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SECURITIES AND EXCHANGE COMMISSION
FORM 10-K
WASHINGTON, D. C. 20549
-------------------
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
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FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993. COMMISSION FILE NUMBER 1-2189
[LOGO] ABBOTT LABORATORIES
AN ILLINOIS CORPORATION 36-0698440
(I.R.S. employer identification
number)
ONE ABBOTT PARK ROAD (708) 937-6100
ABBOTT PARK, ILLINOIS 60064-3500 (telephone number)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
ON WHICH REGISTERED
TITLE OF EACH CLASS
Common Shares, Without Par Value New York Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS, AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS
FOR THE PAST 90 DAYS.
YES __X__ NO _____
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN AND WILL NOT BE CONTAINED, TO THE BEST
OF THE REGISTRANT'S KNOWLEDGE, IN THE PROXY STATEMENT INCORPORATED BY REFERENCE
IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. [ ]
THE AGGREGATE MARKET VALUE OF THE 748,888,598 SHARES OF VOTING STOCK HELD BY
NONAFFILIATES OF THE REGISTRANT, COMPUTED BY USING THE CLOSING PRICE AS REPORTED
ON THE CONSOLIDATED TRANSACTION REPORTING SYSTEM FOR ABBOTT LABORATORIES COMMON
SHARES WITHOUT PAR VALUE ON JANUARY 31, 1994, WAS APPROXIMATELY $22,092,213,641.
NUMBER OF COMMON SHARES OUTSTANDING AS OF JANUARY 31, 1994: 819,811,254.
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF THE ABBOTT LABORATORIES ANNUAL REPORT FOR THE YEAR ENDED DECEMBER
31, 1993 ARE INCORPORATED BY REFERENCE INTO PARTS I, II, AND IV.
PORTIONS OF THE 1994 ABBOTT LABORATORIES PROXY STATEMENT ARE INCORPORATED BY
REFERENCE INTO PART III.
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PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
Abbott Laboratories is an Illinois corporation, incorporated in 1900. The
Company's* principal business is the discovery, development, manufacture, and
sale of a broad and diversified line of health care products and services.
FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS,
GEOGRAPHIC AREAS, AND CLASSES OF SIMILAR PRODUCTS
Incorporated herein by reference is the footnote entitled "Industry Segment
and Geographic Area Information" of the Consolidated Financial Statements in the
Abbott Laboratories Annual Report for the year ended December 31, 1993 ("1993
Annual Report"), filed as an exhibit to this report. Also incorporated herein by
reference is the text and table of sales by class of similar products included
in the section of the 1993 Annual Report captioned "Financial Review."
NARRATIVE DESCRIPTION OF BUSINESS
PHARMACEUTICAL AND NUTRITIONAL PRODUCTS
Included in this segment is a broad line of adult and pediatric
pharmaceuticals and nutritionals. These products are sold primarily on the
prescription or recommendation of physicians or other health care professionals.
The segment also includes agricultural and chemical products, bulk
pharmaceuticals, and consumer products.
Principal pharmaceutical and nutritional products include the
anti-infectives clarithromycin, sold in the United States under the trademark
Biaxin-R- and outside the United States primarily under the trademark Klacid-R-
and tosufloxacin, sold in Japan under the trademark Tosuxacin-TM-; various forms
of the antibiotic erythromycin, sold primarily as PCE-R- or polymer-coated
erythromycin, Erythrocin-R-, and E.E.S.-R-; agents for the treatment of
epilepsy, including Depakote-R-; a broad line of cardiovascular products,
including Loftyl-R-, a vasoactive agent sold outside the United States;
Hytrin-R-, used as an anti-hypertensive and for the treatment of benign
prostatic hyperplasia; Abbokinase-R-, a thrombolytic drug; Survanta-R-, a bovine
derived lung surfactant; various forms of prepared infant formula, including
Similac-R-, Isomil-R-, and Alimentum-R-; and other medical and pediatric
nutritionals, including Ensure-R-, Ensure Plus-R-, Jevity-R-, Glucerna-R-,
Advera-TM-, PediaSure-R-, Pedialyte-R- and Gain-R-. Consumer products include
the dandruff shampoo Selsun Blue-R-; Murine-R- eye care and ear care products;
Tronolane-R- hemorrhoid medication; and Faultless-R- rubber sundry products.
Agricultural and chemical products include plant growth regulators, including
ProGibb-R-; herbicides; larvicides, including Vectobac-R-; and biologically
derived insecticides, including DiPel-R- and XenTari-R-.
Pharmaceutical and nutritional products are generally sold directly to
retailers, wholesalers, health care facilities, and government agencies. In most
cases, they are distributed from Company-owned distribution centers or public
warehouses. Certain products are co-marketed with other companies. In certain
overseas countries, some of these products are marketed and distributed through
distributors. Primary marketing efforts for pharmaceutical and nutritional
products are directed toward securing the prescription or recommendation of the
Company's brand of products by physicians or other health care professionals.
Managed care purchasers, for example health maintenance organizations (HMOs) and
pharmacy benefit managers, are becoming increasingly important customers.
Competition is generally from other broad line and specialized health care
manufacturers. A significant aspect of competition is the search for
technological innovations. The
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* As used throughout the text of this Report, the term "Company" refers to
Abbott Laboratories, an Illinois corporation, or Abbott Laboratories and its
consolidated subsidiaries, as the context requires.
1
introduction of new products by competitors and changes in medical practices and
procedures can result in product obsolescence. In addition, the substitution of
generic drugs for the brand prescribed has increased competitive pressures on
pharmaceutical products.
Consumer products are promoted directly to the public by consumer
advertising. These products are generally sold directly to retailers and
wholesalers. Competitive products are sold by other diversified consumer and
health care companies. Competitive factors include consumer advertising,
scientific innovation, price, and availability of generic product forms.
Agricultural and chemical products are generally sold to agricultural
distributors and pharmaceutical companies. Competition is primarily from large
chemical and agricultural companies and companies selling specialized
agricultural products. Competition is based on numerous factors depending on the
market served. Important competitive factors include product performance for
specialized industrial and agricultural uses, price, and technological
advantages.
The Company is the leading worldwide producer of the antibiotic
erythromycin. Similac-R- is the leading infant formula product in the United
States.
Under an agreement between the Company and Takeda Chemical Industries, Ltd.
of Japan (Takeda), TAP Pharmaceuticals Inc. (TAP), owned 50 percent by the
Company and 50 percent by Takeda, develops and markets in the United States
products based on Takeda research. TAP markets Lupron-R-, an LH-RH analog, and
Lupron Depot-R-, a sustained release form of Lupron-R-, in the United States.
These agents are used for the treatment of advanced prostatic cancer,
endometriosis, and central precocious puberty. The Company also has marketing
rights to certain Takeda products in select Latin American markets. The Company
also markets Lupron-R-, Lupron Depot-R-, and Lupron Depot-Ped-R- in select
markets outside the United States.
HOSPITAL AND LABORATORY PRODUCTS
Hospital and laboratory products include diagnostic systems for blood banks,
hospitals, commercial laboratories, and alternate-care testing sites;
intravenous and irrigation fluids and related administration equipment,
including electronic drug delivery systems; drugs and drug delivery systems;
anesthetics; critical care products; and other medical specialty products for
hospitals and alternate-care sites.
The principal products included in this segment are parenteral (intravenous
or I.V.) solutions and related administration equipment sold as the LifeCare-R-
line of products, LifeShield-R- sets, and Venoset-R- products; irrigating
fluids; parenteral nutritionals such as Aminosyn-R- and Liposyn-R-; Plum-R- and
Omni-Flow-R- electronic drug delivery systems; Abbott Pain Management
Provider-R-; patient-controlled analgesia (PCA) systems; venipuncture products;
hospital injectables; premixed I.V. drugs in various containers; ADD-Vantage-R-
and Nutrimix-R- drug and nutritional delivery systems; anesthetics, including
Pentothal-R-, isoflurane, and enflurane; hemodynamic monitoring equipment;
Calcijex-R-, an injectable agent for treatment of bone disease in hemodialysis
patients; critical care products including Opticath-R-; screening tests for
hepatitis B, HTLV-1, hepatitis B core, and hepatitis C; tests for detection of
AIDS antibodies and antigens, and other infectious disease detection systems;
tests for determining levels of abused drugs with the ADx-R- instrument;
physiological diagnostic tests; cancer monitoring tests including tests for
prostate specific antigen; laboratory tests and therapeutic drug monitoring
systems such as TDx-R-; clinical chemistry systems such as Abbott Spectrum-R-,
Abbott Spectrum-R- EPx-R-, Abbott Spectrum-R- CCx-TM-, and Quantum-TM-;
Commander-R- and IMx-R- lines of diagnostic instruments and chemical reagents
used with immunoassay diagnostics; Abbott Vision-R-, a desk-top blood analyzer,
the Abbott TestPack-R- system for diagnostic testing, and a full line of
hematology systems and reagents known as the Cell-Dyn-R- series. The hospital
and laboratory products the Company expects to introduce in the United States in
1994 include: AxSym-TM-, a diagnostic system; Abbott Maestro-TM-, a data
management system; and EnCounter-R-, a desktop hematology analyzer.
The Company markets hospital and laboratory products in the United States
and many other countries. These products are generally distributed to
wholesalers and directly to hospitals, laboratories, and physicians' offices
from distribution centers maintained by the Company. Sales are
2
also made in the home infusion services market directly to patients receiving
treatment outside the hospital through marketing arrangements with hospitals and
other health care providers. Overseas sales are made either directly to
customers or through distributors, depending on the market served.
The hospital and laboratory products industry segment is highly competitive,
both in the United States and overseas. This segment is subject to competition
in technological innovation, price, convenience of use, service, instrument
warranty provisions, product performance, long-term supply contracts, and
product potential for overall cost effectiveness and productivity gains.
Products in this segment can be subject to rapid product obsolescence. The
Company has benefitted from technological advantages of certain of its current
products; however, these advantages may be reduced or eliminated as competitors
introduce new products.
The Company is one of the leading domestic manufacturers of I.V. and
irrigating solutions and related administration equipment, parenteral
nutritional products, anesthesia products, and drug delivery systems. It is also
the worldwide leader in in vitro diagnostic products, including thyroid tests,
therapeutic drug monitoring, cancer monitoring tests, diagnostic tests for the
detection of hepatitis and AIDS antibodies, and immunodiagnostic instruments.
INFORMATION WITH RESPECT TO THE COMPANY'S BUSINESS IN GENERAL
SOURCES AND AVAILABILITY OF RAW MATERIALS
The Company purchases, in the ordinary course of business, necessary raw
materials and supplies essential to the Company's operations from numerous
suppliers in the United States and overseas. There have been no recent
availability problems or significant supply shortages.
PATENTS, TRADEMARKS, AND LICENSES
The Company is aware of the desirability for patent and trademark protection
for its products. The Company owns, has applications pending for, and is
licensed under a substantial number of patents. Accordingly, where possible,
patents and trademarks are sought and obtained for the Company's products in the
United States and all countries of major marketing interest to the Company.
Principal trademarks and the products they cover are discussed in the Narrative
Description of Business on pages 1 and 2. These, and various patents which
expire during the period 1994 to 2011, in the aggregate, are believed to be of
material importance in the operation of the Company's business. However, the
Company believes that no single patent, license, trademark, (or related group of
patents, licenses, or trademarks) is material in relation to the Company's
business as a whole.
SEASONAL ASPECTS, CUSTOMERS, BACKLOG, AND RENEGOTIATION
There are no significant seasonal aspects to the Company's business. The
incidence of certain infectious diseases which occur at various times in
different areas of the world does, however, affect the demand for the Company's
anti-infective products. Orders for the Company's products are generally filled
on a current basis, and order backlog is not material to the Company's business.
No single customer accounted for sales equaling 10 percent or more of the
Company's consolidated net sales. No material portion of the Company's business
is subject to renegotiation of profits or termination of contracts at the
election of the government.
RESEARCH AND DEVELOPMENT
The Company spent $880,974,000 in 1993, $772,407,000 in 1992, and
$666,336,000 in 1991 on research to discover and develop new products and
processes and to improve existing products and processes. The Company continues
to concentrate research expenditures in pharmaceutical and diagnostic products.
ENVIRONMENTAL MATTERS
The Company believes that its operations comply in all material respects
with applicable laws and regulations concerning environmental protection.
Regulations under federal and state environmental laws impose stringent
limitations on emissions and discharges to the environment from various
manufacturing operations. The Company's capital and operating expenditures for
pollution control in
3
1993 were approximately $32 million and $31 million, respectively. Capital and
operating expenditures for pollution control are estimated to approximate $39
million and $36 million, respectively, in 1994.
The Company is participating as one of many potentially responsible parties
in investigation and/ or remediation at eight locations in the United States and
Puerto Rico under the Comprehensive Environmental Response, Compensation, and
Liability Act, commonly known as Superfund. The aggregate costs of remediation
at these sites by all identified parties are uncertain but have been subject to
widely ranging estimates totaling as much as several hundred million dollars. In
many cases, the Company believes that the actual costs will be lower than these
estimates, and the fraction for which the Company may be responsible is
anticipated to be considerably less and will be paid out over a number of years.
The Company expects to participate in the investigation or cleanup at these
sites. The Company is also voluntarily investigating potential contamination at
five Company-owned sites, and has initiated voluntary remediation at four
Company-owned sites, in cooperation with the Environmental Protection Agency
(EPA) or similar state agencies.
While it is not feasible to predict with certainty the costs related to the
previously described investigation and cleanup activities, the Company believes
that such costs, together with other expenditures to maintain compliance with
applicable laws and regulations concerning environmental protection, should not
have a material adverse effect on the Company's earnings or competitive
position.
EMPLOYEES
The Company employed 49,659 persons as of December 31, 1993.
REGULATION
The development, manufacture, sale, and distribution of the Company's
products are subject to comprehensive government regulation, and the general
trend is toward more stringent regulation. Government regulation by various
federal, state, and local agencies, which includes detailed inspection of and
controls over research and laboratory procedures, clinical investigations, and
manufacturing, marketing, sampling, distribution, recordkeeping, storage and
disposal practices, substantially increases the time, difficulty, and costs
incurred in obtaining and maintaining the approval to market newly developed and
existing products. Government regulatory actions can result in the seizure or
recall of products, suspension or revocation of the authority necessary for
their production and sale, and other civil or criminal sanctions.
Continuing studies of the utilization, safety, and efficacy of health care
products and their components are being conducted by industry, government
agencies, and others. Such studies, which employ increasingly sophisticated
methods and techniques, can call into question the utilization, safety, and
efficacy of previously marketed products and in some cases have resulted, and
may in the future result, in the discontinuance of marketing of such products
and give rise to claims for damages from persons who believe they have been
injured as a result of their use.
The cost of human health care products continues to be a subject of
investigation and action by governmental agencies, legislative bodies, and
private organizations in the United States and other countries. In the United
States, most states have enacted generic substitution legislation requiring or
permitting a dispensing pharmacist to substitute a different manufacturer's
version of a pharmaceutical product for the one prescribed. Federal and state
governments continue to press efforts to reduce costs of Medicare and Medicaid
programs, including restrictions on amounts agencies will reimburse for the use
of products. Manufacturers must pay certain statutorily-prescribed rebates on
Medicaid purchases for reimbursement on prescription drugs under state Medicaid
plans. In addition, the Federal government follows a diagnosis-related group
(DRG) payment system for certain institutional services provided under Medicare
or Medicaid. The DRG system entitles a health care facility to a fixed
reimbursement based on discharge diagnoses rather than actual costs incurred in
patient treatment, thereby increasing the incentive for the facility to limit or
control expenditures for many health care products. The Veterans Health Care Act
of 1992 requires manufacturers to extend
4
additional discounts on pharmaceutical products to various federal agencies,
including the Department of Veterans Affairs, Department of Defense, and Public
Health Service entities and institutions.
In the United States, governmental cost-containment efforts have extended to
the federally subsidized Special Supplemental Food Program for Women, Infants,
and Children (WIC). All states participate in WIC and have sought and obtained
rebates from manufacturers of infant formula whose products are used in the
program. All of the states have also conducted competitive bidding for infant
formula contracts which require the use of specific infant formula products for
the state WIC program. The Child Nutrition and WIC Reauthorization Act of 1989
requires all states participating in WIC to engage in competitive bidding upon
the expiration of their existing infant formula contracts.
Governmental regulatory agencies now require manufacturers to pay additional
fees. Under the Prescription Drug User Fee Act of 1992, the Federal Food and
Drug Administration imposes substantial fees on various aspects of the approval,
manufacture and sale of prescription drugs. Congress is now considering
expanding user fees to medical devices. The Company believes that such
legislation, if enacted, will add considerable expense for the Company.
In the United States comprehensive legislation has been proposed that would
make significant changes to the availability, delivery and payment for
healthcare products and services. It is the intent of such proposed legislation
to provide health and medical insurance for all United States citizens and to
reduce the rate of increases in United States healthcare expenditures. If such
legislation is enacted, the Company believes it could have the effect of
reducing prices for, or reducing the rate of price increases for health and
medical insurance and medical products and services.
International operations are also subject to a significant degree of
government regulation. Many countries, directly or indirectly through
reimbursement limitations, control the selling price of most health care
products. Furthermore, many developing countries limit the importation of raw
materials and finished products. International regulations are having an impact
on United States regulations, as well. The International Organization for
Standardization ("ISO") provides the voluntary criteria for regulating medical
devices within the European Economic Community. The Food and Drug Administration
("FDA") has announced that it will attempt to harmonize its regulation of
medical devices with that of the ISO. Recently published changes to the FDA's
regulations governing the manufacture of medical devices appear to encompass and
exceed the ISO's approach to regulating medical devices. The FDA's adoption of
the ISO's approach to regulation and other changes to the manner in which the
FDA regulates medical devices will increase the cost of compliance with those
regulations.
Efforts to reduce health care costs are also being made in the private
sector. Health care providers have responded by instituting various cost
reduction and containment measures.
It is not possible to predict the extent to which the Company or the health
care industry in general might be affected by the matters discussed above.
INTERNATIONAL OPERATIONS
The Company markets products in approximately 130 countries through
affiliates and distributors. Most of the products discussed in the preceding
sections of this report are sold outside the United States. In addition, certain
products of a local nature and variations of product lines to meet local
regulatory requirements and marketing preferences are manufactured and marketed
to customers outside the United States. International operations are subject to
certain additional risks inherent in conducting business outside the United
States, including price and currency exchange controls, changes in currency
exchange rates, limitations on foreign participation in local enterprises,
expropriation, nationalization, and other governmental action.
5
ITEM 2. PROPERTIES
The Company's corporate offices are located at One Abbott Park Road, Abbott
Park, Illinois 60064-3500. The locations of a number of the Company's principal
plants are listed below.
LOCATION INDUSTRY SEGMENTS OF PRODUCTS PRODUCED
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Abbott Park, Illinois Pharmaceutical and Nutritional Products, and Hospital and Laboratory Products
Altavista, Virginia Pharmaceutical and Nutritional Products
Austin, Texas Hospital and Laboratory Products
Barceloneta, Puerto Rico Pharmaceutical and Nutritional Products, and Hospital and Laboratory Products
Campoverde, Italy Pharmaceutical and Nutritional Products, and Hospital and Laboratory Products
Casa Grande, Arizona Pharmaceutical and Nutritional Products
Columbus, Ohio Pharmaceutical and Nutritional Products
Delkenheim, Germany Hospital and Laboratory Products
Irving, Texas Hospital and Laboratory Products
Laurinburg, North Carolina Pharmaceutical and Nutritional Products, and Hospital and Laboratory Products
Mexico City, Mexico Pharmaceutical and Nutritional Products, and Hospital and Laboratory Products
Montreal, Canada Pharmaceutical and Nutritional Products, and Hospital and Laboratory Products
Mountain View, California Hospital and Laboratory Products
North Chicago, Illinois Pharmaceutical and Nutritional Products, and Hospital and Laboratory Products
Queenborough, England Pharmaceutical and Nutritional Products, and Hospital and Laboratory Products
Rocky Mount, North Carolina Hospital and Laboratory Products
Salt Lake City, Utah Hospital and Laboratory Products
Santa Clara, California Hospital and Laboratory Products
Sligo/Donegal/Cootehill, Pharmaceutical and Nutritional Products, and Hospital and Laboratory Products
Ireland
Sturgis, Michigan Pharmaceutical and Nutritional Products
St. Remy, France Pharmaceutical and Nutritional Products, and Hospital and Laboratory Products
Tokyo, Japan Hospital and Laboratory Products
In addition to the above, the Company has manufacturing facilities in eight
other locations in the United States and Puerto Rico. Overseas manufacturing
facilities are located in 19 other countries. The Company's facilities are
deemed suitable, provide adequate productive capacity, and are utilized at
normal and acceptable levels.
In the United States and Puerto Rico, the Company owns seven distribution
centers. The Company also has twelve United States research and development
facilities located at Abbott Park, Illinois; Andover, Massachusetts; Ashland,
Ohio; Columbus, Ohio (2 locations); Irving, Texas; Long Grove, Illinois; Madera,
California; Mountain View, California; North Chicago, Illinois; Salt Lake City,
Utah; and Santa Clara, California. Overseas, the Company has research and
development facilities in Argentina, Australia, Canada, Germany, Italy, Japan,
The Netherlands, and the United Kingdom.
6
The corporate offices, all manufacturing plants, and all other facilities in
the United States and overseas are owned or leased by the Company or
subsidiaries of the Company.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various claims and legal proceedings including
(as of January 31, 1994) 7 antitrust suits and 6 investigations in connection
with the Company's sale and marketing of infant formula products, 138 product
liability cases that allege injuries to the offspring of women who ingested a
synthetic estrogen (DES) during pregnancy and 22 antitrust suits in connection
with the Company's sale and marketing of pharmaceuticals.
The infant formula antitrust suits, which are pending in various federal and
state courts, allege that the Company conspired with one or more of its
competitors to fix prices for infant formula, to rig a bid on a contract to
provide infant formula under the federal government's Special Supplemental Food
Program for Women, Infants, and Children (WIC), to deprive states of the
benefits of competition in providing rebates to the state pursuant to WIC sales,
and to restrain trade and monopolize the market for infant formula products in
violation of state and federal antitrust laws. The suits were brought on behalf
of individuals, a competitor, the Federal Trade Commission, and state
governmental agencies seeking treble damages, civil penalties, and other relief.
Three of the 7 cases are pending in state courts in Calhoun County and Shelby
County, Alabama and in Austin, Texas. The Calhoun County suit purports to be a
class action on behalf of Alabama consumers. The 4 other cases are pending in
federal courts in Los Angeles, California, Tallahassee, Florida, Baton Rouge,
Louisiana (this suit purports to be a class action on behalf of Louisiana
consumers), and Washington, D.C. The Company has filed responses to the
complaints denying all substantive allegations. The investigations are being
conducted by the Attorneys General of the states of California, Connecticut, New
York, Pennsylvania and Wisconsin and by the Canadian Bureau of Competition
Policy. The four shareholder derivative suits (which were consolidated in
federal court in Chicago, Illinois) that had been filed against certain of the
Company's officers and directors regarding the Company's sale and marketing of
infant formula products were dismissed with prejudice on January 31, 1994.
Twelve of the 22 pharmaceutical antitrust suits are pending in the United
States District Court for the Southern District of New York; 4 are pending in
state court in San Francisco County, California; the 6 remaining cases are
pending in federal district courts in San Francisco, California, Savannah,
Georgia, Minneapolis, Minnesota, Charleston, South Carolina, Austin, Texas, and
Galveston, Texas. These suits allege that various pharmaceutical manufacturers
have conspired to fix drug prices and/or to discriminate in pricing to retail
pharmacies by providing discounts to mail-order pharmacies, institutional
pharmacies, and HMOs. The suits were brought on behalf of retail pharmacies,
seek treble damages and other relief, and some purport to be class actions. The
Company intends to respond to the complaints denying all substantive
allegations.
While it is not feasible to predict the outcome of such pending claims,
proceedings, and investigations with certainty, management is of the opinion,
with which its General Counsel concurs, that their ultimate disposition should
not have a material adverse effect on the Company's financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
Officers of the Company are elected annually by the board of directors at
the first meeting held after the annual shareholders meeting. Each officer holds
office until a successor has been duly elected and qualified or until the
officer's death, resignation, or removal. Vacancies may be filled at any meeting
of the board. Any officer may be removed by the board of directors when, in its
judgment, removal would serve the best interests of the Company.
Current corporate officers, and their ages as of February 11, 1994, are
listed below. The officers' principal occupations and employment from January
1989 to present and the dates of their first
7
election as officers of the Company are also shown. Unless otherwise stated,
employment was by the Company for the period indicated. There are no family
relationships between any corporate officers or directors.
DUANE L. BURNHAM**, 52
1989 -- Vice Chairman and Chief Financial Officer, and Director.
1989 to 1990 -- Vice Chairman and Chief Executive Officer, and Director.
1990 to present -- Chairman of the Board and Chief Executive Officer, and
Director.
Elected Corporate Officer -- 1982.
THOMAS R. HODGSON**, 52
1989 to 1990 -- Executive Vice President and Director.
1990 to present -- President and Chief Operating Officer, and Director.
Elected Corporate Officer -- 1980.
ROBERT N. BECK**, 53
1989 to 1992 -- Executive Vice President, BankAmerica and Bank of America.
1992 to present -- Senior Vice President, Human Resources.
Elected Corporate Officer -- 1992.
PAUL N. CLARK**, 47
1989 to 1990 -- Vice President, Pharmaceutical Operations.
1990 to present -- Senior Vice President, Pharmaceutical Operations.
Elected Corporate Officer -- 1985.
GARY P. COUGHLAN**, 49
1989 -- Senior Vice President and Chief Financial Officer, Kraft, Inc.
1989 to 1990 -- Senior Vice President, Finance, Kraft General Foods.
1990 to present -- Senior Vice President, Finance and Chief Financial
Officer.
Elected Corporate Officer -- 1990.
LAEL F. JOHNSON**, 56
1989 -- Vice President, Secretary and General Counsel.
1989 to present -- Senior Vice President, Secretary and General Counsel.
Elected Corporate Officer -- 1981.
JOHN G. KRINGEL**, 54
1989 to 1990 -- Vice President, Hospital Products.
1990 to present -- Senior Vice President, Hospital Products.
Elected Corporate Officer -- 1981.
J. DUNCAN MCINTYRE**, 56
1989 to 1990 -- Vice President.
1990 to present -- Senior Vice President, International Operations.
Elected Corporate Officer -- 1987.
THOMAS M. MCNALLY**, 46
1989 -- Area Vice President, Pacific, Asia and Africa, Abbott International,
Ltd. (a subsidiary of the Company).
1989 to 1990 -- Vice President, Chemical and Agricultural Products.
1990 to 1993 -- Senior Vice President, Chemical and Agricultural Products.
1993 to present -- Senior Vice President, Ross Products.
Elected Corporate Officer -- 1989.
ROBERT L. PARKINSON, JR.**, 43
1989 -- Divisional Vice President, Commercial Operations.
1989 to 1990 -- Vice President, Corporate Hospital Marketing.
1990 to 1993 -- Vice President, European Operations.
8
1993 to present -- Senior Vice President, Chemical and Agricultural
Products.
Elected Corporate Officer -- 1989.
DAVID A. THOMPSON**, 52
1989 to 1990 -- Vice President, Diagnostic Operations.
1990 to present -- Senior Vice President, Diagnostic Operations.
Elected Corporate Officer -- 1982.
JOY A. AMUNDSON**, 39
1989 to 1990 -- General Manager, Alternate Site.
1990 -- Divisional Vice President and General Manager, Hospital Products
Business Sector.
1990 to 1994 -- Vice President, Corporate Hospital Marketing.
1994 to present -- Vice President, Health Systems.
Elected Corporate Officer -- 1990.
CHRISTOPHER B. BEGLEY, 41
1989 -- Director, Hospital Products Business Sector.
1989 to 1990 -- General Manager, Hospital Products Business Sector.
1990 to 1993 -- Divisional Vice President and General Manager, Hospital
Products Business Sector.
1993 -- Vice President, Hospital Products Business Sector.
Elected Corporate Officer -- 1993.
THOMAS D. BROWN, 45
1989 to 1992 -- Divisional Vice President, Western Hemisphere.
1992 to 1993 -- Divisional Vice President, Diagnostic Commercial Operations.
1993 to present -- Vice President, Diagnostic Commercial Operations.
Elected Corporate Officer -- 1993.
GARY R. BYERS**, 52
1989 to 1993 -- Divisional Vice President, Corporate Auditing.
1993 to present -- Vice President, Internal Audit.
Elected Corporate Officer -- 1993.
KENNETH W. FARMER**, 48
1989 -- Vice President, Management Information Services.
1989 to present -- Vice President, Management Information Services and
Administration.
Elected Corporate Officer -- 1985.
THOMAS C. FREYMAN**, 39
1989 to 1991 -- Treasurer, Abbott International, Ltd. (a subsidiary of the
Company).
1991 to present -- Vice President and Treasurer.
Elected Corporate Officer -- 1991.
JAY B. JOHNSTON, 50
1989 to 1992 -- President, Dainabot Co., Ltd. (an affiliate of the Company)
and General Manager Asia Pacific, Abbott Diagnostics
Division.
1992 -- Divisional Vice President, Business Development.
1992 to 1993 -- Divisional Vice President and General Manager, Diagnostic
Assays and Operations.
1993 to present -- Corporate Vice President, Diagnostic Assays and
Operations.
Elected Corporate Officer -- 1993.
JAMES J. KOZIARZ, 44
1989 to 1990 -- General Manager, Hepatitis/Retrovirus Business Sector.
1990 to 1992 -- Vice President and General Manager, Diagnostic Assays.
1992 to present -- Vice President, Diagnostic Products Research and
Development.
Elected Corporate Officer -- 1993.
9
CHRISTOPHER A. KUEBLER, 40
1989 to 1992 -- Divisional Vice President, Marketing.
1992 to 1993 -- Divisional Vice President, Sales and Marketing.
1993 to present -- Vice President, European Operations.
Elected Corporate Officer -- 1993.
JOHN F. LUSSEN**, 52
1989 to present -- Vice President, Taxes.
Elected Corporate Officer -- 1985.
DAVID V. MILLIGAN, PH.D., 53
1989 to 1992 -- Vice President, Diagnostic Products Research and
Development.
1992 to present -- Vice President, Pharmaceutical Products Research and
Development.
Elected Corporate Officer -- 1984.
RICHARD H. MOREHEAD**, 59
1989 to present -- Vice President, Corporate Planning and Development.
Elected Corporate Officer -- 1985.
THEODORE A. OLSON**, 55
1989 to present -- Vice President and Controller.
Elected Corporate Officer -- 1988.
CARL A. SPALDING, 48
1989 to 1992 -- Vice President, International, Johnson & Johnson.
1992 to present -- Vice President, General Manager, Ross Products.
Elected Corporate Officer -- 1993.
WILLIAM H. STADTLANDER, 48
1989 to 1992 -- Divisional Vice President, Medical Nutritionals.
1992 to present -- Divisional Vice President and General Manager, Medical
Nutritionals.
Elected Corporate Officer -- 1993.
DANIEL O. STRUBLE**, 53
1989 to present -- Vice President, Corporate Engineering.
Elected Corporate Officer -- 1987.
ELLEN M. WALVOORD**, 54
1989 to 1991 -- Director, Corporate Communications.
1991 -- Vice President, Investor Relations.
1991 to present -- Vice President, Investor Relations and Public Affairs.
Elected Corporate Officer -- 1991.
JOSEF WENDLER, 44
1989 to 1990 -- General Manager, Austria & Switzerland.
1990 to 1992 -- Regional Director, Europe, Diagnostic Division.
1992 to 1993 -- Divisional Vice President, Pacific, Asia, Africa.
1993 to present -- Vice President, Pacific/ Asia /Africa Operations.
Elected Corporate Officer -- 1993.
MILES D. WHITE, 38
1989 to 1990 -- Director of Marketing for the U.S., Abbott Diagnostics
Division.
1990 -- Business Unit General Manager, Physiological Diagnostics, Abbott
Diagnostics Division and Business Unit General Manager, Cancer
Diagnostics.
1990 to 1992 -- Divisional Vice President and General Manager, Hospital
Laboratory Sector.
1992 to 1993 -- Divisional Vice President and General Manager, Diagnostic
Systems and Operations.
1993 to present -- Vice President, Diagnostic Systems and Operations.
Elected Corporate Officer -- 1993.
10
DON G. WRIGHT**, 51
1989 to present -- Vice President, Corporate Quality Assurance and
Regulatory Affairs.
Elected Corporate Officer -- 1988.
- ------------------------
** Pursuant to Item 401(b) of Regulation S-K the Company has identified these
persons as "executive officers" within the meaning of Item 401(b).
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
PRINCIPAL MARKET
The principal market for the Company's common shares is the New York Stock
Exchange. Shares are also listed on the Chicago and Pacific Stock Exchanges and
are traded on the Boston, Cincinnati, and Philadelphia Exchanges. Overseas, the
Company's shares are listed on the London Stock Exchange, Tokyo Stock Exchange,
and the Swiss Stock Exchanges of Zurich, Basel, Geneva, and Lausanne.
MARKET PRICE PER SHARE
------------------------------------------
1993 1992
-------------------- --------------------
HIGH LOW HIGH LOW
--------- --------- --------- ---------
First Quarter....................................................... 30 7/8 22 5/8 34 1/8 29 3/8
Second Quarter...................................................... 28 5/8 23 1/4 34 26 1/8
Third Quarter....................................................... 27 5/8 22 3/4 31 5/8 27 3/8
Fourth Quarter...................................................... 30 1/8 26 1/8 33 26 1/2
Market prices are as reported by the New York Stock Exchange composite
transaction reporting system.
SHAREHOLDERS
There were 82,947 shareholders of record of Abbott common shares as of
December 31, 1993.
DIVIDENDS
Quarterly dividends of $.17 per share and $.15 per share were declared on
common shares in 1993 and 1992, respectively after reflecting the May 29, 1992
stock split.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated herein by reference for the years 1989 through 1993 are the
applicable portions of the section captioned "Summary of Selected Financial
Data" of the 1993 Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Incorporated herein by reference is management's discussion and analysis of
financial condition and results of operations for the years 1993, 1992, and 1991
found under the section captioned "Financial Review" of the 1993 Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated herein by reference are the portions of the 1993 Annual Report
captioned Consolidated Balance Sheet, Consolidated Statement of Income,
Consolidated Statement of Cash Flows, Consolidated Statement of Shareholders'
Investment, Notes to Consolidated Financial Statements and Report of Independent
Public Accountants (which contains the related report of Arthur Andersen & Co.
dated January 14, 1994). Data relating to quarterly interim results is found in
Note 8.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
11
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated herein by reference are "Information Concerning Nominees for
Directors" and "Compliance with Section 16(a) of The Securities Exchange Act of
1934" found in the 1994 Abbott Laboratories Proxy Statement ("1994 Proxy
Statement"), which will be filed with the Commission on or about March 4, 1994.
ITEM 11. EXECUTIVE COMPENSATION
The material in the 1994 Proxy Statement under the heading "Executive
Compensation," other than the Report of the Compensation Committee and the
Performance Graph, are hereby incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference is the text found under the caption
"Information Concerning Security Ownership" in the 1994 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference is that portion of the 1994 Proxy Statement
under the caption "Compensation Committee Interlocks and Insider Participation."
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) DOCUMENTS FILED AS PART OF THIS FORM 10-K.
1. FINANCIAL STATEMENTS: The Consolidated Financial Statements for the
years ended December 31, 1993, 1992, and 1991 and the related report of Arthur
Andersen & Co. dated January 14, 1994 appearing under the portions of the 1993
Annual Report captioned Consolidated Balance Sheet, Consolidated Statement of
Earnings, Consolidated Statement of Cash Flows, Consolidated Statement of
Shareholders' Investment, Notes to Consolidated Financial Statements and Report
of Independent Public Accountants, respectively, are incorporated by reference
in response to Item 14(a)1. With the exception of the portions of the 1993
Annual Report specifically incorporated herein by reference, such Report shall
not be deemed filed as part of this Annual Report on Form 10-K or otherwise
deemed subject to the liabilities of Section 18 of the Securities Exchange Act
of 1934.
2. FINANCIAL STATEMENT SCHEDULES: The required financial statement
schedules are found on the pages indicated below. These schedules should be read
in conjunction with the Consolidated Financial Statements in the 1993 Annual
Report:
PAGE NO./
SCHEDULES EXHIBIT NO.
- ------------------------------------------------------------------------------------------------------ ---------------
Investment Securities Maturing After One Year (Schedule I)............................................ p. 18
Property and Equipment (Schedule V)................................................................... p. 19
Accumulated Depreciation and Amortization of Property and Equipment (Schedule VI)..................... p. 20
Valuation and Qualifying Accounts (Schedule VIII)..................................................... p. 21
Short-term Borrowings (Schedule IX)................................................................... p. 22
Supplementary Consolidated Statement of Earnings Information (Schedule X)............................. p. 23
Schedules II, III, IV, VII, XI, XII, and XIII are not submitted because they are not applicable or not
required.
Supplemental Report of Independent Public Accountants................................................. Exh. 23.1
Consent of Independent Public Accountants............................................................. Exh. 23.2
Individual Financial Statements of the registrant have been omitted pursuant to Rule 3.05, paragraph
(1) of Regulation S-X.
3. EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K: The information called
for by this paragraph is incorporated herein by reference to the Exhibit Index
on pages 16 and 17 of this Form 10-K.
12
(b) REPORTS ON FORM 8-K DURING THE QUARTER ENDED DECEMBER 31, 1993:
No reports on Form 8-K were filed during the quarter ended December 31,
1993.
(c) EXHIBITS FILED (SEE EXHIBIT INDEX ON PAGES 16 AND 17).
(D) FINANCIAL STATEMENT SCHEDULES FILED (SEE PAGES 18 THROUGH 23).
13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Abbott Laboratories has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
ABBOTT LABORATORIES
By /s/ DUANE L. BURNHAM
Duane L. Burnham
Chairman of the Board and
Chief Executive Officer
Date: February 11, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Abbott
Laboratories and in the capacities and on the dates indicated:
/s/ DUANE L. BURNHAM
Duane L. Burnham
Chairman of the Board,
Chief Executive Officer, and
Director of Abbott Laboratories
(principal executive officer)
Date: February 11, 1994
/s/ GARY P. COUGHLAN
Gary P. Coughlan
Senior Vice President, Finance and
Chief Financial Officer
(principal financial officer)
Date: February 11, 1994
/s/ THOMAS R. HODGSON
Thomas R. Hodgson
President, Chief Operating Officer,
and Director of Abbott Laboratories
Date: February 11, 1994
/s/ THEODORE A. OLSON
Theodore A. Olson
Vice President and Controller
(principal accounting officer)
Date: February 11, 1994
/s/ K. FRANK AUSTEN
K. Frank Austen, M.D.
Director of Abbott Laboratories
Date: February 11, 1994
/s/ H. LAURANCE FULLER
H. Laurance Fuller
Director of Abbott Laboratories
Date: February 11, 1994
/s/ BERNARD J. HAYHOE
Bernard J. Hayhoe
Director of Abbott Laboratories
Date: February 11, 1994
/s/ ALLEN F. JACOBSON
Allen F. Jacobson
Director of Abbot Laboratories
Date: February 11, 1994
14
/s/ DAVID A. JONES
David A. Jones
Director of Abbott Laboratories
Date: February 11, 1994
/s/ BOONE POWELL, JR.
Boone Powell, Jr.
Director of Abbott Laboratories
Date: February 11, 1994
/s/ A. BARRY RAND
A. Barry Rand
Director of Abbott Laboratories
Date: February 11, 1994
/s/ W. ANN REYNOLDS
W. Ann Reynolds
Director of Abbott Laboratories
Date: February 11, 1994
/s/ WILLIAM D. SMITHBURG
William D. Smithburg
Director of Abbott Laboratories
Date: February 11, 1994
/s/ JOHN R. WALTER
John R. Walter
Director of Abbott Laboratories
Date: February 11, 1994
/s/ WILLIAM L. WEISS
William L. Weiss
Director of Abbott Laboratories
Date: February 11, 1994
15
EXHIBIT INDEX
ABBOTT LABORATORIES
ANNUAL REPORT
FORM 10-K
1993
REG.S-K
EXHIBIT
TABLE
ITEM NO.
- ----------
3.1 * ARTICLES OF INCORPORATION--ABBOTT LABORATORIES, FILED AS AN
EXHIBIT (PAGES 22-30) TO THE ABBOTT LABORATORIES 1992 ANNUAL
REPORT ON FORM 10-K.
3.2 * CORPORATE BYLAWS--ABBOTT LABORATORIES, FILED AS EXHIBIT 3 TO
THE ABBOTT LABORATORIES QUARTERLY REPORT FOR THE QUARTER
ENDED JUNE 30, 1993 ON FORM 10-Q.
10 MATERIAL CONTRACTS.
10.1 * Supplemental Plan--Abbott Laboratories Extended Disability
Plan, filed as an exhibit (pages 50-51) to the 1992 Abbott
Laboratories Annual Report on Form 10-K.
10.2 * The Abbott Laboratories 1981 Incentive Stock Program, filed
as an exhibit (pages 52-62) to the 1992 Abbott Laboratories
Annual Report on Form 10-K.
10.3 * The Abbott Laboratories 1986 Incentive Stock Program, filed
as an exhibit (pages 37-59) to the 1989 Abbott Laboratories
Annual Report on Form 10-K.
10.4 * The Abbott Laboratories 1991 Incentive Stock Program, filed
as an exhibit (pages 128-149) to the 1990 Abbott
Laboratories Annual Report on Form 10-K.
10.5 * Consulting agreement between Abbott Laboratories and K.
Frank Austen, M.D. dated September 13, 1991, filed as an
exhibit (pages 63-66) to the 1992 Abbott Laboratories Annual
Report on Form 10-K.
10.6 * Indenture dated as of October 1, 1993 between Abbott
Laboratories and Harris Trust and Savings Bank, filed as
Exhibit 4.1 to the Abbott Laboratories Quarterly Report for
the Quarter ended September 30, 1993 on Form 10-Q.
10.7 Abbott Laboratories 401(k) Supplemental Plan.
10.8 Abbott Laboratories Supplemental Pension Plan.
10.9 The 1986 Abbott Laboratories Management Incentive Plan.
10.10 Abbott Laboratories Non-Employee Directors' Fee Plan.
11 CALCULATION OF FULLY DILUTED EARNINGS PER SHARE.
12 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES.
13 THE PORTIONS OF THE ABBOTT LABORATORIES ANNUAL REPORT FOR
THE YEAR ENDED DECEMBER 31, 1993 CAPTIONED FINANCIAL REVIEW,
CONSOLIDATED BALANCE SHEET, CONSOLIDATED STATEMENT OF
EARNINGS, CONSOLIDATED STATEMENT OF CASH FLOWS, CONSOLIDATED
STATEMENT OF SHAREHOLDERS' INVESTMENT, NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS, REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS, AND THE APPLICABLE PORTIONS OF THE SECTION
CAPTIONED SUMMARY OF FINANCIAL DATA FOR THE YEARS 1989
THROUGH 1993.
16
REG.S-K
EXHIBIT
TABLE
ITEM NO.
- ----------
21 SUBSIDIARIES OF ABBOTT LABORATORIES.
23.1 SUPPLEMENTAL REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS.
23.2 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS.
THE 1994 ABBOTT LABORATORIES PROXY STATEMENT WILL BE FILED
WITH THE COMMISSION UNDER SEPARATE COVER ON OR ABOUT MARCH
4, 1994.
- ---------
* Incorporated herein by reference.
The Company will furnish copies of any of the above exhibits to a
shareholder upon written request to the Corporate Secretary, Abbott
Laboratories, One Abbott Park Road, Abbott Park, Illinois 60064-3500.
17
ABBOTT LABORATORIES AND SUBSIDIARIES
SCHEDULE I--INVESTMENT SECURITIES MATURING AFTER ONE YEAR
DECEMBER 31, 1993
(DOLLARS IN THOUSANDS)
PRINCIPAL
AMOUNT OF MARKET
NAME OF ISSUE AND TITLE OF EACH ISSUE SECURITY COST VALUE
- -------------------------------------------------------------------------- ----------- ----------- -----------
Time deposits and certificates of deposit due 1995 through 1998 at
interest rates from 7.80% to 9.50%....................................... $ 34,500 $ 34,500 $ 38,189
Debt obligations issued or guaranteed by various
governments or government agencies:
Mortgage Backed Certificates, guaranteed by Government
National Mortgage Association, due 2003 through 2012 at
interest rates from 7.25% to 16.00%.................................... 81,309 82,058 86,765
Other Notes, Certificates, and Debentures due 1995
through 2001 at interest rates from 2.70% to 14.375%................... 60,554 60,554 60,595
----------- ----------- -----------
Total debt obligations issued or guaranteed by various
governments or government agencies....................................... 141,863 142,612 147,360
Corporate debt obligations, due 1995 to 2001 at interest rates
from 2.763% to 8.875%.................................................... 44,703 44,703 46,330
----------- ----------- -----------
Total Investment Securities Maturing after One Year....................... $ 221,066 $ 221,815 $ 231,879
----------- ----------- -----------
----------- ----------- -----------
18
ABBOTT LABORATORIES AND SUBSIDIARIES
SCHEDULE V--PROPERTY AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(DOLLARS IN THOUSANDS)
BALANCE AT
BEGINNING RETIREMENTS TRANSLATION BALANCE AT
CLASSIFICATION OF YEAR ADDITIONS AND SALES ADJUSTMENTS END OF YEAR
- ---------------------------------- ---------- ------------- ---------- --------- -----------
Year Ended December 31, 1993:
Land............................ $ 120,617 $ 15,193 $ -- $ 1,826 $ 137,636
Buildings (including leasehold
and
land improvements)............ 1,064,974 209,034 (4,054) (8,334) 1,261,620
Equipment....................... 3,735,259 645,739 (145,617) (66,102) 4,169,279
Construction in Progress........ 576,291 82,766(a) (5,865) (581) 652,611
---------- ------------- ---------- --------- -----------
$5,497,141 $ 952,732 $(155,536) $(73,191) $ 6,221,146
---------- ------------- ---------- --------- -----------
---------- ------------- ---------- --------- -----------
Year Ended December 31, 1992:
Land............................ $ 64,984 $ 59,016 $ (2,934) $ (449) $ 120,617
Buildings (including leasehold
and land improvements)........ 950,810 130,844 (8,754) (7,926) 1,064,974
Equipment....................... 3,304,062 647,640 (166,162) (50,281) 3,735,259
Construction in Progress........ 465,367 169,747(a) (53,812) (5,011) 576,291
---------- ------------- ---------- --------- -----------
$4,785,223 $1,007,247 $(231,662) $(63,667) $ 5,497,141
---------- ------------- ---------- --------- -----------
---------- ------------- ---------- --------- -----------
Year Ended December 31, 1991:
Land............................ $ 64,907 $ 1,954 $ (1,093) $ (784) $ 64,984
Buildings (including leasehold
and
land improvements)............ 912,256 50,632 (4,068) (8,010) 950,810
Equipment....................... 3,016,483 475,462 (144,612) (43,271) 3,304,062
Construction in Progress........ 263,904 204,709(a) (2,496) (750) 465,367
---------- ------------- ---------- --------- -----------
$4,257,550 $ 732,757 $(152,269) $(52,815) $ 4,785,223
---------- ------------- ---------- --------- -----------
---------- ------------- ---------- --------- -----------
- ---------
(a) Net of transfers to Land, Buildings, and Equipment.
19
ABBOTT LABORATORIES AND SUBSIDIARIES
SCHEDULE VI--ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(DOLLARS IN THOUSANDS)
ADDITIONS
BALANCE AT CHARGED TO
BEGINNING COSTS AND RETIREMENTS TRANSLATION BALANCE AT
CLASSIFICATION OF YEAR EXPENSES AND SALES ADJUSTMENTS END OF YEAR
- -------------------------------------- ------------- ------------ ------------- ------------- -------------
Year Ended December 31, 1993:
Buildings (including leasehold and
land improvements)................ $ 327,876 $ 44,178 $ (3,274) $ (2,219) $ 366,561
Equipment........................... 2,070,027 439,903 (128,047) (38,289) 2,343,594
------------- ------------ ------------- ------------- -------------
$ 2,397,903 $ 484,081 $ (131,321) $ (40,508) $ 2,710,155
------------- ------------ ------------- ------------- -------------
------------- ------------ ------------- ------------- -------------
Year Ended December 31, 1992:
Buildings (including leasehold and
land improvements)................ $ 292,381 $ 40,485 $ (2,355) $ (2,635) $ 327,876
Equipment........................... 1,830,759 387,297 (117,619) (30,410) 2,070,027
------------- ------------ ------------- ------------- -------------
$ 2,123,140 $ 427,782 $ (119,974) $ (33,045) $ 2,397,903
------------- ------------ ------------- ------------- -------------
------------- ------------ ------------- ------------- -------------
Year Ended December 31, 1991:
Buildings (including leasehold and
land improvements)................ $ 260,141 $ 35,258 $ (1,074) $ (1,944) $ 292,381
Equipment........................... 1,621,627 343,759 (109,439) (25,188) 1,830,759
------------- ------------ ------------- ------------- -------------
$ 1,881,768 $ 379,017 $ (110,513) $ (27,132) $ 2,123,140
------------- ------------ ------------- ------------- -------------
------------- ------------ ------------- ------------- -------------
20
ABBOTT LABORATORIES AND SUBSIDIARIES
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
(DOLLARS IN THOUSANDS)
AMOUNTS
BALANCE AT PROVISIONS CHARGED OFF,
ALLOWANCES FOR DOUBTFUL BEGINNING CHARGED TO NET OF BALANCE AT
ACCOUNTS AND SALES DEDUCTIONS OF YEAR INCOME (A) RECOVERIES END OF YEAR
- ------------------------------------------------------ ------------ ------------ -------------- -------------
1993.................................................. $ 106,857 $ 29,441 $ (19,373) $ 116,925
------------ ------------ -------------- -------------
------------ ------------ -------------- -------------
1992.................................................. $ 82,244 $ 41,598 $ (16,985) $ 106,857
------------ ------------ -------------- -------------
------------ ------------ -------------- -------------
1991.................................................. $ 65,455 $ 32,750 $ (15,961) $ 82,244
------------ ------------ -------------- -------------
------------ ------------ -------------- -------------
- ---------
(a) Represents provisions related to allowances for doubtful accounts and the
net change in the allowances for sales deductions.
21
ABBOTT LABORATORIES AND SUBSIDIARIES
SCHEDULE IX SHORT-TERM BORROWINGS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(DOLLARS IN THOUSANDS)
1993 1992 1991
----------- ----------- -----------
Domestic:
Average Borrowings During the Year(a).................................... $ 836,888 $ 581,171 $ 409,521
Weighted Average Interest Rate During the Year(b)........................ 4.0% 4.4% 6.8%
Highest Level of Borrowings at any Month-end During the Year............. $ 981,000 $ 779,000 $ 452,000
Weighted Average Interest Rate at December 31............................ 3.6% 4.0% 6.0%
Borrowings at December 31(c)............................................. $ 750,000 $ 768,000 $ 399,000
International:
Average Borrowings During the Year(d).................................... $ 153,092 $ 175,582 $ 189,979
Weighted Average Interest Rate During the Year(b)........................ 11.6% 14.4% 17.2%
Highest Level of Borrowings at any Month-end During the Year............. $ 196,955 $ 218,526 $ 275,871
Weighted Average Interest Rate at December 31............................ 8.2% 10.6% 17.7%
Borrowings at December 31(e)............................................. $ 91,514 $ 141,116 $ 124,526
- ---------
(a) Calculated by weighting the average daily balances for the year.
(b) Calculated by dividing interest expense by average borrowings during the
year.
(c) Consists principally of commercial paper.
(d) Represents the sum of the beginning of year and month-end balances divided
by 13.
(e) Consists principally of bank loans.
22
ABBOTT LABORATORIES AND SUBSIDIARIES
SCHEDULE X-SUPPLEMENTARY CONSOLIDATED
STATEMENT OF EARNINGS INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
(DOLLARS IN THOUSANDS)
CHARGED TO COSTS AND EXPENSES
-------------------------------------
ITEM 1993 1992 1991
- --------------------------------------------------------------------------- ----------- ----------- -----------
Maintenance and Repairs.................................................... $ 200,197 $ 179,771 $ 161,721
----------- ----------- -----------
----------- ----------- -----------
Advertising................................................................ $ 143,902 $ 141,898 $ 172,386
----------- ----------- -----------
----------- ----------- -----------
Royalties.................................................................. $ 107,356 $ 104,085 $ 109,692
----------- ----------- -----------
----------- ----------- -----------
23
EXHIBIT 10.7
Adopted by Board of
Directors on 9/10/93
ABBOTT LABORATORIES 401(K) SUPPLEMENTAL PLAN
SECTION 1
INTRODUCTION
1.1 PURPOSE. This Abbott Laboratories 401(k) Supplemental Plan (the
"Plan") is being established by Abbott Laboratories ("Abbott") to provide
eligible management employees of Abbott an opportunity to accumulate capital for
their retirement or other termination of employment in excess of the
contributions allowed under the Abbott Laboratories Stock Retirement Plan
("Stock Plan").
1.2 EFFECTIVE DATE. The Plan shall be effective as of October 1, 1993.
1.3 ADMINISTRATION. The Plan shall be administered by the Compensation
Committee (the "Committee") appointed by the Board of Directors of Abbott.
SECTION 2
ELIGIBILITY AND PARTICIPATION
2.1 PERSONS ELIGIBLE TO PARTICIPATE. Participation in the Plan shall be
limited to employees who are serving as corporate officers of Abbott as of
October 1, 1993 or who become corporate officers thereafter. The term
"corporate officer" for purposes of the Plan shall mean an individual elected an
officer of Abbott by its Board of Directors (or designated as such for purposes
of the Plan by the Committee), but shall not include assistant officers. In the
event an employee should cease to be a corporate officer of Abbott due to
demotion, termination of employment or otherwise, such employee shall cease to
be eligible to participate in the Plan and any contributions then being made on
behalf of such employee shall immediately cease.
2.2 PARTICIPANT. An eligible employee may elect to participate in the
Plan by electing to have contributions made on the employee's behalf as provided
in Section 5.
SECTION 3
EMPLOYEE CONTRIBUTIONS
3.1 ALLOWABLE CONTRIBUTIONS. An eligible employee may elect to have his
employer make "pre-tax contributions" on his behalf in an amount not greater
than 18% in total of his compensation in any calendar year for services rendered
to his employer. A pre-tax contribution made by an employer on behalf of a
participant shall reduce the participant's compensation at the time of payment
of such compensation. Each election hereunder shall be in writing, and shall be
in multiples of 1% of compensation.
- 2 -
3.2 COMPENSATION. A participant's "compensation" shall have the same
meaning as that term is used in Subsection 7-2 of the Stock Plan.
3.3 MAXIMUM EMPLOYEE CONTRIBUTIONS. Notwithstanding Subsection 3.1, in no
event shall the sum of:
(a) the participant's total contributions, pre-tax contributions,
supplemental deposits and supplemental pre-tax contributions made
under the Stock Plan; plus
(b) the participant's total pre-tax contributions made under the Plan;
for any calendar year, exceed 18% of the employee's compensation for such year.
In the event the limitation described in this subsection 3.3 would be exceeded
for any participant, the participant's pre-tax contributions made under this
Plan shall be reduced until the limit is not exceeded.
SECTION 4
EMPLOYER CONTRIBUTIONS
For the calendar year ending December 31, 1993, and for each subsequent
calendar year, Abbott shall make a contribution on behalf of each participant in
the Plan who makes pre-tax contributions ("basic contributions") under the Plan
during such year at the rate of two percent (2%) of compensation in excess of,
for calendar year 1993, Two Hundred Thousand Dollars ($200,000), and for
calendar years subsequent to 1993, the limit in effect for such year under
Section 40l(a)(17), Internal Revenue Code of 1986, as amended. Such employer
contribution shall be in an amount equal to the contribution the participant
would have received under subsection 8-3 of the Stock Plan with respect to such
basic contributions had such basic contributions been made under subsection 7-1
of the Stock Plan. A participant who suspends his basic contributions to the
Plan during any calendar year shall receive an employer contribution under this
Section 4 based on the basic contributions made by the participant during such
year.
A contribution made by a participant under subsection 5.4 shall be
considered a basic contribution for purposes of this Section 4 to the extent it
includes contributions at the rate of two percent (2%) of compensation for 1993
in excess of Two Hundred Thousand Dollars ($200,000).
- 3 -
SECTION 5
ELECTIONS
5.1 ANNUAL ELECTIONS REQUIRED. Except as provided in subsections 5.2 and
5.3, a participant shall elect to make pre-tax contributions with respect to
compensation earned in any calendar year, prior to the first day of such
calendar year. Each such election shall be in writing, shall be filed with the
Committee, shall be effective only for the calendar year for which made and,
except as provided in subsection 5.2, shall be irrevocable. Notwithstanding
subsection 5.2, an employee who fails to make an election under this subsection
5.1 for a calendar year may not contribute to the Plan during such year.
5.2 LIMITED CHANGES. A participant who has elected under subsection 5.1
to make pre-tax contributions for any calendar year, may increase or decrease
such pre-tax contributions during such calendar year by filing a written
election with the Committee. A participant may make no more than two such
elections under this subsection 5.2 during such calendar year. Any election
filed under this subsection 5.2 shall become effective for compensation earned
no earlier then the first payroll period commencing after receipt of the
election by the Committee. Any election filed under this subsection 5.2 shall
remain in effect for compensation earned during the remainder of such calendar
year unless changed by a subsequent election under this subsection 5.2.
5.3 NEWLY ELIGIBLE EMPLOYEES. A newly eligible employee (including
employees who become eligible due to the adoption of the Plan) shall make the
election described in subsection 5.1 within thirty (30) days of the date he is
notified of his eligibility to participate in the Plan. Any such election shall
become effective for compensation earned no earlier then the first payroll
period commencing after receipt of the election by the Committee and shall
remain in effect for the remainder of the then current calendar year unless
changed as provided in subsection 5.2.
5.4 SPECIAL CONTRIBUTION FOR 1993. Employees who are serving as corporate
officers of Abbott and who have established "Grantor Trusts" under the 1986
Abbott Laboratories Management Incentive Plan ("MIP") as of October 1, 1993, may
elect to make a lump-sum contribution based on compensation earned during the
period of January 1, 1993 through September 30, 1993 (the "Make-up Period") by
filing an election with the Administrator and tendering payment in cash to such
Grantor Trust of the amount of the contribution, not later than October 31,
1993. Any such contribution shall not exceed the maximum contribution allowed
under subsection 3.3 based on the employee's Stock Plan contributions made, and
compensation earned, during the Make-Up Period.
- 4 -
5.5 GRANTOR TRUST ELECTION. As part of the annual elections described in
subsection 5.1, each participant may also elect to have his pre-tax and employer
contributions for such year deposited in a "Grantor Trust" established by the
participant under the circumstances and on the terms described in subsection
6.1. Any such election shall be irrevocable and shall apply to all pre-tax
contributions made during, and employer contributions made for, such calendar
year on behalf of such participant. If the participant fails to make an
election under this subsection 5.5, the participant's pre-tax contributions made
during, and employer contribution made for, such calendar year shall be retained
by Abbott and shall not be deposited in a grantor trust in the future.
SECTION 6
FUNDING EMPLOYER AND EMPLOYEE CONTRIBUTIONS
6.1 CONTRIBUTIONS TO BE DEPOSITED IN GRANTOR TRUSTS. Each participant's
pre-tax contributions and employer contributions which the participant has filed
an election under subsection 5.5 shall be retained by Abbott and credited to a
Grantor Trust Account established under subsection 7.1. As soon as practicable
after the date the value of the participant's Grantor Trust Account exceeds
Fifty Thousand Dollars ($50,000), the entire value of such account, less the
approximate aggregate federal, state and local individual income taxes
(determined under subsection 8.5) attributable to the Grantor Trust Account,
shall be deposited in a "Grantor Trust" established by the participant, provided
such trust is in a form which the Committee determines is substantially similar
to the trust attached to this Plan as Exhibit A. The appropriate aggregate
federal, state and local individual income taxes attributable to the Grantor
Trust Account shall be paid directly to the participant.
6.2 CONTRIBUTIONS TO BE RETAINED BY ABBOTT. Each participant's pre-tax
contributions and employer contributions for which the participant has not filed
an election under subsection 5.5 shall be retained by Abbott and credited to a
Deferred Account established under subsection 7.1.
6.3 AFTER ESTABLISHMENT OF GRANTOR TRUST. After a Grantor Trust has been
established by a participant under subsection 6.1, all pre-tax contributions and
employer contributions made thereafter for which the participant has filed an
election under Subsection 5.5, shall be deposited in such Grantor Trust (less
the approximate aggregate federal, state and local individual income taxes
(determined under subsection 8.5) attributable to such contributions). Such
deposits shall be made as soon as practicable after the last complete payroll
period of the calendar quarter in which the contributions are made.
- 5 -
6.4 FUNDING SPECIAL CONTRIBUTION FOR 1993. The full amount of any
contribution made by a participant under subsection 5.4 shall be deposited in
the participant's Grantor Trust established under subsection 5.1 of the MIP.
Such participant's Trust Account established under subsection 5.2 of the MIP
shall be credited with the sum of (a) the amount of such contribution, plus (b)
the amount of the approximate aggregate federal, state and local individual
income taxes (determined under subsection 6.7 of the MIP) attributable to the
sum of paragraph (a) and (b) of this subsection 6.4. Thereafter, such
contribution shall be treated for all purposes of the MIP as if it were an
allocation paid under subsection 5.1 (b) of the MIP.
SECTION 7
ACCOUNTING
7.1 SEPARATE ACCOUNTS. The Committee shall maintain two separate
Accounts, a "Deferred Account" and a "Trust Account" in the name of each
participant. The Deferred Account shall be comprised of any pre-tax
contributions made on behalf of the participant under subsection 3.1 and any
employer contributions made on behalf of the participant under Section 4, for
which the participant has not made an election under subsection 5.5, and any
adjustments made pursuant to subsection 7.2. The "Trust Account" shall be
comprised of any pre-tax contributions made on behalf of the participant under
subsection 3.1 and any employer contributions made on behalf of the participant
under Section 4, for which the participant has made an election under subsection
5.5, and any adjustments made pursuant to subsection 7.3.
7.2 ADJUSTMENT OF DEFERRED ACCOUNTS. As of the end of each calendar year,
the Administrator shall adjust each participant's Deferred Account as follows:
(a) FIRST, charge an amount equal to any payments made to the participant
during that year pursuant to subsections 7.9 or 7.10;
(b) NEXT, credit an amount equal to any pre-tax contributions and employer
contributions made on behalf of such participant for that year for
which the participant has not made an election under subsection 5.5;
and
(c) FINALLY, credit an amount equal to the Interest Accrual earned for
that year pursuant to subsection 7.4.
7.3 ADJUSTMENT OF TRUST ACCOUNTS. As of the end of each calendar year,
the Administrator shall adjust each participant's Trust Account as follows:
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(a) FIRST, charge an amount equal to the product of: (i) any payments
made to the participant during that year from the participant's
Grantor Trust (other than distributions of trust earnings in excess of
the Net Interest Accrual authorized by the administrator of the trust
to provide for the Tax Gross Up under subsection 8.4); multiplied by
(ii) a fraction, the numerator of which is the balance in the
participant's Trust Account as of the end of the prior calendar year
and the denominator of which is the balance of the participant's
Grantor Trust (as determined by the administrator of the trust) as
of that same date;
(b) NEXT, credit an amount equal to any pre-tax contributions and employer
contributions made on behalf of the participant for that year for
which the participant has made an election under subsection 5.5;
(c) FINALLY, credit an amount equal to the Interest Accrual earned for
that year pursuant to subsection 7.4.
7.4 INTEREST ACCRUALS ON ACCOUNTS. As of the end of each calendar year, a
participant's Deferred Account and Trust Account shall be credited with interest
equal to: (a) the average of the prime rates of interest charged by the two
largest banks located in the City of Chicago on loans made by them as of January
1 and the end of each month of the calendar year plus (b) two hundred
twenty-five (225) basis points. Such interest shall be credited on the
conditions established by the Committee.
7.5 GUARANTEED RATE PAYMENTS. In addition to any employer contribution
made on behalf of a participant for any calendar year pursuant to section 4,
Abbott shall also make a payment to a participant's Grantor Trust (a "Guaranteed
Rate Payment") for any year in which the net earnings of such trust do not equal
or exceed the participant's Net Interest Accrual for that year. A participant's
"Net Interest Accrual" for a year is an amount equal to: (a) the Interest
Accrual credited to the participant's Trust Account for that year; less (b) the
product of (i) the amount of such Interest Accrual, multiplied by (ii) the
aggregate of the federal, state and local individual income tax rates
(determined in accordance with subsection 8.5). The Guaranteed Rate Payment
shall equal the difference between the participant's Net Interest Accrual and
the net earnings of the participant's Grantor Trust for the year, and shall be
paid within 90 days of the end of the calendar year.
7.6 DESIGNATION OF BENEFICIARIES. Subject to the conditions and
limitations set forth below, each participant, and after a participant's death,
each primary beneficiary designated by a participant in accordance with the
provisions of this subsection 7.6, shall have the right from time to time to
designate a primary beneficiary or beneficiaries and, successive or contingent
beneficiary or beneficiaries to receive unpaid amounts from the
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participant's Deferred Account under the Plan. Beneficiaries may be a natural
person or persons or a fiduciary, such as a trustee of a trust or the legal
representative of an estate. Any such designation shall take effect upon the
death of the participant or such beneficiary, as the case may be, or in the case
of any fiduciary beneficiary, upon the termination of all of its duties (other
than the duty to dispose of the right to receive amounts remaining to be paid
under the Plan). The conditions and limitations relating to the designation of
beneficiaries are as follows:
(a) A nonfiduciary beneficiary shall have the right to designate a further
beneficiary or beneficiaries only if the original participant or the
next preceding primary beneficiary, as the case may be, shall have
expressly so provided in writing; and
(b) A fiduciary beneficiary shall designate as a further beneficiary or
beneficiaries only those persons or other fiduciaries who are entitled
to receive the amounts payable from the participant's account under
the trust or estate of which it is a fiduciary.
Any beneficiary designation or grant of any power to any beneficiary under this
subsection may be exercised only by an instrument in writing, executed by the
person making the designation or granting such power and filed with the
Secretary of Abbott during such person's lifetime or prior to the termination of
a fiduciary's duties. If a deceased participant or a deceased nonfiduciary
beneficiary who had the right to designate a beneficiary as provided above dies
without having designated a further beneficiary, or if no beneficiary designated
as provided above is living or qualified and acting, the Committee, in its
discretion, may direct distribution of the amount remaining from time to time to
either:
(i) any one or more or all of the next of kin (including the surviving
spouse) of the participant or the deceased beneficiary, as the case
may be, and in such proportions as the Committee determines; or
(ii) the legal representative of the estate of the deceased participant or
deceased beneficiary as the case may be.
7.7 NON-ASSIGNABILITY AND FACILITY OF PAYMENT. Amounts payable to
participants and their beneficiaries under the Plan are not in any way subject
to their debts and other obligations, and may not be voluntarily or
involuntarily sold, transferred or assigned; provided that the preceding
provisions of this section shall not be construed as restricting in any way a
designation right granted to a beneficiary pursuant to the terms of subsection
7.6. When a participant or the beneficiary of a participant is under legal
disability, or in the Committee's opinion is in any way incapacitated so as to
be unable to manage his or her financial
- 8 -
affairs, the Committee may direct that payments shall be made to the
participant's or beneficiary's legal representative, or to a relative or friend
of the participant or beneficiary for the benefit of the participant or
beneficiary, or the Committee may direct the payment or distribution for the
benefit of the participant or beneficiary in any manner that the Committee
determines.
7.8 PAYER OF AMOUNTS ALLOCATED TO PARTICIPANTS. Any employer contribution
made on behalf of a participant in the Plan and any interest credited thereto
(and to other contributions) will be paid by the employer (or such employer's
successor) by whom the participant was employed during the calendar year for
which any amount was allocated, and for that purpose, if a participant shall
have been employed by two or more employers during any calendar year the amount
allocated under this Plan for that year shall be an obligation of each of the
respective employers in proportion to the respective amounts of compensation
paid by each of them in that calendar year.
7.9 MANNER OF PAYMENT. Subject to subsection 7.10, a participant shall
elect the timing and manner of payment of each portion of his Deferred Account
attributable to contributions made for any calendar year, at the time of his
election for such calendar year under subsection 5.1. Notwithstanding
subsection 5.2, any election made under this subsection 7.10 shall be
irrevocable as to that portion of the Deferred Account to which the election
relates. The participant may select a payment method from any of the following
alternatives:
(a) Payment in a lump-sum as soon as practicable following the
participant's retirement or other termination of employment; or
(b) Payment under any method allowed by the Committee for deferred
accounts under the MIP.
7.10 PAYMENT UPON TERMINATION FOLLOWING CHANGE IN CONTROL.
Notwithstanding any other provisions of the Plan, if employment of any
participant with Abbott and its subsidiaries should terminate for any reason
within five (5) years after the date of a Change in Control, the aggregate
unpaid balance of the participant's Deferred Account and Trust Account, shall
be paid to the participant in a lump sum within thirty (30) days following the
date of such termination.
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7.11 CHANGE IN CONTROL. A "Change in Control" shall be deemed to have
occurred on the earliest of the following dates:
(i) The date any entity or person (including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934 (the
"Exchange Act")) shall have become the beneficial owner of, or shall
have obtained voting control over thirty percent (30%) or more of
the outstanding common shares of Abbott;
(ii) The date the shareholders of Abbott approve a definitive agreement
(A) to merge or consolidate Abbott with or into another corporation,
in which Abbott is not the continuing or surviving corporation or
pursuant to which any common shares of Abbott would be converted
into cash, securities or other property of another corporation,
other than a merger of Abbott in which holders of common shares
immediately prior to the merger have the same proportionate
ownership of common stock of the surviving corporation immediately
after the merger as immediately before, or (B) to sell or otherwise
dispose of substantially all the assets of Abbott; or
(iii) The date there shall have been a change in a majority of the Board
of Directors of Abbott within a twelve (12) month period unless the
nomination for election by Abbott's shareholders of each new
director was approved by the vote of two-thirds of the directors
then still in office who were in office at the beginning of the
twelve (12) month period.
7.12 PROHIBITION AGAINST AMENDMENT. The provisions of subsections 7.10,
7.11 and this subsection 7.12 may not be amended or deleted, nor superseded by
any other provision of this Plan, during the period beginning on the date of a
Change in Control and ending on the date five (5) years following such Change in
Control.
SECTION 8
MISCELLANEOUS
8.1 RULES. The Committee may establish such rules and regulations as it
may consider necessary or desirable for the effective and efficient
administration of the Plan.
8.2 TAXES. Any employer shall be entitled, if necessary or desirable, to
pay, or withhold the amount of any federal, state or local tax, attributable to
any amounts payable by it under the Plan after giving the person entitled to
receive such amount
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notice as far in advance as practicable, and may defer making payment of any
amount with respect to which any such tax question may be pending unless and
until indemnified to its satisfaction.
8.3 RIGHTS OF PARTICIPANTS. Employment rights of participants with Abbott
and its subsidiaries shall not be enlarged or affected by reason of
establishment of or inclusion as a participant in the Plan. Nothing contained
in the Plan shall require Abbott or any subsidiary to segregate or earmark any
assets, funds or property for the purpose of payment of any amounts which may
have been deferred. The Deferred and Trust Accounts established pursuant to
subsection 7.1 are for the convenience of the administration of the Plan and no
trust relationship with respect to such Accounts is intended or should be
implied. Participant's rights shall be limited to payment to them at the time
or times and in such amounts as are contemplated by the Plan. Any decision made
by the Committee which is within his sole and uncontrolled discretion, shall be
conclusive and binding upon all persons whomsoever.
8.4 TAX GROSS UP. In addition to the employer contribution provided under
Section 4, each participant (or, if the participant is deceased, the beneficiary
designated under the participant's Grantor Trust) shall be entitled to a Tax
Gross Up payment for each year there is a balance in his Trust Account. The
"Tax Gross Up" shall approximate: (a) the amount necessary to compensate the
participant (or beneficiary) for the net increase in the participant's (or
beneficiary's) federal, state and local income taxes as a result of the
inclusion in his taxable income of the income of the participant's Grantor Trust
and any Guaranteed Rate Payment for that year; less (b) any distribution to the
participant (or beneficiary) of his Grantor Trust's net earnings for that year;
plus (c) an amount necessary to compensate the participant (or beneficiary) for
the net increase in the taxes described in (a) above as a result of the
inclusion in his taxable income of any payment made pursuant to this subsection
8.4. Payment of the Tax Gross Up shall be made by the employers (in such
proportions as Abbott shall designate) directly from their general corporate
assets.
8.5 INCOME TAX ASSUMPTIONS. For purposes of Sections 7 and 8, a
participant's federal income tax rate shall be deemed to be the highest marginal
rate of federal individual income tax in effect in the calendar year in which a
calculation under those Sections is to be made, and state and local tax rates
shall be deemed to be the highest marginal rates of individual income tax in
effect in the state and locality of the participant's residence on the date such
a calculation is made, net of any federal tax benefits.
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8.6 GENDER. For purposes of the Plan, words in the masculine gender shall
include the feminine and neuter genders, the singular shall include the plural
and the plural shall include the singular.
8.7 MANNER OF ACTION BY COMMITTEE. A majority of the members of the
Committee qualified to act on any particular question may act by meeting or by
writing signed without meeting, and may execute any instrument or document
required or delegate to one of its members authority to sign. The Committee
from time to time may delegate the performance of certain ministerial functions
in connection with the Plan, such as the keeping of records, to such person or
persons as the Committee may select. Except as otherwise expressly provided in
the Plan, the costs of administration of the Plan will be paid by Abbott. Any
notice required to be given to, or any document required to be filed with the
Committee, will be properly given or filed if mailed or delivered in writing to
the Secretary of Abbott.
8.8 RELIANCE UPON ADVICE. The Board of Directors and the Committee may
rely upon any information or advice furnished to it by any Officer of Abbott or
by Abbott's independent auditors, or other consultants, and shall be fully
protected in relying upon such information or advice. No member of the Board of
Directors or the Committee shall be liable for any act or failure to act on
their part, excepting only any acts done or omitted to be done in bad faith, nor
shall they be liable for any act or failure to act of any other member.
SECTION 9
AMENDMENT, TERMINATION AND CHANGE OF
CONDITIONS RELATING TO PAYMENTS
The Plan will be effective from its effective date until terminated by the
Board of Directors. The Board of Directors reserves the right to amend the Plan
from time to time and to terminate the Plan at any time. No such amendment or
any termination of the Plan shall reduce any fixed or contingent obligations
which shall have arisen under the Plan prior to the date of such amendment or
termination.
EXHIBIT A
IRREVOCABLE GRANTOR TRUST AGREEMENT
THIS AGREEMENT, made this ______ day of ______________________, _____, by
and between ___________________________ of ________________________, Illinois
(the "grantor"), and The Northern Trust Company located at Chicago, Illinois, as
trustee (the "trustee"),
WITNESSETH THAT:
WHEREAS, the grantor desires to establish and maintain a trust to hold
certain benefits received by the grantor under the Abbott Laboratories 40l(k)
Supplemental Plan, as it may be amended from time to time;
NOW, THEREFORE, IT IS AGREED as follows:
ARTICLE I
INTRODUCTION
I-1. NAME. This agreement and the trust hereby evidenced (the "trust")
may be referred to as the "________________ 19___ Grantor Trust".
I-2. THE TRUST FUND The "trust fund" as at any date means all property
then held by the trustee under this agreement.
I-3. STATUS OF THE TRUST. The trust shall be irrevocable. The trust is
intended to constitute a grantor trust under Sections 671-678 of the Internal
Revenue Code, as amended, and shall be construed accordingly.
I-4. THE ADMINISTRATOR. Abbott Laboratories ("Abbott") shall act as the
"administrator" of the trust, and as such shall have certain powers, rights and
duties under this agreement as described below. Abbott will certify to the
trustee from time to time the person or persons authorized to act on behalf of
Abbott as the administrator. The trustee may rely on the latest certificate
received without further inquiry or verification.
I-5. ACCEPTANCE. The trustee accepts the duties and obligations of the
"trustee" hereunder, agrees to accept funds delivered to it by the grantor or
the administrator, and agrees to hold such funds (and any proceeds from the
investment of such funds) in trust in accordance with this agreement.
ARTICLE II
DISTRIBUTION OF THE TRUST FUND
II-1. DEFERRED ACCOUNT. The administrator shall maintain a "deferred
account" under the trust. As of the end of each calendar year, the
administrator shall charge the deferred account
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with all distributions made from such account during that year; and credit such
account with income and realized gains and charge such account with expenses and
realized losses for the year.
II-2. DISTRIBUTIONS FROM THE DEFERRED ACCOUNT PRIOR TO THE GRANTOR'S
DEATH. Principal and accumulated income credited to the deferred account shall
not be distributed from the trust prior to the grantor's retirement or other
termination of employment with Abbott or a subsidiary of Abbott (the grantor's
"settlement date"); provided that, each year the administrator may direct the
trustee to distribute to the grantor a portion of the income of the deferred
account for that year, with the balance of such income to be accumulated in that
account. The administrator shall inform the trustee of the grantor's settlement
date. Thereafter, the trustee shall distribute the amounts from time to time
credited to the deferred account to the grantor, if then living, either in a
lump-sum payable as soon as practicable following the settlement date, or in a
series of annual installments, with the amount of each installment computed by
one of the following methods:
(a) The amount of each installment shall be equal to the sum of: (i) the
amount credited to the deferred account as of the end of the year in
which the grantor's settlement date occurs, divided by the number of
years over which installments are to be distributed; plus (ii) the net
earnings credited to the deferred account for the preceding year
(excluding the year in which the grantor's settlement date occurs).
(b) The amount of each installment shall be determined by dividing the
amount credited to the deferred account as of the end of the preceding
year by the difference between (i) the total number of years over
which installments are to be distributed, and (ii) the number of
annual installment distributions previously made from the deferred
account.
(c) Each installment (after the first installment) shall be approximately
equal, with the amount comprised of the sum of: (i) the amount of the
first installment, plus interest thereon at the rate determined under
the Abbott Laboratories 401(k) Supplemental Plan, compounded annually;
and (ii) the net earnings credited to the deferred account for the
preceding year.
Notwithstanding the foregoing, the final installment distribution made to the
grantor under this paragraph II-3 shall equal the total principal and
accumulated income then held in the trust fund. The grantor, by writing filed
with the trustee and the administrator on or before the end of the calendar year
in which the grantor's settlement date occurs, may select either the lump-sum or
an installment payment method and, if an installment method is selected, may
select both the period (which may not be less
- 3 -
than ten years from the end of the calendar year in which the grantor's
settlement date occurred) over which the installment distributions are to be
made and the method of computing the amount of each installment. In the absence
of such a written direction by the grantor, installment distributions shall be
made over a period of ten years, and the amount of each installment shall be
computed by using the method described in subparagraph (a) next above.
Installment distributions under this Paragraph II-2 shall be made as of January
1 of each year, beginning with the calendar year following the year in which the
grantor's settlement date occurs. The administrator shall inform the trustee of
the amount of each installment distribution under this paragraph II-2, and the
trustee shall be fully protected in relying on such information received from
the administrator.
II-3. DISTRIBUTIONS FROM THE TRUST FUND AFTER THE GRANTOR'S DEATH. The
grantor, from time to time may name any person or persons (who may be named
contingently or successively and who may be natural persons or fiduciaries) to
whom the principal of the trust fund and all accrued or undistributed income
thereof shall be distributed in a lump sum or, if the beneficiary is the
grantor's spouse, in installments, as directed by the grantor, upon the
grantor's death. If the grantor directs an installment method of distribution,
any amounts remaining at the death of the spouse beneficiary shall be
distributed in a lump sum. Each designation shall revoke all prior
designations, shall be in writing and shall be effective only when filed by
the grantor with the administrator during the grantor's lifetime. If the
grantor fails to direct a method of distribution, the distribution shall be
made in a lump sum. If the grantor fails to designate a beneficiary as
provided above, then on the grantor's death, the trustee shall distribute the
balance of the trust fund in a lump sum to the executor or administrator of
the grantor's estate.
II-4. FACILITY OF PAYMENT. When a person entitled to a distribution
hereunder is under legal disability, or, in the trustee's opinion, is in any way
incapacitated so as to be unable to manage his or her financial affairs, the
trustee may make such distribution to such person's legal representative, or to
a relative or friend of such person for such person's benefit. Any distribution
made in accordance with the preceding sentence shall be a full and complete
discharge of any liability for such distribution hereunder.
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II-5. PERPETUITIES. Notwithstanding any other provisions of this
agreement, on the day next preceding the end of 21 years after the death of the
last to die of the grantor and the grantor's descendants living on the date of
this instrument, the trustee shall immediately distribute any remaining balance
in the trust to the beneficiaries then entitled to distributions hereunder.
ARTICLE III
MANAGEMENT OF THE TRUST FUND
III-1. GENERAL POWERS. The trustee shall, with respect to the trust fund,
have the following powers, rights and duties in addition to those provided
elsewhere in this agreement or by law:
(a) Subject to the limitations of subparagraph (b) next below, to sell,
contract to sell, purchase, grant or exercise options to purchase, and
otherwise deal with all assets of the trust fund, in such way, for
such considerations, and on such terms and conditions as the trustee
decides.
(b) To retain in cash such amounts as the trustee considers advisable; and
to invest and reinvest the balance of the trust fund, without
distinction between principal and income, in obligations of the United
States Government and its agencies or which are backed by the full
faith and credit of the United States Government or in any mutual
fund, common trust fund or collective investment fund which invests
solely in such obligations; and any such investment made or retained
by the trustee in good faith shall be proper despite any resulting
risk or lack of diversification or marketability.
(c) To deposit cash in any depositary (including the banking department of
the bank acting as trustee) without liability for interest, and to
invest cash in savings accounts or time certificates of deposit
bearing a reasonable rate of interest in any such depositary.
(d) To invest, subject to the limitations of subparagraph (b) above, in
any common or commingled trust fund or funds maintained or
administered by the trustee solely for the investment of trust funds.
(e) To borrow from anyone, with the administrator's approval, such sum or
sums from time to time as the trustee considers desirable to carry out
this trust, and to mortgage or pledge all or part of the trust fund as
security.
- 5 -
(f) To retain any funds or property subject to any dispute without
liability for interest and to decline to make payment or delivery
thereof until final adjudication by a court of competent jurisdiction
or until an appropriate release is obtained.
(g) To begin, maintain or defend any litigation necessary in connection
with the administration of this trust, except that the trustee shall
not be obliged or required to do so unless indemnified to the
trustee's satisfaction.
(h) To compromise, contest, settle or abandon claims or demands.
(i) To give proxies to vote stocks and other voting securities, to join in
or oppose (alone or jointly with others) voting trusts, mergers,
consolidations, foreclosures, reorganizations, liquidations, or other
changes in the financial structure of any corporation, and to exercise
or sell stock subscription or conversion rights.
(j) To hold securities or other property in the name of a nominee, in a
depositary, or in any other way, with or without disclosing the trust
relationship.
(k) To divide or distribute the trust fund in undivided interests or
wholly or partly in kind.
(l) To pay any tax imposed on or with respect to the trust; to defer
making payment of any such tax if it is indemnified to its
satisfaction in the premises; and to require before making any payment
such release or other document from any lawful taxing authority and
such indemnity from the intended payee as the trustee considers
necessary for its protection.
(m) To deal without restriction with the legal representative of the
grantor's estate or the trustee or other legal representative of any
trust created by the grantor or a trust or estate in which a
beneficiary has an interest, even though the trustee, individually,
shall be acting in such other capacity, without liability for any loss
that may result.
(n) To appoint or remove by written instrument any bank or corporation
qualified to act as successor trustee, wherever located, as special
trustee as to part or all of the trust fund, including property as to
which the trustee does not act, and such special trustee, except as
specifically limited or provided by this or the appointing instrument,
shall have all
- 6 -
of the rights, titles, powers, duties, discretions and immunities of
the trustee, without liability for any action taken or omitted to be
taken under this or the appointing instrument.
(o) To appoint or remove by written instrument any bank, wherever located,
as custodian of part or all of the trust fund, and each such custodian
shall have such rights, powers, duties and discretions as are
delegated to it by the trustee.
(p) To employ agents, attorneys, accountants or other persons, and to
delegate to them such powers as the trustee considers desirable, and
the trustee shall be protected in acting or refraining from acting on
the advice of persons so employed without court action.
(q) To perform any and all other acts which in the trustee's judgment are
appropriate for the proper management, investment and distribution of
the trust fund.
III-2. PRINCIPAL AND INCOME. Any income earned on the trust fund which is
not distributed as provided in Article II shall be accumulated and from time to
time added to the principal of the trust. The grantor's interest in the trust
shall include all assets or other property held by the trustee hereunder,
including principal and accumulated income.
III-3. STATEMENTS. The trustee shall prepare and deliver monthly to the
administrator and annually to the grantor, if then living, otherwise to each
beneficiary then entitled to distributions under this agreement, a statement (or
series of statements) setting forth (or which taken together set forth) all
investments, receipts, disbursements and other transactions effected by the
trustee during the reporting period; and showing the trust fund and the value
thereof at the end of such period.
III-4. COMPENSATION AND EXPENSES. All reasonable costs, charges and
expenses incurred in the administration of this trust, including compensation to
the trustee, any compensation to agents, attorneys, accountants and other
persons employed by the trustee, and expenses incurred in connection with the
sale, investment and reinvestment of the trust fund shall be paid from the trust
fund.
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ARTICLE IV
GENERAL PROVISIONS
IV-1. INTERESTS NOT TRANSFERABLE. The interests of the grantor or other
persons entitled to distributions hereunder are not subject to their debts or
other obligations and may not be voluntarily or involuntarily sold, transferred,
alienated, assigned or encumbered.
IV-2. DISAGREEMENT AS TO ACTS. If there is a disagreement between the
trustee and anyone as to any act or transaction reported in any accounting, the
trustee shall have the right to a settlement of its account by any proper court.
IV-3. TRUSTEE'S OBLIGATIONS. No power, duty or responsibility is imposed
on the trustee except as set forth in this agreement. The trustee is not
obliged to determine whether funds delivered to or distributions from the trust
are proper under the trust, or whether any tax is due or payable as a result of
any such delivery or distribution. The trustee shall be protected in making any
distribution from the trust as directed pursuant to Article II without inquiring
as to whether the distributee is entitled thereto; and the trustee shall not be
liable for any distribution made in good faith without written notice or
knowledge that the distribution is not proper under the terms of this agreement.
IV-4. GOOD FAITH ACTIONS. The trustee's exercise or non-exercise of its
powers and discretions in good faith shall be conclusive on all persons. No one
shall be obliged to see to the application of any money paid or property
delivered to the trustee. The certificate of the trustee that it is acting
according to this agreement will fully protect all persons dealing with the
trustee.
IV-5. WAIVER OF NOTICE. Any notice required under this agreement may be
waived by the person entitled to such notice.
IV-6. CONTROLLING LAW. The laws of the State of Illinois shall govern the
interpretation and validity of the provisions of this agreement and all
questions relating to the management, administration, investment and
distribution of the trust hereby created.
IV-7. SUCCESSORS. This agreement: shall be binding on all persons
entitled to distributions hereunder and their respective heirs and legal
representatives, and on the trustee and its successors.
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ARTICLE V
CHANGES IN TRUSTEE
V-1. RESIGNATION OR REMOVAL OF TRUSTEE. The trustee may resign at any
time by giving thirty days' advance written notice to the administrator and the
grantor. The administrator may remove a trustee by written notice to the
trustee and the grantor.
V-2. APPOINTMENT OF SUCCESSOR TRUSTEE. The administrator shall fill any
vacancy in the office of trustee as soon as practicable by written notice to the
successor trustee; and shall give prompt written notice thereof to the grantor,
if then living, otherwise to each beneficiary then entitled to payments or
distributions under this agreement. A successor trustee shall be a bank (as
defined in Section 581 of the Internal Revenue Code, as amended).
V-3. DUTIES OF RESIGNING OR REMOVED TRUSTEE AND OF SUCCESSOR TRUSTEE. A
trustee that resigns or is removed shall furnish promptly to the administrator
and the successor trustee an account of its administration of the trust from the
date of its last account. Each successor trustee shall succeed to the title to
the trust fund vested in its predecessor without the signing or filing of any
instrument, but each predecessor trustee shall execute all documents and do all
acts necessary to vest such title of record in the successor trustee. Each
successor trustee shall have all the powers conferred by this agreement as if
originally named trustee. No successor trustee shall be personally liable for
any act or failure to act of a predecessor trustee. With the approval of the
administrator, a successor trustee may accept the account furnished and the
property delivered by a predecessor trustee without incurring any liability for
so doing, and such acceptance will be complete discharge to the predecessor
trustee.
ARTICLE VI
AMENDMENT AND TERMINATION
VI-1. AMENDMENT. With the consent of the administrator, this trust may be
amended from time to time by the grantor, if then living, otherwise by a
majority of the beneficiaries then entitled to payments or distributions
hereunder, except as follows:
(a) The duties and liabilities of the trustee cannot be changed
substantially without its consent.
(b) This trust may not be amended so as to make the trust
revocable.
VI-2. TERMINATION. This Trust Shall Not Terminate, and all rights,
titles, powers, duties, discretions and immunities imposed on or reserved to
the trustee, the administrator, the grantor and the beneficiaries shall
continue in effect, until all
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assets of the trust have been distributed by the trustee as provided in Article
II.
* * *
IN WITNESS WHEREOF, the grantor and the trustee have executed this
agreement as of the day and year first above written.
Grantor______________________________
The Northern Trust Company as Trustee
By___________________________________
Its__________________________________
EXHIBIT 10.8
Adopted by Board of Directors 12/13/85.
Amended by Board of Review 3/13/86,
12/11/86, 3/ll/87, 3/4/88, 12/9/88, 3/9/89,
10/1/89, 12/21/90, 6/1/92 and 9/30/93.
ABBOTT LABORATORIES SUPPLEMENTAL PENSION PLAN
SECTION 1
INTRODUCTION
1-1. On September 9, 1977, December 14, 1979 and February 10, 1984 the
Board of Directors of Abbott Laboratories ("Abbott") adopted certain resolutions
providing for payment of (i) pension benefits calculated under the Abbott
Laboratories Annuity Retirement Plan ("Annuity Plan") in excess of those which
may be paid under that plan under the limits imposed by Section 415 of the U.S.
Internal Revenue Code, as amended, and the Employee Retirement Income Security
Act ("ERISA") and (ii) the additional pension benefits that would be payable
under the Annuity Plan if deferred awards under the Abbott Laboratories
Management Incentive Plan were included in "final earnings" as defined in the
Annuity Plan.
On February 10, 1984 the Board of Directors of Abbott also adopted a
resolution (this and the resolutions described above being hereinafter referred
to as the "prior resolutions") allowing participants in the Abbott Laboratories
Stock Retirement Plan Stock Plan to elect "supplemental pay conversion"
contributions in excess of the limits imposed by Section 415 of the U.S.
Internal Revenue Code, as amended.
The purpose of this ABBOTT LABORATORIES SUPPLEMENTAL PENSION PLAN (the
"Supplemental Plan") is to clarify, restate and supersede the prior resolutions.
1-2. The Supplemental Plan shall apply to employees of Abbott and its
subsidiaries and affiliates existing as of the date of
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adoption of the Supplemental Plan or thereafter created or acquired. (Abbott
and each of such subsidiaries and affiliates are hereinafter referred to as an
"employer" and collectively as the "employers").
1-3. All benefits provided under the Supplemental Plan shall be provided
from the general assets of the employers and not from any trust fund or other
designated asset. All participants in the Supplemental Plan shall be general
creditors of the employers with no priority over other creditors.
1-4. The Supplemental Plan shall be administered by the Abbott
Laboratories Employee Benefit Board of Review appointed and acting under the
Annuity Plan ("Board of Review"). Except as stated below, the Board of Review
shall perform all powers and duties with respect to the Supplemental Plan,
including the power to direct payment of benefits, allocate costs among
employers, adopt amendments and determine questions of interpretation. The
Board of Directors of Abbott shall have the sole authority to terminate the
Supplemental Plan.
SECTION 2
ERISA ANNUITY PLAN SUPPLEMENTAL BENEFIT
2-1. The benefits described in this Section 2 shall apply to all
participants in the Annuity Plan who retire, or terminate with a vested pension
under that plan, on or after September 9, 1977.
2-2. Each Annuity Plan participant whose retirement or vested pension
under that plan would otherwise be limited by Section 415, Internal Revenue
Code, shall receive a supplemental pension under this Supplemental Plan in an
amount, which, when added to his or her
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Annuity Plan pension, will equal the amount the participant would be entitled
to under the Annuity Plan as in effect from time to time, based on the
particular option selected by the participant, without regard to the limitations
imposed by Section 415, Internal Revenue Code.
SECTION 3
1986 TAX REFORM ACT SUPPLEMENTAL BENEFIT
3-1. The benefits described in this Section 3 shall apply to all
participants in the Annuity Plan who retire, or terminate with a vested pension
under that plan, after December 31, 1988.
3-2. Each Annuity Plan participant shall receive a supplemental pension
under this Supplemental Plan in an amount determined as follows:
(a) The supplemental pension shall be the difference, if any, between:
(i) The monthly benefit payable under the Annuity Plan plus any
supplement provided by Section 2; and
(ii) The monthly benefit which would have been payable under the
Annuity Plan (without regard to the limits imposed by Section
415, Internal Revenue Code) if the participant's "final
earnings", as defined in the Annuity Plan had included
compensation in excess of the limits imposed by Section
401(a)(17), Internal Revenue Code and any "pre-tax
contributions" made by the participant under the Abbott
Laboratories Supplemental 401(k) Plan.
SECTION 4
DEFERRED MIP ANNUITY PLAN SUPPLEMENTAL BENEFIT
4-1. The benefits described in this Section 4 shall apply to all
participants in the Annuity Plan who retire, or terminate with a vested pension,
under that plan, on or after December 14, 1979 and who were awarded Management
Incentive Plan awards for any calendar
- 4 -
year during the ten consecutive calendar years ending with the year of
retirement or termination of employment.
4-2. Each Annuity Plan participant shall receive a supplemental pension
under this Supplemental Plan in an amount determined as follows:
(a) The supplemental pension shall be the difference, if any, between:
(i) The monthly benefit payable under the Annuity Plan plus any
supplement provided by Section 2 and Section 3; and
(ii) the monthly benefit which would have been payable under the
Annuity Plan (without regard to the limits imposed by Section
415, Internal Revenue Code) if the participant's "final
earnings", as defined in the Annuity Plan, were one-sixtieth of
the sum of:
(A) the participant's total "basic earnings" (excluding any
payments under the Management Incentive Plan or any
Division Incentive Plan) received in the sixty consecutive
calendar months for which his basic earnings (excluding any
payments under the Management Incentive Plan or any
Division Incentive Plan) were highest within the last one
hundred twenty consecutive calendar months immediately
preceding his retirement or termination of employment; and
(B) the amount of the participant's total awards under the
Management Incentive Plan and any Division Incentive Plan
(whether paid immediately or deferred) made for the five
consecutive calendar years during the ten consecutive
calendar years ending with the year of retirement or
termination for which such amount is the greatest and (for
participants granted Management Incentive Plan awards for
less than five consecutive calendar years during such ten
year period) which include all Management Incentive Plan
awards granted for consecutive calendar years within such
ten year period.
(b) That portion of any Management Incentive Plan award which the
Compensation Committee has determined shall be excluded from the
participant's "basic earnings" shall be
- 5 -
excluded from the calculation of "final earnings" for purposes of this
subsection 4-2. "Final earnings" for purposes of this subsection 4-2
shall include any compensation in excess of the limits imposed by
Section 401(a)(17), Internal Revenue Code.
(c) In the event the period described in subsection 4-2(a)(ii)(B) is the
final five calendar years of employment and a Management Incentive
Plan award is made to the participant subsequent to retirement for the
participant's final calendar year of employment, the supplemental
pension shall be adjusted by adding such new award and subtracting a
portion of the earliest Management Incentive Plan award included in
the calculation, from the amount determined under subsection
4-2(a)(ii)(B). The portion subtracted shall be equal to that portion
of the participant's final calendar year of employment during which
the participant was employed by Abbott. If such adjustment results in
a greater supplemental pension, the greater pension shall be paid
beginning the first month following the date of such new award.
SECTION 5
CORPORATE OFFICER ANNUITY PLAN SUPPLEMENTAL BENEFIT
5-1. The benefits described in this Section 5 shall apply to all
participants in the Annuity Plan who are corporate officers of Abbott as of
September 30, 1993 or who become corporate officers thereafter, and who retire,
or terminate with a vested pension under that plan on or after September 30,
1993. The term "corporate officer" for purposes of this Section 5 shall mean an
individual elected an officer of Abbott by its Board of Directors (or designated
as such for purposes of this Section 5 by the Compensation Committee of the
Board of Directors of Abbott), but shall not include assistant officers.
5-2. Subject to the limitations and adjustments described below, each
participant described in subsection 5-1 shall receive a monthly supplemental
pension under this Supplemental Plan commencing on the participant's normal
retirement date under the Annuity Plan
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and payable as a life annuity, equal to 6/10 of 1 percent (.006) of the
participant's final earnings (as defined in subsection 4-6 of the Annuity Plan
but without regard to the limit imposed by Section 401(a)(17) of the Internal
Revenue Code) for each of the first twenty years of the participant's benefit
service (as defined in the Annuity Plan) occurring after the participant's
attainment of age 35.
5-3. In no event shall the sum of (a) the participant's aggregate
percentage of final earnings calculated under subsection 5-2 and (b) the
participant's aggregate percentage of final earnings calculated under subsection
5-1(b)(i) of the Annuity Plan, exceed the maximum aggregate percentage of final
earnings allowed under subsection 5-1(b)(i) of the Annuity Plan (without regard
to any limits imposed by the Internal Revenue Code), as in effect on the date of
the participant's retirement or termination. In the event the limitation
described in this subsection 5-3 would be exceeded for any participant, the
participant's aggregate percentage calculated under subsection 5-2 shall be
reduced until the limit is not exceeded.
5-4. Benefit service occurring between the date a participant ceases to be
a corporate officer of Abbott and the date the participant again becomes a
corporate officer of Abbott shall be disregarded in calculating the
participant's aggregate percentage under subsection 5-2.
5-5. Any supplemental pension otherwise due a participant under this
Section 5 shall be reduced by the amount (if any) by which:
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(a) the sum of (i) the benefits due such participant under the Annuity
Plan and this Supplemental Plan, plus (ii) the actuarially equivalent
value of the employer-paid portion of all benefits due such
participant under the primary retirement plans of all non-Abbott
employers of such participant; exceeds
(b) the maximum benefit that would be due under the Annuity Plan (without
regard to any limits imposed by Section 415 or other provisions of the
Internal Revenue Code) based on the participant's actual final
earnings (as defined in subsection 4-6 of the Annuity Plan but without
regard to the limit imposed by Section 401(a)(17) of the Internal
Revenue Code), if the participant had accrued the maximum benefit
service recognized by the Annuity Plan.
The term "primary retirement plan" shall mean any pension benefit plan as
defined in ERISA, whether or not qualified under the Internal Revenue Code,
which is determined by the Board of Review to be the primary pension plan of its
sponsoring employer. The term "non-Abbott employer" shall mean any employer
other than Abbott or a subsidiary or affiliate of Abbott. A retirement plan
maintained by an employer prior to such employer's acquisition by Abbott shall
be deemed a retirement plan maintained by a non-Abbott employer for purposes of
this subsection 5-5.
5-6. Any supplemental pension due a participant under this Section 5 shall
be actuarially adjusted as provided in the Annuity Plan to reflect the pension
form selected by the participant and the participant's age at commencement of
the pension, and shall be paid as provided in subsection 6-2.
SECTION 6
CORPORATE OFFICER ANNUITY PLAN
SUPPLEMENTAL EARLY RETIREMENT BENEFIT
6-1. The benefits described in this Section 6 shall apply to all persons
described in subsection 5-1.
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6-2. The supplemental pension due under Sections 2, 3, 4 and 5 to each
participant described in subsection 6-1 shall be reduced as provided in
subsections 5-3 and 5-6 of the Annuity Plan for each month by which its
commencement date precedes the last day of the month in which the participant
will attain age 60. No reduction will be made for the period between the last
day of the months the participant will attain age 60 and age 62.
6-3. Each participant described in subsection 6-1 shall receive a monthly
supplemental pension under this Supplemental Plan equal to any reduction made in
such participant's Annuity Plan pension under subsections 5-3 or 5-6 of the
Annuity Plan for the period between the last day of the months the participant
will attain age 60 and age 62.
SECTION 7
ERISA STOCK PLAN SUPPLEMENTAL BENEFIT
7-1. This Section 7 shall apply to any employee who participates in the
Stock Plan at any time during the period commencing January l, 1984 and ending
December 31, 1986 and shall apply only to supplemental pay conversion
contributions made by such participant during such period.
7-2. All "supplemental pay conversion" contributions as defined in the
Stock Plan elected by participants in that plan in excess of the limits imposed
on each such participant by Section 415, Internal Revenue Code, (the
"supplemental contributions") shall not be paid over to the Abbott Laboratories
Stock Retirement Trust (the "Stock Trust"), but shall be retained by the
participant's employer and credited by Abbott to bookkeeping accounts maintained
- 9 -
for each such participant corresponding to the investment alternatives available
under the Stock Plan (the "bookkeeping accounts").
7-3. Each participant's supplemental contributions shall be allocated
among his or her bookkeeping accounts in the same proportions as the
participant's supplemental pay conversion contributions are allocated among the
investment alternatives available under the Stock Plan.
7-4. Each participant's supplemental contributions allocated to his or her
bookkeeping account for Abbott common shares shall be credited with the same
dividends and appreciation such contributions would have earned had they been
deposited in the Stock Trust and invested solely in Abbott common shares. Each
participant's supplemental contributions allocated to his or her bookkeeping
accounts for other investment alternatives shall be credited with the same rate
of return such contributions would have earned had they been deposited in the
Stock Trust and invested solely in such investment alternative.
7-5. The amounts credited to each participant's bookkeeping accounts shall
be distributed to such participant or his or her beneficiary in the manner
described in subsection 8-2 or 8-3.
7-6. Each distribution from a participant's bookkeeping account for Abbott
common shares shall be increased by an amount which, after provision for any
federal income tax applicable to such amount, will equal the difference between
the then applicable maximum ordinary income and long-term capital gain federal
income tax rates applied to that portion of the distribution which exceeds
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the sum of the participant's supplemental contributions allocated to that
account and the imputed dividends thereon.
SECTION 8
MISCELLANEOUS
8-1. For purposes of this Supplemental Plan, the term "Management
Incentive Plan" shall mean the Abbott Laboratories 1971 Management Incentive
Plan, the Abbott Laboratories 1981 Management Incentive Plan and all successor
plans to those plans.
8-2. The supplemental pensions described in Sections 2, 3, 4, 5 and 6
shall be paid to the participant or his or her beneficiary based on the
particular pension option elected by the participant, in the same manner, at the
same time, for the same period and on the same terms and conditions as the
pension payable to the participant or his beneficiary under the Annuity Plan.
In the event a participant is paid his or her pension under the Annuity Plan in
a lump sum, any supplemental pension due under Sections 2, 3, 4, 5 or 6 shall
likewise be paid in a lump sum. All amounts credited to a participant under
Section 7 shall be distributed to the participant or his or her beneficiary in
the same manner, at the same time and on the same terms and conditions as the
distribution of the participant's interest in the Stock Trust. Notwithstanding
the foregoing provisions of this subsection 8-2: (a) if the present value of the
vested supplemental pensions described in Sections 2, 3, 4, 5 and 6 of a
participant who is actively employed by Abbott exceeds $100,000, then payment of
such pensions shall be made to the participant under Section 9 below; and (b)
the amount credited to a participant under Section 7 shall be paid to the
participant
- 11 -
under Section 10 below; and (c) if the monthly vested supplemental pensions,
expressed as a straight life annuity, due a participant or his or her
beneficiary under Sections 2, 3, 4, 5 and 6 do not exceed an aggregate of One
Hundred Fifty Dollars ($150.00) as of the commencement date of the pension
payable such participant or his or her beneficiary under the Annuity Plan, and
payment of such supplemental pension has not previously been made under Section
9, the present value of such supplemental pensions shall be paid such
participant or beneficiary in a lump-sum.
8-3. Notwithstanding any other provisions of this Supplemental Plan, if
employment of any participant with Abbott and its subsidiaries and affiliates
should terminate for any reason within five (5) years after the date of a Change
in Control:
(a) All amounts credited to the participant under Section 7 shall be paid
to the participant in a lump sum within thirty (30) days following
such termination;
(b) The present value of any supplemental pension due the participant
under Section 2 (whether or not then payable) shall be paid to the
participant in a lump sum within thirty (30) days following such
termination; and
(c) The present value of any supplemental pension due the participant
under Sections 3 or 4 (whether or not then payable) shall be paid to
the participant in a lump sum within thirty (30) days following such
termination.
The supplemental pension described in paragraph (b) shall be computed using as
the applicable limit under Section 415, Internal Revenue Code, such limit as is
in effect on the termination date and based on the assumption that the
participant will receive his or her Annuity Plan pension in the form of a
straight life annuity with no
- 12 -
ancillary benefits. The present values of the supplemental pensions described
in paragraphs (b) and (c) shall be computed as of the date of payment by using
an interest rate equal to the Pension Benefit Guaranty Corporation interest rate
applicable to an immediate annuity, as in effect on the date of payment.
8-4. For purposes of subsection 8-3, a "Change in Control" shall be
deemed to have occurred on the earliest of the following dates:
(a) The date any entity or person (including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934 (the "Exchange
Act")) shall have become the beneficial owner of, or shall have
obtained voting control over thirty percent (30%) or more of the
outstanding common shares of the Company;
(b) The date the shareholders of the Company approve a definitive
agreement (A) to merge or consolidate the Company with or into another
corporation, in which the Company is not the continuing or surviving
corporation or pursuant to which any common shares of the Company
would be converted into cash, securities or other property of another
corporation, other than a merger of the Company in which holders of
common shares immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation
immediately after the merger as immediately before, or (B) to sell or
otherwise dispose of substantially all the assets of the Company; or
(c) The date there shall have been a change in a majority of the Board of
Directors of the Company within a twelve (12) month period unless the
nomination for election by the Company's shareholders of each new
director was approved by the vote of two-thirds of the directors then
still in office who were in office at the beginning of the twelve (12)
month period.
8-5. The provisions of subsections 8-3, 8-4 and this subsection 8-5 may
not be amended or deleted, nor superseded by any
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other provisions of this Supplemental Plan, during the period beginning on the
date of a Change in Control and ending on the date five years following such
Change in Control.
8-6. All benefits due under this Supplement Plan shall be paid by Abbott
and Abbott shall be reimbursed for such payments by the employee's employer. In
the event the employee is employed by more than one employer, each employer
shall reimburse Abbott in proportion to the period of time the employee was
employed by such employer, as determined by the Board of Review in its sole
discretion.
8-7. The benefits under the Supplemental Plan are not in any way subject
to the debts or other obligations of the persons entitled to benefits and may
not be voluntarily or involuntarily sold, transferred to assigned.
8-8. Nothing contained in this Supplemental Plan shall confer on any
employee the right to be retained in the employ of Abbott or any of its
subsidiaries or affiliates.
8-9. Upon adoption of this Supplemental Plan, the prior resolutions shall
be deemed rescinded.
SECTION 9
ALTERNATE PAYMENT OF SUPPLEMENTAL PENSIONS
9-1. If, as of any December 31, the present value of the supplemental
pensions described in Sections 2, 3, 4, 5 and 6 of a participant who is actively
employed by Abbott exceeds $100,000, then payment of such present value shall be
made, at the direction of the participant, by either of the following methods:
(a) current payment in cash directly to the participant; or (b) current payment
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of a portion of such present value (determined as of that December 31) in cash
for the participant directly to a Grantor Trust established by the participant,
provided such trust is in a form which Abbott determines to be substantially
similar to the trust attached to this Plan as Exhibit A; and current payment of
the balance of such present value in cash directly to the participant, provided
that the payment made directly to the participant shall approximate the
aggregate federal, state and local individual income taxes attributable to the
amount paid pursuant to this subparagraph 9-l(b). If a participant fails to
make an election under this subsection 9-l, or if a participant makes an
election under subparagraph 9-1(b) but fails to establish a Grantor Trust, then
payment shall be made in cash directly to the participant. Each payment
required under this subsection 9-l shall be made as soon as practicable after
the amount thereof can be ascertained by Abbott, but in no event later than the
last day of the calendar year following the calendar year in which the present
value of the participant's supplemental pensions described in Sections 2, 3, 4,
5 and 6 first exceeds $100,000.
9-2. If the present value of a participant's supplemental pensions has
been paid to the participant (including amounts paid to the participant's
Grantor Trust) pursuant to subsection 9-1, then as of each subsequent December
31, such participant shall be entitled to a payment in an amount equal to: (a)
the present value (as of that December 31) of the participant's supplemental
pensions described in Sections 2, 3, 4, 5 and 6; less (b) the current value (as
of that December 31) of the payments previously made to the
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participant under subsection 9-1 and 9-2; less (c) the excess, if any, of (1)
the Tax Gross Up payment made to the participant under subsection 11-1 for the
immediately preceding calendar year, over (2) the net increase in the
participant's federal, state and local income taxes as a result of the inclusion
in his or her taxable income of the income of the participant's Grantor Trust
and any Guaranteed Rate Payments for that year. Payments under this subsection
9-2 shall be made, at the direction of the participant, by either of the
following methods: (i) current payment in cash directly to the participant; or
(ii) current payment of a portion of such amount in cash for the participant
directly to the Grantor Trust established by the participant; and current
payment of the balance of such amount in cash directly to the participant,
provided that the payment made directly to the participant shall approximate the
aggregate federal, state and local individual income taxes attributable to the
amount paid pursuant to this subparagraph 9-2(ii). If a participant fails to
make an election under this subsection 9-2, then payment shall be made in cash
directly to the participant. Each payment required under this subsection 9-2
shall be made as soon as practicable after the amount thereof can be ascertained
by Abbott, but in no event later than the last day of the calendar year
following the December 31 as of which such payment becomes due. No payments
shall be made under this subsection 9-2 as of any December 31 after the calendar
year in which the participant retires or otherwise terminates employment with
Abbott.
- 16 -
9-3. Present values shall be determined using reasonable actuarial
assumptions specified for this purpose by Abbott and consistently applied. The
"current value" of the payments previously made to a participant under
subsections 9-1 and 9-2 means the aggregate amount of such payments, with
interest thereon (at the rate specified for this purpose by Abbott) from January
1 of the year of payment.
9-4. Abbott will establish and maintain a separate Supplemental Pension
Account in the name of each participant, which shall reflect any amounts paid to
a participant (including amounts paid to a participant's Grantor Trust) pursuant
to subsections 9-1 and 9-2, and any adjustments made pursuant to subsection 9-5.
The accounts established pursuant to this subsection 9-4 are for the convenience
of the administration of the Plan and no trust relationship with respect to such
accounts is intended or should be implied.
9-5. As of the end of each calendar year, Abbott shall adjust each
participant's Supplemental Pension Account as follows:
(a) FIRST, charge an amount equal to the product of: (i) any payments made
(or which would have been made) to the participant during that year
from his or her Grantor Trust (other than distributions of earnings in
excess of the Net Interest Accrual to provide for the Tax Gross Up
under subsection 11-1); multiplied by (ii) a fraction, the numerator
of which is the balance in the participant's Supplemental Pension
Account as of the end of the prior calendar year and the denominator
of which is the balance (or the amount which would have been the
balance) in the participant's Grantor Trust as of that same date;
- 17 -
(b) NEXT, credit an amount equal to the Interest Accrual for that year
pursuant to subsection 9-6; and
(c) FINALLY, credit an amount equal to the amount that is paid for that
year to the participant (including the amount paid to the
participant's Grantor Trust) pursuant to subsections 9-1 and 9-2.
9-6. As of the end of each calendar year, a participant's Supplemental
Pension Account shall be credited with interest calculated at a reasonable rate
of interest specified for this purpose by Abbott and consistently applied. Any
amount so credited shall be referred to as a participant's "Interest Accrual."
9-7. In addition to any payment made to a participant for any calendar
year pursuant to subsection 9-1 or 9-2, Abbott shall also make a payment to a
participant's Grantor Trust (a "Guaranteed Rate Payment"), for any year in which
the net income of such trust does not equal or exceed the participant's Net
Interest Accrual for that year. A participant's "Net Interest Accrual" for a
year is an amount equal to: (a) the Interest Accrual credited to the
participant's Supplemental Pension Account for that year; less (b) the product
of (i) the amount of such Interest Accrual, multiplied by (ii) the aggregate of
the federal, state and local individual income tax rates (determined in
accordance with subsection 11-2). The Guaranteed Rate Payment shall equal the
difference between the participant's Net Interest Accrual and the net income of
the participant's Grantor Trust for the year, and shall be paid within 180 days
of the end of that year. No payments shall be made under this subsection 9-7
for any year following the year of the participant's death.
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9-8. If at any time after a participant's retirement or other termination
of employment with Abbott, there is no longer a balance in his or her Grantor
Trust, then such participant (or his or her surviving spouse if such spouse is
entitled to periodic payments from the Grantor Trust) shall be entitled to a
"Continuation Payment" under this subsection 9-8. The amount of the
Continuation Payment shall be equal to the amount of the supplemental pension
that would have been payable to the participant (or surviving spouse) had no
payments been made to or for the participant under subsections 9-1 and 9-2.
Continuation Payments shall be made monthly, beginning with the month following
the month in which there is no longer a balance in the participant's Grantor
Trust and ending with the month of the participant's (or surviving spouse's)
death. Payments under this subsection 9-8 shall be made by the employers (in
such proportions as Abbott shall designate) directly from their general
corporate assets. Appropriate adjustments to the Continuation Payments shall be
made in the event distributions have been made from a participant's Grantor
Trust for reasons other than benefit payments to the participant or surviving
spouse.
SECTION 10
PAYMENT OF SUPPLEMENTAL CONTRIBUTIONS
Notwithstanding any other provisions of the plan, the amount credited to a
participant under Section 7 shall be paid in cash directly to the participant on
or before December 31, 1990.
SECTION 11
TAX GROSS UP PAYMENTS
11-1. In addition to the payments provided under subsections 9-1 and 9-2,
each participant shall also be entitled to a Tax Gross
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Up payment for each year there is a balance in his or her Supplemental Pension
Account. The "Tax Gross Up" shall approximate: (a) the product of (i) the
participant's Net Interest Accrual for the year (calculated using the greater of
the rate of return of the Grantor Trusts or the rate specified in subsection
9-6), multiplied by (ii) the aggregate of the federal, state and local tax rates
(determined in accordance with subsection 11-2); less (b) the excess, if any, of
(i) the participant's Net Interest Accrual for the year calculated using the
rate of return of the Grantor Trusts; over (ii) such Net Interest Accrual
calculated using the rate specified in subsection 9-6; plus (c) an amount equal
to the product of (i) any payment made pursuant to this subsection 11-1,
multiplied by (ii) the aggregate tax rate determined under subparagraph
11-1(a)(ii) above. Payment of the Tax Gross Up shall be made by the employers
(in such proportions as Abbott shall designate) directly from their general
corporate assets. The Tax Gross Up for a year shall be paid to the participant
as soon as practicable after the amount of the Tax Gross Up can be ascertained
by Abbott, but in no event later than the last day of the calendar year
following the calendar year to which the Tax Gross Up relates. No payments
shall be made under this subsection 11-1 for any year following the year of the
participant's death.
11-2. For purposes of Sections 9 and 11, a participant's federal income
tax rate shall be deemed to be the highest marginal rate of federal individual
income tax in effect in the calendar year in which a calculation under those
Sections is to be made, and state and local tax rates shall be deemed to be the
highest marginal
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rates of individual income tax in effect in the state and locality of the
participant's residence in the calendar year for which such a calculation is to
be made, net of any federal tax benefits.
EXHIBIT A
___________________________
SUPPLEMENTAL BENEFIT
GRANTOR TRUST
THIS AGREEMENT, made this _____ day of __________________, 199__, by and
between ________________________________________ of ______________ (the
"grantor"), and The Northern Trust Company, located at Chicago, Illinois, as
trustee (the "trustee"),
WITNESSETH THAT:
WHEREAS, the grantor desires to establish and maintain a trust to hold
certain benefits received by the grantor under the Abbott Laboratories
Supplemental Pension Plan, as it may be amended from time to time;
NOW, THEREFORE, IT IS AGREED as follows:
ARTICLE I
INTRODUCTION
I-1. NAME. This agreement and the trust hereby evidenced (the "trust")
may be referred to as the "________________________ Supplemental Benefit Grantor
Trust."
I-2. THE TRUST FUND. The "trust fund" as at any date means all property
then held by the trustee under this agreement.
I-3. STATUS OF THE TRUST. The trust shall be irrevocable. The trust is
intended to constitute a grantor trust under Sections 671-678 of the Internal
Revenue Code, as amended, and shall be construed accordingly.
I-4. THE ADMINISTRATOR. Abbott Laboratories ("Abbott") shall act as the
"administrator" of the trust, and as such shall have certain powers, rights and
duties under this agreement as described below. Abbott will certify to the
trustee from time to time the person or persons authorized to act on behalf of
Abbott as the administrator. The trustee may rely on the latest certificate
received without further inquiry or verification.
I-5. ACCEPTANCE. The trustee accepts the duties and obligations of the
"trustee" hereunder, agrees to accept funds delivered to it by the grantor or
the administrator, and agrees to hold such funds (and any proceeds from the
investment of such funds) in trust in accordance with this agreement.
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ARTICLE II
DISTRIBUTION OF THE TRUST FUND
II-1. SEPARATE ACCOUNTS. The administrator shall maintain two separate
accounts under the trust, a "supplemental pension account" and a "supplemental
contribution account." Funds delivered to the trustee shall be allocated between
the accounts as directed by the administrator. As of the end of each calendar
year, the administrator shall charge each account with all distributions made
from such account during that year; and credit each account with its share of
trust income and realized gains and charge each account with its share of trust
expenses and realized losses for the year. The trustee shall not be required to
make any separate investment of the trust fund for the accounts, and may
administer and invest all funds delivered to it under the trust as one trust
fund.
II-2. DISTRIBUTIONS PRIOR TO THE GRANTOR'S DEATH. Principal and
accumulated income shall not be distributed from the trust prior to the
grantor's retirement or other termination of employment with Abbott or a
subsidiary of Abbott (the grantor's "settlement date"); provided that, each year
the administrator may direct the trustee to distribute to the grantor a portion
of the income of the trust fund for that year, with the balance of such income
to be accumulated in the trust. The administrator shall inform the trustee of
the grantor's settlement date. Thereafter, the trustee shall distribute the
amounts from time to time credited to the supplemental pension account to the
grantor, if then living, in the same manner, at the same time and over the same
period as the pension payable to the grantor under Abbott Laboratories Annuity
Retirement Plan; and the trustee shall distribute the amounts from time to time
credited to the supplemental contribution account to the grantor, if then
living, in the same manner, at the same time and over the same period as the
distribution of the grantor's benefits from Abbott Laboratories Stock Retirement
Plan.
II-3. DISTRIBUTIONS AFTER THE GRANTOR'S DEATH. On the death of the
grantor, the entire principal of the trust fund and all accrued or undistributed
income thereof shall be distributed in a lump sum to or for the benefit of such
one or more persons designated by the grantor in a beneficiary designation
provided by the administrator. If the grantor fails to designate a beneficiary
as provided above, then on the grantor's death, the trustee shall distribute the
balance of the trust fund to the executor or administrator of the grantor's
estate.
II-4. FACILITY OF PAYMENT. When a person entitled to a distribution
hereunder is under legal disability, or, in the trustee's opinion, is in any way
incapacitated so as to be unable to manage his or her financial affairs, the
trustee may make such distribution to such person's legal representative, or to
a relative or friend of such person for such person's benefit. Any distribution
made in accordance with the preceding sentence shall be
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a full and complete discharge of any liability for such distribution hereunder.
II-5. PERPETUITIES. Notwithstanding any other provisions of this
agreement, on the day next preceding the end of 21 years after the death of the
last to die of the grantor and the grantor's descendants living on the date of
this instrument, the trustee shall immediately distribute any remaining balance
in the trust to the beneficiaries then entitled to distributions hereunder.
ARTICLE III
MANAGEMENT OF THE TRUST FUND
III-1. GENERAL POWERS. The trustee shall, with respect to the trust fund,
have the following powers, rights and duties in addition to those provided
elsewhere in this agreement or by law:
(a) Subject to the limitations of subparagraph (b) next below, to sell,
contract to sell, purchase, grant or exercise options to purchase, and
otherwise deal with all assets of the trust fund, in such way, for
such considerations, and on such terms and conditions as the trustee
decides.
(b) To retain in cash such amounts as the trustee considers advisable; and
to invest and reinvest the balance of the trust fund, without
distinction between principal and income, in an annuity contract or
contracts issued by a legal reserve life insurance company or in
obligations of the United States Government and its agencies or which
are backed by the full faith and credit of the United States
Government; and any such investment made or retained by the trustee in
good faith shall be proper despite any resulting risk or lack of
diversification or marketability.
(c) To deposit cash in any depositary (including the banking department of
the bank acting as trustee) without liability for interest, and to
invest cash in savings accounts or time certificates of deposit
bearing a reasonable rate of interest in any such depositary.
(d) To invest, subject to the limitations of subparagraph (b) above, in
any common or commingled trust fund or funds maintained or
administered by the trustee solely for the investment of trust funds.
(e) To borrow from anyone, with the administrator's approval, such sum or
sums from time to time as the trustee considers desirable to carry out
this trust, and to mortgage or pledge all or part of the trust fund as
security.
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(f) To retain any funds or property subject to any dispute without
liability for interest and to decline to make payment or delivery
thereof until final adjudication by a court of competent jurisdiction
or until an appropriate release is obtained.
(g) To begin, maintain or defend any litigation necessary in connection
with the administration of this trust, except that the trustee shall
not be obliged or required to do so unless indemnified to the
trustee's satisfaction.
(h) To compromise, contest, settle or abandon claims or demands.
(i) To give proxies to vote stocks and other voting securities, to join in
or oppose (alone or jointly with others) voting trusts, mergers,
consolidations, foreclosures, reorganizations, liquidations, or other
changes in the financial structure of any corporation, and to exercise
or sell stock subscription or conversion rights.
(j) To hold securities or other property in the name of a nominee, in a
depositary, or in any other way, with or without disclosing the trust
relationship.
(k) To divide or distribute the trust fund in undivided interests or
wholly or partly in kind.
(l) To pay any tax imposed on or with respect to the trust; to defer
making payment of any such tax if it is indemnified to its
satisfaction in the premises; and to require before making any payment
such release or other document from any lawful taxing authority and
such indemnity from the intended payee as the trustee considers
necessary for its protection.
(m) To deal without restriction with the legal representative of the
grantor's estate or the trustee or other legal representative of any
trust created by the grantor or a trust or estate in which a
beneficiary has an interest, even though the trustee, individually,
shall be acting in such other capacity, without liability for any loss
that may result.
(n) To appoint or remove by written instrument any bank or corporation
qualified to act as successor trustee, wherever located, as special
trustee as to part or all of the trust fund, including property as to
which the trustee does not act, and such special trustee, except as
specifically limited or provided by this or the appointing instrument,
shall have all of the rights, titles, powers, duties, discretions and
immunities of the trustee, without
- 5 -
liability for any action taken or omitted to be taken under this or
the appointing instrument.
(o) To appoint or remove by written instrument any bank, wherever located,
as custodian of part or all of the trust fund, and each such custodian
shall have such rights, powers, duties and discretions as are
delegated to it by the trustee.
(p) To employ agents, attorneys, accountants or other persons, and to
delegate to them such powers as the trustee considers desirable, and
the trustee shall be protected in acting or refraining from acting on
the advise of persons so employed without court action.
(q) To perform any and all other acts which in the trustee's judgment are
appropriate for the proper management, investment and distribution of
the trust fund.
III-2. PRINCIPAL AND INCOME. Any income earned on the trust fund which is
not distributed as provided in Article II shall be accumulated and from time to
time added to the principal of the trust. The grantor's interest in the trust
shall include all assets or other property held by the trustee hereunder,
including principal and accumulated income.
III-3. ANNUAL STATEMENTS. Periodically, but at least within a reasonable
time after the close of each calendar year, the trustee shall prepare and
deliver to the administrator and to the grantor, if then living, otherwise to
each beneficiary then entitled to distributions under this agreement, a
statement (or series of statements) setting forth (or which taken together set
forth) all investments, receipts, disbursements and other transactions effected
by the trustee during the calendar year; and showing the trust fund and the
value thereof at the end of the year.
III-4. COMPENSATION AND EXPENSES. All reasonable costs, charges and
expenses incurred in the administration of this trust, including compensation to
the trustee, any compensation to agents, attorneys, accountants and other
persons employed by the trustee, and expenses incurred in connection with the
sale, investment and reinvestment of the trust fund shall be paid from the trust
fund.
ARTICLE IV
GENERAL PROVISIONS
IV-1. INTERESTS NOT TRANSFERABLE. The interests of the grantor or other
persons entitled to distributions hereunder are not subject to their debts or
other obligations and may not be voluntarily or involuntarily sold, transferred,
alienated, assigned or encumbered.
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IV-2. DISAGREEMENT AS TO ACTS. If there is a disagreement between the
trustee and anyone as to any act or transaction reported in any accounting, the
trustee shall have the right to a settlement of its account by any proper court.
IV-3. TRUSTEE'S OBLIGATIONS. No power, duty or responsibility is imposed
on the trustee except as set forth in this agreement. The trustee is not
obliged to determine whether funds delivered to or distributions from the trust
are proper under the trust, or whether any tax is due or payable as a result of
any such delivery or distribution. The trustee shall be protected in making any
distribution from the trust as directed pursuant to Article II without inquiring
as to whether the distributee is entitled thereto; the trustee shall not be
liable for any distribution made in good faith without written notice or
knowledge that the distribution is not proper under the terms of this agreement;
and the trustee shall not be liable for any action taken because of the specific
direction of the administrator.
IV-4. GOOD FAITH ACTIONS. The trustee's exercise or non-exercise of its
powers and discretions in good faith shall be conclusive on all persons. No one
shall be obliged to see to the application of any money paid or property
delivered to the trustee. The certificate of the trustee that it is acting
according to this agreement will fully protect all persons dealing with the
trustee.
IV-5. WAIVER OF NOTICE. Any notice required under this agreement may be
waived by the person entitled to such notice.
IV-6. CONTROLLING LAW. The laws of the State of Illinois shall govern the
interpretation and validity of the provisions of this agreement and all
questions relating to the management, administration, investment and
distribution of the trust hereby created.
IV-7. SUCCESSORS. This agreement shall be binding on all persons entitled
to distributions hereunder and their respective heirs and legal representatives,
and on the trustee and its successors.
ARTICLE V
CHANGES IN TRUSTEE
V-1. RESIGNATION OR REMOVAL OF TRUSTEE. The trustee may resign at any
time by giving thirty days' advance written notice to the administrator and the
grantor. The administrator may remove a trustee by written notice to the
trustee and the grantor.
V-2. APPOINTMENT OF SUCCESSOR TRUSTEE. The administrator shall fill any
vacancy in the office of trustee as soon as practicable by written notice to the
successor trustee; and shall give prompt written notice thereof to the grantor,
if then living, otherwise to each beneficiary then entitled to payments or
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distributions under this agreement. A successor trustee shall be a bank (as
defined in Section 581 of the Internal Revenue Code, as amended).
V-3. DUTIES OF RESIGNING OR REMOVED TRUSTEE AND OF SUCCESSOR TRUSTEE. A
trustee that resigns or is removed shall furnish promptly to the administrator
and the successor trustee an account of its administration of the trust from the
date of its last account. Each successor trustee shall succeed to the title to
the trust fund vested in its predecessor without the signing or filing of any
instrument, but each predecessor trustee shall execute all documents and do all
acts necessary to vest such title of record in the successor trustee. Each
successor trustee shall have all the powers conferred by this agreement as if
originally named trustee. No successor trustee shall be personally liable for
any act or failure to act of a predecessor trustee. With the approval of the
administrator, a successor trustee may accept the account furnished and the
property delivered by a predecessor trustee without incurring any liability for
so doing, and such acceptance will be complete discharge to the predecessor
trustee.
ARTICLE VI
AMENDMENT AND TERMINATION
VI-1. AMENDMENT. With the consent of the administrator, this trust may be
amended from time to time by the grantor, if then living, otherwise by a
majority of the beneficiaries then entitled to payments or distributions
hereunder, except as follows:
(a) The duties and liabilities of the trustee cannot be changed
substantially without its consent.
(b) This trust may not be amended so as to make the trust revocable.
VI-2. TERMINATION. This trust shall not terminate, and all rights,
titles, powers, duties, discretions and immunities imposed on or reserved to the
trustee, the administrator, the grantor and the beneficiaries shall continue in
effect, until all assets of the trust have been distributed by the trustee as
provided in Article II.
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IN WITNESS WHEREOF, the grantor and the trustee have executed this
agreement as of the day and year first above written.
____________________________________
Grantor
________________________, as Trustee
By _________________________________
Its ______________________________
EXHIBIT 10.9
Adopted by the Board of Directors on December 13, 1985.
Amended by the Board of Directors on 3/14/86, 12/11/87,
4/14/89, 2/8/91, 4/10/92 and 9/10/93
1986
ABBOTT LABORATORIES
MANAGEMENT INCENTIVE PLAN
SECTION 1
INTRODUCTION
1.1 BACKGROUND AND PURPOSES. This 1986 ABBOTT LABORATORIES MANAGEMENT
INCENTIVE PLAN (the "Plan") is a successor Plan to the 1961, 1971 and 1981
Management Incentive Plans (the "Predecessor Plans"). This Plan is being
established by ABBOTT LABORATORIES ("Abbott") for the following purposes:
(a) To provide greater incentive for participants in the Plan to attain
and maintain the highest standards of managerial performance by
rewarding them for services rendered with compensation, in addition to
their base salaries, in proportion to the success of Abbott and to the
participants' respective contribution to such success; and
(b) To attract and retain in the employ of Abbott and its subsidiaries
persons of outstanding competence.
1.2 EFFECTIVE DATE AND FISCAL YEAR. The Plan shall be effective as of
January 1, 1986. The term "fiscal year," as used in this Plan, means the fiscal
period from time to time employed by Abbott for the purpose of reporting
earnings to shareholders.
1.3 ADMINISTRATION. The Plan will be administered by the Compensation
Committee (the "Committee") appointed by the Board of Directors of Abbott.
- 2 -
SECTION 2
ELIGIBILITY AND PARTICIPATION
2.1 PERSONS ELIGIBLE FOR PARTICIPATION. Participation in the Plan will be
limited to those Officers and managerial employees of Abbott and its
subsidiaries who, from time to time, shall be selected as participants by the
Committee.
2.2 PARTICIPANTS. The term "participant," as used in the Plan, shall
include both active participants and inactive participants.
2.3 ACTIVE PARTICIPANTS. For each fiscal year, beginning with the first
fiscal year in which the Plan is in effect, there shall be a group of active
participants which, except as provided below, shall not exceed thirty-five
persons, and shall consist of those persons eligible for participation who shall
have been designated as active participants and notified of that fact by the
Committee at any time before or during the fiscal year. If, as a result of the
growth of Abbott and its subsidiaries or changes in Abbott's organization, the
Board of Directors deems it appropriate, the Board of Directors may, in its
discretion, from time to time, increase the number of persons who may be
designated as active participants for any fiscal year beyond the limit of
thirty-five persons provided for above. Selection as an active participant for
any fiscal year shall not confer upon any person a right to be an active
participant in any subsequent fiscal year, nor shall it confer upon him the
right to receive any allocation under the Plan, other than amounts allocated to
him by the Committee pursuant to
- 3 -
the Plan, and all such allocations shall be subject to all of the terms and
conditions of the Plan.
2.4 INACTIVE PARTICIPANTS. Inactive participants shall consist of those
persons, including beneficiaries of deceased participants, if any, for whom an
allocation shall have been made for a prior fiscal year under this Plan or a
Predecessor Plan, the payment of which was deferred and remains unpaid. Status
as an inactive participant shall not preclude a person from also being an active
participant during any fiscal year.
SECTION 3
MANAGEMENT INCENTIVE PLAN FUND
3.1 BASE FOR MANAGEMENT INCENTIVE PLAN FUND. The "base earnings" for
determining whether any portion of consolidated net income for any fiscal year
may be allocated to the Management Incentive Plan Fund for such year shall be
that amount of consolidated net income (as defined in subsection 3.2) which is
equal to 15 percent of the Abbott Common Shareholder's Equity for such fiscal
year. For this purpose, "Abbott Common Shareholders' Equity" for any fiscal
year shall mean the Shareholders' Investment, as reflected in the consolidated
balance sheet of Abbott as of the close of the next preceding fiscal year, plus
or minus such adjustments thereof as may be determined by the Committee in order
to reflect:
(a) The existence, issuance, sale, exchange, conversion or retirement of
any securities, other than common shares, of Abbott (whether involving
preferred stock, debt, convertible preferred stock or convertible debt
securities); and
- 4 -
(b) The issuance or retirement of any common shares or any changes in
accounting methods or period adopted by Abbott since the close of such
next preceding fiscal year.
Any adjustments to be made in accordance with (a) and (b) above in determining
Abbott Common Shareholders' Equity for any fiscal year shall be determined by
the Committee after consultation with Abbott's independent auditors, and any
determination made by the Committee after such consultation shall be conclusive
upon all persons.
3.2 CONSOLIDATED NET INCOME. For the purposes of this Plan, for any
fiscal year or period, the "consolidated net income" shall be the consolidated
net income of Abbott and its subsidiaries, prepared in accordance with generally
accepted accounting principles, consistently applied, after provision for any
interest accrued with respect to such period on account of deferred payments
under this Plan or a Predecessor Plan, but before allowances for any amount to
be allocated to the Management Incentive Plan Fund, both net of applicable
income taxes, and after such adjustments for the following, as may be determined
by the Committee after consultation with Abbott's independent auditors (all net
of applicable income taxes):
(a) The exclusion of any charges for amortization of goodwill arising out
of acquisitions made for securities which, as a result of adjustments
made in determining Abbott Common Shareholders' Equity pursuant to
subsection 3.1, are treated as common share equivalents; and
(b) The exclusion of any interest on debt securities which are convertible
into common shares of Abbott and which shall have been considered as
common share equivalents in determining Abbott Common Shareholders'
Equity pursuant to subsection 3.1 hereof; and
- 5 -
(c) The deduction of any dividend requirement for preferred shares which
has not been considered as common share equivalents in determining
Common Shareholders' Equity pursuant to subsection 3.1 hereof.
In the sole discretion of the Committee there shall also be excluded in the
calculation of "consolidated net income" unusual gains and losses and the tax
effects thereof, changes in generally accepted accounting principles and the tax
effects thereof and extraordinary gains and losses.
3.3 DETERMINATION OF MANAGEMENT INCENTIVE PLAN AMOUNT FOR ANY YEAR. For
each fiscal year that consolidated net income exceeds base earnings, and as soon
as practicable after ascertainment of that fact, the Committee shall determine a
tentative amount as the Management Incentive Plan Amount for that year, which
tentative amount shall not exceed the lesser of:
(a) an amount which, when treated as an expense currently deductible for
income tax purposes in such year, would cause a 5 percent reduction in
such year's excess of consolidated net income over the base earnings
for such year; and
(b) an amount which, when treated as an expense currently deductible for
income tax purposes in such year, would cause a 1-1/2 percent
reduction in such year's consolidated net income; and
(c) an amount which equals 100 percent of the aggregate base salaries of
all active participants for such year.
For purposes of the Plan "base salary" means the amount of salary paid to each
active participant by Abbott and its subsidiaries for such year, and does not
include bonuses, awards, or any other compensation of any kind. Following
determination of such tentative Management Incentive Plan Amount, the Committee
shall report in writing the amount of such tentative amount to the Board of
- 6 -
Directors. At the meeting of the Board of Directors coincident with or next
following receipt by it of the Committee's determination, the Board of Directors
shall have the power to approve or reduce, but not to increase, the tentative
amount reported to it by the Committee. The amount approved by the Board of
Directors shall be the Management Incentive Plan Amount for such year.
3.4 THE MANAGEMENT INCENTIVE PLAN FUND. The Management Incentive Plan
Fund at any time shall consist of an amount equal to the aggregate of the
Management Incentive Plan Amounts established pursuant to subsection 3.3 of this
Plan for all fiscal years during which this Plan shall have been operative, plus
the amounts established as Management Incentive Plan Amounts for any prior
fiscal year pursuant to a Predecessor Plan, reduced by an amount equal to the
aggregate of the amounts of awards which shall have been allocated to
participants in accordance with this Plan or a Predecessor Plan, and which
awards either have been paid or remain payable to participants or their
beneficiaries.
SECTION 4
ALLOCATION OF MANAGEMENT INCENTIVE FUND
4.1 ANNUAL ALLOCATION OF MANAGEMENT INCENTIVE FUND. As soon as
practicable after the close of each fiscal year, part or all of the amount then
in the Management Incentive Plan Fund (including the Management Incentive Plan
Amount for such fiscal year) will be allocated by the Committee among active
participants in the Plan for such fiscal year, having due regard for the
purposes for which the Plan was established, in the following manner and order:
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(a) First, if the Chairman of the Board of Abbott shall be an active
participant for such year, the members of the Committee, other than
the Chairman of the Board, shall determine the amount, if any, to be
allocated to the Chairman of the Board from such Fund for such year;
and
(b) Next, all or a part of the balance of such Fund may be allocated among
the active participants (other than the Chairman of the Board) for
such year, in such amounts and proportions as the Committee shall
determine.
provided, however, that the amount allocated to any active participant for any
year shall not exceed 125 percent of such participants' base salary for that
year.
4.2 COMMITTEE'S DISCRETION IN ALLOCATIONS. In making any allocations in
accordance with subsection 4.1 for any year, the discretion of the Committee
shall be absolute, and no active participants for any year, by reason of their
designation as such, shall be entitled to any particular amounts or any amount
whatsoever.
SECTION 5
PAYMENT OF AMOUNTS ALLOCATED TO PARTICIPANTS
5.1 TIME OF PAYMENT. For fiscal years beginning after December 31, 1988,
a participant shall direct the payment or deferral of an allocation made to him
pursuant to subsection 4.1 (subject to such conditions relating to the right of
the participant to receive Payment of such amount as established by the
Committee) by one or more of the following methods:
(a) current payment in cash to the participant;
(b) current payment of a portion of the allocation in cash for the
participant directly to a "Grantor Trust" established by the
participant, provided such trust is in a form which the Committee
determines is substantially similar to the trust
- 8 -
attached to this Plan as Exhibit A; and current payment of the balance
of the allocation in cash directly to the participant, provided that
the payment made directly to the participant shall approximate the
aggregate federal, state and local individual income taxes (determined
in accordance with subsection 6.7) attributable to the allocation paid
pursuant to this paragraph (b); or
(c) deferral of payment until such time and in such manner as determined
in accordance with subsection 5.11.
A participant shall make the preceding direction within 30 days of the date he
is notified of his eligibility to participate in the Plan. A participant may
change such direction with respect to any future allocation, provided that the
change is made prior to the beginning of the fiscal year to which such
allocation relates. Payment of a participant's allocation for the 1988 fiscal
year and of any allocations deferred under the Plan prior to such year shall be
made in accordance with the provisions of either or both of paragraphs (a) and
(b) above. The Committee shall establish and maintain a Trust Account in
accordance with subsection 5.2 and for purposes of subsection 5.4, shall treat
such payment as if it were an allocation made for that fiscal year.
5.2 SEPARATE ACCOUNTS. The Committee will maintain two separate Accounts,
a "Deferred Account" and a "Trust Account," in the name of each participant.
The Deferred Account shall be comprised of any allocations the payment of which
is deferred pursuant to subsection 5.1(c) and any adjustments made pursuant to
subsection 5.3. The Trust Account shall be comprised of any allocations paid in
cash to a participant (including amounts paid to a participant's Grantor Trust)
pursuant to subsection 5.1(b) and any adjustments made pursuant to subsection
5.4.
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5.3 ADJUSTMENT OF DEFERRED ACCOUNTS. As of the end of each fiscal year,
the Committee shall adjust each participant's Deferred Account as follows:
(a) FIRST, charge an amount equal to any payments made to the participant
during that year pursuant to subsections 5.11 or 5.12;
(b) NEXT, credit an amount equal to the allocation for that year that is
deferred pursuant to subsection 5.1(c); and
(c) FINALLY, credit an amount equal to the Interest Accrual earned for
that year pursuant to subsection 5.5.
5.4 ADJUSTMENT OF TRUST ACCOUNTS. As of the end of each fiscal year,
the Committee shall adjust each participant's Trust Account as follows:
(a) FIRST, charge an amount equal to the product of: (i) any payments made
to the participant during that year from the participant's Grantor
Trust (other than distributions of trust earnings in excess of the Net
Interest Accrual authorized by the administrator of the trust to
provide for the Tax Gross Up under subsection 6.6); multiplied by (ii)
a fraction, the numerator of which is the balance in the participant's
Trust Account as of the end of the prior fiscal year and the
denominator of which is the balance of the participant's Grantor Trust
(as determined by the administrator of the trust) as of that same
date;
(b) NEXT, credit an amount equal to the allocation for that year that is
paid to the Participant (including the amount paid to the
participant's Grantor Trust) pursuant to subsection 5.l(b); and
(c) FINALLY, credit an amount equal to the Interest Accrual earned for
that Year pursuant to subsection 5.5.
5.5 INTEREST ACCRUALS ON ACCOUNTS. As of the end of each fiscal year, a
participant's Deferred Account and Trust Account shall be credited with interest
equal to: (a) the average of the
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prime rates of interest charged by the two largest banks located in the City of
Chicago on loans made by them as of January 1 and the end of each month of the
fiscal year; plus (b) two hundred twenty-five (225) basis points. Such interest
shall be credited on the conditions established by the Committee, provided that
any allocation of an award from the Management Incentive Plan Fund shall be
considered to have been made and credited to a participant's Deferred Account
and Trust Account as of the first day of the fiscal year in which such award is
made regardless of the date upon which the Committee actually makes the
determination to award such allocation.
5.6 GUARANTEED RATE PAYMENTS. In addition to any allocation made to a
participant for any fiscal year pursuant to subsection 4.1 which is paid or
deferred pursuant to subsection 5.1, Abbott shall also make a payment to a
participant's Grantor Trust (a "Guaranteed Rate Payment") for any year in which
the net earnings of such trust do not equal or exceed the participant's Net
Interest Accrual for that year. A participant's "Net Interest Accrual" for a
year is an amount equal to: (a) the Interest Accrual credited to the
participant's Trust Account for that year; less (b) the product of (i) the
amount of such Interest Accrual, multiplied by (ii) the aggregate of the
federal, state and local individual income tax rates (determined in accordance
with subsection 6.7). The Guaranteed Rate Payment shall equal the difference
between the participant's Net Interest Accrual and the net earnings of the
participant's Grantor Trust for the year, and shall be paid within 90 days of
the end of the fiscal year.
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5.7 DESIGNATION OF BENEFICIARIES. Subject to the conditions and
limitations set forth below, each participant, and after a participant's death,
each primary beneficiary designated by a participant in accordance with the
provisions of this subsection 5.7, shall have the right from time to time to
designate a primary beneficiary or beneficiaries and, successive or contingent
beneficiary or beneficiaries to receive unpaid amounts from the participant's
Deferred Account under the Plan and the Predecessor Plans. Beneficiaries may be
a natural person or persons or a fiduciary, such as a trustee of a trust or the
legal representative of an estate. Any such designation shall take effect upon
the death of the participant or such beneficiary, as the case may be, or in the
case of any fiduciary beneficiary, upon the termination of all of its duties
(other than the duty to dispose of the right to receive amounts remaining to be
paid under the Plan or a Predecessor Plan). The conditions and limitations
relating to the designation of beneficiaries are as follows:
(a) A nonfiduciary beneficiary shall have the right to designate a further
beneficiary or beneficiaries only if the original participant or the
next preceding primary beneficiary, as the case may be, shall have
expressly so provided in writing; and
(b) A fiduciary beneficiary shall designate as a further beneficiary
or beneficiaries only those persons or other fiduciaries who are
entitled to receive the amounts payable from the participant's
account under the trust or estate of which it is a fiduciary.
Any beneficiary designation or grant of any power to any beneficiary under this
subsection may be exercised only by an instrument in writing, executed by the
person making the designation or granting
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such power and filed with the Secretary of Abbott during such person's lifetime
or prior to the termination of a fiduciary's duties. If a deceased participant
or a deceased nonfiduciary beneficiary who had the right to designate a
beneficiary as provided above dies without having designated a further
beneficiary, or if no beneficiary designated as provided above is living or
qualified and acting, the Committee, in its discretion, may direct distribution
of the amount remaining from time to time to either:
(i) any one or more or all of the next of kin (including the surviving
spouse) of the participant or the deceased beneficiary, as the case
may be, and in such proportions as the Committee determines; or
(ii) the legal representative of the estate of the deceased participant
or deceased beneficiary as the case may be.
5.8 STATUS OF BENEFICIARIES. Following a participant's death, the
participant's beneficiary or beneficiaries will be considered and treated as an
inactive participant for all purposes of this Plan.
5.9 NON-ASSIGNABILITY AND FACILITY OF PAYMENT. Amounts payable to
participants and their beneficiaries under the Plan are not in any way subject
to their debts and other obligations, and may not be voluntarily or
involuntarily sold, transferred or assigned; provided that the preceding
provisions of this section shall not be construed as restricting in any way a
designation right granted to a beneficiary pursuant to the terms of subsection
5.7. When a participant or the beneficiary of a participant is under legal
disability, or in the Committee's opinion is in any way incapacitated so as to
be unable to manage his or her financial affairs, the Committee may direct that
payments shall be made to the
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participant's or beneficiary's legal representative, or to a relative or friend
of the participant or beneficiary for the benefit of the participant or
beneficiary, or the Committee may direct the payment or distribution for the
benefit of the participant or beneficiary in any manner that the Committee
determines.
5.10 PAYER OF AMOUNTS ALLOCATED TO PARTICIPANTS. Any amount allocated to
a participant in the Plan and any interest credited thereto will be paid by the
employer (or such employer's successor) by whom the participant was employed
during the fiscal year for which any amount was allocated, and for that purpose,
if a participant shall have been employed by two or more employers during any
fiscal year the amount allocated under this Plan for that year shall be an
obligation of each of the respective employers in proportion to the respective
amounts of base salary paid by each of them in that fiscal year.
5.11 MANNER OF PAYMENT. Subject to subsections 5.12, a participant shall
elect the timing and manner of payment of his Deferred Account at the time of
his deferral election under subsection 5.l. The participant may select a
payment method from among alternative payment methods established by the
Committee.
5.12 PAYMENT UPON TERMINATION FOLLOWING CHANGE IN CONTROL.
Notwithstanding any other provisions of this Plan or the Predecessor Plans, or
the provisions of any award made under this Plan or the Predecessor Plans, if
employment of any participant with Abbott and its subsidiaries should terminate
for any reason within five (5) years after the date of a Change in Control, the
aggregate unpaid balance of all awards previously made to such participant
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under this Plan and all Predecessor Plans, plus any unpaid interest credited
thereon, shall be paid to the participant in a lump sum within thirty (30) days
following the date of such termination.
5.13 CHANGE IN CONTROL. A "Change in Control" shall be deemed to have
occurred on the earliest of the following dates:
(i) The date any entity or person (including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934 (the
"Exchange Act")) shall have become the beneficial owner of, or shall
have obtained voting control over thirty percent (30%) or more of
the outstanding common shares of Abbott;
(ii) The date the shareholders of Abbott approve a definitive agreement
(A) to merge or consolidate Abbott with or into another corporation,
in which Abbott is not the continuing or surviving corporation or
pursuant to which any common shares of Abbott would be converted
into cash, securities or other property of another corporation,
other than a merger of Abbott in which holders of common shares
immediately prior to the merger have the same proportionate
ownership of common stock of the surviving corporation immediately
after the merger as immediately before, or (B) to sell or otherwise
dispose of substantially all the assets of Abbott; or
(iii) The date there shall have been a change in a majority ofthe Board of
Directors of Abbott within a twelve (12) month period unless the
nomination for election by Abbott's shareholders of each new
director was approved by the vote of two-thirds of the directors
then still in office who were in office at the beginning of the
twelve (12) month period.
5.14 PROHIBITION AGAINST AMENDMENT. The provisions of subsections 5.12,
5.13 and this subsection 5.14 may not be amended or deleted, nor superseded by
any other provision of this Plan, during the period beginning on the date of a
Change in Control and ending on the date five (5) years following such Change
in Control.
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SECTION 6
MISCELLANEOUS
6.1 RULES. The Committee may establish such rules and regulations as it
may consider necessary or desirable for the effective and efficient
administration of the Plan.
6.2 MANNER OF ACTION BY COMMITTEE. A majority of the members of the
Committee qualified to act on any particular question may act by meeting or by
writing signed without meeting, and may execute any instrument or document
required or delegate to one of its members authority to sign. The Committee
from time to time may delegate the performance of certain ministerial functions
in connection with the Plan, such as the keeping of records, to such person or
persons as the Committee may select. Except as otherwise expressly provided in
the Plan, the costs of administration of the Plan will be paid by Abbott. Any
notice required to be given to, or any document required to be filed with the
Committee, will be properly given or filed if mailed or delivered in writing to
the Secretary of Abbott.
6.3 RELIANCE UPON ADVICE. The Board of Directors and the Committee may
rely upon any information or advice furnished to it by any Officer of Abbott or
by Abbott's independent auditors, or other consultants, and shall be fully
protected in relying upon such information or advice. No member of the Board of
Directors or the Committee shall be liable for any act or failure to act on
their part, excepting only any acts done or omitted to be done in bad faith, nor
shall they be liable for any act or failure to act of any other member.
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6.4 TAXES. Any employer shall be entitled, if necessary or desirable, to
pay, or withhold the amount of any federal, state or local tax, attributable to
any amounts payable by it under the Plan after giving the person entitled to
receive such amount notice as far in advance as practicable, and may defer
making payment of any amount with respect to which any such tax question may be
pending unless and until indemnified to its satisfaction.
6.5 RIGHTS OF PARTICIPANTS. Employment rights of participants with Abbott
and its subsidiaries shall not be enlarged or affected by reason of
establishment of or inclusion as a participant in the Plan. Nothing contained
in the Plan shall require Abbott or any subsidiary to segregate or earmark any
assets, funds or property for the purpose of payment of any amounts which may
have been deferred. The Deferred and Trust Accounts established pursuant to
subsection 5.2 are for the convenience of the administration of the Plan and no
trust relationship with respect to such Accounts is intended or should be
implied. Participant's rights shall be limited to payment to them at the time
or times and in such amounts as are contemplated by the Plan. Any decision made
by the Board of Directors or the Committee, which is within the sole and
uncontrolled discretion of either, shall be conclusive and binding upon the
other and upon all other persons whomsoever.
6.6 TAX GROSS UP. In addition to the allocations provided under
subsection 4.1, each participant (or, if the participant is deceased, the
beneficiary designated under the participant's Grantor Trust) shall be entitled
to a Tax Gross Up payment for each
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year there is a balance in his or her Trust Account. The "Tax Gross Up" shall
approximate: (a) the amount necessary to compensate the participant (or
beneficiary) for the net increase in the participant's (or beneficiary's)
federal, state and local income taxes as a result of the inclusion in his or her
taxable income of the income of the participant's Grantor Trust and any
Guaranteed Rate Payment for that year; less (b) any distribution to the
participant (or beneficiary) of his or her Grantor Trust's net earnings for that
year; plus (c) an amount necessary to compensate the participant (or
beneficiary) for the net increase in the taxes described in (a) above as a
result of the inclusion in his or her taxable income of any payment made
pursuant to this subsection 6.6. Payment of the Tax Gross Up shall be made by
the employers (in such proportions as Abbott shall designate) directly from
their general corporate assets.
6.7 INCOME TAX ASSUMPTIONS. For purposes of Sections 5 and 6, a
participant's federal income tax rate shall be deemed to be the highest marginal
rate of federal income individual tax in effect in the calendar year in which a
calculation under those Sections is to be made, and state and local tax rates
shall be deemed to be the highest marginal rates of individual income tax in
effect in the state and locality of the participant's residence on the date such
a calculation is made, net of any federal tax benefits.
6.8 PAYMENT OF PRIOR DEFERRALS. Notwithstanding any other provision of
this Plan, the Committee, in its absolute discretion, may direct that all or a
portion of the balance in a participant's Deferred Account be paid in accordance
with the provisions of
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subsection 5.1(b). In such event, the Committee shall establish and maintain a
Trust Account in accordance with subsection 5.2 and, for purposes of subsection
5.4, shall treat such payment as if it were an allocation made for that fiscal
year.
SECTION 7
AMENDMENT, TERMINATION AND CHANGE OF
CONDITIONS RELATING TO PAYMENTS
7.1 AMENDMENT AND TERMINATION. The Plan will be effective from its
effective date until terminated by the Board of Directors. During the fifth
year after the Plan's effective date and during every fifth year thereafter, the
Committee may recommend to the Board of Directors whether the Plan should be
amended or terminated. The Board of Directors reserves the right to amend the
Plan from time to time and to terminate the Plan at any time, except that no
such amendment or any termination of the Plan shall reduce any fixed or
contingent obligations which shall have arisen under the Plan prior to the date
of such amendment or termination, or change the terms and conditions of payment
of any allocation theretofore made without the consent of the participant
concerned.
7.2 CHANGE OF CONDITIONS RELATING TO PAYMENTS. Following the
establishment by the Committee of any conditions relating to the payment of any
amount allocated to a participant for any fiscal year and any interest credited
thereon (including the time of payment or the time of commencement of payment
and any period over which payment shall be made), neither the Committee nor the
participant concerned, acting unilaterally, shall have the power to change the
conditions originally established by the Committee. However, in
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order to effectuate the purposes of the Plan, any conditions initially
established by the Committee may be changed thereafter by mutual agreement of
the Committee and the participant concerned.
Exhibit A
IRREVOCABLE GRANTOR TRUST AGREEMENT
THIS AGREEMENT, made this __________ day of ______________, 1991, by and
between _________________________ of __________________, Illinois
(the "grantor"), and The Northern Trust Company located at Chicago, Illinois,
as trustee (the "trustee"),
WITNESSETH THAT:
WHEREAS, the grantor desires to establish and maintain a trust to hold
certain benefits received by the grantor under the 1986 Abbott Laboratories
Management Incentive Plan, as it may be amended from time to time;
NOW, THEREFORE, IT IS AGREED as follows:
ARTICLE I
INTRODUCTION
I-1. NAME. This agreement and the trust hereby evidenced (the "trust")
may be referred to as the "__________________ 1991 Grantor Trust".
I-2. THE TRUST FUND The "trust fund" as at any date means all property
then held by the trustee under this agreement.
I-3. STATUS OF THE TRUST. The trust shall be irrevocable. The trust is
intended to constitute a grantor trust under Sections 671-678 of the Internal
Revenue Code, as amended, and shall be construed accordingly.
I-4. THE ADMINISTRATOR. Abbott Laboratories ("Abbott") shall act as the
"administrator" of the trust, and as such shall have certain powers, rights and
duties under this agreement as described below. Abbott will certify to the
trustee from time to time the person or persons authorized to act on behalf of
Abbott as the administrator. The trustee may rely on the latest certificate
received without further inquiry or verification.
I-5. ACCEPTANCE. The trustee accepts the duties and obligations of the
"trustee" hereunder, agrees to accept funds delivered to it by the grantor or
the administrator, and agrees to hold such funds (and any proceeds from the
investment of such funds) in trust in accordance with this agreement.
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ARTICLE II
DISTRIBUTION OF THE TRUST FUND
II-1. SEPARATE ACCOUNTS. The administrator shall maintain two separate
accounts under the trust, a "rollout account" and a "deferred account." Funds
delivered to the trustee shall be allocated between the accounts by the trustee
as directed by the administrator. As of the end of each calendar year, the
administrator shall charge each account with all distributions made from such
account during that year; and credit each account with its share of income and
realized gains and charge each account with its share of expenses and realized
losses for the year. The trustee shall not be required to make any separate
investment of the trust fund for the accounts, and may administer and invest all
funds delivered to it under the trust as one trust fund.
II-2. DISTRIBUTIONS FROM THE ROLLOUT ACCOUNT PRIOR TO THE GRANTOR'S DEATH.
The trustee shall distribute principal and accumulated income credited to the
rollout account to the grantor, if then living, at such times and in such
amounts as the administrator shall direct.
II-3. DISTRIBUTIONS FROM THE DEFERRED ACCOUNT PRIOR TO THE GRANTOR'S
DEATH. Principal and accumulated income credited to the deferred account shall
not be distributed from the trust prior to the grantor's retirement or other
termination of employment with Abbott or a subsidiary of Abbott (the grantor's
"settlement date"); provided that, each year the administrator may direct the
trustee to distribute to the grantor a portion of the income of the deferred
account for that year, with the balance of such income to be accumulated in that
account. The administrator shall inform the trustee of the grantor's settlement
date. Thereafter, the trustee shall distribute the amounts from time to time
credited to the deferred account to the grantor, if then living, in a series of
annual installments, with the amount of each installment computed by one of the
following methods:
(a) The amount of each installment shall be equal to the sum of: (i) the
amount credited to the deferred account as of the end of the year in
which the grantor's settlement date occurs, divided by the number of
years over which installments are to be distributed; plus (ii) the net
earnings credited to the deferred account for the preceding year
(excluding the year in which the grantor's settlement date occurs).
(b) The amount of each installment shall be determined by dividing the
amount credited to the deferred account as of the end of the preceding
year by the difference between (i) the total number of years over
which installments are to be distributed, and
- 3 -
(ii) the number of annual installment distributions previously made
from the deferred account.
(c) Each installment (after the first installment) shall be approximately
equal, with the amount comprised of the sum of: (i) the amount of the
first installment, plus interest thereon at the rate determined under
the 1986 Abbott Laboratories Management Incentive Plan, compounded
annually; and (ii) the net earnings credited to the deferred account
for the preceding year.
Notwithstanding the foregoing, the final installment distribution made to the
grantor under this paragraph II-3 shall equal the total principal and
accumulated income then held in the trust fund. The grantor, by writing filed
with the trustee and the administrator on or before the end of the calendar year
in which the grantor's settlement date occurs (or the end of the calendar year
in which this trust is established, if the grantor's settlement date has already
occurred), may select both the period (which may not be less than ten years from
the end of the calendar year in which the grantor's settlement date occurred)
over which the installment distributions are to be made and the method of
computing the amount of each installment. In the absence of such a written
direction by the grantor, installment distributions shall be made over a period
of ten years, and the amount of each installment shall be computed by using the
method described in subparagraph (a) next above. Installment distributions
under this Paragraph II-3 shall be made as of January 1 of each year, beginning
with the calendar year following the year in which the grantor's settlement date
occurs. The administrator shall inform the trustee of the amount of each
installment distribution under this paragraph II-3, and the trustee shall be
fully protected in relying on such information received from the administrator.
II-4. DISTRIBUTIONS FROM THE TRUST FUND AFTER THE GRANTOR'S DEATH. The
grantor, from time to time may name any person or persons (who may be named
contingently or successively and who may be natural persons or fiduciaries) to
whom the principal of the trust fund and all accrued or undistributed income
thereof shall be distributed in a lump sum or, if the beneficiary is the
grantor's spouse, in installments, as directed by the grantor, upon the
grantor's death. If the grantor directs an installment method of distribution,
any amounts remaining at the death of the spouse beneficiary shall be
distributed in a lump sum. Each designation shall revoke all prior
designations, shall be in writing and shall be effective only when filed by the
grantor with the administrator during the grantor's lifetime. If the grantor
fails to direct a method of distribution, the distribution shall be made in a
lump sum. If the grantor fails to designate a beneficiary as provided above,
then on the grantor's death, the trustee shall distribute the balance of the
trust fund in a lump sum to the executor or administrator of the grantor's
estate.
- 4 -
II-5. FACILITY OF PAYMENT. When a person entitled to a distribution
hereunder is under legal disability, or, in the trustee's opinion, is in any way
incapacitated so as to be unable to manage his or her financial affairs, the
trustee may make such distribution to such person's legal representative, or to
a relative or friend of such person for such person's benefit. Any distribution
made in accordance with the preceding sentence shall be a full and complete
discharge of any liability for such distribution hereunder.
II-6. PERPETUITIES. Notwithstanding any other provisions of this
agreement, on the day next preceding the end of 21 years after the death of the
last to die of the grantor and the grantor's descendants living on the date of
this instrument, the trustee shall immediately distribute any remaining balance
in the trust to the beneficiaries then entitled to distributions hereunder.
ARTICLE III
MANAGEMENT OF THE TRUST FUND
III-1. GENERAL POWERS. The trustee shall, with respect to the trust fund,
have the following powers, rights and duties in addition to those provided
elsewhere in this agreement or by law:
(a) Subject to the limitations of subparagraph (b) next below, to sell,
contract to sell, purchase, grant or exercise options to purchase, and
otherwise deal with all assets of the trust fund, in such way, for
such considerations, and on such terms and conditions as the trustee
decides.
(b) To retain in cash such amounts as the trustee considers advisable; and
to invest and reinvest the balance of the trust fund, without
distinction between principal and income, in obligations of the United
States Government and its agencies or which are backed by the full
faith and credit of the United States Government or in any mutual
fund, common trust fund or collective investment fund which invests
solely in such obligations; and any such investment made or retained
by the trustee in good faith shall be proper despite any resulting
risk or lack of diversification or marketability.
(c) To deposit cash in any depositary (including the banking department of
the bank acting as trustee) without liability for interest, and to
invest cash in savings accounts or time certificates of deposit
bearing a reasonable rate of interest in any such depositary.
- 5 -
(d) To invest, subject to the limitations of subparagraph (b) above, in
any common or commingled trust fund or funds maintained or
administered by the trustee solely for the investment of trust funds.
(e) To borrow from anyone, with the administrator's approval, such sum or
sums from time to time as the trustee considers desirable to carry out
this trust, and to mortgage or pledge all or part of the trust fund as
security.
(f) To retain any funds or property subject to any dispute without
liability for interest and to decline to make payment or delivery
thereof until final adjudication by a court of competent jurisdiction
or until an appropriate release is obtained.
(g) To begin, maintain or defend any litigation necessary in connection
with the administration of this trust, except that the trustee shall
not be obliged or required to do so unless indemnified to the
trustee's satisfaction.
(h) To compromise, contest, settle or abandon claims or demands.
(i) To give proxies to vote stocks and other voting securities, to join in
or oppose (alone or jointly with others) voting trusts, mergers,
consolidations, foreclosures, reorganizations, liquidations, or other
changes in the financial structure of any corporation, and to exercise
or sell stock subscription or conversion rights.
(j) To hold securities or other property in the name of a nominee, in a
depositary, or in any other way, with or without disclosing the trust
relationship.
(k) To divide or distribute the trust fund in undivided interests or
wholly or partly in kind.
(l) To pay any tax imposed on or with respect to the trust; to defer
making payment of any such tax if it is indemnified to its
satisfaction in the premises; and to require before making any payment
such release or other document from any lawful taxing authority and
such indemnity from the intended payee as the trustee considers
necessary for its protection.
(m) To deal without restriction with the legal representative of the
grantor's estate or the trustee or other legal representative of any
trust
- 6 -
created by the grantor or a trust or estate in which a beneficiary has
an interest, even though the trustee, individually, shall be acting in
such other capacity, without liability for any loss that may result.
(n) To appoint or remove by written instrument any bank or corporation
qualified to act as successor trustee, wherever located, as special
trustee as to part or all of the trust fund, including property as to
which the trustee does not act, and such special trustee, except as
specifically limited or provided by this or the appointing instrument,
shall have all of the rights, titles, powers, duties, discretions and
immunities of the trustee, without liability for any action taken or
omitted to be taken under this or the appointing instrument.
(o) To appoint or remove by written instrument any bank, wherever located,
as custodian of part or all of the trust fund, and each such custodian
shall have such rights, powers, duties and discretions as are
delegated to it by the trustee.
(p) To employ agents, attorneys, accountants or other persons, and to
delegate to them such powers as the trustee considers desirable, and
the trustee shall be protected in acting or refraining from acting on
the advice of persons so employed without court action.
(q) To perform any and all other acts which in the trustee's judgment are
appropriate for the proper management, investment and distribution of
the trust fund.
III-2. PRINCIPAL AND INCOME. Any income earned on the trust fund which is
not distributed as provided in Article II shall be accumulated and from time to
time added to the principal of the trust. The grantor's interest in the trust
shall include all assets or other property held by the trustee hereunder,
including principal and accumulated income.
III-3. STATEMENTS. The trustee shall prepare and deliver monthly to the
administrator and annually to the grantor, if then living, otherwise to each
beneficiary then entitled to distributions under this agreement, a statement (or
series of statements) setting forth (or which taken together set forth) all
investments, receipts, disbursements and other transactions effected by the
trustee during the reporting period; and showing the trust fund and the value
thereof at the end of such period.
- 7 -
III-4. COMPENSATION AND EXPENSES. All reasonable costs, charges and
expenses incurred in the administration of this trust, including compensation to
the trustee, any compensation to agents, attorneys, accountants and other
persons employed by the trustee, and expenses incurred in connection with the
sale, investment and reinvestment of the trust fund shall be paid from the trust
fund.
ARTICLE IV
GENERAL PROVISIONS
IV-1. INTERESTS NOT TRANSFERABLE. The interests of the grantor or other
persons entitled to distributions hereunder are not subject to their debts or
other obligations and may not be voluntarily or involuntarily sold, transferred,
alienated, assigned or encumbered.
IV-2. DISAGREEMENT AS TO ACTS. If there is a disagreement between the
trustee and anyone as to any act or transaction reported in any accounting, the
trustee shall have the right to a settlement of its account by any proper court.
IV-3. TRUSTEE'S OBLIGATIONS. No power, duty or responsibility is imposed
on the trustee except as set forth in this agreement. The trustee is not
obliged to determine whether funds delivered to or distributions from the trust
are proper under the trust, or whether any tax is due or payable as a result of
any such delivery or distribution. The trustee shall be protected in making any
distribution from the trust as directed pursuant to Article II without inquiring
as to whether the distributee is entitled thereto; and the trustee shall not be
liable for any distribution made in good faith without written notice or
knowledge that the distribution is not proper under the terms of this agreement.
IV-4. GOOD FAITH ACTIONS. The trustee's exercise or non-exercise of its
powers and discretions in good faith shall be conclusive on all persons. No one
shall be obliged to see to the application of any money paid or property
delivered to the trustee. The certificate of the trustee that it is acting
according to this agreement will fully protect all persons dealing with the
trustee.
IV-5. WAIVER OF NOTICE. Any notice required under this agreement may be
waived by the person entitled to such notice.
IV-6. CONTROLLING LAW. The laws of the State of Illinois shall govern the
interpretation and validity of the provisions of this agreement and all
questions relating to the management, administration, investment and
distribution of the trust hereby created.
IV-7. SUCCESSORS. This agreement: shall be binding on all persons
entitled to distributions hereunder and their respective heirs and legal
representatives, and on the trustee and its successors.
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ARTICLE V
CHANGES IN TRUSTEE
V-1. RESIGNATION OR REMOVAL OF TRUSTEE. The trustee may resign at any
time by giving thirty days' advance written notice to the administrator and the
grantor. The administrator may remove a trustee by written notice to the
trustee and the grantor.
V-2. APPOINTMENT OF SUCCESSOR TRUSTEE. The administrator shall fill any
vacancy in the office of trustee as soon as practicable by written notice to the
successor trustee; and shall give prompt written notice thereof to the grantor,
if then living, otherwise to each beneficiary then entitled to payments or
distributions under this agreement. A successor trustee shall be a bank (as
defined in Section 581 of the Internal Revenue Code, as amended).
V-3. DUTIES OF RESIGNING OR REMOVED TRUSTEE AND OF SUCCESSOR TRUSTEE. A
trustee that resigns or is removed shall furnish promptly to the administrator
and the successor trustee an account of its administration of the trust from the
date of its last account. Each successor trustee shall succeed to the title to
the trust fund vested in its predecessor without the signing or filing of any
instrument, but each predecessor trustee shall execute all documents and do all
acts necessary to vest such title of record in the successor trustee. Each
successor trustee shall have all the powers conferred by this agreement as if
originally named trustee. No successor trustee shall be personally liable for
any act or failure to act of a predecessor trustee. With the approval of the
administrator, a successor trustee may accept the account furnished and the
property delivered by a predecessor trustee without incurring any liability for
so doing, and such acceptance will be complete discharge to the predecessor
trustee.
ARTICLE VI
AMENDMENT AND TERMINATION
VI-1. AMENDMENT. With the consent of the administrator, this trust may be
amended from time to time by the grantor, if then living, otherwise by a
majority of the beneficiaries then entitled to payments or distributions
hereunder, except as follows:
(a) The duties and liabilities of the trustee cannot be changed
substantially without its consent.
(b) This trust may not be amended so as to make the trust revocable.
VI-2. TERMINATION THIS TRUST SHALL NOT TERMINATE, and all rights, titles,
powers, duties, discretions and immunities imposed on or reserved to the
trustee, the administrator, the
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grantor and the beneficiaries shall continue in effect, until all assets of the
trust have been distributed by the trustee as provided in Article II.
* * *
IN WITNESS WHEREOF, the grantor and the trustee have executed
this agreement as of the day and year first above written.
____________________________________
Grantor
The Northern Trust Company as Trustee
By__________________________________
Its_________________________________
EXHIBIT 10.10
Amended effective September 10, 1993
ABBOTT LABORATORIES NON-EMPLOYEE DIRECTORS' FEE PLAN
SECTION 1
PURPOSE
ABBOTT LABORATORIES NON-EMPLOYEE DIRECTORS' FEE PLAN - referred to below
as the "Plan" - has been established by ABBOTT LABORATORIES - referred to
below as the "Company" - to attract and retain as members of its Board of
Directors persons who are not full-time employees of the Company or any of its
subsidiaries but whose business experience and judgment are a valuable asset
to the Company and its subsidiaries.
SECTION 2
DIRECTORS COVERED
As used in the Plan, the term "Director" means any person who is elected
to the Board of Directors of the Company in April, 1962 or at any time
thereafter, and is not a full-time employee of the Company or any of its
subsidiaries.
SECTION 3
FEES PAYABLE TO DIRECTORS
3.1 Each Director shall be entitled to a deferred monthly fee of
Four Thousand One Hundred Sixty-Seven Dollars ($4,167.00) for each calendar
month or portion thereof (excluding the month in which he is first elected a
Director) that he holds such office with the Company.
3.2 A Director who serves as Chairman of the Executive Committee of
the Board of Directors shall be entitled to a deferred monthly fee of One
Thousand Six Hundred Dollars ($1,600.00) for each calendar month or portion
thereof (excluding the month in which he is first elected to such position)
that he holds such position.
3.3 A Director who serves as Chairman of the Audit Committee of the
Board of Directors shall be entitled to a deferred monthly fee of Six Hundred
Sixty-Seven Dollars ($667.00) for each calendar month or portion thereof
(excluding the month in which he is first elected to such position) that he
holds such position.
3.4 A Director who serves as Chairman of the Compensation Committee
of the Board of Directors shall be entitled to a deferred monthly fee of Six
Hundred Sixty-Seven Dollars ($667.00) for each calendar month or portion thereof
(excluding the month in which he is first elected to such position) that he
holds such position.
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3.5 A Director who serves as Chairman of the Nominations Committee of
the Board of Directors shall be entitled to a deferred monthly fee of Six
Hundred Sixty-Seven Dollars ($667.00) for each calendar month or portion
thereof (excluding the month in which he is first elected to such position)
that he holds such position.
3.6 A Director who serves as Chairman of any other Committee created
by this Board of Directors shall be entitled to a deferred monthly fee of Six
Hundred Sixty-Seven Dollars ($667.00) for each calendar month or portion
thereof (excluding the month in which he is first elected to such position)
that he holds such position.
3.7 A Director's Deferred Fee Account shall be credited with interest
annually. During the calendar years 1968 and prior, the rate of interest
credited to deferred fees shall be four (4) percent per annum. During the
calendar years 1969 through 1992, the rate of interest credited to deferred
fees shall be the average of the prime rates being charged by two largest
commercial banks in the City of Chicago as of the end of the month coincident
with or last preceding the date upon which said interest is so credited.
During the calendar years 1993 and subsequent, the rate of interest credited
to deferred fees shall be equal to: (a) the average of the prime rates being
charged by the two largest commercial banks in the City of Chicago as of the
end of the month coincident with or last preceding the date upon which said
interest is so credited; plus (b) two hundred twenty-five (225) basis points.
For purposes of the provisions of the Plan, the term "deferred fees" shall
include "deferred monthly fees," and "deferred meeting fees," and shall also
include any such interest credited thereon.
SECTION 4
PAYMENT OF DIRECTORS' FEES
4.1 A Director's deferred fees earned pursuant to the Plan shall
commence to be paid on the first day of the calendar month next following the
earlier of his death or his attainment of age sixty-five (65) if he is not
then serving as a Director, or the termination of his service as a Director if
he serves as a Director after the attainment of age sixty-five (65); provided
that any Director may, by written notice filed with the Secretary of the
Company, elect to receive current payment of all or any portion of the monthly
and meeting fees earned by him in calendar years subsequent to the calendar
year in which he files such notice (or all or any portion of such fees earned
by him in the calendar year he first becomes a Director, if such notice is
filed within 30 days of becoming a Director), in which case such fees or the
portion thereof so designated earned in such calendar years shall not be
deferred but shall be paid quarterly as earned and no interest shall be
credited thereon. Such election may be revoked or modified by any Director by
written notice to the Secretary of the Company as to fees to be earned by him
in calendar years subsequent to the calendar year in which he files such
notice.
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4.2 After a Director's deferred fees shall have commenced to be
payable pursuant to Paragraph 4.1 they shall be payable in annual installments
in the order in which they shall have been deferred (i.e. the deferred fees
for the earliest year of service as a Director will be paid on the date
provided for in Section 4.1, the deferred fees for the next earliest year of
service as a Director will be paid on the anniversary of the payment of the
first installment, etc.).
4.3 A Director's deferred fees shall continue to be paid until all
deferred fees which he is entitled to receive under the Plan shall have been
paid to him (or, in case of his death, to his beneficiary).
4.4 Notwithstanding any other provisions of the Plan, if a Director's
service as a Director should terminate for any reason within five (5) years
after the date of a Change in Control, the aggregate unpaid balance of such
Director's deferred fees plus all unpaid interest credited thereon, shall be
paid to such Director in a lump sum within thirty (30) days following the date
of such termination.
4.5 A "Change in Control" shall be deemed to have occurred on the
earliest of the following dates:
(i) The date any entity or person (including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934 (the
"Exchange Act")) shall have become the beneficial owner of, or shall
have obtained voting control over thirty percent (30%) or more of
the outstanding common shares of the Company;
(ii) The date the shareholders of the Company approve a definitive
agreement (A) to merge or consolidate the Company with or into
another corporation, in which the Company is not the continuing or
surviving corporation or pursuant to which any common shares of the
company would be converted into cash, securities or other property
of another corporation, other than a merger of the Company in which
holders of common shares immediately prior to the merger have the
same proportionate ownership of common stock of the surviving
corporation immediately after the merger as immediately before, or
(B) to sell or otherwise dispose of substantially all the assets of
the Company; or
(iii) The date there shall have been a change in a majority of the Board
of Directors of the Company within a twelve (12) month period unless
the nomination for election by the Company's shareholders of each
new director was approved by the vote of two-thirds of the directors
then still in office who were in office at the beginning of the
twelve (12) month period.
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4.6 The provisions of Paragraphs 4.4 and 4.5 and this Paragraph 4.6
may not be amended or deleted, nor superseded by any other provision of the
Plan, during the period beginning on the date of a Change in Control and
ending on the date five (5) years following such Change in Control.
SECTION 5
DIRECTORS' RETIREMENT BENEFIT
5.1 The Compensation Committee may, in its discretion, grant any
Director who retires from the Board of Directors a monthly retirement benefit
on the terms and conditions hereinafter set forth and such retirement benefit
shall be provided to the surviving spouse of any Director who dies while
serving as a Director.
5.2 The term "continuous service" shall mean the Director's longest
period of uninterrupted service on the Board of Directors, determined under
the following rules:
(a) A Director shall be entitled to one month of
continuous service for each calendar month or portion
thereof (excluding the month in which he or she is
first elected a Director) that the Director holds such
office with the Company, excluding any month during
which the Director was a full-time employee of the
Company or any of its subsidiaries.
(b) A Director shall not be entitled to more than one
hundred twenty (120) months of continuous service.
5.3 Each Director or surviving spouse who is granted a retirement
benefit hereunder shall receive a monthly benefit equal to the deferred
monthly fee in effect for Directors under Paragraph 3.l as of the date of the
earlier of the Director's death or termination of service as a Director. The
monthly benefit shall commence to be paid on the first day of the calendar
month next following the earlier of the Director's death or termination of
service as a Director. Unless the retirement benefit is terminated, the
monthly benefit shall continue to be paid on the first day of each calendar
month thereafter, until the benefit has been paid for a number of months equal
to the Director's continuous service, or until the death of the Director or
surviving spouse, if earlier. If a Director should retire and be granted a
retirement benefit hereunder and subsequently die with such benefit still in
effect, prior to receipt of all payments due hereunder, the monthly benefit
shall continue to the surviving spouse of such Director until all payments due
hereunder have been made or until the death of the surviving spouse, if
earlier.
5.4 Each Director who is granted a retirement benefit hereunder shall
make him or herself available for such consultation with the Board of
Directors or any committee or member thereof, as
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may be reasonably requested from time to time by the Chairman of the Board of
Directors, following such Director's termination of service as a Director.
The Company shall reimburse each such Director for all reasonable travel,
lodging and subsistence expenses incurred by the Director at the request of
the Company in rendering such consultation. The Company may terminate the
retirement benefit if the Director should fail to render such consultation,
unless prevented by disability or other reason beyond the Director's control.
5.5 It is recognized that during a Director's period of service as a
Director and as a consultant hereunder, a Director will acquire knowledge of
the affairs of the Company and its subsidiaries, the disclosure of which would
be contrary to the best interests of the Company. Accordingly, the Company
may terminate the retirement benefit if, without the express consent of the
Company, the Director accepts election to the Board of Directors of, acquires
a partnership or proprietary interest in, or renders services as an employee
or consultant to, any business entity which is engaged in substantial
competition with the Company or any of its subsidiaries.
5.6 An individual will be considered a Director's "surviving spouse"
for purposes of this Section 5 only if the Director and such individual were
married in a religious or civil ceremony recognized under the laws of the
state where the marriage was contracted and the marriage remained legally
effective at the date of the Director's death.
SECTION 6
CONVERSION TO COMMON STOCK UNITS
6.1 Any Director who is then serving as a director may, by written
notice filed with the Secretary of the Company, elect to have all or any
portion of deferred fees previously earned but not yet paid, transferred from
the Director's Deferred Fee Account to a Stock Account maintained on his or
her behalf pursuant to paragraph 9.3. Any election as to a portion of such
fees shall be expressed as a percentage and the same percentage shall be
applied to all such fees regardless of the calendar year in which earned or to
all deferred fees earned in designated calendar years, as specified by the
Director. A Director may make no more than one election under this paragraph
6.l in any calendar year. All such elections may apply only to deferred fees
for which an election has not previously been made and shall be irrevocable.
6.2 Any Director may, by written notice filed with the Secretary of
the Company, elect to have all or any portion of deferred fees earned
subsequent to the date such notice is filed credited to a Stock Account
established under this Section 6. Fees covered by such election shall be
credited to such account at the end of each calendar quarter in, or for which,
such fees are earned. Such election may be revoked or modified by such
Director, by
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written notice filed with the Secretary of the Company, as to deferred fees to
be earned in calendar years subsequent to the calendar year such notice is
filed, but shall be irrevocable as to deferred fees earned prior to such year.
6.3 Deferred fees credited to a Stock Account under paragraph 6.1
shall be converted to Common Stock Units by dividing the deferred fees so
credited by the closing price of common shares of the Company on the date
notice of election under paragraph 6.1 is received by the Company (or the next
business day, if there are no sales on such date) as reported on the New York
Stock Exchange Composite Reporting System. Deferred fees credited to a Stock
Account under paragraph 6.2 shall be converted to Common Stock Units by
dividing the deferred fees so credited by the closing price of common shares
of the Company as of the last business day of the calendar quarter for which
the credit is made, as reported on the New York Stock Exchange Composite
Reporting System.
6.4 Each Common Stock Unit shall be credited with the same cash and
stock dividends, stock splits and other distributions and adjustments as are
received by one common share of the Company. All cash dividends and other cash
distributions credited to Common Stock Units shall be converted to additional
Common Stock Units by dividing each such dividend or distribution by the
closing price of common shares of the Company on the payment date for such
dividend or distribution, as reported by the New York Stock Exchange Composite
Reporting System.
6.5 The value of the Common Stock Units credited each Director shall
be paid the Director in cash on the dates specified in paragraph 4.2 (or, if
applicable, paragraph 4.4). The amount of each payment shall be determined by
multiplying the Common Stock Units payable on each date specified in paragraph
4.2 (or, if applicable, paragraph 4.4) by the closing price of common shares
of the Company on the day prior to that date (or the next preceding business
day if there are no sales on such date), as reported by the New York Stock
Exchange Composite Reporting System.
SECTION 7
MISCELLANEOUS
7.1 Each Director or former Director entitled to payment of deferred
fees hereunder, from time to time may name any person or persons (who may be
named contingently or successively) to whom any deferred Director's fees
earned by him and payable to him are to be paid in case of his death before he
receives any or all of such deferred Director's fees. Each designation will
revoke all prior designations by the same Director or former Director, shall
be in form prescribed by the Company, and will be effective only when filed by
the Director or former Director in writing with the Secretary of the Company
during his lifetime. If a deceased Director or former Director shall have
failed to name a beneficiary in the manner provided above, or if the
beneficiary named by a
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deceased Director or former Director dies before him or before payment of all
the Director's or former Director's deferred Directors' fees, the Company, in
its discretion, may direct payment in a single sum of any remaining deferred
Directors' fees to either:
(a) any one or more or all of the next of kin (including the surviving
spouse) of the Director or former Director, and in such proportions as
the Company determines; or
(b) the legal representative or representatives of the estate of the last
to die of the Director or former Director and his last surviving
beneficiary.
The person or persons to whom any deceased Director's or former Director's
deferred Directors' fees are payable under this paragraph will be referred to
as his "beneficiary."
7.2 Establishment of the Plan and coverage thereunder of any person
shall not be construed to confer any right on the part of such person to be
nominated for reelection to the Board of Directors of the Company, or to be
reelected to the Board of Directors.
7.3 Payment of deferred Directors' fees will be made only to the
person entitled thereto in accordance with the terms of the Plan, and deferred
Directors' fees are not in any way subject to the debts or other obligations
of persons entitled thereto, and may not be voluntarily or involuntarily sold,
transferred to assigned. When a person entitled to a payment under the Plan is
under legal disability or, in the Company's opinion, is in any way
incapacitated so as to be unable to manage his financial affairs, the Company
may direct that payment be made to such person's legal representative, or to a
relative or friend of such person for his benefit. Any payment made in
accordance with the preceding sentence shall be in complete discharge of the
Company's obligation to make such payment under the Plan.
7.4 Any action required or permitted to be taken by the Company under
the terms of the Plan shall be by affirmative vote of a majority of the
members of the Board of Directors then in office.
SECTION 8
AMENDMENT AND DISCONTINUANCE
While the Company expects to continue the Plan, it must necessarily
reserve, and does hereby reserve, the right to amend or discontinue the Plan
at any time; provided, however, that any amendment or discontinuance of the
Plan shall be prospective in operation only, and shall not affect the payment
of any deferred Directors' fees theretofore earned by any Director, or the
conditions under which any such fees are to be paid or forfeited under the
Plan, unless the Director affected shall expressly consent thereto.
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SECTION 9
ALTERNATE PAYMENT OF DEFERRED FEES
9.1 By written notice filed with the Secretary of the Company prior
to calendar years beginning after December 31, 1988 (or, for the calendar year
he first becomes a Director within 30 days of becoming a Director), a Director
may elect to receive all or any portion of his deferred fees earned in such
calendar years in a lump sum in accordance with the provisions of this Section
9. An election under this subsection 9.1 may be revoked or modified by the
Director by written notice to the Secretary of the Company as to deferred fees
earned under Section 3 in calendar years beginning after the calendar year in
which he files such notice. Any amounts that were deferred for calendar years
beginning before January 1, 1989 shall automatically be paid as provided in
this Section 9.
9.2 If payment of a Director's deferred fees is made pursuant to
paragraph 9.1, a portion of such fees shall be paid in cash for the Director
directly to a "Grantor Trust" established by the Director, provided such trust
is in a form which the Company determines to be substantially similar to the
trust attached to this plan as Exhibit A; and the balance of the deferred fees
shall be paid in cash directly to the Director, provided that the payment made
directly to the Director shall approximate the aggregate federal, state and
local individual income taxes attributable to the deferred fees paid pursuant
to this paragraph 9.2.
9.3 The Company will establish and maintain four separate accounts in
the name of each Director, "a Deferred Fee Account", a "Deferred Fee Trust
Account", a "Stock Account" and a "Stock Trust Account". The Deferred Fee
Account shall reflect the deferred fees and interest to be credited to a
Director pursuant to Section 3. The Deferred Fee Trust Account shall reflect
any deferred fees paid in cash to a Director (including amounts paid to a
Director's Grantor Trust and allocated to the deferred account maintained
thereunder) pursuant to paragraph 9.2 and any adjustments made pursuant to
paragraph 9.4. The Stock Account shall reflect the deferred fees converted to
Common Stock Units pursuant to Section 6 and any adjustments made pursuant to
that Section. The Stock Trust Account shall reflect deferred fees that have
been converted to Common Stock Units under Section 6 and paid in cash to a
Director (including amounts paid to a Director's Grantor Trust and allocated
to the stock account maintained thereunder) pursuant to paragraph 9.2 and any
adjustments made pursuant to paragraph 9.5. The Accounts established pursuant
to this paragraph 9.3 are for the convenience of the administration of the
plan and no trust relationship with respect to such Accounts is intended or
should be implied.
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9.4 As of the end of each calendar year, the Company shall adjust
each Director's Deferred Fee Trust Account as follows:
(a) FIRST, charge an amount equal to the product of: (i) any payments made
to the Director during that year from the deferred account maintained
under his or her Grantor Trust (other than distributions of trust
earnings in excess of the Net Interest Accrual authorized by the
administrator of the trust to provide for the Tax Gross Up under
paragraph 9.9 below); multiplied by (ii) a fraction, the numerator of
which is the balance in the Director's Deferred Fee Trust Account as
of the end of the prior calendar year and the denominator of which is
the balance in the deferred account maintained under the Director's
Grantor Trust (as determined by the administrator of the trust) as of
that same date;
(b) NEXT, credit an amount equal to the deferred fees that have not been
converted to Common Stock Units that are paid that year to the
Director (including the amount paid to the Director's Grantor Trust
and allocated to the deferred account maintained thereunder) pursuant
to paragraph 9.2; and
(c) FINALLY, credit an amount equal to the Interest Accrual earned for
that year pursuant to paragraph 9.6.
9.5 As of the end of each calendar year, the Company shall adjust
each Director's Stock Trust Account as follows:
(a) FIRST, charge an amount equal to the product of: (i) any payments made
to the Director during that year from the stock account maintained
under his or her Grantor Trust (other than distributions of trust
earnings authorized by the administrator of the trust to provide for
the Tax Gross Up under paragraph 9.9 below); multiplied by (ii) a
fraction, the numerator of which is the balance in the Director's
Stock Trust Account as of the end of the prior calendar year and the
denominator of which is the balance in the stock account maintained
under the Director's Grantor Trust (as determined by the administrator
of the trust) as of that same date;
(b) NEXT, credit an amount equal to the deferred fees that have been
converted to Common Stock Units that are paid that year to the
Director (including the amount paid to the Director's Grantor Trust
and allocated to the stock account maintained thereunder) pursuant to
paragraph 9.2; and
(c) FINALLY, credit an amount equal to the Book Value Adjustments to be
made for that year pursuant to paragraph 9.6.
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9.6 As of the end of each calendar year, a Director's Deferred Fee
Trust Account shall be credited with interest at the rate described in
paragraph 3.7. Any amount so credited shall be referred to as a Director's
"Interest Accrual". As of that same date, a Director's Stock Trust Account
shall be adjusted as provided in paragraph 6.4, and shall also be adjusted to
reflect the increase or decrease in the fair market value of the Company's
common stock determined in accordance with paragraph 6.5. Such adjustments
shall be referred to as "Book Value Adjustments."
9.7 In addition to any fees earned by a Director under Section 3 of
this plan or paid under paragraphs 4.1 or 9.1 the Company shall also make a
payment to a Director's Grantor Trust (a "Guaranteed Rate Payment"), to be
credited to the deferred account maintained thereunder, for any year in which
the net income credited to the deferred account maintained under such trust
does not equal or exceed the Director's Net Interest Accrual for that year. A
Director's "Net Interest Accrual" for a year is an amount equal to: (a) the
Interest Accrual credited to the Director's Deferred Fee Trust Account for
that year; less (b) the product of (i) the amount of such Interest Accrual,
multiplied by (ii) the aggregate of the federal, state and local individual
income tax rates (determined in accordance with paragraph 9.10). The
Guaranteed Rate Payment shall equal the difference between the Director's Net
Interest Accrual and the net income credited to the deferred account
maintained under the Director's Grantor Trust for the year, and shall be paid
within 90 days of the end of that year.
9.8 The Company shall also make a payment to a Director's Grantor
Trust (a "Guaranteed Principal Payment"), to be credited to the stock account
maintained thereunder, to the extent the that the balance in the stock account
as of the end of any calendar year is less than 75 percent of the balance of
the Director's Stock Trust Account (net of federal, state and local income
taxes) as of that same date. For the calendar year in which the last
installment distribution is made from the Director's Grantor Trust, the
payment made under this paragraph 9.8 shall equal the amount, if any, needed
to increase the fair market value of the stock account maintained under the
Director's Grantor Trust; such that if a distribution of the stock account
were then made to the Director, the Director would receive the same amount he
or she would have received (net of federal, state and local income taxes) if
his or her Stock Trust Account were to be distributed on that same date with
the deferred fees that had been allocated to that Account taxed at the
federal, state and local income tax rates in effect on the date the fees were
credited to the Account and the balance of the Account taxed at the federal,
state and local income tax rates in effect on the date of the distribution.
Payments required under this paragraph 9.8 shall be made within 90 days of the
end of the calendar year, except the last payment which shall be made not
later than the due date of the last installment distribution from the
Director's Grantor Trust.
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9.9 In addition to the fees provided under Section 3, each Director
(or, if the Director is deceased, the beneficiary designated under the
Director's Grantor Trust) shall be entitled to a Tax Gross Up payment for each
year there is a balance in his or her Deferred Fee Trust Account or Stock
Trust Account. The "Tax Gross Up" shall approximate: (a) the amount necessary
to compensate the Director (or beneficiary) for the net increase in his or her
federal, state and local income taxes as a result of the inclusion in the
Director's (or beneficiary's) taxable income of the income of his or her
Grantor Trust and any Guaranteed Rate and Guaranteed Principal Payments for
that year; less (b) any distribution to the Director (or beneficiary) of his
or her Grantor Trust's net earnings for that year; plus (c) an amount
necessary to compensate the Director (or beneficiary) for the net increase in
the taxes described in (a) above as a result of the inclusion in his or her
taxable income of any payment made pursuant to this paragraph 9.9.
9.10 For purposes of this Section, a Director's federal income tax
rate shall be deemed to be the highest marginal rate of federal individual
income tax in effect in the calendar year in which a calculation under this
Section is to be made and state and local tax rates shall be deemed to be the
highest marginal rates of individual income tax in effect in the state and
locality of the Director's residence on the date such a calculation is made,
net of any federal tax benefits. Notwithstanding the preceding sentence, if a
Director is not a citizen or resident of the United States, his or her income
tax rates shall be deemed to be the highest marginal income tax rates actually
imposed on the Director's benefits under this Plan or earnings under his or
her Grantor Trust.
Exhibit A
IRREVOCABLE GRANTOR TRUST AGREEMENT
THIS AGREEMENT, made this ______ day of _______________________, 198__, by
and between __________________________ of ________________, _________________
(the "grantor"), and The Northern Trust Company, located at Chicago, Illinois,
as trustee (the "trustee"),
WITNESSETH THAT:
WHEREAS, the grantor desires to establish and maintain a trust to hold
certain benefits received by the grantor under the Abbott Laboratories
Non-Employee Directors' Fee Plan, as it may be amended from time to time;
NOW, THEREFORE, IT IS AGREED as follows:
ARTICLE I
INTRODUCTION
I-1. NAME. This agreement and the trust hereby evidenced (the
"trust") may be referred to as the "_______________ 1988 Grantor Trust".
I-2. THE TRUST FUND. The "trust fund" as at any date means all
property then held by the trustee under this agreement.
I-3. STATUS OF THE TRUST. The trust shall be irrevocable. The trust
is intended to constitute a grantor trust under Sections 671-678 of the
Internal Revenue Code, as amended, and shall be construed accordingly.
I-4. THE ADMINISTRATOR. Abbott Laboratories ("Abbott") shall act as
the "administrator" of the trust, and as such shall have certain powers,
rights and duties under this agreement as described below. Abbott will
certify to the trustee from time to time the person or persons authorized to
act on behalf of Abbott as the administrator. The trustee may rely on the
latest certificate received without further inquiry or verification.
I-5. ACCEPTANCE. The trustee accepts the duties and obligations of
the "trustee" hereunder, agrees to accept funds delivered to it by the grantor
or the administrator, and agrees to hold such funds (and any proceeds from the
investment of such funds) in trust in accordance with this agreement.
- 2 -
ARTICLE II
DISTRIBUTION OF THE TRUST FUND
II-1. SEPARATE ACCOUNTS. The administrator shall maintain two
separate accounts under the trust, a "deferred account" and a "stock account."
Funds delivered to the trustee shall be allocated between the accounts by the
trustee as directed by the administrator. As of the end of each calendar
year, the administrator shall charge each account with all distributions made
from such account during that year; and credit each account with its share of
income and realized gains and charge each account with its share of expenses
and realized losses for the year. The trustee shall be required to make
separate investments of the trust fund for the accounts, and may not
administer and invest all funds delivered to it under the trust as one trust
fund.
II-2. DISTRIBUTIONS PRIOR TO THE GRANTOR'S DEATH. Principal and
accumulated income shall not be distributed from the trust prior to the
grantor's termination of service as a Director of Abbott (the grantor's
"settlement date"); provided that, each year the administrator may direct the
trustee to distribute to the grantor a portion of the income of the trust fund
for that year, with the balance of such income to be accumulated in the trust.
The administrator shall inform the trustee of the grantor's settlement date.
Thereafter, the trustee shall distribute the trust fund to the grantor, if
then living, in a series of annual installments, commencing on the first day
of the month next following the later of the grantor's settlement date or the
date the grantor attains age 65 years. The administrator shall inform the
trustee of the number of installment distributions and the amount of each
installment distribution under this paragraph II-2, and the trustee shall be
fully protected in relying on such information received from the
administrator.
II-3. DISTRIBUTIONS AFTER THE GRANTOR'S DEATH. The grantor, from
time to time may name any person or persons (who may be named contingently or
successively and who may be natural persons or fiduciaries) to whom the
principal of the trust fund and all accrued or undistributed income thereof
shall be distributed in a lump sum or, if the beneficiary is the grantor's
spouse, in installments, as directed by the grantor, upon the grantor's death.
If the grantor directs an installment method of distribution, any amounts
remaining at the death of the spouse beneficiary shall be distributed in a
lump sum. Each designation shall revoke all prior designations, shall be in
writing and shall be effective only when filed by the grantor with the
administrator during the grantor's lifetime. If the grantor fails to direct a
method of distribution, the distribution shall be made in a lump sum. If the
grantor fails to designate a beneficiary as provided above, then on the
grantor's death, the trustee shall distribute the balance of the trust fund in
a lump sum to the executor or administrator of the grantor's estate.
- 3 -
II-4. FACILITY OF PAYMENT. When a person entitled to a distribution
hereunder is under legal disability, or, in the trustee's opinion, is in any
way incapacitated so as to be unable to manage his or her financial affairs,
the trustee may make such distribution to such person's legal representative,
or to a relative or friend of such person for such person's benefit. Any
distribution made in accordance with the preceding sentence shall be a full
and complete discharge of any liability for such distribution hereunder.
II-5. PERPETUITIES. Notwithstanding any other provisions of this
agreement, on the day next preceding the end of 21 years after the death of
the last to die of the grantor and the grantor's descendants living on the
date of this instrument, the trustee shall immediately distribute any
remaining balance in the trust to the beneficiaries then entitled to
distributions hereunder.
ARTICLE III
MANAGEMENT OF THE TRUST FUND
III-1. GENERAL POWERS. The trustee shall, with respect to the trust
fund, have the following powers, rights and duties in addition to those
provided elsewhere in this agreement or by law:
(a) Subject to the limitations of subparagraph (b) next below, to sell,
contract to sell, purchase, grant or exercise options to purchase, and
otherwise deal with all assets of the trust fund, in such way, for
such considerations, and on such terms and conditions as the trustee
decides.
(b) To retain in cash such amounts as the trustee considers advisable; and
to invest and reinvest the balance of the trust fund, without
distinction between principal and income, in common stock of Abbott
Laboratories, or in obligations of the United States Government and
its agencies or which are backed by the full faith and credit of the
United States Government or in any mutual fund, common trust fund or
collective investment fund which invests solely in such obligations;
and any such investment made or retained by the trustee in good faith
shall be proper despite any resulting risk or lack of diversification
or marketability.
(c) To deposit cash in any depositary (including the banking department of
the bank acting as trustee) without liability for interest, and to
invest cash in savings accounts or time certificates of deposit
bearing a reasonable rate of interest in any such depositary.
(d) To invest, subject to the limitations of subparagraph (b) above, in
any common or commingled trust fund or funds
- 4 -
maintained or administered by the trustee solely for the investment of
trust funds.
(e) To borrow from anyone, with the administrator's approval, such sum or
sums from time to time as the trustee considers desirable to carry out
this trust, and to mortgage or pledge all or part of the trust fund as
security.
(f) To retain any funds or property subject to any dispute without
liability for interest and to decline to make payment or delivery
thereof until final adjudication by a court of competent jurisdiction
or until an appropriate release is obtained.
(g) To begin, maintain or defend any litigation necessary in connection
with the administration of this trust, except that the trustee shall
not be obliged or required to do so unless indemnified to the
trustee's satisfaction.
(h) To compromise, contest, settle or abandon claims or demands.
(i) To give proxies to vote stocks and other voting securities, to join in
or oppose (alone or jointly with others) voting trusts, mergers,
consolidations, foreclosures, reorganizations, liquidations, or other
changes in the financial structure of any corporation, and to exercise
or sell stock subscription or conversion rights.
(j) To hold securities or other property in the name of a nominee, in a
depositary, or in any other way, with or without disclosing the trust
relationship.
(k) To divide or distribute the trust fund in undivided interests or
wholly or partly in kind.
(l) To pay any tax imposed on or with respect to the trust; to defer
making payment of any such tax if it is indemnified to its
satisfaction in the premises; and to require before making any payment
such re lease or other document from any lawful taxing authority and
such indemnity from the intended payee as the trustee considers
necessary for its Protection.
(m) To deal without restriction with the legal representative of the
grantor's estate or the trustee or other legal representative of any
trust created by the grantor or a trust or estate in which a
beneficiary has an interest, even though the trustee, individually,
shall be acting in such other capacity, without liability for any loss
that may result.
(n) To appoint or remove by written instrument any bank or corporation
qualified to act as successor trustee, wherever located, as special
trustee as to part or all of the trust fund, including property as to
which the trustee does not act, and such special trustee, except as
specifically limited or
- 5 -
provided by this or the appointing instrument, shall have all of the
rights, titles, powers, duties, discretions and immunities of the
trustee, without liability for any action taken or omitted to be taken
under this or the appointing instrument.
(o) To appoint or remove by written instrument any bank, wherever located,
as custodian of part or all of the trust fund, and each such custodian
shall have such rights, powers, duties and discretions as are
delegated to it by the trustee.
(p) To employ agents, attorneys, accountants or other persons, and to
delegate to them such powers as the trustee considers desirable, and
the trustee shall be protected in acting or refraining from acting on
the advice of Persons so employed without court action.
(q) To perform any and all other acts which in the trustee's judgment are
appropriate for the proper management, investment and distribution of
the trust fund.
III-2. PRINCIPAL AND INCOME. Any income earned on the trust fund
which is not distributed as provided in Article II shall be accumulated and
from time to time added to the principal of the trust. The grantor's interest
in the trust shall include all assets or other property held by the trustee
hereunder, including principal and accumulated income.
III-3. STATEMENTS. The trustee shall prepare and deliver monthly to
the administrator and annually to the grantor, if then living, otherwise to
each beneficiary then entitled to distributions under this agreement, a
statement (or series of statements) setting forth (or which taken together set
forth) all investments, receipts, disbursements and other transactions
effected by the trustee during the reporting period; and showing the trust
fund and the value thereof at the end of such period.
III-4. COMPENSATION AND EXPENSES. All reasonable costs, charges and
expenses incurred in the administration of this trust, including compensation
to the trustee, any compensation to agents, attorneys, accountants and other
persons employed by the trustee, and expenses incurred in connection with the
sale, investment and reinvestment of the trust fund shall be paid from the
trust fund.
ARTICLE IV
GENERAL PROVISIONS
IV-1. INTERESTS NOT TRANSFERABLE. The interests of the grantor or
other persons entitled to distributions hereunder are not subject to their
debts or other obligations and may not be voluntarily or involuntarily sold,
transferred, alienated, assigned or encumbered.
- 6 -
IV-2. DISAGREEMENT AS TO ACTS. If there is a disagreement between
the trustee and anyone as to any act or transaction reported in any
accounting, the trustee shall have the right to a settlement of its account by
any proper court.
IV-3. TRUSTEE'S OBLIGATIONS. No power, duty or responsibility is
imposed on the trustee except as set forth in this agreement. The trustee is
not obliged to determine whether funds delivered to or distributions from the
trust are proper under the trust, or whether any tax is due or payable as a
result of any such delivery or distribution. The trustee shall be protected
in making any distribution from the trust as directed pursuant to Article II
without inquiring as to whether the distributee is entitled thereto; and the
trustee shall not be liable for any distribution made in good faith without
writ ten notice or knowledge that the distribution is not proper under the
terms of this agreement.
IV-4. GOOD FAITH ACTIONS. The trustee's exercise or non-exercise of
its powers and discretions in good faith shall be conclusive on all persons.
No one shall be obliged to see to the application of any money paid or
property delivered to the trustee. The certificate of the trustee that it is
acting according to this agreement will fully protect all persons dealing with
the trustee.
IV-5. WAIVER OF NOTICE. Any notice required under this agreement may
be waived by the Person entitled to such notice.
IV-6. CONTROLLING LAW. The laws of the State of Illinois shall
govern the interpretation and validity of the provisions of this agreement and
all questions relating to the management, administration, investment and
distribution of the trust hereby created.
IV-7. SUCCESSORS. This agreement shall be binding on all persons
entitled to distributions hereunder and their respective heirs and legal
representatives, and on the trustee and its successors.
ARTICLE V
CHANGES IN TRUSTEE
V-1. RESIGNATION OR REMOVAL OF TRUSTEE. The trustee may resign at
any time by giving thirty days' advance written notice to the administrator
and the grantor. The administrator may remove a trustee by written notice to
the trustee and the grantor.
V-2. APPOINTMENT OF SUCCESSOR TRUSTEE. The administrator shall fill
any vacancy in the office of trustee as soon as practicable by written notice
to the successor trustee; and shall give prompt written notice thereof to the
grantor, if then living, otherwise to each beneficiary then entitled to
payments or
- 7 -
distributions under this agreement. A successor trustee shall be a bank (as
defined in Section 581 of the Internal Revenue Code, as amended).
V-3. DUTIES OF RESIGNING OR REMOVED TRUSTEE AND OF SUCCESSOR
TRUSTEE. A trustee that resigns or is removed shall furnish promptly to the
administrator and the successor trustee an account of its administration of
the trust from the date of its last account. Each successor trustee shall
succeed to the title to the trust fund vested in its predecessor without the
signing or filing of any instrument, but each predecessor trustee shall
execute all documents and do all acts necessary to vest such title of record
in the successor trustee. Each successor trustee shall have all the powers
conferred by this agreement as if originally named trustee. No successor
trustee shall be personally liable for any act or failure to act of a
predecessor trustee. With the approval of the administrator, a successor
trustee may accept the account furnished and the property delivered by a
predecessor trustee without incurring any liability for so doing, and such
acceptance will be complete discharge to the predecessor trustee.
ARTICLE VI
AMENDMENT AND TERMINATION
VI-1. AMENDMENT. With the consent of the administrator, this trust
may be amended from time to time by the grantor, if then living, otherwise by
a majority of the beneficiaries then entitled to payments or distributions
hereunder, except as follows:
(a) The duties and liabilities of the trustee cannot be changed
substantially without its consent.
(b) This trust may not be amended so as to make the trust revocable.
VI-2. TERMINATION. This trust shall not terminate, and all rights,
titles, powers, duties, discretions and immunities imposed on or reserved to
the trustee, the administrator, the grantor and the beneficiaries shall
continue in effect, until all assets of the trust have been distributed by the
trustee as provided in Article II.
- 8 -
IN WITNESS WHEREOF, the grantor and the trustee have executed this
agreement as of the day and year first above written.
Grantor_______________________________
The Northern Trust Company, as
Trustee
By____________________________________
Its___________________________________
EXHIBIT 11
ABBOTT LABORATORIES AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(DOLLARS AND SHARES IN MILLIONS EXCEPT PER SHARE FIGURES)
YEAR ENDED DECEMBER 31
--------------------------------
1993 1992 1991
-------- -------- --------
1. Net earnings............................................................. $1,399.1 $1,239.1 $1,088.7
-------- -------- --------
2. Average number of shares outstanding during the year..................... 829.0 844.1 854.1
-------- -------- --------
3. Earnings per share based upon average outstanding share (1. DIVIDED BY
2.)........................................................................ $1.69 $1.47 $1.27
-------- -------- --------
-------- -------- --------
4. Fully diluted earnings per share:
a. Stock options granted and outstanding for which the market price at
year-end exceeds the option price......................................... 18.7 20.1 25.9
-------- -------- --------
-------- -------- --------
b. Aggregate proceeds to the Company from the exercise of options in
4.a....................................................................... $297.0 $295.1 $354.4
-------- -------- --------
-------- -------- --------
c. Market price of the Company's common stock at year-end................. $29.63 $30.38 $34.44
-------- -------- --------
-------- -------- --------
d. Shares which could be repurchased under the treasury stock method (4.b.
+ 4.c.)................................................................... 10.0 9.7 10.3
-------- -------- --------
-------- -------- --------
e. Addition to average outstanding shares (4.a. - 4.d.)................... 8.7 10.4 15.6
-------- -------- --------
-------- -------- --------
f. Shares for fully diluted earnings per share calculation (2. + 4.e.).... 837.7 854.5 869.7
-------- -------- --------
-------- -------- --------
g. Fully diluted earnings per share (1. + 4.f.)........................... $1.67 $1.45 $1.25
-------- -------- --------
-------- -------- --------
EXHIBIT 11
ABBOTT LABORATORIES AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(DOLLARS AND SHARES IN MILLIONS EXCEPT PER SHARE FIGURES)
YEAR ENDED DECEMBER 31
--------------------------------
1993 1992 1991
-------- -------- --------
1. Net earnings............................................................. $1,399.1 $1,239.1 $1,088.7
-------- -------- --------
2. Average number of shares outstanding during the year..................... 829.0 844.1 854.1
-------- -------- --------
3. Earnings per share based upon average outstanding share (1. DIVIDED BY
2.)........................................................................ $1.69 $1.47 $1.27
-------- -------- --------
-------- -------- --------
4. Fully diluted earnings per share:
a. Stock options granted and outstanding for which the market price at
year-end exceeds the option price......................................... 18.7 20.1 25.9
-------- -------- --------
-------- -------- --------
b. Aggregate proceeds to the Company from the exercise of options in
4.a....................................................................... $297.0 $295.1 $354.4
-------- -------- --------
-------- -------- --------
c. Market price of the Company's common stock at year-end................. $29.63 $30.38 $34.44
-------- -------- --------
-------- -------- --------
d. Shares which could be repurchased under the treasury stock method (4.b.
+ 4.c.)................................................................... 10.0 9.7 10.3
-------- -------- --------
-------- -------- --------
e. Addition to average outstanding shares (4.a. - 4.d.)................... 8.7 10.4 15.6
-------- -------- --------
-------- -------- --------
f. Shares for fully diluted earnings per share calculation (2. + 4.e.).... 837.7 854.5 869.7
-------- -------- --------
-------- -------- --------
g. Fully diluted earnings per share (1. + 4.f.)........................... $1.67 $1.45 $1.25
-------- -------- --------
-------- -------- --------
Exhibit 13
The portions of the Abbott Laboratories Annual Report for the year ended
December 31, 1993 captioned Financial Review, Consolidated Balance Sheet,
Consolidated Statement of Earnings, Consolidated Statement of Cash Flows,
Consolidated Statement of Shareholders' Investment, Notes to Consolidated
Financial Statements, Report of Independent Public Accountants, and the
applicable portions of the section captioned Summary of Financial Data
for the years 1989 through 1993.
Abbott Laboratories and Subsidiaries
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
ASSETS
December 31
----------------------------------------
1993 1992 1991
---------- ---------- ----------
Current Assets:
Cash and cash equivalents.................... $ 300,676 $ 116,576 $ 60,395
Investment securities, at cost............... 78,149 141,601 85,838
Trade receivables, less allowances of -
1993: $116,925; 1992: $106,857; 1991: $82,244 1,336,222 1,244,396 1,150,894
Inventories -
Finished products.......................... 476,548 421,932 406,026
Work in process............................ 216,493 190,163 186,591
Materials.................................. 247,492 251,713 222,768
---------- ---------- ----------
Total inventories........................ 940,533 863,808 815,385
---------- ---------- ----------
Prepaid income taxes......................... 458,026 477,387 425,442
Other prepaid expenses and receivables....... 471,929 387,970 353,114
---------- ---------- ----------
Total Current Assets..................... 3,585,535 3,231,738 2,891,068
---------- ---------- ----------
Investment Securities Maturing After One Year,
at Cost...................................... 221,815 270,639 340,184
---------- ---------- ----------
Property And Equipment, at cost:
Land......................................... 137,636 120,617 64,984
Buildings.................................... 1,261,620 1,064,974 950,810
Equipment.................................... 4,169,279 3,735,259 3,304,062
Construction in progress..................... 652,611 576,291 465,367
---------- ---------- ----------
6,221,146 5,497,141 4,785,223
Less: accumulated depreciation
and amortization........................... 2,710,155 2,397,903 2,123,140
---------- ---------- ----------
Net Property and Equipment............... 3,510,991 3,099,238 2,662,083
Deferred Charges and Other Assets.............. 370,228 339,621 361,931
---------- ---------- ----------
$7,688,569 $6,941,236 $6,255,266
========== ========== ==========
The accompanying notes to consolidated financial statements are an integral part
of this statement.
Exhibit 13
Abbott Laboratories and Subsidiaries
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
LIABILITIES AND SHAREHOLDERS' INVESTMENT
December 31
----------------------------------------
1993 1992 1991
---------- ---------- ----------
Current Liabilities:
Short-term borrowings.......................... $ 841,514 $ 909,116 $ 523,526
Trade accounts payable......................... 638,509 597,226 522,397
Salaries, wages and commissions................ 215,432 196,259 212,394
Other accrued liabilities...................... 933,049 905,877 649,744
Dividends payable.............................. 139,600 125,300 106,297
Income taxes payable........................... 324,749 41,583 194,255
Current portion of long-term debt.............. 2,080 7,147 20,724
---------- ---------- ----------
Total Current Liabilities.................... 3,094,933 2,782,508 2,229,337
---------- ---------- ----------
Long-Term Debt................................... 306,840 110,018 125,118
---------- ---------- ----------
Other Liabilities and Deferrals:
Deferred income taxes.......................... 51,383 321,301 347,245
Other.......................................... 560,484 379,768 350,579
---------- ---------- ----------
Total Other Liabilities and Deferrals........ 611,867 701,069 697,824
---------- ---------- ----------
Shareholders' Investment:
Preferred shares, one dollar par value
Authorized - 1,000,000 shares, none issued..... - - -
Common shares, without par value
Authorized - 1,200,000,000 shares
Issued at stated capital amount -
1993: 830,941,614 shares; 1992: 846,017,815
shares; 1991: 860,765,782 shares............... 469,828 442,390 361,008
Earnings employed in the business................ 3,364,952 2,990,689 2,867,857
Cumulative translation adjustments............... (100,716) (23,131) 37,621
---------- ---------- ----------
3,734,064 3,409,948 3,266,486
Less:
Common shares held in treasury, at cost -
1993: 9,811,930 shares; 1992: 9,965,386 shares;
1991: 10,236,556 shares........................ 51,783 52,593 54,024
Unearned compensation - restricted stock awards 7,352 9,714 9,475
---------- ---------- ----------
Total Shareholders' Investment............... 3,674,929 3,347,641 3,202,987
---------- ---------- ----------
$7,688,569 $6,941,236 $6,255,266
========== ========== ==========
Exhibit 13
Abbott Laboratories and Subsidiaries
CONSOLIDATED STATEMENT OF EARNINGS
(Dollars in Thousands Except Per Share Data)
Year Ended December 31
----------------------------------------
1993 1992 1991
---------- ---------- ----------
Net Sales........................................ $8,407,843 $7,851,912 $6,876,588
---------- ---------- ----------
Cost of products sold.......................... 3,684,727 3,505,273 3,139,972
Research and development....................... 880,974 772,407 666,336
Selling, general and administrative............ 1,988,176 1,833,220 1,513,250
Provision for product withdrawal............... (70,000) 215,000 -
---------- ---------- ----------
Total Operating Cost and Expenses............ 6,483,877 6,325,900 5,319,558
---------- ---------- ----------
Operating Earnings............................... 1,923,966 1,526,012 1,557,030
Interest expense................................. 54,283 52,961 63,831
Interest and dividend income..................... (37,821) (42,250) (45,117)
Other (income) expense, net...................... (35,726) 48,534 (5,906)
Gain on sale of investment....................... - (271,986) -
---------- ---------- ----------
Earnings Before Taxes............................ 1,943,230 1,738,753 1,544,222
Taxes on earnings................................ 544,104 499,696 455,545
---------- ---------- ----------
Earnings Before Extraordinary Gain and
Accounting Change.............................. 1,399,126 1,239,057 1,088,677
Extraordinary Gain, Net of Tax of $74,068........ - - 128,182
Cumulative Effect of Accounting Change,
Net of Tax of $78,151.......................... - - (128,114)
---------- ---------- ----------
Net Earnings..................................... $1,399,126 $1,239,057 $1,088,745
========== ========== ==========
Earnings Per Common Share Before
Extraordinary Gain and Accounting Change....... $1.69 $1.47 $1.27
Extraordinary Gain, Net of Tax................... - - .15
Cumulative Effect of Accounting Change,
Net of Tax..................................... - - (.15)
----- ----- -----
Earnings Per Common Share........................ $1.69 $1.47 $1.27
===== ===== =====
Average Number of Common Shares Outstanding...... 828,988,000 844,122,000 854,062,000
============ =========== ===========
The accompanying notes to consolidated financial statements are an integral part
of this statement.
Exhibit 13
Abbott Laboratories and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
Year Ended December 31
----------------------------------------
1993 1992 1991
---------- ---------- ----------
Cash Flow From (Used In) Operating Activities:
Net earnings................................... $1,399,126 $1,239,057 $1,088,745
Adjustments to reconcile net earnings to
net cash from operating activities -
Depreciation and amortization.................. 484,081 427,782 379,017
Exchange (gains) losses, net................... 41,795 24,925 7,830
Investing and financing (gains) losses, net.... (6,038) 36,511 35,370
Trade receivables.............................. (192,451) (181,085) (139,768)
Inventories.................................... (91,490) (109,087) (44,818)
Prepaid expenses and other assets.............. (93,759) (114,009) (221,698)
Trade accounts payable and other liabilities... 375,645 121,741 344,516
Provision for product withdrawal............... (70,000) 215,000 -
Gain on sale of investment..................... - (271,986) -
Extraordinary gain............................. - - (202,250)
Accounting change.............................. - - 206,265
---------- ---------- ----------
Net Cash From Operating Activities........... 1,846,909 1,388,849 1,453,209
---------- ---------- ----------
Cash Flow From (Used In) Investing Activities:
Acquisitions of property, equipment
and businesses............................... (952,732) (1,007,247) (770,611)
Purchases of investment securities............. (335,915) (178,727) (284,092)
Proceeds from sales of investment securities... 447,983 496,120 398,682
Other.......................................... 46,826 22,277 13,915
---------- ---------- ----------
Net Cash Used in Investing Activities........ (793,838) (667,577) (642,106)
---------- ---------- ----------
Cash Flow From (Used In) Financing Activities:
Proceeds from borrowings with original
maturities of more than 3 months............. 289,429 196,487 344,162
Repayments of borrowings with original
maturities of more than 3 months............. (197,090) (213,833) (241,735)
Proceeds from (repayments of) other borrowings. 30,124 381,848 (211,991)
Purchases of common shares..................... (465,822) (607,598) (317,811)
Proceeds from stock options exercised.......... 27,536 74,027 57,898
Dividends paid................................. (548,044) (488,413) (410,345)
---------- ---------- ----------
Net Cash Used in Financing Activities........ (863,867) (657,482) (779,822)
---------- ---------- ----------
Exhibit 13
Abbott Laboratories and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
(Dollars in Thousands)
Year Ended December 31
----------------------------------------
1993 1992 1991
---------- ---------- ----------
Effect of exchange rate changes on cash and
cash equivalents............................... (5,104) (7,609) (4,920)
---------- ---------- ----------
Net Increase in Cash and Cash Equivalents........ 184,100 56,181 26,361
Cash and Cash Equivalents, Beginning of Year..... 116,576 60,395 34,034
---------- ---------- ----------
Cash and Cash Equivalents, End of Year........... $ 300,676 $ 116,576 $ 60,395
========== ========== ==========
Supplemental Cash Flow Information:
Income taxes paid.............................. $ 332,834 $ 702,897 $ 651,442
Interest paid.................................. 52,477 58,709 59,915
The accompanying notes to consolidated financial statements are an integral part
of this statement.
Exhibit 13
Abbott Laboratories and Subsidiaries
CONSOLIDATED STATEMENT OF SHAREHOLDER'S INVESTMENT
(Dollars in Thousands Except Per Share Data)
Year Ended December 31
----------------------------------------
1993 1992 1991
---------- ---------- ----------
Common Shares:
Issued at Beginning of Year
Shares: 1993: 846,017,815;
1992: 860,765,782; 1991: 868,573,972......... $ 442,390 $ 361,008 $ 297,522
Issued under incentive stock programs
Shares: 1993: 2,602,920; 1992: 5,865,601;
1991: 4,856,024.............................. 29,619 61,683 49,423
Tax benefit from sale of option shares and
vesting of restricted stock awards
(no share effect)............................ 8,300 29,800 19,000
Retired - Shares: 1993: 17,679,121;
1992: 20,613,568; 1991: 12,664,214........... (10,481) (10,101) (4,937)
Issued at End of Year ---------- ---------- ----------
Shares: 1993: 830,941,614;
1992: 846,017,815; 1991: 860,765,782......... $ 469,828 $ 442,390 $ 361,008
========== ========== ==========
Earnings Employed in the Business:
Balance at Beginning of Year................... $2,990,689 $2,867,857 $2,528,033
Net earnings................................... 1,399,126 1,239,057 1,088,745
Cash dividends declared on common shares
(per share-1993: $.68; 1992: $.60;
1991: $.50).................................. (562,344) (507,416) (426,622)
Cost of common shares and share rights
retired in excess of stated capital amount... (465,724) (614,953) (323,399)
Cost of treasury shares issued below market
value of restricted stock awards............. 3,205 6,144 1,100
---------- ---------- ----------
Balance at End of Year......................... $3,364,952 $2,990,689 $2,867,857
========== ========== ==========
Cumulative Translation Adjustments:
Balance at Beginning of Year................... $ (23,131) $ 37,621 $ 74,328
Translation adjustments........................ (77,695) (62,380) (36,750)
Allocated income taxes......................... 110 1,628 43
---------- ---------- ----------
Balance at End of Year......................... $ (100,716) $ (23,131) $ 37,621
========== ========== ==========
Exhibit 13
Abbott Laboratories and Subsidiaries
CONSOLIDATED STATEMENT OF SHAREHOLDER'S INVESTMENT (CONTINUED)
(Dollars in Thousands Except Per Share Data)
Year Ended December 31
----------------------------------------
1993 1992 1991
---------- ---------- ----------
Common Shares Held in Treasury:
Balance at Beginning of Year
Shares: 1993: 9,965,386; 1992: 10,236,556;
1991: 10,292,868............................. $ 52,593 $ 54,024 $ 54,321
Issued under incentive stock programs
Shares: 1993: 153,456; 1992: 271,170;
1991: 56,312................................. (810) (1,431) (297)
Balance at End of Year ---------- ---------- ----------
Shares: 1993: 9,811,930; 1992: 9,965,386;
1991: 10,236,556............................. $ 51,783 $ 52,593 $ 54,024
========== ========== ==========
Unearned Compensation - Restricted Stock Awards:
Balance at Beginning of Year................... $ 9,714 $ 9,475 $ 11,945
Issued at market value - Shares: 1993: 144,000;
1992: 254,000; 1991: 46,000.................. 3,771 7,079 1,134
Lapses - Shares: 1993: 42,800; 1992: 38,000;
1991: 18,000................................. (887) (637) (301)
Amortization................................... (5,246) (6,203) (3,303)
---------- ---------- ----------
Balance at End of Year......................... $ 7,352 $ 9,714 $ 9,475
========== ========== ==========
The accompanying notes to consolidated financial statements are an integral part
of this statement.
Exhibit 13
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1993
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
- ----------------------
The consolidated financial statements include the accounts of the parent company
and subsidiaries, after elimination of intercompany transactions. The accounts
of foreign subsidiaries are consolidated as of November 30.
Cash and Cash Equivalents
- -------------------------
Cash equivalents consist of time deposits and certificates of deposit with
original maturities of three months or less. The carrying amount of cash and
cash equivalents approximated fair value as of December 31, 1993 and 1992.
Inventories
- -----------
Inventories are stated at the lower of cost (first-in, first-out basis) or
market. Cost includes material and conversion costs.
Property and Equipment
- ----------------------
Depreciation and amortization are provided on the straight-line method over the
estimated useful lives of the assets.
Product Liability
- -----------------
Provisions are made for the portions of probable losses which are not covered by
product liability insurance.
Financial Instruments
- ---------------------
The Company enters into foreign exchange contracts and foreign currency option
contracts to manage its exposure to foreign currency rate changes. At December
31, 1993, 1992, and 1991, the Company held approximately $536 million,
$673 million, and $1.5 billion, respectively, of such instruments. The
instruments held at December 31, 1993, primarily in European and Japanese
currencies, mature through 1995. Realized and unrealized gains and losses on
contracts that qualify as hedges of anticipated purchases are recognized in the
same period that the foreign currency exposure is recognized. At December 31,
1993, 1992, and 1991, approximately $2.0 million, $1.0 million, and
$7.4 million, respectively, of net losses had been deferred. Gains and losses
on contracts that do not qualify for hedge accounting are recognized in income
as foreign currency exchange rates change.
The Company also enters into a variety of interest rate hedge contracts in the
management of interest rate exposures. At December 31, 1993 and 1991, the
Company held $200 million of such instruments, which mature through 1995; and at
December 31, 1992, held $300 million of such instruments. Gains or losses are
recognized in income in the same period that the interest rate exposure is
recognized.
Exhibit 13
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1993
The net asset (liability) recorded at December 31, 1993 and 1992 for foreign
exchange, foreign currency option and interest rate contracts was $9.8 million
and $(9.3) million, respectively, compared with the respective fair value of the
net asset (liability) of $5.6 million and $(9.8) million.
Fair value is the quoted market price of the instrument held or the quoted
market price of a similar instrument. Disclosure of fair value is not required
for December 31, 1991.
Translation Adjustments
- -----------------------
For foreign operations in highly inflationary economies, translation gains and
losses are included in other (income) expense, net. For remaining foreign
operations, translation adjustments are included as a component of shareholders'
investment.
Earnings per Common Share
- -------------------------
Earnings per common share amounts are computed using the weighted average number
of common shares outstanding.
NOTE 2 - DEBT AND LINES OF CREDIT
(dollars in thousands)
The following is a summary of long-term debt at December 31:
1993 1992 1991
-------- -------- --------
5.6% debentures, due 2003................. $200,000 $ - $ -
Industrial revenue bonds at various
rates of interest, averaging 4.0%
at December 31, 1993, and due at
various dates through 2023............... 82,600 82,600 82,600
Other, principally foreign affiliate
borrowings at various rates of
interest, averaging 4.7% at
December 31, 1993, and due at
various dates through 1998............... 24,240 27,418 42,518
-------- -------- --------
Total, net of current maturities.......... 306,840 110,018 125,118
Current maturities of long-term debt...... 2,080 7,147 20,724
-------- -------- --------
Total carrying amount..................... $308,920 $117,165 $145,842
======== ======== ========
Total fair market value................... $304,038 $115,568
======== ========
Exhibit 13
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1993
Payments required on long-term debt outstanding at December 31, 1993, are
$19,969 in 1995, $1,399 in 1996, $4,209 in 1997, and $2,460 in 1998.
At December 31, 1993, there were $300,000 of domestic lines of credit, none of
which were used. Related compensating balances, which are subject to withdrawal
by the Company at its option, and commitment fees are not material. The Company
may issue up to $300,000 of senior debt securities in the future under a
registration statement filed with the Securities and Exchange Commission in
1993.
At December 31, 1993 and 1992, the carrying amount of short-term borrowings
approximated fair value.
NOTE 3 - BENEFIT PLANS
(dollars in thousands)
Retirement plans consist of defined benefit, defined contribution, and medical
and dental plans.
Pension benefits for the Company's defined benefit plans generally are based on
the employee's years of service and compensation near retirement. Certain plan
benefits would vest and certain restrictions on the use of plan assets would
take effect upon a change in control of the Company.
Net pension cost for the Company's significant defined benefit plans includes
the following components:
1993 1992 1991
-------- -------- --------
Service cost - benefits earned during the year.. $ 59,381 $ 52,128 $ 46,428
Interest cost on projected benefit obligations.. 84,864 76,355 68,380
Return on assets................................ (128,221) (46,128) (267,341)
Net amortization and deferral................... (729) (74,779) 159,513
-------- -------- --------
Net pension cost................................ $ 15,295 $ 7,576 $ 6,980
======== ======== ========
Exhibit 13
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1993
The plans' funded status at December 31 was as follows:
1993 1992 1991
-------- -------- --------
Actuarial present value of benefit obligations -
Vested benefits............................... $791,435 $620,537 $549,748
Nonvested benefits............................ 97,985 82,557 69,608
-------- -------- --------
Accumulated benefit obligations................. $889,420 $703,094 $619,356
======== ======== ========
1993 1992 1991
---------- ---------- ----------
Plans' assets at fair value, principally
listed securities............................. $1,342,541 $1,244,881 $1,243,518
Actuarial present value of projected
benefit obligations........................... 1,198,768 951,603 857,741
---------- ---------- ----------
Projected benefit obligations
less than plans' assets....................... 143,773 293,278 385,777
Unrecognized net transitional asset............. (74,710) (85,563) (98,152)
Unrecognized prior service cost................. 30,951 32,455 34,344
Unrecognized net gain........................... (57,724) (199,779) (276,254)
---------- ---------- ----------
Net prepaid pension cost........................ $ 42,290 $ 40,391 $ 45,715
========== ========== ==========
Assumptions used for the Company's major defined benefit plan as of December 31
include:
1993 1992 1991
-------- -------- --------
Discount rate for determining obligations
and interest cost............................. 7 1/4% 9% 9%
Expected aggregate average long-term change
in compensation............................... 4% 6% 6%
Expected long-term rate of return on assets..... 9% 10% 10%
The principal defined contribution plan is the stock retirement plan. Company
contributions to this plan were $41,225 in 1993, $37,055 in 1992, and $31,254 in
1991, equal to 7.33 percent of dividends, as provided under the plan.
The Company provides certain medical and dental benefits to qualifying domestic
retirees. Effective January 1, 1991, the Company adopted Statement of Financial
Accounting Standards No. 106 "Employers' Accounting for Postretirement Benefits
Other Than Pensions." The Company recorded the transition obligation as the
cumulative effect of an accounting change.
Exhibit 13
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1993
Net postretirement health care cost includes the following components:
1993 1992 1991
------- ------- -------
Service cost - benefits earned during the year $16,823 $14,681 $ 9,194
Interest cost on accumulated postretirement
benefit obligations........................... 29,266 25,355 18,073
Return on assets................................ (9,239) (6,489) (15,453)
Net amortization and deferral................... 2,393 (583) 8,794
------- ------- -------
Net postretirement health care cost............. $39,243 $32,964 $20,608
======= ======= =======
The plans' funded status at December 31 was as follows:
1993 1992 1991
--------- --------- ---------
Actuarial present value of benefit obligations -
Retirees...................................... $ 171,231 $ 115,463 $ 100,381
Fully eligible active participants............ 117,158 72,659 58,078
Other active participants..................... 162,219 127,688 64,759
--------- --------- ---------
Accumulated postretirement benefit obligations.. 450,608 315,810 223,218
Plans' assets at fair value, principally
listed securities............................. 100,920 91,778 86,018
--------- --------- ---------
Accumulated postretirement benefit obligations
in excess of plans' assets.................... (349,688) (224,032) (137,200)
Unrecognized net loss (gain).................... 161,692 58,125 (7,577)
--------- --------- ---------
Accrued postretirement health care cost......... $(187,996) $(165,907) $(144,777)
========= ========= =========
Assumptions used for the Company's retiree health care plans as of December 31
include:
1993 1992 1991
-------- -------- --------
Discount rate for determining obligations
and interest cost.............................. 7 1/4% 9% 9%
Expected long-term rate of return on assets..... 9% 10% 10%
A 9 percent annual rate of increase in the per capita cost of covered health
care benefits was assumed for 1994. This rate is assumed to decrease gradually
to 5 percent in year 2000 and remain at that level thereafter. A
one-percentage-point increase in the assumed health care cost trend rates would
increase the accumulated postretirement benefit obligations as of December 31,
1993 by approximately $76,000 and the total of the service and interest cost
components of net postretirement health care cost for the year then ended by
approximately $17,200.
Exhibit 13
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1993
The Company also provides certain other postemployment benefits, primarily
disability plans, to qualifying domestic employees, and accrues for the related
cost over the service lives of the employee.
NOTE 4 - INVESTMENT SECURITIES
(dollars in thousands)
The following is a summary of investment securities at December 31:
Current Investment Securities 1993 1992 1991
-------- -------- --------
Time deposits and certificates of deposit....... $ 32,350 $ 84,430 $ 79,966
Corporate debt obligations and other securities. 40,155 38,285 -
Debt obligations issued or guaranteed by
various governments or government agencies.... 5,644 18,886 5,872
-------- -------- ---------
Total carrying amount............................. $ 78,149 $141,601 $ 85,838
======== ======== ========
Total fair market value........................... $ 78,319 $142,887
======== ========
Investment Securities Maturing after One Year 1993 1992 1991
-------- -------- --------
Time deposits and certificates of deposit....... $ 34,500 $ 54,500 $ 70,500
Debt obligations issued or guaranteed by
various governments or government agencies.... 142,612 166,139 197,684
Corporate debt obligations...................... 44,703 50,000 72,000
-------- -------- ---------
Total carrying amount............................. $221,815 $270,639 $340,184
======== ======== ========
Total fair market value........................... $231,879 $285,763
======== ========
Of the investment securities listed above, $293,888, $409,105, and $424,218,
were held at December 31, 1993, 1992, and 1991, respectively, by subsidiaries
operating in Puerto Rico under tax incentive grants expiring from 2002 through
2007. In addition, these subsidiaries held cash equivalents of $197,200,
$33,800, and $4,000 at December 31, 1993, 1992, and 1991, respectively.
Exhibit 13
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1993
NOTE 5 - TAXES ON EARNINGS
(dollars in thousands)
Effective January 1, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes." This
statement requires that deferred income taxes reflect the tax consequences on
future years of differences between the tax bases of assets and liabilities and
their financial reporting amounts. Prior to 1993, provisions were made for the
estimated amount of income taxes on reported earnings which were payable
currently and in the future. The effect of this change on income before taxes
and net income was not significant, and prior years' financial statements have
not been restated.
U.S. income taxes are provided on those earnings of foreign subsidiaries and
subsidiaries operating in Puerto Rico under tax incentive grants, which are
intended to be remitted to the parent company. Undistributed earnings
reinvested indefinitely in foreign subsidiaries as working capital and plant and
equipment aggregated $702,000 at December 31, 1993. Deferred income taxes not
provided on these earnings are not significant.
Earnings before taxes, and the related provisions for taxes on earnings, are as
follows:
Earnings Before Taxes 1993 1992 1991
---------- ---------- ----------
Domestic.............................. $1,480,163 $1,418,335 $1,205,883
Foreign............................... 463,067 320,418 338,339
---------- ---------- ----------
Total................................. $1,943,230 $1,738,753 $1,544,222
========== ========== ==========
Taxes on Earnings 1993 1992 1991
---------- ---------- ----------
Current:
U.S. Federal and Possessions........ $ 355,813 $ 347,711 $ 316,377
State............................... 49,222 63,838 50,758
Foreign............................. 175,455 133,065 140,559
---------- ---------- ----------
Total current.......................... 580,490 544,614 507,694
---------- ---------- ----------
Deferred:
Domestic............................ (29,461) (35,739) (49,998)
Foreign............................. 2,066 (9,179) (2,151)
Enacted tax rate changes............ (8,991) - -
---------- ---------- ----------
Total deferred......................... (36,386) (44,918) (52,149)
---------- ---------- ----------
Total.................................... $ 544,104 $ 499,696 $ 455,545
========== ========== ==========
Exhibit 13
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1993
Differences between the effective income tax rate and the U.S. statutory tax
rate were as follows:
1993 1992 1991
----- ----- -----
Statutory tax rate................... 35.0% 34.0% 34.0%
Benefit of tax exemptions in
Puerto Rico and Ireland............. (6.7) (6.1) (5.6)
State taxes, net of federal benefit.. 1.7 2.1 2.2
All other, net....................... (2.0) (1.3) (1.1)
---- ---- ----
Effective tax rate 28.0% 28.7% 29.5%
==== ==== ====
As of December 31, 1993, total deferred tax assets were $632,112 and total
deferred tax liabilities were $211,839. Valuation allowances for tax assets are
not significant. The major temporary differences that give rise to deferred tax
assets are compensation and employee benefits ($146,505), valuation and exposure
reserves for inventory and accounts receivable ($86,003 and $91,329,
respectively), deferred intercompany profit ($72,129), and state income taxes
($30,715). The use of accelerated depreciation for U.S. income tax purposes
($165,482) and employee benefits ($32,578) are the primary temporary differences
that give rise to deferred tax liabilities.
NOTE 6 - INCENTIVE STOCK PROGRAM
The 1991 Incentive Stock Program authorizes the granting of stock options, stock
appreciation rights, limited stock appreciation rights, restricted stock awards,
performance units, and foreign qualified benefits. Stock options, limited stock
appreciation rights, restricted stock awards, and foreign qualified benefits
have been granted and are currently outstanding under this program and prior
programs. The purchase price of the shares under option must be at least 100
percent of the fair market value of the common stock on the date of grant.
Limited stock appreciation rights have been granted to certain holders of stock
options and can be exercised, by surrendering related stock options, only upon a
change in control of the Company. At December 31, 1993, 4,374,757 options, with
purchase prices from $6.31 to $32.69 per share, were subject to limited stock
appreciation rights. Upon a change in control of the Company, all outstanding
stock options become fully exercisable, and all terms and conditions of all
restricted stock awards are deemed satisfied. At December 31, 1993, 13,598,451
shares were reserved for future grants under the 1991 Program.
Exhibit 13
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1993
Data with respect to stock options under the 1991 Program and prior programs are
as follows:
Options Outstanding
-----------------------------
Shares Price per Share
---------- ----------------
January 1, 1993............................ 31,768,681 $ 5.21 to $33.82
Granted.................................... 1,362,660 23.64 to 30.50
Exercised.................................. (2,602,920) 5.21 to 27.19
Lapsed..................................... (451,383) 25.22 to 33.47
----------
December 31, 1993.......................... 30,077,038 $ 5.27 to $33.82
==========
Exercisable at December 31, 1993 17,812,066 $ 5.27 to $33.82
==========
NOTE 7 - LITIGATION AND ENVIRONMENTAL MATTERS
The Company is involved in various claims and legal proceedings including
numerous antitrust suits and investigations in connection with the sale and
marketing of infant formula and pharmaceutical products. In May and July 1993,
the Company settled certain of these claims and legal proceedings relating to
the infant formula products.
The Company is also involved in numerous product liability cases, many of which
allege injuries to the offspring of women who ingested a synthetic estrogen
(DES) during pregnancy. In addition, the Company has been identified as a
potentially responsible party for investigation and cleanup costs at a number of
locations in the United States and Puerto Rico under federal remediation laws
and is voluntarily investigating potential contamination at a number of
Company-owned locations.
The matters above are discussed more fully in Item 1, Business - Environmental
Matters, and Item 3, Legal Proceedings, in the Annual Report on Form 10-K, which
is available upon request.
While it is not feasible to predict the outcome of such pending claims,
proceedings, investigations and remediation activities with certainty,
management is of the opinion, with which its General Counsel concurs, that their
ultimate disposition should not have a material adverse effect on the Company's
financial position.
Exhibit 13
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1993
NOTE 8 - QUARTERLY RESULTS (Unaudited)
(dollars in millions Three Months Ended
except per share data) --------------------------------
1993 1992 1991
-------- -------- --------
March 31
--------
Net Sales................................. $2,045.6 $1,877.9 $1,653.6
Gross Profit.............................. 1,112.4 1,033.2 889.4
Earnings Before Extraordinary
Gain and Accounting Change ............. 345.5 294.2 254.1
Net Earnings.............................. 345.5 294.2 254.2
Earnings Per Common Share
Before Extraordinary Gain and
Accounting Change....................... .41 .35 .30
Earnings Per Common Share................. .41 .35 .30
June 30
-------
Net Sales................................. $2,073.8 $1,908.7 $1,683.0
Gross Profit.............................. 1,186.8 1,045.7 908.2
Net Earnings.............................. 346.1 317.1 268.3
Earnings Per Common Share................. .42 .37 .31
September 30
------------
Net Sales................................. $2,060.4 $1,968.8 $1,653.7
Gross Profit.............................. 1,143.4 1,076.1 886.7
Net Earnings.............................. 316.2 278.8 251.5
Earnings Per Common Share................. .38 .33 .29
December 31
-----------
Net Sales................................. $2,228.0 $2,096.5 $1,886.3
Gross Profit.............................. 1,280.5 1,191.6 1,052.3
Net Earnings.............................. 391.3 349.0 314.7
Earnings Per Common Share................. .48 .42 .37
Exhibit 13
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1993
NOTE 9 - OTHER SIGNIFICANT EVENTS
In June 1992, the Company voluntarily withdrew from the worldwide market its
quinolone anti-infective, temafloxacin, and recorded a charge of $215 million
for costs associated with this withdrawal. In 1993, the Company resolved
various contingencies relative to the temafloxacin withdrawal and recorded a
credit of $70 million in the second quarter for these items.
In the first quarter 1993, the Company sold its peritoneal dialysis product
line. The gain on the sale is reported in other (income) expense, net.
In May 1992, the Company sold its 20 percent investment in Boston Scientific
Corporation for a pre-tax gain of $272 million. In 1991, the Company sold its
investment in Amgen Inc. for an after-tax gain of $128 million. The sale was
reported as an extraordinary gain in the 1991 first quarter.
NOTE 10 - INDUSTRY SEGMENT AND GEOGRAPHIC AREA INFORMATION
(dollars in millions)
The Company's principal business is the discovery, development, manufacture, and
sale of a broad and diversified line of health care products and services. These
products have been classified into the following industry segments:
PHARMACEUTICAL AND NUTRITIONAL PRODUCTS - Included are a broad line of adult and
pediatric pharmaceuticals and nutritionals, which are sold primarily on the
prescription or recommendation of physicians or other health care professionals;
consumer products; agricultural and chemical products; and bulk pharmaceuticals.
HOSPITAL AND LABORATORY PRODUCTS - Included are diagnostic systems for blood
banks, hospitals, commercial laboratories and alternate-care testing sites;
intravenous and irrigation fluids and related administration equipment; drugs
and drug delivery systems; anesthetics; critical care products; and other
medical specialty products for hospitals and alternate-care sites.
In the following tables, net sales by industry segment and geographic area
include both sales to customers, as reported in the Consolidated Statement of
Earnings, and inter-area sales (for geographic areas) at sales prices which
approximate market. Operating profit excludes corporate expenses.
Exhibit 13
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1993
INDUSTRY SEGMENTS (a) 1993 1992 1991
------ ------ ------
Net Sales:
Pharmaceutical and nutritional............. $4,389 $4,025 $3,512
Hospital and laboratory.................... 4,019 3,827 3,365
------ ------ ------
Total ....................................... $8,408 $7,852 $6,877
====== ====== ======
Operating Profit:
Pharmaceutical and nutritional (b)......... $1,211 $ 879 $ 993
Hospital and laboratory.................... 794 703 639
------ ------ ------
Operating Profit........................... 2,005 1,582 1,632
Corporate expenses, net (c)................ 46 104 69
Interest (income) expense, net............. 16 11 19
Gain on sale of investment................. - (272) -
------ ------ ------
Earnings Before Taxes........................ $1,943 $1,739 $1,544
====== ====== ======
Identifiable Assets:
Pharmaceutical and nutritional............. $3,046 $2,616 $2,240
Hospital and laboratory.................... 3,296 3,108 2,887
General corporate (d)...................... 1,347 1,217 1,128
------ ------ ------
Total ....................................... $7,689 $6,941 $6,255
====== ====== ======
Capital Expenditures:
Pharmaceutical and nutritional............. $ 475 $ 502 $ 363
Hospital and laboratory.................... 474 500 365
General corporate.......................... 4 5 5
------ ------ ------
Total ....................................... $ 953 $1,007 $ 733
====== ====== ======
Depreciation and Amortization:
Pharmaceutical and nutritional............. $ 189 $ 161 $ 139
Hospital and laboratory.................... 292 264 238
General corporate.......................... 3 3 2
------ ------ ------
Total ....................................... $ 484 $ 428 $ 379
====== ====== ======
Exhibit 13
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1993
GEOGRAPHIC AREAS (a) and (e) 1993 1992 1991
------ ------ ------
Net Sales:
United States:
Domestic and export customers............ $5,347 $4,918 $4,376
Inter-area............................... 932 930 870
------ ------ ------
Total United States........................ 6,279 5,848 5,246
Latin America.............................. 413 339 285
Europe, Mideast and Africa................. 1,554 1,649 1,422
Pacific, Far East and Canada............... 1,094 946 794
Eliminations............................... (932) (930) (870)
------ ------ ------
Total ....................................... $8,408 $7,852 $6,877
====== ====== ======
Operating Profit (b):
United States.............................. $1,390 $1,114 $1,260
Latin America.............................. 106 70 49
Europe, Mideast and Africa................. 301 260 272
Pacific, Far East and Canada............... 189 143 100
Eliminations............................... 19 (5) (49)
------ ------ ------
Total ....................................... $2,005 $1,582 $1,632
====== ====== ======
Identifiable Assets, Excluding General
Corporate Assets (d):
United States............................ $4,492 $4,017 $3,580
Latin America............................ 228 188 161
Europe, Mideast and Africa............... 1,096 1,089 1,012
Pacific, Far East and Canada............. 703 627 566
Eliminations............................. (177) (197) (192)
------ ------ ------
Total ....................................... $6,342 $5,724 $5,127
====== ====== ======
Exhibit 13
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1993
INDUSTRY SEGMENT AND GEOGRAPHIC AREA INFORMATION (CONTINUED)
(a) In 1993, net sales and operating profit were unfavorably impacted by the
relatively stronger U.S. dollar while 1992 was favorably affected by the
relatively weaker U.S. dollar. In 1991, net sales and operating profit were
not significantly affected by fluctuations in the U.S. dollar.
(b) The 1992 operating profit was unfavorably impacted by the pre-tax charge
of $215 for costs associated with the voluntary withdrawal of temafloxacin
from the worldwide market. The 1993 operating profit was favorably impacted
by the $70 pre-tax credit resulting from resolution of various contingencies
related to the withdrawal, and unfavorably impacted by the $104 pre-tax
charge reflecting the settlement of certain claims and legal proceedings in
connection with the sale and marketing of infant formula products.
(c) Corporate expenses, net, include results from joint ventures, minority
interest expenses, and net foreign exchange losses. These amounts are
included in Other (income) expense, net, in the Consolidated Statement of
Earnings. Net foreign exchange losses were $41.3 in 1993, $93.2 in 1992,
and $11.1 in 1991.
(d) General corporate assets are principally cash and cash equivalents and
investment securities.
(e) The Company has a domestic manufacturing facility which produces
semi-processed pharmaceuticals primarily for foreign subsidiaries to finish
and sell. The sales of the finished products, operating profit, and
identifiable assets associated with this operation have been included in the
appropriate foreign area.
Exhibit 13
Abbott Laboratories and Subsidiaries
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of Abbott Laboratories:
We have audited the accompanying consolidated balance sheet of Abbott
Laboratories (an Illinois corporation) and Subsidiaries as of December 31, 1993,
1992, and 1991, and the related consolidated statements of earnings,
shareholders' investment, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Abbott Laboratories and
Subsidiaries as of December 31, 1993, 1992, and 1991, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
As explained in Note 3 to the consolidated financial statements, the Company
adopted the requirements of Statement of Financial Accounting Standards No. 106
"Employers' Accounting for Postretirement Benefits Other Than Pensions,"
effective January 1, 1991.
Chicago, Illinois,
January 14, 1994 Arthur Andersen & Co.
Exhibit 13
Abbott Laboratories and Subsidiaries
FINANCIAL REVIEW
December 31, 1993
RESULTS OF OPERATIONS
- ---------------------
Sales
- -----
Worldwide sales increased 7.1 percent in 1993 due to unit growth of 8.6 percent
and net price increases of .9 percent, partially offset 2.4 percent by the
effect of the relatively stronger U.S. dollar. Sales increased 14.2 percent in
1992 due to unit growth of 10.6 percent and net price increases of 2.9 percent.
In 1991, sales increased 11.7 percent due to unit growth of 8.9 percent and net
price increases of 2.9 percent.
Domestic sales increased 8.7 percent in 1993, 13.1 percent in 1992, and
11.8 percent in 1991, primarily due to volume. International sales increased
4.5 percent in 1993, 16.0 percent in 1992, and 11.4 percent in 1991, primarily
due to volume, net of exchange. International sales were unfavorably affected
by exchange of about 6.4 percent in 1993 and .5 percent in 1991. In 1992,
international sales were favorably impacted 1.7 percent due to exchange. Sales
in international markets represented approximately 37 percent of worldwide
sales.
Sales in the pharmaceutical and nutritional products segment increased
9.0 percent in 1993, compared with increases of 14.6 percent in 1992, and
11.1 percent in 1991. Domestic sales in this segment increased 10.2 percent in
1993, approximately 9.2 percent due to volume growth and 1.0 percent due to net
price increases. In 1992, domestic sales increased 14.5 percent, approximately
8.9 percent due to volume growth and 5.6 percent due to net price increases, and
in 1991 increased 11.8 percent, approximately 6.6 percent due to price, and
5.2 percent volume. International sales in this segment increased 6.5 percent
in 1993, resulting from unit growth of 9.2 percent and net price increases of
3.4 percent; and were unfavorably affected 6.1 percent by the relatively
stronger U.S. dollar. International sales in this segment increased
14.7 percent in 1992, resulting from unit growth of 11.0 percent and net price
increases of 3.3 percent. In 1991, international sales increased 9.8 percent
due to unit growth of approximately 7.6 percent and net price increases of
3.2 percent, partially offset 1.0 percent by the effect of the relatively
stronger U.S. dollar. Sales of new products in this segment in 1993 are
estimated to be about $130 million.
Sales in the hospital and laboratory products segment increased 5.0 percent in
1993, 13.7 percent in 1992, and 12.2 percent in 1991. Domestic sales in this
segment increased 6.6 percent in 1993, 11.2 percent in 1992 and 12.0 percent in
1991, all primarily due to unit growth. International sales in this segment in
1993 increased 3.0 percent, approximately 9.8 percent due to unit growth offset
6.7 percent due to exchange. International sales in this segment in 1992
increased 17.0 percent, approximately 13.5 percent due to unit growth and
2.7 percent due to exchange. In 1991, international sales in this segment
increased 12.5 percent, primarily due to unit growth. Sales of new products in
this segment in 1993 are estimated to be about $465 million.
Exhibit 13
Abbott Laboratories and Subsidiaries
FINANCIAL REVIEW (CONTINUED)
December 31, 1993
The classes of products which contributed at least 10 percent to consolidated
net sales in at least one of the last three years were:
(dollars in millions) 1993 1992 1991
------ ------ ------
Infant Formula............................. $1,147 $1,075 $1,060
Fluids and Equipment....................... 836 924 864
Medical Nutritionals....................... 864 760 625
Worldwide sales of infant formula increased in 1993 primarily due to unit
growth, and in 1992 primarily due to net price increases. In 1993, fluids and
equipment sales decreased due to the sale of a product line, and in 1992
increased primarily due to unit growth. Increases in medical nutritionals sales
were primarily due to volume gains.
Operating Earnings
- ------------------
Gross profit margins (sales less cost of products sold, including freight and
distribution expenses) improved from 54.3 percent of sales in 1991 and
55.4 percent in 1992, to 56.2 percent in 1993. Productivity improvements,
favorable product mix, and net price increases in some product lines more than
offset the impacts of inflation and competitive pricing pressures in other
product lines. In 1993, gross profit margins were unfavorably impacted by the
relatively stronger U.S. dollar while 1992 was favorably affected by the
relatively weaker U.S. dollar. In the U.S., states receive price rebates from
manufacturers of infant formula under the federally subsidized Special
Supplemental Food Program for Women, Infants, and Children (WIC). The WIC
rebate programs continue to have a negative effect on the gross profit margins
of this portion of the infant formula business.
Research and development expense increased to $881 million in 1993, and
represented 10.5 percent of net sales, compared with 9.8 percent of net sales in
1992 and 9.7 percent of net sales in 1991. Research and development
expenditures continue to be concentrated on diagnostic and pharmaceutical
products.
Selling, general and administrative expenses increased 8.5 percent in 1993,
compared to increases of 21.1 percent in 1992, and 18.6 percent in 1991. The
1993 increase reflects the settlement of certain claims and legal proceedings in
connection with the sale and marketing of infant formula products. In May 1993,
the Company recorded a pre-tax charge to earnings of approximately $104 million
in connection with these settlements. The increases in 1992 and 1991 resulted
from higher levels of selling and marketing support for new and existing
products, primarily pharmaceutical and diagnostic products.
Exhibit 13
Abbott Laboratories and Subsidiaries
FINANCIAL REVIEW (CONTINUED)
December 31, 1993
In June 1992, the Company voluntarily withdrew from the worldwide market its
quinolone anti-infective, temafloxacin, and recorded a pre-tax charge of
$215 million for costs associated with this withdrawal. In 1993, the Company
resolved various contingencies relative to the temafloxacin withdrawal and
recorded a pre-tax credit to earnings of $70 million for these items.
Temafloxacin was introduced in the U.S. in February 1992, and had been
introduced in several other countries throughout 1991. Total sales of this
product were not significant; however, operating earnings of the pharmaceutical
and nutritional products segment in 1992 were unfavorably affected by the costs
of withdrawal of this product.
Other (Income) Expense, Net
- ---------------------------
Other (income) expense, net, includes net foreign exchange losses of
$41.3 million in 1993, $93.2 million in 1992, and $11.1 million in 1991,
including net exchange (gains) losses on foreign currency contracts. These
contracts were purchased to manage the Company's exposure to foreign currency
rate changes. Other (income) expense, net, also includes the first quarter 1993
gain on the sale of the Company's peritoneal dialysis product line, and the
Company's share of the income from joint ventures, primarily TAP Pharmaceuticals
Inc.
Sale of Investments
- -------------------
In May 1992, the Company sold its 20 percent investment in Boston Scientific
Corporation for a pre-tax gain of $272 million. Net proceeds from the sale were
used toward the purchase of eight million shares of the Company's common stock
as authorized by the Board of Directors. In 1991, the Company sold its
investment in Amgen Inc. for an after-tax gain of $128 million. The sale was
reported as an extraordinary gain in the 1991 first quarter.
Taxes on Earnings
- -----------------
The Company's effective income tax rate for 1993 was 28.0 percent, compared with
28.7 percent for 1992 and 29.5 percent for 1991.
In the first quarter 1993, the Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." The effect of this change on
income before taxes and net income is not significant, and prior years'
financial statements have not been restated.
In August 1993, the President of the United States signed the Omnibus Budget
Reconciliation Act of 1993 into law. The effects of this Act on the Company's
tax provision in 1993 were not significant. However, as the result of this Act,
the Company's 1994 tax provision is expected to increase approximately
$50 million.
Exhibit 13
Abbott Laboratories and Subsidiaries
FINANCIAL REVIEW (CONTINUED)
December 31, 1993
Accounting Standards
- --------------------
In November 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 112 "Employers' Accounting for Postemployment
Benefits." The Company's accounting for such benefits is in accordance with
this standard.
In the first quarter of 1991, the Company adopted Statement of Financial
Accounting Standards No. 106 "Employers' Accounting for Postretirement Benefits
Other Than Pensions," with immediate recognition of the transition obligation of
$128 million.
FINANCIAL CONDITION
- -------------------
Cash Flow
- ---------
The Company expects positive cash flow from operating activities to continue to
approximate or exceed the Company's capital expenditures and cash dividends.
Debt and Capital
- ----------------
The Company has maintained its favorable bond ratings (AAA by Standard & Poor's
Corporation and Aa1 by Moody's Investors Service) and continues to have readily
available financial resources, including unused domestic lines of credit of
$300 million at December 31, 1993.
In the third quarter 1993, the Company filed a registration statement with the
Securities and Exchange Commission for the issuance of $500 million of senior
debt securities. In October 1993, $200 million of 5.6 percent notes due 2003
were issued by the Company under this filing. Net proceeds were used to retire
short-term borrowings and for the purchase of the Company's common shares. The
Company may issue up to an additional $300 million of debt securities in the
future under this registration statement.
During the last three years, the Company purchased 49,599,000 of its common
shares at a cost of $1.391 billion, including 5,899,000 shares of the 20,000,000
shares authorized for purchase by the Board of Directors in September 1993.
Capital Expenditures
- --------------------
Capital expenditures of $953 million in 1993, $1.0 billion in 1992, and
$733 million in 1991, were principally for upgrading and expanding manufacturing
and research and development facilities in both segments and for administrative
support facilities. The leveling of capital expenditures is expected to
continue over the next few years, with a relatively equal proportion dedicated
to each segment.
Exhibit 13
Abbott Laboratories and Subsidiaries
FINANCIAL REVIEW (CONTINUED)
December 31, 1993
LEGISLATIVE ISSUES
- ------------------
The Company's primary markets are highly competitive and subject to substantial
government regulation. In the U.S., comprehensive legislation may be enacted
that would make significant changes to the availability, delivery and payment
for health care products and services. International operations are also
subject to a significant degree of government regulation. It is not possible to
predict the extent to which the Company or the health care industry in general
might be adversely affected by these factors in the future. A more complete
discussion of these factors is contained in Item 1, Business, in the Annual
Report on Form 10-K, which is available upon request.
Exhibit 13
Abbott Laboratories and Subsidiaries
SUMMARY OF SELECTED FINANCIAL DATA
Year Ended December 31, 1993
(Dollars in Millions Except Per Share Data)
1993 1992 1991 1990 1989
-------- ------- ------- ------- -------
SUMMARY OF OPERATIONS:
Net sales................................ $8,407.8 7,851.9 6,876.6 6,158.7 5,379.8
Cost of products sold.................... $3,684.7 3,505.3 3,140.0 2,910.1 2,556.7
Research and development................. $ 881.0 772.4 666.3 567.0 501.8
Selling, general and administrative...... $1,988.2 1,833.2 1,513.3 1,275.6 1,100.2
Operating earnings (1)................... $1,924.0 1,526.0 1,557.0 1,406.0 1,221.1
Interest expense......................... $ 54.3 53.0 63.8 91.4 74.4
Interest and dividend income............. $ (37.8) (42.3) (45.1) (51.6) (73.8)
Other (income) expense, net.............. $ (35.7) 48.5 (5.9) 15.5 26.3
Earnings before taxes (2)................ $1,943.2 1,738.8 1,544.2 1,350.7 1,194.2
Taxes on earnings........................ $ 544.1 499.7 455.5 384.9 334.4
Earnings before extraordinary gain and
accounting change (3).................. $1,399.1 1,239.1 1,088.7 965.8 859.8
Earnings per common share before extra-
ordinary gain and accounting change (3) $ 1.69 1.47 1.27 1.11 .96
FINANCIAL POSITION:
Working capital.......................... $ 490.6 449.2 661.7 460.0 719.2
Investment securities maturing
after one year, at cost................ $ 221.8 270.6 340.2 314.0 300.0
Net property and equipment............... $3,511.0 3,099.2 2,662.1 2,375.8 2,090.2
Total assets............................. $7,688.6 6,941.2 6,255.3 5,563.2 4,851.6
Long-term debt........................... $ 306.8 110.0 125.1 134.8 146.7
Shareholders' investment................. $3,674.9 3,347.6 3,203.0 2,833.6 2,726.4
Return on shareholders' investment....... % 39.8 37.8 36.1 34.7 33.1
Book value per share..................... $ 4.48 4.00 3.77 3.30 3.08
OTHER STATISTICS:
Gross profit margin...................... % 56.2 55.4 54.3 52.7 52.5
Research and development to net sales.... % 10.5 9.8 9.7 9.2 9.3
Capital expenditures..................... $ 952.7 1,007.2 732.8 629.5 501.5
Cash dividends declared per common share. $ .68 .60 .50 .42 .35
Common shares outstanding (in thousands). 821,130 836,052 850,530 858,282 884,958
Number of common shareholders............ 82,947 75,703 56,541 49,827 45,361
Number of employees...................... 49,659 48,118 45,694 43,770 40,929
Sales per employee (in dollars).......... $169,312 163,180 150,492 140,706 131,441
Market price per share - high............ $ 30 7/8 34 1/8 34 3/4 23 1/8 17 5/8
Market price per share - low............. $ 22 5/8 26 1/8 19 5/8 15 5/8 11 1/2
Market price per share - close........... $ 29 5/8 30 3/8 34 3/8 22 1/2 17
Exhibit 13
Abbott Laboratories and Subsidiaries
SUMMARY OF SELECTED FINANCIAL DATA (CONTINUED)
Year Ended December 31, 1993
(Dollars in Millions Except Per Share Data)
1988 1987 1986 1985 1984
-------- ------- ------- ------- -------
SUMMARY OF OPERATIONS:
Net sales................................ $4,937.0 4,387.9 3,807.6 3,360.3 3,104.0
Cost of products sold.................... $2,353.2 2,101.9 1,868.4 1,694.9 1,565.4
Research and development................. $ 454.6 361.3 284.9 240.6 218.7
Selling, general and administrative...... $1,027.2 919.0 775.7 687.7 643.4
Operating earnings....................... $1,102.0 1,005.7 878.6 737.1 676.5
Interest expense......................... $ 85.0 77.6 86.3 98.1 94.2
Interest and dividend income............. $ (69.4) (56.7) (63.1) (76.0) (70.5)
Other (income) expense, net.............. $ 30.9 47.7 36.7 20.5 6.6
Earnings before taxes.................... $1,055.5 937.1 818.7 694.5 646.2
Taxes on earnings........................ $ 303.5 304.5 278.2 229.2 243.6
Earnings before extraordinary gain and
accounting change...................... $ 752.0 632.6 540.5 465.3 402.6
Earnings per common share before extra-
ordinary gain and accounting change.... $ .83 .69 .58 .48 .42
FINANCIAL POSITION:
Working capital.......................... $ 913.3 668.7 585.4 891.9 743.3
Investment securities maturing
after one year, at cost................ $ 285.7 292.9 254.2 281.1 327.4
Net property and equipment............... $1,952.6 1,741.6 1,543.3 1,368.5 1,236.6
Total assets............................. $4,825.1 4,385.7 3,865.6 3,468.4 3,170.4
Long-term debt........................... $ 349.3 271.0 297.4 443.0 470.2
Shareholders' investment................. $2,464.6 2,093.5 1,778.9 1,870.7 1,602.7
Return on shareholders' investment....... % 33.0 32.7 29.6 26.8 26.7
Book value per share..................... $ 2.74 2.31 1.94 1.96 1.67
OTHER STATISTICS:
Gross profit margin...................... % 52.3 52.1 50.9 49.6 49.6
Research and development to net sales.... % 9.2 8.2 7.5 7.2 7.0
Capital expenditures..................... $ 521.2 432.7 383.4 292.9 334.8
Cash dividends declared per common share. $ .30 .25 .21 .175 .15
Common shares outstanding (in thousands). 899,384 906,924 915,356 956,764 961,876
Number of common shareholders............ 46,324 45,822 40,387 34,923 34,963
Number of employees...................... 38,751 37,828 35,754 34,742 33,668
Sales per employee (in dollars).......... $127,403 115,995 106,495 96,721 92,193
Market price per share - high............ $ 13 1/8 16 3/4 13 3/4 9 6 1/8
Market price per share - low............. $ 10 3/4 10 7 7/8 5 4 5/8
Market price per share - close........... $ 12 12 11 3/8 8 1/2 5 1/8
Exhibit 13
Abbott Laboratories and Subsidiaries
SUMMARY OF SELECTED FINANCIAL DATA (CONTINUED)
Year Ended December 31, 1993
(Dollars in Millions Except Per Share Data)
1983
----------
SUMMARY OF OPERATIONS:
Net sales................................ $2,927.9
Cost of products sold.................... $1,517.7
Research and development................. $ 184.5
Selling, general and administrative...... $ 621.4
Operating earnings ...................... $ 604.3
Interest expense......................... $ 77.6
Interest and dividend income............. $ (73.2)
Other (income) expense, net.............. $ 25.3
Earnings before taxes ................... $ 574.6
Taxes on earnings........................ $ 227.0
Earnings before extraordinary gain and
accounting change ..................... $ 347.6
Earnings per common share before extra-
ordinary gain and accounting change ... $ .36
FINANCIAL POSITION:
Working capital.......................... $ 616.1
Investment securities maturing
after one year, at cost................ $ 402.4
Net property and equipment............... $1,069.2
Total assets............................. $2,821.6
Long-term debt........................... $ 483.9
Shareholders' investment................. $1,417.9
Return on shareholders' investment....... % 25.5
Book value per share..................... $ 1.46
OTHER STATISTICS:
Gross profit margin...................... % 48.2
Research and development to net sales.... % 6.3
Capital expenditures..................... $ 311.8
Cash dividends declared per common share. $ .125
Common shares outstanding (in thousands). 968,784
Number of common shareholders............ 32,784
Number of employees...................... 34,328
Sales per employee (in dollars).......... $ 85,291
Market price per share - high............ $ 6 5/8
Market price per share - low............. $ 4 1/2
Market price per share - close........... $ 5 5/8
Exhibit 13
Abbott Laboratories and Subsidiaries
SUMMARY OF SELECTED FINANCIAL DATA (CONTINUED)
Year Ended December 31, 1993
(Dollars in Millions Except Per Share Data)
(1) In 1992, the Company recorded a pre-tax charge of $215 for costs associated
with the voluntary withdrawal of temafloxacin from the worldwide market.
In 1993, the Company resolved various contingencies related to the
withdrawal and recorded a pre-tax credit of $70.
(2) In 1992, the Company recorded a pre-tax gain of $272 on the sale of its
investment in Boston Scientific Corporation.
(3) In 1991, the Company realized an after-tax gain of $128, or $.15 per share,
on the sale of an investment. The Company also adopted Statement of
Financial Accounting Standards No. 106, which resulted in an after-tax
transition expense of $128, or $.15 per share.
EXHIBIT 21
SUBSIDIARIES OF ABBOTT LABORATORIES
The following is a list of subsidiaries of the Company. Abbott
Laboratories is not a subsidiary of any other corporation.
State of
Domestic Subsidiaries Incorporation
- --------------------- -------------
Abbott Biotech, Inc. Delaware
Abbott Chemicals, Inc. Delaware
Abbott Health Products, Inc. Delaware
Abbott Home Infusion Services New York
of New York, Inc.
Abbott International Ltd. Delaware
Abbott International Ltd. of Puerto Rico Puerto Rico
Abbott Laboratories International Co. Illinois
Abbott Laboratories Pacific Ltd. Illinois
Abbott Laboratories (Puerto Rico)
Incorporated Puerto Rico
Abbott Laboratories Residential
Development Fund, Inc. Illinois
Abbott Laboratories Services Corp. Illinois
Abbott Manufacturing, Inc. Delaware
- 2 -
Abbott Trading Company, Inc. Virgin Islands
Abbott Universal Ltd. Delaware
CMM Transportation, Inc. Delaware
Corporate Alliance, Inc. Delaware
Exact Science, Inc. Florida
Fuller Research Corporation Delaware
HAVEN Leasing Corporation Delaware
Laser Surgery Partnership Illinois
Medlase Holding Corporation Delaware
North Shore Properties, Inc. Delaware
Oximetrix de Puerto Rico, Inc. Delaware
Oximetrix, Inc. Delaware
Sequoia Turner Corporation California
Sequoia Turner Export Corporation California
Solartek Products, Inc. Delaware
Sorenson Research Co., Inc. Utah
Swan-Myers, Incorporated Indiana
TAP Pharmaceuticals Inc. Delaware
Tobal Products Incorporated Illinois
- 3 -
Country
in Which
Foreign Subsidiaries Organized
- -------------------- ---------
Abbott Laboratories Argentina, S.A. Argentina
Abbott Australian Holdings Pty.
Limited Australia
Abbott Australasia Pty. Limited Australia
Abbott Gesellschaft m.b.H. Austria
Abbott Hospitals Limited Bahamas
Abbott Laboratories (Bangladesh) Ltd. Bangladesh
Abbott, S.A. Belgium
Abbott Ireland Ltd. Bermuda
Abbott Laboratorios do Brasil Ltda. Brazil
Abbott Laboratories Limited Canada
Abbott Laboratories de Chile
Limitada Chile
Ningbo Asia-Pacific Biotechnology Ltd. China, People's
(formerly Ningbo Abbott Biotechnology Ltd.) Republic of
Abbott Laboratories de Colombia,
S.A. Colombia
Abbott Laboratories A/S Denmark
- 4 -
Abbott Laboratorios del Ecuador, S.A. Ecuador
Abbott, S.A. de C.V. El Salvador
Abbott Laboratories Limited England
Abbott Laboratories Trustee
Company Limited England
Abbott France S.A. France
Abbott G.m.b.H. Germany
Oximetrix G.m.b.H. Germany
Abbott Laboratories (Hellas) S.A. Greece
FAMAR Panos A. Marinopoulos S.A. Greece
FAMAR Anonymous Industrial Co. of Greece
Pharmaceuticals and Cosmetics
Abbott Grenada Limited Grenada
Abbott Laboratorios, S.A. Guatemala
Abbott Laboratories Limited Hong Kong
Abbott Laboratories (India) Ltd. India
Abind Healthcare Private Limited India
P. T. Abbott Indonesia Indonesia
Abbott Laboratories, Ireland,
Limited Ireland
Abbott Ireland Ltd. Ireland
- 5 -
Abbott S.p.A. Italy
Laboratori Abbott S.p.A. Italy
Abbott West Indies Limited Jamaica
Consolidated Laboratories Limited Jamaica
Abbott Japan K.K. Japan
Dainabot K.K. Japan
Abbott Korea Limited Korea
Abbott Middle East S.A.R.L. Lebanon
Abbott Laboratories (Malaysia) Sdn. Bhd. Malaysia
Abbott Laboratories de Mexico, S.A. de C.V. Mexico
Abbott Laboratories (Mozambique)
Limitada Mozambique
Edisco B.V. The Netherlands
Abbott B.V. The Netherlands
M & R Laboratoria B.V. The Netherlands
Abbott Laboratories (N.Z.) Limited New Zealand
Abbott Laboratories Nigeria Limited Nigeria
Abbott Laboratories (Pakistan) Limited Pakistan
Abbott Laboratories, C.A. Panama
- 6 -
Abbott Overseas, S.A. Panama
Abbott Laboratorios S.A. Peru
Abbott Laboratories Philippines
l02 E. de los Santos Realty Co., Inc. Philippines
Union-Madison Realty Company, Inc. Philippines
Abbott Laboratorios, Limitada Portugal
Abbott Laboratories (Singapore)
Private Limited Singapore
Abbott Laboratories South Africa
(Pty.) Limited South Africa
Abbott Laboratories, S.A. Spain
Abbott Cientifica, S.A. Spain
Abbott Scandinavia A.B. Sweden
Abbott A.G. Switzerland
Abbott Laboratories S.A. Switzerland
Abbott Finance Company S.`a r.l. Switzerland
Investment Services A.G. Switzerland
Overseas Services S.A. Switzerland
Abbott Laboratories Taiwan Limited Taiwan
Abbott Laboratories Limited Thailand
- 7 -
Abbott Laboratuarlari Ithalat Ihracat
Ve Tecaret Anonim Sirketi Turkey
Abbott Laboratories Uruguay Limitada Uruguay
Abbott Laboratories, C.A. Venezuela
Medicamentos M & R, S.A. Venezuela
EXHIBIT 23.1
SUPPLEMENTAL REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Abbott Laboratories:
We have audited in accordance with generally accepted auditing standards,
the financial statements included in the Company's Annual Report incorporated by
reference in this Form 10-K, and have issued our report thereon dated January
14, 1994. Our audits were made for the purpose of forming an opinion on those
statements taken as a whole. Schedules I, V, VI, VIII, IX, and X are the
responsibility of the Company's management, are presented for purposes of
complying with the Securities and Exchange Commission's rules, and are not part
of the basic financial statements. These schedules have been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
/s/ Arthur Andersen & Co.
Chicago, Illinois, ARTHUR ANDERSEN & CO.
January 14, 1994
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of the following into the Company's previously filed S-8 Registration
Statements Numbers 2-79691 for the Abbott Laboratories 1981 Incentive Stock
Program, 33-4368 for the Abbott Laboratories 1986 Incentive Stock Program,
33-39798 for the Abbott Laboratories 1991 Incentive Stock Program, and 33-26685
and 33-51585 for the Abbott Laboratories Stock Retirement Plan and Trust and
into the Company's previously filed S-3 Registration Statement Number 33-50253:
1. Our supplemental report dated January 14, 1994 included in this Annual
Report on Form 10-K for the year ended December 31, 1993; and
2. Our report dated January 14, 1994 incorporated by reference in this
Annual Report on Form 10-K for the year ended December 31, 1993.
/s/ Arthur Andersen & Co.
Chicago, Illinois, ARTHUR ANDERSEN & CO.
February 23, 1994
