Exhibit 10.7


 


As Amended and Restated


Effective as of January 1, 2008


 


1998 PERFORMANCE INCENTIVE PLAN (PIP) RULES


409A DOCUMENT


 


The following rules shall govern the administration of the 1998
Abbott Laboratories Performance Incentive Plan (PIP) and any comparable
successor plan with respect to all amounts that are not Grandfathered Amounts.  Capitalized terms used but not otherwise
defined in these Rules shall have the meaning provided in the PIP.  These rules shall remain in effect until
amended by the Committee:


 


1.                       Fiscal Year. 
The term “fiscal year”, as used in the PIP, means the fiscal period from
time to time employed by Abbott for the purpose of reporting earnings to
shareholders.


 


2.                       Consolidated Net Income. 
“Consolidated Net Income” shall be the consolidated net income for such
fiscal year as stated in Abbott’s Audited Financial Statements.  Excluded from the calculation of consolidated
net income will be the effect of changes in GAAP and the tax effects thereon,
and extraordinary gains and loses and the tax effects thereon if presented in
the audited Consolidated Statement of Earnings.


 


3.                       Naming of Participants. 
For any fiscal year, all participants in the PIP must be named by the Committee
prior to the completion of the immediately preceding fiscal year.  A PIP participant may not be an active
participant in the MIP in the same fiscal year.


 


4.                       Inclusion in Pensionable Earnings. 
The full amount of any PIP award earned under Rule 5 will be
included in the participant’s pensionable earnings.


 


5.                       Time of Payment. 
Beginning with any award allocation paid after December 31, 1998, a
participant must direct payment or deferral of an allocation made to the participant
under the PIP by one or more of the following methods:


 


(a)                  In cash to the participant, which
payment shall be made no later than the last day of the “applicable 2 1⁄2 month
period”, as such term is defined in Treasury Regulation
§ 1.409A-1(b)(4)(i)(A);


 


(b)                 A portion in cash and deposited to a
grantor trust (the “Grantor Trust”) established by the participant (in a form
which the Committee determines is substantially similar to the trust in Exhibit A)
and the balance paid to the participant approximately equal to the participant’s
aggregate federal, state and local individual income and employment taxes;
provided that all payments or contributions 


 

















 


to the Grantor Trust and
participant contemplated by this Rule 5(b) shall be made no later
than the last day of the “applicable 2 1⁄2 month period”, as such term is defined
in Treasury Regulation § 1.409A-1(b)(4)(i)(A); or


 


(c)                 Deferral of payment until the time,
and in the manner determined in Rule 17.


 


Amounts paid under the PIP will
not be considered amounts paid under the MIP for purposes of subsections 3.3
and 3.4 and Section 4 of the MIP.  The
base salaries of PIP participants will not be considered for determination of
the MIP amount in subsection 3.3 of the MIP.


 


6.                       Time of Election.


 


(a)                  A participant must make the election
described in Rule 5 by filing it with the Committee before expiration of
the election period established by the Committee, which period shall end  no
later than December 31 of the fiscal year prior to the year during which
the performance incentive compensation is earned under the PIP.


 


(b)                 Notwithstanding the timing requirements
of Rule 6(a), an individual who newly becomes eligible to participate in
the PIP by being designated as a participant under Section 3.1 of the PIP
(and who was not eligible to participate in any other plan that would be
aggregated with the Plan under Treasury Regulation §1.409A-1(c)) may make the
an initial deferral election described in Rule 5 by filing it with the
Committee or its delegate within the thirty (30) day period immediately
following the date he or she first is designated as participant, provided,
that the compensation deferred pursuant to such election relates solely to
services performed after the date of such election.  For this purpose, an election shall be deemed
to apply to compensation paid for services performed after the election if the election
applies to no more than the amount prescribed by Treasury Regulation
§1.409A-2(a)(7)(i).


 


(c)                  Any election described in Rule 5
shall be irrevocable for the fiscal year to which the election applies.


 


7.                       Accounts. 
The Committee shall establish accounts for participants who have made
elections pursuant to Rule 5(b) or 5(c) as follows.


 


(a)                  The Committee will maintain a “Deferred
Account” in the name of each participant who has elected to defer payment of
all or a portion of his or her PIP award under Rule 5(c).  The Deferred Account shall consist of
allocations deferred according to Rule 5(c) and any adjustments made
in accordance with Rule 8.


 


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(b)                 The Committee will maintain two
separate Accounts, a “Pre-Tax Account” and an “After-Tax Account”, in the name
of each participant who has declined to defer allocations by electing to have a
portion of his or her PIP award deposited in cash to a Grantor Trust according
to Rule 5(b).  The Pre-Tax Account
shall consist of the aggregate of all allocations contemplated by Rule 5(b),
whether deposited to the participant’s Grantor Trust or made in cash to the
participant, and any adjustments made in accordance with Rule 9.  The After-Tax Account shall consist of
allocations deposited to the participant’s Grantor Trust in cash according to Rule 5(b) and
any adjustments made in accordance with Rule 10.


 


8.                       Adjustment of Deferred Accounts. 
At the end of each fiscal year, a participant’s Deferred Account will be
adjusted as follows:


 


(a)                  First, reduced by an amount equal to
any distribution made to the participant during the year according to Rule 17
or Rule 18;


 


(b)                 Next, increased by an amount equal
to any allocation for that year that is deferred according to Rule 5(c);
and


 


(c)                  Last, increased by an amount equal
to the interest earned for that year according to Rule 11.


 


9.                       Adjustment of Pre-Tax Accounts. 
At the end of each fiscal year, a participant’s Pre-Tax Account will be
adjusted as follows:


 


(a)                  First, reduced, in any year in which
the participant is entitled to receive a distribution from his or her Grantor
Trust, by an amount equal to the distribution that would have been made to the
participant if the aggregate amounts allocated according to Rule 5(b) had
instead been deferred under Rule 5(c);


 


(b)                 Next, increased by an amount equal
to any allocation for that year that is paid to the participant (including the
amount paid to the participant’s Grantor Trust) according to Rule 5(b);
and


 


(c)                  Last, increased by an amount equal
to the interest earned for that year according to Rule 11.


 


10.                 Adjustment of After-Tax Accounts. 
At the end of each fiscal year, a participant’s After-Tax Account will
be adjusted as follows:


 


(a)                  First, reduced, in any year in which
the participant is in receipt of a distribution from his or her Grantor Trust,
by an amount calculated as provided in Rule 28 which represents the
distribution for such year;


 


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(b)                 Next, increased by an amount equal
to the allocation for that year that is deposited in the participant’s Grantor
Trust according to Rule 5(b); and


 


(c)                  Last, increased by an amount equal
to the interest earned for that year according to Rule 11.


 


11.                 Interest Accruals on Accounts.


 


(a)                  As of the end of each fiscal year, a
participant’s Deferred Account or Pre-Tax Account, as applicable, shall be
credited with interest (“Interest”) at the following rate:


 


(i)                                     the average of the “prime rate” of
interest  published by The Wall Street
Journal (Mid-West Edition) or comparable successor quotation service on the
first business day of January and the last business day of each month of
the fiscal year; plus


 


(ii)                                  two hundred twenty-five (225) basis
points.


 


(b)                 As of the end of each fiscal year, a
participant’s After-Tax Account shall be credited with the amount of Interest
set forth above, multiplied by (one minus the aggregate of the applicable
federal, state and local individual income tax rates and employment tax rate,
determined in accordance with Rule 26 (the “After-Tax Interest”)).


 


(c)                  The Interest and After-Tax Interest,
as applicable, shall be credited on the conditions established by the
Committee, provided that any award allocation shall be considered to have been
made and credited to a participant’s Account as of the first day of the fiscal
year in which the award is made.


 


12.                 Guaranteed Rate Payments. 
In addition to any allocation made to a participant for any fiscal year
in accordance with Rule 5(b), Abbott shall also make a payment to a
participant’s Grantor Trust (a “Guaranteed Rate Payment”) for each year in
which the Grantor Trust is in effect.  The
Guaranteed Rate Payment shall equal the excess, if any, of the participant’s
Net Interest Accrual (as defined below) over the net earnings of the
participant’s Grantor Trust for the year, and shall be paid within the thirty (30)
days beginning April 1 of the following fiscal year.  A participant’s Net Interest Accrual for a
year is an amount equal to the After-Tax Interest credited to the participant’s
After-Tax Account for that year in accordance with Rule 11(b).


 


13.                 Grantor Trust Assets. 
Each participant’s Grantor Trust assets shall be invested solely in the
instruments specified by investment guidelines established by the
Committee.  Such investment guidelines,
once established, may be changed by the Committee, provided that any change
shall not take effect until the year following the year in which the change is
made and provided further that the instruments 


 


4

















 


specified
shall be consistent with the provisions of Section 3(b) of the form
of Grantor Trust attached hereto as Exhibit A.


 


14.                 Designation of Beneficiaries. 
Subject to the conditions and limitations set forth below, each
participant, and after a participant’s death, each primary beneficiary designated
by a participant in accordance with the provisions of this Rule 14, shall
have the right from time to time to designate a primary beneficiary or
beneficiaries and, successive or contingent beneficiary or beneficiaries to
receive unpaid amounts from the participant’s Deferred Account under the
PIP.  Beneficiaries may be a natural
person or persons or a fiduciary, such as a trustee of a trust or the legal
representative of an estate.  Any such
designation shall take effect upon the death of the participant or such
beneficiary, as the case may be, or in the case of any fiduciary beneficiary,
upon the termination of all of its duties (other than the duty to dispose of
the right to receive amounts remaining to be paid under the PIP).  The conditions and limitations relating to
the designation of beneficiaries are as follows:


 


(a)                  A nonfiduciary beneficiary shall
have the right to designate a further beneficiary or beneficiaries only if the
original participant or the next preceding primary beneficiary, as the case may
be, shall have expressly so provided in writing; and


 


(b)                 A fiduciary beneficiary shall
designate as a further beneficiary or beneficiaries only those persons or other
fiduciaries that are entitled to receive the amounts payable from the
participant’s account under the trust or estate of which it is a fiduciary.


 


Any beneficiary designation or grant of any power to any beneficiary
under this Rule 14 may be exercised only by an instrument in writing,
executed by the person making the designation or granting such power and filed
with the Secretary of Abbott during the person’s lifetime or prior to the
termination of a fiduciary’s duties.  If
a deceased participant or a deceased nonfiduciary beneficiary who had the right
to designate a beneficiary as provided above dies without having designated a
further beneficiary, or if no beneficiary designated as provided above is
living or qualified and acting, the Committee, in its discretion, may direct
distribution of the amount remaining from time to time to either: (i)  any
one or more or all of the next of kin (including the surviving spouse) of the
participant or the deceased beneficiary, as the case may be, and in such
proportions as the Committee determines; or (ii)  the legal representative
of the estate of the deceased participant or deceased beneficiary as the case
may be.


 


15.                 Non-assignability and Facility of
Payment.  Amounts payable to participants and their
beneficiaries under the PIP are not in any way subject to their debts and other
obligations, and may not be voluntarily or involuntarily sold, transferred or assigned;
provided that the provisions of these Rules shall not be construed as
restricting 


 


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in any way a
designation right granted to a beneficiary under Rule 14.  When a participant or the beneficiary of a
participant is under legal disability, or in the Committee’s opinion is in any
way incapacitated so as to be unable to manage his or her financial affairs,
the Committee may direct that payments shall be made to the participant’s or
beneficiary’s legal representative, or to a relative or friend of the
participant or beneficiary for the benefit of the participant or beneficiary,
or the Committee may direct the payment or distribution for the benefit of the
participant or beneficiary in any manner that the Committee determines.


 


16.                 Payer of Amounts Allocated to
Participants.  Any amount allocated to a participant in the
PIP and any interest credited thereto will be paid by the employer (or such
employer’s successor) by whom the participant was employed during the fiscal
year for which any amount was allocated, and for that purpose, if a participant
shall have been employed by two or more employers during any fiscal year the
amount allocated under the PIP for that year shall be an obligation of each of
the respective employers in proportion to the respective amounts of base salary
paid by each of them in that fiscal year.


 


17.                 Manner of Payment of Deferred
Accounts.  Subject to Rule 18, a participant shall
elect to receive payment of his Deferred Account in substantially equal annual
installments over a minimum period of ten years, or a longer period, at the
time of his deferral election under Rule 5.  Payment of a participant’s Deferred Account
shall commence on the first business day of January of the year following
the year in which the participant incurs a termination of employment.


 


18.                 Payment Upon Termination Following
Change in Control.  Notwithstanding any other provision of the
PIP or the provisions of any award made under the PIP, if a participant incurs
a termination of employment with Abbott and its subsidiaries for any reason within
two (2) years following the date of a Change in Control, provided that the
event constituting a Change in Control is also a “change in control event”, as
such term is defined in Treasury Regulation § 1.409A-3(i)(5): (a) with
respect to a participant whose allocations under the PIP are deferred in
accordance with Rule 5(c), the aggregate unpaid balance of the participant’s
Deferred Account shall be paid to such participant in a lump sum within thirty
(30) days following the date of such termination of employment, and (b) with
respect to a participant whose allocations under the PIP are made pursuant to Rule 5(b),
(i) the aggregate of the participant’s unpaid allocation under Rule 5(b) (if
any) for the fiscal year in which the termination occurs and (ii) a pro
rata portion of the unpaid Guaranteed Rate Payment under Rule 12
attributable to the portion of the year elapsed prior to the date of
termination, shall be paid to such participant’s Grantor Trust in a lump sum
within thirty (30) days following the date of such termination of employment.


 


19.                 Change in Control. 
A “Change in Control” shall be deemed to have occurred on the earliest
of the following dates:


 


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


 


(b)                 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 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
Abbott) whose appointment or election by the Board or nomination for election
by Abbott’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


 


(c)                  the date on which there is
consummated a merger or consolidation of Abbott or any direct or indirect
subsidiary of Abbott with any other corporation or other entity, other than (i) a
merger or consolidation (A) immediately following which the individuals
who comprise the Board immediately prior thereto constitute at least a majority
of the Board of Directors of Abbott, the entity surviving such merger or
consolidation or, if Abbott or the entity surviving such merger or
consolidation is then a subsidiary, the ultimate parent thereof and (B) which
results in the voting securities of Abbott 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 Abbott
or any subsidiary of Abbott, at least 50% of the combined voting power of the securities
of Abbott or such surviving entity or any parent thereof outstanding immediately
after such merger or consolidation, or (ii) a merger or consolidation
effected to implement a recapitalization of Abbott (or similar transaction) in
which no Person is or becomes the Beneficial Owner, directly or indirectly, of
securities of Abbott (not including in the securities Beneficially Owned by
such Person any securities acquired directly from Abbott or its Affiliates) representing
20% or more of the combined voting power of Abbott’s then outstanding
securities; or


 


(d)                 the date the shareholders of Abbott
approve a plan of complete liquidation or dissolution of Abbott or there is
consummated an agreement for the sale or disposition by Abbott of all or
substantially all of Abbott’s assets, other than a sale


 


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or disposition
by Abbott of all or substantially all of Abbott’s assets to an entity, at least
50% of the combined voting power of the voting securities of which are owned by
shareholders of Abbott, in combination with the ownership of any trustee or
other fiduciary holding securities under an employee benefit plan of Abbott or
any subsidiary of Abbott, in substantially the same proportions as their
ownership of Abbott 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 Abbott immediately prior to such transaction or
series of transactions continue to have  substantially
the same proportionate ownership in an entity which owns all or substantially
all of the assets of Abbott immediately following such transaction or series of
transactions.


 


For purposes of these Rules: “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; “Exchange Act” shall mean the Securities Exchange Act
of 1934, as amended from time to time; 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) Abbott or any of its subsidiaries, (ii) a trustee or
other fiduciary holding securities under an employee benefit plan of Abbott 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 Abbott in substantially the same
proportions as their ownership of stock of Abbott.


 


20.                 Potential Change in Control. 
A “Potential Change in Control” shall exist during any period in which
the circumstances described in paragraphs (a), (b), (c) or (d), below,
exist (provided, however, that a Potential Change in Control shall cease to
exist not later than the occurrence of a Change in Control):


 


(a)                  Abbott enters into an agreement, the
consummation of which would result in the occurrence of a Change in Control,
provided that a Potential Change in Control described in this paragraph (a) shall
cease to exist upon the expiration or other termination of all such agreements.


 


(b)                 Any Person (without regard to the
exclusions set forth in subsections (i) through (iv) of such
definition) publicly announces an intention to take or to consider taking
actions the consummation of which would constitute a Change in Control;
provided that a Potential Change in Control described in this paragraph (b) shall
cease to exist upon the withdrawal of such intention, or upon a


 


8

















 


determination
by the Board that there is no reasonable chance that such actions would be
consummated.


 


(c)                  Any Person becomes the Beneficial
Owner, directly or indirectly, of securities of Abbott representing 10% or more
of either the then outstanding shares of common stock of Abbott or the combined
voting power of Abbott’s then outstanding securities (not including any
securities beneficially owned by such Person which are or were acquired
directly from Abbott or its Affiliates).


 


(d)                 The Board adopts a resolution to the
effect that, for purposes of this Agreement, a Potential Change in Control
exists; provided that a Potential Change in Control described in this paragraph
(d) shall cease to exist upon a determination by the Board that the
reasons that gave rise to the resolution providing for the existence of a
Potential Change in Control have expired or no longer exist.


 


21.                 Prohibition Against Amendment. 
The provisions of Rules 18, 19, 20 and this Rule 21 may not be
amended or deleted, nor superseded by any other Rule, (i) during the
pendency of a Potential Change in Control and (ii) during the period beginning
on the date of a Change in Control and ending on the date five (5) years
following such Change in Control.


 


22.                 Reliance Upon Advice. 
The Board and the Committee may rely upon any information or advice
furnished to it by any Officer of Abbott or by Abbott’s independent auditors,
or other consultants, and shall be fully protected in relying upon such information
or advice.  No member of the Board or the
Committee shall be liable for any act or failure to act on their part,
excepting only any acts done or omitted to be done in bad faith, nor shall they
be liable for any act or failure to act of any other member.


 


23.                 Taxes. 
Any employer shall be entitled, if necessary or desirable, to pay, or
withhold the amount of any federal, state or local tax, attributable to any
amounts payable by it under the PIP after giving the person entitled to receive
such amount notice as far in advance as practicable, and may require payment from
the participant in an amount necessary to satisfy such taxes prior to remitting
such taxes.


 


24.                 Rights of Participants. 
Employment rights of participants with Abbott and its subsidiaries shall
not be enlarged or affected by reason of establishment of or inclusion as a participant
in the PIP.  Nothing contained in the PIP
shall require Abbott or any subsidiary to segregate or earmark any assets,
funds or property for the purpose of payment of any amounts which may have been
deferred.  The Deferred, Pre-Tax and
After-Tax Accounts established in accordance with Rule 7 are for the
convenience of the administration of the PIP and no trust relationship with
respect to such Accounts is intended or should be implied.  Participant’s rights shall be limited to payment
to them at the time or times and in such amounts as are contemplated by the PIP
and these Rules.  Any decision made by
the Board or the Committee, which is


 


9

















 


within the
sole and uncontrolled discretion of either, shall be conclusive and binding
upon the other and upon all other persons whomsoever.


 


25.                 Tax Adjustment Payment. 
In addition to the allocations provided in accordance with Rule 5,
each participant who has established a Grantor Trust (or, if the participant is
deceased, the beneficiary designated under the participant’s Grantor Trust)
shall be entitled to a Tax Adjustment Payment for each year in which the Grantor
Trust is in effect.  Payment of the Tax
Adjustment Payment shall be made by the employers (in such proportions as
Abbott shall designate) directly from their general corporate assets, no later
than the end of the calendar year in which the participant remits the related
taxes.  The “Tax Adjustment Payment”
shall equal:


 


(a)                  the amount necessary to compensate
the participant (or beneficiary) for the net increase in the participant’s (or
beneficiary’s) federal, state and local income taxes as a result of the
inclusion in his or her taxable income of the income of the participant’s Grantor
Trust and any Guaranteed Rate Payment for that year; plus


 


(b)                an amount necessary to compensate the participant (or
beneficiary) for the net increase in the taxes described in (a) above as a
result of the inclusion in his or her taxable income of any payment made
pursuant to this Rule 25.


 


26.                 Income Tax Assumptions. 
For purposes of these Rules, a participant’s federal income tax rate
shall be deemed to be the highest marginal rate of federal income individual
tax in effect in the calendar year in which a calculation under the Rules is
to be made, and state and local tax rates shall be deemed to be the highest
marginal rates of individual income tax in effect in the state and locality of
the participant’s residence on the date such a calculation is made, net of any
federal tax benefits without a benefit for any net capital losses. For purposes
of these Rules, a participant’s employment tax rate shall be deemed to be the
highest marginal rate of Federal Insurance Contribution Act tax in effect in the
calendar year in which a calculation under the applicable Rule is to be made.


 


27.                 Change of Conditions Relating to
Payments.  No change to the time of payment or the time
of commencement of payment and any period over which payment shall be made
shall be effected except in strict compliance with the subsequent election requirements
of Treasury Regulation § 1.409A-2(b) to the extent subject thereto.


 


28.                 Administrator’s Calculation of
Grantor Trust Distributions. The Administrator shall calculate the amount to be
distributed from a participant’s Grantor Trust in any year in which the
participant is entitled to a benefit distribution by multiplying (i) the
amount of the reduction determined in accordance with Rule 9(a), by (ii) a
fraction, the numerator of which is the balance in the participant’s After-Tax
Account as of the end of the prior fiscal year and the denominator of which is
the balance of the participant’s Pre-Tax Account as of that same date


 


29.                 Section 409A. 
To the extent applicable, it is intended that these Rules comply
with the provisions of Code Section 409A. 
The Rules will be administered and interpreted


 


10

















 


in a manner
consistent with this intent, and any provision that would cause the Rules to
fail to satisfy Code Section 409A will have no force and effect until
amended to comply therewith (which amendment may be retroactive to the extent
permitted by Code Section 409A). 
Notwithstanding anything contained herein to the contrary, for all
purposes of these Rules, a participant shall not be deemed to have had a
termination of employment until the participant has incurred a separation from
service as defined in Treasury Regulation §1.409A-1(h) and, to the extent
required to avoid accelerated taxation and/or tax penalties under Code Section 409A
and applicable guidance issued thereunder, payment of the amounts payable under
the Rules that would otherwise be payable during the six-month period
after the date of termination shall instead be paid on the first business day
after the expiration of such six-month period, plus interest thereon, at a rate
equal to the rate specified in Rule 11 (to the extent that such interest
is not already provided to the participant under Rule 12), from the
respective dates on which such amounts would otherwise have been paid until the
actual date of payment.  In addition, for
purposes of these Rules, each amount to be paid and each installment payment
shall be construed as a separate identified payment for purposes of Code Section 409A.


 


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Exhibit B


 


IRREVOCABLE
GRANTOR TRUST AGREEMENT


 


THIS
AGREEMENT, made this          day of                  ,
20    , by and between                                     
of                    ,
Illinois (the “grantor”), and The Northern Trust Company located at Chicago,
Illinois, as trustee (the “trustee”),


 


WITNESSETH THAT:


 


WHEREAS, the grantor desires to establish and
maintain a trust to hold certain benefits received by the grantor under the
1986 Abbott Laboratories Management Incentive Plan, as it may be amended from
time to time;


 


NOW, THEREFORE, IT IS AGREED as follows:


 

















 


ARTICLE I


 


INTRODUCTION


 


I-1                                  NAME.
This agreement and the trust hereby evidenced (the “trust”) may be referred to
as the “                    
20    Grantor Trust”.


 


I-2                                  THE
TRUST FUND. The “trust fund” as at any date means all property then held by the
trustee under this agreement.


 


I-3                                  STATUS
OF THE TRUST. The trust shall be irrevocable. The trust is intended to
constitute a grantor trust under Sections 671-678 of the Internal Revenue Code,
as amended, and shall be construed accordingly.


 


I-4                                  THE
ADMINISTRATOR. Abbott Laboratories (“Abbott”) shall act as the “administrator”
of the trust, and as such shall have certain powers, rights and duties under
this agreement as described below. Abbott will certify to the trustee from time
to time the person or persons authorized to act on behalf of Abbott as the
administrator. The trustee may rely on the latest certificate received without
further inquiry or verification.


 


I-5                                  ACCEPTANCE.
The trustee accepts the duties and obligations of the “trustee” hereunder,
agrees to accept funds delivered to it by the grantor or the administrator, and
agrees to hold such funds (and any proceeds from the investment of such funds)
in trust in accordance with this agreement.


 


ARTICLE II


 


DISTRIBUTION
OF THE TRUST FUND


 


II-1                              SEPARATE
ACCOUNTS. The administrator shall maintain two separate accounts under the
trust, a “rollout account” and a “deferred account.” Funds delivered to the
trustee shall be allocated between the accounts by the trustee as directed by
the administrator. As of the end of each calendar year, the administrator shall
charge each account with all distributions made from such account during that
year; and credit each account with its share of income and realized gains and
charge each account with its share of expenses and realized losses for the
year. The trustee shall not be required to make any separate investment of the
trust fund for the accounts, and may administer and invest all funds delivered
to it under the trust as one trust fund.


 


II-2                              DISTRIBUTIONS
FROM THE ROLLOUT ACCOUNT PRIOR TO THE GRANTOR’S DEATH. The trustee shall
distribute principal and accumulated income credited to the rollout account to
the grantor, if then living, at such times and in such amounts as the
administrator shall direct.


 

















 


II-3                              DISTRIBUTIONS
FROM THE DEFERRED ACCOUNT PRIOR TO THE GRANTOR’S DEATH. Principal and
accumulated income credited to the deferred account shall not be distributed
from the trust prior to the grantor’s retirement or other termination of
employment with Abbott or a subsidiary of Abbott (the grantor’s “settlement
date”); provided that, each year the administrator may direct the trustee to
distribute to the grantor a portion of the income of the deferred account for
that year, with the balance of such income to be accumulated in that account.
The administrator shall inform the trustee of the grantor’s settlement date.
Thereafter, the trustee shall distribute the amounts from time to time credited
to the deferred account to the grantor, if then living, in a series of annual
installments, with the amount of each installment computed by one of the
following methods:


 


(a)                                  The amount of each
installment shall be equal to the sum of: (i) the amount credited to the
deferred account as of the end of the year in which the grantor’s settlement
date occurs, divided by the number of years over which installments are to be
distributed; plus (ii) the net earnings credited to the deferred account
for the preceding year  (excluding the
year in which the grantor’s settlement date occurs).


 


(b)                                 The amount of each
installment shall be determined by dividing the amount credited to the deferred
account as of the end of the preceding year by the difference between (i) the
total number of years over which installments are to be distributed, and (ii) the
number of annual installment distributions previously made from the deferred
account.


 


(c)                                  Each installment
(after the first installment) shall be approximately equal, with the amount
comprised of the sum of: (i) the amount of the first installment, plus
interest thereon at the rate determined under the 1986 Abbott Laboratories
Management Incentive Plan, compounded annually; and (ii) the net earnings
credited to the deferred account for the preceding year.


 


(i)                                     the
foregoing, the final installment distribution made to the grantor under this
paragraph II-3 shall equal the total principal and accumulated income then held
in the trust fund. The grantor, by writing filed with the trustee and the
administrator on or before the end of the calendar year in which the grantor’s
settlement date occurs (or the end of the calendar year in which this trust is
established, if the grantor’s settlement date has already occurred), may select
both the period (which may not be less than 


 

















 


ten years from
the end of the calendar year in which the grantor’s settlement date occurred)
over which the installment distributions are to be made and the method of
computing the amount of each installment. In the absence of such a written
direction by the grantor, installment distributions shall be made over a period
of ten years, and the amount of each installment shall be computed by using the
method described in subparagraph (a) next above. Installment distributions
under this Paragraph II-3 shall be made as of January 1 of each year,
beginning with the calendar year following the year in which the grantor’s
settlement date occurs. The administrator shall inform the trustee of the
amount of each installment distribution under this paragraph II-3, and the
trustee shall be fully protected in relying on such information received from
the administrator.


 


II-4.                           DISTRIBUTIONS
FROM THE TRUST FUND AFTER THE GRANTOR’S DEATH. The grantor, from time to time
may name any person or persons (who may be named contingently or successively
and who may be natural persons or fiduciaries) to whom the principal of the
trust fund and all accrued or undistributed income therefrom shall be
distributed in a lump sum or, if the beneficiary is the grantor’s spouse (or a
trust for which the grantor’s spouse is the sole income beneficiary), in
installments, as directed by the grantor, upon the grantor’s death. If the
grantor directs an installment method of distribution to the spouse as
beneficiary, any amounts remaining at the death of the spouse beneficiary shall
be distributed in a lump sum to the executor or administrator of the spouse
beneficiary’s estate. If the grantor directs an installment method of
distribution to a trust for which the grantor’s spouse is the sole income
beneficiary, any amounts remaining at the death of the spouse shall be
distributed in a lump sum to such trust. Despite the foregoing, if (i) the
beneficiary is a trust for which the grantor’s spouse is the sole income
beneficiary, (ii) payments are being made pursuant to this paragraph II-4
other than in a lump sum and (iii) income earned by the trust fund for the
year exceeds the amount of the annual installment payment, then such trust may
elect to withdraw such excess income by written notice to the trustee. Each
designation shall revoke all prior designations, shall be in writing and shall
be effective only when filed by the grantor with the administrator during the
grantor’s lifetime. If the grantor fails to direct a method of distribution,
the distribution shall be made in a lump sum. If the grantor fails to designate
a beneficiary as provided above, then on the grantor’s death, the trustee shall
distribute the balance of the trust fund in a lump sum to the executor or
administrator of the grantor’s estate.


 


II-5                              FACILITY
OF PAYMENT. When a person entitled to a distribution hereunder is under legal
disability, or, in the trustee’s opinion, is in any way incapacitated so as to
be unable to manage his or her financial affairs, the trustee may 


 

















 


make such distribution to such person’s legal representative, or to a
relative or friend of such person for such person’s benefit. Any distribution
made in accordance with the preceding sentence shall be a full and complete
discharge of any liability for such distribution hereunder.


 


II-6                              PERPETUITIES.
Notwithstanding any other provisions of this agreement, on the day next
preceding the end of 21 years after the death of the last to die of the grantor
and the grantor’s descendants living on the date of this instrument, the
trustee shall immediately distribute any remaining balance in the trust to the
beneficiaries then entitled to distributions hereunder.


 


ARTICLE III


MANAGEMENT OF
THE TRUST FUND


 


III-1.                       GENERAL
POWERS. The trustee shall, with respect to the trust fund, have the following
powers, rights and duties in addition to those provided elsewhere in this
agreement or by law:


 


(a)                                  Subject
to the limitations of subparagraph (b) next below, to sell, contract to
sell, purchase, grant or exercise options to purchase, and otherwise deal with
all assets of the trust fund, in such way, for such considerations, and on such
terms and conditions as the trustee decides.


 


(b)                                 To
retain in cash such amounts as the trustee considers advisable; and to invest
and reinvest the balance of the trust fund, without distinction between
principal and income, in obligations of the United States Government and its
agencies or which are backed by the full faith and credit of the United States
Government or in any mutual fund, common trust fund or collective investment
fund which invests solely in such obligations; and any such investment made or
retained by the trustee in good faith shall be proper despite any resulting
risk or lack of diversification or marketability.


 


(c)                                  To
deposit cash in any depositary (including the banking department of the bank
acting as trustee) without liability for interest, and to invest cash in
savings accounts or time certificates of deposit bearing a reasonable rate of
interest in any such depositary.


 


(d)                                 To
invest, subject to the limitations of subparagraph (b) above, in any
common or commingled trust fund or funds maintained or administered by the
trustee solely for the investment of trust funds.


 

















 


(e)                                  To
borrow from anyone, with the administrator’s approval, such sum or sums from
time to time as the trustee considers desirable to carry out this trust, and to
mortgage or pledge all or part of the trust fund as security.


 


(f)                                    To
retain any funds or property subject to any dispute without liability for
interest and to decline to make payment or delivery thereof until final
adjudication by a court of competent jurisdiction or until an appropriate
release is obtained.


 


(g)                                 To
begin, maintain or defend any litigation necessary in connection with the
administration of this trust, except that the trustee shall not be obliged or
required to do so unless indemnified to the trustee’s satisfaction.


 


(h)                                 To
compromise, contest, settle or abandon claims or demands.


 


(i)                                     To
give proxies to vote stocks and other voting securities, to join in or oppose
(alone or jointly with others) voting trusts, mergers, consolidations,
foreclosures, reorganizations, liquidations, or other changes in the financial
structure of any corporation, and to exercise or sell stock subscription or
conversion rights.


 


(j)                                     To
hold securities or other property in the name of a nominee, in a depositary or
in any other way, with or without disclosing the trust relationship.


 


(k)                                  To
divide or distribute the trust fund in undivided interests or wholly or partly
in kind.


 


(l)                                     To
pay any tax imposed on or with respect to the trust; to defer making payment of
any such tax if it is indemnified to its satisfaction in the premises; and to
require before making any payment such release or other document from any
lawful taxing authority and such indemnity from the intended payee as the
trustee consider necessary for its protection.


 


(m)                               To
deal without restriction with the legal representative of the grantor’s estate
or the trustee or other legal representative of any trust created by the
grantor or a trust or estate in which a beneficiary has an interest, even
though 


 

















 


the trustee,
individually, shall be acting in such other capacity without liability for any
loss that may result.


 


(n)                                 To
appoint or remove by written instrument any bank or corporation qualified to
act as successor trustee, wherever located, as special trustee as to part or
all of the trust fund, including property as to which the trustee does not act,
and such special trustee, except as specifically limited or provided by this or
the appointing instrument, shall have all of the rights, titles, powers,
duties, discretions and immunities of the trustee, without liability for any
action taken or omitted to be taken under this or the appointing instrument.


 


(o)                                 To
appoint or remove by written instrument any bank, wherever located, as
custodian of part or all of the trust fund, and each such custodian shall have
such rights, powers, duties and discretions as are delegated to it by the
trustee.


 


(p)                                 To
employ agents, attorneys, accountants or other persons, and to delegate to them
such powers as the trustee considers desirable, and the trustee shall be
protected in acting or refraining from acting on the advice of persons so
employed without court action.


 


(q)                                 To
perform any and all other acts which in the trustee’s judgment are appropriate
for the proper management, investment and distribution of the trust fund.


 


III-2.                       PRINCIPAL
AND INCOME. Any income earned on the trust fund which is not distributed as
provided in Article II shall be accumulated and from time to time added to
the principal of the trust. The grantor’s interest in the trust shall include
all assets or other property held by the trustee hereunder, including principal
and accumulated income.


 


III-3.                       STATEMENTS.
The trustee shall prepare and deliver monthly to the administrator and annually
to the grantor, if then living, otherwise to each beneficiary then entitled to
distributions under this agreement, a statement (or series of statements)
setting forth (or which taken together set forth) all investments, receipts,
disbursements and other transactions effected by the trustee during the
reporting period; and showing the trust fund and the value thereof at the end
of such period.


 


III-4.                       COMPENSATION
AND EXPENSES. All reasonable costs, charges and expenses incurred in the
administration of this trust, including compensation to the trustee, any
compensation to agents, attorneys, accountants and other persons 


 

















 


employed by
the trustee, and expenses incurred in connection with the sale, investment and
reinvestment of the trust fund shall be paid from the trust fund.


 


ARTICLE IV


GENERAL
PROVISIONS


 


IV-1.                       INTERESTS
NOT TRANSFERABLE. The interests of the grantor or other persons entitled to
distributions hereunder are not subject to their debts or other obligations and
may not be voluntarily or involuntarily sold, transferred, alienated, assigned
or encumbered.


 


IV-2.                       DISAGREEMENT
AS TO ACTS. If there is a disagreement between the trustee and anyone as to any
act or transaction reported in any accounting, the trustee shall have the right
to a settlement of its account by any proper court.


 


IV-3.                       TRUSTEE’S
OBLIGATIONS. No power, duty or responsibility is imposed on the trustee except
as set forth in this agreement. The trustee is not obliged to determine whether
funds delivered to or distributions from the trust are proper under the trust,
or whether any tax is due or payable as a result of any such delivery or
distribution. The trustee shall be protected in making any distribution from
the trust as directed pursuant to Article II without inquiring as to
whether the distributee is entitled thereto; and the trustee shall not be
liable for any distribution made in good faith without written notice or
knowledge that the distribution is not proper under the terms of this
agreement.


 


IV-4.                       GOOD FAITH
ACTIONS. The trustee’s exercise or non-exercise of its powers and discretions
in good faith shall be conclusive on all persons. No one shall be obliged to
see to the application of any money paid or property delivered to the trustee.
The certificate of the trustee that it is acting according to this agreement
will fully protect all persons dealing with the trustee.


 


IV-5.                       WAIVER OF
NOTICE. Any notice required under this agreement may be waived by the person
entitled to such notice.


 


IV-6.                       CONTROLLING
LAW. The laws of the State of Illinois shall govern the interpretation and
validity of the provisions of this agreement and all questions relating to the
management, administration, investment and distribution of the trust hereby
created.


 


IV-7.                       SUCCESSORS.
This agreement shall be binding on all persons entitled to distributions
hereunder and their respective heirs and legal representatives, and on the
trustee and its successors.


 


ARTICLE V


CHANGES IN
TRUSTEE


 


V-1.                           RESIGNATION
OR REMOVAL OF TRUSTEE. The trustee may resign at any time by giving thirty (30)
days’ advance written notice to the administrator 


 

















 


and the
grantor. The administrator may remove a trustee by written notice to the
trustee and the grantor.


 


V-2.                           APPOINTMENT
OF SUCCESSOR TRUSTEE. The administrator shall fill any vacancy in the office of
trustee as soon as practicable by written notice to the successor trustee; and
shall give prompt written notice thereof to the grantor, if then living,
otherwise to each beneficiary then entitled to payments or distributions under
this agreement. A successor trustee shall be a bank (as defined in Section 581
of the Internal Revenue Code, as amended).


 


V-3.                           DUTIES
OF RESIGNING OR REMOVED TRUSTEE AND OF SUCCESSOR TRUSTEE. A trustee that
resigns or is removed shall furnish promptly to the administrator and the
successor trustee an account of its administration of the trust from the date
of its last account. Each successor trustee shall succeed to the title to the
trust fund vested in its predecessor without the signing or filing of any
instrument, but each predecessor trustee shall execute all documents and do all
acts necessary to vest such title of record in the successor trustee. Each
successor trustee shall have all the powers conferred by this agreement as if
originally named trustee. No successor trustee shall be personally liable for
any act or failure to act of a predecessor trustee. With the approval of the
administrator, a successor trustee may accept the account furnished and the
property delivered by a predecessor trustee without incurring any liability for
so doing, and such acceptance will be complete discharge to the predecessor
trustee.


 


ARTICLE VI


AMENDMENT AND
TERMINATION


 


VI-1.                       AMENDMENT.
With the consent of the administrator, this trust may be amended from time to
time by the grantor, if then living, otherwise by a majority of the
beneficiaries then entitled to payments or distributions hereunder, except as
follows:


 


(a)                                  The
duties and liabilities of the trustee cannot be changed substantially without
its consent.


 


(b)                                 This
trust may not be amended so as to make the trust revocable.


 


 VI-2.                    TERMINATION. This trust shall not
terminate, and all rights, titles, powers, duties, discretions and immunities
imposed on or reserved to the trustee, the administrator, the grantor and the
beneficiaries shall continue in effect, until all assets of the trust have been
distributed by the trustee as provided in Article II.


 

















 


*      *      *


 


IN WITNESS WHEREOF, the grantor and the
trustee have executed this agreement as of the day and year first above
written.


 


 


	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Grantor

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The Northern Trust Company as Trustee

  
	
   

  	
   

  	
  By

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its