Exhibit
10.1


 


ABBOTT
LABORATORIES


1996
INCENTIVE STOCK PROGRAM


(as amended and restated through the


2nd
Amendment February 20, 2004)


 


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
receiving Restricted Stock Awards under paragraph 13 and Non-qualified Stock
Options 


 


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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 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 


 


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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 AND RESTRICTED STOCK
UNITS


 


(a)                                  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).


 


(b)                                 RESTRICTED STOCK UNITS.  Restricted Stock Units will consist of an
unfunded promise to deliver shares of stock at some future date to participants
without other payment therefor as additional compensation for their services to
the Company or any of its subsidiaries. 
Stock delivered under this paragraph 10 (b) shall be satisfied from the
Company’s available treasury shares. 
Restricted Stock Units granted under this paragraph 10(b) 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 stock units, the rights of the Company to provide for the forfeiture of
such stock units upon termination of the participant’s employment within
specified periods and the right to receive dividend equivalent payments.


 


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(c)                                  No more than ten percent (10%) of the total
number of shares available for grant in any calendar year may be granted as
Restricted Stock Units or Restricted Stock Awards (in the aggregate) 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
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 


 


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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.


 


(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.


 


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(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 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 


 


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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 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 


 


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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 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, 


 


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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.


 


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 


 


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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


 


(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 


 


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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 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.


 


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(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.


 


(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 


 


14





















 


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 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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