Document:

Exhibit 10.5

 

EXECUTION VERSION

 

EMPLOYEE MATTERS AGREEMENT

 

BY AND BETWEEN

 

ABBOTT LABORATORIES

 

AND

 

ABBVIE INC.

 

DATED AS OF DECEMBER 31, 2012

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    
	
ARTICLE I DEFINITIONS
    	
1
    
	
 
    	
 
    	
 
    
	
Section 1.01.
    	
Defined Terms
    	
1
    
	
 
    	
 
    	
 
    
	
ARTICLE II GENERAL   PRINCIPLES
    	
12
    
	
 
    	
 
    	
 
    
	
Section 2.01.
    	
Allocation of EMA Liabilities
    	
12
    
	
Section 2.02.
    	
Employment with AbbVie
    	
13
    
	
Section 2.03.
    	
Establishment of AbbVie Plans
    	
14
    
	
Section 2.04.
    	
Post-Distribution Employment Transfers
    	
15
    
	
Section 2.05.
    	
Collective Bargaining
    	
17
    
	
Section 2.06.
    	
Distributorship Model
    	
17
    
	
 
    	
 
    	
 
    
	
ARTICLE III U.S. QUALIFIED   AND NON-QUALIFIED RETIREMENT PLANS
    	
17
    
	
 
    	
 
    	
 
    
	
Section 3.01.
    	
AbbVie Pension Plan
    	
17
    
	
Section 3.02.
    	
Abbott-AbbVie Multiple Employer Pension Plan
    	
20
    
	
Section 3.03.
    	
Stock Retirement/Savings Plan
    	
23
    
	
Section 3.04.
    	
Pension Plan for Former BASF and Former Solvay Employees
    	
25
    
	
Section 3.05.
    	
Supplemental Pension Plan
    	
27
    
	
Section 3.06.
    	
Deferred Compensation Plan
    	
28
    
	
Section 3.07.
    	
Supplemental Savings Plan
    	
29
    
	
Section 3.08.
    	
Deferred Compensation Plan for Former Employees of Solvay   and Supplemental Pension Plan for Former BASF and Former Solvay Employees
    	
29
    
	
 
    	
 
    	
 
    
	
ARTICLE IV NON-U.S.   RETIREMENT PLANS
    	
30
    
	
 
    	
 
    	
 
    
	
Section 4.01.
    	
Establishment of Non-U.S. Retirement Plans and Transfers of   Assets and Liabilities
    	
30
    
	
Section 4.02.
    	
Shared Plan Model
    	
32
    
	
Section 4.03.
    	
Overseas Managers Pension Plan and Territorial Pension Plan
    	
34
    
	
 
    	
 
    	
 
    
	
ARTICLE V WELFARE AND FRINGE   BENEFIT PLANS
    	
35
    
	
 
    	
 
    	
 
    
	
Section 5.01.
    	
U.S. Health and Welfare Plans
    	
35
    
	
Section 5.02.
    	
COBRA and HIPAA
    	
37
    
	
Section 5.03.
    	
U.S. Life Insurance Trust
    	
37
    
	
Section 5.04.
    	
Vacation, Holidays and Leaves of Absence
    	
38
    
	
Section 5.05.
    	
Severance and Unemployment Compensation
    	
38
    
	
Section 5.06.
    	
Workers’ Compensation
    	
38
    
	
Section 5.07.
    	
Non-U.S. Shared Health and Welfare Plans
    	
38
    

 

i

 

	
ARTICLE VI   EQUITY, INCENTIVE, AND EXECUTIVE COMPENSATION PROGRAMS
    	
39
    
	
 
    	
 
    	
 
    
	
Section 6.01.
    	
Equity Incentive Programs
    	
39
    
	
Section 6.02.
    	
Employee Stock Purchase Plan
    	
42
    
	
Section 6.03.
    	
Annual Incentive Plans
    	
42
    
	
Section 6.04.
    	
Performance Incentive Plan and Management Incentive Plan
    	
43
    
	
Section 6.05.
    	
Directors’ Fee Plan
    	
44
    
	
Section 6.06.
    	
Grantor Trusts
    	
44
    
	
 
    	
 
    	
 
    
	
ARTICLE VII PUERTO RICO   PLANS
    	
44
    
	
 
    	
 
    	
 
    
	
Section 7.01.
    	
Puerto Rico Retirement Plans
    	
44
    
	
Section 7.02.
    	
Puerto Rico Stock Retirement/Savings Plans
    	
47
    
	
Section 7.03.
    	
Puerto Rico Supplemental Retirement Plans
    	
49
    
	
Section 7.04.
    	
Puerto Rico Health and Welfare Plans
    	
50
    
	
Section 7.05.
    	
COBRA and HIPAA
    	
52
    
	
 
    	
 
    	
 
    
	
ARTICLE VIII MISCELLANEOUS
    	
53
    
	
 
    	
 
    	
 
    
	
Section 8.01.
    	
Transfer of Records
    	
53
    
	
Section 8.02.
    	
Cooperation
    	
53
    
	
Section 8.03.
    	
Employee Agreements
    	
53
    
	
Section 8.04.
    	
Repayment Assets
    	
54
    
	
Section 8.05.
    	
Compliance
    	
54
    
	
Section 8.06.
    	
Preservation of Rights
    	
54
    
	
Section 8.07.
    	
Matching Grant Plan and Employee Giving Campaign
    	
54
    
	
Section 8.08.
    	
Clara Abbott Foundation
    	
54
    
	
Section 8.09.
    	
Not a Change in Control
    	
54
    
	
Section 8.10.
    	
Reverse Jurisdictions
    	
55
    
	
Section 8.11.
    	
Notices
    	
55
    
	
Section 8.12.
    	
Limitation on Enforcement
    	
55
    
	
Section 8.13.
    	
Disputes
    	
55
    
	
Section 8.14.
    	
Schedules
    	
56
    
	
Section 8.15.
    	
Interpretation
    	
56
    
	
Section 8.16.
    	
Counterparts; Entire Agreement, Conflicts; Corporate Power;   Facsimile Signatures
    	
56
    
	
Section 8.17.
    	
Governing Law
    	
57
    
	
Section 8.18.
    	
Assignability
    	
57
    
	
Section 8.19.
    	
Third Party Beneficiaries
    	
58
    
	
Section 8.20.
    	
Severability
    	
58
    
	
Section 8.21.
    	
Force Majeure
    	
58
    
	
Section 8.22.
    	
No Set Off
    	
58
    
	
Section 8.23.
    	
Headings
    	
58
    
	
Section 8.24.
    	
Survival of Covenants
    	
58
    
	
Section 8.25.
    	
Waivers of Default
    	
59
    
	
Section 8.26.
    	
Amendments
    	
59
    
	
Section 8.27.
    	
Specific Performance
    	
59
    
	
Section 8.28.
    	
Mutual Drafting
    	
59
    

 

ii

 

EMPLOYEE MATTERS AGREEMENT

 

This EMPLOYEE MATTERS AGREEMENT dated as of December 31, 2012 and effective as of the Effective Time (as defined below) is by and between ABBOTT LABORATORIES, an Illinois corporation (“Abbott”), and ABBVIE INC., a Delaware corporation (“AbbVie”).

 

R E C I T A L S:

 

WHEREAS, the Abbott Board (as defined below) has determined that it is appropriate and advisable to separate Abbott’s research-based pharmaceuticals business from its other businesses;

 

WHEREAS, to effectuate the foregoing, Abbott and AbbVie have entered into a Separation and Distribution Agreement (as defined below) which provides for, among other things, the contribution from Abbott to AbbVie of certain Assets (as defined below), the assumption by AbbVie of certain liabilities from Abbott, the distribution by Abbott of AbbVie Common Stock (as defined below) to Abbott shareholders, and the execution and delivery of certain other agreements to facilitate and provide for the foregoing, in each case subject to the terms and conditions set forth therein;

 

WHEREAS, the Employees (as defined below) of the AbbVie Business (as defined below) have been employed by the Abbott Group (as defined below) and are to be Employees of the AbbVie Group (as defined below) after the Separation (as defined below); and

 

WHEREAS, this Agreement describes the principal employment, compensation and employee benefit plan arrangements between the Parties.

 

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, the Parties hereby agree as follows:

 

AGREEMENT

 

ARTICLE I

 

DEFINITIONS

 

Section 1.01.  Defined Terms. The following capitalized terms as used in this Agreement shall have the meaning set forth below unless otherwise specified herein:

 

“Abbott” has the meaning set forth in the first sentence of this Agreement.

 

“Abbott-AbbVie MEPP” means the Abbott-AbbVie Multiple Employer Pension Plan established pursuant to Section 3.02.

 

“Abbott ARP” means the Abbott Laboratories Annuity Retirement Plan.

 

 

“Abbott Benefit Plan” means a Benefit Plan sponsored by, maintained by, or contributed to by the Abbott Group, except that such term shall not include the Abbott-AbbVie MEPP.

 

“Abbott Board” means the Abbott board of directors.

 

“Abbott Cash Profit Sharing Plan” means the Abbott Laboratories Cash Profit Sharing Plan.

 

“Abbott Common Shares” has the meaning set forth in the Separation and Distribution Agreement.

 

“Abbott Compensation Committee” means the compensation committee of the Abbott Board.

 

“Abbott DCP” means the Abbott Laboratories Deferred Compensation Plan.

 

“Abbott Directors’ Fee Plan” means the Abbott Laboratories Non-Employee Directors’ Fee Plan.

 

“Abbott ESPP” means the Abbott Laboratories 2009 Employee Stock Purchase Plan for Non-U.S. Employees and any sub-plan established thereunder.

 

“Abbott Former Employee” means a Former Employee who is not an AbbVie Former Employee.

 

“Abbott Group” means Abbott and the Abbott Subsidiaries.

 

“Abbott Health and Welfare Plan” means a Health and Welfare Plan sponsored by, maintained by, or contributed to by the Abbott Group.

 

“Abbott KSP” means the Abbott Laboratories 401(k) Supplemental Plan.

 

“Abbott Life Insurance Trust” means the Abbott Laboratories Life Insurance Trust.

 

“Abbott LTD Participant” means an Abbott Former Employee who is, as of the Distribution Date, receiving long-term disability benefits under the Abbott Laboratories Extended Disability Plan or the Abbott Laboratories Puerto Rico Long Term Disability Plan.

 

“Abbott Management Incentive Plan” means the 1986 Abbott Laboratories Management Incentive Plan.

 

“Abbott OMPP” means the Abbott Overseas Managers Pension Plan.

 

“Abbott Option” means an option to purchase one or more Abbott Common Shares granted under an Abbott Stock Program and outstanding immediately prior to the Distribution Date (whether or not then exercisable).

 

2

 

“Abbott Performance Incentive Plan” means the 1998 Abbott Laboratories Performance Incentive Plan.

 

“Abbott Post-Distribution Stock Value” means the opening per-share price, as reported on the NYSE, of Abbott Common Shares on the Distribution Date (or, if the Distribution Date is not an NYSE trading day, on the first trading day following the Distribution Date).

 

“Abbott PR” means Abbott Healthcare (Puerto Rico) Ltd. or, where the context so requires, its appropriate Affiliate or Subsidiary that employs Employees in Puerto Rico.

 

“Abbott PR Health and Welfare Plan - New” means, following the Distribution, a PR Health and Welfare Plan sponsored by, maintained by, or contributed to by the Abbott Group and established pursuant to Section 7.04.

 

“Abbott PR Retirement Plan - New” means the Abbott Puerto Rico Retirement Plan established pursuant to Section 7.01.

 

“Abbott PR SERP - New” means the Abbott Puerto Rico Supplemental Pension Plan established pursuant to Section 7.03.

 

“Abbott PR SRP - New” means the Abbott Laboratories Stock Retirement Plan (Puerto Rico) established pursuant to Section 7.02.

 

“Abbott Ratio” means the quotient obtained by dividing the Abbott Stock Value by the Abbott Post-Distribution Stock Value.

 

“Abbott Restricted Stock Award” means a restricted stock award granted pursuant to an Abbott Stock Program and outstanding immediately prior to the Distribution Date.

 

“Abbott Retained Employee” means any Employee other than an AbbVie Employee.

 

“Abbott Retiree Health Care Plan” means the Abbott Laboratories Retiree Health Care Plan.

 

“Abbott Retiree Life Plan” means the Abbott Laboratories Retiree Life Insurance Plan.

 

“Abbott RSU Award” means a restricted stock unit award granted pursuant to an Abbott Stock Program and outstanding immediately prior to the Distribution Date.

 

“Abbott SERP” means the Abbott Laboratories Supplemental Pension Plan.

 

“Abbott SRP” means the Abbott Laboratories Stock Retirement Plan.

 

“Abbott Stock Programs” means, collectively, the Abbott Laboratories 2009 Incentive Stock Program, the Abbott Laboratories 1996 Incentive Stock Program, and any incentive compensation program or arrangement that governs the terms of equity-based incentive

 

3

 

awards assumed by the Abbott Group in connection with a corporate transaction and that is maintained by the Abbott Group immediately prior to the Distribution Date (excluding any plan maintained solely by AbbVie or any AbbVie Subsidiary), and any sub-plans established under those programs.

 

“Abbott Stock Value” means the sum of the Abbott Post-Distribution Stock Value and the Adjusted AbbVie Stock Value.

 

“Abbott Subsidiary” means any Subsidiary of Abbott prior to, at or after the Effective Time (including, prior to the Effective Time, AbbVie and the AbbVie Subsidiaries).

 

“Abbott TPP” means the Abbott Laboratories Territorial Pension Plan.

 

“Abbott Trust” means the Abbott Laboratories Annuity Retirement Trust.

 

“Abbott Value Factor” means the quotient obtained by dividing (i) the Abbott Post-Distribution Stock Value, by (ii) the sum of (A) the Adjusted AbbVie Stock Value and (B) the Abbott Post-Distribution Stock Value.

 

“AbbVie” has the meaning set forth in the first sentence of this Agreement.

 

“AbbVie Award” means an AbbVie Option, AbbVie Restricted Stock Award, or AbbVie RSU Award granted pursuant to Section 6.01.

 

“AbbVie Benefit Plan” means, following the Distribution, each Benefit Plan sponsored by, maintained by, or contributed to by the AbbVie Group, provided that such term shall not include the Abbott-AbbVie MEPP, and, provided, further, that such term shall include, following the consummation of a Local Closing Transaction, each Benefit Plan sponsored by, maintained by, or contributed to by the applicable Deferred AbbVie Local Business.

 

“AbbVie Board” means the AbbVie board of directors.

 

“AbbVie Business” has the meaning set forth in the Separation and Distribution Agreement.

 

“AbbVie Cash Profit Sharing Plan” means the AbbVie Cash Profit Sharing Plan.

 

“AbbVie Common Stock” has the meaning set forth in the Separation and Distribution Agreement.

 

“AbbVie DCP” means the AbbVie Deferred Compensation Plan.

 

“AbbVie Directors’ Fee Plan” means the AbbVie Non-Employee Directors’ Fee Plan.

 

“AbbVie Employee” means any Employee who is (i) employed by the AbbVie Group as of immediately prior to the Distribution Date, (ii) designated prior to the Distribution Date by Abbott as an individual whose employment is to transfer (referred to internally by the Parties as “map”)  to the AbbVie Group, (iii) hired by the Abbott Group on or after the

 

4

 

Distribution Date (but prior to the consummation of the applicable Local Closing Transaction) who is primarily employed in connection with a Deferred AbbVie Local Business, or (iv) designated as an AbbVie Employee by joint agreement of the Parties (in all cases, other than an Employee who is designated by Abbott prior to the Distribution Date as intended not to transfer to the AbbVie Group).

 

“AbbVie ESPP” means the AbbVie 2013 Employee Stock Purchase Plan for Non-U.S. Employees and any sub-plan established thereunder.

 

“AbbVie Former Employee” means a Former Employee who either (i) was designated by Abbott as an Employee whose employment was to transfer (“map”) to the AbbVie Group or (ii) if no such designation was made, was primarily employed or engaged in the AbbVie Business immediately prior to such individual’s termination of employment.

 

“AbbVie Group” means AbbVie and the AbbVie Subsidiaries.

 

“AbbVie Health and Welfare Plan” means, following the Distribution, a Health and Welfare Plan sponsored by, maintained by, or contributed to by the AbbVie Group.

 

“AbbVie ISP” means the AbbVie 2013 Incentive Stock Program.

 

“AbbVie Life Insurance Trust” means the AbbVie Employee Insurance Trust.

 

“AbbVie LTD Participant” means an AbbVie Former Employee who is, as of the Distribution Date, receiving long-term disability benefits under the Abbott Laboratories Extended Disability Plan or the Abbott Laboratories Puerto Rico Long Term Disability Plan.

 

“AbbVie OMPP” means the AbbVie Overseas Managers Pension Plan.

 

“AbbVie Option” means an option to purchase one or more shares of AbbVie Common Stock granted by AbbVie in accordance with Section 6.01.

 

“AbbVie Pension Plan” means the AbbVie Pension Plan.

 

“AbbVie PR” means AbbVie Ltd. (formerly known as Abbott Pharmaceuticals (Puerto Rico) Ltd.) or, where the context so requires, its appropriate Affiliate or Subsidiary that employs Employees in Puerto Rico.

 

“AbbVie PR Health and Welfare Plans” means the PR Health and Welfare Plans sponsored by, maintained by, or contributed to by the AbbVie Group.

 

“AbbVie PR Pension Plan” means the AbbVie Puerto Rico Pension Plan (formerly known as the Abbott Puerto Rico Retirement Plan).

 

“AbbVie PR Savings Plan” means the AbbVie Puerto Rico Savings Plan (formerly known as the Abbott Laboratories Stock Retirement Plan (Puerto Rico)).

 

“AbbVie PR SERP” means the AbbVie Puerto Rico Supplemental Pension Plan (formerly known as the Abbott Puerto Rico Supplemental Pension Plan).

 

5

 

“AbbVie Ratio” means the quotient obtained by dividing the Abbott Stock Value by the AbbVie Stock Value.

 

“AbbVie Restricted Stock Award” means a restricted stock award granted by AbbVie in accordance with Section 6.01.

 

“AbbVie RSU Award” means a restricted stock unit award granted by AbbVie in accordance with Section 6.01.

 

“AbbVie Savings Plan” means the AbbVie Savings Plan.

 

“AbbVie SERP” means the AbbVie Supplemental Pension Plan.

 

“AbbVie SSP” means the AbbVie Supplemental Savings Plan.

 

“AbbVie Stock Value” means the opening per-share price, as reported on the NYSE, of AbbVie Common Stock on the Distribution Date (or, if the Distribution Date is not an NYSE trading day, on the first trading day following the Distribution Date).

 

“AbbVie Subsidiary” has the meaning set forth in the Separation and Distribution Agreement.

 

“AbbVie TPP” means the AbbVie Territorial Pension Plan.

 

“AbbVie Value Factor” means the quotient obtained by dividing (i) the Adjusted AbbVie Stock Value, by (ii) the sum of (A) the Adjusted AbbVie Stock Value and (B) the Abbott Post-Distribution Stock Value.

 

“Adjusted Abbott Award” means an Adjusted Abbott Option, Adjusted Abbott Restricted Stock Award, or Adjusted Abbott RSU Award.

 

“Adjusted Abbott Option” means an option to purchase one or more Abbott Common Shares adjusted in accordance with Section 6.01.

 

“Adjusted Abbott Restricted Stock Award” means an Abbott Restricted Stock Award adjusted in accordance with Section 6.01.

 

“Adjusted Abbott RSU Award” means a restricted stock unit award granted pursuant to an Abbott Stock Program adjusted in accordance with Section 6.01.

 

“Adjusted AbbVie Stock Value” means the product obtained by multiplying (i) the AbbVie Stock Value times (ii) the Distribution Ratio.

 

“Affiliate” has the meaning set forth in the Separation and Distribution Agreement.

 

“Agreement” means this Employee Matters Agreement and each of the Schedules hereto.

 

6

 

“Ancillary Agreements” has the meaning set forth in the Separation and Distribution Agreement.

 

“Assets” has the meaning set forth in the Separation and Distribution Agreement.

 

“Benefit Plan” means any (i) “employee benefit plan,” as defined in ERISA Section 3(3) (whether or not such plan is subject to ERISA); and (ii) employment, compensation, severance, salary continuation, bonus, thirteenth month, incentive, retirement, thrift, superannuation, savings, pension, workers’ compensation, termination benefit (including termination notice requirements), termination indemnity, other indemnification, supplemental unemployment benefit, redundancy pay, profit sharing, deferred compensation, stock ownership, stock purchase, stock option, stock appreciation right, restricted stock, “phantom” stock, performance share, restricted stock unit, other stock-based incentive, change in control, paid time off, perquisite, fringe benefit, vacation, disability, life, or other insurance, death benefit, hospitalization, medical, or other compensatory or benefit plan, program, fund, agreement, arrangement, or policy of any kind (whether written or oral, qualified or nonqualified, funded or unfunded, foreign or domestic, currently effective or terminated), and any trust, escrow or similar agreement related thereto, whether or not funded, excluding any plan, program, fund, agreement, arrangement, or policy (other than for workers’ compensation liabilities) that is mandated by and maintained solely pursuant to applicable Law.

 

“Change of Control” has the meaning set forth in the Separation and Distribution Agreement.

 

“COBRA” means coverage required by Code Section 4980B or ERISA Section 601 et. seq.

 

“Code” means the U.S. Internal Revenue Code of 1986, as amended.

 

“Conveyance and Assumption Instruments” has the meaning set forth in the Separation and Distribution Agreement.

 

“Deferred AbbVie Local Business” has the meaning set forth in the Separation and Distribution Agreement.

 

“Distribution” has the meaning set forth in the Separation and Distribution Agreement.

 

“Distribution Date” has the meaning set forth in the Separation and Distribution Agreement.

 

“Distribution Ratio” means the number of shares of AbbVie Common Stock distributed in the Distribution in respect of one Abbott Common Share.

 

“Effective Time” means 12:01 a.m. Eastern Time on the Distribution Date.

 

“EMA Liabilities” means all debts, liabilities, obligations, responsibilities, response actions, losses, damages (whether compensatory, punitive, consequential, incidental, treble or other), fines, penalties and sanctions, absolute or contingent, matured or unmatured,

 

7

 

liquidated or unliquidated, foreseen or unforeseen, joint, several or individual, asserted or unasserted, accrued or unaccrued, known or unknown, whenever arising, including those arising under or in connection with any Law or other pronouncements of Governmental Authorities having the effect of Law, Proceeding, threatened Proceeding, order or consent decree of any Governmental Authority or any award of any arbitration tribunal, and those arising under any contract, guarantee, commitment or undertaking, whether sought to be imposed by a Governmental Authority, private party, or Party, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute, or otherwise, and including any costs, expenses, interest, attorneys’ fees, disbursements and expenses of counsel, expert and consulting fees and costs related thereto or to the investigation or defense thereof, to the extent relating to, arising out of or resulting from employment or termination of employment of an Employee or Former Employee (but not including liabilities of the Parties for the effects of an Employee’s or Former Employee’s services on the business, operations, customer or vendor relations, products or reputation of the Parties), Employment Taxes, Benefit Plans, or other obligations, liabilities or responsibilities expressly assumed or retained under this Agreement.

 

“Employee” means an employee on the payroll of Abbott, an Abbott Subsidiary, AbbVie or an AbbVie Subsidiary (not including any Former Employee), including any employee absent from work on account of vacation, jury duty, funeral leave, personal leave, sickness, short-term disability, long-term disability or workers’ compensation leave (in each case, unless treated as a separated employee for employment purposes), military leave, family leave, pay continuation leave, or other approved leave of absence or for whom an obligation to recall, rehire or otherwise return to employment exists under a contractual obligation or Law.

 

“Employee Agreement” means an employment contract between a member of the Abbott Group and an Employee, including, without limitation, the U.S. standard-form employee agreement customarily signed by certain Employees of the Abbott Group.

 

“Employee Recoupment Asset” means an employer’s right to repayment from an employee in respect of a tax equalization payment, sign-on bonus payment, relocation expense payment, tuition payment, reimbursement, loan, or other similar item, including any agreement related thereto.

 

“Employment Tax” means withholding, payroll, social security, workers’ compensation, unemployment, disability and any similar tax imposed by any Tax Authority or social security authority, and any interest, penalties, additions to tax, or additional amounts with respect to the foregoing imposed on any taxpayer or consolidated, combined, or unitary group of taxpayers.  With respect to any Employment Tax, the term “Tax Authority” means the governmental entity or political subdivision thereof that imposes such Employment Tax, and the agency (if any) charged with the collection of such Employment Tax for such entity or subdivision.

 

“ERISA” means the U.S. Employee Retirement Income Security Act of 1974, as amended.

 

“ESOP” means an employee stock ownership plan, as defined in ERISA Section 407(d)(6) and Code Section 4975(e)(7).

 

8

 

“Ex-U.S. Transition Services Agreement” has the meaning set forth in the Separation and Distribution Agreement.

 

“Force Majeure” has the meaning set forth in the Separation and Distribution Agreement.

 

“Former Employee” means any individual whose employment with the Abbott Group terminated on or prior to the Distribution Date for whom no obligation to recall, rehire or otherwise return to employment exists under a contractual obligation or Law.

 

“Governmental Authority” has the meaning set forth in the Separation and Distribution Agreement.

 

“Health and Welfare Plan” means any Benefit Plan established or maintained to provide, for Employees or Former Employees who work primarily in the United States or their beneficiaries, through the purchase of insurance or otherwise, medical, dental, prescription, vision, short-term disability, long-term disability, death benefits, life insurance, accidental death and dismemberment insurance, business travel accident insurance, employee assistance program, group legal services, wellness, cafeteria (including premium payment, health care flexible spending account, and dependent care flexible spending account components), travel reimbursement, transportation, vacation benefits, apprenticeship or other training programs, day care centers, or prepaid legal services benefits, including any “employee welfare benefit plan” (as defined in ERISA Section 3(1)) that is not a severance plan.

 

“HIPAA” means the Health Insurance Portability and Accountability Act of 1996, as amended.

 

“Incurred Claim” means an EMA Liability related to services or benefits provided under a Benefit Plan, and shall be deemed to be incurred: (i) with respect to medical, dental, vision, and prescription drug benefits, upon the rendering of services giving rise to such EMA Liability; (ii) with respect to death benefits, life insurance, accidental death and dismemberment insurance, and business travel accident insurance, upon the occurrence of the event giving rise to such EMA Liability; (iii) with respect to disability benefits, upon the date of disability, as determined by the disability benefit insurance carrier or claim administrator, giving rise to such EMA Liability; (iv) with respect to a period of continuous hospitalization, upon the date of admission to the hospital; and (v) with respect to tuition reimbursement or adoption assistance, upon completion of the requirements for such reimbursement or assistance, whichever is applicable.

 

“Law” has the meaning set forth in the Separation and Distribution Agreement.

 

“Local Closing Transaction” means the local closing transaction involving a Deferred AbbVie Local Business.

 

“LTD Participant” means a Former Employee who is either an Abbott LTD Participant or an AbbVie LTD Participant.

 

9

 

“Non-U.S. Abbott Benefit Plan” means an Abbott Benefit Plan established, maintained, or contributed to by the Abbott Group that is for the benefit of Employees or Former Employees who work primarily outside of the United States.

 

“Non-U.S. AbbVie Benefit Plan” means an AbbVie Benefit Plan established, maintained, or contributed to by the AbbVie Group that is for the benefit of Employees or Former Employees who work primarily outside of the United States.

 

“Non-U.S. AbbVie Employee” means an AbbVie Employee who works primarily outside of the United States or primarily in Puerto Rico.

 

“Notice” means any written notice, request, demand or other communication specifically referencing this Agreement and given in accordance with Section 8.12.

 

“Parties” means the parties to this Agreement.

 

“Pension Plan for Former BASF and Former Solvay Employees” means the Abbott Laboratories Pension Plan for Former BASF and Former Solvay Employees.

 

“Person” has the meaning set forth in the Separation and Distribution Agreement.

 

“Post-Distribution AbbVie Employee” means an AbbVie Employee whose intended transfer from the Abbott Group to the AbbVie Group in connection with the Distribution is to occur after the Distribution Date.

 

“PR Health and Welfare Plans” means any and all Benefit Plans established or maintained to provide, for Employees or Former Employees who work primarily in Puerto Rico or their beneficiaries, through the purchase of insurance or otherwise, medical, dental, prescription, vision, short-term disability, long-term disability, death benefits, life insurance, accidental death and dismemberment insurance, business travel accident insurance, employee assistance program, group legal services, wellness, cafeteria (including premium payment, health care flexible spending account, and dependent care flexible spending account components), travel reimbursement, transportation, vacation benefits, apprenticeship or other training programs, day care centers, or prepaid legal services benefits, including any “employee welfare benefit plan” (as defined in ERISA Section 3(1)) that is not a severance plan.

 

“Proceeding” has the meaning set forth in the Separation and Distribution Agreement.

 

“Purchase Cycle” has the meaning set forth in the Abbott ESPP.

 

“Purchase Date” has the meaning set forth in the Abbott ESPP.

 

“QDRO” means a qualified domestic relations order within the meaning of ERISA Section 206(d) and Code Section 414(p).

 

“Rehired Employee” means (i) a Transferred Employee who terminates employment with the AbbVie Group after the Distribution Date (or, with respect to a Post-Distribution AbbVie Employee employed by a Deferred AbbVie Local Business, after the

 

10

 

consummation of the applicable Local Closing Transaction) and is subsequently rehired by the Abbott Group during the Transition Period (including an individual whose employment is transferred pursuant to the procedures contemplated by Section 2.04(b)); (ii) an Abbott Retained Employee who terminates employment with the Abbott Group after the Distribution Date and is subsequently hired by the AbbVie Group during the Transition Period (including an individual whose employment is transferred pursuant to the procedures contemplated by Section 2.04(b)); or (iii) a Former Employee who commences employment with the Abbott Group or the AbbVie Group during the Transition Period.

 

“Securities Act” means the U.S. Securities Act of 1933, as amended.

 

“Separation” has the meaning set forth in the Separation and Distribution Agreement.

 

“Separation and Distribution Agreement” means the Separation and Distribution Agreement by and between the Parties, dated as of November 28, 2012.

 

“Subsidiary” has the meaning set forth in the Separation and Distribution Agreement.

 

“Third Party” has the meaning set forth in the Separation and Distribution Agreement.

 

“Transfer Date” means, with respect to each (i) AbbVie Employee (other than a Post-Distribution AbbVie Employee), the Distribution Date; (ii) Post-Distribution AbbVie Employee, the date on which such person first becomes employed by the AbbVie Group following the Distribution Date; and (iii) LTD Participant, where the Transfer Date concept is relevant, the Distribution Date.

 

“Transferred Employee” has the meaning set forth in Section 2.02(a)(i).

 

“Transferred Flexible Spending Account Balances” has the meaning set forth in Section 5.01(d)(iii).

 

“Transferred Non-U.S. Employee” means a Transferred Employee who works primarily outside of the United States or primarily in Puerto Rico.

 

“Transition Period” means the period beginning on the Distribution Date and ending on the date that is the 30-month anniversary of the Distribution Date.

 

“U.S. Transition Services Agreement” has the meaning set forth in the Separation and Distribution Agreement.

 

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ARTICLE II

 

GENERAL PRINCIPLES

 

Section 2.01.  Allocation of EMA Liabilities.

 

(a)                                 AbbVie EMA Liabilities.  Effective as of the Effective Time, and except as expressly provided in this Agreement, AbbVie hereby assumes (or retains) and agrees to pay, perform, fulfill, and discharge, or to cause the applicable AbbVie Subsidiaries to assume (or retain) and agree to pay, perform, fulfill and discharge, all EMA Liabilities to the extent relating to, arising out of, or resulting from:

 

(i)                                     the employment (or termination of employment) of any AbbVie Employee by the Abbott Group up to the applicable Transfer Date and by the AbbVie Group on and after the applicable Transfer Date (including, in each case, all EMA Liabilities relating to, arising out of, or resulting from Employment Taxes, any Abbott Benefit Plan or any AbbVie Benefit Plan);

 

(ii)                                  the employment (or termination of employment) of any AbbVie Former Employee (including, in each case, all EMA Liabilities relating to, arising out of, or resulting from Employment Taxes, any Abbott Benefit Plan or any AbbVie Benefit Plan); and

 

(iii)                               obligations, EMA Liabilities, and responsibilities expressly assumed or retained by AbbVie or the applicable AbbVie Subsidiaries pursuant to this Agreement.

 

(b)                                 Abbott EMA Liabilities.  Effective as of the Effective Time, and except as expressly provided in this Agreement, Abbott hereby retains (or assumes) and agrees to pay, perform, fulfill, and discharge, or to cause the applicable Abbott Subsidiaries to assume (or retain) and agree to pay, perform, fulfill and discharge, all EMA Liabilities to the extent relating to, arising out of, or resulting from:

 

(i)                                     the employment (or termination of employment) of any Abbott Retained Employee by the Abbott Group prior to, on, or after the Distribution Date (including all EMA Liabilities to the extent relating to, arising out of, or resulting from Employment Taxes or any Abbott Benefit Plan);

 

(ii)                                  the employment (or termination of employment) of any Abbott Former Employee (including all EMA Liabilities to the extent relating to, arising out of, or resulting from Employment Taxes or any Abbott Benefit Plan); and

 

(iii)                               obligations, EMA Liabilities, and responsibilities expressly retained or assumed by Abbott or the applicable Abbott Subsidiaries pursuant to this Agreement.

 

(c)                                  Other EMA Liabilities.  To the extent that this Agreement does not address particular EMA Liabilities and the Parties later determine that they should be allocated in

 

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connection with the Separation, the Parties shall agree in good faith on the allocation, taking into account the handling of comparable EMA Liabilities under this Agreement.

 

Section 2.02.  Employment with AbbVie.

 

(a)                                 Employment Transfers.  The Parties intend for AbbVie Employees to transfer to the AbbVie Group and shall use commercially reasonable efforts and cooperate with each other to effectuate this intent.  The Parties shall cooperate in good faith to identify clearly the Employees designated for transfer to the AbbVie Group.

 

(i)                                     Except as otherwise mutually agreed upon by the Parties, as of each AbbVie Employee’s Transfer Date, the AbbVie Group shall: (A) continue to employ (on a basis consistent with Section 2.02(b)) each AbbVie Employee employed in a jurisdiction where employment continues automatically by operation of Law (and such individual does not object, where such right exists under applicable Law); and (B) offer to employ (on a basis consistent with Section 2.02(b)) each AbbVie Employee employed in a jurisdiction where employment does not continue automatically by operation of Law.  Each AbbVie Employee who accepts an offer of employment with the AbbVie Group, or who continues employment with the AbbVie Group following his or her Transfer Date automatically by operation of Law (and does not object where such right exists under applicable Law), as the case may be, including each Post-Distribution AbbVie Employee who so accepts an offer or so continues employment, will be referred to in this Agreement as a “Transferred Employee.”

 

(ii)                                  The Abbott Group may terminate the employment of any AbbVie Employee who does not become a Transferred Employee as of his or her intended Transfer Date. AbbVie will be responsible for, and will indemnify the Abbott Group from and against, any EMA Liabilities incurred (including any severance payments made): (A) in connection with the termination of an AbbVie Employee pursuant to this Section 2.02(a)(ii); and (B) arising from or in connection with a refusal by any AbbVie Employee to become a Transferred Employee.

 

(b)                                 Compensation and Benefits.

 

(i)                                     Abbott shall use commercially reasonable efforts to provide that, except as otherwise mutually agreed upon by the Parties, no transfer of employment of an AbbVie Employee to the AbbVie Group prior to the Distribution Date will cause such AbbVie Employee to lose coverage under any Abbott Benefit Plan prior to the Distribution Date.  Except as expressly provided in this Agreement or in local Conveyance and Assumption Instruments, no Transferred Employee shall participate in any Abbott Benefit Plan following his or her Transfer Date.

 

(ii)                                  Except as expressly provided in this Agreement, the AbbVie Group shall provide to each Transferred Employee as of his or her Transfer Date (A) base salary at the same rate as provided to that Transferred Employee immediately prior to the Transfer Date, (B) cash incentive compensation opportunities that are substantially similar to those offered under the corresponding Abbott Benefit Plan(s) immediately prior to the Transfer Date, and (C) benefits under the other AbbVie Benefit Plans that are substantially

 

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similar to benefits provided under the corresponding Abbott Benefit Plans immediately prior to the Transfer Date.  Nothing in the preceding sentence shall prevent the AbbVie Group from modifying the compensation and benefits of a Transferred Employee after such Transferred Employee’s Transfer Date.  Notwithstanding the preceding sentence, neither Abbott nor AbbVie shall, prior to December 31, 2013, materially  modify the benefit programs provided to their respective Employees working primarily in the United States and Puerto Rico except in the ordinary course of business or as required by Law.

 

(c)                                  Service Credit.  Except as otherwise  expressly provided in this Agreement or to the extent it would result in a duplication of benefits, (i) AbbVie and each AbbVie Benefit Plan shall give each Transferred Employee and each AbbVie LTD Participant credit for all service with the Abbott Group and shall calculate such service as it would be calculated by Abbott or under the corresponding Abbott Benefit Plan as of the applicable Transfer Date, and (ii) Abbott and each Abbott Benefit Plan shall give each Rehired Employee employed by Abbott credit for service with the AbbVie Group (as contemplated under Section 2.04) and shall calculate such service as it would be calculated by AbbVie or under the corresponding AbbVie Benefit Plan as of the rehire date.

 

Section 2.03.  Establishment of AbbVie Plans.

 

(a)                                 Generally.

 

(i)                                     U.S (Not Including Puerto Rico).  Prior to the Distribution Date, AbbVie shall adopt Benefit Plans (and related trusts, if applicable, as determined by the Parties) with terms substantially similar to those of the corresponding Abbott Benefit Plans, including in particular those listed in Schedule 2.03(a); provided, however, that AbbVie may limit participation in any AbbVie Benefit Plan to Transferred Employees and, to the extent applicable, AbbVie LTD Participants who participated in the corresponding Abbott Benefit Plan immediately prior to the applicable Transfer Date.

 

(ii)                                  Non-U.S (Not Including Puerto Rico).  Prior to the Distribution Date, the AbbVie Group shall, except as otherwise mutually agreed upon by the Parties, adopt Non-U.S. AbbVie Benefit Plans, with terms substantially similar to those of the corresponding Non-U.S. Abbott Benefit Plans; provided, however, that AbbVie may limit participation in any Non-U.S. AbbVie Benefit Plan to Transferred Non-U.S. Employees and, to the extent applicable, AbbVie LTD Participants who participated in the corresponding Non-U.S. Abbott Benefit Plan immediately prior to the applicable Transfer Date.  As described in Article IV, or as otherwise mutually agreed upon by the Parties from time to time,  Abbott shall, or shall cause the applicable Abbott Subsidiaries or the applicable Non-U.S. Abbott Benefit Plan’s related trust to, transfer to the AbbVie Group or the relevant Non-U.S. AbbVie Benefit Plan’s related trust, an amount equal to the trust Assets, insurance reserves, and other Assets of each Non-U.S. Abbott Benefit Plan relating to the EMA Liabilities of such Non-U.S. Abbott Benefit Plan assumed by AbbVie or such Non-U.S. AbbVie Benefit Plan.  As described in Article IV, or as otherwise mutually agreed upon by the Parties from time to time, the AbbVie Group shall, or shall cause the relevant Non-U.S. AbbVie Benefit Plan to, assume the EMA Liabilities of the corresponding Non-U.S. Abbott Benefit Plan with respect to all benefits

 

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accrued under that Non-U.S. Abbott Benefit Plan by Transferred Non-U.S. Employees and, to the extent applicable, AbbVie LTD Participants.

 

(iii)                               Puerto Rico. The establishment of Benefit Plans and the allocation of Assets and EMA Liabilities relating to Employees and Former Employees in Puerto Rico are set forth in Article VII.

 

(b)                                 Plan Information and Operation.  Abbott shall provide AbbVie with information describing each Abbott Benefit Plan election made by a Transferred Employee or by an AbbVie LTD Participant that may have application following the applicable Transfer Date.  AbbVie shall determine, in its sole discretion, whether to administer the AbbVie Benefit Plans using those elections or to require Transferred Employees or AbbVie LTD Participants to submit new elections with respect to the AbbVie Benefit Plans.  Except as provided in this Agreement, the Distribution and the transfer of any Employee’s employment to the AbbVie Group shall not cause a distribution from or payment of benefits under any Abbott Benefit Plan.  Each Party shall, upon reasonable request, provide the other Party and the other Party’s respective Affiliates, agents, and vendors all information reasonably necessary to the other Party’s operation or administration of its Benefit Plans.

 

Section 2.04.  Post-Distribution Employment Transfers.

 

(a)                                 No-Hire.  The Parties agree that, during the Transition Period, neither Party nor any of such Party’s Affiliates shall hire an Employee of the other Party and its Affiliates without the express written consent of each Party’s head of human resources (or such individual’s delegate). This Section 2.04(a) shall not be construed as a limitation on the transfer to the AbbVie Group of any Post-Distribution AbbVie Employee, on transfers in accordance with Section 2.04(b), or on the ability of a Party to hire an individual who is no longer employed by the other Party.

 

(b)                                 Transition Period Transfers by Mutual Agreement.  The Parties recognize that, during the Transition Period, they may determine it to be in their mutual best interests to transfer an individual classified as an Abbott Retained Employee to the AbbVie Group or to transfer an individual classified as a Transferred Employee to the Abbott Group.  With the express written consent of each Party’s head of human resources (or such individual’s delegate), such Abbott Retained Employee’s or Transferred Employee’s, as applicable, employment will be terminated by the Abbott Group or the AbbVie Group, as applicable, and such Employee will be immediately hired by the other Party (such terminations and hires are referred to in this Section 2.04(b) as “transfers”).  Abbott Retained Employees (with such status being determined as of immediately following the Distribution Date) who are subsequently transferred to the AbbVie Group pursuant to this Section 2.04(b) shall be treated as Abbott Retained Employees for all purposes hereof during their time as Employees of the Abbott Group until their actual transfer to the AbbVie Group, upon and following which the Parties shall use commercially reasonable efforts to provide that they are treated as Transferred Employees for all purposes hereof.  Transferred Employees (with such status being determined as of immediately following the applicable Transfer Date) who are subsequently transferred to the Abbott Group pursuant to this Section 2.04(b) shall be treated as Transferred Employees for all purposes hereof during their time as Employees of the AbbVie Group until their actual transfer to the Abbott Group, upon and following which the Parties shall use commercially reasonable efforts to provide that they are

 

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treated as Abbott Retained Employees for all purposes hereof.   Without limiting the generality of the foregoing, except as provided in Section 2.02(c), each Rehired Employee whose employment is transferred pursuant to this Section 2.04(b) shall be deemed for all purposes to have been continuously employed by the applicable entity hiring such Employee for all prior periods of time that such Employee was employed by either the Abbott Group or the AbbVie Group.  Nothing in this paragraph requires (i) the hiring Party to make whole any Rehired Employee if such Employee leaves behind unvested equity awards that were granted after the Distribution Date, or (ii) the former employer to waive vesting requirements with respect to any unvested equity awards held by any Rehired Employee that were granted after the Distribution Date.

 

(c)                                  Rehired Employees.  Except as provided in Section 3.01(b)(ii), each Rehired Employee whose rehire does not occur in connection with a transfer pursuant to Section 2.04(b) shall be subject to the hiring Party’s general rules and Benefit Plan terms applicable to rehires.  Such Rehired Employee shall be deemed, for purposes of applying such rules, including break-in-service and service crediting rules, except as provided in Section 2.02(c), to have been employed by the applicable entity hiring him or her for all prior periods of time that he or she was employed by either the Abbott Group or the AbbVie Group.

 

(d)                                 Certain Pension Liabilities Associated With Rehired Employees. The Parties shall use commercially reasonable efforts to provide that the Assets and EMA Liabilities associated with the participation of any Rehired Employee (whether or not transferred in accordance with Section 2.04(b)) in the defined benefit pension plans of the AbbVie Group and the Abbott Group shall be transferred to the defined benefit pension plan sponsored by the entity (or by its applicable Affiliate) that rehires such Employee during the Transition Period.

 

(e)                                  Post-Distribution Employment in Deferred AbbVie Local Businesses. The following provisions shall apply to the Deferred AbbVie Local Businesses:

 

(i)                                     During the period commencing on the Distribution Date and ending on the consummation of the applicable Local Closing Transaction, Abbott shall, or shall cause its appropriate Affiliate to:

 

(A)                               provide AbbVie or its appropriate Affiliate with at least 30 days’ advance written notice prior to (1) terminating the employment of an AbbVie Employee, unless such termination of employment is the result of a violation of the Abbott Code of Business Conduct or other misconduct or is pursuant to Section 2.02(a)(ii); (2) making any material amendment to the Abbott Code of Business Conduct or other policies applicable to the employment of an AbbVie Employee;  (3) making any substantive change to the employment contract of an AbbVie Employee unless such change is required by applicable Law; (4) making any change to the base salary of an AbbVie Employee, other than an increase within the budget approved by AbbVie based on the Employee’s performance rating; (5) giving a performance rating other than Achieved Expectations (AE) to an AbbVie Employee grade 18 or higher; (6) changing the job grade of an AbbVie Employee; (7) making any substantive change in the plan design of an Abbott Benefit Plan in which an AbbVie Employee participates; or (8) making any other modification to an Abbott Benefit Plan in which an AbbVie

 

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Employee participates if such modification would result in a significant change in the cost of such plan to the employer or the participant; and

 

(B)                               obtain the approval of AbbVie or its appropriate Affiliate prior to (1) hiring any individual who will be classified as an AbbVie Employee unless such headcount was authorized prior to the Distribution Date; (2) promoting any AbbVie Employee to a position in job grade 18 or higher unless such promotion was authorized prior to the Distribution Date; or (3) making any substantive change to annual goals or cash incentive compensation opportunities for an AbbVie Employee.

 

(ii)                                  Except as otherwise mutually agreed upon by the Parties (such as in a Conveyance and Assumption Instrument or other agreement), if an AbbVie Employee’s transfer of employment to the AbbVie Group upon the consummation of a Local Closing Transaction causes, at the time of such transfer, a forfeiture of awards granted under an Abbott Stock Program (or successor thereto) after the Distribution Date, Abbott shall not have any obligation, EMA Liability or responsibility to such AbbVie Employee with respect to such forfeited awards, and AbbVie shall equitably compensate the affected AbbVie Employee for such forfeited awards in a manner determined by AbbVie in its sole discretion.  The foregoing sentence shall not preclude the Parties from making arrangements, if allowed by the Abbott Stock Program (or successor thereto) and applicable Law, to permit affected AbbVie Employees to continue to hold, after the Local Closing Transaction, awards granted under an Abbott Stock Program (or successor thereto) after the Distribution Date.

 

Section 2.05.  Collective Bargaining.  AbbVie shall cause the appropriate member of the AbbVie Group to assume all EMA Liabilities arising under any collective bargaining agreement (including but not limited to any national, sector or local collective bargaining agreement) with respect to any Transferred Non-U.S. Employee.  To the extent necessary, AbbVie shall cause the appropriate member of the AbbVie Group to join any industrial, employer or similar association or federation if membership is required for the relevant collective bargaining agreement to continue to apply.

 

Section 2.06.  Distributorship Model.  In the event that AbbVie operates any Deferred AbbVie Local Business through a local distributor rather than through an Affiliate, AbbVie agrees to use commercially reasonable efforts to cause such local distributor to employ the AbbVie Employees on similar terms and conditions of employment.

 

ARTICLE III

 

U.S. QUALIFIED AND NON-QUALIFIED RETIREMENT PLANS

 

Section 3.01.  AbbVie Pension Plan.

 

(a)                                 Establishment of AbbVie Pension Plan.  Effective as of or before the Distribution Date, AbbVie shall establish the AbbVie Pension Plan, which shall be substantially similar to, and shall include a benefit formula that is the same as the benefit formula in effect under, the Abbott ARP as of the Distribution Date. As soon as practicable after the Distribution

 

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Date and upon receipt by Abbott of (i) a copy of the AbbVie Pension Plan; (ii) copies of certified resolutions of the AbbVie Board (or its authorized committee or other delegate) evidencing adoption of the AbbVie Pension Plan and any related trust(s) and the assumption by the AbbVie Pension Plan of the EMA Liabilities described in Section 3.01(b); and (iii) either (A) a favorable determination letter issued by the Internal Revenue Service with respect to the AbbVie Pension Plan and any related trust, or (B) an opinion of counsel, which counsel and opinion are reasonably satisfactory to Abbott, with respect to the qualified status of the AbbVie Pension Plan under Code Section 401(a) and the tax-exempt status of any related trust under Code Section 501(a), Abbott shall direct the trustee of the Abbott Trust to transfer from the portion of the Abbott Trust that holds assets of the Abbott ARP to the portion of the Abbott Trust that holds assets of the AbbVie Pension Plan the amounts described in Section 3.01(b).

 

(b)                                 ERISA Section 4044 Transfer.

 

(i)                                     As of the Distribution Date, AbbVie shall cause the AbbVie Pension Plan to accept Assets and assume all EMA Liabilities under the Abbott ARP for Transferred Employees (other than Post-Distribution AbbVie Employees) and AbbVie LTD Participants (including Assets and EMA Liabilities in respect of beneficiaries and/or alternate payees) and the Abbott ARP shall transfer all such Assets and be relieved of such EMA Liabilities.  The amount of Assets to be transferred from the Abbott ARP to the AbbVie Pension Plan in such transfer (or transfers) shall be determined as of the Distribution Date in accordance with, and shall comply with, Code Section 414(l) and, to the extent deemed applicable by the Parties, ERISA Section 4044, and shall take into account the transfer (or transfers) of Assets described in Section 3.02(b).  Assumptions used to determine the value (or amount) of the Assets to be transferred shall be the safe harbor assumptions specified for valuing benefits in trusteed plans under Department of Labor Regulations Section 4044.51-57 and, to the extent not so specified, shall be based on the assumptions used in the annual valuation report most recently prepared prior to the transfer by the actuary for the Abbott ARP.  The transfer amount described above shall be credited or debited, as applicable, with a pro rata share of the actual investment earnings or losses allocable to the transfer amount for the period between the Distribution Date and an assessment date set by Abbott that is as close as practicable, taking into account the timing and reporting of valuation of assets in the Abbott Trust, to the date upon which Assets equal in value to the transfer amount are actually transferred from the Abbott ARP to the AbbVie Pension Plan. During the time prior to such transfer, benefits for Transferred Employees who terminate employment with the AbbVie Group and for AbbVie LTD Participants shall be paid from the Abbott ARP.  The ultimate transfer amount shall be reduced by the amount of these benefits and credited or debited by the actual investment earnings or losses from the payment date to the assessment date set by Abbott above.  In addition, during this period, AbbVie will be responsible for a pro rata share of trustee and administration fees attributable to the AbbVie Pension Plan assets that remain in the Abbott ARP.  The entries in the Abbott ARP funding standard account shall be divided among the Abbott ARP, the AbbVie Pension Plan, and the Abbott-AbbVie MEPP based on the guidance provided in Revenue Ruling 81-212 and 86-47.

 

(ii)                                  Periodically, at such times as agreed upon by the Parties after the transfer(s) described in Section 3.01(b)(i), (A) AbbVie shall cause the AbbVie Pension

 

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Plan to receive Assets and assume all EMA Liabilities under the Abbott ARP for Post-Distribution AbbVie Employees and other Employees who cease to be employed by Abbott after the Distribution Date and become employed by AbbVie during the Transition Period (including Assets and EMA Liabilities in respect of beneficiaries and/or alternate payees) and the Abbott ARP shall transfer all such Assets and be relieved of such EMA Liabilities, and (B) Abbott shall cause the Abbott ARP to receive Assets and assume all EMA Liabilities under the AbbVie Pension Plan for Employees who cease to be employed by AbbVie after the Distribution Date and become employed by Abbott during the Transition Period (including Assets and EMA Liabilities in respect of beneficiaries and/or alternate payees) and the AbbVie Pension Plan shall transfer all such Assets and be relieved of such EMA Liabilities.  The amount of such Assets to be transferred shall be determined as provided in Section 3.01(b)(i) and shall be subject to the applicable provisions of Section 3.01(b)(i).

 

(c)                                  AbbVie Pension Plan Provisions.  The AbbVie Pension Plan shall provide that:

 

(i)                                     Transferred Employees and AbbVie LTD Participants shall (A) be eligible to participate in the AbbVie Pension Plan as of the applicable Transfer Date to the extent they were eligible to participate in the Abbott ARP as of the applicable Transfer Date, and (B) receive credit for vesting, eligibility and benefit service for all service credited for those purposes under the Abbott ARP as of the applicable Transfer Date as if that service had been rendered to AbbVie;

 

(ii)                                  the compensation paid by the Abbott Group to a Transferred Employee or an AbbVie LTD Participant that is recognized under the Abbott ARP as of the applicable Transfer Date shall be credited and recognized for all applicable purposes under the AbbVie Pension Plan as though it were compensation from the AbbVie Group;

 

(iii)                               the accrued benefit of each Transferred Employee and each AbbVie LTD Participant under the Abbott ARP as of the applicable Transfer Date shall be payable under the AbbVie Pension Plan at the time and in a form that would have been permitted under the Abbott ARP as in effect as of the applicable Transfer Date, with employment by the Abbott Group prior to the applicable Transfer Date treated as employment by the AbbVie Group under the AbbVie Pension Plan for purposes of determining eligibility for optional forms of benefit, early retirement benefits, or other benefit forms;

 

(iv)                              the AbbVie Pension Plan shall assume and honor the terms of all QDROs in effect under the Abbott ARP as of the Transfer Date with respect to Transferred Employees and AbbVie LTD Participants; and

 

(v)                                 no Assets shall be transferred from the Code Section 401(h) account in the Abbott ARP to the AbbVie Pension Plan.

 

(d)                                 Determination Letter Request.  AbbVie shall submit an application to the Internal Revenue Service as soon as practicable after the Distribution Date (but no later than the last day of the remedial amendment period as defined in applicable Code provisions) for a

 

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determination letter regarding the qualification of the AbbVie Pension Plan and the tax status of its related trust as of the Distribution Date and shall make any amendments reasonably requested by the Internal Revenue Service to receive a favorable determination letter regarding the AbbVie Pension Plan.

 

(e)                                  Abbott ARP after Distribution Date.  From and after the Distribution Date, (i) the Abbott ARP shall continue to be responsible for EMA Liabilities in respect of Abbott Retained Employees and Abbott LTD Participants, and (ii) no Employees of the AbbVie Group (other than Post-Distribution AbbVie Employees) shall accrue any benefits under the Abbott ARP.  Without limiting the generality of the foregoing, Transferred Employees and AbbVie LTD Participants shall cease to be active participants in the Abbott ARP effective as of the applicable Transfer Date.

 

(f)                                   Plan Fiduciaries.  For all periods after the Distribution Date, the Parties agree that the applicable fiduciaries of each of the Abbott ARP and the AbbVie Pension Plan, respectively, shall have the authority with respect to the Abbott ARP and the AbbVie Pension Plan, respectively, to determine the plan investments and such other matters as are within the scope of their duties under ERISA Section 404.  Unless and until the applicable fiduciaries of the AbbVie Pension Plan determine that it is desired to invest the Assets of the AbbVie Pension Plan in a separate trust, the Assets of the AbbVie Pension Plan shall be invested through the Abbott Trust.  At such time as the applicable fiduciaries of the AbbVie Pension Plan determine that it is desired to invest the Assets of the AbbVie Pension Plan in a separate trust, Abbott shall direct the trustee of the Abbott Trust to transfer from the Abbott Trust to the trust(s) which forms a part of the AbbVie Pension Plan Assets equal in value to the Assets of AbbVie Pension Plan, with the composition of such assets to be mutually determined by the applicable fiduciaries of the AbbVie Pension Plan, the Abbott-AbbVie MEPP and the Abbott Trust.

 

(g)                                  No Loss of Unvested Benefits; No Distributions.  The transfer of any Transferred Employee’s employment to the AbbVie Group will not result in loss of that Transferred Employee’s unvested benefits under the Abbott ARP or the AbbVie Pension Plan and no Transferred Employee shall be entitled to a distribution of his or her benefit under the Abbott ARP as a result of such transfer of employment.

 

Section 3.02.  Abbott-AbbVie Multiple Employer Pension Plan.

 

(a)                                 Establishment of Abbott-AbbVie MEPP.  Effective as of or before the Distribution Date, the Parties shall establish the Abbott-AbbVie MEPP, which shall provide benefits for Former Employees (other than LTD Participants) participating in the Abbott ARP immediately prior to the Distribution Date.  The benefits provided by the Abbott-AbbVie MEPP to a Former Employee shall be the same as those the Former Employee would have received or is receiving under the Abbott ARP as of the Distribution Date.  As soon as practicable after the Distribution Date and upon (i) receipt by (A) AbbVie of copies of certified resolutions of the Abbott Board (or its authorized committee or other delegate) evidencing adoption of the Abbott-AbbVie MEPP and any related trust(s), and (B) Abbott of copies of certified resolutions of the AbbVie Board (or its authorized committee or other delegate) evidencing adoption of the Abbott-AbbVie MEPP and any related trust(s); and (ii) issuance of either (A) a favorable determination letter by the Internal Revenue Service with respect to the Abbott-AbbVie MEPP and any related trust, or (B) an opinion of counsel, which counsel and opinion are reasonably

 

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satisfactory to the other of Abbott or AbbVie, with respect to the qualified status of the Abbott-AbbVie MEPP under Code Section 401(a) and the tax-exempt status of any related trust under Code Section 501(a), Abbott shall direct the trustee of the Abbott Trust to transfer from the portion of the Abbott Trust that holds assets of the Abbott ARP to the portion of the Abbott Trust that holds assets of the Abbott-AbbVie MEPP the amounts described in Section 3.02(b).

 

(b)                                 ERISA Section 4044 Transfer.

 

(i)                                     As of the Distribution Date, the Parties shall cause the Abbott-AbbVie MEPP to accept Assets and assume all EMA Liabilities under the Abbott ARP for Former Employees (other than LTD Participants) who were participating in the Abbott ARP as of immediately prior to the Distribution Date (including Assets and EMA Liabilities in respect of beneficiaries and/or alternate payees established in relation to such Former Employees) and the Abbott ARP shall transfer all such Assets and be relieved of such EMA Liabilities.  The amount of Assets to be transferred from the Abbott ARP to the Abbott-AbbVie MEPP in such transfer (or transfers) shall be determined as of the Distribution Date in accordance with, and shall comply with, Code Section 414(l) and, to the extent deemed applicable by the Parties, ERISA Section 4044, and shall take into account the transfer (or transfers) of Assets described in Section 3.01(b).  Assumptions used to determine the value of the Assets to be transferred shall be the safe harbor assumptions specified for valuing benefits in trusteed plans under Department of Labor Regulations Section 4044.51-57 and, to the extent not so specified, shall be based on the assumptions used in the annual valuation report most recently prepared prior to the transfer by the actuary for the Abbott ARP.  The transfer amount described above shall be credited or debited, as applicable, with a pro rata share of the actual investment earnings or losses allocable to the transfer amount for the period between the Distribution Date and an assessment date set by Abbott that is as close as practicable, taking into account the timing and reporting of valuation of assets in the Abbott Trust, to the date upon which Assets are equal in value to the transfer amount actually transferred from the Abbott ARP to the Abbott-AbbVie MEPP.  During the time prior to such transfer, benefits for Former Employees shall be paid from the Abbott ARP.  The ultimate transfer amount shall be reduced by the amount of these benefits payable to Former Employees who are not LTD Participants and credited or debited by the actual investment earnings or losses from the payment date to the assessment date set by Abbott above.  In addition, during this period, each Party will be responsible for a pro rata share of trustee and administration fees attributable to the Abbott-AbbVie MEPP assets that remain in the Abbott ARP.  The entries in the Abbott ARP funding standard account shall be divided among the Abbott ARP, the AbbVie Pension Plan, and the Abbott-AbbVie MEPP based on the guidance provided in Revenue Rulings 81-212 and 86-47.

 

(ii)                                  Periodically, at such times as agreed upon by the Parties after the transfer(s) described in subparagraph (i) above, (A) AbbVie shall cause the AbbVie Pension Plan to receive Assets and assume all EMA Liabilities under the Abbott-AbbVie MEPP for participants in the Abbott-AbbVie MEPP who become employed by AbbVie during the Transition Period (including Assets and EMA Liabilities in respect of beneficiaries and/or alternate payees) and the Abbott-AbbVie MEPP shall transfer all such Assets and be relieved of such EMA Liabilities, and (B) Abbott shall cause the

 

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Abbott ARP to receive Assets and assume all EMA Liabilities under the Abbott-AbbVie MEPP for participants in the Abbott-AbbVie MEPP who become employed by Abbott during the Transition Period (including Assets and EMA Liabilities in respect of beneficiaries and/or alternate payees) and the Abbott-AbbVie MEPP shall transfer all such Assets and be relieved of such EMA Liabilities.  The amount of such Assets to be transferred shall be determined as provided in Section 3.02(b)(i) and shall be subject to the applicable provisions of Section 3.02(b)(i).

 

(c)                                  Abbott-AbbVie MEPP Provisions. The Abbott-AbbVie MEPP shall provide that:

 

(i)                                     the benefit of each Former Employee participating in the Abbott-AbbVie MEPP shall be such Former Employee’s accrued benefit under the Abbott ARP immediately prior to the Distribution Date;

 

(ii)                                  the accrued benefit of each Former Employee participating in the Abbott ARP as of the Distribution Date shall be paid under the Abbott-AbbVie MEPP at the time and in a form that would have been permitted under the Abbott ARP as in effect as of the Distribution Date;

 

(iii)                               the Abbott-AbbVie MEPP shall assume and honor the terms of all QDROs in effect under the Abbott ARP as of the Distribution Date with respect to participating Former Employees;

 

(iv)                              certain individuals who were previously employed by TAP Pharmaceutical Products Inc. who are participating in the Abbott ARP as of immediately prior to the Distribution Date shall continue to earn vesting and seniority service for purposes of the Abbott-AbbVie MEPP in accordance with Supplement E of the Abbott ARP as in effect on the Distribution Date; and

 

(v)                                 no assets shall be transferred from the Code Section 401(h) Account in the Abbott ARP to the Abbott-AbbVie MEPP.

 

(d)                                 Determination Letter Request.  The Parties shall cooperate and submit an application to the Internal Revenue Service as soon as practicable after the Distribution Date (but no later than the last day of the remedial amendment period as defined in applicable Code provisions) for a determination letter regarding the qualification of the Abbott-AbbVie MEPP and the tax-exempt status of its related trust as of the Distribution Date and shall make any amendments reasonably requested by the Internal Revenue Service to receive a favorable determination letter regarding the Abbott-AbbVie MEPP.

 

(e)                                  Plan Fiduciaries.  The fiduciaries of the Abbott-AbbVie MEPP shall be appointed, and shall have such rights, duties, and responsibilities, as shall be determined by mutual agreement of the Parties as set forth in the applicable plan and trust documents for the Abbott-AbbVie MEPP. Unless and until the applicable fiduciaries of the Abbott-AbbVie MEPP determine that it is desired to invest the Assets of the Abbott-AbbVie MEPP in a separate trust, the Assets of the Abbott-AbbVie MEPP shall be invested through the Abbott Trust.  At such time as the applicable fiduciaries of the Abbott-AbbVie MEPP determine that it is desired to

 

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invest the Assets of the Abbott-AbbVie MEPP in a separate trust, Abbott shall direct the trustee of the Abbott Trust to transfer from the Abbott Trust to the trust(s) which forms a part of the Abbott-AbbVie MEPP Assets equal in value to the Assets of the Abbott-AbbVie MEPP, with the composition of such assets to be mutually determined by the applicable fiduciaries of the Abbott-AbbVie MEPP and the Abbott Trust.

 

(f)                                   Abbott-AbbVie MEPP after Distribution Date.  From and after the Distribution Date, no individual shall accrue any benefits under the Abbott-AbbVie MEPP.  If a participant in the Abbott-AbbVie MEPP becomes employed by the Abbott Group or the AbbVie Group on or after the Distribution Date in a position that is eligible for pension plan participation, any additional pension accruals shall occur under the Abbott ARP or the AbbVie Pension Plan, as applicable.

 

Section 3.03.  Stock Retirement/Savings Plan.

 

(a)                                 Establishment of AbbVie Savings Plan.  Effective as of or before the Distribution Date, AbbVie shall establish the AbbVie Savings Plan.  As of the Distribution Date, the terms of the AbbVie Savings Plan shall be substantially similar to the terms of the Abbott SRP as of the Distribution Date (except as described in Section 3.03(f)).  On or prior to the Distribution Date, AbbVie shall provide Abbott with (i) a copy of the AbbVie Savings Plan; (ii) a copy of certified resolutions of the AbbVie Board (or its authorized committee or other delegate) evidencing adoption of the AbbVie Savings Plan and the related trust(s) and the assumption by the AbbVie Savings Plan of the EMA Liabilities described in Section 3.03(b); and (iii) either (A) a favorable determination letter issued by the Internal Revenue Service with respect to the AbbVie Savings Plan and its related trust or (B) an opinion of counsel, which counsel and opinion are reasonably satisfactory to Abbott, with respect to the qualified status of the AbbVie Savings Plan under Code Section 401(a) and the tax-exempt status of its related trust under Code Section 501(a).

 

(b)                                 Transfer of Account Balances.  As soon as practicable after the Distribution Date, Abbott shall cause the trustee of the Abbott SRP to transfer from the trust(s) which forms a part of the Abbott SRP to the trust(s) which forms a part of the AbbVie Savings Plan amounts equal to the account balances of the Transferred Employees and the AbbVie LTD Participants (including account balances in respect of beneficiaries and alternate payees established in relation to such individuals) under the Abbott SRP, determined as of the date of the transfer.  Such transfers shall be made in cash, Abbott Common Shares, shares of AbbVie Common Stock, promissory notes evidencing outstanding loans and other Assets or any combination thereof in cash or in kind, as instructed by the Abbott SRP Investment Committee.  AbbVie shall cause the transferred amounts to be allocated among the Transferred Employees’ and AbbVie LTD Participants’ (and beneficiaries’ and/or alternate payees’, as applicable) AbbVie Savings Plan accounts and to such investment funds in the same manner in which those amounts were allocated under the Abbott SRP.  Any Asset and EMA Liability transfers pursuant to this Section 3.03 shall comply in all respects with Code Sections 414(l) and 411(d)(6).

 

(c)                                  AbbVie Savings Plan Provisions. The AbbVie Savings Plan shall provide that:

 

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(i)                                     Transferred Employees and AbbVie LTD Participants shall (A) be eligible to participate in the AbbVie Savings Plan as of the applicable Transfer Date to the extent they were eligible to participate in the Abbott SRP as of the applicable Transfer Date, and (B) receive credit for vesting purposes for all service credited for that purpose under the Abbott SRP as of the applicable Transfer Date as if that service had been rendered to AbbVie; and

 

(ii)                                  the account balance of each Transferred Employee and AbbVie LTD Participant under the Abbott SRP as of the date of the transfer of Assets from the Abbott SRP (including any outstanding promissory notes) shall be credited to such individual’s account balance under the AbbVie Savings Plan.

 

(d)                                 Determination Letter Request.  AbbVie shall submit an application to the Internal Revenue Service as soon as practicable following the Distribution Date (but no later than the last day of the remedial amendment period as defined in applicable Code provisions) for a determination regarding the qualification of the AbbVie Savings Plan and the tax-exempt status of its related trust as of the Distribution Date and shall make any amendments reasonably requested by the Internal Revenue Service to receive a favorable determination letter regarding the AbbVie Savings Plan.

 

(e)                                  Abbott SRP after Distribution Date.  From and after the Distribution Date, (i) the Abbott SRP shall continue to be responsible for EMA Liabilities in respect of Abbott Retained Employees and Former Employees (other than AbbVie LTD Participants), and (ii) no Employees of the AbbVie Group (other than Post-Distribution AbbVie Employees), shall accrue any benefits under the Abbott SRP.  Without limiting the generality of the foregoing, Transferred Employees and AbbVie LTD Participants shall cease to be active participants in the Abbott SRP effective as of the applicable Transfer Date.

 

(f)                                   Plan Fiduciaries and Stock Considerations. For all periods after the Distribution Date, the Parties agree that the applicable fiduciaries of each of the Abbott SRP and the AbbVie Savings Plan, respectively, shall have the authority with respect to the Abbott SRP and the AbbVie Savings Plan, respectively, to determine the investment alternatives, the terms and conditions with respect to those investment alternatives and such other matters as are within the scope of their duties under ERISA Section 404.

 

(g)                                  No Loss of Unvested Benefits; No Distributions.  The transfer of any Transferred Employee’s employment to the AbbVie Group will not result in loss of that Transferred Employee’s unvested benefits under the Abbott SRP or the AbbVie Savings Plan and no Transferred Employee shall be entitled to a distribution of his or her benefit under the Abbott SRP as a result of such transfer of employment.

 

(h)                                 Subsequent Transfers.  If, after the Distribution Date, a participant in the Abbott SRP becomes employed by the AbbVie Group or a participant in the AbbVie Savings Plan becomes employed by the Abbott Group, any additional allocations shall occur under the Abbott SRP or the AbbVie Savings Plan, as applicable.  If such participant’s employment by the Abbott Group or the AbbVie Group commences during the Transition Period, the Abbott SRP or the AbbVie Savings Plan, as applicable, shall transfer or permit the applicable participant to roll over a distribution of such participant’s account (including any outstanding loans) from the

 

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AbbVie Savings Plan or the Abbott SRP, as applicable, all in accordance with the terms of the Abbott SRP and the AbbVie Savings Plan and/or plan administrative procedures, as applicable.

 

Section 3.04.  Pension Plan for Former BASF and Former Solvay Employees.

 

(a)                                 Transfer of Plan Sponsorship to AbbVie.  As of the Distribution Date, AbbVie shall assume sponsorship of the Pension Plan for Former BASF and Former Solvay Employees.  The plan and the related trust agreement shall be amended, effective as of the Distribution Date, to reflect such sponsorship and to make other changes to effectuate the sponsorship change.  From and after the Distribution Date, the Pension Plan for Former BASF and Former Solvay Employees shall be responsible for EMA Liabilities in respect of Transferred Employees and Former Employees (other than Abbott LTD Participants).

 

(b)                                 Abbott Retention of Assets and Liabilities for Benefits Due to Abbott Retained Employees and Abbott LTD Participants.

 

(i)                                     As described in Section 3.04(b)(ii), Abbott shall retain all Assets and EMA Liabilities relating to, arising out of, or resulting from the Pension Plan for Former BASF and Former Solvay Employees with respect to Abbott Retained Employees and Abbott LTD Participants and their beneficiaries and/or alternate payees.  Effective as of or before the Distribution Date, Abbott shall amend the Abbott ARP to incorporate the provisions necessary to document and provide for such benefits due to the affected Abbott Retained Employees and Abbott LTD Participants.  From and after the Distribution Date (or, if later, the date on which the Assets and EMA Liabilities attributable to benefits for the Abbott Retained Employees and Abbott LTD Participants are transferred to the Abbott ARP), no Employees of the Abbott Group shall participate in or accrue any benefits under the Pension Plan for Former BASF and Former Solvay Employees.

 

(ii)                                  As of the Distribution Date, Abbott shall cause the Abbott ARP to accept Assets and assume all EMA Liabilities under the Pension Plan for Former BASF and Former Solvay Employees for Abbott Retained Employees and Abbott LTD Participants (including Assets and EMA Liabilities in respect of beneficiaries and/or alternate payees) and the Pension Plan for Former BASF and Former Solvay Employees shall transfer all such Assets and be relieved of such EMA Liabilities.  The amount of Assets to be transferred from the Pension Plan for Former BASF and Former Solvay Employees to the Abbott ARP in such transfer (or transfers) shall be determined as of the Distribution Date in accordance with, and shall comply with, Code Section 414(l) and, to the extent deemed applicable by the Parties, ERISA Section 4044. Assumptions used to determine the value of the Assets to be transferred shall be the safe harbor assumptions specified for valuing benefits in trusteed plans under Department of Labor Regulations Section 4044.51-57 and, to the extent not so specified, shall be based on the assumptions used in the annual valuation report most recently prepared prior to the transfer by the actuary for the Pension Plan for Former BASF and Former Solvay Employees.  The transfer amount described above shall be credited or debited, as applicable, with a pro rata share of the actual investment earnings or losses allocable to the transfer amount for the period between the Distribution Date and an assessment date set by Abbott that is as close as practicable, taking into account the timing and valuation of assets in the Abbott

 

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Trust, to the date upon which Assets equal in value to the transfer amount are actually transferred from the Pension Plan for Former BASF and Former Solvay Employees to the Abbott ARP. During the time prior to such transfer, benefits for Abbott Retained Employees who terminate employment with the Abbott Group and for Abbott LTD Participants shall be paid from the Pension Plan for Former BASF and Former Solvay Employees. The ultimate transfer amount shall be reduced by the amount of these benefits and credited or debited by the actual investment earnings or losses from the payment date to the assessment date set by Abbott above.  In addition, during this period, Abbott will be responsible for a pro rata share of trustee and administration fees attributable to the Pension Plan for Former BASF and Former Solvay Employees assets that remain in the Abbott ARP.  The entries in the Abbott ARP funding standard account shall be divided among the Abbott ARP and the Pension Plan for Former BASF and Former Solvay Employees based on the guidance provided in Revenue Ruling 81-212 and 86-47.

 

(iii)                               Periodically, at such times as agreed upon by the Parties after the transfer(s) described in Section 3.04(b)(ii), (A) AbbVie shall cause the Pension Plan for Former BASF and Former Solvay Employees to receive Assets and assume all EMA Liabilities under the Abbott ARP for any Abbott Retained Employees (and their beneficiaries and alternate payees) on whose behalf a transfer was made under Section 3.04(b)(ii) who cease to be employed by Abbott after the Distribution Date and become employed by AbbVie during the Transition Period (including Assets and EMA Liabilities in respect of beneficiaries and/or alternate payees) and the Abbott ARP shall transfer all such Assets and be relieved of such EMA Liabilities, and (B) Abbott shall cause the Abbott ARP to receive Assets and assume all EMA Liabilities under the Pension Plan for Former BASF and Former Solvay Employees for any Employees who cease to be employed by AbbVie after the Distribution Date and become employed by Abbott during the Transition Period (including Assets and EMA Liabilities in respect of beneficiaries and/or alternate payees) and the Pension Plan for Former BASF and Former Solvay Employees shall transfer all such Assets and be relieved of such EMA Liabilities.  The amount of Assets to be transferred shall be determined as provided in Section 3.04(b)(ii) and shall be subject to the applicable provisions of Section 3.04(b)(ii).

 

(c)                                  Plan Fiduciaries.  For all periods after the Distribution Date, the Parties agree that the applicable fiduciaries of each of the Pension Plan for Former BASF and Former Solvay Employees and the Abbott ARP, respectively, shall have the authority with respect to the Pension Plan for Former BASF and Former Solvay Employees and the Abbott ARP, respectively, to determine the plan investments and such other matters as are within the scope of their duties under ERISA Section 404.  Unless and until the applicable fiduciaries of the Pension Plan for Former BASF and Former Solvay Employees determine that it is desired to invest the Assets of the Pension Plan for Former BASF and Former Solvay Employees in a separate trust, the Assets of the Pension Plan for Former BASF and Former Solvay Employees shall be invested through the Abbott Trust.  At such time as the applicable fiduciaries of the Pension Plan for Former BASF and Former Solvay Employees determine that it is desired to invest the Assets of the Pension Plan for Former BASF and Former Solvay Employees in a separate trust, Abbott shall direct the trustee of the Abbott Trust to transfer from the Abbott Trust to the trust(s) which forms a part of the Pension Plan for Former BASF and Former Solvay Employees Assets equal

 

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in value to the Assets of Pension Plan for Former BASF and Former Solvay Employees, with the composition of such assets to be mutually determined by the applicable fiduciaries of the Pension Plan for Former BASF and Former Solvay Employees and the Abbott Trust.

 

Section 3.05.  Supplemental Pension Plan.

 

(a)                                 Establishment of AbbVie SERP.  Effective as of or before the Distribution Date, AbbVie shall establish the AbbVie SERP, with terms and funding arrangements substantially similar to those of the Abbott SERP as of the Distribution Date.

 

(b)                                 Assumption of SERP Liabilities and Transfer from Abbott SERP. Except as provided below, as of a Transferred Employee’s or an AbbVie LTD Participant’s Transfer Date, AbbVie shall, and shall cause the AbbVie SERP to, assume all EMA Liabilities for all obligations under the Abbott SERP for the benefits of such individual (and any other individual on whose behalf EMA Liabilities are transferred from the Abbott ARP to the AbbVie Pension Plan under Section 3.01(b)(ii)(A)) and his or her beneficiaries and/or alternate payees determined as of the applicable Transfer Date, and Abbott and the Abbott SERP shall be relieved of all EMA Liabilities for those benefits.  Abbott shall retain the EMA Liabilities for all obligations under the Abbott SERP for the benefits for Abbott Retained Employees and Former Employees (other than AbbVie LTD Participants) (and any other individual on whose behalf EMA Liabilities are transferred from the AbbVie Pension Plan to the Abbott ARP under Section 3.01(b)(ii)(B)), but shall share with AbbVie the cost of benefits provided to Former Employees (other than LTD Participants) in accordance with procedures mutually agreed to by the Parties.

 

(c)                                  AbbVie SERP Provisions.  As of the Distribution Date, the AbbVie SERP shall provide that:

 

(i)                                     Transferred Employees and AbbVie LTD Participants shall (A) be eligible to participate in the AbbVie SERP to the extent they were eligible to participate in the Abbott SERP as of the applicable Transfer Date, and (B) receive credit for vesting, eligibility and benefit service for all service credited for those purposes under the Abbott SERP as of the Transfer Date as if that service had been rendered to AbbVie (provided that in the event that any such Transferred Employee or AbbVie LTD Participant receives a distribution from the Abbott SERP, the value of such distribution shall be offset against future benefits under the AbbVie SERP to the extent necessary to avoid a duplication of benefits, the terms of such offset to be set forth in the AbbVie SERP);

 

(ii)                                  the compensation paid by the Abbott Group to a Transferred Employee or to an AbbVie LTD Participant that was recognized under the Abbott SERP as of the Transfer Date shall be credited and recognized for all applicable purposes under the AbbVie SERP as though it were compensation from the AbbVie Group;

 

(iii)                               the accrued benefit of each Transferred Employee and each AbbVie LTD Participant under the Abbott SERP as of the applicable Transfer Date shall be payable under the AbbVie SERP at the time and in a form that would have been permitted under the Abbott SERP as in effect as of such Transfer Date, with employment by the Abbott Group prior to the Transfer Date treated as employment by the AbbVie

 

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Group under the AbbVie SERP for purposes of determining eligibility for optional forms of benefit, early retirement benefits, or other benefit forms; and

 

(iv)                              the AbbVie SERP shall assume and honor the terms of all arrangements relating to beneficiaries and alternate payees in effect and honored under the Abbott SERP as of the applicable Transfer Date with respect to Transferred Employees and AbbVie LTD Participants.

 

(d)                                 Abbott SERP after Distribution Date.  From and after a Transferred Employee’s or AbbVie LTD Participant’s Transfer Date, such Transferred Employee or AbbVie LTD Participant shall not participate in or accrue any benefits under the Abbott SERP. Without limiting the generality of the foregoing, each Transferred Employee and AbbVie LTD Participant shall cease to participate in the Abbott SERP effective as of the applicable Transfer Date.  The Abbott SERP shall continue to be responsible for EMA Liabilities in respect of Abbott Retained Employees and Former Employees (other than AbbVie LTD Participants) and their beneficiaries and/or alternate payees.

 

Section 3.06.  Deferred Compensation Plan.

 

(a)                                 Establishment of AbbVie DCP. Effective as of or before the Distribution Date, AbbVie shall establish the AbbVie DCP, with terms substantially similar to those of the Abbott DCP as of the Distribution Date.

 

(b)                                 Assumption of DCP Liabilities and Transfer from Abbott DCP.

 

(i)                                     As of a Transferred Employee’s or an AbbVie LTD Participant’s Transfer Date, AbbVie shall, and shall cause the AbbVie DCP to, assume all EMA Liabilities for all obligations under the Abbott DCP for the benefits of such individual and his or her beneficiaries and/or alternate payees, determined as of the applicable Transfer Date, and Abbott and the Abbott DCP shall be relieved of all EMA Liabilities for those benefits.

 

(ii)                                  As of or as soon as practicable after the applicable Transfer Date, the Parties shall cooperate to cause the accounts of the applicable Transferred Employee or AbbVie LTD Participant participating in the Abbott DCP to be transferred to the AbbVie DCP.  AbbVie shall (A) credit each such Transferred Employee’s or AbbVie LTD Participant’s account with (1) the amount deferred by such individual into the Abbott DCP as of the applicable Transfer Date, plus (2) any employer contributions, whether vested or unvested, deemed to have been made in relation to the amount described in (1), including, in each case, any earnings thereon, and (B) recognize and honor all deferral and distribution elections made by such individual (including any deferral election applicable to any bonus earned but not yet paid as of the applicable Transfer Date).

 

(c)                                  Abbott DCP after Distribution Date.  From and after a Transferred Employee’s or an AbbVie LTD Participant’s Transfer Date, such individual shall not participate in or accrue any benefits under the Abbott DCP.  Without limiting the generality of the foregoing, each Transferred Employee or AbbVie LTD Participant shall cease to participate in

 

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the Abbott DCP effective as of his or her Transfer Date.  The Abbott DCP shall continue to be responsible for EMA Liabilities in respect of Abbott Retained Employees and Former Employees (other than AbbVie LTD Participants) and their beneficiaries and/or alternate payees.

 

Section 3.07.  Supplemental Savings Plan.

 

(a)                                 Establishment of AbbVie SSP.  Effective as of or before the Distribution Date, AbbVie shall establish the AbbVie SSP, with terms and funding arrangements substantially similar to those of the Abbott KSP as of the Distribution Date.

 

(b)                                 Assumption of KSP Liabilities and Transfer from Abbott KSP.

 

(i)                                     As of a Transferred Employee’s or an AbbVie LTD Participant’s Transfer Date, AbbVie shall, and shall cause the AbbVie SSP to, assume all EMA Liabilities for all obligations under the Abbott KSP for the benefits of such individual and his or her beneficiaries and/or alternate payees, determined as of such Transfer Date, and Abbott and the Abbott KSP shall be relieved of all EMA Liabilities for those benefits.

 

(ii)                                  As of or as soon as practicable after the applicable Transfer Date, the Parties shall cooperate to cause the accounts of the applicable Transferred Employee or AbbVie LTD Participant participating in the Abbott KSP to be transferred to the AbbVie SSP.  AbbVie shall (A) credit each such Transferred Employee’s or AbbVie LTD Participant’s account with (1) the amount deferred by such individual into the Abbott KSP as of the applicable Transfer Date, plus (2) any employer contributions, whether vested or unvested, deemed to have been made in relation to the amount described in (1), including, in each case, any earnings thereon, and (B) recognize and honor all deferral and distribution elections made by such individual.

 

(c)                                  Abbott KSP after Distribution Date.  From and after a Transferred Employee’s or an AbbVie LTD Participant’s Transfer Date, such individual shall not participate in or accrue any benefits under the Abbott KSP.  Without limiting the generality of the foregoing, each Transferred Employee or AbbVie LTD Participant shall cease to participate in the Abbott KSP effective as of his or her Transfer Date.  The Abbott KSP shall continue to be responsible for EMA Liabilities in respect of Abbott Retained Employees and Former Employees (other than AbbVie LTD Participants) and their beneficiaries and/or alternate payees, but shall share with AbbVie the cost of benefits provided to Former Employees (other than LTD Participants) in accordance with procedures mutually agreed to by the Parties.

 

Section 3.08.  Deferred Compensation Plan for Former Employees of Solvay and Supplemental Pension Plan for Former BASF and Former Solvay Employees.

 

(a)                                 Transfer of Plan Sponsorship to AbbVie.  Effective as of the Distribution Date, a member of the AbbVie Group shall assume or retain sponsorship of the Deferred Compensation Plan for Former Employees of Solvay and the Supplemental Pension Plan for Former BASF and Former Solvay Employees and, except as otherwise provided in Section 3.08(b), shall be responsible for all EMA Liabilities thereunder.  Such plans shall be amended, effective as of the Distribution Date, to reflect such sponsorship and to make other changes reasonably necessary to effectuate the sponsorship change.

 

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(b)                                 Abbott Retention of Liabilities for Benefits Due to Abbott Retained Employees and Abbott LTD Participants.  Abbott shall retain all EMA Liabilities relating to, arising out of, or resulting from the Deferred Compensation Plan for Former Employees of Solvay and the Supplemental Pension Plan for Former BASF and Former Solvay Employees with respect to Abbott Retained Employees and Abbott LTD Participants and their beneficiaries and/or alternate payees (and, with respect to such Supplemental Pension Plan for Former BASF and Former Solvay Employees, any other individual on whose behalf EMA Liabilities are transferred from the Pension Plan for Former BASF and Former Solvay Employees to the Abbott ARP under Section 3.04(b)(iii)).  Effective as of or before the Distribution Date, Abbott shall amend or adopt such plans as it deems necessary to incorporate the provisions necessary to document and provide for such benefits due to the affected Abbott Retained Employees and Abbott LTD Participants.  From and after the Distribution Date, no Employee of the Abbott Group shall participate in or accrue any benefits under the Deferred Compensation Plan for Former Employees of Solvay and the Supplemental Pension Plan for Former BASF and Former Solvay Employees.

 

ARTICLE IV

 

NON-U.S. RETIREMENT PLANS

 

Section 4.01.  Establishment of Non-U.S. Retirement Plans and Transfers of Assets and Liabilities.  Except as mutually agreed upon by the Parties or required under this Article IV or Article VII, AbbVie shall, or shall cause its appropriate Affiliate to, establish a pension plan (whether a defined contribution or defined benefit pension plan) with terms that are substantially similar to those of the corresponding Non-U.S. Abbott Benefit Plan.

 

(a)                                 Transfer of Non-U.S. Retirement Plan Assets and Liabilities.  After a Non-U.S. AbbVie Benefit Plan is established, then, except as otherwise provided in this Agreement, the Assets and EMA Liabilities determined as of the Distribution Date under the corresponding Non-U.S. Abbott Benefit Plan attributable to Transferred Non-U.S. Employees (and, with respect to each of the countries or entities listed in Schedule 4.01(a), AbbVie Former Employees) who are participants in that plan, along with any other Assets and EMA Liabilities that AbbVie agrees to assume with respect to such plan, shall be transferred to the applicable Non-U.S. AbbVie Benefit Plan.  The Non-U.S. Abbott Benefit Plan shall retain all Assets and EMA Liabilities related to Abbott Retained Employees, Abbott Former Employees, and, with respect to each of the countries or entities not listed in Schedule 4.01(a), AbbVie Former Employees. Assets will be allocated between the plans based on the proportion of EMA Liabilities borne by each plan.  Except as otherwise mutually agreed upon by the Parties, such EMA Liabilities will be valued as of the Distribution Date using the projected benefit obligation based on plan provisions as in effect at the Distribution Date and applying demographic and other assumptions used in the most recently completed valuation of the applicable Non-U.S. Abbott Benefit Plan; provided, however, that all economic assumptions will be updated as of the Distribution Date.  The transfer amount described above shall be credited or debited, as applicable, with a pro rata share of the actual investment earnings or losses allocable to the transfer amount for the period between the Distribution Date and an assessment date set by Abbott that is as close as practicable, taking into account the timing and reporting of valuation of the applicable Non-U.S. Abbott Benefit Plan’s Assets, to the date upon which Assets equal in value to the transfer amount are actually

 

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transferred from the applicable Non-U.S. Abbott Benefit Plan to the applicable Non-U.S. AbbVie Benefit Plan.  During this period, with respect to countries or entities listed in Schedule 4.01(a), benefits for AbbVie Former Employees shall be paid from the Non-U.S. Abbott Benefit Plan. Except as otherwise mutually agreed upon by the Parties, the ultimate transfer amount shall be reduced by the amount of these benefits and credited or debited by the actual investment earnings or losses from the payment date to the assessment date set by Abbott above.  Any third party fees, costs or expenses incurred under the applicable Non-U.S. Abbott Benefit Plan during the period from the Distribution Date to the assessment date set by Abbott shall be shared by the Parties based on the proportion of EMA Liabilities borne by the applicable Non-U.S. Abbott Benefit Plan and the applicable Non-U.S. AbbVie Benefit Plan.  The Parties agree to use commercially reasonable efforts to accomplish each transfer as soon as practicable following the Distribution Date and to cooperate with each other to make such filings and disclosures and obtain such approvals as may be deemed necessary or advisable in accordance with applicable Law.

 

(b)                                 Non-U.S. AbbVie Retirement Plan Provisions.  Each Non-U.S. AbbVie Benefit Plan shall provide, except as otherwise provided in this Agreement or local Conveyance and Assumption Instruments  that:

 

(i)                                     Transferred Non-U.S. Employees (and, with respect to each of the countries or entities listed in Schedule 4.01(a), AbbVie Former Employees) shall (A) be eligible to participate in the Non-U.S. AbbVie Benefit Plan to the extent they were eligible to participate in the corresponding Non-U.S. Abbott Benefit Plan as of the Distribution Date, and (B) receive credit for vesting, eligibility and benefit service for all service credited for those purposes under the corresponding Non-U.S. Abbott Benefit Plan as if that service had been rendered to AbbVie;

 

(ii)                                  the compensation paid by the Abbott Group to a Transferred Non-U.S. Employee (or, with respect to each of the countries or entities listed in Schedule 4.01(a), an AbbVie Former Employee) that is recognized under the Non-U.S. Abbott Benefit Plan shall be credited and recognized for all applicable purposes under the corresponding Non-U.S. AbbVie Benefit Plan as though it were compensation from the AbbVie Group; and

 

(iii)                               the accrued benefit of each Transferred Non-U.S. Employee (or, with respect to each of the countries or entities listed in Schedule 4.01(a), each AbbVie Former Employee) under the Non-U.S. Abbott Benefit Plan that is transferred to the corresponding Non-U.S. AbbVie Benefit Plan pursuant to Section 4.01(a) shall be paid under such Non-U.S. AbbVie Benefit Plan in accordance with the terms of such Non-U.S. AbbVie Benefit Plan and applicable Law, with employment by the Abbott Group treated as employment by the AbbVie Group under the Non-U.S. AbbVie Benefit Plan for purposes of determining eligibility for optional forms of benefit, early retirement benefits, or other benefit forms.

 

(c)                                  Subsequent Transfers.  Periodically, at such times as agreed upon by the Parties after the initial transfer described in Section 4.01(a), (i) AbbVie shall cause the applicable Non-U.S. AbbVie Benefit Plan to receive Assets and assume all EMA Liabilities under the applicable Non-U.S. Abbott Benefit Plan for Post-Distribution AbbVie Employees and other

 

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Employees who cease to be employed by Abbott after the Distribution Date and become employed by AbbVie during the Transition Period (including Assets and EMA Liabilities in respect of beneficiaries and/or alternate payees) and the applicable Non-U.S. Abbott Benefit Plan shall transfer all such Assets and be relieved of such EMA Liabilities, and (ii) Abbott shall cause the applicable Non-U.S. Abbott Benefit Plan to receive Assets and assume all EMA Liabilities under the applicable Non-U.S. AbbVie Benefit Plan for Employees who cease to be employed by AbbVie after the Distribution Date and become employed by Abbott during the Transition Period (including Assets and EMA Liabilities in respect of beneficiaries and/or alternate payees) and the applicable Non-U.S. AbbVie Benefit Plan shall transfer all such Assets and be relieved of such EMA Liabilities.  The amount of such Assets to be transferred shall be determined as provided in Section 4.01(a) and shall be subject to the applicable provisions of Section 4.01(a).

 

Section 4.02.  Shared Plan Model.

 

(a)                                 AbbVie Participation in Non-U.S. Abbott Retirement Plans.

 

(i)                                     In each of the countries or entities listed in Schedule 4.02(a),  Abbott shall, or shall cause its appropriate Affiliate to, permit AbbVie or its appropriate Affiliate to continue to participate in the Non-U.S. Abbott Benefit Plan providing retirement benefits in that country after the Distribution.  Except as otherwise mutually agreed upon by the Parties, such continued participation is subject to the following requirements: (A) Abbott or its appropriate Affiliate will remain the principal employer under the plan; (B) Abbott and only Abbott or its appropriate Affiliate may amend the plan at any time; (C) any third party fees, costs or expenses shall be shared by the Parties on the basis of their proportionate share of the EMA Liabilities under the Non-U.S. Abbott Benefit Plan;  (D) Abbott shall determine the benefit formula or structure under the plan (which shall apply uniformly to all similarly situated participants); and (E) such continued participation may not extend beyond two years after the Distribution Date, unless otherwise mutually agreed by each Party’s head of human resources (or such individual’s delegate).

 

(ii)                                  At or before the end of the shared plan period, in each of the countries or entities listed in Schedule 4.02(a),  AbbVie shall, or shall cause its appropriate Affiliate to, establish its own plan or arrangement to deliver the benefits due to AbbVie Employees (including both current and former AbbVie Employees) and AbbVie Former Employees under the applicable Non-U.S. Abbott Benefit Plan or otherwise shall be responsible for all costs incurred by the Parties in connection with winding up or terminating the participation of AbbVie or its appropriate Affiliate in the Non-U.S. Abbott Benefit Plan.  Following the establishment of the Non-U.S. AbbVie Benefit Plan, the Assets and EMA Liabilities of the Non-U.S. Abbott Benefit Plan attributable to AbbVie Employees (including both current and former AbbVie Employees) and AbbVie Former Employees who are participants in that plan shall be transferred to the applicable Non-U.S. AbbVie Benefit Plan.  Assets will be allocated between the plans based on the proportion of EMA Liabilities borne by each plan.  Except as otherwise mutually agreed upon by the Parties, such EMA Liabilities will be valued as of the Distribution Date using the projected unit credit method based on plan provisions as in effect at the Distribution Date and applying the demographic and other assumptions used in the most recently completed valuation of the applicable Non-U.S.

 

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Abbott Benefit Plan; provided, however, that all economic assumptions will be updated as of the Distribution Date.  The transfer amount described above shall be credited or debited, as applicable, with a pro rata share of the actual investment earnings or losses allocable to the transfer amount for the period between the establishment of the Non-U.S. AbbVie Benefit Plan and an assessment date set by Abbott that is as close as practicable, taking into account the timing and reporting of valuation of the applicable Non-U.S. Abbott Benefit Plan’s Assets, to the date upon which Assets equal in value to the transfer amount are actually transferred from the applicable Non-U.S. Abbott Benefit Plan to the applicable Non-U.S. AbbVie Benefit Plan.  During this period, benefits for former AbbVie Employees and  AbbVie Former Employees shall be paid from the Non-U.S. Abbott Benefit Plan. Except as otherwise mutually agreed upon by the Parties, the ultimate transfer amount shall be reduced by the amount of these benefits and credited or debited by the actual investment earnings or losses from the payment date to the assessment date set by Abbott above.  Any third party fees, costs or expenses incurred under the applicable Non-U.S. Abbott Benefit Plan during the period from the establishment of the Non-U.S. AbbVie Benefit Plan to the assessment date set by Abbott shall be shared by the Parties based on the proportion of EMA Liabilities borne by the applicable Non-U.S. Abbott Benefit Plan and the applicable Non-U.S. AbbVie Benefit Plan.  The Parties agree to use commercially reasonable efforts to accomplish each transfer as soon as practicable following the establishment of the Non-U.S. AbbVie Benefit Plan and to cooperate with each other to make such filings and disclosures and obtain such approvals as may be deemed necessary or advisable in accordance with applicable Law.  Such transfers and any actuarial assumptions shall be subject to such minimum consents, approvals and other legal requirements as may apply under applicable Law, including, if required, the consent of any affected plan participant or any other third party.

 

(b)                                 Non-U.S. Abbott Retirement Plan Provisions.  Each Non-U.S. Abbott Benefit Plan described in Section 4.02(a) shall provide, except as otherwise provided in this Agreement  that:

 

(i)                                     AbbVie Employees shall (A) be eligible to participate in the Non-U.S. Abbott Benefit Plan to the extent they were eligible to participate in such plan immediately prior to the Distribution Date, and (B) receive credit for vesting, eligibility and benefit service for all service with AbbVie during the shared plan period as if that service had been rendered to Abbott;

 

(ii)                                  the compensation paid by the AbbVie Group to an AbbVie Employee during the shared plan period shall be credited and recognized for all applicable purposes under the corresponding Non-U.S. Abbott Benefit Plan as though it were compensation from the Abbott Group; and

 

(iii)                               the accrued benefit of each AbbVie Employee under the Non-U.S. Abbott Benefit Plan shall be paid at the time and in a form provided under such plan, with employment by the AbbVie Group during the shared plan period treated as employment by the Abbott Group under the Non-U.S. Abbott Benefit Plan for purposes of determining eligibility for optional forms of benefit, early retirement benefits, or other benefit forms.

 

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(c)                                  Subsequent Transfers.  Periodically, at such times as agreed upon by the Parties after the initial transfer described in Section 4.02(a), (i) AbbVie shall cause the applicable Non-U.S. AbbVie Benefit Plan to receive Assets and assume all EMA Liabilities under the applicable Non-U.S. Abbott Benefit Plan for Post-Distribution AbbVie Employees and other Employees who cease to be employed by Abbott after the Distribution Date and become employed by AbbVie during the Transition Period (including Assets and EMA Liabilities in respect of beneficiaries and/or alternate payees) and the applicable Non-U.S. Abbott Benefit Plan shall transfer all such Assets and be relieved of such EMA Liabilities, and (ii) Abbott shall cause the applicable Non-U.S. Abbott Benefit Plan to receive Assets and assume all EMA Liabilities under the applicable Non-U.S. AbbVie Benefit Plan for Employees who cease to be employed by AbbVie after the Distribution Date and become employed by Abbott during the Transition Period (including Assets and EMA Liabilities in respect of beneficiaries and/or alternate payees) and the applicable Non-U.S. AbbVie Benefit Plan shall transfer all such Assets and be relieved of such EMA Liabilities.  The amount of such Assets to be transferred shall be determined as provided in Section 4.02(a) and shall be subject to the applicable provisions of Section 4.02(a).

 

Section 4.03.  Overseas Managers Pension Plan and Territorial Pension Plan.

 

(a)                                 Establishment of AbbVie OMPP and AbbVie TPP.  Effective as of or before the Distribution Date, AbbVie shall establish the AbbVie OMPP and the AbbVie TPP, with terms substantially similar to those of the Abbott OMPP or the Abbott TPP, as applicable, as of the Distribution Date.

 

(b)                                 OMPP and TPP Liabilities.  AbbVie shall, and shall cause the AbbVie OMPP and the AbbVie TPP to, assume all EMA Liabilities for all obligations under the Abbott OMPP or the Abbott TPP, as applicable, for the benefits for Transferred Employees, and Abbott and the Abbott OMPP and the Abbott TPP shall be relieved of all EMA Liabilities for those benefits.  Abbott shall retain the EMA Liabilities for all obligations under the Abbott OMPP and the Abbott TPP for the benefits for Abbott Retained Employees and Former Employees, but shall share with AbbVie the cost of benefits provided to Former Employees in accordance with procedures mutually agreed to by the Parties.

 

(c)                                  AbbVie OMPP and AbbVie TPP as of the Distribution Date.  As of the Distribution Date, the AbbVie OMPP and the AbbVie TPP shall provide that:

 

(i)                                     Transferred Employees who are participants in the AbbVie OMPP or the AbbVie TPP, as applicable, shall receive credit for vesting, eligibility, and benefit service for all service credited for those purposes under the Abbott OMPP or the Abbott TPP, as applicable, as if that service had been rendered to AbbVie;

 

(ii)                                  the compensation paid by the Abbott Group to a Transferred Employee which was recognized under the Abbott OMPP or the Abbott TPP shall be credited and recognized for all applicable purposes under the AbbVie OMPP or the AbbVie TPP, as applicable, as though it were compensation from the AbbVie Group; and

 

(iii)                               following the Distribution Date, the AbbVie OMPP and the AbbVie TPP shall not be amended in any manner that would reduce the accrued benefit (including any early retirement subsidy) of any Transferred Employee.

 

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(d)                                 Abbott OMPP and Abbott TPP after Distribution Date.  From and after the Distribution Date, no AbbVie Employees (other than Post-Distribution Transferred Employees) shall participate in or accrue any benefits under the Abbott OMPP or the Abbott TPP.

 

ARTICLE V

 

WELFARE AND FRINGE BENEFIT PLANS

 

Section 5.01.  U.S. Health and Welfare Plans.

 

(a)                                 Establishment of AbbVie Health and Welfare Plans.  Effective as of or before the Distribution Date, AbbVie shall establish the AbbVie Health and Welfare Plans, with terms substantially similar to those of the corresponding Abbott Health and Welfare Plans as of the Distribution Date unless otherwise provided in this Article V.

 

(b)                                 Waiver of Conditions; Benefit Maximums. AbbVie shall use commercially reasonable efforts to cause the AbbVie Health and Welfare Plans to:

 

(i)                                     with respect to initial enrollment following the applicable Transfer Date, waive

 

(A)                               all limitations as to preexisting conditions, exclusions, and service conditions with respect to participation and coverage requirements applicable to any Transferred Employee or AbbVie LTD Participant, other than limitations that were in effect with respect to the Transferred Employee or the AbbVie LTD Participant under the applicable Abbott Health and Welfare Plan as of immediately prior to such individual’s Transfer Date, and

 

(B)                               any waiting period limitation or evidence of insurability requirement applicable to a Transferred Employee or AbbVie LTD Participant other than limitations or requirements that were in effect with respect to such Transferred Employee or AbbVie LTD Participant under the applicable Abbott Health and Welfare Plan as of immediately prior to such individual’s Transfer Date; and

 

(ii)                                  take into account

 

(A)                               with respect to aggregate annual, lifetime, or similar maximum benefits available under the AbbVie Health and Welfare Plans, a Transferred Employee’s or AbbVie LTD Participant’s prior claim experience under the Abbott Health and Welfare Plans and any Benefit Plan that provides leave benefits; and

 

(B)                               any eligible expenses incurred by a Transferred Employee or AbbVie LTD Participant and his or her covered dependents during the portion of the plan year of the applicable Abbott Health and Welfare Plan ending on the applicable Transfer Date to be taken into account under such AbbVie Health and

 

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Welfare Plan for purposes of satisfying all deductible, coinsurance, and maximum out-of-pocket requirements applicable to such Transferred Employee or AbbVie LTD Participant and his or her covered dependents for the applicable plan year as if such amounts had been paid in accordance with such AbbVie Health and Welfare Plan.

 

(c)                                  Spousal Transition Issues. The Abbott Group and the AbbVie Group will cooperate to develop uniform guidelines intended to ensure that, to the extent commercially reasonable, from the Distribution Date through December 31, 2013, Employees who are married to each other or who are domestic partners as of the Distribution Date do not incur additional aggregate cost, or derive additional aggregate benefit, under the Health and Welfare Plans of the Parties solely because one such Employee is an Abbott Retained Employee and the other is a Transferred Employee.

 

(d)                                 Allocation of Health and Welfare Assets and Liabilities.

 

(i)                                     General Principles.  Except as otherwise specifically provided in this Agreement, Abbott shall retain all EMA Liabilities relating to Incurred Claims under the Abbott Health and Welfare Plans, and shall also retain Assets (including, without limitation, Medicare reimbursements, pharmaceutical rebates, and similar items) associated with such Incurred Claims. AbbVie shall be responsible for all EMA Liabilities relating to Incurred Claims under any AbbVie Health and Welfare Plan and shall also retain Assets (including, without limitation, Medicare reimbursements, pharmaceutical rebates, and similar items) associated with such Incurred Claims.

 

(ii)                                  Disability Benefits.   Notwithstanding any other provision hereof, Abbott shall be responsible for Incurred Claims (including ongoing benefit payments) of Abbott Retained Employees and Abbott Former Employees for short- and long-term disability benefits, regardless of when the applicable Incurred Claim was incurred, and AbbVie shall be responsible for Incurred Claims (including ongoing benefit payments) of AbbVie Employees and AbbVie Former Employees for short- and long-term disability benefits, regardless of when the applicable Incurred Claim was incurred.

 

(iii)                               Flexible Spending Accounts.  The Parties shall use commercially reasonable efforts to ensure that, effective as of the Distribution Date, (A) the health care and dependent care flexible spending accounts of Transferred Employees (whether positive or negative) (the “Transferred Flexible Spending Account Balances”) under the applicable Abbott Health and Welfare Plan shall be transferred to the corresponding AbbVie Health and Welfare Plan; (B) the elections, contribution levels and coverage of the applicable Transferred Employees shall apply under the AbbVie Health and Welfare Plan in the same manner as under the corresponding Abbott Health and Welfare Plan; and (C) the applicable Transferred Employees shall be eligible for reimbursement from the AbbVie Health and Welfare Plan on the same basis and the same terms and conditions as under the corresponding Abbott Health and Welfare Plan.  As soon as practicable after the Distribution Date, and in any event within 30 business days after the amount of the Transferred Flexible Spending Account Balances is determined, Abbott shall pay AbbVie the net aggregate amount of the Transferred Flexible Spending Account Balances, if such amount is positive, and AbbVie shall pay Abbott the net aggregate amount of the

 

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Transferred Flexible Spending Account Balances, if such amount is negative.  With respect to Transferred Employees whose Transfer Date occurs after the Distribution Date, the Parties shall cooperate in good faith to provide for transfers and/or reimbursement after the applicable Transfer Date with respect to the health care and dependent care flexible spending accounts of such Transferred Employees in accordance with procedures mutually agreed to by the Parties.

 

(iv)                              Retiree Health Care Plan and Retiree Life Insurance Plan.  Notwithstanding any other provision hereof, Abbott shall retain the EMA Liabilities and responsibility for all obligations under the Abbott Retiree Health Care Plan and the Abbott Retiree Life Insurance Plan for benefits due to Abbott Retained Employees and Former Employees (other than AbbVie LTD Participants), and shall also retain Assets, including, without limitation, Medicare reimbursements, pharmaceutical rebates, and similar items, associated with such benefits, but shall share with AbbVie the cost of benefits provided to Former Employees (other than LTD Participants) under the Abbott Retiree Health Care Plan and the Abbott Retiree Life Insurance Plan in accordance with procedures mutually agreed to by the Parties.

 

(e)                                  Abbott Health and Welfare Plans after Distribution Date.  Transferred Employees shall cease to participate in the Abbott Health and Welfare Plans effective as of their respective Transfer Dates.

 

(f)                                   401(h) Account.  Abbott shall retain all Assets associated with the 401(h) account associated with the Abbott ARP.

 

Section 5.02.  COBRA and HIPAA.  Abbott shall continue to be responsible for compliance with the health care continuation requirements of COBRA, the certificate of creditable coverage requirements of HIPAA, and the corresponding provisions of the Abbott Health and Welfare Plans with respect to any (a) Abbott Retained Employees and any Former Employees (and their covered dependents) who incur a qualifying event under COBRA on, prior to, or following the Distribution Date, (b) any AbbVie Employees who do not become Transferred Employees (and their covered dependents) who incur a qualifying event under COBRA on, prior to, or following the Distribution Date, and (c) any other AbbVie Employees (and their covered dependents), with respect to qualifying events under COBRA incurred prior to or on the applicable Transfer Date.  AbbVie shall assume responsibility for compliance with the health care continuation requirements of COBRA, the certificate of creditable coverage requirements of HIPAA, and the corresponding provisions of the AbbVie Health and Welfare Plans with respect to any Transferred Employees (and their covered dependents) who incur a qualifying event or loss of coverage under the Abbott Health and Welfare Plans and/or the AbbVie Health and Welfare Plans after their respective Transfer Dates.  The Parties agree that the consummation of the transactions contemplated by the Separation and Distribution Agreement shall not constitute a COBRA qualifying event for any purpose of COBRA.

 

Section 5.03.  U.S. Life Insurance Trust.  Effective as of the Distribution Date, AbbVie shall establish the AbbVie Life Insurance Trust and shall take all actions reasonably necessary to ensure that the AbbVie Life Insurance Trust satisfies the requirements of Code Section 501(c)(9) and is exempt from taxation under Code Section 501(a), including, but not limited to, filing any required determination letter filing with the Internal Revenue Service. Effective as of the

 

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Distribution Date, after making appropriate adjustment for any incurred but not reported claims payable from the Abbott Life Insurance Trust, Abbott shall cause the Abbott Life Insurance Trust to transfer to the AbbVie Life Insurance Trust any remaining Assets and reserves under the Abbott Life Insurance Trust which are attributable to contributions by Transferred Employees.  The Parties shall each take any and all actions as they deem necessary or appropriate to ensure that the transfer of Assets and reserves from the Abbott Life Insurance Trust to the AbbVie Life Insurance Trust does not result in any adverse tax consequences to the Abbott Life Insurance Trust or the AbbVie Life Insurance Trust, Abbott, AbbVie, or any participants or beneficiaries under the Abbott Life Insurance Trust or the AbbVie Life Insurance Trust.  The Parties shall cooperate with each other to carry out the provisions of this Section 5.03.

 

Section 5.04.  Vacation, Holidays and Leaves of Absence. Effective as of the applicable Transfer Date, AbbVie shall assume all EMA Liabilities of the Abbott Group with respect to vacation, holiday, annual leave or other leave of absence, and required payments related thereto, for each AbbVie Employee.  Abbott shall retain all EMA Liabilities with respect to vacation, holiday, annual leave or other leave of absence, and required payments related thereto, for each Abbott Retained Employee.

 

Section 5.05.  Severance and Unemployment Compensation. Effective as of the Distribution Date, AbbVie shall be responsible for any and all EMA Liabilities to, or relating to, AbbVie Employees and AbbVie Former Employees in respect of severance and unemployment compensation, regardless of whether the event giving rise to the EMA Liability occurred prior to, on, or following the Distribution Date.  Abbott shall be responsible for any and all EMA Liabilities to, or relating to, Abbott Retained Employees and Abbott Former Employees in respect of severance and unemployment compensation, regardless of whether the event giving rise to the EMA Liability occurred prior to, on, or following the Distribution Date.

 

Section 5.06.  Workers’ Compensation.  With respect to claims for workers compensation in the United States, (a) the AbbVie Group shall be responsible for claims in respect of AbbVie Employees and AbbVie Former Employees, whether occurring prior to, on or following the Distribution Date, and (b) the Abbott Group shall be responsible for all claims in respect of Abbott Retained Employees and Abbott Former Employees, whether occurring prior to, on or following the Distribution Date.

 

Section 5.07.  Non-U.S. Shared Health and Welfare Plans.

 

(a)                                 Shared Health and Welfare Plans.  To the extent that, following the Distribution Date, there is any Benefit Plan pursuant to which health and welfare benefits are provided to Employees of both the Abbott Group and the AbbVie Group who work primarily outside of the United States, the Parties shall, or shall cause their appropriate Affiliates to, share the costs for such shared plan, except as otherwise mutually agreed upon by the Parties.  Any Abbott or AbbVie Affiliate may withdraw from or otherwise cease to participate in any such shared plan following the Distribution Date upon at least 90 days’ advance written notice to the other participating employer(s) of such withdrawal or cessation.

 

(b)                                 Multi-National Pooling Arrangements.  For purposes of this provision, the term “multi-national pooling arrangement” means a contract or arrangement that facilitates the purchase or provision of employee benefits.  Abbott shall retain all Assets (including, without

 

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limitation, rights to dividends and similar items) with respect to employee benefits-related pooling contracts to which Abbott is a party or under which Abbott pays the premiums.  From and after the Distribution Date, AbbVie shall retain all Assets (including, without limitation, rights to dividends and similar items) with respect to employee benefits-related pooling contracts to which AbbVie is a party or under which AbbVie pays the premiums.

 

ARTICLE VI

 

EQUITY, INCENTIVE, AND EXECUTIVE COMPENSATION PROGRAMS

 

Section 6.01.  Equity Incentive Programs.

 

(a)                                 The Parties shall use commercially reasonable efforts to take all actions necessary or appropriate so that each outstanding Abbott Option, Abbott Restricted Stock Award, or Abbott RSU Award granted under an Abbott Stock Program shall be adjusted as set forth in this Section 6.01.

 

(i)                                     Abbott Options. As determined by the Abbott Compensation Committee pursuant to its authority under the applicable Abbott Stock Program, each Abbott Option, regardless of by whom held, whether vested or unvested, shall be converted on the Distribution Date into both an Adjusted Abbott Option and an AbbVie Option and shall, except as otherwise provided in this Section 6.01, be subject to the same terms and conditions (including with respect to vesting) after the Distribution Date as applicable to such Abbott Option immediately prior to the Distribution Date; provided, however, that from and after the Distribution Date:

 

(A)                               the number of Abbott Common Shares subject to such Adjusted Abbott Option, rounded down to the nearest whole share, shall be equal to the product obtained by multiplying (1) the number of Abbott Common Shares subject to such Abbott Option immediately prior to the Distribution Date times (2) the Abbott Value Factor and times (3) the Abbott Ratio;

 

(B)                               the number of shares of AbbVie Common Stock subject to such AbbVie Option, rounded down to the nearest whole share, shall be equal to the product obtained by multiplying (1) the number of Abbott Common Shares subject to the Abbott Option immediately prior to the Distribution Date times (2) the AbbVie Value Factor and times (3) the AbbVie Ratio;

 

(C)                               the per share exercise price of such Adjusted Abbott Option, rounded up to the nearest hundredth of a cent, shall be equal to the quotient obtained by dividing (1) the per share exercise price of such Abbott Option immediately prior to the Distribution Date by (2) the Abbott Ratio; and

 

(D)                               the per share exercise price of such AbbVie Option, rounded up to the nearest hundredth of a cent, shall be equal to the quotient obtained by dividing (1) the per share exercise price of the Abbott Option immediately prior to the Distribution Date by (2) the AbbVie Ratio;

 

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provided, however, that the exercise price, the number of Abbott Common Shares and shares of AbbVie Common Stock subject to such options, and the terms and conditions of exercise of such options shall be determined in a manner consistent with the requirements of Code Section 409A; provided, further, that, in the case of any Abbott Option to which Code Section 421 applies by reason of its qualification under Code Section 422 as of immediately prior to the Distribution Date, the exercise price, the number of Abbott Common Shares and shares of AbbVie Common Stock subject to such option, and the terms and conditions of exercise of such option shall be determined in a manner consistent with the requirements of Code Section 424(a).

 

(ii)                                  Abbott Restricted Stock Awards. Each holder of an outstanding Abbott Restricted Stock Award immediately prior to the Distribution Date shall receive, as of the Distribution Date, an AbbVie Restricted Stock Award for such number of shares as determined by applying the Distribution Ratio in the same way as if the outstanding Abbott Restricted Stock Award were comprised of fully vested Abbott Common Shares as of the Distribution Date. Except as set forth in this Section 6.01(a)(ii), the Adjusted Abbott Restricted Stock Award and the AbbVie Restricted Stock Award issued in accordance with this Section 6.01(a)(ii) both shall be subject to substantially the same terms and conditions (including with respect to vesting, except to the extent that performance vesting requirements are adjusted as a result of the Distribution) immediately following the Distribution Date as applicable to the Abbott Restricted Stock Award immediately prior to the Distribution Date.  Notwithstanding the foregoing, as of the Distribution Date each performance-based Abbott Restricted Stock Award granted on December 1, 2012 shall be converted in full into an AbbVie Restricted Stock Award as provided in the applicable award agreement.

 

(iii)                               Abbott RSU Awards. Each holder of an outstanding Abbott RSU Award immediately prior to the Distribution Date shall receive, as of the Distribution Date, an AbbVie RSU Award in such number of units as determined by applying the Distribution Ratio in the same way as if the outstanding Abbott RSU Award were comprised of fully vested Abbott Common Shares as of the Distribution Date. Except as set forth in this Section 6.01(a)(iii), the Adjusted Abbott RSU Award and the AbbVie RSU Award issued in accordance with this Section 6.01(a)(iii) both shall be subject to substantially the same terms and conditions (including with respect to vesting, except to the extent that performance vesting requirements are adjusted as a result of the Distribution) immediately following the Distribution Date as applicable to the Abbott RSU Award immediately prior to the Distribution Date.

 

(b)                                 Miscellaneous Award Terms.  After the Distribution Date, Adjusted Abbott Awards, regardless of by whom held, shall be settled by Abbott, and AbbVie Awards, regardless of by whom held, shall be settled by AbbVie; provided, however, that Abbott shall be responsible for any dividend equivalent payments with respect to Adjusted Abbott RSU Awards and AbbVie RSU Awards held by Abbott Retained Employees or Abbott Former Employees, and AbbVie shall be responsible for any dividend equivalent payments with respect to Adjusted Abbott RSU Awards and AbbVie RSU Awards held by AbbVie Employees or AbbVie Former Employees.  Except as otherwise provided in this Agreement (such as in Section 2.02 or Section 6.01(e)), with respect to grants adjusted pursuant to this Section 6.01, (i) employment with the

 

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Abbott Group shall be treated as employment with AbbVie with respect to AbbVie Awards held by Abbott Retained Employees, and (ii) employment with the AbbVie Group shall be treated as employment with Abbott with respect to Adjusted Abbott Awards held by AbbVie Employees.  In addition, none of the Separation, the Distribution, or any employment transfer described in Section 2.04(b) shall constitute a termination of employment for any Employee for purposes of any Adjusted Abbott Award or any AbbVie Award.  Following the Distribution Date, for any award adjusted under this Section 6.01, any reference to a “change in control,” “change of control” or similar definition in an award agreement, employment agreement or Abbott Stock Program applicable to such award (A) with respect to Adjusted Abbott Awards, shall be deemed to refer to a “change in control,” “change of control” or similar definition as set forth in the applicable award agreement, employment agreement or Abbott Stock Program (an “Abbott Change of Control”), and (B) with respect to AbbVie Awards, shall be deemed to refer to a “Change in Control” as defined in the AbbVie ISP (an “AbbVie Change of Control”).  Without limiting the foregoing, with respect to provisions related to vesting of awards, an Abbott Change of Control shall be treated as an AbbVie Change of Control for purposes of AbbVie Awards held by Abbott Retained Employees, and an AbbVie Change of Control shall be treated as an Abbott Change of Control for purposes of Adjusted Abbott Awards held by AbbVie Employees.

 

(c)                                  Tax Reporting and Withholding.  Following the Distribution Date, and for the duration of the applicable U.S. Transition Services Agreement or Ex-U.S. Transition Services Agreement provisions under which Abbott provides payroll services for AbbVie, it is expected that (i) Abbott will be responsible for all income, payroll and other tax remittance and reporting related to income of Abbott Retained Employees, Abbott Former Employees, and individuals who are or were Abbott non-employee directors in respect of Adjusted Abbott Awards and AbbVie Awards; and (ii) AbbVie will be responsible for all income, payroll and other tax remittance and reporting related to income of AbbVie Employees and AbbVie Former Employees in respect of Adjusted Abbott Awards and AbbVie Awards.  Abbott or AbbVie, as applicable, shall facilitate performance by the other Party of its obligations hereunder by promptly remitting amounts or shares withheld in conjunction with a transfer of shares or cash, either (as mutually agreed by the Parties) directly to the applicable taxing authority or to the other Party for remittance to such taxing authority. The Parties will cooperate and communicate with each other and with third-party providers to effectuate withholding and remittance of taxes, as well as required tax reporting, in a timely, efficient and appropriate manner.

 

(d)                                 Registration and Other Regulatory Requirements.  AbbVie agrees to file Form S-1 and Form S-8 registration statements with respect to, and to cause to be registered pursuant to the Securities Act, the shares of AbbVie Common Stock authorized for issuance under the AbbVie ISP, as required pursuant to the Securities Act, before the date of issuance of any shares of AbbVie Common Stock pursuant to the AbbVie ISP.  The Parties shall take such additional actions as are deemed necessary or advisable to effectuate the foregoing provisions of this Section 6.01, including compliance with securities Laws and other legal requirements associated with equity compensation awards in affected non-U.S. jurisdictions.  Abbott agrees to facilitate the adoption and approval of the AbbVie ISP consistent with the requirements of Treasury Regulations Section 1.162-27(f)(4)(iii).

 

(e)                                  Abbott Equity-Based Awards in Certain Non-U.S. Jurisdictions.  Notwithstanding the foregoing provisions of this Section 6.01, the Parties may mutually agree, in

 

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their sole discretion, not to adjust certain outstanding Abbott equity-based awards pursuant to the foregoing provisions of this Section 6.01, where those actions would create or trigger adverse legal, accounting or tax consequences for Abbott, AbbVie, and/or the affected non-U.S. award holders. In such circumstances, Abbott and/or AbbVie may take any action necessary or advisable to prevent any such adverse legal, accounting or tax consequences, including, but not limited to, agreeing that the outstanding Abbott equity-based awards of the affected non-U.S. award holders shall terminate in accordance with the terms of the Abbott Stock Programs and the underlying award agreements, in which case AbbVie or Abbott, as applicable, shall equitably compensate the affected non-U.S. award holders in an alternate manner determined by AbbVie or Abbott, as applicable, in its sole discretion, or apply an alternate adjustment method.   Where and to the extent required by applicable Law or tax considerations outside the United States, the adjustments described in this Section 6.01 shall be deemed to have been effectuated immediately prior to the Distribution Date.

 

Section 6.02.  Employee Stock Purchase Plan.

 

(a)                                 Abbott ESPP.  The administrator of the Abbott ESPP shall take all actions necessary and appropriate to provide that: (i) the Purchase Cycle during which the Distribution Date is to occur shall end at a reasonable time before the Distribution Date to allow participants to purchase Abbott Common Shares under the Abbott ESPP prior to the Distribution Date; (ii) all participant payroll deductions and other contributions under the Abbott ESPP shall cease on or before the Purchase Date described in clause (i) of this paragraph; (iii) Transferred Non-U.S. Employees in the Abbott ESPP shall not be eligible to participate in any future Purchase Cycles that begin following the Distribution Date; (iv) any cash remaining in the Abbott ESPP account of any Transferred Non-U.S. Employee described in clause (iii) shall be refunded to such Transferred Non-U.S. Employee without interest as soon as administratively practicable; and (v) the next following Purchase Cycle shall be established by the administrator of the Abbott ESPP in its sole discretion. For purposes of this paragraph, the administrator of the Abbott ESPP may establish an alternate Purchase Cycle ending date for a sub-plan of the Abbott ESPP, as it determines to be necessary or advisable to accommodate the operation and administration of the sub-plan.

 

(b)                                 Establishment of AbbVie ESPP.  Effective as of or before the Distribution Date, AbbVie shall establish the AbbVie ESPP, with terms substantially similar to those of the Abbott ESPP as of the Distribution Date; provided, however, that AbbVie may delay implementation of the AbbVie ESPP in one or more countries to the extent necessary to complete those actions and undertakings that AbbVie, in its sole discretion, determines to be necessary or advisable to comply with applicable Law.

 

Section 6.03.  Annual Incentive Plans.

 

(a)                                 Annual Bonuses Generally.  The AbbVie Group shall be responsible for all annual bonus payments to Transferred Employees in respect of any plan year, the payment date for which occurs on or after the applicable Transferred Employee’s Transfer Date.

 

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(b)                                 U.S. Abbott Laboratories Cash Profit Sharing Plan.

 

(i)                                     Effective as of or before the Distribution Date, AbbVie shall establish the AbbVie Cash Profit Sharing Plan, with terms substantially similar, subject to Section 6.03(b)(iii), to the Abbott Cash Profit Sharing Plan as in effect immediately prior to the Distribution Date.

 

(ii)                                  The AbbVie Cash Profit Sharing Plan shall provide that Transferred Employees shall be eligible to participate in the AbbVie Cash Profit Sharing Plan beginning on the applicable Transfer Date to the same extent that they were eligible to participate in the Abbott Cash Profit Sharing Plan immediately prior to such Transfer Date.

 

(iii)                               Each Transferred Employee who participated in the Abbott Cash Profit Sharing Plan prior to the Distribution Date with respect to the plan year commencing on October 1, 2012 and who is eligible to receive payment in respect of such plan year pursuant to the terms of the AbbVie Cash Profit Sharing Plan (treating service with the Abbott Group as if with the AbbVie Group) shall be entitled to receive from AbbVie a cash payment in accordance with the AbbVie Cash Profit Sharing Plan for such plan year (treating compensation paid by the Abbott Group as if paid by the AbbVie Group, for purposes of determining eligible compensation for the plan year).  AbbVie shall make all determinations of performance and all payment calculations under this Section 6.03(b) and shall be solely responsible for all payments to or with respect to Transferred Employees hereunder.

 

Section 6.04.  Performance Incentive Plan and Management Incentive Plan.

 

(a)                                 Establishment of AbbVie Performance Incentive Plan and Management Incentive Plan.  Effective as of or before the Distribution Date, AbbVie shall establish the AbbVie 2013 Performance Incentive Plan and the AbbVie 2013 Management Incentive Plan, with terms and funding arrangements substantially similar to those of the Abbott Performance Incentive Plan and the Abbott Management Incentive Plan as of the Distribution Date.

 

(b)                                 Transfers from Abbott Performance Incentive Plan and Management Incentive Plan.  As of or as soon as practicable after the Distribution Date, the Parties shall cooperate to cause the accounts of AbbVie Employees and AbbVie LTD Participants participating in the Abbott Performance Incentive Plan or the Abbott Management Incentive Plan to be transferred to the corresponding AbbVie plan established under Section 6.04(a).  AbbVie shall (i) credit each such AbbVie Employee’s or AbbVie LTD Participant’s account with (A) the amount in such AbbVie Employee’s account deferred by such AbbVie Employee into the Abbott Performance Incentive Plan or the Abbott Management Incentive Plan as of the Distribution Date, plus (B) any employer contributions, whether vested or unvested, in relation to the amount described in (A), including, in each case, any earnings thereon, and (ii) recognize and honor all deferral and distribution elections made by such individual.  No AbbVie Employee shall participate in or accrue any benefits under the Abbott Performance Incentive Plan or the Abbott Management Incentive Plan on or after the Distribution Date.

 

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(c)                                  Performance Incentive Plan and Management Incentive Plan Liabilities.  As of the Distribution Date, AbbVie shall, and shall cause the AbbVie Performance Incentive Plan or the AbbVie Management Incentive Plan, as applicable, to assume all EMA Liabilities for all obligations under the Abbott Performance Incentive Plan or the Abbott Management Incentive Plan, as applicable, for the benefits of AbbVie Employees and AbbVie LTD Participants determined as of the Distribution Date, and Abbott and the Abbott Performance Incentive Plan or the Abbott Management Incentive Plan, as applicable, shall be relieved of all EMA Liabilities for those benefits.  Abbott shall retain the EMA Liabilities for all obligations under the Abbott Performance Incentive Plan or the Abbott Management Incentive Plan for the benefits for Abbott Retained Employees and Former Employees (other than AbbVie LTD Participants), but shall share with AbbVie the cost of benefits provided to Former Employees (other than LTD Participants) under the Abbott Performance Incentive Plan or the Abbott Management Incentive Plan in accordance with procedures mutually agreed to by the Parties.

 

Section 6.05.  Directors’ Fee Plan.  Effective as of or before the Distribution Date, AbbVie shall establish the AbbVie Directors’ Fee Plan, with terms and funding arrangements substantially similar to those of the Abbott Directors’ Fee Plan as of the Distribution Date.  Abbott shall retain the EMA Liabilities for all obligations under the Abbott Directors’ Fee Plan, but shall share with AbbVie the cost of benefits provided thereunder to any individuals in respect of service prior to the Distribution Date in accordance with procedures mutually agreed to by the Parties.  Each participant in the Abbott Directors’ Fee Plan with an outstanding Stock Account (as defined in the Abbott Directors’ Fee Plan) balance as of the Distribution Date, shall, as of the Distribution Date, be credited under such plan with notional shares of AbbVie Common Stock in an amount determined by applying the Distribution Ratio in the same manner as if the Common Stock Units (as defined in the Abbott Directors’ Fee Plan) in such Stock Account were actual Abbott Common Shares.  The notional shares of AbbVie Common Stock so credited shall be subject to substantially the same terms and conditions that apply to the Common Stock Units, except that they shall relate to shares of AbbVie Common Stock rather than to Abbott Common Shares.

 

Section 6.06.  Grantor Trusts.  Certain Transferred Employees and AbbVie LTD Participants who are participating in the Abbott SERP, the Abbott KSP, the Abbott Performance Incentive Plan, and/or the Abbott Management Incentive Plan, as applicable, have established grantor trusts in connection with such plans.  Prior to the Distribution Date, the Parties shall use commercially reasonable efforts to cause each grantor trust under such plans to be amended to provide that (a) AbbVie is the administrator of such trust and (b) distribution of amounts under such trusts is made by reference to termination of employment with the AbbVie Group and not termination of employment with the Abbott Group.

 

ARTICLE VII

 

PUERTO RICO PLANS

 

Section 7.01.  Puerto Rico Retirement Plans.

 

(a)                                 Retention of Plan Sponsorship by AbbVie PR.  Effective as of the Distribution Date, AbbVie PR shall continue sponsorship of the AbbVie PR Pension Plan.  The plan and the related trust agreement shall be amended, effective as of or prior to the Distribution

 

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Date, to reflect the name change, and to make other changes to effectuate such sponsorship continuation.

 

(b)                                 Establishment of the Abbott PR Retirement Plan — New.  Effective as of or before the Distribution Date, Abbott PR shall establish the Abbott PR Retirement Plan — New, which shall be substantially similar to, and shall include a benefit formula that is the same as the benefit formula in effect under, the AbbVie PR Pension Plan as of the Distribution Date. As soon as practicable after the Distribution Date and upon receipt by AbbVie PR of (i) a copy of the Abbott PR Retirement Plan - New; (ii) copies of certified resolutions of the Abbott PR board of directors (or its authorized committee or other delegate) evidencing adoption of the Abbott PR Retirement Plan - New and any related trust(s) and the assumption by the Abbott PR Retirement Plan - New of the EMA Liabilities described in Section 7.01(c); and (iii) either (A) a favorable determination letter issued by the Secretary of Treasury of Puerto Rico with respect to the Abbott PR Retirement Plan - New and any related trust, or (B) an opinion of counsel, which counsel and opinion are reasonably satisfactory to AbbVie PR, with respect to the qualified status of the Abbott PR Retirement Plan - New and the tax-exempt status of its related trust under Section 1081.01 (a) of the PR Code, AbbVie PR shall direct the trustee of the AbbVie PR Pension Plan trust to transfer from the trust(s) which forms a part of the AbbVie PR Pension Plan to the trust(s) which forms a part of the Abbott PR Retirement Plan - New the amounts described in Section 7.01(c)(i).

 

(c)                                  Transfer of Assets.

 

(i)                                     As of the Distribution Date, Abbott PR shall cause the Abbott PR Retirement Plan - New to accept Assets and assume all EMA Liabilities under the AbbVie PR Pension Plan for Abbott Retained Employees and Abbott LTD Participants (including Assets and EMA Liabilities in respect of beneficiaries and/or alternate payees), and the AbbVie PR Pension Plan shall transfer all such Assets and be relieved of such EMA Liabilities.  The amount of Assets to be transferred from the AbbVie PR Pension Plan to the Abbott PR Retirement Plan - New in such transfer shall be determined as of the Distribution Date in accordance with, and shall comply with, ERISA Section 208 and, to the extent deemed applicable by Abbott PR and AbbVie PR, ERISA Section 4044.  Assumptions used to determine the value (or amount) of the Assets to be transferred shall be the safe harbor assumptions specified for valuing benefits in trusteed plans under Department of Labor Regulations Section 4044.51-57 and, to the extent not so specified, shall be based on the assumptions used in the annual valuation report most recently prepared prior to the transfer by the actuary for the AbbVie PR Pension Plan.  The transfer amount described above shall be credited or debited, as applicable, with a pro rata share of the actual investment earnings or losses allocable to the transfer amount for the period between the Distribution Date and an assessment date set by AbbVie PR that is as close as practicable, taking into account the timing and reporting of valuation of assets in the AbbVie PR Pension Plan trust to the date upon which Assets equal in value to the transfer amount are actually transferred from the AbbVie PR Pension Plan to the Abbott PR Retirement Plan - New. During the time prior to such transfer, benefits for Abbott Retained Employees who terminate employment with the Abbott Group and for Abbott LTD Participants shall be paid from the AbbVie PR Pension Plan.  The ultimate transfer amount shall be reduced by the amount of these benefits and credited or debited

 

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by the actual investment earnings or losses from the payment date to the assessment date set by AbbVie PR above.  In addition, during this period, Abbott PR will be responsible for a pro rata share of trustee and administration fees attributable to the AbbVie PR Pension Plan.  The entries in the AbbVie PR Pension Plan funding standard account shall be divided among the AbbVie PR Pension Plan and the Abbott PR Retirement Plan - New based on the guidance provided in Revenue Ruling 81-212 and 86-47.

 

(ii)                                  Periodically, at such times as agreed upon by Abbott PR and AbbVie PR after the initial transfer described in Section 7.01(c)(i), (A) Abbott PR shall cause the Abbott PR Retirement Plan - New to receive Assets and assume all EMA Liabilities under the AbbVie PR Pension Plan for Employees who cease to be employed by AbbVie PR after the Distribution Date and become employed by Abbott PR during the Transition Period (including Assets and EMA Liabilities in respect of beneficiaries or alternate payees) and the AbbVie PR Pension Plan shall transfer all such Assets and be relieved of such EMA Liabilities, and (B) AbbVie PR shall cause the AbbVie PR Pension Plan to receive Assets and assume all EMA Liabilities under the Abbott PR Retirement Plan - New for Employees who cease to be employed by Abbott PR after the Distribution Date and become employed by AbbVie PR during the Transition Period (including Assets and EMA Liabilities in respect of beneficiaries or alternate payees) and the Abbott PR Retirement Plan - New shall transfer all such Assets and be relieved of such EMA Liabilities.  The amount of such Assets to be transferred shall be determined as provided in Section 7.01(c)(i) and shall be subject to the applicable provisions of Section 7.01(c)(i).

 

(d)                                 Abbott PR Retirement Plan - New Provisions.  The Abbott PR Retirement Plan - New shall provide that:

 

(i)                                     Abbott Retained Employees and Abbott LTD Participants shall (A) be eligible to participate in the Abbott PR Retirement Plan - New as of the Distribution Date to the extent they were eligible to participate in the AbbVie PR Pension Plan immediately prior to the Distribution Date, and (B) receive credit for vesting, eligibility and benefit service for all service credited for those purposes under the AbbVie PR Pension Plan as of the Distribution Date as if that service had been rendered to Abbott PR;

 

(ii)                                  the compensation paid by the Abbott Group to an Abbott Retained Employee or to an Abbott LTD Participant that is recognized under the AbbVie PR Pension Plan as of the Distribution Date shall be credited and recognized for all applicable purposes under the Abbott PR Retirement Plan - New;

 

(iii)                               the accrued benefit of each Abbott Retained Employee and each Abbott LTD Participant under the AbbVie PR Pension Plan as of the Distribution Date shall be payable under the Abbott PR Retirement Plan - New at the time and in a form that would have been permitted under the AbbVie PR Pension Plan as in effect as of the Distribution Date, with employment by the Abbott Group prior to the Distribution Date credited under the Abbott PR Retirement Plan - New for purposes of determining eligibility for optional forms of benefit, early retirement benefits, or other benefit forms; and

 

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(iv)                              the Abbott PR Retirement Plan - New shall assume and honor the terms of all QDROs in effect under the AbbVie PR Pension Plan as of the Distribution Date with respect to Abbott Retained Employees and Abbott LTD Participants.

 

(e)                                  Determination Letter Request.  Abbott PR shall submit an application to the Puerto Rico Secretary of Treasury as soon as practicable after the Distribution Date (but no later than the last day of the required amendment period as provided in applicable PR Code provisions) for a determination letter regarding the qualification of the Abbott PR Retirement Plan- New and the tax status of its related trust as of the Distribution Date and shall make any amendments reasonably requested by the Puerto Rico Secretary of Treasury to receive a favorable determination letter regarding the Abbott PR Retirement Plan - New.

 

(f)                                   AbbVie PR Pension Plan after Distribution Date.  From and after the Distribution Date, (i) the AbbVie PR Pension Plan shall continue to be responsible for EMA Liabilities in respect of AbbVie Employees and Former Employees (other than Abbott LTD Participants), and (ii) no Employees of the Abbott Group, including Abbott Retained Employees and Abbott LTD Participants, shall accrue any benefits under the AbbVie PR Pension Plan.  Without limiting the generality of the foregoing, Abbott Retained Employees and Abbott LTD Participants shall cease to be active participants in the AbbVie PR Pension Plan effective as of the Distribution Date.

 

(g)                                  Plan Fiduciaries.  For all periods after the Distribution Date, the Parties agree that the applicable fiduciaries of each of the AbbVie PR Pension Plan and the Abbott PR Retirement Plan - New, respectively, shall have the authority with respect to the AbbVie PR Pension Plan and the Abbott PR Retirement Plan - New, respectively, to determine the plan investments and such other matters as are within the scope of their duties under ERISA Section 404.

 

(h)                                 No Loss of Unvested Benefits; No Distributions.  The transfer of any Abbott Retained Employee’s employment to Abbott PR will not result in loss of that Employee’s unvested benefits under the AbbVie PR Pension Plan or the Abbott PR Retirement Plan - New and no Abbott Retained Employee shall be entitled to a distribution of his or her benefit under the AbbVie PR Pension Plan as a result of such transfer of employment.

 

Section 7.02.  Puerto Rico Stock Retirement/Savings Plans.

 

(a)                                 Retention of Plan Sponsorship by AbbVie PR.  Effective as of the Distribution Date, AbbVie PR shall continue sponsorship of the AbbVie PR Savings Plan.  The plan and the related trust agreement shall be amended, effective as of or before the Distribution Date, to reflect the name change, and to make other changes to effectuate such sponsorship continuation.

 

(b)                                 Establishment of the Abbott PR SRP - New.  Effective as of or before the Distribution Date, Abbott PR shall establish the Abbott PR SRP - New.  As of the Distribution Date, the terms of the Abbott PR SRP - New shall be substantially similar to the terms of the AbbVie PR Savings Plan as of the Distribution Date.  On or prior to the Distribution Date, Abbott PR shall provide AbbVie PR with (i) a copy of the Abbott PR SRP - New; (ii) a copy of certified resolutions of the Abbott PR Board of Directors (or its authorized committee or other

 

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delegate) evidencing adoption of the Abbott PR SRP - New and the related trust(s) and the assumption by the Abbott PR SRP - New of the EMA Liabilities described in Section 7.02(c) hereof; and (iii) either (A) a favorable determination letter issued by the Puerto Rico Secretary of Treasury with respect to the Abbott PR SRP - New and its related trust or (B) an opinion of counsel, which counsel and opinion are reasonably satisfactory to AbbVie PR, with respect to the qualified status of the Abbott PR SRP - New and the tax-exempt status of its related trust under PR Code Section 1081.01(a).

 

(c)                                  Transfer of Account Balances.  As soon as practicable after the Distribution Date, AbbVie PR shall cause the trustee of the AbbVie PR Savings Plan to transfer from the trust(s) which forms a part of the AbbVie PR Savings Plan to the trust(s) which forms a part of the Abbott PR SRP - New amounts equal to the account balances of the Abbott Retained Employees and Abbott LTD Participants (including account balances in respect of beneficiaries and alternate payees established in relation to such individuals) under the AbbVie PR Savings Plan, determined as of the date of the transfer.  Such transfers shall be made in cash, Abbott Common Shares, shares of AbbVie Common Stock, promissory notes evidencing outstanding loans and other Assets or any combination thereof in cash or in kind, as instructed by the applicable AbbVie PR Savings Plan fiduciary.  Abbott PR shall cause the transferred amounts to be allocated among the Abbott Retained Employees’ and Abbott LTD Participants’ (and beneficiaries’ and/or alternate payees’, as applicable) Abbott PR SRP - New accounts and to such investment funds in the same manner in which those amounts were allocated under the AbbVie PR Savings Plan.  Any Asset and EMA Liability transfers pursuant to this Section 7.02 shall comply in all respects with ERISA Sections 208 and 204(g).

 

(d)                                 Abbott PR SRP - New Plan Provisions. The Abbott PR SRP- New shall provide that:

 

(i)                                     Abbott Retained Employees and Abbott LTD Participants shall (A) be eligible to participate in the Abbott PR SRP-New as of the Distribution Date to the extent they were eligible to participate in the AbbVie PR Savings Plan immediately prior to the Distribution Date, and (B) receive credit for vesting purposes for all service credited for that purpose under the AbbVie PR Savings Plan as of the Distribution Date as if that service had been rendered to Abbott PR; and

 

(ii)                                  the account balance of each Abbott Retained Employee and Abbott LTD Participant under the AbbVie PR Savings Plan as of the date of the transfer of Assets from the AbbVie PR Savings Plan (including any outstanding promissory notes) shall be credited to such individual’s account balance under the Abbott PR SRP - New.

 

(e)                                  Determination Letter Request.  Abbott PR shall submit an application to the Puerto Rico Secretary of Treasury as soon as practicable following the Distribution Date (but no later than the last day of the remedial amendment period as defined in applicable PR Code provisions) for a determination regarding the qualification of the Abbott PR SRP - New and the tax-exempt status of its related trust as of the Distribution Date and shall make any amendments reasonably requested by the Puerto Rico Secretary of Treasury to receive a favorable determination letter regarding the Abbott PR SRP - New.

 

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(f)                                   AbbVie PR Savings Plan after Distribution Date.  From and after the Distribution Date, (i) the AbbVie PR Savings Plan shall continue to be responsible for EMA Liabilities in respect of AbbVie Employees and Former Employees (other than Abbott LTD Participants), and (ii) no Employees of the Abbott Group shall accrue any benefits under the AbbVie PR Savings Plan.  Without limiting the generality of the foregoing, Abbott Retained Employees and Abbott LTD Participants shall cease to be active participants in the AbbVie PR Savings Plan effective as of the Distribution Date.

 

(g)                                  Fiduciaries. For all periods after the Distribution Date, the Parties agree that the applicable fiduciaries of each of the Abbott PR SRP- New and the AbbVie PR Savings Plan, respectively, shall have the authority with respect to the Abbott PR SRP - New and the AbbVie PR Savings Plan, respectively, to determine the investment alternatives, the terms and conditions with respect to those investment alternatives and such other matters as are within the scope of their duties under ERISA Section 404.

 

(h)                                 No Loss of Unvested Benefits; No Distributions.  The transfer of any Abbott Retained Employee’s employment to Abbott PR will not result in loss of that Abbott Retained Employee’s unvested benefits under the AbbVie PR Savings Plan or the Abbott PR SRP- New, and no Abbott Retained Employee shall be entitled to a distribution of his or her benefit under the AbbVie PR Savings Plan as a result of such transfer of employment.

 

(i)                                     Subsequent Transfers.  If, after the Distribution Date, a participant in the AbbVie PR Savings Plan becomes employed by the Abbott Group, or a participant in the Abbott PR SRP - New becomes employed by the AbbVie Group, any additional allocations shall occur under the AbbVie PR Savings Plan or the Abbott PR SRP - New, as applicable.  If such participant’s employment by the AbbVie Group or the Abbott Group commences during the Transition Period, the AbbVie PR Savings Plan or the Abbott PR SRP — New, as applicable, shall transfer or permit the applicable participant to roll over a distribution of such participant’s account (including any outstanding loans) from the AbbVie PR Savings Plan or the Abbott PR SRP - New, as applicable, all in accordance with the terms of the AbbVie PR Savings Plan and the Abbott PR SRP — New and/or the plan administrative procedures, as applicable.

 

Section 7.03.  Puerto Rico Supplemental Retirement Plans.

 

(a)                                 Retention of Plan Sponsorship by AbbVie PR.  Effective as of the Distribution Date, AbbVie PR shall continue sponsorship of the AbbVie PR SERP.  The plan shall be amended, effective as of or before the Distribution Date, to reflect the name change, and to make other changes to effectuate such sponsorship continuation.

 

(b)                                 Establishment of the Abbott PR SERP - New.  Effective as of or before the Distribution Date, Abbott PR shall establish the Abbott PR SERP — New with terms substantially similar to those of the AbbVie PR SERP.

 

(c)                                  Assumption of SERP Liabilities and Transfer from AbbVie PR SERP. As of the Distribution Date, Abbott PR shall, and shall cause the Abbott PR SERP - New to, assume all EMA Liabilities for all obligations under the AbbVie PR SERP for the benefits of Abbott Retained Employees and Abbott LTD Participants and their beneficiaries and/or alternate payees determined as of the Distribution Date, and AbbVie PR and the AbbVie PR SERP shall be

 

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relieved of all EMA Liabilities for those benefits.  AbbVie PR shall retain the EMA Liabilities for all obligations under the AbbVie PR SERP for the benefits for AbbVie Employees and Former Employees (other than Abbott LTD Participants).

 

(d)                                 Abbott PR SERP - New Provisions.  As of the Distribution Date, the Abbott PR SERP - New shall provide that:

 

(i)                                     Abbott Retained Employees and Abbott LTD Participants shall (A) be eligible to participate in the Abbott PR SERP - New to the extent they were eligible to participate in the AbbVie PR SERP immediately prior to the Distribution Date, and (B) receive credit for vesting, eligibility and benefit service for all service credited for those purposes under the AbbVie PR SERP as of the Distribution Date (provided that in the event that any such Abbott Retained Employee or Abbott LTD Participant receives a distribution from the AbbVie PR SERP, the value of such distribution shall be offset against future benefits under the Abbott PR SERP - New to the extent necessary to avoid a duplication of benefits, the terms of such offset to be set forth in the Abbott PR SERP);

 

(ii)                                  the compensation paid to an Abbott Retained Employee or to an Abbott LTD Participant that was recognized under the AbbVie PR SERP as of the Distribution Date shall be credited and recognized for all applicable purposes under the Abbott PR SERP - New;

 

(iii)                               the accrued benefit of each Abbott Retained Employee and each Abbott LTD Participant under the AbbVie PR SERP as of the Distribution Date shall be payable under the Abbott PR SERP - New at the time and in a form that would have been permitted under the AbbVie PR SERP as in effect as of such Distribution Date, with employment by the Abbott Group prior to the Distribution Date credited under the Abbott PR SERP - New for purposes of determining eligibility for optional forms of benefit, early retirement benefits, or other benefit forms; and

 

(iv)                              the Abbott PR SERP - New shall assume and honor the terms of all arrangements relating to beneficiaries and alternate payees in effect and honored under the AbbVie PR SERP as of the Distribution Date with respect to such Abbott Retained Employees and Abbott LTD Participants.

 

(e)                                  AbbVie PR SERP after Distribution Date. From and after the Distribution Date, no Employees of the Abbott Group shall participate in or accrue any benefits under the AbbVie PR SERP. Without limiting the generality of the foregoing, each Abbott Retained Employee and Abbott LTD Participant shall cease to participate in the AbbVie PR SERP effective as of the Distribution Date.  The AbbVie PR SERP shall continue to be responsible for EMA Liabilities in respect of AbbVie Employees and Former Employees (other than Abbott LTD Participants) and their beneficiaries and/or alternate payees.

 

Section 7.04.  Puerto Rico Health and Welfare Plans.

 

(a)                                 Retention of Plan Sponsorship by AbbVie PR.  Effective as of the Distribution Date, AbbVie PR shall continue sponsorship of the AbbVie PR Health and Welfare

 

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Plans.  The plans shall be amended, effective as of or before the Distribution Date, to reflect the name change, and to make other changes to effectuate such sponsorship continuation.

 

(b)                                 Establishment of Abbott PR Health and Welfare Plans - New.  Effective as of or before the Distribution Date, Abbott PR shall establish the Abbott PR Health and Welfare Plans - New, with terms substantially similar to those of the corresponding AbbVie PR Health and Welfare Plans as of the Distribution Date unless otherwise provided in this Section 7.04.

 

(c)                                  Waiver of Conditions; Benefit Maximums. Abbott PR shall, to the extent commercially reasonable, cause the Abbott PR Health and Welfare Plans - New to:

 

(i)                                     with respect to initial enrollment following the Distribution Date, waive

 

(A)                               all limitations as to preexisting conditions, exclusions, and service conditions with respect to participation and coverage requirements applicable to any Abbott Retained Employee or Abbott LTD Participant, other than limitations that were in effect with respect to the Abbott Retained Employee or Abbott LTD Participant under the corresponding AbbVie PR Health and Welfare Plan as of immediately prior to the Distribution Date, and

 

(B)                               any waiting period limitation or evidence of insurability requirement applicable to an Abbott Retained Employee or Abbott LTD Participant other than limitations or requirements that were in effect with respect to such Abbott Retained Employee or Abbott LTD Participant under the corresponding AbbVie PR Health and Welfare Plan as of immediately prior to the Distribution Date; and

 

(ii)                                  take into account

 

(A)                               with respect to aggregate annual, lifetime, or similar maximum benefits available under the Abbott PR Health and Welfare Plan - New, an Abbott Retained Employee’s or Abbott LTD Participant’s prior claim experience under the corresponding AbbVie PR Health and Welfare Plan and any Benefit Plan that provides leave benefits; and

 

(B)                               any eligible expenses incurred by an Abbott Retained Employee or Abbott LTD Participant and his or her covered dependents during the portion of the plan year of the corresponding AbbVie PR Health and Welfare Plan ending on the Distribution Date to be taken into account under such Abbott PR Health and Welfare Plan - New for purposes of satisfying all deductible, coinsurance, and maximum out-of-pocket requirements applicable to such Abbott Retained Employee or Abbott LTD Participant and his or her covered dependents for the applicable plan year as if such amounts had been paid in accordance with such Abbott PR Health and Welfare Plan - New.

 

(d)                                 Spousal Transition Issues. The Abbott Group and AbbVie Group will cooperate to develop uniform guidelines intended to ensure that, to the extent commercially

 

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practicable, from the Distribution Date through December 31, 2013, Employees who are married to each other or who are domestic partners as of the Distribution Date do not incur additional aggregate cost, or derive additional aggregate benefit, under the PR Health and Welfare Plans of the Parties solely because one such Employee is an Abbott Retained Employee and the other is an AbbVie Employee.

 

(e)                                  Allocation of Health and Welfare Assets and Liabilities.

 

(i)                                     General Principles.  Except as otherwise specifically provided in this Agreement, AbbVie PR shall retain all EMA Liabilities relating to Incurred Claims under the AbbVie PR Health and Welfare Plans, and shall also retain Assets (including, without limitation, Medicare reimbursements, pharmaceutical rebates, and similar items) associated with such Incurred Claims. Abbott PR shall be responsible for all EMA Liabilities relating to Incurred Claims of any Abbott Retained Employee or Abbott LTD Participant under any Abbott PR Health and Welfare Plan - New, and shall also retain Assets (including, without limitation, Medicare reimbursements, pharmaceutical rebates, and similar items) associated with such Incurred Claims.

 

(ii)                                  Disability Benefits, Disability Health Care and Disability Life Insurance.  Notwithstanding any other provision hereof, Abbott PR shall be responsible for Incurred Claims (including ongoing benefit payments) of Abbott Retained Employees and Abbott LTD Participants for short-term and long-term disability, disability healthcare and disability life insurance benefits, regardless of when the applicable Incurred Claim was incurred.

 

(iii)                               Retiree Health Care Plan and Retiree Life Insurance Plan.  Notwithstanding any other provision hereof, AbbVie PR shall retain the EMA Liabilities and responsibility for all obligations under the AbbVie Puerto Rico Retiree Health Care Plan (formerly known as The Abbott Laboratories Puerto Rico Retiree Health Care Plan) and the AbbVie Retiree Life Insurance Plan (formerly known as the Abbott Laboratories Retiree Life Insurance Plan) for benefits due to AbbVie Employees and Former Employees (other than Abbott LTD Participants) (and shall also retain Assets, including, without limitation, Medicare reimbursements, pharmaceutical rebates, and similar items, associated with such benefits).

 

(f)                                   AbbVie PR Health and Welfare Plans after Distribution Date.  Abbott Retained Employees and Abbott LTD Participants shall cease to participate in the AbbVie PR Health and Welfare Plans effective as of the Distribution Date.

 

Section 7.05.  COBRA and HIPAA.  AbbVie PR shall continue to be responsible for compliance with the health care continuation requirements of COBRA, the certificate of creditable coverage requirements of HIPAA, and the corresponding provisions of the AbbVie PR Health and Welfare Plans with respect to (a) any AbbVie Employees and any Former Employees (and their covered dependents) who incur a qualifying event under COBRA on, prior to, or following the Distribution Date, and (b) any other Abbott Employees (and their covered dependents), with respect to qualifying events under COBRA incurred prior to or on the applicable Transfer Date.  Abbott PR shall assume responsibility for compliance with the health care continuation requirements of COBRA, the certificate of creditable coverage requirements of

 

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HIPAA, and the corresponding provisions of the Abbott PR Health and Welfare Plans - New with respect to any Abbott Retained Employees or Abbott LTD Participants (and their covered dependents) who incur a qualifying event or loss of coverage under the AbbVie PR Health and Welfare Plans and/or the Abbott PR Health and Welfare Plans - New after the Distribution Date.  The Parties agree that the consummation of the transactions contemplated by the Separation and Distribution Agreement shall not constitute a COBRA qualifying event for any purpose of COBRA.

 

ARTICLE VIII

 

MISCELLANEOUS

 

Section 8.01.  Transfer of Records.  Abbott shall transfer to AbbVie any and all employment records (including, but not limited to, any Form I-9, Form W-2 or other Internal Revenue Service forms) with respect to Transferred Employees and other records reasonably required by AbbVie to enable AbbVie properly to carry out its obligations under this Agreement. Such transfer of records generally shall occur as soon as administratively practicable on or after the Distribution Date. Each Party will permit the other Party reasonable access to Employee records, to the extent reasonably necessary for such accessing Party to carry out its obligations hereunder.

 

Section 8.02.  Cooperation.  Each Party shall upon reasonable request provide the other Party and the other Party’s respective Affiliates, agents, and vendors all information reasonably necessary to the other Party’s performance of its obligations hereunder. The Parties agree to use commercially reasonable efforts and to cooperate with each other to carry out their obligations hereunder and to effectuate the terms of this Agreement.

 

Section 8.03.  Employee Agreements.  As of the Distribution Date, Abbott and the applicable member of the Abbott Group hereby assign to AbbVie or another member of the AbbVie Group: (a) to the extent an AbbVie Employee did not otherwise sign an Employee Agreement to effectuate his or her transfer to and hiring by AbbVie, each Employee Agreement entered into between a member of the Abbott Group and any AbbVie Employee; and (b) all rights or obligations under any Employee Agreement relating to the AbbVie Business; provided, however, that Abbott and the Abbott Group shall retain all rights or obligations under each Employee Agreement or applicable Law to the extent that such rights or obligations are unrelated to the AbbVie Business.  After the Distribution Date, (i) the AbbVie Group shall keep secret and retain in strictest confidence, and shall not use for the benefit of itself or others, any Abbott Group confidential or proprietary information that is unrelated to the AbbVie Business, and the AbbVie Group shall ensure that its Employees are bound by a secrecy obligation in accordance with this provision, and (ii) the Abbott Group shall keep secret and retain in strictest confidence, and shall not use for the benefit of itself or others, any AbbVie Group confidential or proprietary information that is unrelated to the Abbott Business, and the Abbott Group shall ensure that its Employees are bound by a secrecy obligation in accordance with this provision.  Upon written request by Abbott or the Abbott Group, AbbVie or the AbbVie Group shall make available to Abbott or the Abbott Group the original copy of any Employee Agreement that was assigned to AbbVie or the AbbVie Group under this Agreement.

 

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Section 8.04.  Repayment Assets. Effective as of the applicable Transfer Date, the Abbott Group shall be entitled to all Employee Recoupment Assets in respect of Abbott Retained Employees and Abbott Former Employees, and the AbbVie Group shall be entitled to all Employee Recoupment Assets in respect of AbbVie Employees and AbbVie Former Employees.  Without limiting the generality of the foregoing, the Abbott Group hereby assigns to the AbbVie Group, effective as of the applicable Transfer Date, all rights and obligations relating to any Employee Recoupment Assets of the Abbott Group in respect of any AbbVie Employee or AbbVie Former Employee.

 

Section 8.05.  Compliance. The agreements and covenants of the Parties hereunder shall at all times be subject to the requirements and limitations of applicable Law (including, for purposes of Article IV, local rules and customs relating to the treatment of pension plans) and collective bargaining agreements.  Where an agreement or covenant of a Party hereunder cannot be effected in compliance with applicable Law or an applicable collective bargaining agreement, the Parties agree to negotiate in good faith to modify such agreement or covenant to the least extent possible in keeping with the original agreement or covenant in order to comply with applicable Law or such applicable collective bargaining agreement.  Each provision of this Agreement is subject to and qualified by this Section 8.05, whether or not such provision expressly states that it is subject to or limited by applicable Law or by applicable collective bargaining agreements. Each reference to the Code, ERISA, or the Securities Act or any other Law shall be deemed to include the rules, regulations, and guidance issued thereunder.

 

Section 8.06.  Preservation of Rights. Unless expressly provided otherwise in this Agreement, nothing herein shall be construed as a limitation on the right of the Abbott Group or the AbbVie Group to (a) amend or terminate any Benefit Plan or (b) terminate the employment of any Employee.

 

Section 8.07.  Matching Grant Plan and Employee Giving Campaign.

 

(a)                                 U.S. Matching Grant Plan.  The Abbott Fund shall retain all EMA Liabilities under the Abbott Fund Matching Grant Plan with respect to donations made prior to the Distribution Date.  The Abbott Fund is to match or cause to be matched all eligible donations made prior to the Distribution Date, in accordance with the terms of the Abbott Fund Matching Grant Plan.  Each Party will make its own decision regarding future matching grant plans.

 

(b)                                 U.S. Employee Giving Campaign.  Abbott and the Abbott Fund, as applicable, shall retain all EMA Liabilities under the Abbott Laboratories Employee Giving Campaign with respect to donations and pledges made prior to the Distribution Date.  During 2013, Abbott will collect and distribute funds pledged in 2012 by AbbVie Employees.  Each Party will make its own decision regarding future employee giving campaigns.

 

Section 8.08.  Clara Abbott Foundation. No reference to benefits or any Benefit Plan contained in this Agreement shall include or affect the benefits and services provided by the Clara Abbott Foundation.

 

Section 8.09.  Not a Change in Control.  The Parties acknowledge and agree that the transactions contemplated by the Separation and Distribution Agreement and this Agreement do not constitute a “change in control” or a “change of control” for purposes of any Benefit Plan.

 

54

 

Section 8.10.  Reverse Jurisdictions.  Notwithstanding anything in this Agreement to the contrary, with the exception of Article I, Section 2.01 and Article VII, the parties acknowledge and agree that for each of the entities or countries listed in Schedule 8.10, where the context so requires in accordance with the applicable local Conveyance and Assumption Instruments, each reference to “AbbVie” in this Agreement shall be construed as a reference to “Abbott,” and each reference to “Abbott” in this Agreement shall be construed as a reference to “AbbVie.”

 

Section 8.11.  Notices.  All notices under this Agreement shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service, by facsimile with receipt confirmed (followed by delivery of an original via overnight courier service) or by registered or certified mail (postage prepaid, return receipt requested) to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a Notice):

 

If to Abbott:

 

Abbott Laboratories
 100 Abbott Park Road
 Building AP6D, Dept. 396
 Abbott Park, Illinois 60064

Attn:  Senior Vice President, Human Resources
 Facsimile:  (847) 937-3966

 

If to AbbVie:

 

AbbVie Inc. 
 1 North Waukegan Road
 North Chicago, Illinois 60064
 Attn:  Senior Vice President, Human Resources
 Facsimile:  (847) 935-3297

 

Either Party may, by Notice to the other Party, change the address or facsimile number to which such Notices are to be given.

 

Section 8.12.  Limitation on Enforcement.  This Agreement is an agreement solely between the Parties. Nothing in this Agreement, whether express or implied, shall be construed to: (a) confer upon any current or former Employee of the Abbott Group or the AbbVie Group, or any other person any rights or remedies, including, but not limited to any right to (i) employment or recall; (ii) continued employment or continued service for any specified period; or (iii) claim any particular compensation, benefit or aggregation of benefits, of any kind or nature; or (b) create, modify, or amend any Benefit Plan.

 

Section 8.13.  Disputes.  The Parties agree to use commercially reasonable efforts to resolve in an amicable manner any and all controversies, disputes and claims between them arising out of or related in any way to this Agreement.  The Parties agree that any controversy, dispute or claim (whether arising in contract, tort or otherwise) arising out of or related in any way to this Agreement that cannot be amicably resolved informally will be resolved pursuant to the dispute resolution procedures set forth in Article VII of the Separation and Distribution Agreement.

 

55

 

Section 8.14.  Schedules. As of the Distribution Date, the Parties shall update Schedules  2.03(a), 4.01(a), 4.02(a), and 8.10 to this Agreement, as necessary.

 

Section 8.15.  Interpretation.  Words in the singular shall be deemed to include the plural and vice versa and words of one gender shall be deemed to include the other genders as the context requires.  The terms “hereof,” “herein,” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole (including all of the Schedules and Exhibits hereto and thereto) and not to any particular provision of this Agreement.  Article, Section, Exhibit and Schedule references are to the Articles, Sections, Exhibits, and Schedules to this Agreement unless otherwise specified.  Unless otherwise stated, all references to any agreement shall be deemed to include the exhibits, schedules and annexes to such agreement.  The word “including” and words of similar import when used in this Agreement shall mean “including, without limitation,” unless the context otherwise requires or unless otherwise specified.  The word “or” shall not be exclusive.  Unless otherwise specified in a particular case, the word “days” refers to calendar days.  References herein to this Agreement shall be deemed to refer to this Agreement as of the date on which it is executed and as it may be amended, modified or supplemented thereafter, unless otherwise specified.  References to the performance, discharge or fulfillment of any EMA Liability in accordance with its terms shall have meaning only to the extent such EMA Liability has terms.  If the EMA Liability does not have terms, the reference shall mean performance, discharge or fulfillment of such EMA Liability.

 

Section 8.16.  Counterparts; Entire Agreement, Conflicts; Corporate Power; Facsimile Signatures.

 

(a)                                 Counterparts.  This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement.

 

(b)                                 Entire Agreement, Conflicts.

 

(i)                                     This Agreement, the employee benefits cost-sharing agreement entered into by and between the Parties to implement certain provisions of this Agreement (the “Employee Benefits Cost-Sharing Agreement”), the Separation and Distribution Agreement and the Ancillary Agreements (including the Conveyance and Assumption Instruments), and the exhibits, schedules and annexes hereto and thereto, contain the entire agreement between the Parties with respect to the subject matter hereof, supersede all previous agreements, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter and there are no agreements or understandings between the Parties other than those set forth or referred to herein or therein.

 

(ii)                                  It is the intention of the Parties that the Employee Benefits Cost-Sharing Agreement shall be consistent with the terms of this Agreement.  In the event of any conflict between the Employee Benefits Cost-Sharing Agreement and this Agreement, the provisions of this Agreement shall control.  The Parties agree that the Employee Benefits Cost-Sharing Agreement is not intended and shall not be construed in any way to enhance, modify or decrease any of the rights or obligations of Abbott, any Abbott Subsidiary, AbbVie or any AbbVie Subsidiary from those contained in this

 

56

 

Agreement.  In the event of any conflict between the terms of a Conveyance and Assumption Instrument and the terms of this Agreement with respect to EMA Liabilities, this Agreement shall control.

 

(c)                                  Corporate Power.  Abbott represents on behalf of itself and, to the extent applicable, each Abbott Subsidiary, and AbbVie represents on behalf of itself and, to the extent applicable, each AbbVie Subsidiary, as follows:

 

(i)                                     each such Person has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby and thereby; and

 

(ii)                                  this Agreement has been duly executed and delivered by it and constitutes a valid and binding agreement of it enforceable in accordance with the terms thereof.

 

(d)                                 Signatures and Delivery.  Each Party acknowledges that it and the other Party may execute this Agreement by manual, stamp or mechanical signature, and that delivery of an executed counterpart of a signature page to this Agreement (whether executed by manual, stamp or mechanical signature) by facsimile or by email in portable document format (PDF) shall be effective as delivery of such executed counterpart of this Agreement.  Each Party expressly adopts and confirms a stamp or mechanical signature (regardless of whether delivered in person, by mail, by courier, by facsimile or by email in portable document format (PDF)) made in its respective name as if it were a manual signature delivered in person, agrees that it shall not assert that any such signature or delivery is not adequate to bind such Party to the same extent as if it were signed manually and delivered in person and agrees that, at the reasonable request of the other Party at any time, it shall as promptly as reasonably practicable cause each such Agreement to be manually executed (any such execution to be as of the date of the initial date thereof) and delivered in person, by mail or by courier.

 

Section 8.17.  Governing Law.  This Agreement shall be governed by and construed and interpreted in accordance with the Laws of the State of Delaware, irrespective of the choice of Laws and principles of the State of Delaware, as to all matters, including matters of validity, construction, effect, enforceability, performance and remedies.

 

Section 8.18.  Assignability.  This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns; provided, however, that neither Party may assign its rights or delegate its obligations under this Agreement without the express prior written consent of the other Party hereto.  Notwithstanding the foregoing, no such consent shall be required for the assignment of a Party’s rights and obligations under this Agreement in whole in connection with a Change of Control of a Party so long as the resulting, surviving or transferee Person assumes all the obligations of the relevant Party thereto by operation of Law or pursuant to an agreement in form and substance reasonably satisfactory to the other Party.  Nothing herein is intended to, or shall be construed to, prohibit either Party or any of its Subsidiaries from being party to or undertaking a Change of Control.

 

57

 

Section 8.19.  Third Party Beneficiaries.  The provisions of this Agreement are solely for the benefit of the Parties and their respective Subsidiaries, after giving effect to the Distribution, and their permitted successors and assigns, and are not intended to confer upon any Person except the Parties and their respective Subsidiaries, after giving effect to the Distribution, and their permitted successors and assigns, any rights or remedies hereunder.  There are no other third-party beneficiaries of this Agreement and this Agreement shall not provide any other Third Party with any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement.

 

Section 8.20.  Severability.  In the event that any one or more of the terms or provisions of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement, or the application of such term or provision to Persons or circumstances or in jurisdictions other than those as to which it has been determined to be invalid, illegal or unenforceable, and the Parties shall use their commercially reasonable efforts to substitute one or more valid, legal and enforceable terms or provisions into this Agreement which, insofar as practicable, implement the purposes and intent of the Parties.  Any term or provision of this Agreement held invalid or unenforceable only in part, degree or within certain jurisdictions shall remain in full force and effect to the extent not held invalid or unenforceable to the extent consistent with the intent of the parties as reflected by this Agreement.  To the extent permitted by applicable Law, each party waives any term or provision of Law which renders any term or provision of this Agreement to be invalid, illegal or unenforceable in any respect.

 

Section 8.21.  Force Majeure.  Neither Party shall be deemed in default of this Agreement for failure to fulfill any obligation so long as and to the extent to which any delay or failure in the fulfillment of such obligations is prevented, frustrated, hindered or delayed as a consequence of circumstances of Force Majeure.  In the event of any such excused delay, the time for performance shall be extended for a period equal to the time lost by reason of the delay.  A Party claiming the benefit of this provision shall, as soon as reasonably practicable after the occurrence of any such event, (a) provide Notice to the other Party of the nature and extent of any such Force Majeure condition; and (b) use commercially reasonable efforts to remove any such causes and resume performance under this Agreement as soon as reasonably practicable.

 

Section 8.22.  No Set Off.  Except as mutually agreed to in writing by the Parties, neither Party nor any of its Subsidiaries shall have any right of set off or other similar rights with respect to (a) any amounts received pursuant to this Agreement; or (b) any other amounts claimed to be owed to the other Party or any of its Subsidiaries arising out of this Agreement.

 

Section 8.23.  Headings.  The Article, Section and Paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

 

Section 8.24.  Survival of Covenants.  Except as expressly set forth in this Agreement, the covenants and other agreements contained in this Agreement, and liability for the breach of any obligations contained herein, shall survive the Effective Time and shall remain in full force and effect thereafter.

 

58

 

Section 8.25.  Waivers of Default.  Waiver by either Party of any default by the other Party of any provision of this Agreement shall not be deemed a waiver by the waiving Party of any subsequent or other default, nor shall it prejudice the rights of the waiving Party.

 

Section 8.26.  Amendments.  No provisions of this Agreement shall be deemed amended, supplemented or modified unless such amendment, supplement or modification is in writing and signed by an authorized representative of both Parties or their relevant Subsidiaries, as the case may be.  No provisions of this Agreement shall be deemed waived unless such waiver is in writing and signed by the authorized representative of the Party or relevant Subsidiary against whom it is sought to be enforced.

 

Section 8.27.  Specific Performance.  Subject to the provisions of Section 8.13, in the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, the Party or Parties who are or are to be thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief (on an interim or permanent basis) of its rights under this, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative.  The Parties agree that the remedies at law for any breach or threatened breach, including monetary damages, may be inadequate compensation for any loss and that any defense in any Proceeding for specific performance that a remedy at Law would be adequate is waived.

 

Section 8.28.  Mutual Drafting.  This Agreement shall be deemed to be the joint work product of the Parties and any rule of construction that a document shall be interpreted or construed against a drafter of such document shall not be applicable.

 

* * * * *

 

59

 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their authorized representatives.

 

 

	
ABBOTT LABORATORIES
    	
 
    	
ABBVIE   INC.  
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
By:
    	
/s/   Thomas C. Freyman 
    	
 
    	
By:
    	
/s/   Richard A. Gonzalez 
    
	
 
    	
Name:   
    	
Thomas   C. Freyman 
    	
 
    	
 
    	
Name:   
    	
Richard   A. Gonzalez 
    
	
 
    	
Title:   
    	
Executive   Vice President, Finance

and   Chief Financial Officer
    	
 
    	
 
    	
Title:   
    	
Chairman   of the Board

and   Chief Executive Officer
    

 

[Signature Page to Employee Matters Agreement]

 

 

SCHEDULES TO EMPLOYEE MATTERS AGREEMENT

 

Schedule 2.03(a)

 

Establishment of AbbVie Benefit Plans — U.S.

 

1986 Abbott Laboratories Management Incentive Plan

1998 Abbott Laboratories Performance Incentive Plan

Abbott Laboratories 2009 Employee Stock Purchase Plan for Non-U.S. Employees

Abbott Laboratories 2009 Incentive Stock Program

Abbott Laboratories 401(k) Supplemental Plan

Abbott Laboratories Adoption Assistance Plan

Abbott Laboratories Annuity Retirement Plan

Abbott Laboratories Awards for Performance Excellence Plan

Abbott Laboratories Cash Profit Sharing Plan

Abbott Laboratories Change in Control Severance Pay Plan

Abbott Laboratories Child Care Center Plan

Abbott Laboratories Deferred Compensation Plan

Abbott Laboratories Employee Insurance Trust

Abbott Laboratories Extended Disability Plan

Abbott Laboratories Flexible Benefits Plan

Abbott Laboratories Health Care Plan

Abbott Laboratories Life Accident Plan

Abbott Laboratories Non-Employee Directors’ Fee Plan

Abbott Laboratories Retiree Health Care Plan

Abbott Laboratories Retiree Life Insurance Plan

Abbott Laboratories Stock Retirement Plan

Abbott Laboratories Supplemental Pension Plan

Abbott Laboratories Territorial Pension Plan

Abbott Laboratories Transitional Pay Plan

Abbott Laboratories Tuition Assistance Plan

Abbott Overseas Managers Pension Plan

 

1

 

Schedule 4.01(a)

 

Non-U.S. Jurisdictions Where Pension Liabilities

for AbbVie Former Employees Transfer to AbbVie

 

Germany

Greece

Netherlands

Norway

Portugal

United Kingdom

 

Schedule 4.02(a)

 

Non-U.S. Jurisdictions with Shared Plan Model

 

Japan

Netherlands

South Africa

Switzerland

 

Schedule 8.10

 

Reverse Entities

 

In the following entities, any employees mapped to AbbVie will continue to be employed by such entity following the Local Closing Transaction, and any employees mapped to Abbott will be transferred to Abbott or an applicable Abbott Subsidiary:

 

Germany — Abbott Products GmbH

 

Ireland — Fournier Laboratories Ireland

 

Ukraine — Abbott Products GmbH (Ukraine Branch)

 

Puerto Rico (Manufacturing Business) — AbbVie Ltd. (f/k/a Abbott Pharmaceuticals (Puerto Rico) Ltd.)

 

2Exhibit 10.6

 

EXECUTION VERSION

 

INTERNATIONAL COMMERCIAL OPERATIONS AGREEMENT

 

BY AND BETWEEN

 

ABBOTT LABORATORIES

 

AND

 

ABBVIE INC.

 

DATED AS OF DECEMBER 31, 2012

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
ARTICLE I
    	
DEFINITIONS
    	
2
    
	
 
    	
 
    	
 
    
	
Section 1.01.
    	
Definitions
    	
2
    
	
 
    	
 
    	
 
    
	
ARTICLE II
    	
INTERNATIONAL TRANSITION PERIOD
    	
7
    
	
 
    	
 
    	
 
    
	
Section 2.01.
    	
Legal Title
    	
7
    
	
Section 2.02.
    	
Treatment of Deferred AbbVie Local Businesses
    	
7
    
	
Section 2.03.
    	
Operation of Deferred AbbVie Local Businesses
    	
8
    
	
Section 2.04.
    	
Deferred AbbVie Business Report
    	
8
    
	
Section 2.05.
    	
Aggregate Net Amount
    	
9
    
	
Section 2.06.
    	
Services Affiliates
    	
9
    
	
Section 2.07.
    	
Reporting; Disputes; Aggregate Net Amount Payment Mechanics
    	
10
    
	
Section 2.08.
    	
Late Payments
    	
14
    
	
Section 2.09.
    	
Accounting Calendar
    	
14
    
	
Section 2.10.
    	
Disclaimer of Representations and Warranties
    	
14
    
	
 
    	
 
    	
 
    
	
ARTICLE III
    	
TRANSFER OF DEFERRED ABBVIE LOCAL BUSINESSES
    	
16
    
	
 
    	
 
    	
 
    
	
Section 3.01.
    	
General
    	
16
    
	
Section 3.02.
    	
Transfer to AbbVie Local Entity
    	
16
    
	
Section 3.03.
    	
Transfer to Distributor
    	
17
    
	
Section 3.04.
    	
Deferred AbbVie Balance Sheet
    	
18
    
	
Section 3.05.
    	
Sale or Wind-Down
    	
19
    
	
Section 3.06.
    	
Proceeds from Local Closing
    	
20
    
	
Section 3.07.
    	
Local Income Taxes
    	
20
    
	
 
    	
 
    	
 
    
	
ARTICLE IV
    	
TERM
    	
21
    
	
 
    	
 
    	
 
    
	
Section 4.01.
    	
Term
    	
21
    
	
Section 4.02.
    	
Survival
    	
21
    
	
 
    	
 
    	
 
    
	
ARTICLE V
    	
DISPUTE RESOLUTION
    	
21
    
	
 
    	
 
    	
 
    
	
Section 5.01.
    	
Dispute Resolution
    	
21
    
	
Section 5.02.
    	
Continuation of Commitments
    	
21
    
	
 
    	
 
    	
 
    
	
ARTICLE VI
    	
MISCELLANEOUS
    	
22
    
	
 
    	
 
    	
 
    
	
Section 6.01.
    	
Confidentiality
    	
22
    
				

 

i

 

	
Section 6.02.
    	
Protective Arrangements
    	
23
    
	
Section 6.03.
    	
Counterparts; Entire Agreement; Corporate Power; Facsimile   Signatures
    	
23
    
	
Section 6.04.
    	
Governing Law
    	
24
    
	
Section 6.05.
    	
Assignability
    	
24
    
	
Section 6.06.
    	
Third Party Beneficiaries
    	
24
    
	
Section 6.07.
    	
Notices
    	
25
    
	
Section 6.08.
    	
Severability
    	
25
    
	
Section 6.09.
    	
Force Majeure
    	
26
    
	
Section 6.10.
    	
No Set Off
    	
26
    
	
Section 6.11.
    	
Responsibility for Expenses
    	
26
    
	
Section 6.12.
    	
Headings
    	
26
    
	
Section 6.13.
    	
Waivers of Default
    	
26
    
	
Section 6.14.
    	
Amendments
    	
27
    
	
Section 6.15.
    	
Interpretation
    	
27
    
	
Section 6.16.
    	
Public Announcements
    	
27
    
	
Section 6.17.
    	
Specific Performance
    	
27
    
	
Section 6.18.
    	
Mutual Drafting
    	
27
    

 

ii

 

THIS INTERNATIONAL COMMERCIAL OPERATIONS AGREEMENT, dated as of December 31, 2012, is by and between Abbott Laboratories, an Illinois corporation (“Abbott”) and AbbVie Inc., a Delaware corporation (“AbbVie”).

 

RECITALS:

 

WHEREAS, Abbott announced its plan to separate (the “Separation”) into two publicly traded companies, one in diversified medical products and the other in research-based pharmaceuticals. The diversified medical products company shall consist of Abbott and its Affiliates’ (as defined herein) existing diversified medical products portfolio, including its branded generic pharmaceutical, devices, diagnostic and nutritional businesses, and shall retain the Abbott name. The research-based pharmaceutical company shall include Abbott and its Affiliates’ current portfolio of proprietary pharmaceuticals and biologics and shall bear the new name “AbbVie”;

 

WHEREAS, in connection with the Separation, Abbott and AbbVie Inc. have entered into a Separation and Distribution Agreement (as may be amended from time to time, the “Separation and Distribution Agreement”) to govern the overall terms of the Separation;

 

WHEREAS, Abbott is the direct or indirect parent of each of the Abbott Subsidiaries (as defined herein) listed on Schedule 1.01(a) hereto (each, an “Abbott Local Entity”);

 

WHEREAS, it is in the framework of the Separation that Abbott and AbbVie have agreed that the beneficial interest to the AbbVie Assets and the AbbVie Liabilities of the AbbVie Business (each as defined herein) conducted by the Abbott Local Entities has been transferred to AbbVie;

 

WHEREAS, in accordance with the terms of the Separation and Distribution Agreement, due to the requirements of applicable Laws, the need to obtain certain consents from local Governmental Authorities (as defined herein) or for other business reasons, Abbott and AbbVie have agreed (a) to defer until after the Distribution Date (as defined herein) the transfer of legal title to the Assets (as defined herein) and the assumption of the Liabilities (as defined herein) of each Deferred AbbVie Local Business (as defined herein) from the Abbott Local Entities to AbbVie or any AbbVie Local Entity (as defined herein) and (b) (i) to transfer beneficial title to all AbbVie Assets of each Abbott Local Entity, including the right to regularly receive the benefits with respect to each Deferred AbbVie Local Business earned by the Local Abbott Entities, to AbbVie and (ii) that AbbVie shall assume the applicable Liabilities of each Abbott Local Entity as beneficial owner of each Deferred AbbVie Local Business;

 

WHEREAS, Abbott and AbbVie agree that the transfer of each Deferred AbbVie Local Business to the applicable AbbVie Local Entity or distributor shall not ultimately result in the payment of further consideration by AbbVie or the applicable AbbVie Local Entity as a consequence of the purchase price for each such Deferred AbbVie Local Business being reimbursed by Abbott to AbbVie in accordance with Section 3.06; and

 

 

WHEREAS, each of Abbott and AbbVie desires to describe these and certain other arrangements between Abbott and AbbVie during and at the conclusion of the International Operations Transition Period (as defined herein).

 

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement (as defined herein), the Parties (as defined herein) hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

Section 1.01.                          Definitions. Reference is made to Section 6.15 regarding the interpretation of certain words and phrases used in this Agreement.  In addition, for the purpose of this Agreement, the following terms shall have the meanings set forth below; provided that where such term is defined to have the meaning set forth in the Separation and Distribution Agreement and such definition includes the term “Party”, then “Party” as used in the definition of such term in the Separation and Distribution Agreement shall be construed to have the meaning set forth in this Agreement.

 

“Abbott” has the meaning set forth in the Preamble.

 

“Abbott Local Entity” has the meaning set forth in the Recitals.

 

“Abbott Mark-Up Amount” has the meaning set forth in Schedule 2.05(b).

 

“Abbott Subsidiary” means any Business Entity that is a Subsidiary (or a branch or representative office thereof) of Abbott prior to, at or after the Effective Time (other than AbbVie or an AbbVie Subsidiary).

 

“AbbVie” has the meaning set forth in the Preamble.

 

“AbbVie Assets” has the meaning set forth in the Separation and Distribution Agreement.

 

“AbbVie Business” has the meaning set forth in the Separation and Distribution Agreement.

 

“AbbVie Business Expenses” has the meaning set forth in Section 2.06(a)(i).

 

“AbbVie Liabilities” has the meaning set forth in the Separation and Distribution Agreement.

 

“AbbVie Local Entity” means each AbbVie Subsidiary or designee that acquires legal title to any Assets or Liabilities of a Deferred AbbVie Local Business in accordance with the terms of this Agreement.

 

“AbbVie Pro Forma Balance Sheet” has the meaning set forth in the Separation and Distribution Agreement.

 

2

 

“AbbVie Subsidiary” means any Business Entity that is a Subsidiary (or branch or representative office thereof) of AbbVie prior to or after the Effective Time, including the Transferred Entities, which shall be deemed to have been AbbVie Subsidiaries at all times prior to, at and after the Effective Time.

 

“Accrued Taxes” has the meaning set forth in Schedule 2.05(b).

 

“Actual Tax Amount” has the meaning set forth in Schedule 2.05(b).

 

“Adjustment Dispute Notice” has the meaning set forth in Section 2.07(f)(ii)(2).

 

“Adjustment Notice” has the meaning set forth in Section 2.07(f)(i).

 

“Affiliate” has the meaning set forth in the Separation and Distribution Agreement.

 

“Aggregate AbbVie Business Expenses” has the meaning set forth in Schedule 2.05(b).

 

“Aggregate Mark-Up Fee” has the meaning set forth in Schedule 2.05(b).

 

“Aggregate Monthly Cash Decrease” has the meaning set forth in Schedule 2.05(b).

 

“Aggregate Monthly Cash Increase” has the meaning set forth in Schedule 2.05(b).

 

“Aggregate Net Amount” has the meaning set forth in Schedule 2.05(b).

 

“Assets” has the meaning set forth in the Separation and Distribution Agreement.

 

“Agreement” means this International Commercial Operations Agreement and each of the Schedules and Exhibits hereto.

 

“Average Rate” means the exchange rate determined by taking the simple average of the prior month Book Rate and the current month Book Rate.

 

“Book Rate” means for any currency other than US Dollars, the official monthly rates used by Abbott for conversion of its monthly balance sheet. The Book Rate is determined by taking the foreign exchange rates from the Bloomberg screen at the second to last Business Day of each calendar month.  For the Euro, British Pound, Australian Dollar and New Zealand Dollar, the bid rate is used.  For all other currencies, the ask price is used.  If the exchange rates available locally are not reflected on the Bloomberg screen, Abbott may choose to approve a deviation allowing the country to report rates directly; provided that such deviations are signed and in place in accordance with the Abbott B.2.0 policy.

 

“Business Day” means any day other than a Saturday, Sunday or other day on which Abbott shall be closed for business in accordance with Abbott’s internal accounting calendar.

 

“Business Entity” means any corporation, general or limited partnership, trust, joint venture, unincorporated organization, limited liability entity or other entity.

 

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“Change of Control” has the meaning set forth in the Separation and Distribution Agreement.

 

“Consents” means any consents, waivers or approvals from, or notification requirements to, any Third Parties.

 

“Conveyance and Assumption Instruments” has the meaning set forth in the Separation and Distribution Agreement.

 

“Conveyance Taxes” means all transfer, documentary, recording, sales, use, registration, stamp, value added, goods and services and other similar Taxes (including all applicable real estate transfer Taxes, but excluding any Taxes based on or attributable to income or capital gains), together with any notarial and registry fees and recording costs imposed by any Tax Authority or other Governmental Authority in connection with the transactions contemplated by this Agreement.

 

“Deferred AbbVie Balance Sheet” has the meaning set forth in Section 3.04(a).

 

“Deferred AbbVie Business Report” has the meaning set forth in Section 2.04(a).

 

“Deferred AbbVie Local Business” means the AbbVie Business conducted by each Abbott Local Entity from the Effective Time until the consummation of the applicable Local Closing.

 

“Dispute” has the meaning set forth in Section 5.01.

 

“Dispute Notice” has the meaning set forth in Section 2.07(b)(ii).

 

“Distribution Date” has the meaning set forth in the Separation and Distribution Agreement.

 

“Effective Time” means 12:01 a.m. Eastern Time on the Distribution Date.

 

“Employment Taxes” means withholding, payroll, social security, workers’ compensation, unemployment, disability, and any similar tax imposed by any Tax Authority or social security authority, and any interest, penalties, additions to tax, or additional amounts with respect to the foregoing imposed on any taxpayer or consolidated, combined, or unitary group of taxpayers.

 

“Exchange Rate” means the exchange rate between the applicable Local Currency and US Dollars as observed by Bloomberg (ask rate or, if the Local Currency is in Euros, bid rate) at 8:00a.m. Central Time Chicago on any given day.

 

“Ex-US Transition Services Agreement” has the meaning set forth in Schedule 2.05(b).

 

“Final Closing Date” has the meaning set forth in Section 4.01(a).

 

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“Force Majeure” means, with respect to a Party, an event beyond the control of such Party (or any Person acting on its behalf), which by its nature could not reasonably have been foreseen by such Party (or such Person), or, if it could reasonably have been foreseen, was unavoidable, and includes acts of God, storms, floods, riots, fires, sabotage, civil commotion or civil unrest, interference by civil or military authorities, acts of war (declared or undeclared) or armed hostilities, other national or international calamities or acts of terrorism or failures of energy sources or distribution or transportation facilities.  Notwithstanding the foregoing, the receipt by a Party of an unsolicited takeover offer or other acquisition proposal, even if unforeseen or unavoidable, and such Party’s response thereto shall not be deemed an event of Force Majeure.

 

“GAAP” means U.S. generally accepted accounting principles as applied by Abbott.

 

“Governmental Authority” means any supranational, international, national, federal, state, provincial or local court, government, department, commission, board, bureau, agency, official or other regulatory, administrative or governmental authority, including the NYSE and any similar self-regulatory body under applicable securities Laws.

 

“Income Tax Benefit” means the amount of Taxes measured by income that would be reduced as a result of a loss incurred upon the consummation of a Local Closing, or of an increase in Tax basis resulting from a Local Closing, as determined in accordance with GAAP and the principles set forth in Section 3.07.

 

“Independent Accounting Firm” has the meaning set forth in Section 2.07(d).

 

“Information” has the meaning set forth in the Separation and Distribution Agreement.

 

“International Operations Transition Period” means the period commencing on the Effective Time and ending on the Final Closing Date.

 

“Law” means any supranational, international, national, federal, state, provincial, local or similar law (including common law), statute, code, order, ordinance, rule, regulation, treaty (including any income Tax treaty), license, permit, authorization, approval, Consent, decree, injunction, binding judicial or administrative interpretation or other requirement, in each case enacted, promulgated issued or entered by a Governmental Authority.

 

“Liabilities” has the meaning set forth in the Separation and Distribution Agreement.

 

“Local Buy-Sell Entity” means each of the Abbott Local Entities that is not a Services Affiliate.

 

“Local Closing” has the meaning set forth in Section 3.01.

 

“Local Closing Date” has the meaning set forth in Section 3.01.

 

“Local Currency” has the meaning set forth in Section 3.02(c).

 

“Local Income Tax” has the meaning set forth in Section 3.07.

 

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“Mark-Up Fee” has the meaning set forth in Section 2.06(a)(ii).

 

“Monthly Cash Decrease”  has the meaning set forth in Schedule 2.05(b).

 

“Monthly Cash Increase” has the meaning set forth in Schedule 2.05(b).

 

“Notice” means any written notice, request demand or other communication specifically referencing this Agreement and given in accordance with Section 6.07.

 

“Net Proceeds” has the meaning set forth in Section 3.06(b).

 

“Parties” means the parties to this Agreement.

 

“Person” means: any (a) individual; (b) Business Entity; or (c) Governmental Authority.

 

“Personal Data” means data that can be used by itself or in combination with other available data to identify a specific individual.

 

“Prime Rate” has the meaning set forth in the Separation and Distribution Agreement.

 

“Report” has the meaning set forth in Section 2.07(a)(ii).

 

“Representative” has the meaning set forth in Section 6.01(a).

 

“Separation” has the meaning set forth in the Recitals.

 

“Separation and Distribution Agreement” has the meaning set forth in the Recitals.

 

“Services Affiliate” means each of the Abbott Local Entities listed on Schedule 1.01(b).

 

“Stored Records” has the meaning set forth in the Separation and Distribution Agreement.

 

“Subsidiary” or “subsidiary” means, with respect to any Person, any Business Entity of which such Person: (a) beneficially owns, either directly or indirectly, more than fifty percent (50%) of (i) the total combined voting power of all classes of voting securities of such Business Entity; (ii) the total combined equity interests; or (iii) the capital or profit interests, in the case of a partnership; or (b) otherwise has the power to vote, either directly or indirectly, sufficient securities to elect a majority of the board of directors or similar governing body.

 

“Tax” means: (a) any income, net income, gross income, gross receipts, profits, capital stock, franchise, property, ad valorem, stamp, excise, severance, occupation, service, sales, use, license, lease, transfer, import, export, customs duties, value added, alternative minimum, estimated or other similar tax (including any fee, assessment, or other charge in the nature of or in lieu of any tax) imposed by any Tax Authority, and any interest, penalties, additions to tax or additional amounts with respect to the foregoing imposed on any taxpayer or consolidated, combined or unitary group of taxpayers; and (b) any Employment Tax.

 

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“Tax Authority” means, with respect to any Tax, the Governmental Authority or political subdivision thereof that imposes such Tax, and the agency (if any) charged with the collection of such Tax for such Governmental Authority or subdivision.

 

“Tax Return” means any report of Tax due or similar report or document required to be filed under applicable Law with respect to any Tax for any taxpayer or consolidated, combined or unitary basis under applicable Law with the relevant Tax Authority.

 

“Tax Sharing Agreement” has the meaning set forth in the Separation and Distribution Agreement.

 

“Third Party” means any Person other than the Parties or any of their respective Subsidiaries.

 

“Transferred Entities” has the meaning set forth in the Separation and Distribution Agreement.

 

“Transition Committee” has the meaning set forth in the Separation and Distribution Agreement.

 

“Unresolved Disputes” has the meaning set forth in Section 2.07(d).

 

ARTICLE II

 

INTERNATIONAL TRANSITION PERIOD

 

Section 2.01.                          Legal Title.  Legal title to all of the AbbVie Assets that are held as of the Effective Time by any Abbott Local Entity, and all of the AbbVie Liabilities of any Abbott Local Entity that are outstanding as of the Effective Time, shall remain with such Abbott Local Entity until the consummation of the applicable Local Closing pursuant to Article III, if any.

 

Section 2.02.                          Treatment of Deferred AbbVie Local Businesses.

 

(a)                                 From and after the Effective Time until the consummation of the applicable Local Closing pursuant to Article III: (a) the Deferred AbbVie Local Businesses shall be held by each Abbott Local Entity  on behalf of and for the benefit of AbbVie; (b) Abbott, an Abbott Local Entity or, where applicable, a designee shall pay, perform and discharge fully the Liabilities of the Deferred AbbVie Local Businesses; and (c) insofar as reasonably practicable and to the extent permitted by applicable Law, Abbott, an Abbott Local Entity or, where applicable, a designee shall manage and operate each Deferred AbbVie Local Business in accordance with this Agreement and take such other actions as may reasonably be requested by AbbVie so that all of the benefits and Liabilities attributable to the Deferred AbbVie Local Businesses, including use, risk of loss, potential for gain and dominion, and control and command over such Deferred AbbVie Local Businesses, shall inure from and after the Effective Time to AbbVie.

 

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(b)                                 If, after giving effect to the transactions contemplated by this Agreement, the Parties determine that the intent of the Parties set forth in Section 2.02(a) has not been achieved, the Parties shall use their commercially reasonable efforts to mutually agree upon alternative arrangements to implement the purposes and intent of the Parties set forth in Section 2.02(a).

 

Section 2.03.                          Operation of Deferred AbbVie Local Businesses.

 

(a)                                 In furtherance of Section 2.02(a), Abbott shall use, or cause the applicable Abbott Local Entity to use, commercially reasonable efforts to manage and operate each Deferred AbbVie Local Business as may reasonably be requested by AbbVie from time to time. Unless otherwise instructed by AbbVie,  Abbott shall cause each Abbott Local Entity to operate the applicable Deferred AbbVie Local Business in a manner that is based on past practice and that is substantially similar in nature, quality and timeliness to the analogous operations conducted by the applicable Abbott Local Entity prior to the Effective Time. Abbott shall cause each Abbott Local Entity to perform its duties and responsibilities hereunder in good faith.

 

(b)                                 Nothing in this Agreement shall require Abbott to cause any Abbott Local Entity to operate any Deferred AbbVie Local Business to the extent the manner of such operations would constitute a violation of applicable Laws, the Abbott Code of Business Conduct or any existing Contract with a Third Party. If Abbott is or becomes aware of any such restriction on an Abbott Local Entity, Abbott shall use commercially reasonable efforts to promptly provide Notice of any such restriction to AbbVie.  The Parties agree to cooperate and use commercially reasonable efforts to obtain any necessary Consents required under any existing Contract with a Third Party to allow an Abbott Local Entity to operate the applicable Deferred AbbVie Local Business in accordance with the standards set forth in this Section 2.03. Any costs and expenses incurred by any Party in connection with obtaining any such Consent that is required to allow any Abbott Local Entity to operate any Deferred AbbVie Local Business shall be borne by AbbVie.  If the Parties, despite the use of such commercially reasonable efforts, are unable to obtain a required Consent or the operation of a Deferred AbbVie Local Business by an Abbott Local Entity would constitute a violation of applicable Laws or the Abbott Code of Business Conduct, Abbott shall use commercially reasonable efforts in good faith to cause the Abbott Local Entity to operate the applicable Deferred AbbVie Local Business in a manner as closely as possible to the standards described in this Section 2.03 that would apply absent the exception provided for in the first sentence of this Section 2.03(b).

 

(c)                                  Except as expressly provided in this Agreement, Abbott shall not cause any Abbott Local Entity to operate any Deferred AbbVie Local Business for the benefit of any Third Party or any other Person other than AbbVie or the applicable AbbVie Local Entity.

 

Section 2.04.                          Deferred AbbVie Business Report.

 

(a)                                 Not later than thirty (30) days after the Distribution Date, Abbott shall prepare and deliver to AbbVie a financial report (the “Deferred AbbVie Business Report”) setting forth the AbbVie Assets and AbbVie Liabilities of each Deferred AbbVie Local Business held by each Abbott Local Entity as of the Effective Time. The Deferred AbbVie Business Report shall be prepared on a country-by-country basis in the applicable Local Currency in

 

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accordance with GAAP applied on a basis consistent with the AbbVie Pro Forma Balance Sheet and with the same level of detail as used by Abbott in the preparation of Abbott’s monthly financial reporting package and the standard financial reports used by Abbott on the Distribution Date.

 

(b)                                 If AbbVie disagrees with any amount set forth in the Deferred AbbVie Business Report, AbbVie shall give Notice to Abbott within thirty (30) days of receipt of the Deferred AbbVie Business Report stating the specific reasons for its disagreement. If Abbott and AbbVie are unable to resolve any disagreement, the disagreement shall be resolved pursuant to the procedures set forth in Section 2.07(d) and Section 2.07(e).

 

Section 2.05.                          Aggregate Net Amount.

 

(a)                                 Subject to Section 2.07 and Section 2.08, if on a monthly basis during the International Operations Transition Period, in connection with the operation of the Deferred AbbVie Local Businesses during such period:

 

(i)                                     the Aggregate Net Amount is a positive number, Abbott (on behalf of all Abbott Local Entities) shall remit to AbbVie the Aggregate Net Amount derived from the operation of the Deferred AbbVie Local Business by all of the Abbott Local Entities; or

 

(ii)                                  the Aggregate Net Amount is a negative number, AbbVie shall remit to Abbott the Aggregate Net Amount advanced for the operation of the Deferred AbbVie Local Business by all of the Abbott Local Entities.

 

(b)                                 The Aggregate Net Amount shall be calculated in accordance with the principles set forth on Schedule 2.05(b).

 

Section 2.06.                          Services Affiliates.

 

(a)                                 Not later than the fifteenth (15th) day of each calendar month during the International Operations Transition Period, and, in the calendar month immediately following the last calendar month of the International Operations Transition Period if the results of all operations of the Deferred AbbVie Local Business prior to the expiration of the International Operations Transition Period have not been included in the Aggregate Net Amount for a prior calendar month, each Services Affiliate for whom a Local Closing has not occurred, or for whom a Local Closing has occurred but for whom the results of all operations of the Deferred AbbVie Local Business prior to such Local Closing have not been included in the Aggregate Net Amount for a prior calendar month, shall prepare and deliver to the applicable Affiliate of AbbVie an invoice setting forth the following:

 

(i)                                     the total costs and expenses incurred by such Services Affiliate to operate the Deferred AbbVie Local Business for the prior calendar month (the “AbbVie Business Expenses”); and

 

(ii)                                  the amount of the mark-up of the costs and expenses in (i) (each a “Mark-Up Fee”).

 

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(b)                                 The applicable Affiliate of AbbVie, shall, pursuant to the terms of the applicable promotional and other services agreement entered into between such Affiliate of AbbVie and each Services Affiliate, pay to the applicable Services Affiliate the amount invoiced pursuant to Section 2.06(a) within forty-five (45) days from the date of the invoice by wire transfer (or such other timing or method of payment as may be agreed pursuant to the terms of the applicable promotional and other services agreement between the applicable Affiliate of AbbVie and the applicable Services Affiliate).

 

Section 2.07.                          Reporting; Disputes; Aggregate Net Amount Payment Mechanics.

 

(a)                                 Not later than the eleventh (11th) Business Day of each calendar month during the International Operations Transition Period, and, in the calendar month immediately following the last calendar month of the International Operations Transition Period if the results of all operations of each Deferred AbbVie Local Business prior to the expiration of the International Operations Transition Period have not been included in the Aggregate Net Amount for a prior calendar month, Abbott shall prepare and deliver to AbbVie in writing, for each Abbott Local Entity for whom a Local Closing has not occurred, or for whom a Local Closing has occurred but for whom the results of all operations of the Deferred AbbVie Local Business prior to such Local Closing have not been included in the Aggregate Net Amount for a prior calendar month, in each case attributable to the Deferred AbbVie Local Business operated by the applicable Abbott Local Entity for the prior calendar month, each of the following:

 

(i)                                     a profit and loss statement, a balance sheet, and a cash flow statement (prepared using the indirect method); and

 

(ii)                                  a report (each, a “Report”) setting forth:

 

(1)                 the Aggregate Net Amount;

 

(2)                 the Monthly Cash Increase or the Monthly Cash Decrease, as applicable, for each Local Buy-Sell Entity;

 

(3)                 the Aggregate Monthly Cash Increase and the Aggregate Monthly Cash Decrease;

 

(4)                 the Mark-Up Fee, the AbbVie Business Expenses and the Abbott Mark-Up Amount for each Services Affiliate; and

 

(5)                 the Aggregate Mark-Up Fee and the Aggregate AbbVie Business Expenses.

 

Each profit and loss statement, balance sheet, cash flow statement and Report shall be prepared in accordance with the principles set forth on Schedule 2.05(b) and, to the extent not inconsistent with such principles, in accordance with GAAP applied on a basis consistent with the AbbVie Pro Forma Balance Sheet, Abbott’s historical accounting policies, procedures and conventions, and with the same level of detail as used by Abbott in the preparation of Abbott’s monthly financial reporting package and the standard financial reports used by Abbott on the Distribution Date. Each profit and loss statement, balance sheet and cash

 

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flow statement shall include amounts specifically identifiable to the Deferred AbbVie Local Business segregated in unique AbbVie accounts within the Abbott Local Entity’s financial systems.

 

(b)                                 Within seven (7) days after the delivery of each Report, AbbVie shall deliver to Abbott a Notice in which AbbVie shall either:

 

(i)                                     agree in writing with the Aggregate Net Amount, in which case such calculation shall, subject to Section 2.07(d) and Section 2.07(e) (as each relates to an Adjustment Dispute Notice), Section 2.07(f) and Section 2.07(g), be final and binding on the Parties; or

 

(ii)                                  dispute the Aggregate Net Amount (or a component thereof) by delivering to Abbott a Notice (a “Dispute Notice”) setting forth in reasonable detail the basis for such dispute and certifying that such disputed Aggregate Net Amount (or a component thereof) is being disputed in good faith.

 

For purposes of this Section 2.07(b), AbbVie may only deliver a Dispute Notice on the basis that Abbott’s calculation of the Aggregate Net Amount (or a component thereof):  (1) was not in accordance with the principles set forth on Schedule 2.05(b); (2) was not in accordance with, to the extent not inconsistent with the principles set forth on Schedule 2.05(b), GAAP applied on a basis consistent with the AbbVie Pro Forma Balance Sheet; or (3) contains mathematical errors in its calculation.

 

(c)                                  If AbbVie fails to take either of the foregoing actions within ten (10) days after delivery of the Report, then AbbVie shall be deemed to have irrevocably accepted the Aggregate Net Amount, in which case, the Aggregate Net Amount shall, subject to Section 2.07(d) and Section 2.07(e) (as each relates to an Adjustment Dispute Notice), Section 2.07(f) and Section 2.07(g), be final and binding on the Parties.

 

(d)                                 If AbbVie timely delivers a Dispute Notice to Abbott, either Party timely delivers an Adjustment Dispute Notice to the other Party pursuant to Section 2.07(f), or there is otherwise a dispute between the Parties with respect to the matters set forth in Section 2.04(b) or Section 3.04(b), then Abbott and AbbVie shall attempt in good faith, for a period of thirty (30) days, to resolve the dispute between the Parties. Any resolution by Abbott and AbbVie during such thirty (30) day period as to any items in dispute shall be final and binding on the Parties.  If Abbott and AbbVie do not resolve all such items in dispute by the end of such thirty (30) day period, then Abbott and AbbVie shall engage a mutually agreeable independent accounting firm of recognized national standing, which firm is not the regular auditing firm of either Abbott or AbbVie, and shall submit to such independent accounting firm the remaining items in dispute (the “Unresolved Disputes”) for resolution. If Abbott and AbbVie are unable to jointly select such independent accounting firm within fifteen (15) days after such thirty (30) day period, Abbott, on the one hand, and AbbVie, on the other hand, shall each select an independent accounting firm of recognized national standing in the United States of America and each such selected accounting firm shall select a third independent accounting firm of recognized national standing, which firm is not the regular auditing firm of either Abbott or AbbVie; provided, however, that if either Abbott, on the one hand, or AbbVie, on the other hand, fail to select such

 

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independent accounting firm during such fifteen (15) day period, then the Parties agree that the independent accounting firm selected by the other Party shall be the independent accounting firm selected by the Parties for purposes of this Section 2.07 (such selected independent accounting firm, whether pursuant to this sentence or the preceding sentence, the “Independent Accounting Firm”).  The Independent Accounting Firm shall act as an accounting expert, but not as an arbitrator, to determine based solely on the provisions of this Section 2.07 (or Section 2.04(b) or Section 3.04(b), as applicable) and the presentations by Abbott and AbbVie, and not by independent review, only the Unresolved Disputes and only as to whether such amounts were arrived at in conformity with Section 2.07 and Schedule 2.05(b) (or Section 2.04(b) or Section 3.04(b), as applicable). Abbott and AbbVie shall instruct the Independent Accounting Firm to render its determination with respect to the Unresolved Disputes in a written report that specifies the conclusions of the Independent Accounting Firm as to each Unresolved Dispute. Abbott and AbbVie shall each use their commercially reasonable efforts to cause the Independent Accounting Firm to render its determination within ten (10) days after referral of the Unresolved Disputes to such firm or as soon thereafter as reasonably practicable.  The Independent Accounting Firm’s determination as set forth in its report shall be final and binding on the Parties. The fees and expenses of the Independent Accounting Firm shall be shared by Abbott and AbbVie in inverse proportion to the relative amounts of the amount in dispute determined to be for the account of Abbott and AbbVie, respectively.

 

(e)                                  For purposes of complying with this Section 2.07, Abbott and AbbVie shall furnish to each other and to the Independent Accounting Firm such work papers and other documents and information relating to the Unresolved Dispute as the Independent Accounting Firm may request and are available to that Party (or its independent public accountants) and shall be afforded the opportunity to present to the Independent Accounting Firm any material related to the Unresolved Dispute and to discuss any items relating to the Unresolved Dispute with the Independent Accounting Firm. The Parties shall require that the Independent Accounting Firm enter into a reasonable engagement letter and customary confidentiality agreement with respect to the work papers and other documents and information provided to the Independent Accounting Firm pursuant to this Section 2.07.

 

(f)                                   (i)  Within sixty (60) days after the expiration of the ten (10) day period set forth in Section 2.07(b), either Party may deliver to the other Party a Notice (an “Adjustment Notice”) in which such Party disputes the Aggregate Net Amount (or a component thereof) previously determined and agreed upon pursuant to Section 2.07(b) or Section 2.07(c), which such Adjustment Notice shall set forth in reasonable detail the basis for such dispute and certifying that such dispute and the resulting proposed adjustment to the Aggregate Net Amount is being disputed in good faith. Any dispute included in a Dispute Notice delivered by AbbVie to Abbott pursuant to Section 2.07(b) that is either (i) resolved between the Parties pursuant to Section 2.07(d) or (ii) determined by the Independent Accounting Firm pursuant to Section 2.07(d) as an Unresolved Dispute may not, in either case, be included as an item in any Adjustment Notice.

 

(ii)  Within twenty (20) days after the delivery of any Adjustment Notice, the Party receiving the Adjustment Notice shall either:

 

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(1)  agree in writing with the proposed adjustment to the Aggregate Net Amount, in which case such adjustment shall be final and binding on the Parties; or

 

(2)  dispute the proposed adjustment to the Aggregate Net Amount (or a component thereof) by delivering to the Party who issued the Adjustment Notice a Notice (an “Adjustment Dispute Notice”) setting forth in reasonable detail the basis for such dispute and certifying that such dispute with respect to the proposed adjustment to the Aggregate Net Amount (or a component thereof) is being disputed in good faith.

 

For purposes of this Section 2.07(f), a Party may only deliver an Adjustment Notice or an Adjustment Dispute Notice on the basis that the calculation of the Aggregate Net Amount (or a component thereof) previously determined and agreed upon pursuant to Section 2.07(b) or Section 2.07(c), or the proposed adjustment thereto, as applicable: (x) was not in accordance with the principles set forth on Schedule 2.05(b); (y) was not in accordance with, to the extent not inconsistent with the principles set forth on Schedule 2.05(b), GAAP applied on a basis consistent with the AbbVie Pro Forma Balance Sheet; or (z) contains mathematical errors in its calculation.

 

(g)                                  If the Party receiving an Adjustment Notice fails to take either of the foregoing actions within twenty (20) days after delivery of such Adjustment Notice, then such Party shall be deemed to have irrevocably accepted the proposed adjustment to the Aggregate Net Amount, in which case, such adjustment to the Aggregate Net Amount shall be final and binding on the Parties.

 

(h)                                 (i)  Not later than three (3) days following determination of the Aggregate Net Amount (other than with respect to the portion of the Aggregate Net Amount subject to an Unresolved Dispute): (A) if the Aggregate Net Amount (other than with respect to the portion of the Aggregate Net Amount subject to an Unresolved Dispute) is a positive number, AbbVie shall deliver a settlement statement to Abbott stating the Aggregate Net Amount (excluding the portion of the Aggregate Net Amount subject to an Unresolved Dispute); and (B) if the Aggregate Net Amount (other than with respect to the portion of the Aggregate Net Amount subject to an Unresolved Dispute) is a negative number, Abbott shall deliver a settlement statement to AbbVie stating the Aggregate Net Amount (excluding the portion of the Aggregate Net Amount subject to an Unresolved Dispute).

 

(ii)  Not later than three (3) days following the Independent Accounting Firm’s determination of any Unresolved Dispute: (1) if the determination of the Independent Accounting Firm results in an increase to the Aggregate Net Amount that was subject to such Unresolved Dispute, AbbVie shall deliver a settlement statement to Abbott stating the amount of such increase, and (2) if the determination of the Independent Accounting Firm results in a decrease to the Aggregate Net Amount that was subject to such Unresolved Dispute, Abbott shall deliver a settlement statement to AbbVie stating the amount of such decrease.

 

(iii)  Not later than three (3) days following determination of any adjustment to the Aggregate Net Amount previously determined and agreed upon pursuant to Section 2.07(b) or Section 2.07(c): (A) if the adjustment to the Aggregate Net Amount results in an Aggregate Net Amount that is greater than the Aggregate Net Amount previously determined

 

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and agreed upon pursuant to Section 2.07(b) or Section 2.07(c), AbbVie shall deliver a settlement statement to Abbott stating the amount of the adjustment; and (B) if the adjustment to the Aggregate Net Amount results in an Aggregate Net Amount that is less than the Aggregate Net Amount previously determined and agreed upon pursuant to Section 2.07(b) or Section 2.07(c), Abbott shall deliver a settlement statement to AbbVie stating the amount of the adjustment.

 

(iv)  Abbott or AbbVie, as applicable, shall pay the amount stated on all settlement statements by wire transfer (or such other method of payment as may be agreed between the Parties) in US Dollars no later than the earlier of (1) five (5) days from the date of the applicable settlement statement, or (2) the last day of the calendar month in which the applicable settlement statement was delivered that banks in Chicago, Illinois, United States are open for business.

 

The Parties shall use their commercially reasonable efforts, and shall co-operate in good faith, to ensure that the Aggregate Net Amount is paid by Abbott Luxembourg or AbbVie Luxembourg, as applicable, within the same calendar month as the Report setting forth such Aggregate Net Amount is prepared and delivered by Abbott Luxembourg to AbbVie Luxembourg pursuant to Section 2.07(a)(ii).

 

Section 2.08.                          Late Payments.  Any amount not paid when due pursuant to this Agreement (and any amounts billed or otherwise invoiced or demanded and properly payable that are not paid within sixty (60) days of the date of such bill, invoice or other demand) shall accrue interest at a rate per annum equal to the Prime Rate plus two percent (2%), or the maximum legal rate, whichever is lower.

 

Section 2.09.                          Accounting Calendar.  AbbVie acknowledges that it has received a copy of Abbott’s internal accounting calendar for 2013 from Abbott. Prior to the commencement of each subsequent Abbott internal accounting calendar year during the International Operations Transition Period, Abbott shall make available to AbbVie a copy of Abbott’s internal accounting calendar for such Abbott internal accounting calendar year.

 

Section 2.10.                          Disclaimer of Representations and Warranties.

 

(a)                                 EACH OF ABBOTT (ON BEHALF OF ITSELF AND EACH OF ITS SUBSIDIARIES) AND ABBVIE (ON BEHALF OF ITSELF AND EACH OF ITS SUBSIDIARIES) UNDERSTANDS AND AGREES THAT, EXCEPT AS EXPRESSLY SET FORTH HEREIN, NO PARTY TO THIS AGREEMENT OR OTHERWISE, IS (X): REPRESENTING OR WARRANTING TO ANY OTHER PARTY HERETO IN ANY WAY AS TO (I) THE ASSETS, BUSINESSES OR LIABILITIES TRANSFERRED OR ASSUMED AS CONTEMPLATED HEREBY; (II) ANY APPROVALS OR NOTIFICATIONS REQUIRED IN CONNECTION HEREWITH; (III) THE VALUE OR FREEDOM FROM ANY SECURITY INTERESTS OF, OR ANY OTHER MATTER CONCERNING, ANY ASSETS OF SUCH PARTY; (IV) THE ABSENCE OF ANY DEFENSES TO OR RIGHT OF SETOFF AGAINST OR FREEDOM FROM COUNTERCLAIM WITH RESPECT TO ANY PROCEEDING OR OTHER ASSET, INCLUDING ANY ACCOUNTS RECEIVABLE, OF EITHER PARTY; OR (V) THE LEGAL SUFFICIENCY OF ANY CONVEYANCE AND ASSUMPTION

 

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INSTRUMENTS TO CONVEY TITLE TO ANY ASSET OR THING OF VALUE UPON THE EXECUTION, DELIVERY AND FILING OF SUCH CONVEYANCE AND ASSUMPTION INSTRUMENTS: OR (Y) IS MAKING ANY OTHER REPRESENTATIONS OR GRANTING ANY WARRANTIES, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE. EXCEPT AS MAY EXPRESSLY BE SET FORTH IN THIS AGREEMENT, ALL SUCH ASSETS ARE BEING TRANSFERRED ON AN “AS IS,” “WHERE IS” BASIS (AND, IN THE CASE OF ANY REAL PROPERTY, BY MEANS OF A QUITCLAIM OR SIMILAR FORM DEED OR CONVEYANCE) AND THE RESPECTIVE TRANSFEREES SHALL BEAR THE ECONOMIC AND LEGAL RISKS THAT (A) ANY CONVEYANCE AND ASSUMPTION INSTRUMENT MAY PROVE TO BE INSUFFICIENT TO VEST IN THE TRANSFEREE GOOD AND MARKETABLE TITLE, FREE AND CLEAR OF ALL SECURITY INTERESTS; AND (B) ANY NECESSARY CONSENTS ARE NOT OBTAINED OR THAT ANY REQUIREMENTS OF LAWS, AGREEMENTS, SECURITY INTERESTS OR JUDGMENTS ARE NOT COMPLIED WITH.

 

(b)                                 (i) EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, EACH PARTY ACKNOWLEDGES AND AGREES THAT ALL SERVICES AND PRODUCTS ARE PROVIDED ON AN “AS-IS” BASIS, THAT EACH PARTY ASSUMES ALL RISK AND LIABILITY ARISING FROM OR RELATING TO ITS USE OF AND RELIANCE UPON THE SERVICES, AND THAT EACH PARTY MAKES NO WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE SERVICES AND PRODUCTS, AND HEREBY DISCLAIMS ANY REPRESENTATION OR WARRANTY OF MERCHANTABILITY, FITNESS FOR ANY PARTICULAR PURPOSE, NON-INFRINGEMENT OR ANY OTHER WARRANTY WHATSOEVER; and (ii) notwithstanding anything to the contrary herein, Abbott and the Abbott Local Entities shall have no obligation to AbbVie or the AbbVie Local Entities for any Liabilities relating to, arising out of, or resulting from the performance of their respective obligations pursuant to this Agreement except to the extent that such Liabilities relate to, arise out of, or result from (1) gross negligence, willful misconduct or fraud of Abbott or an Abbott Local Entity or (2) any payment obligation of Abbott or any Abbott Local Entity pursuant to this Agreement.

 

(c)                                  Each of Abbott (on behalf of itself and each of the Abbott Local Entities) and AbbVie (on behalf of itself and each of the AbbVie Local Entities) further understands and agrees that if the disclaimer of express or implied representations and warranties contained in this Section 2.10 is held unenforceable or is unavailable for any reason under the Laws of any jurisdiction outside the United States or if, under the Laws of a jurisdiction outside the United States, both Abbott or any of the Local Abbott Entities, on the one hand, and AbbVie or any of the Local AbbVie Entities, on the other hand, are jointly or severally liable for any Liability of the Deferred AbbVie Local Business or any other Liability of the Abbott Local Entity, respectively, then, the Parties intend that, notwithstanding any provision to the contrary under the Laws of such foreign jurisdictions, the provisions of this Agreement (including the disclaimer of all representations and warranties, allocation of Liabilities among the Parties and their respective Subsidiaries, releases, indemnification and contribution of Liabilities) shall prevail for any and all purposes among the Parties and, the Abbott Local Entities and the AbbVie Local Entities, as applicable.

 

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ARTICLE III

 

TRANSFER OF DEFERRED ABBVIE LOCAL BUSINESSES

 

Section 3.01.                          General.  With respect to the Deferred AbbVie Local Business of each Abbott Local Entity, on or before the end of the International Operations Transition Period: (a) AbbVie or an AbbVie Local Entity shall obtain legal title to the Assets and the Liabilities of such Deferred AbbVie Local Business from such Abbott Local Entity; (b) AbbVie shall elect that such Assets and Liabilities of such Deferred AbbVie Local Business be transferred to a distributor; or (c) at the request of AbbVie before the date that is ninety (90) days prior to the end of the International Operations Transition Period, or in accordance with Section 3.05(b) and Section 3.05(c), the applicable Abbott Local Entity shall sell to a Third Party or wind-down the Assets and the Liabilities of such Deferred AbbVie Local Business (each of (a), (b) and (c), a “Local Closing”). AbbVie shall be entitled to initiate a Local Closing by providing Abbott at least ninety (90) days prior Notice of the anticipated date of consummation of such Local Closing; provided, however, that, except with respect to a Local Closing pursuant to Section 3.05, the actual closing date for any Local Closing shall be mutually agreed upon in advance between Abbott and AbbVie (the “Local Closing Date”).

 

Section 3.02.                          Transfer to AbbVie Local Entity.

 

(a)                                 If AbbVie initiates a Local Closing and elects to exercise its right to obtain legal title to the Assets and the Liabilities of the Deferred AbbVie Local Business from an Abbott Local Entity, such right shall be transferred by AbbVie to a duly formed AbbVie Local Entity.  At such Local Closing, the Abbott Local Entity holding legal title to the Assets and Liabilities of the applicable Deferred AbbVie Local Business shall sell, transfer, convey and deliver to the applicable AbbVie Local Entity, and the applicable AbbVie Local Entity shall purchase and accept delivery of, all such Assets and the applicable AbbVie Local Entity shall accept, assume and agree faithfully to perform, discharge and fulfill all such Liabilities in exchange for a purchase price equal to the fair market value of such Deferred Local AbbVie Business as of the Local Closing Date. The Conveyance and Assumption Instruments for a Local Closing shall be substantially in the same form as those used by the Parties or their respective Subsidiaries, as applicable, in connection with the contribution, assignment, transfer, conveyance and delivery of the Assets and the transfer of the Liabilities of the AbbVie Business prior to the Distribution Date.

 

(b)                                 Subject to Section 3.04, no later than fifteen (15)  days (or such lesser number of days as mutually agreed in writing by the Parties) prior to the Local Closing Date pursuant to Section 3.02(a), Abbott shall deliver to AbbVie and the applicable AbbVie Local Entity a report prepared by an internationally recognized public accounting firm setting forth the fair market value for the applicable Deferred AbbVie Local Business in accordance with the valuation methodologies applied by such an internationally recognized public accounting firm in connection with the contribution, assignment, transfer, conveyance and delivery of the Assets and the transfer of the Liabilities for the applicable AbbVie Business prior to the Distribution Date.

 

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(c)                                  If applicable Law permits an Affiliate of the applicable AbbVie Local Entity to pay the purchase price (whether to an Affiliate of the applicable Abbott Local Entity or the applicable Abbott Local Entity), then AbbVie may elect to pay the purchase price plus any applicable Conveyance Taxes on behalf of the applicable AbbVie Local Entity to the applicable Abbott Local Entity or Abbott, as elected by Abbott pursuant to the following sentence.  If applicable Law permits an Affiliate of the applicable Abbott Local Entity to receive the purchase price on behalf of the applicable Abbott Local Entity, then Abbott may elect to receive the purchase price plus any applicable Conveyance Taxes on behalf of the applicable Abbott Local Entity.  The purchase price plus any applicable Conveyance Taxes shall be paid by or on behalf of the AbbVie Local Entity to the Abbott Local Entity or Abbott on the applicable Local Closing Date in accordance with payment instructions to be provided in writing by Abbott.  If paid by the applicable AbbVie Local Entity, the purchase price plus any applicable Conveyance Taxes shall be paid at the election of Abbott in US Dollars or the local currency of the jurisdiction in which the applicable Abbott Local Entity selling the Assets and the Liabilities of the Deferred AbbVie Local Business has its principal place of business (“Local Currency”) by converting the applicable US Dollar amount to Local Currency using the Exchange Rate published two (2) days prior to the applicable Local Closing Date.  If paid by AbbVie, the purchase price plus any applicable Conveyance Taxes shall be paid in US Dollars. For purposes of this Section 3.02(c), the amount of applicable Conveyance Taxes to be paid by AbbVie or the AbbVie Local Entity to Abbott or the Abbott Local Entity, as the case may be, shall be limited to those Conveyance Taxes for which AbbVie or its Subsidiaries is responsible under the Tax Sharing Agreement.

 

Section 3.03.                          Transfer to Distributor.

 

(a)                                 If AbbVie initiates a Local Closing and elects to exercise its right to appoint a distributor to operate the Deferred Local AbbVie Business such right may be transferred by AbbVie to an Affiliate of AbbVie. At such Local Closing, the Abbott Local Entity holding legal title to the Assets and Liabilities of the applicable Deferred AbbVie Local Business shall sell, transfer, convey and deliver to the applicable distributor, and the applicable distributor shall purchase and accept delivery of, all such Assets and the applicable distributor shall accept, assume and agree faithfully to perform, discharge and fulfill all such Liabilities in exchange for a purchase price equal to the fair market value of such Deferred Local AbbVie Business as of the Local Closing Date, or, to the extent that not all of the Assets and Liabilities of the Deferred Local AbbVie Business are to be acquired by the distributor, the fair market value of the applicable Assets and Liabilities as of the Local Closing Date. If any distributor requires that the applicable Abbott Local Entity indemnify such distributor in connection with the purchase of the applicable Assets and the assumption of the applicable Liabilities of the Deferred Local AbbVie Business, then AbbVie shall indemnify the applicable Abbott Local Entity for any actions or claims brought against such Abbott Local Entity by the distributor pursuant to such indemnification, provided, however, that the applicable Abbott Local Entity shall (i) not provide any indemnification to any distributor without the prior written consent of AbbVie; and (ii) shall use commercially reasonable efforts limit the scope of any such indemnification.

 

(b)                                 Subject to Section 3.04, no later than fifteen (15)  days (or such lesser number of days as mutually agreed in writing by the Parties) prior to the Local Closing Date, Abbott shall deliver to AbbVie and the applicable distributor a report prepared by an internationally recognized public accounting firm setting forth the fair market value for the

 

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applicable Deferred AbbVie Local Business as of the Local Closing Date, or, to the extent that not all of the Assets and Liabilities of the Deferred Local AbbVie Business are to be acquired by the distributor, the fair market value of the applicable Assets and Liabilities as of the Local Closing Date.

 

(c)                                  The purchase price plus any applicable Conveyance Taxes shall be paid by or on behalf of the distributor to the Abbott Local Entity on the applicable Local Closing Date in accordance with payment instructions to be provided in writing by the applicable Abbott Local Entity.  The purchase price plus any applicable Conveyance Taxes shall be paid by or on behalf of the distributor in US Dollars or in Local Currency converted from the US Dollar amount using the Exchange Rate published two (2) days prior to the applicable Local Closing Date.

 

(d)                                 If AbbVie initiates a Local Closing and reaches a mutual agreement with an Abbott Local Entity that such Abbott Local Entity shall be appointed as the distributor to operate the applicable Deferred Local AbbVie Business pursuant to a separate customary distribution agreement and for a period extending beyond the International Operations Transition Period, then Abbott shall acquire such right from AbbVie in exchange for a purchase price equal to the fair market value of such Deferred Local AbbVie Business as of the Local Closing Date, or, to the extent that not all of the Assets and Liabilities of the Deferred Local AbbVie Business are to be acquired by the Abbott Local Entity distributor, the fair market value of the applicable Assets and Liabilities as of the Local Closing Date. At such Local Closing, the Abbott Local Entity holding legal title to the Assets and Liabilities of the applicable Deferred AbbVie Local Business shall be appointed as the distributor to operate the applicable Deferred Local AbbVie Business pursuant to an agreement other than this Agreement, the Local Abbott Entity shall retain title to such Assets and the Local Abbott Entity shall faithfully perform, discharge and fulfill all such Liabilities in exchange for its appointment as distributor of such Deferred Local AbbVie Business. The purchase price  shall be paid by Abbott to AbbVie on the applicable Local Closing Date in accordance with payment instructions to be provided in writing by AbbVie.  The purchase price shall be paid by Abbott in US Dollars converted from the Local Currency using the Exchange Rate published two (2) days prior to the applicable Local Closing Date.

 

(e)                                  If the distributor is either a Third Party or an Abbott Subsidiary and such distributor fails to reach an agreement with AbbVie to acquire all Assets, and assume all Liabilities, of a Deferred Local AbbVie Business, Abbott shall proceed to take such actions in accordance with Section 3.05 as are reasonably necessary to; (i) sell to a Third Party the remaining Assets and Liabilities of the Deferred Local AbbVie Business, or (ii) wind-down and liquidate all of the remaining Assets and pay all of the remaining Liabilities of such Deferred AbbVie Local Business which are not acquired or assumed (as applicable) by the distributor.

 

Section 3.04.                          Deferred AbbVie Balance Sheet.  In the event of a Local Closing under Section 3.02 or Section 3.03:

 

(a)                                 not later than sixty (60) days (or such lesser number of days as mutually agreed in writing by the Parties) prior to the Local Closing Date, Abbott shall prepare and deliver to AbbVie a pro forma balance sheet (the “Deferred AbbVie Balance Sheet”) setting forth the Assets and Liabilities of the Deferred AbbVie Local Business held by applicable Abbott Local Entity as at the last day of Abbott’s most recent financial quarter. The Deferred AbbVie Balance

 

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Sheet shall be prepared in accordance with generally accepted accounting principles of the jurisdiction in which the applicable Abbott Local Entity selling the Assets and the Liabilities of the Deferred AbbVie Local Business has its principal place of business, applied on a basis consistent with the AbbVie Pro Forma Balance Sheet and with the same level of detail as used by Abbott in the preparation of Abbott’s monthly financial reporting package and the standard financial reports used by Abbott on the Distribution Date; and

 

(b)                                 if AbbVie disagrees with any amount set forth in the Deferred AbbVie Balance Sheet, AbbVie shall provide Notice to Abbott within ten (10) days of receipt of such Deferred AbbVie Balance Sheet stating the specific reasons for its disagreement.  If Abbott and AbbVie are unable to resolve any disagreement, the disagreement shall be resolved pursuant to the procedures set forth in Section 2.07(d) and Section 2.07(e).

 

Section 3.05.                          Sale or Wind-Down.

 

(a)                                 If, before the date that is ninety (90) days prior to the end of the International Operations Transition Period, AbbVie initiates a Local Closing and requests that Abbott or the applicable Abbott Local Entity sell to a Third Party one or more of the Assets and Liabilities of a Deferred AbbVie Local Business or wind-down a Deferred AbbVie Local Business, then the following shall apply:

 

(i)                                     Abbott or the applicable Abbott Local Entity shall proceed to make such commercially reasonable efforts in order to sell to a Third Party one or more of the Assets and Liabilities of the applicable Deferred AbbVie Local Business or wind-down the applicable Deferred AbbVie Local Business and liquidate all of the remaining Assets and pay all of the remaining AbbVie Liabilities of such applicable Deferred AbbVie Local Business; and

 

(ii)                                  AbbVie shall make such commercially reasonable efforts, and shall co-operate in good faith, to assist Abbott or the applicable Abbott Local Entity with such sale or wind-down for the applicable Deferred AbbVie Local Business.

 

(b)                                 If a Local Closing has not taken place pursuant to Section 3.02, Section 3.03 or Section 3.05(a) for any Abbott Local Entity on or before the date that is ninety (90) days prior to the end of the International Operations Transition Period, Abbott shall deliver to AbbVie a Notice setting forth (i) the name of the Abbott Local Entity or Abbott Local Entities holding any remaining Deferred AbbVie Local Business; (ii) the estimated fair market value of each such remaining Deferred AbbVie Local Business; and (iii) the nature of all Assets and Liabilities of each such remaining Deferred AbbVie Local Business.

 

(c)                                  If AbbVie has not delivered Abbott a Notice within ten (10) days of receiving the Notice from Abbott pursuant to Section 3.05(b) that it desires to acquire the Assets and the Liabilities of each such remaining Deferred AbbVie Local Business, then the following shall apply:

 

(i)                                     Abbott or the applicable Abbott Local Entity shall proceed to make such commercially reasonable efforts in order to sell to a Third Party one or more of the Assets and Liabilities of each applicable Deferred AbbVie Local Business or wind-down each Deferred

 

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AbbVie Local Business and liquidate all of the remaining Assets and pay all of the remaining AbbVie Liabilities of each such Deferred AbbVie Local Business;

 

(ii)                                  AbbVie shall make such commercially reasonable efforts, and shall co-operate in good faith, to assist Abbott or the applicable Abbott Local Entity with such sale or wind-down for each applicable Deferred AbbVie Local Business; and

 

(iii)                               following the expiration of the International Operations Transition Period, except as set forth in Section 3.05(c)(i), Abbott and the Abbott Local Entities shall not have any responsibility, Liability or obligation to AbbVie with respect to all of the Assets and all of the Liabilities of each remaining Deferred AbbVie Local Business.

 

Section 3.06.                          Proceeds from Local Closing.

 

(a)                                 Within five (5) days of the receipt of the funds by Abbott or an Abbott Local Entity pursuant to Section 3.02(c), Section 3.03(c) or Section 3.05 in connection with a Local Closing, Abbott shall remit to AbbVie an amount equal to the Net Proceeds in accordance with payment instructions to be provided in writing by AbbVie. The Net Proceeds shall be paid in US Dollars converted from Local Currency using the Exchange Rate published two (2) days prior to the applicable Local Closing Date.

 

(b)                                 “Net Proceeds” shall mean the funds received by Abbott or the applicable Abbott Local Entity pursuant to Section 3.02(c), Section 3.03(c) or Section 3.05  less (i) all remaining AbbVie Liabilities held by the applicable Abbott Local Entity and the costs incurred by the applicable Abbott Local Entity in connection with the sale or wind-down activities, (ii) the aggregate amount of Conveyance Taxes received, if any, that are the responsibility of AbbVie or its Subsidiaries under the Tax Sharing Agreement, and (iii) the amount of any applicable Conveyance Taxes to be paid by a distributor to Abbott or the applicable Abbott Local Entity in the case of a Local Closing described in Section 3.03(a), but only to the extent that such Conveyance Taxes would have been the responsibility of AbbVie or its Subsidiaries under the Tax Sharing Agreement had an AbbVie Local Entity and not the distributor acquired the Assets and Liabilities of the Deferred AbbVie Local Business.

 

(c)                                  Within five (5) days of consummation of a Local Closing pursuant to Section 3.02(c), Section 3.03(c) or Section 3.05, if the Net Proceeds is a negative number, AbbVie shall pay to Abbott an amount in full settlement of the negative Net Proceeds in accordance with payment instructions to be provided in writing by Abbott. The Net Proceeds shall be paid in US Dollars converted from Local Currency using the Exchange Rate published two (2) days prior to the applicable Local Closing Date.

 

Section 3.07.                          Local Income Taxes.  Any income Taxes (the “Local Income Tax”) incurred by the Abbott Local Entity attributable to, resulting from, or arising out of, any gain attributable to the transfer of the Deferred AbbVie Local Business at the Local Closing shall be reimbursed by AbbVie to Abbott; provided that: (a) the amount of such reimbursement shall not exceed the lesser of the applicable Income Tax Benefit and the amount of applicable Local Income Tax; and (b) the Income Tax Benefit and the Local Income Tax shall be determined using the highest Tax rate of the applicable Abbott Local Entity (and not a rate determined solely

 

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for the Deferred AbbVie Local Business) in effect at the time of Local Closing. In the case of any loss incurred by the Abbott Local Entity attributable to, resulting from, or arising out of, the transfer of the Deferred AbbVie Local Business at the Local Closing, Abbott shall pay to AbbVie the amount of the Income Tax Benefit realized by the Local Abbott Entity from such loss; provided that, the amount of the Income Tax Benefit of the loss shall be determined using the highest Tax rate of the applicable Abbott Local Entity (and not a rate determined solely for the Deferred AbbVie Local Business) in effect for the calendar year of the Local Closing. Any amount due under this Section 3.07 shall be paid in US Dollars within thirty (30) days of the filing of the relevant income Tax Return by the Local Abbott Entity that includes the Local Closing using the applicable Average Rate at the time such payment is made.

 

ARTICLE IV

 

TERM

 

Section 4.01.                          Term.  This Agreement shall become effective at the Effective Time and shall remain in effect for a term expiring on the earlier of (i) the date of the consummation of the last Local Closing for the applicable Abbott Local Entity and (ii) the second (2nd) anniversary of the Distribution Date (the “Final Closing Date”).

 

Section 4.02.                          Survival.  The provisions of Section 2.06, Section 2.07, Section 2.08, Section 2.10, Section 3.03(e), Section 3.05, Section 3.06, this Section 4.02, Article V and Article VI of this Agreement, any outstanding payment obligations under Article II and any outstanding payment and wind down obligations under Article III shall survive the termination of this Agreement and shall remain in full force and effect thereafter.

 

ARTICLE V

 

DISPUTE RESOLUTION

 

Section 5.01.                          Dispute Resolution.  Other than as set forth in Section 2.07, in the event of any controversy, dispute or claim (a “Dispute”) arising out of or relating to either Party’s rights or obligations under this Agreement (whether arising in contract, tort or otherwise) or otherwise arising out of or relating in any way to this Agreement (including the interpretation or validity of this Agreement), such Dispute shall be resolved in accordance with the dispute resolution process referred to in Section 7.01 to the Separation and Distribution Agreement.

 

Section 5.02.                          Continuation of Commitments.  Unless otherwise agreed in writing, the Parties shall, and shall cause their respective Subsidiaries to, continue to honor all commitments under this Agreement to the extent required by this Agreement during the course of dispute resolution pursuant to the provisions of this Article V with respect to all matters related to such Dispute.

 

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ARTICLE VI

 

MISCELLANEOUS

 

Section 6.01.                          Confidentiality.

 

(a)                                 Confidentiality.  From and after the Effective Time, subject to Section 6.02 and except as contemplated by or otherwise provided in this Agreement, Abbott, on behalf of itself and each of the Abbott Local Entities, and AbbVie, on behalf of itself and each of the AbbVie Local Entities, agrees to hold, and to cause its respective directors, officers, employees, agents, accountants, counsel and other advisors and representatives (each, a “Representative”) to hold, in strict confidence, with at least the same degree of care that applies to Abbott’s confidential and proprietary information pursuant to policies in effect as of the Effective Time, all confidential and proprietary information concerning the other Party (or its business) and the other Party’s Subsidiaries (or their respective businesses) that is either in its possession (including confidential and proprietary information in its possession prior to the Effective Time) or furnished by the other Party or the other Party’s Subsidiaries or their respective Representatives at any time pursuant to this Agreement, and shall not use any such confidential and proprietary information other than for such purposes as may be expressly permitted hereunder, except, to the extent that such confidential and proprietary information has been: (i) in the public domain or generally available to the public, other than as a result of a disclosure by such Party or any of its Subsidiaries or any of their respective Representatives in violation of this Agreement; (ii) later lawfully acquired from other sources by such Party or any of its Subsidiaries, which sources are not themselves bound by a confidentiality obligation or other contractual, legal or fiduciary obligation of confidentiality with respect to such confidential and proprietary information; or (iii) independently developed or generated without reference to or use of the respective proprietary or confidential information of the other Party or any of its Subsidiaries.  If any confidential and proprietary information of one Party or any of its Subsidiaries is disclosed to another Party or any of its Subsidiaries in connection with providing services to such first Party or any of its Subsidiaries under this Agreement, then such disclosed confidential and proprietary information shall be used only as required to perform such services.

 

(b)                                 No Release.  Each Party agrees (i) not to release or disclose, or permit to be released or disclosed, any information addressed in Section 6.01(a) to any other Person, except its Representatives who need to know such information in their capacities as such, and except in compliance with Section 6.02 and (b) to use commercially reasonable efforts to maintain any such information in accordance with Section 6.03 of the Separation and Distribution Agreement.

 

(c)                                  Third-Party Information; Privacy and Data Protection Laws.  Each Party acknowledges that it and its respective Subsidiaries may presently have and, following the Effective Time, may gain access to or possession of confidential or proprietary information of, or personal information relating to, Third Parties (i) that was received under confidentiality or non-disclosure agreements entered into between such Third Parties, on the one hand, and the other Party or the other Party’s Subsidiaries, on the other hand, prior to the Effective Time; or (ii) that, as between the two Parties, was originally collected by the other Party or the other Party’s Subsidiaries and that may be subject to and protected by privacy, data protection or other

 

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applicable Laws.  As provided in more detail in a data protection agreement to be entered into between Abbott and AbbVie as of the Effective Time, each Party agrees that it shall hold, protect and use, and shall cause its Subsidiaries and its and their respective Representatives to hold, protect and use, in strict confidence the confidential and proprietary information of, or personal information relating to, Third Parties in accordance with privacy, data protection or other applicable Laws and the terms of any agreements that were either entered into before the Effective Time or affirmative commitments or representations that were made before the Effective Time by, between or among the other Party or the other Party’s Subsidiaries, on the one hand, and such Third Parties, on the other hand.

 

Section 6.02.                          Protective Arrangements.  In the event that either Party or any of its Affiliates is requested or required (by oral question, interrogatories, requests for information or documents, subpoena, civil investigative demand or similar process) by any Governmental Authority or pursuant to applicable Law to disclose or provide any confidential or proprietary information of the other Party that is subject to the confidentiality provisions hereof, or to disclose or provide any Personal Data that it processes on behalf of the other Party in accordance with the data protection agreement to be entered into between Abbott and AbbVie as of the Effective Time, such Party shall, unless prohibited by such request or requirement of the applicable Governmental Authority or under applicable Law, provide the other Party with Notice of such request or demand as promptly as practicable under the circumstances so that such other Party shall have an opportunity to seek an appropriate protective order, at such other Party’s own cost and expense.  In the event that such other Party fails to receive such appropriate protective order in a timely manner and the Party receiving the request or demand reasonably determines that its failure to disclose or provide such information shall actually prejudice the Party receiving the request or demand, then the Party that received such request or demand may thereafter disclose or provide information to the extent required by such Law (as so advised by counsel) or by lawful process or such Governmental Authority.

 

Section 6.03.                          Counterparts; Entire Agreement; Corporate Power; Facsimile Signatures.

 

(a)                                 Counterparts.  This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement.

 

(b)                                 Entire Agreement.  This Agreement, the Separation and Distribution Agreement and the exhibits and schedules hereto and thereto contain the entire agreement between the Parties with respect to the subject matter hereof, supersede all previous agreements, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter and there are no agreements or understandings between the Parties other than those set forth or referred to herein or therein. It is the intention of the Parties that the Conveyance and Assumption Instruments shall be consistent with the terms of this Agreement. In the event of any conflict between the Conveyance and Assumption Instruments and this Agreement, the provisions of this Agreement shall control.  The Parties agree that the Conveyance and Assumption Instruments are not intended and shall not be construed in any way to enhance, modify or decrease any of the rights or obligations of Abbott, any Abbott Local Entity, AbbVie or any AbbVie Local Entity from those contained in this Agreement.

 

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(c)                                  Corporate Power.  Abbott represents on behalf of itself and, to the extent applicable, each Abbott Local Entity and AbbVie represents on behalf of itself and, to the extent applicable, each AbbVie Local Entity as follows:

 

(i)                                     each such Person has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby; and

 

(ii)                                  this Agreement has been duly executed and delivered by it and constitutes a valid and binding agreement of it enforceable in accordance with the terms thereof.

 

(d)                                 Signatures and Delivery.  Each Party acknowledges that it and the other Party may execute this Agreement by manual, stamp or mechanical signature, and that delivery of an executed counterpart of a signature page to this Agreement (whether executed by manual, stamp or mechanical signature) by facsimile or by email in portable document format (PDF) shall be effective as delivery of such executed counterpart of this Agreement.  Each Party expressly adopts and confirms a stamp or mechanical signature (regardless of whether delivered in person, by mail, by courier, by facsimile or by email in portable document format (PDF)) made in its respective name as if it were a manual signature delivered in person, agrees that it shall not assert that any such signature or delivery is not adequate to bind such Party to the same extent as if it were signed manually and delivered in person and agrees that, at the reasonable request of the other Party at any time, it shall as promptly as reasonably practicable cause each such Agreement to be manually executed (any such execution to be as of the date of the initial date thereof) and delivered in person, by mail or by courier.

 

Section 6.04.                          Governing Law.  This Agreement shall be governed by and construed and interpreted in accordance with the Laws of the State of Delaware, irrespective of the choice of Laws and principles of the State of Delaware, as to all matters, including matters of validity, construction, effect, enforceability, performance and remedies.

 

Section 6.05.                          Assignability.  This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns; provided, however, that neither Party may assign its rights or delegate its obligations under this Agreement without the express prior written consent of the other Party hereto.  Notwithstanding the foregoing, no such consent shall be required for the assignment of a Party’s rights and obligations under this Agreement in whole in connection with a Change of Control of a Party, so long as the resulting, surviving or transferee Person assumes all the obligations of the relevant Party thereto by operation of Law or pursuant to an agreement in form and substance reasonably satisfactory to the other Party. Nothing herein is intended to, or shall be construed to, prohibit either Party or any of its Subsidiaries from being party to or undertaking a Change of Control.

 

Section 6.06.                          Third Party Beneficiaries.  The provisions of this Agreement are solely for the benefit of the Parties, the Abbott Local Entities and the AbbVie Local Entities  and their respective permitted successors and assigns, and are not intended to confer upon any Person except the Parties, the Abbott Local Entities and the AbbVie Local Entities and their permitted successors and assigns, any rights or remedies hereunder; and there are no other Third Party beneficiaries of this Agreement and this Agreement shall not provide any other Third Party with

 

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any remedy, claim, Liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement.

 

Section 6.07.                          Notices.  All Notices shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service or by facsimile with receipt confirmed (followed by delivery of an original via overnight courier service) or by registered or certified mail (postage prepaid, return receipt requested) to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a Notice):

 

If to Abbott:

 

Abbott Laboratories
 100 Abbott Park Road
 Abbott Park, Illinois 60064-6020
 Attn:  Chief Financial Officer
 Facsimile: (847) 938-6277

 

with a copy to (which shall not constitute Notice):

 

Abbott Laboratories
 100 Abbott Park Road
 Abbott Park, Illinois 60064-6020
 Attn:  General Counsel
 Facsimile: (847) 937-3966

 

If to AbbVie:

 

AbbVie Inc. 
 1 North Waukegan Road
 North Chicago, Illinois 60064
 Attn:  Chief Financial Officer
 Facsimile: (847) 935-3295

 

with a copy to (which shall not constitute Notice):

 

AbbVie Inc. 
 1 North Waukegan Road
 North Chicago, Illinois 60064
 Attn:  General Counsel
 Facsimile: (847) 935-3294

 

Either Party may, by Notice to the other Party, change the address to which such Notices are to be given.

 

Section 6.08.                          Severability.  In the event that any one or more of the terms or provisions of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, such

 

25

 

invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement, or the application of such term or provision to Persons or circumstances or in jurisdictions other than those as to which it has been determined to be invalid, illegal or unenforceable, and the Parties shall use their commercially reasonable efforts to substitute one or more valid, legal and enforceable terms or provisions into this Agreement which, insofar as practicable, implement the purposes and intent of the Parties.  Any term or provision of this Agreement held invalid or unenforceable only in part, degree or within certain jurisdictions shall remain in full force and effect to the extent not held invalid or unenforceable to the extent consistent with the intent of the parties as reflected by this Agreement.  To the extent permitted by applicable Law, each Party waives any term or provision of Law which renders any term or provision of this Agreement to be invalid, illegal or unenforceable in any respect.

 

Section 6.09.                          Force Majeure.  Neither Party shall be deemed in default of this Agreement for failure to fulfill any obligation so long as and to the extent to which any delay or failure in the fulfillment of such obligations is prevented, frustrated, hindered or delayed as a consequence of circumstances of Force Majeure. In the event of any such excused delay, the time for performance shall be extended for a period equal to the time lost by reason of the delay.  A Party claiming the benefit of this provision shall, as soon as reasonably practicable after the occurrence of any such event, (a) provide Notice to the other Party of the nature and extent of any such Force Majeure condition; and (b) use commercially reasonable efforts to remove any such causes and resume performance under this Agreement as soon as reasonably practicable.  Notwithstanding the foregoing, the Final Closing Date shall not be delayed pursuant to this Section 6.09 beyond the date that is thirty (30) months after the Distribution Date for all Local Closings.

 

Section 6.10.                          No Set Off.  Except as expressly contemplated by this Agreement or mutually agreed to in writing by the Parties, neither Party nor any of its Affiliates shall have any right of set off or other similar rights with respect to (a) any amounts received pursuant to this Agreement, or (b) any other amounts claimed to be owed to the other Party or any of its Affiliates arising out of this Agreement.

 

Section 6.11.                          Responsibility for Expenses.  Except as otherwise expressly set forth in this Agreement, or as otherwise agreed to in writing by the Parties, each Party shall bear its own costs and expenses incurred or accrued during the International Operations Transition Period; provided that all fees and expenses incurred or accrued by Abbott or AbbVie with respect to any legal, tax, valuation or other advisor engaged by Abbott or AbbVie upon the joint consent of Abbott and AbbVie solely in connection with the preparation for, and consummation of, a Local Closing (other than a sale or wind-down pursuant to Section 3.05) shall be shared equally, on terms to be agreed from time to time, between Abbott and AbbVie.

 

Section 6.12.                          Headings.  The Article, Section and Paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

 

Section 6.13.                          Waivers of Default.  Waiver by either Party of any default by the other Party of any provision of this Agreement shall not be deemed a waiver by the waiving Party of any subsequent or other default, nor shall it prejudice the rights of the waiving Party.

 

26

 

Section 6.14.                          Amendments.  No provisions of this Agreement shall be deemed amended, supplemented or modified unless such amendment, supplement or modification is in writing and signed by an authorized representative of both Parties.  No provisions of this Agreement shall be deemed waived unless such waiver is in writing and signed by the authorized representative of the Party against whom it is sought to be enforced.

 

Section 6.15.                          Interpretation.  Words in the singular shall be deemed to include the plural and vice versa and words of one gender shall be deemed to include the other genders as the context requires.  The terms “hereof,” “herein,” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole (including all of the Schedules hereto) and not to any particular provision of this Agreement.  Article, Section and Schedule references are to the Articles, Sections and Schedules to this Agreement unless otherwise specified.  Unless otherwise stated, all references to any agreement shall be deemed to include the exhibits, schedules and annexes to such agreement.  The word “including” and words of similar import when used in this Agreement shall mean “including, without limitation,” unless the context otherwise requires or unless otherwise specified.  The word “or” shall not be exclusive.  Unless otherwise specified in a particular case, the word “days” refers to calendar days.  References herein to this Agreement shall be deemed to refer to this Agreement as of the date on which it is executed and as it may be amended, modified or supplemented thereafter, unless otherwise specified.  References to the performance, discharge or fulfillment of any Liability in accordance with its terms shall have meaning only to the extent such Liability has terms. If the Liability does not have terms, the reference shall mean performance, discharge or fulfillment of such Liability.

 

Section 6.16.                          Public Announcements.  From and after the Effective Time, Abbott and AbbVie shall consult with each other before issuing, and give each other the opportunity to review and comment upon, that portion of any press release or other public statements that relates to the transactions contemplated by this Agreement, and shall not issue any such press release or make any such public statement prior to such consultation, except (a) as may be required by applicable Law, court process or by obligations pursuant to any listing agreement with any national securities exchange or national securities quotation system; or (b) as otherwise set forth on Schedule 9.16 to the Separation and Distribution Agreement.

 

Section 6.17.                          Specific Performance.  In the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, the Party or Parties who are or are to be thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief (on an interim or permanent basis) of its rights under this Agreement, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative.  The Parties agree that the remedies at law for any breach or threatened breach, including monetary damages, may be inadequate compensation for any loss and that any defense in any Proceeding for specific performance that a remedy at Law would be adequate is waived.

 

Section 6.18.                          Mutual Drafting.  This Agreement shall be deemed to be the joint work product of the Parties and any rule of construction that a document shall be interpreted or construed against a drafter of such document shall not be applicable.

 

27

 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized representatives.

 

 

	
ABBOTT   LABORATORIES
    	
ABBVIE   INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Thomas C. Freyman
    	
 
    	
By:
    	
/s/   Richard A. Gonzalez
    
	
 
    	
Name:
    	
Thomas   C. Freyman
    	
 
    	
 
    	
Name:
    	
Richard   A. Gonzalez
    
	
 
    	
Title:
    	
Executive   Vice President, Finance
   and Chief Financial Officer
    	
 
    	
 
    	
Title:
    	
Chairman   of the Board
   and Chief Executive Officer
    

 

[Signature Page to International Commercial Operations Agreement]

 

 

Schedule 1.01(a)

 

Abbott Local Entities

 

	
Abbott Subsidiary Company Name
    	
 
    	
Jurisdiction
    
	
Abbott   Products Algeria EURL
    	
 
    	
Algeria
    
	
Abbott   Products EOOD
    	
 
    	
Bulgaria
    
	
Abbott   Laboratories Trading (Shanghai) Co., Ltd
    	
 
    	
China
    
	
Abbott   Laboratorios del Ecuador Cia. Ltda.
    	
 
    	
Ecuador
    
	
Abbott   Laboratorios S.A.
    	
 
    	
Peru
    
	
Abbott   Products Romania SRL
    	
 
    	
Romania
    
	
Abbott   Laboratories Uruguay S.A.
    	
 
    	
Uruguay
    
	
Each branch or representative office of   Abbott Laboratories International LLC to the extent that such branch or   representative office has Assets and Liabilities related to the AbbVie   Business.
    	
 
    	
Each jurisdiction in which a branch or   representative office of Abbott Laboratories International LLC has Assets and   Liabilities of the AbbVie Business.
    

 

Any other Abbott Subsidiary not listed on this Schedule 1.01(a) as determined by, and agreed between, Abbott and AbbVie, as being an Abbott Local Entity shall be treated as an Abbott Local Entity, including any Abbott Subsidiaries in the following jurisdictions: Honduras, Lebanon, Namibia, Nicaragua, Syria and The Virgin Islands.

 

 

Schedule 1.01(b)

 

Services Affiliates

 

	
Abbott Subsidiary Company Name
    	
 
    	
Jurisdiction
    
	
Abbott   Products Algeria EURL
    	
 
    	
Algeria
    
	
Abbott   Products Romania SRL
    	
 
    	
Romania
    
	
Each branch or representative office of   Abbott Laboratories International LLC to the extent that such branch or   representative office has Assets and Liabilities related to the AbbVie   Business.
    	
 
    	
Each jurisdiction in which a branch or   representative office of Abbott Laboratories International LLC has Assets and   Liabilities of the AbbVie Business.
    

 

Any other Abbott Subsidiary not listed on this Schedule 1.01(b) as determined by, and agreed between, Abbott and AbbVie, as being a Services Affiliate shall be treated as a Services Affiliate, including, any Abbott Subsidiaries in the following jurisdictions: Honduras, Lebanon, Namibia, Nicaragua, Syria and The Virgin Islands.

 

 

Schedule 2.05(b)

 

Accounting Principles

 

“Abbott Mark-Up Amount” means an amount equal to 3% of all expenses incurred by a Services Affiliate attributable to the operation of the Deferred AbbVie Local Business during the International Operations Transition Period for items that would have otherwise constituted services provided by such Services Affiliate under the Ex-U.S. Transition Services Agreement if the Local Closing for such Services Affiliate had taken place prior to the Distribution Date, which such amount represents a portion of the Mark-Up Fees for the applicable Services Affiliate.

 

“Aggregate AbbVie Business Expenses” means (a) the sum of all AbbVie Business Expenses in respect of all Services Affiliates for whom a Local Closing has not occurred plus (b) the sum of all AbbVie Business Expenses in respect of all Services Affiliates for whom a Local Closing has occurred but such AbbVie Business Expenses have not been included in the Aggregate Net Amount for a prior calendar month.

 

“Aggregate Mark-Up Fee” means (a) the sum of all Mark-Up Fees in respect of all Services Affiliates for whom a Local Closing has not occurred; plus (b) the sum of all Mark-Up Fees in respect of all Services Affiliates for whom a Local Closing has occurred but such Mark-Up Fees have not been included in the Aggregate Net Amount for a prior calendar month minus; (c) the sum of all Abbott Mark-Up Amounts in respect of all Services Affiliates for whom a Local Closing has not occurred minus; (d) the sum of all Abbott Mark-Up Amounts in respect of all Services Affiliates for whom a Local Closing has occurred but such Mark-Up Fees have not been included in the Aggregate Net Amount for a prior calendar month.

 

“Aggregate Monthly Cash Decrease” means (a) the sum of all Monthly Cash Decreases in respect of all Local Buy-Sell Entities for whom a Local Closing has not occurred; plus (b) the sum of all Monthly Cash Decreases in respect of all Local Buy-Sell Entities for whom a Local Closing has occurred but such Monthly Cash Decreases have not been included in the Aggregate Net Amount for a prior calendar month.

 

“Aggregate Monthly Cash Increase” means (a) the sum of all Monthly Cash Increases in respect of all Local Buy-Sell Entities for whom a Local Closing has not occurred; plus (b) the sum of all Monthly Cash Increases in respect of all Local Buy-Sell Entities for whom a Local Closing has occurred but such Monthly Cash Increases have not been included in the Aggregate Net Amount for a prior calendar month.

 

“Aggregate Net Amount” means (a) the Aggregate Monthly Cash Increase; minus (b) the Aggregate Monthly Cash Decrease; plus (c) the Aggregate Mark-Up Fee.

 

“Ex-US Transition Services Agreement” means the Ex-U.S. Transition Services Agreement entered into prior to the Effective Time by and between Abbott, AbbVie and certain of their respective Affiliates.

 

“Monthly Cash Decrease” means for each calendar month during the International Operations Transition Period, the cash advanced to each Deferred AbbVie Local Business held

 

 

by a Local Buy-Sell Entity for whom a Local Closing has not occurred, or for whom a Local Closing has occurred but such Monthly Cash Decrease has not been included in the Aggregate Net Amount for a prior calendar month, which such amount shall be reflected in the cash flow statement for such Local Buy-Sell Entity as the “Net decrease in cash” and which such amount shall be converted from Local Currency to US Dollars using the Book Rate.

 

“Monthly Cash Increase” means for each calendar month during the International Operations Transition Period, the cash derived from each Deferred AbbVie Local Business held by a Local Buy-Sell Entity for whom a Local Closing has not occurred, or for whom a Local Closing has occurred but such Monthly Cash Increase has not been included in the Aggregate Net Amount for a prior calendar month, which such amount shall be reflected in the cash flow statement for such Local Buy-Sell Entity as the “Net increase in cash” and which such amount shall be converted from Local Currency to US Dollars using the Book Rate.

 

2.                                      In calculating, for each Local Buy-Sell Entity, the Monthly Cash Increase or the Monthly Cash Decrease, as applicable, the following shall be taken into account:

 

(a)                                 Each of the profit and loss statement, balance sheet and cash flow statement provided in accordance with Section 2.07(a) shall be prepared in accordance with the principles set forth in this Schedule 2.05(b) and, to the extent not inconsistent with such principles, in accordance with GAAP applied on a basis consistent with the AbbVie Pro Forma Balance Sheet, Abbott’s historical accounting policies, procedures and conventions, and with the same level of detail as used by Abbott in the preparation of Abbott’s monthly financial reporting package and the standard financial reports used by Abbott on the Distribution Date. Such financial statements shall include amounts specifically attributable to the Deferred AbbVie Local Business segregated in unique AbbVie accounts within the Local Buy-Sell Entity’s financial systems.

 

(b)                                 The net income of the Deferred Local AbbVie Business of each Local Buy-Sell Entity reflected in the profit and loss statement shall be calculated in accordance with the principles set forth in this Schedule 2.05(b) and, to the extent not inconsistent with such principles, in accordance with GAAP applied on a basis consistent with the AbbVie Pro Forma Balance Sheet and Abbott’s historical accounting policies, procedures and conventions.  The net income of the Deferred Local AbbVie Business of each Local Buy-Sell Entity shall be converted from Local Currency to US Dollars using the Average Rate.

 

(c)                                  The Assets and Liabilities attributable to the Deferred AbbVie Local Business of each Local Buy-Sell Entity reflected in the balance sheet shall be converted from Local Currency to US Dollars using the Book Rate.

 

(d)                                 In calculating the net income of each Local Buy-Sell Entity: (i) a mark-up of 3% shall be added to all expenses incurred by such Local Buy-Sell Entity attributable to the operation of the Deferred AbbVie Local Business during the International Operations Transition Period for items that would have otherwise constituted services provided by such Local Buy-Sell Entity under the Ex-U.S. Transition Services Agreement if the Local Closing for such Local Buy-Sell Entity had taken place prior to the Distribution Date; and (ii) a mark-up of 10% shall be added to all expenses incurred by such Local Buy-Sell Entity attributable to the operation of the

 

 

Deferred AbbVie Local Business during the International Operations Transition Period for items that would have otherwise constituted services provided by such Local Buy-Sell Entity under a contract manufacturing agreement if the Local Closing for such Local Buy-Sell Entity had taken place prior to the Distribution Date.  All other expenses attributable to the operations of the Deferred AbbVie Local Business incurred by each Local Buy-Sell Entity during the International Operations Transition Period (for example, salaries of employees of the Deferred AbbVie Local Business) shall not be subject to a mark-up when calculating the net income of such Local Buy-Sell Entity.

 

(e)                                  The portion of the interest expense on any loans entered into by a Local Buy-Sell Entity attributable to the operation of the Deferred AbbVie Local Business shall be taken into account for purposes of calculating the Monthly Cash Increase or the Monthly Cash Decrease, as applicable, for such Local Buy-Sell Entity. If any interest expense on any such loan is included in the calculation of the Monthly Cash Increase or the Monthly Cash Decrease for the applicable Local Buy-Sell Entity, then the applicable cash proceeds and loan Liability with respect to such loan attributable to the operation of the Deferred AbbVie Local Business shall be (i) included as an Asset and a Liability of the Deferred AbbVie Local Business of the applicable Local Buy-Sell Entity, and (ii) included in the calculation of the Monthly Cash Increase or Monthly Cash Decrease for the applicable Local Buy-Sell Entity. If any loan Liability with respect to the operation of the Deferred AbbVie Local Business remains outstanding as of the Local Closing Date, then such loan Liability shall be repaid in full by AbbVie or an Affiliate of AbbVie as part of the consummation of the Local Closing for such Local Buy-Sell Entity.

 

(f)                                   The portion of the cost of the Local Buy-Sell Entity entering into financial hedging arrangements attributable to the operation of the Deferred AbbVie Local shall be taken into account for purposes of calculating the Monthly Cash Increase or the Monthly Cash Decrease, as applicable, for such Local Buy-Sell Entity.

 

(g)                                  The portion of the exchange gain or exchange loss incurred by the Local Buy-Sell Entity attributable to the operation of the Deferred AbbVie Local Business shall be taken into account for purposes of calculating the Monthly Cash Increase or the Monthly Cash Decrease, as applicable, for each Local Buy-Sell Entity.

 

(h)                                 If there is a dispute between the Parties in respect of any amount set forth in the Deferred AbbVie Business Report relating to the AbbVie Assets and AbbVie Liabilities of a Deferred AbbVie Local Business of a Local Buy-Sell Entity, the Monthly Cash Increase or Monthly Cash Decrease in respect of such Local Buy-Sell Entity shall be excluded from the calculation of the Aggregate Monthly Cash Increase or the Aggregate Monthly Cash Decrease until such time as the dispute has been resolved in accordance with Section 2.04(b) or Section 2.07(d) and Section 2.07(e). Upon resolution of the dispute, the Monthly Cash Increase(s) or Monthly Cash Decrease(s) in respect of the Deferred AbbVie Local Business of such Local Buy-Sell Entity for all calendar months since the Distribution Date shall each be included in the calculation of the next Aggregate Monthly Cash Increase or the Aggregate Monthly Cash Decrease.

 

(i)                                     In determining the amount of the Monthly Cash Increase or Monthly Cash Decrease, as applicable, of any Deferred AbbVie Local Business, any income Taxes accrued but

 

 

unpaid attributable to such Deferred AbbVie Local Business (the “Accrued Taxes”) for such period shall be determined using the statutory rates required by GAAP.  Except as provided below, no further adjustments shall be made for the difference, if any, between the Accrued Taxes for any Tax year and the actual amount paid with respect to such Taxes for such Tax year attributable to such Deferred AbbVie Local Business determined using the highest Tax rate of the applicable Abbott Local Entity (and not a rate determined solely for the Deferred AbbVie Local Business) (the “Actual Tax Amount”).  Within a reasonable period of time following the filing of the income Tax Return by an Abbott Local Entity that includes the results of the Deferred AbbVie Local Business, in whole or in part, (a) if the Actual Tax Amount with respect to the Deferred AbbVie Local Business is greater than the Accrued Taxes during such Tax year, AbbVie shall pay Abbott the amount of such difference, and (b) if the Actual Tax Amount with respect to the Deferred AbbVie Local Business is less than the Accrued Taxes during such Tax year, Abbott shall pay AbbVie the amount of such difference. All amounts paid by AbbVie or Abbott pursuant to the preceeding sentence shall be paid in US Dollars converted from Local Currency to US Dollars using the Average Rate in effect at the time such payment is made. All Taxes attributable to the operation of each Deferred AbbVie Local Business shall be calculated on a standalone basis.

 

(j)                                    To the extent that GAAP rules are modified by the Financial Accounting Standards Board during the International Operations Transition Period, the net income of the Deferred Local AbbVie Business of each Local Buy-Sell Entity reflected in the profit and loss statement shall be calculated, and each profit and loss statement, balance sheet and cash flow statement provided in accordance with Section 2.07(a) shall be prepared, in accordance with the principles set forth in this Schedule 2.05(b) and, to the extent not inconsistent with such principles, in accordance with GAAP applied on a basis consistent with the AbbVie Pro Forma Balance Sheet as updated to reflect such modifications to the GAAP rules and Abbott’s historical accounting policies, procedures and conventions.

 

3.                                      No interest shall be payable by AbbVie to Abbott in respect of the Assets of a Deferred AbbVie Local Business held by the Abbott Local Entities during the International Operations Transition Period.

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