Exhibit 10.7


 


ABBOTT LABORATORIES


1996 INCENTIVE STOCK PROGRAM


(as amended and restated through the


1st Amendment December 12, 2003)


 


1.             PURPOSE. 
The purpose of the Abbott Laboratories 1996 Incentive Stock Program (the
“Program”) is to attract and retain outstanding directors, officers and other
employees of Abbott Laboratories (the “Company”) and its subsidiaries, and to
furnish incentives to such persons by providing opportunities to acquire common
shares of the Company, or monetary payments based on the value of such shares
or the financial performance of the Company, or both, on advantageous terms as
herein provided and to further align such persons’ interests with those of the
Company’s other shareholders through compensation that is based on the value of
the Company’s common shares.


 


2.             ADMINISTRATION.  The Program will be administered by a committee (the “Committee”)
of at least two persons which shall be either the Compensation Committee of the
Board of Directors of the Company (the “Board of Directors”) or such other
committee comprised entirely of persons who are both: (i) “disinterested
persons” as defined in Rule 16b-3 of the Securities and Exchange Commission;
and (ii) “outside directors” as defined under Section 162(m) of the Internal
Revenue Code of 1986, as amended, or any successor provision; as the Board of
Directors may from time to time designate. 
The Committee shall interpret the Program, prescribe, amend and rescind
rules and regulations relating thereto and make all other determinations
necessary or advisable for the administration of the Program. A majority of the
members of the Committee shall constitute a quorum and all determinations of
the Committee shall be made by a majority of its members. Any determination of
the Committee under the Program may be made without notice of meeting of the
Committee by a writing signed by all of the Committee members.  The Committee may, from time to time,
delegate any or all of its duties, powers and authority to any officer or
officers of the Company, except to the extent such delegation would be
inconsistent with Rule 16b-3 of the Securities and Exchange Commission or other
applicable law, rule or regulation.  The
Chief Executive Officer of the Company may, on behalf of the Committee, grant
stock options and restricted stock awards under the Program, other than to
persons subject to Section 16 of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). All such grants by the Chief Executive Officer
must be reported to, and ratified by, the Committee within twelve months of the
grant date but, if ratified, shall be effective as of the grant date.


 


3.             PARTICIPANTS.  Participants in the Program will consist of such officers and
other employees of the Company and its subsidiaries as the Committee in its
sole discretion may designate from time to time to receive Benefits
hereunder.  The Committee’s designation
of a participant in any year shall not require the Committee to designate such
person to receive a Benefit in any other year. 
The Committee shall consider such factors as it deems pertinent in
selecting participants and in determining the type and amount of their
respective Benefits, including without limitation (i) the financial condition
of the Company; (ii) anticipated profits for the current or future years; (iii)
contributions of participants to the profitability and development of the
Company; (iv) prior awards to participants; and (v) other compensation provided
to participants. Non-Employee Directors shall also be participants in the
Program solely for purposes of


 


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receiving Restricted Stock Awards under
paragraph 13 and Non-qualified Stock Options under paragraph 14.  The term “Non-Employee Director” shall mean
a member of the Board of Directors who is not a full-time employee of the
Company or any of its subsidiaries.


 


4.             TYPES OF BENEFITS.  Benefits under the Program may be granted in
any one or a combination of (a) Incentive Stock Options; (b) Non-qualified
Stock Options; (c) Stock Appreciation Rights; (d) Limited Stock Appreciation
Rights; (e) Restricted Stock Awards; (f) Performance Awards; and (g) Foreign
Qualified Benefits, all as described below.


 


5.             SHARES RESERVED UNDER THE PROGRAM.  There is hereby reserved for issuance under
the Program: (i) an aggregate of Five Million (5,000,000) common shares; plus
(ii) an authorization for each calendar year (the “Annual Authorization”) for
the years 1996 through 1999, of seven-tenths of one percent (0.7%) of the total
common shares of the Company issued and outstanding as of the first day of such
calendar year and for the years from and including 2000, one and a half percent
(1.5%) of the total common shares of the Company issued and outstanding as of
the first day of such calendar year; which may be newly issued or treasury
shares. The shares hereby reserved are in addition to the shares previously
reserved under the Company’s 1981 Incentive Stock Program, 1986 Incentive Stock
Program and 1991 Incentive Stock Program (the “Prior Programs”). Any common
shares reserved for issuance under the Prior Programs in excess of the number
of shares as to which options or other Benefits have been awarded on the date
of shareholder approval of this Program, plus any such shares as to which
options or other Benefits granted under the Prior Programs may lapse, expire,
terminate or be canceled after such date, shall also be reserved and available
for issuance in connection with Benefits under this Program. Any common shares
reserved under the Program for any calendar year under an Annual Authorization
as to which options or other Benefits have not been awarded as of the end of
such calendar year shall be available for issuance in connection with Benefits
granted in subsequent years.


 


If there is a
lapse, expiration, termination or cancellation of any Benefit granted hereunder
without the issuance of shares or payment of cash thereunder, or if shares are
issued under any Benefit and thereafter are reacquired by the Company pursuant
to rights reserved upon the issuance thereof, or shares are reacquired pursuant
to the payment of the purchase price of shares under stock options by delivery
of other common shares of the Company, the shares subject to or reserved for
such Benefit, or so reacquired, may again be used for new options, rights or
awards of any sort authorized under this Program; provided, however, that in no
event may the number of common shares issued under this Program, and not
reacquired by the Company pursuant to rights reserved upon the issuance thereof
or pursuant to the payment of the purchase price of shares under stock options
by delivery of other common shares of the Company, exceed the total number of
shares reserved for issuance hereunder.


 


6.             INCENTIVE STOCK OPTIONS.  Incentive Stock Options will consist of
options to purchase common shares at purchase prices not less than One Hundred
percent (100%) of the Fair Market Value of such common shares on the date of
grant. An Incentive Stock Option will not be exercisable after the expiration of
ten (10) years from the date such option is granted. In the event of
termination of employment for any reason other than


 


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retirement, disability or death, the right of
the optionee to exercise an Incentive Stock Option shall terminate upon the
earlier of the end of the original term of the option or three (3) months after
the optionee’s last day of work for the Company and its subsidiaries. In the
event of termination of employment due to retirement or disability, or if the
optionee should die while employed, the right of the optionee or his or her
successor in interest to exercise an Incentive Stock Option shall terminate
upon the end of the original term of the option. If the optionee should die
within three (3) months after termination of employment for any reason other
than retirement or disability, the right of his or her successor in interest to
exercise an Incentive Stock Option shall terminate upon the earlier of the end
of the original term of the option or three (3) months after the date of such
death. To the extent the aggregate fair market value (determined as of the time
the Option is granted) of the common shares with respect to which any Incentive
Stock Option is exercisable for the first time by any individual during any
calendar year (under all option plans of the Company and its subsidiary
corporations) exceeds $100,000, the excess shall be treated as a Non-qualified
Stock Option. An Incentive Stock Option shall be exercisable as determined by
the Committee, but in no event earlier than six (6) months from its grant date.


 


7.             NON-QUALIFIED STOCK OPTIONS.  Non-qualified Stock Options will consist of
options to purchase common shares at purchase prices not less than One Hundred
percent (100%) of the Fair Market Value of such common shares on the date of
grant. A Non-qualified Stock Option will not be exercisable after the
expiration of ten (10) years from the date such option is granted. In the event
of termination of employment for any reason other than retirement, disability
or death, the right of the optionee to exercise a Non-qualified Stock Option
shall terminate upon the earlier of the end of the original term of the option
or three (3) months after the optionee’s last day of work for the Company and
its subsidiaries. In the event of termination of employment due to retirement
or disability, or if the optionee should die while employed, the right of the
optionee or his or her successor in interest to exercise a Non-qualified Stock
Option shall terminate upon the end of the original term of the option. If the
optionee should die within three (3) months after termination of employment for
any reason other than retirement or disability, the right of his or her
successor in interest to exercise a Non-qualified Stock Option shall terminate
upon the earlier of the end of the original term of the option or three (3)
months after the date of such death. A Non-qualified Stock Option shall be
exercisable as determined by the Committee, but in no event earlier than six
(6) months from its grant date.


 


8.             STOCK APPRECIATION RIGHTS.  The Committee may, in its discretion, grant
a Stock Appreciation Right to the holder of any stock option granted hereunder
or under the Prior Programs. Such Stock Appreciation Rights shall be subject to
such terms and conditions consistent with the Program as the Committee shall
impose from time to time, including the following:


 


(a)           A Stock Appreciation Right may be
granted with respect to a stock option at the time of its grant or at any time
thereafter up to six (6) months prior to its expiration.


 


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(b)           Stock Appreciation Rights will
permit the holder to surrender any related stock option or portion thereof
which is then exercisable and to elect to receive in exchange therefor cash in
an amount equal to:


 


(i)            The excess of the Fair Market Value
on the date of such election of one common share over the option price
multiplied by


 


(ii)           The number of shares covered by such
option or portion thereof which is so surrendered.


 


(c)           A Stock Appreciation Right granted
to a participant who is subject to Section 16 of the Exchange Act may be
exercised only after six (6) months from its grant date (unless such exercise
would not affect the exemption under Rule 16b-3 of the Securities and Exchange
Commission).


 


(d)           A Stock Appreciation Right may be
granted to a participant regardless of whether such participant has been
granted a Limited Stock Appreciation Right with respect to the same stock
option.  However, a Stock Appreciation
Right may not be exercised during any period that a Limited Stock Appreciation
Right with respect to the same stock option may be exercised.


 


(e)           In the event of the exercise of a
Stock Appreciation Right, the number of shares reserved for issuance hereunder
shall be reduced by the number of shares covered by the stock option or portion
thereof surrendered.


 


9.             LIMITED STOCK APPRECIATION RIGHTS.  The Committee may, in its discretion, grant
a Limited Stock Appreciation Right to the holder of any stock option granted
hereunder or under the Prior Programs. 
Such Limited Stock Appreciation Rights shall be subject to such terms
and conditions consistent with the Program as the Committee shall impose from
time to time, including the following:


 


(a)           A Limited Stock Appreciation Right
may be granted with respect to a stock option at the time of its grant or at
any time thereafter up to six (6) months prior to its expiration.


 


(b)           A Limited Stock Appreciation Right
will permit the holder to surrender any related stock option or portion thereof
which is then exercisable and to receive in exchange therefor cash in an amount
equal to:


 


(i)            The excess of the Fair Market Value
on the date of such election of one common share over the option price
multiplied by


 


(ii)           The number of shares covered by such
option or portion thereof which is so surrendered.


 


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(c)           A
Limited Stock Appreciation Right granted to a participant who is subject to
Section 16 of the Exchange Act may be exercised only after six (6) months from
its grant date (unless such exercise would not affect the exemption under Rule
16b-3 of the Securities and Exchange Commission) and only during the sixty (60)
day period commencing on the later of:


 


(i)            the day following the date of a
Change in Control; or (ii) the first date on which such exercise would be
exempt under Rule 16b-3 of the Securities and Exchange Commission.


 


(d)           A Limited Stock Appreciation Right
may be granted to a participant regardless of whether such participant has been
granted a Stock Appreciation Right with respect to the same stock option.


 


(e)           In the event of the exercise of a
Limited Stock Appreciation Right, the number of shares reserved for issuance hereunder
shall be reduced by the number of shares covered by the stock option or portion
thereof surrendered.


 


10.           RESTRICTED STOCK AWARDS.  Restricted Stock Awards will consist of
common shares transferred to participants without other payment therefor as
additional compensation for their services to the Company or any of its
subsidiaries. Restricted Stock Awards granted under this paragraph 10 shall be
satisfied from the Company’s available treasury shares.  Restricted Stock Awards shall be subject to
such terms and conditions as the Committee determines appropriate, including,
without limitation, restrictions on the sale or other disposition of such
shares and rights of the Company to reacquire such shares upon termination of
the participant’s employment within specified periods.  Subject to such other restrictions as are
imposed by the Committee, the common shares covered by a Restricted Stock Award
granted to a participant who is subject to Section 16 of the Exchange Act may
be sold or otherwise disposed of only after six (6) months from the grant date
of the award (unless such sale would not affect the exemption under Rule 16b-3
of the Securities and Exchange Commission). 
No more than ten percent (10%) of the total number of shares available
for grant in any calendar year may be issued as Restricted Stock Awards under
paragraphs 10 and 13 in that year.


 


11.           PERFORMANCE AWARDS.  Performance Awards in the form of
Performance Units or Performance Shares may be granted to any participant in
the Program.  Performance Units shall
consist of monetary awards which may be earned in whole or in part if the
Company achieves certain goals established by the Committee over a designated
period of time. Performance Shares shall consist of common shares or awards
denominated in common shares which may be earned in whole or in part if the
Company achieves certain goals established by the Committee over a designated
period of time. The goals established by the Committee shall be based on any
one, or combination of, earnings per share, return on equity, return on assets,
total shareholder return, net operating income, cash flow, increase in revenue,
economic value added, increase in share price or cash flow return on
investment. Partial achievement of the goal(s) may result in a payment or
vesting corresponding to the degree of achievement. Payment of an award earned
may be in cash or in common shares or in a combination of both, and may be made
when earned, or may be vested and deferred, as the Committee in its sole


 


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discretion determines.  The maximum amount which may be granted
under all Performance Awards for any one year for any one participant shall be
Five Million Dollars ($5,000,000). This limit shall be applied to Performance
Shares by multiplying the number of Performance Shares granted by the fair
market value of one common share on the date of the award.  During the term of the Program, no more than
5 million shares of Abbott common stock may be granted in the form of
Performance Units and no more than 5 million shares of Abbott common stock may
be granted in the form of Performance Shares. This paragraph 11 is intended to
comply with the performance-based compensation requirements of Section 162(m)
of the Internal Revenue Code of 1986, as amended, and shall be interpreted in
accordance with the rules and regulations thereunder.


 


12.           FOREIGN QUALIFIED BENEFITS.  Benefits under the Program may be granted to
such employees of the Company and its subsidiaries who are residing in foreign
jurisdictions as the Committee in its sole discretion may determine from time
to time.  The Committee may adopt such
supplements to the Program as may be necessary to comply with the applicable
laws of such foreign jurisdictions and to afford participants favorable
treatment under such laws; provided, however, that no Benefit shall be granted
under any such supplement with terms or conditions which are inconsistent with
the provisions as set forth under the Program.


 


13.           RESTRICTED STOCK AWARDS
FOR NON-EMPLOYEE DIRECTORS.


 


(a)           Each year, on the date of the annual
shareholders meeting, each person who is elected a Non-Employee Director at the
annual shareholders meeting shall be awarded both: (i) a Restricted Stock Award
covering a number of common shares with a fair market value on the date of the
award closest to, but not in excess of, an amount equal to six times the
monthly fee in effect under Section 3.1 of the Abbott Laboratories Non-Employee
Director’s Fee Plan on the date of the award and (ii) in the years 1996 through
2005, a Restricted Stock Award covering a number of common shares with a fair
market value on the date of the award closest to, but not in excess of,
Twenty-Two Thousand Dollars ($22,000) for awards made in years 1996 through
2000 and Twenty-Five Thousand Dollars ($25,000) for awards made in years 2001
through 2005.


 


(b)           ISSUANCE OF CERTIFICATES.  As soon as practicable following the date of
the award the Company shall issue certificates (“Certificates”) to the
Non-Employee Director receiving the award, representing the number of common
shares covered by the award. Each Certificate shall bear a legend describing
the restrictions on such shares imposed by this paragraph 13.


 


(c)           RIGHTS.  Upon issuance of the Certificates, the directors in whose names
they are registered shall, subject to the restrictions of this paragraph 13,
have all of the rights of a shareholder with respect to the shares represented
by the certificates, including the right to vote such shares and receive cash
dividends and other distributions thereon.


 


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(d)           RESTRICTED PERIOD.  The shares covered by awards granted under
this paragraph 13 may not be sold or otherwise disposed of within six (6)
months following their grant date (unless such sale would not affect the
exemption under Rule 16b-3 of the Securities and Exchange Commission) and in
addition shall be subject to the restrictions of this paragraph 13 for a period
(the “Restricted Period”) commencing with the date of the award and ending on
the earliest of the following events:


 


(i)            The date the director terminates or
retires from the Board;


 


(ii)           The date the director dies; or


 


(iii)          The date of occurrence of a Change
in Control (as defined in paragraph 20(c)).


 


(e)           RESTRICTIONS.  All shares covered by awards granted under
this paragraph 13 shall be subject to the following restrictions during the
Restricted Period:


 


(i)            The shares may not be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of.


 


(ii)           Any additional common shares of the
Company or other securities or property issued with respect to shares covered
by awards granted under this paragraph 13 as a result of any stock dividend,
stock split or reorganization, shall be subject to the restrictions and other
provisions of this paragraph 13.


 


(iii)          A director shall not be entitled to
receive any shares prior to completion of all actions deemed appropriate by the
Company to comply with federal or state securities laws and stock exchange
requirements.


 


(f)            Except in the event of conflict, all
provisions of the Program shall apply to this paragraph 13. In the event of any
conflict between the provisions of the Program and this paragraph 13, this
paragraph 13 shall control. Those provisions of paragraph 17 which authorize
the Committee to declare outstanding restricted stock awards to be vested and
to amend or modify the terms of Benefits shall not apply to awards granted
under this paragraph 13.  Restricted
Stock Awards granted under this paragraph 13 shall be satisfied from the
Company’s available treasury shares.


 


14.           NON-QUALIFIED STOCK
OPTIONS FOR NON-EMPLOYEE DIRECTORS.


 


(a)           Each Non-Employee Director may elect
to receive any or all of his or her fees earned during the second half of 1996
and each subsequent calendar year under Section 3 of the Abbott Laboratories
Non-Employee Directors’ Fee Plan (the “Directors’ Fee Plan”) in the form of
Non-qualified Stock Options under this Section 14.  Each such election shall be irrevocable, and must be made in
writing and filed with the Secretary of the Company


 


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by December
31, 1995 (for fees earned in the second half of 1996) and (for fees earned in
subsequent calendar years) by June 30 of the calendar year preceding the
calendar year in which such fees are earned (or such later date as may be
permissible under Rule 16b-3 of the Securities and Exchange Commission, but in
no event later than December 31 of such preceding calendar year).


 


(b)           A Non-Employee Director may file a
new election each calendar year applicable to fees earned in the immediately
succeeding calendar year. If no new election or revocation of a prior election
is received by June 30 of any calendar year (or such later date as may be
permissible under paragraph (a)), the election, if any, in effect for such
calendar year shall continue in effect for the immediately succeeding calendar
year. Any election made under this Section 14 shall take precedence over any
election made by the director for the same period, under the Directors’ Fee
Plan, to the extent necessary to resolve any conflict between such
elections.  If a director does not elect
to receive his or her fees in the form of Non-qualified Stock Options, the fees
due such director shall be paid or deferred as provided in the Directors’ Fee
Plan and any applicable election thereunder by the director.


 


(c)           The number of common shares covered
by each Non-qualified Stock Option granted in any year under this Section 14
shall be determined based on an independent appraisal for such year of the
intrinsic value of options granted hereunder and the amount of fees covered by
the director’s election for such year. 
The number of common shares covered by options granted in 1996 (as determined
under this procedure) shall be the number of whole shares equal to (i) the
product of three (3) times the amount of fees which the director has elected
under paragraph (a) to receive in the form of Non-qualified Stock Options,
divided by (ii) One Hundred percent (100%) of the Fair Market Value of one
common share on the grant date. Any fraction of a share shall be disregarded,
and the remaining amount of the fees corresponding to such option shall be paid
as provided in the Directors’ Fee Plan and any applicable election thereunder
by the director.


 


(d)           Effective on October 10, 1997, each
Non-qualified Stock Option due a director under this Section 14 prior to the
1998 annual shareholders meeting shall be granted on October 10, 1997 at a
purchase price equal to One Hundred percent (100%) of the Fair Market Value of
the common shares covered by such option on the grant date.  Effective with the 1998 Annual Shareholders
Meeting, each Non-qualified Stock Option due a director under this Section 14
shall be granted annually, on the date of the annual shareholders meeting, at a
purchase price equal to One Hundred percent (100%) of the Fair Market Value of
the common shares covered by such option on the grant date.  Each such option shall be immediately exercisable
and nonforfeitable, and shall not be exercisable after the expiration of ten
(10) years from the date it is granted. Each such option shall contain
provisions allowing payment of the purchase price and, to the extent permitted,
any taxes due on exercise, by delivery of other common


 


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shares of the
Company (or, in the case of the payment of taxes, by withholding of shares).


 


(e)           All Non-qualified Stock Options
granted under this Section 14 prior to October 10, 1997, shall be immediately
exercisable and nonforfeitable, and shall not be exercisable after the
expiration of ten (10) years from the date granted.


 


15.           NONTRANSFERABILITY.  Except as provided by the Committee, each
stock option and stock appreciation right granted under this Program shall not
be transferable other than by will or the laws of descent and distribution, and
shall be exercisable, during the participant’s lifetime, only by the
participant or the participant’s guardian or legal representative.


 


16.           OTHER PROVISIONS.  The award of any Benefit under the Program may also be subject to
other provisions (whether or not applicable to the Benefit awarded to any other
participant) as the Committee determines appropriate, including, without limitation,
provisions for the purchase of common shares under stock options in
installments, provisions for the payment of the purchase price of shares under
stock options by delivery of other common shares of the Company having a then
market value equal to the purchase price of such shares, restrictions on resale
or other disposition, such provisions as may be appropriate to comply with
federal or state securities laws and stock exchange requirements and
understandings or conditions as to the participant’s employment in addition to
those specifically provided for under the Program.


 


In the case of
a participant who is subject to Section 16(a) and 16(b) of the Exchange Act,
the Committee may, at any time, add such conditions and limitations to any
Benefit granted to such participant, or any feature of any such Benefit, as the
Committee, in its sole discretion, deems necessary or desirable to comply with
Section 16(a) or 16(b) and the rules and regulations thereunder or to obtain
any exemption therefrom. A participant may pay the purchase price of shares
under stock options by delivery of a properly executed exercise notice together
with a copy of irrevocable instructions to a broker to deliver promptly to the
Company the amount of sale or loan proceeds to pay the purchase price.  To facilitate the foregoing, the Company may
enter into agreements for coordinated procedures with one or more brokerage
firms.


 


The Committee
may, in its discretion and subject to such rules as it may adopt, permit or
require a participant to pay all or a portion of the federal, state and local
taxes, including FICA and medicare withholding tax, arising in connection with
the following transactions: (a) the exercise of a Non-qualified Stock Option;
(b) the lapse of restrictions on common shares received as a Restricted Stock
Award; or (c) the receipt or exercise of any other Benefit; by (i) having the
Company withhold common shares, (ii) tendering back common shares received in
connection with such Benefit or (iii) delivering other previously acquired
common shares of the Company having a fair market value approximately equal to
the amount to be withheld.


 


The Committee
may grant stock options under the Program (and, for stock options granted prior
to shareholder approval of this Program, under the Company’s 1991 Incentive
Stock Program) that provide for the grant of replacement stock options if all
or


 


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any portion of
the purchase price or taxes incurred in connection with the exercise, are paid
by delivery (or, in the case of payment of taxes, by withholding of shares) of
other common shares of the Company.  The
replacement stock option shall cover the number of common shares surrendered to
pay the purchase price, plus the number of shares surrendered or withheld to
satisfy the participant’s tax liability, shall have an exercise price equal to
One Hundred percent (100%) of the Fair Market Value of such common shares on
the date such replacement stock option is granted, shall first be exercisable
six months from the date of grant of the replacement stock option and shall
have an expiration date equal to the expiration date of the original stock
option.


 


17.           TERM OF PROGRAM AND AMENDMENT, MODIFICATION,
CANCELLATION OR ACCELERATION OF BENEFITS. 
The Program shall continue in effect until terminated by the Board of
Directors, except that no Incentive Stock Option shall be granted after October
13, 2005 and that no other Benefits shall be granted after April 27, 2010. The
terms and conditions applicable to any Benefits may at any time be amended,
modified or canceled by mutual agreement between the Committee and the
participant or such other persons as may then have an interest therein, so long
as any amendment or modification does not increase the number of common shares
issuable under this Program; and provided further, that the Committee may, at
any time and in its sole discretion, declare any or all stock options and stock
appreciation rights then outstanding under this Program or the Prior Programs
to be exercisable and any or all then outstanding Restricted Stock Awards to be
vested, whether or not such options, rights or awards are then otherwise
exercisable or vested. Notwithstanding the foregoing, except as provided in
paragraph 22, the Committee shall neither lower the purchase price of any
option granted under the Program nor grant any option under the Program in
replacement of a cancelled option which had previously been granted at a higher
purchase price, without shareholder approval.


 


18.           AMENDMENT TO PRIOR PROGRAMS. No options or
other Benefits shall be granted under the Prior Programs on or after the date
of shareholder approval of this Program.


 


19.           INDIVIDUAL LIMIT ON OPTIONS AND STOCK
APPRECIATION RIGHTS; AGGREGATE LIMIT ON INCENTIVE STOCK OPTIONS. The maximum
number of shares with respect to which Incentive Stock Options, Non-qualified
Stock Options, Stock Appreciation Rights and Limited Stock Appreciation Rights
may be granted to any one participant, in aggregate in any one calendar year,
shall be Two Million (2,000,000) shares. Incentive Stock Options with respect
to no more than the lesser of (i) One Hundred and Fifty Million (150,000,000)
shares (plus any shares acquired by the Company pursuant to payment of the
purchase price of shares under incentive stock options by delivery of other
common shares of the Company), or (ii) the total number of shares reserved
under paragraph 5 may be issued under the Plan.


 


20.            TAXES. 
The Company shall be entitled to withhold the amount of any tax
attributable to any amount payable or shares deliverable under the Program
after giving the person entitled to receive such amount or shares notice as far
in advance as practicable, and the Company may defer making payment or delivery
if any such tax may be pending unless and until indemnified to its
satisfaction.


 


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21.           DEFINITIONS.


 


(a)           FAIR MARKET VALUE.  Except as provided below, the Fair Market
Value of the Company’s common shares shall be determined by such methods or
procedures as shall be established by the Committee; provided that, in the case
of any Limited Stock Appreciation Right (other than a right related to an
Incentive Stock Option), the Fair Market Value shall be the higher of:


 


(i)            The highest daily closing price of
the Company’s common shares during the sixty (60) day period following the
Change in Control; or


 


(ii)           The highest gross price paid or to
be paid for the Company’s common shares in any of the transactions described in
paragraphs 21(c)(i) and 21(c)(ii).


 


(b)           SUBSIDIARY.  The term “subsidiary” for all purposes other
than the Incentive Stock Option provisions in paragraph 6, shall mean any
corporation, partnership, joint venture or business trust, fifty percent (50%)
or more of the control of which is owned, directly or indirectly, by the
Company. For Incentive Stock Option purposes the term “subsidiary” shall be
defined as provided in Internal Revenue Code Section 424(f).


 


(c)           CHANGE IN CONTROL.  A “Change in Control” shall be deemed to
have occurred on the earliest of the following dates:


 


(i)            the date any Person is or becomes
the Beneficial Owner, directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such Person any securities
acquired directly from the Company or its Affiliates) representing 20% or more
of the combined voting power of the Company’s then outstanding securities,
excluding any Person who becomes such a Beneficial Owner in connection with a
transaction described in clause (a) of paragraph (iii) below; or


 


(ii)           the date the following individuals
cease for any reason to constitute a majority of the number of directors then
serving: individuals who, on the date hereof, constitute the Board of Directors
and any new director (other than a director whose initial assumption of office
is in connection with an actual or threatened election contest, including but
not limited to a consent solicitation, relating to the election of directors of
the Company) whose appointment or election by the Board of Directors or
nomination for election by the Company’s shareholders was approved or
recommended by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors on the date hereof or whose appointment,
election or nomination for election was previously so approved or recommended;
or


 


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(iii)          the date on which there is
consummated a merger or consolidation of the Company or any direct or indirect
subsidiary of the Company with any other corporation or other entity, other
than (a) a merger or consolidation (I) immediately following which the
individuals who comprise the Board of Directors immediately prior thereto
constitute at least a majority of the Board of Directors of the Company, the
entity surviving such merger or consolidation or, if the Company or the entity
surviving such merger or consolidation is then a subsidiary, the ultimate
parent thereof and (II) which results in the voting securities of the Company
outstanding immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof), in combination with
the ownership of any trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any subsidiary of the Company, at least
50% of the combined voting power of the securities of the Company or such
surviving entity or any parent thereof outstanding immediately after such
merger or consolidation, or (b) a merger or consolidation effected to implement
a recapitalization of the Company (or similar transaction) in which no Person
is or becomes the Beneficial Owner, directly or indirectly, of securities of
the Company (not including in the securities Beneficially Owned by such Person
any securities acquired directly from the Company or its Affiliates)
representing 20% or more of the combined voting power of the Company’s then
outstanding securities; or


 


(iv)          the date the shareholders of the
Company approve a plan of complete liquidation or dissolution of the Company or
there is consummated an agreement for the sale or disposition by the Company of
all or substantially all of the Company’s assets, other than a sale or
disposition by the Company of all or substantially all of the Company’s assets
to an entity, at least 50% of the combined voting power of the voting
securities of which are owned by shareholders of the Company, in combination
with the ownership of any trustee or other fiduciary holding securities under
an employee benefit plan of the Company or any subsidiary of the Company, in
substantially the same proportions as their ownership of the Company
immediately prior to such sale.


 


Notwithstanding the
foregoing, a “Change in Control” shall not be deemed to have occurred by virtue
of the consummation of any transaction or series of integrated transactions
immediately following which the record holders of the common stock of the Company
immediately prior to such transaction or series of


 


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transactions continue
to have  substantially the same
proportionate ownership in an entity which owns all or substantially all of the
assets of the Company immediately following such transaction or series of
transactions.


 


For purposes of this
Program: “Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated
under Section 12 of the Exchange Act; “Beneficial Owner” shall have the meaning
set forth in Rule 13d-3 under the Exchange Act; and “Person” shall have
the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used
in Sections 13(d) and 14(d) thereof, except that such term shall not include
(i) the Company or any of its subsidiaries, (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any of its
Affiliates, (iii) an underwriter temporarily holding securities pursuant to an
offering of such securities, or (iv) a corporation owned, directly or
indirectly, by the shareholders of the Company in substantially the same
proportions as their ownership of stock of the Company.


 


(d)           DISABILITY.  The term “disability” for all purposes of
the Program shall mean the participant’s disability as defined in subsection
4.1(a) of the Abbott Laboratories Extended Disability Plan for twelve (12)
consecutive months.


 


22.            ADJUSTMENT PROVISIONS.


 


(a)           If the Company shall at any time
change the number of issued common shares without new consideration to the
Company (such as by stock dividends or stock splits), the total number of
shares reserved for issuance under this Program, the individual and aggregate
limits described in paragraphs 11 and 19 on the number of shares that may be
granted or issued (as the case may be), the number of shares covered by each
outstanding Benefit and the purchase price of such shares shall be adjusted so
that the aggregate consideration payable to the Company and the value of each
such Benefit shall not be changed.  Subject to paragraph 22(c), the Committee shall also have the
right to provide for the continuation of Benefits or for other equitable
adjustments after changes in the Company or in the common shares resulting from
reorganization, sale, merger, consolidation, spin-off or similar occurrence.


 


(b)           Subject to paragraph 22(c), without
affecting the number of shares otherwise reserved or available hereunder, the
Committee may authorize the issuance or assumption of Benefits in connection
with any merger, consolidation, acquisition of property or stock, or
reorganization upon such terms and conditions as it may deem appropriate.


 


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(c)           Notwithstanding any other provision
of this Program or the Prior Programs including the terms of any Benefit
granted hereunder, if the outstanding common shares of the Company shall be
combined, or be changed into, or exchanged for, another kind of stock of the
Company, into securities of another corporation, or into property (including
cash) whether through recapitalization, reorganization, sale, merger,
consolidation, spin-off, business combination or a similar transaction (a
“Transaction”), the Company shall cause its successor, acquiror (or ultimate
parent of any successor or acquiror), as applicable, to assume each stock
option, Stock Appreciation Right and Limited Stock Appreciation Right
outstanding immediately prior to the Transaction (or to cause new options or
rights to be substituted therefor). 
Pursuant to such assumed or substituted option or rights, participants
shall thereafter be entitled to receive, upon due exercise of any portion of
the option or right, (a) in the event of a Transaction in which the outstanding
common shares of the Company are combined, or changed into, or exchanged for,
solely another kind of stock of the Company or securities of another
corporation (disregarding, for this purpose, cash paid in lieu of fractional
shares), the securities which that person would have been entitled to receive
for common shares acquired through exercise of the same portion of such option
or right immediately prior to the effective date of such Transaction, and (b)
in the event of a Transaction in which the outstanding common shares of the
Company are changed into, or exchanged for, property (including cash) other
than solely stock of the Company or securities of another corporation
(disregarding, for this purpose, cash paid in lieu of fractional shares),
securities the fair market value of which immediately following the effective
date of such Transaction (as determined by the Committee) equals the fair
market value (as determined by the Committee) of the property which that person
would have been entitled to receive for common shares acquired through exercise
of the same portion of such option or right immediately prior to the effective
date of such Transaction.  In each case
such assumed or substituted option or right shall continue to be subject to the
same terms and conditions (including, without limitation, with respect to any
right to receive “replacement options” upon option exercise) to which it was
subject immediately prior to the Transaction.


 


Notwithstanding the
immediately preceding paragraph, upon a Transaction in which the outstanding
common shares of the Company are changed into, or exchanged for, property
(including cash) other than solely stock of the Company or securities of
another corporation (disregarding, for this purpose, cash paid in lieu of
fractional shares) and which constitutes a Change in Control, each participant
may elect to receive, immediately following such Transaction in exchange for
cancellation of any stock option (other than an Incentive Stock Option granted
prior to June 20, 2003), Stock Appreciation Right or Limited Appreciation Right
held by such participant immediately prior to the Transaction, a cash payment,
with respect to each common share subject to such option or right, equal to the
difference between the value of consideration (as determined by the


 


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Committee) received
by the shareholders for a common share of the Company in the Transaction, less
any applicable purchase price.


 


(d)           Notwithstanding any other provision
of this Program or the Prior Programs including the terms of any Benefit
granted hereunder, upon the occurrence of a Change in Control:


 


(i)            All stock options then outstanding
under this Program or the Prior Programs shall become fully exercisable as of
the date of the Change in Control, whether or not then otherwise exercisable;


 


(ii)           All Stock Appreciation Rights and
Limited Stock Appreciation Rights then outstanding shall become fully
exercisable as of the date of the Change in Control, whether or not then
otherwise exercisable;


 


(iii)          All terms and conditions of all
Restricted Stock Awards then outstanding shall be deemed satisfied as of the
date of the Change in Control; and


 


(iv)          All Performance Awards then
outstanding shall be deemed to have been fully earned and to be immediately
payable, in cash, as of the date of the Change in Control.


 


23.           AMENDMENT AND TERMINATION OF PROGRAM.  The Board of Directors may amend the Program
from time to time or terminate the Program at any time, but no such action
shall reduce the then existing amount of any participant’s Benefit or adversely
change the terms and conditions thereof without the participant’s consent.
Notwithstanding the foregoing, except as provided in paragraph 22, the Company
shall neither lower the purchase price of any option granted under the Program
nor grant any option under the Program in replacement of a cancelled option
which had previously been granted at a higher purchase price, without
shareholder approval.  To the extent
required for compliance with Rule 16b-3 of the Securities and Exchange
Commission, paragraph 13 of the Program may not be amended more frequently than
once every six months other than to comport with changes in the Internal
Revenue Code of 1986, as amended, or the rules thereunder, and no amendment of
the Program shall result in any Committee member losing his or her status as a
“disinterested person” as defined in Rule 16b-3 of the Securities and Exchange
Commission with respect to any employee benefit plan of the Company or result
in the Program or awards thereunder losing their exempt status under said Rule
16b-3.


 


24.           EFFECTIVE DATE.  The Program was originally adopted by the Board of Directors on
October 13, 1995.


 


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