Document:

Exhibit 10.6

 

Amended
and Restated effective December 12, 2003

 

ABBOTT LABORATORIES
NON-EMPLOYEE DIRECTORS’ FEE PLAN

SECTION 1.

PURPOSE

ABBOTT LABORATORIES
NON-EMPLOYEE DIRECTORS’ FEE PLAN - referred to below as the “Plan” - has been
established by ABBOTT LABORATORIES - referred to below as the “Company” - to
attract and retain as members of its Board of Directors persons who are not
full-time employees of the Company or any of its subsidiaries but whose
business experience and judgment are a valuable asset to the Company and its
subsidiaries.

SECTION 2.

DIRECTORS COVERED

As used in the Plan, the
term “Director” means any person who is elected to the Board of Directors of
the Company in April, 1962 or at any time thereafter, and is not a full-time
employee of the Company or any of its subsidiaries.

SECTION 3.

FEES PAYABLE TO DIRECTORS

3.1           Each
Director shall be entitled to a deferred monthly fee of Six Thousand Six
Hundred Sixty-Seven Dollars ($6,667.00) for each calendar month or portion
thereof (excluding the month in which he is first elected a Director) that he
holds such office with the Company.

3.2           A
Director who serves as Chairman of the Executive Committee of the Board of
Directors shall be entitled to a deferred monthly fee of One Thousand Six
Hundred Dollars ($1,600.00) for each calendar month or portion thereof
(excluding the month in which he is first elected to such position) that he
holds such position.

3.3           A
Director who serves as Chairman of the Audit Committee of the Board of
Directors shall be entitled to a deferred monthly fee of One Thousand Dollars
($1,000.00) for each calendar month or portion thereof (excluding the month in
which he is first elected to such position) that he holds such position.

3.4           A
Director who serves as Chairman of the Compensation Committee of the Board of
Directors shall be entitled to a deferred monthly fee of One Thousand Dollars
($1,000.00) for each calendar month or portion thereof (excluding the month in
which he is first elected to such position) that he holds such position.

3.5           A
Director who serves as Chairman of the Nominations Committee of the Board of
Directors shall be entitled to a deferred monthly fee of One Thousand Dollars
($1,000.00) for each calendar month or portion thereof (excluding the month in
which he is first elected to such position) that he holds such position.

 

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3.6           A
Director who serves as Chairman of any other Committee created by this Board of
Directors shall be entitled to a deferred monthly fee of One Thousand Dollars
($1,000.00) for each calendar month or portion thereof (excluding the month in
which he is first elected to such position) that he holds such position.

3.7           A
Director’s Deferred Fee Account shall be credited with interest annually.
During the calendar years 1968 and prior, the rate of interest credited to
deferred fees shall be four (4) percent per annum. During the calendar years
1969 through 1992, the rate of interest credited to deferred fees shall be the
average of the prime rates being charged by the two largest commercial banks in
the City of Chicago as of the end of the month coincident with or last
preceding the date upon which said interest is so credited. During the calendar
years 1993 and subsequent, the rate of interest credited to deferred fees shall
be equal to: (a) the average of the prime rates being charged by the two
largest commercial banks in the City of Chicago as of the end of the month
coincident with or last preceding the date upon which said interest is so
credited; plus (b) two hundred twenty-five (225) basis points. For purposes of
the provisions of the Plan, the term “deferred fees” shall include “deferred
monthly fees,” and “deferred meeting fees,” and shall also include any such
interest credited thereon.

SECTION 4.

PAYMENT OF DIRECTORS’ FEES

4.1           A
Director’s deferred fees earned pursuant to the Plan shall commence to be paid
on the first day of the calendar month next following the earlier of his death
or his attainment of age sixty-five (65) if he is not then serving as a
Director, or the termination of his service as a Director if he serves as a
Director after the attainment of age sixty-five (65); provided that any
Director may, by written notice filed with the Secretary of the Company, elect
to receive current payment of all or any portion of the monthly and meeting
fees earned by him in calendar years subsequent to the calendar year in which
he files such notice (or all or any portion of such fees earned by him in the
calendar year he first becomes a Director, if such notice is filed within 30
days of becoming a Director), in which case such fees or the portion thereof so
designated earned in such calendar years shall not be deferred but shall be
paid quarterly as earned and no interest shall be credited thereon. Such
election may be revoked or modified by any Director by written notice to the
Secretary of the Company as to fees to be earned by him in calendar years
subsequent to the calendar year in which he files such notice.

4.2           After
a Director’s deferred fees shall have commenced to be payable pursuant to
Paragraph 4.1 they shall be payable in annual installments in the order in
which they shall have been deferred (i.e. the deferred fees for the earliest
year of service as a Director will be paid on the date provided for in Section
4.1, the deferred fees for the next earliest year of service as a Director will
be paid on the anniversary of the payment of the first installment, etc.).

4.3           A
Director’s deferred fees shall continue to be paid until all deferred fees
which he is entitled to receive under the Plan shall have been paid to him (or,
in case of his death, to his beneficiary).

 

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4.4           Notwithstanding
any other provisions of the Plan, if a Director’s service as a Director should
terminate for any reason within five (5) years after the date of a Change in
Control, the aggregate unpaid balance of such Director’s deferred fees plus all
unpaid interest credited thereon, shall be paid to such Director in a lump sum
within thirty (30) days following the date of such termination.

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

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

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

(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 

 

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Owner, directly or indirectly, of securities of the
Company (not including in the securities Beneficially Owned by such Person any
securities acquired directly from the Company or its Affiliates) representing
20% or more of the combined voting power of the Company’s then outstanding
securities; or

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

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

4.6           A
“Potential Change in Control” shall exist during any period in which the
circumstances described in paragraphs (i), (ii), (iii) or (iv), below, exist
(provided, however, that a Potential Change in Control shall cease to exist not
later than the occurrence of a Change in Control):

 

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(i)        The Company 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.

(ii)     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 determination by the Board of Directors that there is
no reasonable chance that such actions would be consummated.

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

(iv) The Board of Directors
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 (iv) shall cease to exist upon a determination by
the Board of Directors 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.

4.7           The
provisions of Paragraphs 4.4, 4.5, 4.6 and this Paragraph 4.7 may not be
amended or deleted, nor superseded by any other provision of this Plan, (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.

SECTION 5.

DIRECTORS’ RETIREMENT BENEFIT

5.1           Effective
April 30, 1998, each of the persons serving as a Director on December 12, 1997
shall be credited with a retirement benefit of $4,167 a month for 120 months of
continuous service and no additional retirement benefits shall accrue under the
Plan. Each of the persons serving as a Director on December 12, 1997 may elect:
(a) to have his or her retirement benefit under the Plan treated as provided in
Section 5.2 of the Plan; or (b) to have the present value of that retirement
benefit credited to an unfunded phantom stock account and converted into
phantom stock units based on the closing price of the Company’s common stock on
April 30, 1998, with those phantom stock units then being credited with the
same cash and stock dividends, stock splits and other distributions and
adjustments as are paid on the Company’s common stock. The phantom stock units
shall be payable to the Director in annual payments commencing on the first day
of the calendar month next following the earlier of the Director’s death or
termination of service 

 

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as a Director, in an amount determined by the closing price
of the Company’s common stock on the first business day preceding the payment
date. Unless the retirement benefit is terminated, the annual benefit shall
continue to be paid on the anniversary of the day on which the first such
retirement benefit payment was made, until the benefit has been paid for ten
years, or until the death of the Director or surviving spouse, if earlier. If a
Director should die with such benefit still in effect, prior to receipt of all
payments due hereunder, the annual benefit shall continue to be paid to the
surviving spouse of such Director until all payments due hereunder have been
made or until the death of the surviving spouse, if earlier.

5.2           Any
person serving as a Director on December 12, 1997 who elects to have his or her
retirement benefit paid pursuant to this Section 5.2 shall receive a monthly
benefit equal to $4,167. Payment of the monthly benefit shall commence on the
first day of the calendar month next following the earlier of the Director’s
death or termination of service as a Director. Unless the retirement benefit is
terminated, the monthly benefit shall continue to be paid on the first day of
each calendar month thereafter, until the benefit has been paid for one hundred
and twenty (120) months, or until the death of the Director or surviving
spouse, if earlier. If a Director should die with such benefit still in effect,
prior to receipt of all payments due hereunder, the monthly benefit shall
continue to the surviving spouse of such Director until all payments due
hereunder have been made or until the death of the surviving spouse, if
earlier.

5.3           Directors
who retired on or before December 12, 1997 will receive the form and amount of
retirement benefit payable under the terms of the Plan in effect at the time of
their retirement.

5.4           Each
Director who is granted a retirement benefit hereunder shall make him or
herself available for such consultation with the Board of Directors or any
committee or member thereof, as may be reasonably requested from time to time
by the Chairman of the Board of Directors, following such Director’s
termination of service as a Director. The Company shall reimburse each such
Director for all reasonable travel, lodging and subsistence expenses incurred
by the Director at the request of the Company in rendering such consultation.
The Company may terminate the retirement benefit if the Director should fail to
render such consultation, unless prevented by disability or other reason beyond
the Director’s control.

5.5           It
is recognized that during a Director’s period of service as a Director and as a
consultant hereunder, a Director will acquire knowledge of the affairs of the
Company and its subsidiaries, the disclosure of which would be contrary to the
best interests of the Company. Accordingly, the Company may terminate the
retirement benefit if, without the express consent of the Company, the Director
accepts election to the Board of Directors of, acquires a partnership or
proprietary interest in, or renders services as an employee or consultant to,
any business entity which is engaged in substantial competition with the
Company or any of its subsidiaries.

 

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5.6           An
individual will be considered a Director’s “surviving spouse” for purposes of
this Section 5 only if the Director and such individual were married in a
religious or civil ceremony recognized under the laws of the state where the
marriage was contracted and the marriage remained legally effective at the date
of the Director’s death.

SECTION 6.

CONVERSION TO COMMON STOCK UNITS

6.1           Any
Director who is then serving as a director may, by written notice filed with
the Secretary of the Company, elect to have all or any portion of deferred fees
previously earned but not yet paid, transferred from the Director’s Deferred
Fee Account to a Stock Account maintained on his or her behalf pursuant to
paragraph 9.3. Any election as to a portion of such fees shall be expressed as
a percentage and the same percentage shall be applied to all such fees
regardless of the calendar year in which earned or to all deferred fees earned
in designated calendar years, as specified by the Director. A Director may make
no more than one election under this paragraph 6.l in any calendar year. All
such elections may apply only to deferred fees for which an election has not
previously been made and shall be irrevocable.

6.2           Any
Director may, by written notice filed with the Secretary of the Company, elect
to have all or any portion of deferred fees earned subsequent to the date such
notice is filed credited to a Stock Account established under this Section 6.
Fees covered by such election shall be credited to such account at the end of
each calendar quarter in, or for which, such fees are earned. Such election may
be revoked or modified by such Director, by written notice filed with the
Secretary of the Company, as to deferred fees to be earned in calendar years
subsequent to the calendar year such notice is filed, but shall be irrevocable
as to deferred fees earned prior to such year.

6.3           Deferred
fees credited to a Stock Account under paragraph 6.1 shall be converted to
Common Stock Units by dividing the deferred fees so credited by the closing
price of common shares of the Company on the date notice of election under
paragraph 6.1 is received by the Company (or the next business day, if there
are no sales on such date) as reported on the New York Stock Exchange Composite
Reporting System. Deferred fees credited to a Stock Account under paragraph 6.2
shall be converted to Common Stock Units by dividing the deferred fees so
credited by the closing price of common shares of the Company as of the last
business day of the calendar quarter for which the credit is made, as reported
on the New York Stock Exchange Composite Reporting System.

6.4           Each
Common Stock Unit shall be credited with the same cash and stock dividends,
stock splits and other distributions and adjustments as are received by one
common share of the Company. All cash dividends and other cash distributions
credited to Common Stock Units shall be converted to additional Common Stock
Units by dividing each such dividend or distribution by the closing price of
common shares of the Company on the payment date for such dividend or
distribution, as reported by the New York Stock Exchange Composite Reporting
System.

 

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6.5           The
value of the Common Stock Units credited each Director shall be paid the
Director in cash on the dates specified in paragraph 4.2 (or, if applicable,
paragraph 4.4). The amount of each payment shall be determined by multiplying
the Common Stock Units payable on each date specified in paragraph 4.2 (or, if
applicable, paragraph 4.4) by the closing price of common shares of the Company
on the day prior to that date (or the next preceding business day if there are
no sales on such date), as reported by the New York Stock Exchange Composite
Reporting System.

SECTION 7.

MISCELLANEOUS

7.1           Each
Director or former Director entitled to payment of deferred fees hereunder,
from time to time may name any person or persons (who may be named contingently
or successively) to whom any deferred Director’s fees earned by him and payable
to him are to be paid in case of his death before he receives any or all of
such deferred Director’s fees.  Each
designation will revoke all prior designations by the same Director or former
Director, shall be in form prescribed by the Company, and will be effective
only when filed by the Director or former Director in writing with the
Secretary of the Company during his lifetime. If a deceased Director or former
Director shall have failed to name a beneficiary in the manner provided above,
or if the beneficiary named by a deceased Director or former Director dies
before him or before payment of all the Director’s or former Director’s
deferred Directors’ fees, the Company, in its discretion, may direct payment in
a single sum of any remaining deferred Directors’ fees to either:

(a)                                  any one or more or all of the next of kin (including the
surviving spouse) of the Director or former Director, and in such proportions
as the Company determines; or

(b)                                 the legal representative or representatives of the estate of
the last to die of the Director or former Director and his last surviving
beneficiary.

The person or persons to whom any deceased
Director’s or former Director’s deferred Directors’ fees are payable under this
paragraph will be referred to as his “beneficiary.”

7.2           Establishment
of the Plan and coverage thereunder of any person shall not be construed to
confer any right on the part of such person to be nominated for reelection to
the Board of Directors of the Company, or to be reelected to the Board of
Directors.

7.3           Payment
of deferred Directors’ fees will be made only to the person entitled thereto in
accordance with the terms of the Plan, and deferred Directors’ fees are not in
any way subject to the debts or other obligations of persons entitled thereto,
and may not be voluntarily or involuntarily sold, transferred or assigned. When
a person entitled to a payment under the Plan is under legal disability or, in
the Company’s opinion, is in any way incapacitated so as to be unable to manage
his financial affairs, the Company may direct that payment be made to such
person’s legal representative, or to a relative or friend of such person for
his benefit. Any payment made in accordance with the preceding sentence shall
be in complete discharge of the Company’s obligation to make such payment under
the Plan.

 

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7.4           Any
action required or permitted to be taken by the Company under the terms of the
Plan shall be by affirmative vote of a majority of the members of the Board of
Directors then in office.

SECTION 8.

AMENDMENT AND DISCONTINUANCE

While the Company expects to
continue the Plan, it must necessarily reserve, and does hereby reserve, the
right to amend or discontinue the Plan at any time; provided, however, that any
amendment or discontinuance of the Plan shall be prospective in operation only,
and shall not affect the payment of any deferred Directors’ fees theretofore
earned by any Director, or the conditions under which any such fees are to be
paid or forfeited under the Plan, unless the Director affected shall expressly
consent thereto.

SECTION 9.

ALTERNATE PAYMENT OF DEFERRED FEES

9.1           By
written notice filed with the Secretary of the Company prior to calendar years
beginning after December 31, 1988 (or, for the calendar year he first becomes a
Director within 30 days of becoming a Director), a Director may elect to
receive all or any portion of his deferred fees earned in such calendar years
in a lump sum in accordance with the provisions of this Section 9. An election
under this subsection 9.1 may be revoked or modified by the Director by written
notice to the Secretary of the Company as to deferred fees earned under Section
3 in calendar years beginning after the calendar year in which he files such
notice. Any amounts that were deferred for calendar years beginning before
January 1, 1989 shall automatically be paid as provided in this Section 9.

9.2           If
payment of a Director’s deferred fees is made pursuant to paragraph 9.1, a
portion of such fees shall be paid in cash for the Director directly to a
“Grantor Trust” established by the Director, provided such trust is in a form
which the Company determines to be substantially similar to the trust attached
to this plan as Exhibit A; and the balance of the deferred fees shall be paid
in cash directly to the Director, provided that the payment made directly to
the Director shall approximate the aggregate federal, state and local
individual income taxes attributable to the deferred fees paid pursuant to this
paragraph 9.2.

9.3           The
Company will establish and maintain four separate accounts in the name of each
Director, “a Deferred Fee Account”, a “Deferred Fee Trust Account”, a “Stock
Account” and a “Stock Trust Account”. The Deferred Fee Account shall reflect
the deferred fees and interest to be credited to a Director pursuant to Section
3. The Deferred Fee Trust Account shall reflect any deferred fees paid in cash
to a Director (including amounts paid to a Director’s Grantor Trust and
allocated to the deferred account maintained thereunder) pursuant to paragraph
9.2 and any adjustments made pursuant to paragraph 9.4. The Stock Account shall
reflect the deferred fees converted to Common Stock Units pursuant to Section 6
and any adjustments made pursuant to that Section. The Stock Trust Account
shall reflect deferred fees that have been converted to 

 

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Common Stock Units under Section 6 and paid in cash to a
Director (including amounts paid to a Director’s Grantor Trust and allocated to
the stock account maintained thereunder) pursuant to paragraph 9.2 and any
adjustments made pursuant to paragraph 9.5. The Accounts established pursuant
to this paragraph 9.3 are for the convenience of the administration of the plan
and no trust relationship with respect to such Accounts is intended or should
be implied.

9.4           As
of the end of each calendar year, the Company shall adjust each Director’s
Deferred Fee Trust Account as follows:

(a)                                  FIRST, charge an amount equal to the product of: (i) any
payments made to the Director during that year from the deferred account
maintained under his or her Grantor Trust (other than distributions of trust
earnings in excess of the Net Interest Accrual authorized by the administrator
of the trust to provide for the Tax Gross Up under paragraph 9.9 below);
multiplied by (ii) a fraction, the numerator of which is the balance in the
Director’s Deferred Fee Trust Account as of the end of the prior calendar year
and the denominator of which is the balance in the deferred account maintained
under the Director’s Grantor Trust (as determined by the administrator of the
trust) as of that same date;

(b)                                 NEXT, credit an amount equal to the deferred fees that have
not been converted to Common Stock Units that are paid that year to the
Director (including the amount paid to the Director’s Grantor Trust and
allocated to the deferred account maintained thereunder) pursuant to paragraph
9.2; and

(c)                                  FINALLY, credit an amount equal to the Interest Accrual
earned for that year pursuant to paragraph 9.6.

9.5           As
of the end of each calendar year, the Company shall adjust each Director’s
Stock Trust Account as follows:

(a)                                  FIRST, charge an amount equal to the product of: (i) any
payments made to the Director during that year from the stock account
maintained under his or her Grantor Trust (other than distributions of trust
earnings authorized by the administrator of the trust to provide for the Tax
Gross Up under paragraph 9.9 below); multiplied by (ii) a fraction, the
numerator of which is the balance in the Director’s Stock Trust Account as of
the end of the prior calendar year and the denominator of which is the balance
in the stock account maintained under the Director’s Grantor Trust (as
determined by the administrator of the trust) as of that same date;

(b)                                 NEXT, credit an amount equal to the deferred fees that have
been converted to Common Stock Units that are paid that year to the Director
(including the amount paid to the Director’s Grantor Trust and allocated to the
stock account maintained thereunder) pursuant to paragraph 9.2; and

 

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(c)                                  FINALLY, credit an amount equal to the Book Value Adjustments
to be made for that year pursuant to paragraph 9.6.

9.6           As
of the end of each calendar year, a Director’s Deferred Fee Trust Account shall
be credited with interest at the rate described in paragraph 3.7. Any amount so
credited shall be referred to as a Director’s “Interest Accrual”. As of that
same date, a Director’s Stock Trust Account shall be adjusted as provided in
paragraph 6.4, and shall also be adjusted to reflect the increase or decrease
in the fair market value of the Company’s common stock determined in accordance
with paragraph 6.5. Such adjustments shall be referred to as “Book Value
Adjustments.”

9.7           In
addition to any fees earned by a Director under Section 3 of this plan or paid
under paragraphs 4.1 or 9.1 the Company shall also make a payment to a
Director’s Grantor Trust (a “Guaranteed Rate Payment”), to be credited to the
deferred account maintained thereunder, for any year in which the net income
credited to the deferred account maintained under such trust does not equal or
exceed the Director’s Net Interest Accrual for that year. A Director’s “Net
Interest Accrual” for a year is an amount equal to: (a) the Interest Accrual
credited to the Director’s Deferred Fee Trust Account for that year; less (b)
the product of (i) the amount of such Interest Accrual, multiplied by (ii) the
aggregate of the federal, state and local individual income tax rates
(determined in accordance with paragraph 9.10). The Guaranteed Rate Payment
shall equal the difference between the Director’s Net Interest Accrual and the
net income credited to the deferred account maintained under the Director’s
Grantor Trust for the year, and shall be paid within 90 days of the end of that
year.

9.8           The
Company shall also make a payment to a Director’s Grantor Trust (a “Guaranteed
Principal Payment”), to be credited to the stock account maintained thereunder,
to the extent that the balance in the stock account as of the end of any
calendar year is less than 75 percent of the balance of the Director’s Stock
Trust Account (net of federal, state and local income taxes) as of that same
date. For the calendar year in which the last installment distribution is made
from the Director’s Grantor Trust, the payment made under this paragraph 9.8
shall equal the amount, if any, needed to increase the fair market value of the
stock account maintained under the Director’s Grantor Trust; such that if a
distribution of the stock account were then made to the Director, the Director
would receive the same amount he or she would have received (net of federal,
state and local income taxes) if his or her Stock Trust Account were to be
distributed on that same date with the deferred fees that had been allocated to
that Account taxed at the federal, state and local income tax rates in effect
on the date the fees were credited to the Account and the balance of the
Account taxed at the federal, state and local income tax rates in effect on the
date of the distribution. Payments required under this paragraph 9.8 shall be
made within 90 days of the end of the calendar year, except the last payment
which shall be made not later than the due date of the last installment
distribution from the Director’s Grantor Trust.

9.9           In
addition to the fees provided under Section 3, each Director (or, if the
Director is deceased, the beneficiary designated under the Director’s Grantor
Trust) shall be entitled to a Tax Gross Up payment for each year there is a
balance in his or her Deferred Fee Trust Account or Stock Trust Account. The
“Tax Gross Up” shall 

 

11

 

approximate: (a) the amount necessary to compensate the
Director (or beneficiary) for the net increase in his or her federal, state and
local income taxes as a result of the inclusion in the Director’s (or
beneficiary’s) taxable income of the income of his or her Grantor Trust and any
Guaranteed Rate and Guaranteed Principal Payments for that year; less (b) any
distribution to the Director (or beneficiary) of his or her Grantor Trust’s net
earnings for that year; plus (c) an amount necessary to compensate the Director
(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 paragraph 9.9.

9.10         For
purposes of this Section, a Director’s federal income tax rate shall be deemed
to be the highest marginal rate of federal individual income tax in effect in
the calendar year in which a calculation under this Section 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 Director’s
residence on the date such a calculation is made, net of any federal tax
benefits. Notwithstanding the preceding sentence, if a Director is not a
citizen or resident of the United States, his or her income tax rates shall be
deemed to be the highest marginal income tax rates actually imposed on the
Director’s benefits under this Plan or earnings under his or her Grantor Trust.

9.11         If a
Director’s deferred fees have been paid to a Grantor Trust(s) pursuant to
paragraph 9.2, then at any time (and from time to time) prior to the Director’s
retirement the Director may elect to have those deferred fees paid to him or
her from the Grantor Trust(s) either:

(i)        in the order in which they were earned (i.e., the fees for
the earliest year of service as a Director will be the first fees distributed
from the Grantor Trust(s), the fees for the next earliest year of service as a
Director will be paid on the anniversary of the payment of the first
installment, etc.), or

(ii)     in reverse chronological order from the order in which they
were earned (i.e., the fees for the Director’s last year of service as a
Director will be the first fees distributed from the Grantor Trust(s), the fees
for the penultimate year of service as a Director will be paid on the
anniversary of the payment of the first installment, etc.).

If a Director fails to elect a manner of
payment for his or her deferred fees, then those deferred fees will be paid to
the Director in the order in which they were earned. The date on which payments
commence and the other terms governing distributions from the Grantor Trust(s)
shall be determined in accordance with the terms of the Grantor Trust(s). A
Director’s deferred fees shall continue to be paid until all deferred fees to
which the Director is entitled to receive under the Plan shall have been paid
in accordance with the terms of the Grantor Trust(s).

 

12

 

 

Exhibit A

 

IRREVOCABLE GRANTOR
TRUST AGREEMENT

 

 

THIS
RESTATED AGREEMENT, made this ______ day of                     ,
2002, by and between                     
of                                         ,
                      (the “grantor”), and The Northern Trust
Company located at Chicago, Illinois, as trustee (the “trustee”),

 

WITNESSETH
THAT:

 

WHEREAS,
the grantor has established a trust known as the “                    Grantor
Trust”, dated                     ,
to hold certain benefits received by the grantor under the Abbott Laboratories
Non-Employee Directors’ Fee Plan, as it may be amended from time to time; and

 

WHEREAS,
the grantor, with the consent of the administrator of the referenced trust,
desires to amend the agreement creating the referenced trust (“trust
agreement”) in many respects and believes the trust agreement, as so amended,
would be easier to understand if restated.

 

NOW,
THEREFORE, the grantor amends the trust agreement by substituting for it and
all prior amendments the following provisions which set forth all of the terms
and conditions relating to the administration, investment and distribution of
the trust property after this date:

 

ARTICLE
I

Introduction

 

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

 

1

 

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 “deferred account” and a “stock 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 be required to make
separate investments of the trust fund for the accounts, and may not administer
and invest all funds delivered to it under the trust as one trust fund.

 

II-2.  Distributions Prior to the Grantor’s
Death.  Principal and accumulated
income shall not be distributed from the trust prior to the grantor’s
termination of service as a Director 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 trust fund for that
year, with the balance of such income to be accumulated in the trust.  The administrator shall inform the trustee
of the grantor’s settlement date. 
Thereafter, the trustee shall distribute the trust fund to the grantor,
if then living, in a series of annual installments, commencing on the first day
of the month next following the later of the grantor’s settlement date or the
date the grantor attains age 65 years. 
The administrator shall inform the trustee of the number of installment
distributions and the amount of each installment distribution under this
paragraph II-2, and the trustee shall be fully protected in relying on such
information received from the administrator.

 

II-3.  Distributions 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 thereof 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-3 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 

 

2

 

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-4.  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-5.  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 common stock
of Abbott Laboratories, or 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.

 

3

 

                                          (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 considers
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.

 

4

 

                                          (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.

 

5

 

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 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.

 

6

 

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.

 

*                              *                              *

 

7

 

IN
WITNESS WHEREOF, the grantor has executed this amending instrument as of the
day and year first above written.

 

	
   

  	
   

  
	
   

  	
  Grantor

  

 

The
undersigned, as trustee,
acknowledges receipt of the foregoing amending instrument as of the day and
year first above written.

 

	
   

  	
  The
  Northern Trust Company as Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Its

  	
   

  
	
   

  	
   

  	
   

  

 

 

The
undersigned, as a duly authorized representative of the administrator of the
trust, hereby consents to the foregoing amending instrument as of the day and
year first above written.

 

	
   

  	
  Abbott
  Laboratories

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Its

  	
   

  
	
   

  	
   

  	
   

  

 

8Exhibit 10.7

 

ABBOTT LABORATORIES

1996 INCENTIVE STOCK PROGRAM

(as amended and restated through the

1st Amendment December 12, 2003)

 

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

 

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

 

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

 

1

 

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

 

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

 

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

 

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

 

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

 

2

 

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

 

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

 

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

 

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

 

3

 

(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.

 

4

 

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

 

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

 

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

 

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

 

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

 

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

 

5

 

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

 

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

 

13.           RESTRICTED STOCK AWARDS
FOR NON-EMPLOYEE DIRECTORS.

 

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

 

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

 

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

 

6

 

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

 

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

 

(ii)           The date the director dies; or

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

7

 

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

 

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

 

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

 

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

 

8

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

9

 

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

 

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

 

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

 

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

 

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

 

10

 

21.           DEFINITIONS.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

11

 

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

 

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

 

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

 

12

 

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

 

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

 

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

 

22.            ADJUSTMENT PROVISIONS.

 

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

 

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

 

13

 

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

 

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

 

14

 

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.

 

15

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