Pfizer 2009 Annual Report Download - page 86

Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
December 31, 2009, the Preferred ESOP held preferred shares with a stated value of approximately $61 million, convertible into
approximately 4 million shares of our common stock. As of December 31, 2009, the Common ESOP held approximately 5 million
shares of our common stock. As of December 31, 2009, all preferred and common shares held by the ESOPs have been allocated
to the Pharmacia U.S. and certain Puerto Rico savings plan participants.
D. Employee Benefit Trust
The Pfizer Inc. Employee Benefit Trust (EBT) was established in 1999 to fund our employee benefit plans through the use of its
holdings of Pfizer Inc. stock. Our consolidated balance sheets reflect the fair value of the shares owned by the EBT as a reduction of
Shareholders’ equity.
15. Share-Based Payments
Our compensation programs can include share-based payments. In 2009, 2008 and 2007, the primary share-based awards and
their general terms and conditions are as follows:
•Stock options, which, when vested, entitle the holder to purchase a specified number of shares of Pfizer common stock at a price per
share equal to the market price of Pfizer common stock on the date of grant.
•Restricted stock units (RSUs), which, when vested, entitle the holder to receive a specified number of shares of Pfizer common stock,
including shares resulting from dividend equivalents paid on such RSUs.
•Performance share awards (PSAs) and performance-contingent share awards (PCSAs), which, when vested, entitle the holder to
receive a number of shares of Pfizer common stock, within a range of shares from zero to a specified maximum, calculated using a
non-discretionary formula that measures Pfizer’s performance relative to an industry peer group. Dividend equivalents accumulate on
PSAs and are paid at the end of the vesting term in respect of any shares that are paid.
•Short-term incentive awards, which entitle the holder to receive a specified dollar value on the first anniversary of the grant date, based
upon performance. At the election of the holder, such specified dollar value is paid: (i) in the case of senior management, all in RSUs, or
half in RSUs and half in cash; and (ii) in the case of all other holders, all in RSUs, all in cash, or half in RSUs and half in cash.
•Stock appreciation rights (SARs), also referred to as Total Shareholder Return Units (TSRUs), which entitle the holder to receive, two
years after the end of the vesting term, a number of shares of Pfizer common stock with a value equal to the difference between the
defined settlement price and the closing market price of Pfizer common stock on the date of grant, plus accumulated dividend
equivalents through the payment date.
The Company’s shareholders approved the amendment and restatement of the 2004 Stock Plan at the Annual Meeting of
Shareholders held on April 23, 2009. The primary purpose of the amendment was to increase the number of shares of common
stock available for grants by 425 million shares. In addition, the amendment provided other changes including that the number of
stock options, SARs or other performance-based awards that may be granted to any one individual during any 36-month period is
limited to 8 million shares and that RSUs, PSAs and restricted stock grants count as two shares, while stock options and SARs
count as one share, toward the maximums for the incremental 425 million shares. As of December 31, 2009, 499 million shares
were available for award, which included 0.8 million shares available for award through February 13, 2010 under the Pharmacia
Long-Term Incentive plan (the Pharmacia Plan). Such amounts do not include 41 million shares previously issuable but no longer
available for award under the Pharmacia Plan, as amended and restated. The 2004 Stock Plan, as amended, is the only Pfizer plan
under which equity-based compensation may currently be awarded to executives and other employees.
The Company’s shareholders originally approved the 2004 Stock Plan at the Annual Meeting of Shareholders held on April 22,
2004, and, effective upon that approval, new stock option and other share-based awards could be granted only under the originally
approved 2004 Stock Plan. As originally approved, the 2004 Stock Plan allowed a maximum of 3 million shares to be awarded to
any employee per year and 475 million shares in total. RSUs, PSAs, PCSAs and restricted stock grants counted as three shares,
while stock options and SARs counted as one share, toward the maximums under the Plan.
In the past, we had various employee stock and incentive plans under which stock options and other share-based awards were
granted. Stock options and other share-based awards that were granted under prior plans and were outstanding on April 22, 2004,
continue in accordance with the terms of the respective plans.
Although not required to do so, we have used authorized and unissued shares and, to a lesser extent, shares held in our Employee
Benefit Trust and treasury stock to satisfy our obligations under these programs.
84 2009 Financial Report