares of Common Stock, provided certain performance criteria are met. The performance formula is nondiscretionary and is comprised of two performance criteria -- total shareholder return (including reinvestment of dividends) and earnings per share (as reported) -- measured point-to-point over the applicable performance period relative to the performance of the Peer Group as defined in the "Performance Graph" section of this Proxy Statement. The 200 most highly compensated employees of the Company are eligible to be granted the opportunity by the Executive Compensation Committee to earn Performance-Contingent Shares. Except for awards made in 1993, all awards granted under the Program are based upon a five-year performance period. Awards earned by the Named Executive Officers under this Program for the performance period ended December 31, 1995 are shown in the "LTIP Payouts ($)" column of the Summary Compensation Table on page 8 of this Proxy Statement. SAVINGS AND INVESTMENT PLAN Under the terms of the Savings and Investment Plan (the "Savings Plan"), participating employees may contribute up to 15 percent of regular earnings into their Savings Plan accounts. A participating employee may elect to make after-tax contributions, before-tax contributions, or both after-tax and before-tax contributions. In addition, under the Savings Plan, the Company contributes an amount equal to one dollar for each dollar contributed by participating employees up to the first two percent of their regular earnings and fifty cents for each additional dollar contributed by employees on the next four percent of their regular earnings. The Company's matching contributions are invested solely in the Company's Common Stock. In accordance with the requirements of the Code, the Savings Plan currently limits the additions that can be made to a participating employee's account to $30,000 per year. The term "additions" includes Company matching contributions, before-tax contributions made by the Company at the request of the participating employee under Section 401(k) of the Code, and employee after-tax contributions. Of those additions, the maximum before-tax contribution is limited, for January 1, 1994 through December 31, 1995, to $9,240 per year. Effective January 1, 1996, this limit increased to $9,500 per year. In addition, no more than $150,000 of annual compensation may be taken into account in computing benefits under the Savings Plan, in accordance with the Code. The Company has a supplemental plan to pay out of general assets an amount substantially equal to the difference between the amount that, in the absence of legislation limiting such additions and the $150,000 limitation on earnings, would have been allocated to a participating employee's account as employee before-tax contributions, Company matching contributions and the amount actually allocated under the Savings Plan. Employees affected by these limitations can make limited deferrals of income under this supplemental plan and receive credit for such deferrals towards their retirement benefit under the Company's retirement plans. In certain circumstances, the Company is obligated to fund trusts established to secure its obligations to make payments under the supplemental plan. 18 Amounts deferred, if any, under the Savings Plan and the related supplemental plan in 1995 by the Company's Named Executive Officers are included in the "Salary" and "Bonus" columns of the Summary Compensation Table shown on page 8 of this Proxy Statement. Company matching contributions allocated to the Named Executive Officers under the Savings Plan and the related supplemental plan are shown in the "All Other Compensation" column of the Summary Compensation Table on page 8 of this Proxy Statement. STOCK AND INCENTIVE PLAN Pursuant to the Stock and Incentive Plan, Company employees may be granted stock options, stock appreciation rights, stock awards (including restricted stock awards and performance-based stock awards), or performance unit awards, either as a result of a general grant or as a result of an award based on having met certain performance criteria, as determined by the Employee Compensation and Management Development Committee or the Executive Compensation Committee, as applicable. The Stock and Incentive Plan is described in greater detail in Item 3 of this Proxy Statement which begins on page 24. SEVERANCE AGREEMENTS The Company has entered into severance agreements with certain executive officers, including each of the Named Executive Officers. The agreements continue through September 30, 1996 and provide that they are to be automatically extended in one-year increments unless the Company has given prior notice of termination. These agreements are intended to provide for continuity of management in the event of a change in control of the Company. The agreements provide that covered executive officers could be entitled to certain severance benefits following a change in control of the Company. If, following such a change in control, the executive officer is terminated by the Company for any reason, other than for disability or for cause, or if such executive officer terminates his or her employment for good reason (as this term is defined in the agreements), then the executive officer is entitled to a severance payment that will be 2.99 times the greater of (i) the executive officer's base amount, as defined in the agreements or (ii) the sum of the executive officer's (a) base salary in effect at the time of termination and (b) the higher of the (x) last full-year annual incentive payment or (y) projected annual incentive payment for the year in which termination occurs. The severance payment generally would be made in the form of a lump sum. In addition, in the event of such a termination following a change in control, under the agreements each executive officer would receive a payout of all outstanding Performance-Contingent Share Awards that had been granted prior to the date of termination at the maximum amounts that could have been earned pursuant to the awards. The executive officer would also receive a benefit payable from the Company's general funds calculated using the benefit calculation provisions of the Company's Retirement Annuity Plan and the Company's unfunded Supplemental Retirement Plan with the following additional features: the executive officer would receive credit for an additional three years of service and compensation for purposes of calculating such benefit; the benefit would commence at age 55 (or upon the date of termination, if the executive officer is then over age 55) and for this purpose, three years would be added to the executive officer's age; such benefit would be further determined without any reduction on account of its receipt prior to age 65; and, such benefit would be offset by any amounts otherwise payable under the Company's Retirement Annuity Plan and unfunded Supplemental Retirement Plan. The executive officer would also become vested in all other benefits available to retirees of the Company including, without limitation, retiree medical coverage. All restrictions on restricted stock previously awarded to such executive officer would lapse and all unvested options granted to such executive officer would vest and become exercisable for the remainder of the term of the option. 19 If a change in control occurs, the agreements are effective for a period of four years from the end of the then existing term. Under the severance agreements, a change in control would include any of the following events: (i) any "person", as defined in the Securities Exchange Act of 1934, as amended, acquires 20 percent or more of the Company's voting securities; (ii) a majority of the Company's directors are replaced during a two-year period; or (iii) shareholders approve certain mergers, or a liquidation or sale of the Company's assets. In the event that any payments made in connection with a change in control would be subjected to the excise tax imposed by Section 4999 of the Code, the Company will "gross-up" the executive officer's compensation for all federal, state and local income and excise taxes and any penalties and interest thereon. In certain circumstances, the Company is obligated to fund trusts established to secure its obligations to make payments under the severance agreements in advance of the time payment is due. COMPENSATION OF DIRECTORS AND OTHER MATTERS The non-employee directors of the Company receive an annual cash retainer fee of $26,000 per year. Non-employee directors who serve on one Board committee or more (other than the Executive Committee) receive an additional annual fee of $4,000 for such service. In addition, non-employee directors who chair a Board committee receive an additional $2,000 per year, per committee. Directors who are employees of the Company receive no retainers for Board-related service. The non-employee directors of the Company also receive a fee of $1,500 for attending each Board meeting, committee meeting, the Annual Meeting of Shareholders, for each day of a visit by the Board to a plant or office of the Company or its subsidiaries, and for attending any other business meeting to which the director is invited by the Board or the Executive Committee. Directors who are employees of the Company receive no fees for attending any such meeting. In addition to the annual cash compensation discussed above, on the day of the 1995 Annual Meeting of Shareholders, all non-employee directors of the Company were awarded 300 units (increased to 600 units in June of 1995 due to the Company's stock split) measured by the price of the Company's Common Stock under the Pfizer Inc. Nonfunded Deferred Compensation and Unit Award Plan for Non-Employee Directors. A description of this Plan is set forth below. In October of 1995 the Company's Retirement Plan for Non-Employee Directors was terminated. Benefits existing under the Plan were vested as of that time for all directors who had served on the Board as of that date. BENEFIT PLANS FOR NON-EMPLOYEE DIRECTORS Under the Pfizer Inc. Nonfunded Deferred Compensation and Unit Award Plan for Non-Employee Directors (the "Unit Award Plan"), directors who are not employees of the Company or any of its subsidiaries may defer all or a part of their annual cash retainers and meeting fees. At the director's election, the fees held in the director's account may be credited either with interest at the rate of return of Fund A (the Fixed Income Fund) of the Pfizer Inc. Savings and Investment Plan, or with units. The units are calculated by dividing the amount of the fee by the closing price of the Common Stock as of the last business day prior to the date that the fee would otherwise be paid. The units in a director's account are increased by the value of any distributions on the Common Stock, allocated in accordance with the number of units in the account. When a director ceases to hold office, the amount held in the director's account is then payable in cash. The amount to be paid is determined by multiplying the number of units in the account by the closing price of the Common Stock as of the last business day prior to the payment date as determined in the Unit Award Plan. Also under the Unit Award Plan, non-employee directors are granted an initial award of 600 units (300 units prior to the Company's stock split in June of 1995) upon first becoming a director. Thereafter, each non-employee director is granted an annual award of 600 such units ("Annual Unit 20 Award") as of the date of the Company's Annual Meeting, provided the director will continue to serve as a director following the meeting. The awards under the Unit Award Plan are made in addition to the directors' annual cash retainers and meeting attendance fees. Non-employee directors also receive the share equivalent of their annual retainer fee in restricted units. These awards will be in addition to the Annual Unit Awards, the directors' annual cash retainers and meeting attendance fees, and will also be made annually on the day of the Company's Annual Meeting. The appropriate number of units to be awarded to the non-employee directors will be based upon the five-day average of the closing trading price of the Company's Common Stock on the New York Stock Exchange for the first five trading days after April 1 of each year (rounded up to the nearest unit). In certain circumstances, the Company is obligated to fund trusts established to secure its obligations to make payments to its directors under the above benefit plans, programs or agreements in advance of the time payment is due. CONSULTING AGREEMENTS Under a consulting agreement with the Company, Mr. Pratt consults with the Company on business matters involving the areas of tax, trade and intellectual property. In return for this advice, the Company is obligated to pay Mr. Pratt an annual consulting fee, payable monthly. The agreement runs year-to-year and may be terminated at the end of any year by either the Company or Mr. Pratt on 90 days written notice, or at any time upon the mutual agreement of both parties. In addition, the Company must reimburse Mr. Pratt for reasonable business expenses he incurs in connection with the services he provides to the Company under this agreement. The amount paid to Mr. Pratt under the agreement for the services he rendered to the Company during 1995 was $100,000. RELATED TRANSACTIONS During 1995, the Company engaged the services of Lazard Freres & Co. LLC, of which Mr. Rohatyn is a Managing Director and Mr. Lynn is a Senior Advisor. Lazard Freres & Co. LLC acted as a financial advisor in connection with potential acquisitions, divestitures, general corporate matters and as a broker in connection with the purchase and sale of securities. In 1996, the Company plans to retain this firm for such services and similar services. In addition, the Pfizer Retirement Annuity Plan is a limited partner in Corporate Partners, L.P., of which LFCP Corp., a wholly-owned subsidiary of Lazard Freres & Co. LLC, is the general partner. During 1995, the Company received from The Chase Manhattan Bank, N.A. $1,132,226 representing income generated from a $25 million notional principal amount fixed-to-floating-interest-rate swap. Mr. Labrecque was Chairman and Chief Executive Officer of the Bank in 1995. In addition, the Company had the following transactions in 1995 with Minerals Technologies Inc., of which Dr. Valles is Chairman and Chief Executive Officer: purchases of granular lime and calcium carbonate ground limestone for approximately $295,000. The Company also had the following transactions in 1995 with Pitney Bowes, of which George B. Harvey is Chairman, President, and Chief Executive Officer: the leasing and purchasing of office equipment including fax machines, postage meters, supplies and parts for approximately $195,000. The transactions described in this section were entered into by the Company pursuant to arm's length negotiations in the ordinary course of business and on terms that the Company believes to be fair. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION In 1995, the following members of the Board served on the Executive Compensation Committee: Messrs. Burns (Chair), Harvey and Labrecque. As noted above under the "Related Transactions" 21 section, during this same time, the Company received approximately $1,132,226 from The Chase Manhattan Bank, N.A., of which Mr. Labrecque was Chairman and Chief Executive Officer in 1995, representing income generated from a $25 million notional principal amount fixed-to-floating-interest-rate swap. In addition, in 1995 the Company paid Pitney Bowes approximately $195,000 for the purchase and leasing of office equipment. Mr. Harvey is the Chairman, President and Chief Executive Officer of Pitney Bowes. ADDITIONAL INFORMATION The directors (other than Ms. Horner, and Messrs. Burns, Harvey, Labrecque and Raines) and certain officers and former directors and officers of the Company are defendants in a civil suit brought purportedly on behalf of the Company as a shareholder derivative action in the Superior Court of the State of California, County of Orange. The complaint alleges breaches of fiduciary duty and other common law violations in connection with the manufacture and distribution of Shiley heart valves and seeks, among other things, unspecified money damages. The defendants in the action believe that the suit is without merit. BOARD COMMITTEES THE EXECUTIVE COMPENSATION COMMITTEE During 1995, the Executive Compensation Committee consisted of Messrs. Burns (Chair), Harvey and Labrecque. None of the directors on this Committee are employees of the Company. The Committee met eight times in 1995. The Executive Compensation Committee is responsible for establishing annual and long-term performance goals for the Company's elected officers. This responsibility includes establishing the compensation and evaluating the performance of the Chairman and Chief Executive Officer, the employee-directors, and other elected officers of the Company based on the guidelines and standards of the competitive industry. The Committee's additional functions are to determine and certify the shares awarded under the Performance-Contingent Share Award Program; to grant options and awards under the Stock and Incentive Plan; to advise on the setting of compensation for senior executives whose compensation is not set by the Committee; and to publish an annual Executive Compensation Committee Report for the shareholders. The Executive Compensation Committee Report is included on page 11 of this Proxy Statement. THE CORPORATE GOVERNANCE COMMITTEE During 1995, the Corporate Governance Committee (formerly the Nominating Committee) consisted of Dr. Marks (Chair), Miss Fippinger, Ms. Horner and Mr. Lynn. None of the directors on this Committee are employees of the Company. The Committee met seven times in 1995. The Corporate Governance Committee is responsible for considering and making recommendations to the Board concerning the appropriate size, function, and needs of the Board, and for evaluating the performance of the Board as a whole. This responsibility includes considering and recommending candidates to fill new positions on the Board created by either expansion or vacancies that occur by resignation, retirement, or for any other reason; reviewing candidates recommended by shareholders; conducting inquiries into the backgrounds and qualifications of possible candidates; and recommending the director nominees for approval by the Board and the shareholders. The Committee's additional functions are to consider questions of possible conflicts of interest of Board members; to monitor and recommend the functions of the various committees of the Board; to recommend members and chairs of the committees; to advise on changes in Board compensation; to make recommendations on the structure of Board meetings; and to recommend matters for regular consideration by the Board. In addition, the Committee considers and reviews the Company's Corporate Governance Principles; establishes director retirement policies; reviews the job performance of 22 officers and other senior executives with the Chairman and Chief Executive Officer; reviews the outside activities of senior executives; reviews with the Chief Executive Officer the succession plans relating to officer and senior management positions; and considers all matters of social responsibility. THE AUDIT COMMITTEE The Audit Committee consists of Dr. Ikenberry (Chair), Mr. Raines and Mr. Rohatyn, none of whom is an employee of the Company. The Committee met five times in 1995. The Audit Committee has the responsibility of recommending the annual appointment of the public accounting firm to serve as the Company's outside independent auditors, subject to approval by the Board and the shareholders and being available during the course of the outside independent audit to discuss and review any matters with the auditors that might affect the financial statements, internal controls, or other financial aspects of the operations of the Company or its subsidiaries. The Committee reviews the Company's accounting procedures and systems of control, the Company's annual and quarterly financial statements, and any material changes in accounting principles or practices used in preparing the statements. It reviews reports on other risks to the material assets of the Company. Additional responsibilities include reviewing the scope of prospective audits, reviewing the estimated fees of the outside independent auditors and ensuring the implementation of the independent auditor's accepted recommendations regarding internal controls, accounting practices, and procedures. The Committee also reviews the current and future programs of the Company's internal audit department; summaries of all the internal audit reports; initiates any examinations or other appropriate actions with respect to the adequacy of the system of internal controls and the accounting practices of the Company and its subsidiaries; examines and considers current accounting trends and developments; and reviews the Company's compliance with the Foreign Corrupt Practices Act. ITEM 2 -- APPROVAL OF APPOINTMENT OF AUDITORS FOR 1996 The Board, upon the recommendation of its Audit Committee, has appointed KPMG Peat Marwick LLP to serve as the Company's independent auditors for 1996, subject to the approval of the Company's shareholders. The firm and its predecessors have audited the financial records of the Company for many years during which time the practice of rotating the engagement partner has been followed. The Board considers the firm to be well qualified. It is expected that representatives of KPMG Peat Marwick LLP will be present at the Annual Meeting to answer questions. They also will have the opportunity to make a statement if they desire to do so. Total audit fees incurred by the Company for all independent auditors for 1995 were approximately $5,642,000, of which $5,423,000 was attributable to KPMG Peat Marwick LLP. The affirmative vote of a majority of votes cast on this proposal is required for the approval of this proposal. THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL OF KPMG PEAT MARWICK LLP AS INDEPENDENT AUDITORS OF THE COMPANY FOR THE YEAR 1996. 23 ITEM 3 -- APPROVAL OF AMENDMENTS TO THE PFIZER INC. STOCK AND INCENTIVE PLAN TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK AUTHORIZED TO BE ISSUED UNDER THE PLAN AND TO EXTEND THE TERM OF THE PLAN TO DECEMBER 31, 2005 The Pfizer Inc. Stock and Incentive Plan (the "Plan") enables the Company to grant stock options, stock awards, stock appreciation rights, performance unit awards and tandem awards (collectively referred to herein as "grants") to employees of the Company. The shareholders of the Company initially approved the Plan in 1965, and since then have approved a number of amendments to the Plan. Non-employee directors of the Company are not eligible to participate in the Plan. The Plan currently expires on December 31, 2001 but, upon the approval of the Company's shareholders, this expiration date will be extended to December 31, 2005. The Board believes that the Plan has proved to be of substantial value to the Company over the years because it enables the Company to offer employees long-term performance-based compensation -- such as stock options -- that motivates employees to contribute to the continuing financial success of the Company. From the Plan's inception in 1965, through December 31, 1995, options covering 165,393,322 shares (including options that subsequently terminated or lapsed and were regranted under the terms of the Plan) have been granted to employees. From 1965 through December 31, 1995, options for 98,967,282 shares have been exercised. A total of 42,904,217 shares were subject to outstanding options as of such date, leaving only 3,574,593 shares available for future options or awards. The number of shares of Common Stock remaining available for grants under the Plan are insufficient, however, to adequately provide for the participation of the number of employees eligible to receive such grants. Accordingly, the Board adopted amendments to the Plan to increase the aggregate number of shares of Common Stock available for issuance under the Plan by an additional 23 million shares and to extend the term of the Plan to December 31, 2005. The amendments to the Plan are subject to approval of the holders of a majority of the shares of the Common Stock issued, outstanding and entitled to vote. In the event the shareholders approve the current proposal to increase the number of shares authorized to be issued under the Plan, a total of approximately 26,574,590 shares will be available for future options or awards under the Plan. Notwithstanding the broader general terms of the Plan, the Company has committed that, with respect to the additional 23 million shares requested for use under the Plan: (1) no more than 2.2 million shares will be granted as restricted stock or equivalent awards having no exercise price; (2) the balance of the new shares will be granted under options with an exercise price of no less than the fair market value of the underlying stock at the time of grant and a term of no longer than 10 years; (3) no more than 8.4 million of such shares will be granted under "across-the-board" stock options to generally all employees and vesting of approximately one year from grant date; and (4) all shares not granted under (1) or (3) above will be subject to options with a minimum of three year vesting from the grant date. The holders of Common Stock do not have preemptive rights. The Plan, as proposed to be amended, is described below. THE OPERATION OF THE PLAN Within certain limits, the Board has the right to alter, amend or revoke the Plan. The Board of Directors may not, however, without the approval of the shareholders, alter or amend the Plan to increase the maximum number of shares of Common Stock that may be issued under the Plan or the 24 number of such shares that may be issued to any one participant; extend the term of the Plan or of options granted thereunder; reduce the option price below that now provided for under the Plan; or change certain of the conditions of the exercise of options. In the event of certain changes in the number or kind of outstanding shares of Common Stock, an appropriate adjustment will be made with respect to existing and future options. The proceeds received by the Company from the sale of stock under the Plan are added to the general funds of the Company. The Plan is administered by the Employee Compensation and Management Development Committee. However, only the Executive Compensation Committee -- a committee comprised of non-employee directors of the Company -- is authorized to administer those portions of the Plan relating to the grant of stock appreciation rights and related options and those grants or awards made to employees who are directors or executive officers of the Company. The current members of the Executive Compensation Committee are Mr. Burns (Chair), Mr. Harvey and Mr. Labrecque. The current members of the Employee Compensation and Management Development Committee are Mr. Steere (Chair), Dr. McKinnell, Dr. Niblack, Mr. Neimeth and Bruce R. Ellig, Vice President Employee Resources. The Employee Compensation and Management Development Committee and the Executive Compensation Committee are hereafter referred to together as the "Plan Committees." STOCK OPTIONS The option price may not be less than the fair market value of the stock on the date the option is granted. The option price is payable in cash or, if so provided under the terms of the option, in Common Stock. Generally, no option may be exercised during the first year of its term or such longer period as may be specified in the option. The Plan authorizes the Board to make all unvested stock options immediately exercisable upon a change of control of the Company. A "change in control" would include the acquisition by a third party of 20% or more of the Common Stock, or a merger, or liquidation, or sale of substantially all the assets of the Company. The Plan also authorizes the Plan Committees to make options that are not yet exercisable, immediately exercisable where an optionee's employment is to be terminated due to a divestiture or a downsizing by the Company; for a retiring optionee who holds options with extended vesting provisions; upon the death of the optionee and to prevent other such inequities. All unexercised options terminate after a certain number of years, or earlier, depending upon the optionee's termination of employment, retirement, death, or breach of any provision of the option. The Plan Committees determine the term of each stock option grant at the time of the grant. The term of any incentive stock option may not exceed ten years from the date of grant. In cases where it is deemed appropriate, however, non-qualified options can be granted for more than a ten-year period. Shares under options that have terminated or lapsed, including options that have been surrendered unexercised, may be made subject to further options or awards. Among those employees who are currently eligible to receive options, awards and rights under the terms of the Plan are a total of 23 executive officers. In 1995, 23 executive officers of the Company were collectively granted a total of 641,700 options for ten years at $49.00 per share (the then-current market price) under the Plan. During the same period, 2,661 other Company employees were granted a total of 6,411,118 options for ten years at the same price per share. One of the Named Executive Officers of the Company -- Mr. Steere -- is also a director of the Company. In addition, Mr. Bessey served as a director of the Company in 1995. The options received under the Plan by these two Named Executive Officers in 1995 and the Company's other three Named Executive Officers -- Drs. McKinnell and Niblack and Mr. Neimeth -- are set forth on page 9 of this Proxy Statement in the table entitled "Option Grants in 1995". On February 22, 1996, the closing price of the Common Stock traded on the New York Stock Exchange was $67.875 per share, as reported in THE WALL STREET JOURNAL. 25 STOCK APPRECIATION RIGHTS The Plan also provides for the granting of stock appreciation rights to the holders of stock options under the Plan. These rights will entitle the recipient thereof to elect to receive, in lieu of the exercise of the related option, and without payment to the Company, (1) a number of shares of Common Stock determined under a formula set forth in the Plan; or (2) if provided in the terms of the award, cash as determined under such formula; or (3) a combination of cash and shares. STOCK AWARDS The Plan provides for the granting of stock awards that vest only upon at least one year of additional service, and which consist of shares of Common Stock issued to participating employees as additional compensation for their services to the Company. In 1995, one executive officer received the right to earn up to a maximum of 5,040 shares of Company Common Stock and eight other Company employees received the right to earn up to a maximum of 33,040 shares of Company Common Stock in the aggregate under the Plan. The potential size of these awards will be determined by using a non-discretionary formula comprised of two performance criteria (total shareholder return and earnings per share growth relative to the performance of the Company's Peer Group) measured over performance periods ranging from two to five years. The performance formula weighs each criterion equally. To the extent that the Company's performance exceeds the low end range of the performance of the Peer Group in either or both of the performance criteria, a varying amount of shares of Common Stock up to the maximum will be earned by these employees. In addition, in 1995 two executive officers of the Company received restricted stock awards under the Plan totaling 2,500 shares which will vest over a two-year period. Prior to vesting, the shares will be subject to forfeiture if the executive officers do not continue as Company employees during the restricted periods unless their employment ends as a result of their disability, death or a change in control of the Company. PERFORMANCE UNIT AWARDS The Plan provides for the granting by the Company of performance unit awards, consisting of unvested performance units which are credited to participating employees. The initial value of each unit is determined by reference to the book or market value of the Common Stock or to the Company's earnings or such other criteria related to the Company's performance as the Plan Committees deem appropriate. No performance unit award will vest prior to one year after the date of the award. Performance unit awards are payable in cash or, if so provided in the terms of the award, in shares of Common Stock. TANDEM AWARDS The Plan provides for the granting of tandem awards consisting of a right of election among two or more of the following: an option, which may include a stock appreciation right with respect thereto; a performance unit award; and a stock award. In 1995, the Company did not issue any stock appreciation rights, performance unit awards or tandem awards under the Plan. TAX CONSEQUENCES The following discussion addresses certain federal tax consequences in connection with the Plan. State tax treatment is subject to individual state laws and is not reviewed in this discussion. INCENTIVE STOCK OPTIONS An incentive stock option results in no taxable income to the optionee or a deduction to the Company at the time it is granted or exercised. If the optionee retains the stock received as a result of an exercise of a stock option for at least two years from the date of the grant and one year from the date of exercise, then the gain is treated as long-term capital gain. If the shares are disposed of during this 26 period, the option will be treated as a non-qualified stock option. The Company receives a tax deduction only if the shares are disposed of during such period. The deduction is equal to the amount of taxable income to the optionee. NON-QUALIFIED STOCK OPTIONS A non-qualified stock option results in no taxable income to the optionee or deduction to the Company at the time it is granted. An optionee exercising such an option will, at that time, realize taxable compensation in the amount of the difference between the option price and the then market value of the shares. Subject to the applicable provisions of the Internal Revenue Code (the "Code"), a deduction for federal income tax purposes will be allowable to the Company in the year of exercise in an amount equal to the taxable compensation realized by the optionee. STOCK APPRECIATION RIGHTS No income will be recognized by the recipient of a stock appreciation right until shares representing the amount of the appreciation or the cash equivalent, if so elected, are transferred to the recipient pursuant to the exercise of the right. The amount of such income will be equal to the fair market value of such shares on the exercise date (or the cash equivalent), and will be ordinary income. Subject to the applicable provisions of the Code, the Company will be entitled to a deduction at the same time and in the same amount as the employee realizes ordinary income as a result of the exercise of the right. STOCK AWARDS No income will be recognized by the recipient of a stock award if such award is subject to a substantial risk of forfeiture. Generally, at the time the substantial risk of forfeiture terminates with respect to a stock award, the then fair market value of the stock will constitute ordinary income to the employee. Subject to the applicable provisions of the Code, a deduction for federal income tax purposes will be allowable to the Company in an amount equal to the compensation realized by the employee. PERFORMANCE UNIT AWARDS The grant of a performance unit award generally will result in taxable income to the employee on the earlier of actual receipt of compensation pursuant to the award or when such compensation is credited to the employee's account, or set apart, or otherwise made available. Subject to the applicable provisions of the Code, a deduction for federal income tax purposes will be allowable to the Company in an amount equal to the compensation realized by the employee. ACCOUNTING TREATMENT The Company accounts for the issuance of stock-based compensation including stock options, stock appreciation rights, stock awards and performance unit awards in accordance with Accounting Principles Board Opinion ("APB") No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES. APB No. 25 requires the accrual of compensation cost to the extent that the market price of the common stock on the grant date exceeds the exercise price. In 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION. SFAS No. 123 provides for the recognition of compensation expense based on the fair value of the stock-based award (the "fair value method"), but allows companies to continue to measure compensation expense using APB No. 25. Companies electing to continue to account for stock-based compensation in accordance with APB No. 25 must make pro forma disclosures of net income and earnings per share as if the fair value based method had been applied. The Company plans to continue to account for stock-based compensation under APB No. 25. STOCK OPTIONS Under the Plan, the issuance of stock options to employees does not result in compensation expense since the exercise price of the option may not be less than the market price of the common stock on the grant date. 27 STOCK APPRECIATION RIGHTS Issuance of stock appreciation rights results in compensation cost to the extent the market price of the common stock exceeds the exercise price of the rights on the grant date. Compensation cost is subsequently adjusted for changes, if any, in the market price of the Company's common stock for those stock appreciation rights which have not yet been exercised. Compensation costs are expensed over the related service period. STOCK AWARDS Stock awarded to employees results in compensation cost equal to the fair value of the Company's common stock on the grant date. The amount of recorded compensation cost is not adjusted for changes in the market price of the Company's common stock subsequent to the grant date. PERFORMANCE UNIT AWARDS The accounting treatment for performance unit awards is similar to that used for stock appreciation rights, except that the amount of compensation cost recorded is equal to the cash payable or the value of the common shares to be issued under the award. ACCOUNTING FOR INCOME TAXES The compensation cost related to stock options, stock appreciation rights, stock awards and performance unit awards recorded for financial statement purposes may differ from the deduction for income tax purposes. The income tax effect of the difference, if any, generally would be adjusted through additional paid-in capital. The language of the Plan amendments to be approved by the shareholders is set forth in Exhibit 1 to this Proxy Statement. The affirmative vote of a majority of the shares of Common Stock issued and outstanding, is required for the adoption of the amendments. THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE THE AMENDMENTS TO THE STOCK AND INCENTIVE PLAN TO INCREASE THE NUMBER OF SHARES AUTHORIZED TO BE ISSUED UNDER THE PLAN AND TO EXTEND THE TERM OF THE PLAN TO DECEMBER 31, 2005. COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT Section 16 of the Securities Exchange Act of 1934 ("Section 16") requires that reports of beneficial ownership of Common Stock and changes in such ownership be filed with the SEC by the Company's directors and executive officers. The Company is required to conduct a review and to identify in its proxy statement each director or officer who failed to file any required report under Section 16 on a timely basis. Based upon that review, the Company has determined that all required reports were filed on a timely basis for the 1995 fiscal year. REQUIREMENTS, INCLUDING DEADLINES, FOR SUBMISSION OF PROXY PROPOSALS, NOMINATION OF DIRECTORS AND OTHER BUSINESS OF SHAREHOLDERS Under the Company's By-laws, certain procedures are provided which a shareholder must follow to nominate persons for election as directors or to introduce an item of business at an annual meeting of shareholders. These procedures provide that nominations for director nominees and/or an item of business to be introduced at an annual meeting of shareholders must be submitted in writing to the Secretary of the Company at 235 East 42nd Street, New York, NY 10017. The nomination or proposed item of business must be received no later than: (1) 60 days in advance of an annual meeting if it is being held within 30 days preceding the anniversary date of the previous year's meeting, or (2) 90 days in advance of such meeting if it is being held on or after the anniversary date of the previous year's meeting. With respect to any other annual or special meeting, the nomination or item of business must be received by the 10th day following the date of public disclosure of the date of such meeting. The nomination must contain the following information about the nominee: name, age, business and residence addresses; principal occupation or employment; the number of shares of Common Stock 28 held by the nominee; the information that would be required under the rules of the SEC in a proxy statement soliciting proxies for the election of such nominee as a director; and a signed consent of the nominee to serve as a director of the Company, if elected. Notice of a proposed item of business must include a brief description of the substance of, and the reasons for, conducting such business at the annual meeting, the shareholder's name and address, the number of shares of Common Stock held by the shareholder (with supporting documentation where appropriate) and any material interest of the shareholder in such business. The Board is not aware of any matters that are expected to come before the Annual Meeting other than those referred to in this Proxy Statement. If any other matter should come before the Annual Meeting, the persons named in the accompanying proxy intend to vote such proxies in accordance with their best judgment. The chairman of the meeting may refuse to allow the transaction of any business not presented, or to acknowledge the nomination of any person not made, in compliance with the foregoing procedures. Under the rules of the SEC, shareholder proposals intended to be presented at the Company's 1997 Annual Meeting of Shareholders must be received by the Company at its principal executive offices by November 18, 1996 for inclusion in the proxy statement and form of proxy relating to that meeting. MISCELLANEOUS The cost of soliciting proxies will be borne by the Company. In addition to the solicitation of proxies by the use of the mails, the Company may use telephone, telegraph and personal contact. Such solicitation will be made by regular employees of the Company without additional compensation for such services. The Company has also engaged Morrow & Co., Inc. to assist in the proxy solicitation, and has agreed to pay $25,000 plus expenses for such soliciting services. By order of the Board, [SIGNATURE] C. L. Clemente SECRETARY 29 - -------------------------------------------------------------------------------- FOR EDGAR FILING, LANGUAGE THAT WILL BE ADDED IS PRECEDED BY A "<*>" AND FOLLOWED BY A "". LANGUAGE THAT WILL BE ELIMINATED IS PRECEDED BY A "<#>" AND FOLLOWED BY A "". - -------------------------------------------------------------------------------- EXHIBIT 1 PFIZER INC. STOCK AND INCENTIVE PLAN (New material underlined; material to be deleted shown as stricken.) * * * 3. TOTAL NUMBER OF SHARES Subject to the provisions of Section 6(h), the maximum amount of stock which may be issued under the Plan is <#>73,000,000 <*>169,000,000* shares of the Common Stock of the Company (comprised of <#>6,000,000 <*>12,000,000* shares authorized in 1965, <#>6,000,000 <*>12,000,000* shares authorized in 1969, <#>6,000,000 <*>12,000,000** shares authorized in 1972, <#>6,000,000 <*>12,000,000** shares authorized in 1975, <#>6,000,000 <*>12,000,000** shares authorized in 1980, <#>10,000,000 <*>20,000,000*** shares authorized in 1983<*>, <#>and 11,000,000 <*>22,000,000*** shares authorized in 1986, <#>11,000,000 <*>22,000,000*** shares authorized in 1989<*>, <#>and 11,000,000 <*>22,000,000**** shares authorized in 1992<*>, and 23,000,000 shares authorized in 1996). No participant shall be granted (i) options which would result in such participant receiving more than <#>120,000 <*>240,000* shares of the total number of shares authorized in 1965, more than <#>120,000 <*>240,000* shares of the total number of shares authorized in 1969, or more than <#>120,000 <*>240,000** shares of the total number of shares authorized in 1972, or (ii) options or awards which would result in such participant receiving more than <#>120,000 <*>240,000** shares of the total number of shares authorized in 1975, more than <#>200,000 <*>400,000** shares of the total number of shares authorized in 1980, more than <#>200,000 <*>400,000*** shares of the total number of shares authorized in 1983, more than <#>300,000 <*>600,000*** shares of the total number of shares authorized in 1986, more than <#>300,000 <*>600,000*** shares of the total number of shares authorized in 1989, more than <#>300,000 <*>600,000**** shares of the total number of shares authorized in 1992, <*>more than 600,000 shares of the total number of shares authorized in 1996, or (iii) any option, stock award or performance unit award which would result in ownership by such participant of more than five percent of the stock of the Company within the meaning of Section 422(b)(7) of the Internal Revenue Code, or (iv) [i] any incentive stock option, as defined in Section 422A(b) of the Internal Revenue Code, granted on or before December 31, 1986, which would result in such participant receiving a grant of incentive stock options in any calendar year for stock exceeding $100,000, in aggregate fair market value, determined as of the time the option is granted, plus any unused limit carryover, as defined in Section 422A(c)(4) of the Internal Revenue Code, to the year in which such option is granted or [ii] any incentive stock option granted after December 31, 1986, which would result in such participant receiving a grant of incentive stock options for stock that would have an aggregate fair market value in excess of $100,000, determined as of the time that the option is granted, that would be exercisable for the first time by such participant during any calendar year. No option with respect to any shares authorized in 1975 shall be granted to the extent that shares authorized in 1972 are available therefor, or with respect to any shares authorized in 1980 to the extent that shares authorized in 1972 or shares authorized in 1975 are available therefor, or with respect to any shares authorized in 1983 to the extent that shares authorized in 1972, 1975 or 1980 are available therefor, or with respect to any shares authorized in 1986 to the extent that shares authorized in 1972, 1975, 1980 or 1983 are available therefor, or with respect to any shares authorized in 1989 to the extent that shares authorized in 1972, 1975, 1980, 1983, or 1986 are available therefor, or with respect to any shares authorized in 1992 to the extent that shares authorized in 1972, 1975, 1980, 1983, 1986 or 1989 are available therefor <*>or with respect to any shares authorized in 1996 to the extent that shares authorized in 1972, 1975, 1980, 1983, 1986, 1989, or 1992 are available therefor. With respect to all options and stock awards granted on or after January 1, 1972, the records of the Company shall specify the number of shares authorized in 1965, the number of shares authorized in 1969, the number of shares authorized in 1972, the number of shares authorized in 1975, the number of shares authorized in 1980, the number of shares authorized in 1983, the number of shares authorized in 1986, the number of shares authorized in 1989<*>, <#>and the number of shares authorized in 1992 <*>and the number of shares authorized in 1996 covered by such options or awards. None of the shares authorized in 1965, 1969 or 1972 shall be available for stock awards. * * * 5. TERM OF PLAN No option with respect to shares authorized in or prior to 1969 under this Plan shall be granted pursuant to this Plan after December 31, 1978, no option with respect to shares authorized in 1972 shall be granted pursuant to this Plan after December 31, 1992, no option, stock appreciation right or stock award, with respect to shares authorized in 1975 shall be granted pursuant to this Plan after December 31, 1992, no option, stock appreciation right, stock award, performance unit award or tandem award with respect to shares authorized in 1980 shall be granted pursuant to this Plan after December 31, 1992, no option, stock appreciation right, stock award, performance unit award or tandem award with respect to shares authorized in 1983 shall be granted pursuant to this Plan after December 31, 1992, no option, stock appreciation right, stock award, performance unit award or tandem award with respect to shares authorized in 1986 shall be granted pursuant to this Plan after December 31, 1995, no option, stock appreciation right, stock award, performance unit award or tandem award with respect to shares authorized in 1989 shall be granted pursuant to this Plan after December 31, 1998, no option, stock appreciation right, stock award, performance unit award or tandem award with respect to shares authorized in 1992 shall be granted pursuant to this Plan after December 31, 2001<*>, no option, stock appreciation right, stock award, performance unit award or tandem award with respect to shares authorized in 1996 shall be granted pursuant to this Plan after December 31, 2005, but options, stock appreciation rights, performance unit awards, tandem awards and restrictions on awards may extend beyond such dates. * * * - ------------------------ * Adjusted for the three-for-one stock split in 1970, the two-for-one stock split in 1983<*>, <#>and the two-for-one stock split in 1991<*>, and the two-for-one stock split in 1995. ** Adjusted for the two-for-one stock split in 1983, <#>and the two-for-one stock split in 1991<*>, and the two-for-one stock split in 1995. *** Adjusted for the two-for-one stock split in 1991 <*>and the two-for-one stock split in 1995. <*>**** <*>Adjusted for the two-for-one stock split in 1995. [Map indicating location of meeting site] MEETING SITE AREA PFIZER The Grand Hyatt Hotel is serviced by Metro North Annual Meeting of and by the following subway lines going into Grand Shareholders Central Terminal: April 25, 1996 EAST SIDE: IRT (Lexington Avenue) Nos. 4, 5 & 6 10:00 am WEST SIDE: IRT (7th Avenue Line) Nos. 1, 2, & 3 to 42nd Street then transfer east on either: Flushing Line No. 7 or S (Shuttle) [logo] RECYCLED PAPER WITH A MINIMUM OF 10% POST CONSUMER WASTE PFIZER INC. PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF SHAREHOLDERS APRIL 25, 1996, 10:00 A.M. AT THE GRAND HYATT HOTEL 42ND STREET AND LEXINGTON AVENUE NEW YORK, NY THE UNDERSIGNED HEREBY APPOINTS WILLIAM C. STEERE, JR., HENRY A. MCKINNELL, JR., AND C.L. CLEMENTE, AND EACH OF THEM, AS PROXIES, EACH WITH FULL POWER OF SUBSTITUTION, AND HEREBY AUTHORIZES THEM TO REPRESENT AND TO VOTE, AS DESIGNATED ON THE REVERSE SIDE OF THIS FORM, ALL THE SHARES OF COMMON STOCK OF PFIZER INC. HELD OF RECORD BY THE UNDERSIGNED ON FEBRUARY 26, 1996, AT THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 25, 1996 AT 10:00 A.M. AT THE GRAND HYATT HOTEL, 42ND STREET AND LEXINGTON AVENUE, NEW YORK, NY, OR ANY ADJOURNMENT THEREOF. IF NO OTHER INDICATION IS MADE ON THE REVERSE SIDE OF THIS FORM, THE PROXIES SHALL VOTE FOR ITEMS NUMBER 1, 2 AND 3 AND, IN THEIR DISCRETION, UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING. (CONTINUED ON REVERSE SIDE) (CONTINUED FROM OTHER SIDE) PFIZER INC. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1, 2 3.A proposal to approve amendments to the Pfizer Inc. Stock AND 3. and Incentive Plan to increase the number of shares of 1.Election of Directors. (Mark ONE box only). Pfizer Inc. Common Stock authorized to be issued under the Nominees: Constance J. Horner, Thomas G. Labrecque, and Plan and to extend the term of the Plan to December 31, Jean-Paul Valles. 2005. (Mark ONE box only). / / FOR all nominees, / / Vote WITHHELD FOR AGAINST ABSTAIN except vote withheld from all nominees / / / / / / from the following IF ACTING AS ATTORNEY, EXECUTOR, TRUSTEE, OR IN OTHER nominees (if any): REPRESENTATIVE CAPACITY, PLEASE SIGN NAME AND TITLE. //96 2.A proposal to approve the appointment of KPMG Peat Marwick ------------------------------------------------------------ LLP to serve as independent auditors for 1996. (Signature of Shareholder) Date (Mark ONE box only). //96 FOR AGAINST ABSTAIN ------------------------------------------------------------ / / / / / / (Signature, if held jointly) Date Please sign, date, and return this proxy form in the enclosed return envelope. Thank you.
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