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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549


FORM 10-K

(MARK ONE)    
ý   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
OR
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended December 31, 2017   Commission file number 1-2189

Abbott Laboratories

An Illinois Corporation   36-0698440
100 Abbott Park Road
Abbott Park, Illinois 60064-6400		   (I.R.S. employer identification number)
 (224) 667-6100
(telephone number)

Securities Registered Pursuant to Section 12(b) of the Act:

 
Title of Each Class
   Name of Each Exchange on Which Registered
 
Common Shares, Without Par Value
  		   New York Stock Exchange
Chicago Stock Exchange
 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ý            No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.

Yes o            No ý

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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ý            No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ý            No o

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 registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ý   Accelerated Filer o   Non-Accelerated Filer o
(Do not check if a
smaller reporting company)		   Smaller reporting company o

Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes o            No ý

The aggregate market value of the 1,692,434,068 shares of voting stock held by nonaffiliates of the registrant, computed by reference to the closing price as reported on the New York Stock Exchange, as of the last business day of Abbott Laboratories' most recently completed second fiscal quarter (June 30, 2017), was $82,269,220,045. Abbott has no non-voting common equity. Number of common shares outstanding as of January 31, 2018: 1,746,333,892

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the 2018 Abbott Laboratories Proxy Statement are incorporated by reference into Part III. The Proxy Statement will be filed on or about March 16, 2018.


PART I

ITEM 1.    BUSINESS

GENERAL DEVELOPMENT OF BUSINESS

        Abbott Laboratories is an Illinois corporation, incorporated in 1900. Abbott's* principal business is the discovery, development, manufacture, and sale of a broad and diversified line of health care products.


FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS, GEOGRAPHIC AREAS, AND CLASSES OF SIMILAR PRODUCTS

        Incorporated herein by reference is Note 15 entitled "Segment and Geographic Area Information" of the Notes to Consolidated Financial Statements included under Item 8, "Financial Statements and Supplementary Data."


NARRATIVE DESCRIPTION OF BUSINESS

        Abbott has four reportable segments: Established Pharmaceutical Products, Diagnostic Products, Nutritional Products, and Cardiovascular and Neuromodulation Products.

        On October 3, 2017, Abbott completed the acquisition of Alere, Inc., a diagnostic device and service provider, for an aggregate consideration of approximately $4.5 billion in cash.

        On February 27, 2017, Abbott completed the sale of Abbott Medical Optics, its vision care business, to Johnson & Johnson for $4.325 billion in cash.

        On January 4, 2017, Abbott completed the acquisition of St. Jude Medical, Inc., a global medical device manufacturer. Based on the closing Abbott share price on January 4, 2017, the aggregate implied value of the consideration paid in connection with the acquisition was approximately $23.6 billion, including approximately $13.6 billion in cash and approximately $10 billion in Abbott common shares.

        On February 27, 2015, Abbott completed the sale of its developed markets branded generics pharmaceuticals business, which was previously included in the Established Pharmaceutical Products segment, to Mylan Inc. for 110 million shares of Mylan N.V., a newly formed entity that combined Mylan's existing business with Abbott's developed markets branded generics pharmaceuticals business. Abbott retained the branded generics pharmaceuticals business and products of its Established Pharmaceutical Products segment in emerging markets. Abbott has since sold all of its 110 million Mylan N.V. ordinary shares.

Established Pharmaceutical Products

        These products include a broad line of branded generic pharmaceuticals manufactured worldwide and marketed and sold outside the United States in emerging markets. These products are generally sold directly to wholesalers, distributors, government agencies, health care facilities, pharmacies, and independent retailers from Abbott-owned distribution centers and public warehouses, depending on the market served. Certain products are co-marketed or co-promoted with, or licensed from, other companies.

   

*
As used throughout the text of this report on Form 10-K, the term "Abbott" refers to Abbott Laboratories, an Illinois corporation, or Abbott Laboratories and its consolidated subsidiaries, as the context requires.

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        The principal products included in the broad therapeutic area portfolios of the Established Pharmaceutical Products segment are:

        The Established Pharmaceutical Products segment directs its primary marketing efforts toward building a strong brand with key stakeholders, including consumers, pharmacists, physicians, and other healthcare providers. Government agencies are also important customers.

        Competition in the Established Pharmaceutical Products segment is generally from other health care and pharmaceutical companies. In addition, the substitution of generic drugs for the brand prescribed and introduction of additional forms of already marketed established products by generic or branded competitors have increased competitive pressures.

Diagnostic Products

        These products include a broad line of diagnostic systems and tests manufactured, marketed, and sold worldwide. These products are generally marketed and sold directly to blood banks, hospitals, commercial laboratories, clinics, physicians' offices, government agencies, alternate care testing sites, and plasma protein therapeutic companies from Abbott owned distribution centers, public warehouses or third party distributors.

        The principal products included in the Diagnostic Products segment are:

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        The Diagnostic Products segment's products are subject to competition in technological innovation, price, convenience of use, service, instrument warranty provisions, product performance, laboratory efficiency, long-term supply contracts, and product potential for overall cost-effectiveness and productivity gains. Some products in this segment can be subject to rapid product obsolescence or regulatory changes. Although Abbott has benefited from technological advantages of certain of its current products, these advantages may be reduced or eliminated as competitors introduce new products.

Nutritional Products

        These products include a broad line of pediatric and adult nutritional products manufactured, marketed, and sold worldwide. These products are generally marketed and sold directly to consumers and to institutions, wholesalers, retailers, health care facilities, government agencies, and third-party distributors from Abbott-owned distribution centers or third-party distributors.

        The principal products included in the Nutritional Products segment are:

        Primary marketing efforts for nutritional products are directed toward consumers or to securing the recommendation of Abbott's brand of products by physicians or other health care professionals. In addition, certain nutritional products sold as Similac®, Gain™, Grow™, Eleva™, PediaSure®, PediaSure SideKicks®, Pedialyte®, Ensure®, Zone Perfect®, EAS®/Myoplex®, and Glucerna® are also promoted directly to the public by consumer marketing efforts in select markets where appropriate.

        Competition for nutritional products in the segment is generally from other diversified consumer and health care manufacturers. Competitive factors include consumer advertising, formulation, packaging, scientific innovation, intellectual property, price, retail distribution, and availability of product forms. A significant aspect of competition is the search for ingredient innovations. The introduction of new products by competitors, changes in medical practices and procedures, and regulatory changes can result in product

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obsolescence. In addition, private label and local manufacturers' products may increase competitive pressure.

Cardiovascular and Neuromodulation Products

        These products include a broad line of rhythm management, electrophysiology, heart failure, vascular and structural heart devices for the treatment of cardiovascular diseases, as well as neuromodulation devices for the management of chronic pain and movement disorders. These products are manufactured, marketed and sold worldwide. In the United States, these products are generally marketed and sold directly to hospitals, ambulatory surgery centers, and physicians offices from Abbott-owned distribution centers and public warehouses. Outside the United States, sales are made either directly to customers or through distributors, depending on the market served.

        The principal products included in the Cardiovascular and Neuromodulation Products segment are:

        The Cardiovascular and Neuromodulation Products segment's products are subject to competition in technological innovation, price, convenience of use, service, product performance, long-term supply contracts, and product potential for overall cost-effectiveness and productivity gains. Some products in this segment can be subject to rapid product obsolescence or regulatory changes. Although Abbott has benefited from technological advantages of certain of its current products, these advantages may be reduced or eliminated as competitors introduce new products.

Other Products

        The principal products in Abbott's other businesses include blood glucose and continuous glucose monitoring systems, including test strips, sensors, data management decision software, and accessories for people with diabetes, under the FreeStyle® brand. These products are marketed worldwide and generally

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sold directly to wholesalers, government agencies, private health care organizations, health care facilities, mail order pharmacies, and independent retailers from Abbott-owned distribution centers and public warehouses. Some of these products are also marketed and distributed through distributors. Blood and continuous glucose monitoring systems are also marketed and sold to consumers. These products are subject to regulatory changes and competition in technological innovation, price, convenience of use, service, and product performance.


INFORMATION WITH RESPECT TO ABBOTT'S BUSINESS IN GENERAL

Sources and Availability of Raw Materials

        Abbott purchases, in the ordinary course of business, raw materials and supplies essential to Abbott's operations from numerous suppliers in the United States and around the world. There have been no recent significant availability problems or supply shortages for raw materials or supplies.

Patents, Trademarks, and Licenses

        Abbott is aware of the desirability for patent and trademark protection for its products. Accordingly, where possible, patents and trademarks are sought and obtained for Abbott's products in the United States and countries of interest to Abbott. Abbott owns or has licenses under a substantial number of patents and patent applications. Principal trademarks and the products they cover are discussed in the Narrative Description of Business on pages 1 through 5. These, and various patents which expire during the period 2018 to 2038, in the aggregate, are believed to be of material importance in the operation of Abbott's business. Abbott believes that no single patent, license, or trademark is material in relation to Abbott's business as a whole.

Seasonal Aspects, Customers, Backlog, and Renegotiation

        There are no significant seasonal aspects to Abbott's business. Abbott has no single customer that, if the customer were lost, would have a material adverse effect on Abbott. Orders for Abbott's products are generally filled on a current basis, and order backlog is not material to Abbott's business. No material portion of Abbott's business is subject to renegotiation of profits or termination of contracts at the election of a government.

Research and Development

        Abbott spent approximately $2.2 billion in 2017, $1.4 billion in 2016, and $1.4 billion in 2015 on research to discover and develop new products and processes and to improve existing products and processes.

Environmental Matters

        Abbott 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. Abbott's capital and operating expenditures for pollution control in 2017 were approximately $11 million and $37 million, respectively. Capital and operating expenditures for pollution control in 2018 are estimated to be $11 million and $39 million, respectively.

        Abbott has been identified as one of many potentially responsible parties in investigations and/or remediations at several locations in the United States, including Puerto Rico, under the Comprehensive Environmental Response, Compensation, and Liability Act, commonly known as Superfund. Abbott is also engaged in remediation at several other sites, some of which are owned by Abbott, in cooperation with the Environmental Protection Agency or similar agencies. While it is not feasible to predict with certainty the

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final costs related to those investigations and remediation activities, Abbott 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 Abbott's financial position, cash flows, or results of operations.

Employees

        Abbott employed approximately 99,000 people as of December 31, 2017.

Regulation

        The development, manufacture, marketing, sale, promotion, and distribution of Abbott's products are subject to comprehensive government regulation by the U.S. Food and Drug Administration and similar international regulatory agencies. Government regulation by various international, supranational, federal and state agencies addresses (among other matters) the development and approval to market Abbott's products, as well as the inspection of, and controls over, research and laboratory procedures, clinical investigations, product approvals and manufacturing, labeling, packaging, supply chains, marketing and promotion, pricing and reimbursement, sampling, distribution, quality control, post-market surveillance, record keeping, storage, and disposal practices. In addition, Abbott's clinical laboratories and associated testing services are subject to comprehensive government regulation, including registration, certification, and licensure, by federal, state, and local agencies, such as the Centers for Medicare & Medicaid Services, the Drug Enforcement Adminstration, the Substance Abuse and Mental Health Services Administration, and their respective foreign counterparts. Certain of these agencies require our clinical laboratories to meet quality assurance, quality control, and personnel standards and undergo inspections.

        Abbott's international operations are also affected by trade and investment regulations in many countries. These may require local investment, restrict Abbott's investments, or limit the import of raw materials and finished products.

        Abbott's home monitoring services and related products that provide Abbott and third-party medical devices to consumers in the United States are subject to additional federal, state, and local laws and regulations applicable to health care providers and suppliers that submit claims for reimbursement to third-party payors. Medicare, Medicaid, and other third-party payors may from time to time conduct inquiries, claims audits, investigations, and enforcement actions relating to the claims or enrollment criteria.

        Further, Abbott is subject to laws and regulations pertaining to health care fraud and abuse, including state and federal anti-kickback, anti-self-referral, and false claims laws in the United States. Prescription drug, nutrition, and medical device manufacturers such as Abbott are also subject to taxes, as well as application, product, user, establishment, and other fees. Governmental agencies can also invalidate intellectual property rights.

        Compliance with these laws and regulations is costly and materially affects Abbott's business. Among other effects, health care regulations substantially increase the time, difficulty, and costs incurred in obtaining and maintaining approval to market newly developed and existing products. Abbott expects this regulatory environment will continue to require significant technical expertise and capital investment to ensure compliance. Failure to comply can delay the release of a new product or result in regulatory and enforcement actions, the seizure or recall of a product, the suspension or revocation of the authority necessary for a product's production and sale, suspension or revocation of billing privileges, and other civil or criminal sanctions, including fines and penalties. Similarly, compliance with the laws and regulations governing clinical laboratories and testing services requires specialized expertise. Failure to comply with these regulatory requirements can result in sanctions, including suspension, revocation, or limitation of a laboratory's certification, which is necessary to conduct business, as well as significant fines or criminal penalties.

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        Abbott's business can also be affected by ongoing studies of the utilization, safety, efficacy, and outcomes of health care products and their components that are regularly conducted by industry participants, government agencies, and others. These studies can call into question the utilization, safety, and efficacy of previously marketed products. In some cases, these studies have resulted, and may in the future result, in the discontinuation of marketing of such products in one or more countries, and may give rise to claims for damages from persons who believe they have been injured as a result of their use.

        Access to human health care products continues to be a subject of investigation and action by governmental agencies, legislative bodies, and private organizations in many countries. A major focus is cost containment. Efforts to reduce health care costs are also being made in the private sector, notably by health care payors and providers, which have instituted various cost reduction and containment measures. Abbott expects insurers and providers will continue attempts to reduce the cost or utilization of health care products. Many countries control the price of health care products directly or indirectly, through reimbursement, payment, pricing, or coverage limitations. Budgetary pressures on health care payors may also heighten the scope and severity of pricing pressures on Abbott's products for the foreseeable future.

        In the United States, the federal government regularly evaluates reimbursement for medical devices, diagnostics, supplies, and other products, as well as the procedures in which these products may be used. The government follows a diagnosis-related group (DRG) payment system for certain institutional services provided under Medicare or Medicaid and has implemented a prospective payment system (PPS) for services delivered in hospital outpatient, nursing home, and home health settings. DRG and PPS entitle a health care facility to a fixed reimbursement based on the diagnosis and/or procedure 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. Other payment methodology changes have been proposed and implemented from time to time. For example, Medicare implemented a competitive bidding system for certain durable medical equipment (including diabetes products), enteral nutrition products, and supplies. Additionally, the Protecting Access to Medicare Act establishes a new payment system for clinical laboratory tests, which became effective on January 1, 2018.

        In 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (together, the Affordable Care Act), imposed an excise tax on Abbott and other medical device manufacturers and importers. The excise tax was subsequently suspended from January 1, 2016 through December 31, 2017 as part of the Consolidated Appropriations Act of 2016. In January 2018, the excise tax was suspended for an additional two years.

        The Affordable Care Act also includes provisions known as the Physician Payments Sunshine Act, which require manufacturers of drugs, devices, and medical supplies covered under Medicare and Medicaid to record any transfers of value to physicians and teaching hospitals and to report this data to the Centers for Medicare & Medicaid Services for subsequent public disclosure. Similar reporting requirements have also been enacted on the state level domestically, and an increasing number of governments worldwide either have adopted or are considering similar laws requiring transparency of interactions with health care professionals. Failure to report appropriate data may result in civil or criminal fines and/or penalties.

        Policy changes, including potential modification or repeal of all or parts of the Affordable Care Act, or implementation of new health care legislation, could result in significant changes to the health care system.

        The regulation of data privacy and security, and the protection of the confidentiality of certain personal information (including patient health information and financial information), is increasing. For example, the European Union has enacted stricter data protection laws, which will take effect in 2018, that contain enhanced financial penalties for noncompliance. Similarly, the U.S. Department of Health and Human Services has issued rules governing the use, disclosure, and security of protected health information, and the U.S. Food and Drug Administration has issued further guidance concerning

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cybersecurity for medical devices. In addition, certain countries have issued or are considering "data localization" laws, which limit companies' ability to transfer protected data across country borders. Failure to comply with data privacy and security laws and regulations can result in enforcement actions, which could include civil or criminal penalties. Transferring and managing protected information will become more challenging as laws and regulations are enacted or amended, and Abbott expects there will be increasing complexity in this area.

        Governmental cost containment efforts also affect Abbott's nutritional products business. In the United States, for example, under regulations governing the federally funded Special Supplemental Nutrition Program for Women, Infants, and Children, all states must have a cost containment program for infant formula. As a result, through competitive bidding states obtain rebates from manufacturers of infant formula whose products are used in the program.

        Abbott expects debate to continue at all government levels worldwide over the marketing, manufacture, availability, method of delivery, and payment for health care products and services, as well as data privacy and security. Abbott believes that future legislation and regulation in the markets it serves could affect access to health care products and services, increase rebates, reduce prices or reimbursements or the rate of price increases for health care products and services, change health care delivery systems, create new fees and obligations for the pharmaceutical, nutrition, diagnostic, and medical device industries, or require additional reporting and disclosure. It is not possible to predict the extent to which Abbott or the health care industry in general might be affected by the matters discussed above.


INTERNATIONAL OPERATIONS

        As discussed in greater detail in the section captioned, "Narrative Description of Business," Abbott markets products worldwide through affiliates and distributors. Most of the products discussed in the preceding sections of this report are also sold outside the United States. In addition, certain products of a local nature and variations of product lines that 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.


INTERNET INFORMATION

        Copies of Abbott's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge through Abbott's investor relations website (www.abbottinvestor.com) as soon as reasonably practicable after Abbott electronically files the material with, or furnishes it to, the Securities and Exchange Commission.

        Abbott's corporate governance guidelines, outline of directorship qualifications, code of business conduct and the charters of Abbott's audit committee, compensation committee, nominations and governance committee, and public policy committee are all available on Abbott's investor relations website (www.abbottinvestor.com).

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ITEM 1A.    RISK FACTORS

        In addition to the other information in this report, the following risk factors should be considered before deciding to invest in any of Abbott's securities. Additional risks and uncertainties not presently known to Abbott, or risks Abbott currently considers immaterial, could also affect Abbott's actual results. Abbott's business, financial condition, results of operations, or prospects could be materially adversely affected by any of these risks.

Abbott may acquire other businesses, license rights to technologies or products, form alliances, or dispose of or spin-off businesses, which could cause it to incur significant expenses and could negatively affect profitability.

        Abbott may pursue acquisitions, licensing arrangements, and strategic alliances, or dispose of or spin-off some of its businesses, as part of its business strategy. Abbott may not complete these transactions in a timely manner, on a cost-effective basis, or at all, and may not realize the expected benefits. If Abbott is successful in making an acquisition, the products and technologies that are acquired may not be successful or may require significantly greater resources and investments than originally anticipated. Abbott may not be able to integrate acquisitions successfully into its existing business or transition disposed businesses efficiently, and could incur or assume significant debt and unknown or contingent liabilities. Abbott could also experience negative effects on its reported results of operations from acquisition or disposition-related charges, amortization of expenses related to intangibles and charges for impairment of long-term assets. These effects could cause a deterioration of Abbott's credit rating, result in increased borrowing costs and interest expense, and decrease liquidity.

Abbott is subject to cost containment efforts that could cause a reduction in future revenues and operating income.

        In the United States and other countries, Abbott's businesses have experienced downward pressure on product pricing. Cost containment efforts by governments and private organizations are described in greater detail in the section captioned "Regulation." To the extent these cost containment efforts are not offset by greater patient access to health care or other factors, Abbott's future revenues and operating income will be reduced.

Abbott is subject to numerous governmental regulations and it can be costly to comply with these regulations and to develop compliant products and processes.

        Abbott's products are subject to rigorous regulation by the U.S. Food and Drug Administration (FDA) and numerous international, supranational, federal, and state authorities. The process of obtaining regulatory approvals to market a drug or medical device can be costly and time-consuming, and approvals might not be granted for future products, or additional indications or uses of existing products, on a timely basis, if at all. Delays in the receipt of, or failure to obtain, approvals for future products, or new indications and uses, could result in delayed realization of product revenues, reduction in revenues, and in substantial additional costs.

        In addition, no assurance can be given that Abbott will remain in compliance with applicable FDA and other regulatory requirements once approval or marketing authorization has been obtained for a product. These requirements include, among other things, regulations regarding manufacturing practices, product labeling, and advertising and postmarketing reporting, including adverse event reports and field alerts. Many of Abbott's facilities and procedures and those of Abbott's suppliers are subject to ongoing regulation, including periodic inspection by the FDA and other regulatory authorities. Abbott must incur expense and spend time and effort to ensure compliance with these complex regulations. Possible regulatory actions for non-compliance could include warning letters, fines, damages, injunctions, civil penalties, recalls, seizures of Abbott's products, and criminal prosecution.

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        These actions could result in, among other things, substantial modifications to Abbott's business practices and operations; refunds, recalls, or seizures of Abbott's products; a total or partial shutdown of production in one or more facilities while Abbott or Abbott's suppliers remedy the alleged violation; the inability to obtain future pre-market approvals or marketing authorizations; and withdrawals or suspensions of current products from the market. Any of these events could disrupt Abbott's business and have a material adverse effect on Abbott's revenues, profitability and financial condition.

Laws and regulations affecting government benefit programs could impose new obligations on Abbott, require Abbott to change its business practices, and restrict its operations in the future.

        Abbott's industry is subject to various international, supranational, federal, and state laws and regulations pertaining to government benefit program reimbursement, price reporting and regulation, and health care fraud and abuse, including anti-kickback and false claims laws, and international and individual state laws relating to pricing and sales and marketing practices. Violations of these laws may be punishable by criminal and/or civil sanctions, including, in some instances, substantial fines, imprisonment, and exclusion from participation in government health care programs, including Medicare, Medicaid, and Veterans Administration health programs in the U.S. These laws and regulations are broad in scope and they are subject to evolving interpretations, which could require Abbott to incur substantial costs associated with compliance or to alter one or more of its sales or marketing practices. In addition, violations of these laws, or allegations of such violations, could disrupt Abbott's business and result in a material adverse effect on Abbott's revenues, profitability, and financial condition.

Changes in the health care regulatory environment may adversely affect Abbott's business.

        Both in the U.S. and internationally, government authorities may enact changes in regulatory requirements, make legislative or administrative reforms to existing reimbursement programs, make adverse decisions relating to our products' coverage or reimbursement, or make changes to patient access to health care, all of which could adversely impact the demand for and usage of Abbott's products or the prices that Abbott's customers are willing to pay for them.

        Further, in the U.S., a number of the provisions of the U.S. Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 address access to health care products and services and establish certain fees for the medical device industry. These provisions may be modified, repealed, or otherwise invalidated, in whole or in part. Future rulemaking could affect rebates, prices or the rate of price increases for health care products and services, or required reporting and disclosure. Abbott cannot predict the timing or impact of any future rulemaking or changes in the law.

        For additional information concerning health care regulation, see the discussion in "Regulation" under Item 1, "Business."

Abbott incurred and assumed significant indebtedness in connection with the acquisitions of St. Jude Medical and Alere, which could decrease business flexibility and increase consolidated interest expense.

        Following the acquisitions of St. Jude Medical and Alere, Abbott's consolidated indebtedness as of December 31, 2017 was approximately $28 billion. This consolidated indebtedness could have the effect, among other things, of reducing Abbott's flexibility to respond to changing business and economic conditions, increasing Abbott's consolidated interest expense, and reducing funds available for working capital, capital expenditures, acquisitions, and other general corporate purposes.

        Further, Abbott may be required to raise additional financing for working capital, capital expenditures, future acquisitions or other general corporate purposes. Abbott's ability to arrange additional financing or refinancing will depend on, among other factors, Abbott's financial position and performance, as well as prevailing market conditions and other factors beyond Abbott's control. Consequently, Abbott cannot assure that it will be able to obtain additional financing or refinancing on

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terms acceptable to Abbott or at all, which could adversely impact Abbott's ability to make scheduled payments with respect to its consolidated indebtedness and its profitability and financial condition.

        Additionally, further borrowing could cause a deterioration of Abbott's credit rating. Abbott's credit ratings reflect each credit rating agency's then opinion of Abbott's financial strength, operating performance, and ability to meet its debt obligations. Adverse changes in Abbott's credit ratings may result in increased borrowing costs for future long-term debt or short-term borrowing facilities and may limit financing options, including access to the unsecured borrowing market. Abbott may also be subject to additional restrictive covenants that would reduce flexibility.

Abbott depends on sophisticated information technology systems and a cyber attack or other breach of these systems could have a material adverse effect on Abbott's results of operations.

        Similar to other large multi-national companies, the size and complexity of the information technology systems on which Abbott relies for both its infrastructure and products makes them susceptible to a cyber attack, malicious intrusion, breakdown, destruction, loss of data privacy, or other significant disruption. These systems have been and are expected to continue to be the target of malware and other cyber attacks. In addition, third party hacking attempts may cause Abbott's information technology systems and related products, protected data, or proprietary information to be compromised. A significant attack or other disruption could result in adverse consequences, including increased costs and expenses, problems with product functionality, damage to customer relations, lost revenue, and legal or regulatory penalties.

        Abbott invests in its systems and technology and in the protection of its products and data to reduce the risk of an attack or other significant disruption, and monitors its systems on an ongoing basis for any current or potential threats and for changes in technology and the regulatory environment. There can be no assurance that these measures and efforts will prevent future attacks or other significant disruptions to any of the systems on which Abbott relies or that related product issues will not arise in the future. Any significant attack or other disruption on Abbott's systems or products could have a material adverse effect on Abbott's business.

The expiration or loss of patent protection and licenses may affect Abbott's future revenues and operating income.

        Many of Abbott's businesses rely on patent and trademark and other intellectual property protection. Although most of the challenges to Abbott's intellectual property have come from other businesses, governments may also challenge intellectual property protections. To the extent Abbott's intellectual property is successfully challenged, invalidated, or circumvented or to the extent it does not allow Abbott to compete effectively, Abbott's businesses could suffer. To the extent that countries do not enforce Abbott's intellectual property rights, Abbott's future revenues and operating income could be reduced. Any material litigation regarding Abbott's patents and trademarks is described in the section captioned "Legal Proceedings."

Competitors' intellectual property may prevent Abbott from selling its products or have a material adverse effect on Abbott's future profitability and financial condition.

        Competitors may claim that an Abbott product infringes upon their intellectual property. Resolving an intellectual property infringement claim can be costly and time consuming and may require Abbott to enter into license agreements. Abbott cannot guarantee that it would be able to obtain license agreements on commercially reasonable terms. A successful claim of patent or other intellectual property infringement could subject Abbott to significant damages or an injunction preventing the manufacture, sale or use of affected Abbott products. Any of these events could have a material adverse effect on Abbott's profitability and financial condition.

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Abbott's research and development efforts may not succeed in developing commercially successful products and technologies, which may cause Abbott's revenue and profitability to decline.

        To remain competitive, Abbott must continue to launch new products and technologies. To accomplish this, Abbott commits substantial efforts, funds, and other resources to research and development. A risk of failure is inherent in the research and development of new products and technologies. Abbott must make ongoing substantial expenditures without any assurance that its efforts will be commercially successful. Failure can occur at any point in the process, including after significant funds have been invested.

        Promising new products and technologies may fail to reach the market or may only have limited commercial success because of efficacy or safety concerns, failure to achieve positive clinical outcomes, inability to obtain necessary regulatory approvals, limited scope of approved uses, excessive costs to manufacture, failure to establish or maintain intellectual property rights, or infringement of the intellectual property rights of others. Even if Abbott successfully develops new products or enhancements or new generations of Abbott's existing products, they may be quickly rendered obsolete by changing customer preferences, changing industry standards, or competitors' innovations. Innovations may not be accepted quickly in the marketplace because of, among other things, entrenched patterns of clinical practice or uncertainty over third-party reimbursement. Abbott cannot state with certainty when or whether any of its products under development will be launched, whether it will be able to develop, license, or otherwise acquire compounds or products, or whether any products will be commercially successful. Failure to launch successful new products or technologies, or new indications or uses for existing products, may cause Abbott's products or technologies to become obsolete, causing Abbott's revenues and operating results to suffer.

New products and technological advances by Abbott's competitors may negatively affect Abbott's results of operations.

        Abbott's products face intense competition from its competitors' products. Competitors' products may be safer, more effective, more effectively marketed or sold, or have lower prices or superior performance features than Abbott's products. Abbott cannot predict with certainty the timing or impact of the introduction of competitors' products.

The manufacture of many of Abbott's products is a highly exacting and complex process, and if Abbott or one of its suppliers encounters problems manufacturing products, Abbott's business could suffer.

        The manufacture of many of Abbott's products is a highly exacting and complex process, due in part to strict regulatory requirements. Problems may arise during manufacturing for a variety of reasons, including equipment malfunction, failure to follow specific protocols and procedures, problems with raw materials, natural disasters, and environmental factors. In addition, single suppliers are currently used for certain products and materials. If problems arise during the production of a lot or batch of product, those products may have to be discarded. This could, among other things, lead to increased costs, lost revenue, damage to customer relations, time and expense spent investigating the cause and, depending on the cause, similar losses with respect to other lots, batches or products. If problems are not discovered before the product is released to the market, recall and product liability costs may also be incurred. To the extent Abbott or one of its suppliers experiences significant manufacturing problems, this could have a material adverse effect on Abbott's revenues and profitability.

Significant safety concerns could arise for Abbott's products, which could have a material adverse effect on Abbott's revenues and financial condition.

        Health care products typically receive regulatory approval based on data obtained in controlled clinical trials of limited duration. Following regulatory approval, these products will be used over longer periods of time in many patients. Investigators may also conduct additional, and perhaps more extensive,

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studies. If new safety issues are reported, Abbott may be required to amend the conditions of use for a product. For example, Abbott may be required to provide additional warnings on a product's label or narrow its approved intended use, either of which could reduce the product's market acceptance. If serious safety issues arise with an Abbott product, sales of the product could be halted by Abbott or by regulatory authorities. Safety issues affecting suppliers' or competitors' products also may reduce the market acceptance of Abbott's products.

        In addition, in the ordinary course of business, Abbott is the subject of product liability claims and lawsuits alleging that its products or the products of other companies that Abbott promotes have resulted or could result in an unsafe condition for or injury to patients. Product liability claims and lawsuits, safety alerts or product recalls, and other allegations of product safety or quality issues, regardless of their validity or ultimate outcome, may have a material adverse effect on Abbott's business and reputation and on Abbott's ability to attract and retain customers. Consequences may also include additional costs, a decrease in market share for the products, lower income or exposure to other claims. Product liability losses are self-insured. Product liability claims could have a material adverse effect on Abbott's profitability and financial condition.

Fluctuation in foreign currency exchange rates may adversely affect our financial statements and Abbott's ability to realize projected sales and earnings.

        Although Abbott's financial statements are denominated in U.S. dollars, a significant portion of Abbott's revenues and costs are realized in other currencies. Sales outside of the United States in 2017 made up approximately 65 percent of Abbott's net sales. Abbott's profitability is affected by movement of the U.S. dollar against other currencies. Fluctuations in exchange rates between the U.S. dollar and other currencies may also affect the reported value of Abbott's assets and liabilities, as well as its cash flows. Some foreign currencies are subject to government exchange controls. While Abbott enters into hedging arrangements to mitigate some of its foreign currency exposure, Abbott cannot predict with any certainty changes in foreign currency exchange rates or its ability to mitigate these risks.

        Information on the impact of foreign exchange rates on Abbott's financial results is contained in the "Financial Review — Results of Operations" section in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations of this report. A discussion of the steps taken to mitigate the impact of foreign exchange is contained in Item 7A, Quantitative and Qualitative Disclosures about Market Risk in Abbott's 2017 Form 10-K. Information on Abbott's hedging arrangements is contained in Note 11 to the consolidated financial statements in this report.

Deterioration in the economic condition and credit quality of certain countries may negatively affect Abbott's results of operations.

        Unfavorable economic conditions in certain countries may increase the time it takes to collect outstanding trade receivables. Financial instability and fiscal deficits in these countries may result in additional austerity measures to reduce costs, including health care. Deterioration in the quality of sovereign debt, including credit downgrades, could increase Abbott's collection risk where a significant amount of Abbott's receivables in these countries are with governmental health care systems or where Abbott's customers depend on payment by government health care systems.

The international nature of Abbott's business subjects it to additional business risks that may cause its revenue and profitability to decline.

        Abbott's business is subject to risks associated with managing a global supply chain and doing business internationally. Sales outside of the United States in 2017 made up approximately 65 percent of Abbott's net sales. Additional risks associated with Abbott's international operations include:

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Events contemplated by these risks may, individually or in the aggregate, have a material adverse effect on Abbott's revenues and profitability.

Other factors can have a material adverse effect on Abbott's future profitability and financial condition.

        Many other factors can affect Abbott's profitability and its financial condition, including:

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 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

        This Form 10-K contains forward-looking statements that are based on management's current expectations, estimates, and projections. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "forecasts," variations of these words, and similar expressions are intended to identify these forward-looking statements. Certain factors, including but not limited to those identified under "Item 1A. Risk Factors" of this Form 10-K, may cause actual results to differ materially from current expectations, estimates, projections, forecasts, and from past results. No assurance can be made that any expectation, estimate, or projection contained in a forward-looking statement will be achieved or will not be affected by the factors cited above or other future events. Abbott undertakes no obligation to release publicly any revisions to forward-looking statements as the result of subsequent events or developments, except as required by law.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

        None.

ITEM 2.    PROPERTIES

        As of December 31, 2017, Abbott owned or leased properties totaling approximately 42 million square feet in 81 countries, of which approximately 70% is owned by Abbott. Abbott's principal corporate offices are located in Illinois and are owned by Abbott.

        Abbott operates 100 manufacturing facilities in 32 countries. Abbott's facilities are deemed suitable and provide adequate productive capacity. The manufacturing facilities are used by Abbott's reportable segments as follows:

Reportable Segments
  Manufacturing
Sites 		 

Cardiovascular and Neuromodulation Products

     25  

Diagnostic Products

     28  

Established Pharmaceutical Products

     31  

Nutritional Products

     14  

Non-Reportable

     2  
​ ​ ​ ​ ​

Worldwide Total

     100  
​ ​ ​ ​ ​
​ ​ ​ ​ ​
​ ​ ​ ​ ​

        Abbott's research and development facilities in the United States are primarily located in California, Illinois, Minnesota, New Jersey, and Ohio. Abbott also has research and development facilities in various other countries including China, Colombia, India, Singapore, Spain, and the United Kingdom.

        There are no material encumbrances on the properties.

ITEM 3.    LEGAL PROCEEDINGS

        Abbott is involved in various claims, legal proceedings and investigations, including (as of January 31, 2018) those described below. While it is not feasible to predict the outcome of such pending claims, proceedings and investigations with certainty, management is of the opinion that their ultimate resolution should not have a material adverse effect on Abbott's financial position, cash flows, or results of operations.

        In March 2017, the U.S. Environmental Protection Agency (EPA) issued a letter to Alere Toxicology Services, Inc.'s Austin, Texas facility identifying potential violations of the Resources Conservation and Recovery Act and associated regulations. In November 2017, Alere Toxicology Services, Inc. reached an agreement with the EPA and agreed to pay a civil penalty of $186,225.

ITEM 4.    MINE SAFETY DISCLOSURES

        Not applicable.

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 EXECUTIVE OFFICERS OF THE REGISTRANT

        Executive officers of Abbott are elected annually by the board of directors. All other officers are elected by the board or appointed by the chairman of the board. All officers are either elected at the first meeting of the board of directors held after the annual shareholder meeting or appointed by the chairman after that board meeting. Each officer holds office until a successor has been duly elected or appointed and qualified or until the officer's death, resignation, or removal. Vacancies may be filled at any time by the board. Any officer may be removed by the board of directors when, in its judgment, removal would serve the best interests of Abbott. Any officer appointed by the chairman of the board may be removed by the chairman whenever, in the chairman's judgment, removal would serve the best interests of Abbott. A vacancy in any office appointed by the chairman of the board may be filled by the chairman.

        Abbott's executive officers, their ages as of February 16, 2018, and the dates of their first election as officers of Abbott are listed below. The executive officers' principal occupations and employment for the past five years and the year of appointment to the earliest reported office are also shown. Unless otherwise stated, employment was by Abbott. There are no family relationships between any corporate officers or directors.

Miles D. White, 62

Hubert L. Allen, 52

Brian J. Blaser, 53

John M. Capek, 56

Robert B. Ford, 44

Stephen R. Fussell, 60

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Andrew H. Lane, 47

Daniel Salvadori, 39

Brian B. Yoor, 48

Roger M. Bird, 61

Sharon J. Bracken, 47

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Charles R. Brynelsen, 61

Jaime Contreras, 61

Joseph Manning, 49

Michael J. Pederson, 56

Sean Shrimpton, 51

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Jared L. Watkin, 50

Alejandro D. Wellisch, 43

Robert E. Funck, 56

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 PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Principal Market

        The principal market for Abbott's common shares is the New York Stock Exchange. Shares are also listed on the Chicago Stock Exchange and traded on various regional and electronic exchanges. Outside the United States, Abbott's shares are listed on the SIX Swiss Exchange.

 
   Market Price Per Share  
 
   2017   2016  
 
   high   low   high   low  

First Quarter

   $ 45.84   $ 38.34   $ 44.05   $ 36.00  

Second Quarter

     49.59     42.31     44.58     36.76  

Third Quarter

     54.80     47.83     45.79     39.16  

Fourth Quarter

     57.77     53.20     43.78     37.38  

Shareholders

        There were 44,581 shareholders of record of Abbott common shares as of December 31, 2017.

Dividends

        Abbott declared quarterly dividends of $0.265 per share on common shares in the first, second, and third quarters of 2017. In the fourth quarter of 2017, Abbott declared a quarterly dividend of $0.280 per share on common shares.

        Abbott declared quarterly dividends of $0.26 per share on common shares in the first, second, and third quarters of 2016. In the fourth quarter of 2016, Abbott declared a quarterly dividend of $0.265 per share on common shares.

Tax Information for Shareholders

        In 2001, the Illinois Department of Commerce and Economic Opportunity designated Abbott as an Illinois High Impact Business (HIB) for a period not to exceed twenty years. Dividends paid by a corporation that is designated as a HIB and conducts business in a foreign trade zone may be eligible for a subtraction from base income for Illinois income tax purposes. Abbott certified that the HIB requirements were met for the calendar year ending December 31, 2017.

        If you have any questions, please contact your tax advisor.

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Issuer Purchases of Equity Securities

Period
  (a) Total Number
of Shares
(or Units)
Purchased 		  (b) Average Price
Paid per Share
(or Unit) 		  (c) Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced
Plans or Programs 		  (d) Maximum Number (or
Approximate Dollar Value) of
Shares (or Units) that May
Yet Be Purchased Under the
Plans or Programs 		 

October 1, 2017 — October 31, 2017

     1,489 (1) $ 53.610     0   $ 925,131,209 (2)

November 1, 2017 — November 30, 2017

     15,876 (1) $ 54.740     0   $ 925,131,209 (2)

December 1, 2017 — December 31, 2017

     12,126 (1) $ 55.636     0   $ 925,131,209 (2)

Total

     29,491 (1) $ 55.051     0   $ 925,131,209 (2)
(1)
These shares include:

(i)
the shares deemed surrendered to Abbott to pay the exercise price in connection with the exercise of employee stock options — 1,489 in October, 1,568 in November, and 1,146 in December; and

(ii)
the shares purchased on the open market for the benefit of participants in the Abbott Laboratories, Limited Employee Stock Purchase Plan — 0 in October, 14,308 in November, and 10,980 in December.

    These shares do not include the shares surrendered to Abbott to satisfy tax withholding obligations in connection with the vesting of restricted stock or restricted stock units.

(2)
On September 11, 2014, Abbott announced that its board of directors approved the purchase of up to $3 billion of its common shares, from time to time.

ITEM 6.    SELECTED FINANCIAL DATA

 
   Year Ended December 31  
 
   2017   2016   2015   2014   2013  

Net sales (1)

   $ 27,390   $ 20,853   $ 20,405   $ 20,247   $ 19,657  

Earnings from continuing operations (1)

     353     1,063     2,606     1,721     1,988  

Net earnings

     477     1,400     4,423     2,284     2,576  

Basic earnings per common share from continuing operations (1)

     0.20     0.71     1.73     1.13     1.27  

Basic earnings per common share

     0.27     0.94     2.94     1.50     1.64  

Diluted earnings per common share from continuing operations (1)

     0.20     0.71     1.72     1.12     1.26  

Diluted earnings per common share

     0.27     0.94     2.92     1.49     1.62  

Total assets

     76,250     52,666     41,247     41,207     42,937  

Long-term debt, including current portion

     27,718     20,684     5,874     3,448     3,381  

Cash dividends declared per common share

     1.075     1.045     0.98     0.90     0.64  
(1)
Amounts reflect Abbott's developed markets branded generics pharmaceuticals, animal health and former research-based pharmaceuticals business as discontinued operations.

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Financial Review

        Abbott's revenues are derived primarily from the sale of a broad line of health care products under short-term receivable arrangements. Patent protection and licenses, technological and performance features, and inclusion of Abbott's products under a contract most impact which products are sold; price controls, competition and rebates most impact the net selling prices of products; and foreign currency translation impacts the measurement of net sales and costs. Abbott's primary products are nutritional products, diagnostic testing products, branded generic pharmaceuticals and cardiovascular and neuromodulation products. Sales in international markets comprise approximately 65 percent of consolidated net sales.

        On October 3, 2017, Abbott acquired Alere Inc. (Alere), a diagnostic device and service provider, for $51.00 per common share in cash, which equated to a purchase price of approximately $4.5 billion. As part of the acquisition, Abbott tendered for Alere's preferred shares for a total value of approximately $0.7 billion. In addition, approximately $3.0 billion of Alere's debt was assumed and subsequently repaid. The acquisition establishes Abbott as a leader in point of care testing, expands Abbott's global diagnostics presence and provides access to new products, channels and geographies. Abbott's Diagnostic Products reportable segment includes the results of Alere from the date of acquisition.

        On January 4, 2017, Abbott completed the acquisition of St. Jude Medical, Inc. (St. Jude Medical), a global medical device manufacturer, for approximately $23.6 billion, including approximately $13.6 billion in cash and approximately $10 billion in Abbott common shares, based on Abbott's closing stock price on the acquisition date. As part of the acquisition, approximately $5.9 billion of St. Jude Medical's debt was assumed, repaid or refinanced by Abbott. The acquisition provides expanded opportunities for future growth and is an important part of the company's ongoing effort to develop a strong, diverse portfolio of devices, diagnostics, nutritionals and branded generic pharmaceuticals. The combined business competes in nearly every area of the $30 billion cardiovascular device market, as well as in neuromodulation which treats chronic pain and movement disorders. Abbott's Cardiovascular and Neuromodulation reportable segment includes the results of its historical Vascular Products segment and the results of the businesses acquired from St. Jude Medical from the date of acquisition.

        In February 2017, Abbott completed the sale of Abbott Medical Optics (AMO), its vision care business, to Johnson & Johnson for $4.325 billion in cash. The decision to sell AMO reflected Abbott's proactive shaping of its portfolio in line with its strategic priorities. In 2017, Abbott recognized a pre-tax gain of $1.163 billion and an after-tax gain of $728 million related to the sale of AMO. The operating results of AMO were included in Earnings from Continuing Operations up to the date of sale as the business did not qualify for reporting as discontinued operations.

        On February 27, 2015, Abbott completed the sale of its developed markets branded generics pharmaceuticals business, which was previously included in the Established Pharmaceutical Products segment, to Mylan Inc. for 110 million ordinary shares of Mylan N.V., a newly formed entity that combined Mylan's existing business with Abbott's developed markets branded generics pharmaceuticals business. Abbott retained the branded generics pharmaceuticals business and products of its Established Pharmaceutical Products segment in emerging markets. In April 2015, Abbott sold 40.25 million of its Mylan N.V. ordinary shares and in 2017, Abbott sold the remaining 69.75 million ordinary shares. Proceeds from the sale of the 110 million ordinary shares totaled $5.0 billion.

        The sales increase over the last three years was driven primarily by the 2017 acquisitions of St. Jude Medical and Alere and sales growth in the established pharmaceuticals and diagnostics businesses. In 2017, the acquisitions of St. Jude Medical and Alere, partially offset by the sale of AMO, contributed 26.5 percentage points of Abbott's total sales growth. Sales in emerging markets, which represent

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approximately 40 percent of total company sales, increased 13.9 percent in 2017 and 6.3 percent in 2016, excluding the impact of foreign exchange. (Emerging markets include all countries except the United States, Western Europe, Japan, Canada, Australia and New Zealand.)

        Over the last three years, Abbott's operating margin was impacted by several factors. In 2017, Abbott's operating margin decreased by approximately 900 basis points primarily due to costs associated with the acquisitions, including higher intangible amortization expense, inventory step-up amortization and integration costs, partially offset by operating margin improvement across various businesses. In 2016 and 2015, Abbott expanded its operating margin by approximately 120 basis points per year primarily due to margin improvement in the nutritional and diagnostics businesses.

        In Abbott's worldwide nutritional products business, sales over the last three years were positively impacted by demographics such as an aging population and an increasing rate of chronic disease in developed markets and the rise of a middle class in many emerging markets, as well as by numerous new product introductions that leveraged Abbott's strong brands. These positive factors were offset by challenging conditions in various markets over the last three years. In 2017, the nutritionals business experienced growth in the U.S. due to above-market performance in Abbott's infant and toddler brands, including PediaSure®, Pedialyte® and Similac®. Increased 2017 sales in China and India were partially offset by challenging market conditions in the infant formula market in various emerging markets. With respect to the profitability of the nutritional products business, manufacturing and distribution process changes, as well as other cost reductions drove margin improvements across the business over the last three years although such improvements were offset by increased commodity costs in 2017. The decrease in operating margins for this business from 25.0 percent of sales in 2015 to 22.9 percent in 2017 was almost entirely due to the negative impact of foreign exchange.

        In Abbott's worldwide diagnostics business, sales growth over the last three years reflected the acquisition of Alere in October of 2017, as well as continued market penetration by the Core Laboratory business in the U.S. and China, and growth in other emerging markets. In addition, the Point of Care diagnostics business experienced sales growth led by the continued adoption of Abbott's i-STAT® handheld system. Worldwide diagnostic sales increased 16.7 percent in 2017 and 5.5 percent in 2016, excluding the impact of foreign exchange. Excluding the impact of the Alere acquisition, as well as the impact of foreign exchange, sales in the Diagnostics Products segment increased 5.5 percent in 2017. In 2017, Abbott continued the international roll-out of its recently launched Alinity systems for the core laboratory, including "Alinity c" for clinical chemistry, "Alinity i" for immunoassay diagnostics and "Alinity s" for blood and plasma screening. In the fourth quarter of 2017, Abbott received FDA approval in the U.S. for the "Alinity c" and "Alinity i" instruments for clinical chemistry and immunoassay diagnostics. Alinity is an integrated family of next-generation diagnostic systems and solutions which are designed to increase efficiency by running more tests in less space, generating test results faster and minimizing human errors while continuing to provide quality results.

        Margin improvement continued to be a key focus for the diagnostics business in 2017 although such improvements were partially offset by the negative impact of foreign exchange. Operating margins increased from 25.2 percent of sales in 2015 to 26.1 percent in 2017 as the business continued to execute on efficiency initiatives in the manufacturing and supply chain functions.

        The Established Pharmaceutical Products segment focuses on the sale of its products in emerging markets after the sale of its developed markets business to Mylan on February 27, 2015. Excluding the impact of foreign exchange, Established Pharmaceutical sales from continuing operations increased 9.5 percent in 2017 and 10.5 percent in 2016. The sales increase in 2017 was driven by double-digit growth in China and various countries in Latin America. Operating margins increased from 17.7 percent of sales in 2015 to 19.8 percent in 2017.

        Since the beginning of the first quarter of 2017, the results of Abbott's Cardiovascular and Neuromodulation Products segment includes Abbott's historical Vascular Products segment and

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St. Jude Medical from the date of acquisition. Excluding the impact of foreign exchange, sales in the Cardiovascular and Neuromodulation Products segment increased 207.4 percent in 2017 and 4.5 percent in 2016. The sales increase in 2017 was driven by the acquisition of St. Jude Medical. Excluding the impact of the acquisition, as well as the impact of foreign exchange, sales in the Cardiovascular and Neuromodulation Products segment were essentially unchanged in 2017 versus the prior year. In 2017, higher Structural Heart and endovascular sales were offset by lower coronary stent sales and the comparison impact from the favorable 2016 resolution of a third-party royalty agreement. In 2016, sales growth was driven by double-digit growth in Abbott's sales of its MitraClip structural heart device for the treatment of mitral regurgitation, as well as endovascular franchise sales growth. These increases were partially offset by pricing pressures primarily related to drug-eluting stents (DES) and lower market share for Abbott's XIENCE DES franchise in certain geographies. In 2017, operating earnings for this segment increased over 160 percent; the operating margin profile declined from 38.0 percent of sales in 2015 to 30.5 percent in 2017 primarily due to the mix of business resulting from the acquisition of St. Jude Medical and ongoing pricing pressures in the coronary business.

        In 2017, Abbott obtained regulatory approval for various products in addition to the approvals described above in the diagnostics business. In its Cardiovascular and Neuromodulation Products segment, Abbott received U.S. FDA approvals for magnetic resonance (MR) conditional labeling across its full suite of pacemaker, implantable cardioverter defibrillator (ICD), and cardiac resynchronization therapy defibrillator (CRT-D) devices. Abbott announced CE Mark and received U.S. FDA clearance for its Confirm Rx Insertable Cardiac Monitor (ICM), the first and only smartphone-compatible ICM designed to help physicians remotely identify cardiac arrhythmias. Abbott received U.S. FDA approval for its HeartMate 3 system, which helps a weak heart pump blood through the body for advanced heart failure patients in need of short-term hemodynamic support (bridge-to-transplant or bridge to myocardial recovery). Abbott obtained CE Mark for its XIENCE Sierra product, which is the next generation of its drug-eluting coronary stent system. In its diabetes business, Abbott received U.S. FDA approval for its FreeStyle Libre system, which is the only continuous glucose monitoring system that does not require any user calibration.

        Abbott's short- and long-term debt totaled $27.9 billion and $22.0 billion at December 31, 2017 and 2016, respectively. At December 31, 2017, Abbott's long-term debt rating was BBB by Standard and Poor's Corporation and Baa3 by Moody's Investors Service (Moody's). In February 2018, Moody's raised Abbott's rating to Baa2 with a positive outlook. Abbott is committed to reducing its debt levels following the recent acquisitions of St. Jude Medical and Alere. In January 2018, Abbott repaid $3.95 billion of debt and anticipates additional debt repayments throughout 2018. On February 16, 2018, the board of directors authorized the additional redemption of up to $5 billion of currently outstanding long-term notes.

        In the first quarter of 2017, as part of the acquisition of St. Jude Medical, Abbott assumed outstanding debt previously issued by St. Jude Medical. Abbott exchanged certain St. Jude Medical debt obligations with an aggregate principal amount of approximately $2.9 billion for debt issued by Abbott which consists of: $473.8 million of 2.00% Senior Notes due 2018; $483.7 million of 2.80% Senior Notes due 2020; $818.4 million of 3.25% Senior Notes due 2023; $490.7 million of 3.875% Senior Notes due 2025; and $639.1 million of 4.75% Senior Notes due 2043. Following this exchange, approximately $194.2 million of existing St. Jude Medical notes remain outstanding across the five series of existing notes which have the same coupons and maturities as those listed above. There were no significant costs associated with the exchange of debt. In addition, during the first quarter of 2017, Abbott assumed and subsequently repaid approximately $2.8 billion of various St. Jude Medical debt obligations.

        On January 4, 2017, as part of funding the cash portion of the St. Jude Medical acquisition, Abbott borrowed $2.0 billion under a 120-day senior unsecured bridge term loan facility. This facility was repaid during the first quarter of 2017. In 2017, Abbott also issued 364-day yen-denominated debt, of which $195 million was outstanding at December 31, 2017. Abbott also paid off a $479 million yen-denominated short-term borrowing during the year.

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        On July 31, 2017, Abbott entered into a 5-year term loan agreement that allowed Abbott to borrow up to $2.8 billion on an unsecured basis for the acquisition of Alere. On October 3, 2017, Abbott borrowed $2.8 billion under this term loan agreement to finance the acquisition of Alere, to repay certain indebtedness of Abbott and Alere, and to pay fees and expenses in connection with the acquisition. Borrowings under the term loan bore interest based on a Eurodollar rate, plus an applicable margin based on Abbott's credit ratings. Abbott paid off this term loan on January 5, 2018.

        On October 3, 2017, Abbott borrowed $1.7 billion under its lines of credit. Proceeds from such borrowing were used to finance the acquisition of Alere, to repay certain indebtedness of Abbott and Alere, and to pay fees and expenses in connection with the acquisition. The $1.7 billion borrowing was payable on July 10, 2019 and bore interest based on a Eurodollar rate, plus an applicable margin based on Abbott's credit ratings. In the fourth quarter of 2017, Abbott paid off $550 million on the revolving loan. Abbott paid off the remaining balance on this revolving loan on January 5, 2018.

        In anticipation of the acquisition of St. Jude Medical, in November 2016, Abbott issued $15.1 billion of long-term debt consisting of $2.85 billion at 2.35% maturing in 2019; $2.85 billion at 2.90% maturing in 2021; $1.50 billion at 3.40% maturing in 2023; $3.00 billion at 3.75% maturing in 2026; $1.65 billion at 4.75% maturing in 2036; and $3.25 billion at 4.90% maturing in 2046. In November 2016, Abbott also entered into interest rate swap contracts totaling $3.0 billion related to the new debt, which have the effect of changing Abbott's obligation from a fixed interest rate to a variable interest rate obligation on the related debt instruments.

        Abbott declared dividends of $1.075 per share in 2017 compared to $1.045 per share in 2016, an increase of approximately 3%. Dividends paid were $1.849 billion in 2017 compared to $1.539 billion in 2016. The year-over-year change in dividends reflects the impact of the increase in the dividend rate and the additional shares issued to finance the St. Jude Medical acquisition. In December 2017, Abbott increased the company's quarterly dividend by approximately 6% to $0.280 per share from $0.265 per share, effective with the dividend paid in February 2018.

        In 2018, Abbott will focus on integrating Alere and paying down debt, as well as several other key initiatives. The focus of the integration will be to create an organization that expands Abbott's diagnostics business into new products, channels and geographies. In the cardiovascular and neuromodulation business, Abbott will continue to build its product portfolio and focus on obtaining product approvals across numerous countries.

        In the nutritional business, Abbott will continue to build its product portfolio with the introduction of new science-based products, expand in high-growth emerging markets and implement additional margin improvement initiatives. In the established pharmaceuticals business, Abbott will continue to focus on obtaining additional product approvals across numerous countries and increasing its penetration of emerging markets. In Abbott's other segments, Abbott will focus on developing differentiated technologies in higher growth markets.

Critical Accounting Policies

        Sales Rebates —  In 2017, approximately 43 percent of Abbott's consolidated gross revenues were subject to various forms of rebates and allowances that Abbott recorded as reductions of revenues at the time of sale. Most of these rebates and allowances in 2017 are in the Nutritional Products and Diabetes Care segments. Abbott provides rebates to state agencies that administer the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), wholesalers, group purchasing organizations, and other government agencies and private entities. Rebate amounts are usually based upon the volume of purchases using contractual or statutory prices for a product. Factors used in the rebate calculations include the identification of which products have been sold subject to a rebate, which customer or government agency price terms apply, and the estimated lag time between sale and payment of a rebate. Using historical trends, adjusted for current changes, Abbott estimates the amount of the rebate that will

25

be paid, and records the liability as a reduction of gross sales when Abbott records its sale of the product. Settlement of the rebate generally occurs from one to six months after sale. Abbott regularly analyzes the historical rebate trends and makes adjustments to reserves for changes in trends and terms of rebate programs. Rebates and chargebacks charged against gross sales in 2017, 2016 and 2015 amounted to approximately $2.8 billion, $2.5 billion and $2.2 billion, respectively, or 20.5 percent, 22.9 percent and 21.6 percent of gross sales, respectively, based on gross sales of approximately $13.9 billion, $10.7 billion and $10.3 billion, respectively, subject to rebate. A one-percentage point increase in the percentage of rebates to related gross sales would decrease net sales by approximately $139 million in 2017. Abbott considers a one-percentage point increase to be a reasonably likely increase in the percentage of rebates to related gross sales. Other allowances charged against gross sales were approximately $199 million, $160 million and $124 million for cash discounts in 2017, 2016 and 2015, respectively, and $204 million, $242 million and $238 million for returns in 2017, 2016 and 2015, respectively. Cash discounts are known within 15 to 30 days of sale, and therefore can be reliably estimated. Returns can be reliably estimated because Abbott's historical returns are low, and because sales returns terms and other sales terms have remained relatively unchanged for several periods.

        Management analyzes the adequacy of ending rebate accrual balances each quarter. In the domestic nutritional business, management uses both internal and external data available to estimate the level of inventory in the distribution channel. Management has access to several large customers' inventory management data, and for other customers, utilizes data from a third party that measures time on the retail shelf. These sources allow management to make reliable estimates of inventory in the distribution channel. Except for a transition period before or after a change in the supplier for the WIC business in a state, inventory in the distribution channel does not vary substantially. Management also estimates the states' processing lag time based on claims data. In the WIC business, the state where the sale is made, which is the determining factor for the applicable price, is reliably determinable. Estimates are required for the amount of WIC sales within each state where Abbott has the WIC business. External data sources utilized for that estimate are participant data from the U.S. Department of Agriculture (USDA), which administers the WIC program, participant data from some of the states, and internally administered market research. The USDA has been making its data available for many years. Internal data includes historical redemption rates and pricing data. At December 31, 2017, Abbott had WIC business in 29 states.

        Historically, adjustments to prior years' rebate accruals have not been material to net income. Abbott employs various techniques to verify the accuracy of claims submitted to it, and where possible, works with the organizations submitting claims to gain insight into changes that might affect the rebate amounts. For government agency programs, the calculation of a rebate involves interpretations of relevant regulations, which are subject to challenge or change in interpretation.

        Income Taxes —  Abbott operates in numerous countries where its income tax returns are subject to audits and adjustments. Because Abbott operates globally, the nature of the audit items is often very complex, and the objectives of the government auditors can result in a tax on the same income in more than one country. Abbott employs internal and external tax professionals to minimize audit adjustment amounts where possible. In accordance with the accounting rules relating to the measurement of tax contingencies, in order to recognize an uncertain tax benefit, the taxpayer must be more likely than not of sustaining the position, and the measurement of the benefit is calculated as the largest amount that is more than 50 percent likely to be realized upon resolution of the benefit. Application of these rules requires a significant amount of judgment. In the U.S., Abbott's federal income tax returns through 2013 are settled except for the federal income tax returns of the former Alere consolidated group which are settled through 2012. No additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the transition tax related to the U.S. Tax Cuts and Jobs Act, or any additional outside basis differences that exist, as these amounts continue to be indefinitely reinvested in foreign operations.

        Pension and Post-Employment Benefits —  Abbott offers pension benefits and post-employment health care to many of its employees. Abbott engages outside actuaries to assist in the determination of the

26

obligations and costs under these programs. Abbott must develop long-term assumptions, the most significant of which are the health care cost trend rates, discount rates and the expected return on plan assets. The discount rates used to measure liabilities were determined based on high-quality fixed income securities that match the duration of the expected retiree benefits. The health care cost trend rates represent Abbott's expected annual rates of change in the cost of health care benefits and are a forward projection of health care costs as of the measurement date. A difference between the assumed rates and the actual rates, which will not be known for years, can be significant in relation to the obligations and the annual cost recorded for these programs. Low interest rates have significantly increased actuarial losses for these plans. At December 31, 2017, pretax net actuarial losses and prior service costs and (credits) recognized in Accumulated other comprehensive income (loss) for Abbott's defined benefit plans and medical and dental plans were losses of $3.5 billion and $248 million, respectively. Actuarial losses and gains are amortized over the remaining service attribution periods of the employees under the corridor method, in accordance with the rules for accounting for post-employment benefits. Differences between the expected long-term return on plan assets and the actual annual return are amortized over a five-year period. Note 13 to the consolidated financial statements describes the impact of a one-percentage point change in the health care cost trend rate; however, there can be no certainty that a change would be limited to only one percentage point.

        Valuation of Intangible Assets —  Abbott has acquired and continues to acquire significant intangible assets that Abbott records at fair value at the acquisition date. Transactions involving the purchase or sale of intangible assets occur with some frequency between companies in the health care field and valuations are usually based on a discounted cash flow analysis. The discounted cash flow model requires assumptions about the timing and amount of future net cash flows, risk, cost of capital, terminal values and market participants. Each of these factors can significantly affect the value of the intangible asset. Abbott engages independent valuation experts who review Abbott's critical assumptions and calculations for acquisitions of significant intangibles. Abbott reviews definite-lived intangible assets for impairment each quarter using an undiscounted net cash flows approach. If the undiscounted cash flows of an intangible asset are less than the carrying value of an intangible asset, the intangible asset is written down to its fair value, which is usually the discounted cash flow amount. Where cash flows cannot be identified for an individual asset, the review is applied at the lowest group level for which cash flows are identifiable. Goodwill and indefinite-lived intangible assets, which relate to in-process research and development acquired in a business combination, are reviewed for impairment annually or when an event that could result in impairment occurs. At December 31, 2017, goodwill amounted to $24.0 billion and intangibles amounted to $21.5 billion. Amortization expense in continuing operations for intangible assets amounted to $2.0 billion in 2017, $550 million in 2016 and $601 million in 2015. There was no significant reduction of goodwill relating to impairments in 2017, 2016 and 2015.

        Litigation —  Abbott accounts for litigation losses in accordance with FASB Accounting Standards Codification No. 450, "Contingencies." Under ASC No. 450, loss contingency provisions are recorded for probable losses at management's best estimate of a loss, or when a best estimate cannot be made, a minimum loss contingency amount is recorded. These estimates are often initially developed substantially earlier than the ultimate loss is known, and the estimates are refined each accounting period as additional information becomes known. Accordingly, Abbott is often initially unable to develop a best estimate of loss, and therefore the minimum amount, which could be zero, is recorded. As information becomes known, either the minimum loss amount is increased, resulting in additional loss provisions, or a best estimate can be made, also resulting in additional loss provisions. Occasionally, a best estimate amount is changed to a lower amount when events result in an expectation of a more favorable outcome than previously expected. Abbott estimates the range of possible loss to be from approximately $115 million to $160 million for its legal proceedings and environmental exposures. Accruals of approximately $135 million have been recorded at December 31, 2017 for these proceedings and exposures. These accruals represent management's best estimate of probable loss, as defined by FASB ASC No. 450, "Contingencies."

27

Results of Operations

Sales

        The following table details the components of sales growth by reportable segment for the last two years:

 
    
   Components of % Change  
 
   Total
% Change 		  2017
Business
Acquisitions/
Divestitures 		  Price   Volume   Exchange  

Total Net Sales

                                

2017 vs. 2016

    
31.3		    
26.5		    
(0.6
)		  
5.1		    
0.3		  

2016 vs. 2015

     2.2     —     (1.1 )   5.9     (2.6 )

Total U.S.

    
 		    
 		    
 		    
 		    
 		  

2017 vs. 2016

    
49.1		    
46.9		    
(0.9
)		  
3.1		    
—		  

2016 vs. 2015

     3.4     —     (2.9 )   6.3     —  

Total International

    
 		    
 		    
 		    
 		    
 		  

2017 vs. 2016

    
23.3		    
17.3		    
(0.4
)		  
6.0		    
0.4		  

2016 vs. 2015

     1.6     —     (0.3 )   5.7     (3.8 )

Established Pharmaceutical Products Segment

    
 		    
 		    
 		    
 		    
 		  

2017 vs. 2016

    
11.1		    
—		    
2.3		    
7.2		    
1.6		  

2016 vs. 2015

     3.7     —     3.0     7.5     (6.8 )

Nutritional Products Segment

    
 		    
 		    
 		    
 		    
 		  

2017 vs. 2016

    
0.4		    
—		    
0.3		    
0.3		    
(0.2
)

2016 vs. 2015

     (1.1 )   —     (0.4 )   1.6     (2.3 )

Diagnostic Products Segment

    
 		    
 		    
 		    
 		    
 		  

2017 vs. 2016

    
16.7		    
11.2		    
(1.1
)		  
6.6		    
—		  

2016 vs. 2015

     3.6     —     (1.2 )   6.7     (1.9 )

Cardiovascular and Neuromodulation Products Segment

    
 		    
 		    
 		    
 		    
 		  

2017 vs. 2016

    
207.7		    
207.2		    
(4.3
)		  
4.5		    
0.3		  

2016 vs. 2015

     3.7     —     (5.3 )   9.8     (0.8 )

        The increase in Total Net Sales in 2017 reflects the acquisitions of St. Jude Medical and Alere, as well as organic growth in the established pharmaceuticals and diagnostics businesses. The increase in 2016 reflects unit growth, partially offset by the impact of unfavorable foreign exchange. The price declines related to the Cardiovascular and Neuromodulation Products segment in 2017 and 2016 primarily reflect pricing pressure on drug eluting stents (DES) as a result of market competition in the U.S. and other major markets.

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        A comparison of significant product and product group sales is as follows. Percent changes are versus the prior year and are based on unrounded numbers.

(dollars in millions)
   2017   Total
Change 		  Impact of
Exchange 		  Total
Change
Excl. Exchange 		 

Total Established Pharmaceuticals —

                          

Key Emerging Markets

  
$
3,307		    
14
%		  
2
%		  
12
%

Other

     980     3     1     2  

Nutritionals —

    
 		    
 		    
 		    
 		  

International Pediatric Nutritionals

    
2,112		    
(4
)		  
—		    
(4
)

U.S. Pediatric Nutritionals

     1,777     6     —     6  

International Adult Nutritionals

     1,782     3     (1 )   4  

U.S. Adult Nutritionals

     1,254     (3 )   —     (3 )

Diagnostics —

    
 		    
 		    
 		    
 		  

Core Laboratory

    
4,063		    
6		    
—		    
6		  

Molecular

     463     2     1     1  

Point of Care

     550     7     —     7  

Rapid Diagnostics

     540     n/m     n/m     n/m  

Cardiovascular and Neuromodulation —

    
 		    
 		    
 		    
 		  

Rhythm Management

    
2,103		    
n/m		    
n/m		    
n/m		  

Electrophysiology

     1,382     n/m     n/m     n/m  

Heart Failure

     643     n/m     n/m     n/m  

Vascular

     2,892     14     —     14  

Structural Heart

     1,083     208     1     207  

Neuromodulation

     808     n/m     n/m     n/m  

n/m = Percent change is not meaningful.


(dollars in millions)
   2016   Total
Change 		  Impact of
Exchange 		  Total
Change
Excl. Exchange 		 

Total Established Pharmaceuticals —

                          

Key Emerging Markets

  
$
2,912		    
5
%		  
(8
)%		  
13
%

Other

     947     1     (1 )   2  

Nutritionals —

    
 		    
 		    
 		    
 		  

International Pediatric Nutritionals

    
2,206		    
(7
)		  
(4
)		  
(3
)

U.S. Pediatric Nutritionals

     1,677     5     —     5  

International Adult Nutritionals

     1,724     —     (4 )   4  

U.S. Adult Nutritionals

     1,292     1     —     1  

Diagnostics —

    
 		    
 		    
 		    
 		  

Core Laboratory

    
3,844		    
4		    
(2
)		  
6		  

Molecular

     456     (2 )   (1 )   (1 )

Point of Care

     513     8     —     8  

Rapid Diagnostics

     —     —     —     —  

Cardiovascular and Neuromodulation —

    
 		    
 		    
 		    
 		  

Rhythm Management

    
—		    
—		    
—		    
—		  

Electrophysiology

     12     (17 )   —     (17 )

Heart Failure

     —     —     —     —  

Vascular

     2,532     1     —     1  

Structural Heart

     352     35     (1 )   36  

Neuromodulation

     —     —     —     —  
Note:
In order to compute results excluding the impact of exchange rates, current year U.S. dollar sales are multiplied or divided, as appropriate, by the current year average foreign exchange rates and then those amounts are multiplied or divided, as appropriate, by the prior year average foreign exchange rates.

29

        Total Established Pharmaceutical Products sales increased 9.5 percent in 2017 and 10.5 percent in 2016, excluding the impact of foreign exchange. The Established Pharmaceutical Products segment is focused on several key emerging markets including India, Russia, China and Brazil. Excluding the impact of foreign exchange, total sales in these key emerging markets increased 11.9 percent in 2017 and 13.3 percent in 2016. Excluding the impact of foreign exchange, 2017 sales in several geographies including China and various countries in Latin America experienced double-digit growth. Excluding the impact of foreign exchange, sales in Established Pharmaceuticals' other emerging markets increased 2.2 percent in 2017 and increased 2.0 percent in 2016. The 2017 sales growth for Established Pharmaceuticals' other emerging markets includes the unfavorable impact of Venezuelan operations. Excluding Venezuela and the effect of foreign exchange, sales in other emerging markets increased 7.5 percent.

        Total Nutritional Products sales increased 0.6 percent in 2017 and 1.2 percent in 2016, excluding the unfavorable impact of foreign exchange. In Abbott's International Pediatric Nutritional business, the 2017 decrease in sales was driven by challenging market conditions in the infant formula market in various emerging markets, partially offset by growth in China and India. The 2017 growth in China reflects a partial recovery from the 2016 sales decline in China. The 2016 decrease in sales was driven by challenging market conditions in China, including the impact of new food safety regulations, which contributed to an oversupply of product in the market. The 2016 sales decrease in China was partially offset by strong performance in several markets across Latin America and Southeast Asia.

        The increases in U.S. Pediatric Nutritional 2017 and 2016 sales primarily reflect continued above-market performance in Abbott's infant and toddler brands, including PediaSure®, Pedialyte® and Similac®.

        Excluding the unfavorable impact of foreign exchange, the 2017 and 2016 increases in International Adult Nutritional sales are due primarily to growth in Ensure®, Abbott's market-leading complete and balanced nutrition brand, as well as volume growth in emerging markets and continued expansion of the adult nutrition category internationally. U.S. Adult Nutritional revenues decreased in 2017 due to competitive and market dynamics, while sales increased in 2016 driven by the growth of Ensure® sales.

        Total Diagnostic Products sales increased 16.7 percent in 2017 and 5.5 percent in 2016, excluding the impact of foreign exchange. The sales increase in 2017 included the acquisition of Alere, which was completed on October 3, 2017. Excluding the impact of the acquisition, as well as the impact of foreign exchange, sales in the Diagnostics Products segment increased 5.5 percent primarily driven by share gains in the Core Laboratory markets globally, as well as strong performance in Point of Care led by the continued adoption of Abbott's i-STAT® handheld system. The 2016 sales increase was primarily driven by share gains in the Core Laboratory and Point of Care markets in the U.S. and internationally.

        Excluding the effect of foreign exchange, total Cardiovascular and Neuromodulation Products sales grew 207.4 percent in 2017 and 4.5 percent in 2016. The sales increase in 2017 was primarily driven by the acquisition of St. Jude Medical which was completed on January 4, 2017. Excluding the impact of the acquisition, as well as the impact of foreign exchange, sales in the vascular business were essentially flat in 2017 versus the prior year as lower coronary stent sales and the comparison impact from the favorable 2016 resolution of a third-party royalty agreement were offset by higher Structural Heart and endovascular sales. In 2016, double-digit growth in sales of Abbott's MitraClip structural heart device for the treatment of mitral regurgitation was partially offset by lower sales of DES products. The increase in the Endovascular business was driven by higher Supera and vessel closure sales. Cardiovascular and Neuromodulation Products sales in 2016 were also favorably impacted by the resolution of previously disputed third party royalty revenue related to the prior year. Excluding this royalty impact, worldwide sales of Cardiovascular and Neuromodulation Products would have increased 3.4 percent in 2016.

        Abbott has periodically sold product rights to non-strategic products and has recorded the related gains in net sales in accordance with Abbott's revenue recognition policies as discussed in Note 1 to the consolidated financial statements. Related net sales were not significant in 2017, 2016 and 2015.

30

        The expiration of licenses and patent protection can affect the future revenues and operating income of Abbott. There are no significant patent or license expirations in the next three years that are expected to materially affect Abbott.

        In April 2017, Abbott received a warning letter from the U.S. Food and Drug Administration (FDA) related to its manufacturing facility in Sylmar, CA which was acquired by Abbott on January 4, 2017 as part of the acquisition of St. Jude Medical. This facility manufactures implantable cardioverter defibrillators, cardiac resynchronization therapy defibrillators, and monitors. The warning letter relates to the FDA's observations from an inspection of this facility. Abbott has prepared a comprehensive plan of corrective actions which has been provided to the FDA. Execution of the plan is progressing.

Operating Earnings

        Gross profit margins were 47.7 percent of net sales in 2017, 54.1 percent in 2016 and 54.2 percent in 2015. In 2017, the decrease primarily reflects higher intangible amortization expense and inventory step-up amortization related to the St. Jude Medical and Alere acquisitions, partially offset by margin improvements in various businesses. In 2016, the unfavorable effect of foreign exchange offset continued underlying margin expansion, primarily in the Diagnostics and Nutritional segments.

        Research and development expense was $2.235 billion in 2017, $1.422 billion in 2016, and $1.405 billion in 2015 and represented a 57.2 percent increase in 2017, and a 1.2 percent increase in 2016. The 2017 increase in research and development expenses was primarily due to the acquisition of the St. Jude Medical business. The 2016 increase in research and development expenses was primarily due to higher spending on various projects and the impairment of an in-process research and development asset related to a non-reportable segment, partially offset by lower restructuring costs in 2016. In 2017, research and development expenditures totaled $526 million for the Diagnostics Products segment, $967 million for the Cardiovascular and Neuromodulation Products segment, $195 million for the Nutritional Products segment, and $164 million for the Established Pharmaceutical Products segment.

        Selling, general and administrative expenses increased 36.6 percent in 2017 and decreased 1.7 percent in 2016 versus the respective prior year. The 2017 increase was primarily due to the acquisition of the St. Jude Medical business, as well as the incremental expenses to integrate St. Jude Medical with Abbott's existing vascular business, partially offset by the impact of cost improvement initiatives across various functions and businesses. The 2016 decrease reflects the favorable impact of foreign exchange, continued efforts to reduce back office costs, and lower restructuring charges compared to the prior year.

Business Acquisitions

        On January 4, 2017, Abbott completed the acquisition of St. Jude Medical, a global medical device manufacturer, for approximately $23.6 billion, including approximately $13.6 billion in cash and approximately $10 billion in Abbott common shares, which represented approximately 254 million shares of Abbott common stock, based on Abbott's closing stock price on the acquisition date. As part of the acquisition, approximately $5.9 billion of St. Jude Medical's debt was assumed, repaid or refinanced by Abbott. The acquisition provides expanded opportunities for future growth and is an important part of the company's ongoing effort to develop a strong, diverse portfolio of devices, diagnostics, nutritionals and branded generic pharmaceuticals. The combined business competes in nearly every area of the cardiovascular device market, as well as in the neuromodulation market.

        Under the terms of the agreement, for each St. Jude Medical common share, St. Jude Medical shareholders received $46.75 in cash and 0.8708 of an Abbott common share. At an Abbott stock price of $39.36, which reflects the closing price on January 4, 2017, this represented a value of approximately $81 per St. Jude Medical common share and total purchase consideration of $23.6 billion. The cash portion of the acquisition was funded through a combination of medium and long-term debt issued in November 2016 and a $2.0 billion 120-day senior unsecured bridge term loan facility which was subsequently repaid.

31

        The final allocation of the fair value of the St. Jude Medical acquisition is shown in the table below.

(in billions)
    
  

Acquired intangible assets, non-deductible

   $ 15.5  

Goodwill, non-deductible

     13.1  

Acquired net tangible assets

     3.0  

Deferred income taxes recorded at acquisition

     (2.7 )

Net debt

     (5.3 )
​ ​ ​ ​ ​

Total final allocation of fair value

   $ 23.6  
​ ​ ​ ​ ​
​ ​ ​ ​ ​
​ ​ ​ ​ ​

        The goodwill is primarily attributable to expected synergies from combining operations, as well as intangible assets that do not qualify for separate recognition. The goodwill is identifiable to the Cardiovascular and Neuromodulation Products reportable segment. The acquired tangible assets consist primarily of trade accounts receivable of approximately $1.1 billion, inventory of approximately $1.7 billion, other current assets of $176 million, property and equipment of approximately $1.5 billion, and other long-term assets of approximately $455 million. The acquired tangible liabilities consist of trade accounts payable and other current liabilities of approximately $1.1 billion and other non-current liabilities of approximately $870 million.

        In 2016, Abbott and St. Jude Medical agreed to sell certain businesses to Terumo Corporation (Terumo) for approximately $1.12 billion. The sale included the St. Jude Medical Angio-Seal™ and Femoseal™ vascular closure and Abbott's Vado® Steerable Sheath businesses. The sale closed on January 20, 2017 and no gain or loss was recorded in the Consolidated Statement of Earnings.

        On October 3, 2017, Abbott acquired Alere Inc. (Alere), a diagnostic device and service provider, for $51.00 per common share in cash, which equated to a purchase price of approximately $4.5 billion. As part of the acquisition, Abbott tendered for Alere's preferred shares for a total value of approximately $0.7 billion. In addition, approximately $3.0 billion of Alere's debt was assumed and subsequently repaid. The acquisition establishes Abbott as a leader in point of care testing, expands Abbott's global diagnostics presence and provides access to new products, channels and geographies. Abbott utilized a combination of cash on hand and debt to fund the acquisition. See Note 10 — Debt and Lines of Credit for further details regarding the debt utilized for the acquisition.

        The preliminary allocation of the fair value of the Alere acquisition is shown in the table below. The allocation of the fair value of the acquisition will be finalized when the valuation is completed and differences between the preliminary and final allocation could be material.

(in billions)
    
  

Acquired intangible assets, non-deductible

   $ 3.5  

Goodwill, non-deductible

     4.1  

Acquired net tangible assets

     0.9  

Deferred income taxes recorded at acquisition

     (0.7 )

Net debt

     (2.6 )

Preferred stock

     (0.7 )
​ ​ ​ ​ ​

Total preliminary allocation of fair value

   $ 4.5  
​ ​ ​ ​ ​
​ ​ ​ ​ ​
​ ​ ​ ​ ​

        The goodwill is primarily attributable to expected synergies from combining operations, as well as intangible assets that do not qualify for separate recognition. The goodwill is identifiable to the Diagnostic Products reportable segment. The acquired tangible assets consist primarily of trade accounts receivable of approximately $430 million, inventory of approximately $425 million, other current assets of $206 million, property and equipment of approximately $540 million, and other long-term assets of $112 million. The

32

acquired tangible liabilities consist of trade accounts payable and other current liabilities of approximately $625 million and other non-current liabilities of approximately $160 million.

        In the third quarter of 2017, Alere entered into agreements to sell its Triage MeterPro cardiovascular and toxicology business and the assets and liabilities related to its B-type Natriuretic Peptide assay business run on Beckman Coulter analyzers to Quidel Corporation (Quidel). The transactions with Quidel reflect a total purchase price of $400 million payable at the close of the transaction, $240 million payable in six annual installments beginning approximately six months after the close of the transaction, and contingent consideration with a maximum value of $40 million. In the third quarter of 2017, Alere entered into an agreement with Siemens Diagnostics Holding II B.V. (Siemens) to sell its subsidiary, Epocal Inc., for approximately $200 million payable at the close of the transaction. Alere agreed to divest these businesses in connection with the review by the Federal Trade Commission and the European Commission of Abbott's agreement to acquire Alere. The sale to Quidel closed on October 6, 2017, and the sale to Siemens closed on October 31, 2017. No gain or loss on these sales was recorded in the Consolidated Statement of Earnings.

        In 2017, consolidated Abbott results include $6.5 billion of sales and a pre-tax loss of approximately $1.3 billion related to the St. Jude Medical and Alere acquisitions, including approximately $1.5 billion of intangible amortization and $907 million of inventory step-up amortization. The pre-tax loss excludes acquisition, integration and restructuring-related costs.

        If the acquisitions of St. Jude Medical and Alere had occurred at the beginning of 2016, unaudited pro forma consolidated net sales would have been approximately $28.9 billion and the unaudited pro forma consolidated net loss from continuing operations would have been approximately $485 million in 2016. This includes amortization of approximately $940 million of inventory step-up and $1.7 billion of intangibles related to St. Jude Medical and Alere. For 2017, unaudited pro forma consolidated net sales would have been approximately $28.9 billion and unaudited pro forma consolidated net earnings from continuing operations would have been approximately $750 million, which includes $225 million of intangible amortization related to Alere. The unaudited pro forma consolidated net earnings from continuing operations for 2017 exclude inventory step-up amortization related to St. Jude Medical and Alere of approximately $907 million which was recorded in 2017 but included in the 2016 unaudited pro forma results as noted above. The unaudited pro forma information is not necessarily indicative of the consolidated results of operations that would have been realized had the St. Jude Medical and Alere acquisitions been completed as of the beginning of 2016, nor is it meant to be indicative of future results of operations that the combined entity will experience.

        On July 17, 2017, Abbott commenced a tender offer to purchase for cash the 1.77 million outstanding shares of Alere's Series B Convertible Perpetual Preferred Stock at a price of $402 per share, plus accrued but unpaid dividends to, but not including, the settlement date of the tender offer. This tender offer was subject to the satisfaction of certain conditions, including Abbott's acquisition of Alere and upon there being validly tendered (and not properly withdrawn) at the expiration date of the tender offer that number of shares of Preferred Stock that equaled at least a majority of the Preferred Stock issued and outstanding at the expiration of the tender offer. The tender offer expired on October 3, 2017. All conditions to the offer were satisfied and Abbott accepted for payment the 1.748 million shares of Preferred Stock that were validly tendered (and not properly withdrawn). The remaining shares were cashed out for an amount equal to the $400.00 per share liquidation preference of such shares, plus accrued but unpaid dividends, without interest. Payment for all of the shares of Preferred Stock was made in the fourth quarter of 2017.

        In August 2015, Abbott completed the acquisition of the equity of Tendyne Holdings, Inc. (Tendyne) that Abbott did not already own for approximately $225 million in cash plus additional payments up to $150 million to be made upon completion of certain regulatory milestones. The acquisition of Tendyne, which is focused on developing minimally invasive mitral valve replacement therapies, allows Abbott to broaden its foundation in the treatment of mitral valve disease. The final allocation of the fair value of the

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acquisition resulted in non-deductible acquired in-process research and development of approximately $220 million, which is accounted for as an indefinite-lived intangible asset until regulatory approval or discontinuation, non-deductible goodwill of approximately $142 million, deferred tax assets and other net assets of approximately $18 million, deferred tax liabilities of approximately $85 million, and contingent consideration of approximately $70 million. The goodwill is identifiable to the Cardiovascular and Neuromodulation Products segment. If the acquisition of Tendyne had taken place as of the beginning of the comparable prior annual reporting period, consolidated net sales and earnings would not have been significantly different from reported amounts.

Restructurings

        In 2017, Abbott management approved restructuring plans as part of the integration of the acquisitions of St. Jude Medical into the cardiovascular and neuromodulation segment and Alere into the diagnostics segment, in order to leverage economies of scale and reduce costs. In 2017, charges of approximately $187 million, including one-time employee termination benefits were recorded, of which approximately $5 million is recorded in Cost of products sold and approximately $182 million in Selling, general and administrative expense.

        From 2014 to 2017, Abbott management approved plans to streamline operations in order to reduce costs and improve efficiencies in various Abbott businesses including the nutritional, established pharmaceuticals and vascular businesses. Abbott recorded employee-related severance and other charges of approximately $120 million in 2017, $33 million in 2016 and $95 million in 2015. Approximately $7 million in 2017, $9 million in 2016 and $18 million in 2015 are recorded in Cost of products sold, approximately $77 million in 2017, $5 million in 2016 and $34 million in 2015 are recorded in Research and development and approximately $36 million in 2017, $19 million in 2016 and $43 million in 2015 are recorded in Selling, general and administrative expense. Additional charges of approximately $2 million in 2017, $2 million in 2016 and $45 million in 2015 were recorded primarily for accelerated depreciation.

Interest Expense and Interest (Income)

        In 2017, interest expense increased primarily due to the $15.1 billion of debt issued in November of 2016 related to the financing of the St. Jude Medical acquisition which closed on January 4, 2017. In 2016, interest expense increased primarily due to the amortization of bridge financing fees related to the financing of the St. Jude Medical and Alere acquisitions. Interest expense in 2016 also increased due to the $15.1 billion of debt issued in November 2016. In 2015, interest expense increased due to the issuance of $2.5 billion of long-term debt during the year.

Other (Income) Expense, net

        Other (income) expense, net, for 2017 includes a pre-tax gain of $1.163 billion on the sale of AMO to Johnson & Johnson. 2016 includes $947 million of expense to adjust Abbott's holding of Mylan N.V. ordinary shares due to a decline in the fair value of the securities which was considered by Abbott to be other than temporary. 2015 includes a $207 million pretax gain on the sale of a portion of the Mylan N.V. ordinary shares received through the sale of the developed markets branded generics pharmaceuticals business and income resulting from a decrease in the fair value of contingent consideration related to a business acquisition.

Taxes on Earnings

        The income tax rates on earnings from continuing operations were 84.2 percent in 2017, 24.8 percent in 2016 and 18.1 percent in 2015.

        The Tax Cuts and Jobs Act ("TCJA") was enacted in the U.S. on December 22, 2017. The TCJA reduces the U.S. federal corporate tax rate from 35% to 21%, requires companies to pay a one-time

34

transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings.

        In the fourth quarter of 2017, Abbott recorded an estimate of net tax expense of $1.46 billion for the impact of the TCJA, which is included in Taxes on Earnings from Continuing Operations in the Consolidated Statement of Earnings. The estimate is provisional and includes a charge of approximately $2.89 billion for the transition tax, partially offset by a net benefit of approximately $1.42 billion for the remeasurement of deferred tax assets and liabilities and a net benefit of approximately $10 million related to certain other impacts of the TCJA.

        The one-time transition tax is based on Abbott's total post-1986 earnings and profits (E&P) that were previously deferred from U.S. income taxes. Abbott has not yet completed its calculation of the total post-1986 E&P for its foreign subsidiaries. The tax computation also requires the determination of the amount of post-1986 E&P considered held in cash and other specified assets. This amount may change as Abbott finalizes the calculation of post-1986 foreign E&P previously deferred from U.S. federal taxation and finalizes the amounts held in cash and other specified assets. Abbott plans to elect to pay the transition tax over eight years as allowed by the TCJA.

        Given the significant complexity of the TCJA, Abbott will continue to evaluate and analyze the impact of this legislation. The $1.46 billion estimate is provisional and is based on Abbott's initial analysis of the TCJA and may be materially adjusted in future periods due to among other things, additional analysis performed by Abbott and additional guidance that may be issued by the U.S. Department of Treasury, the Securities and Exchange Commission or the Financial Accounting Standards Board.

        In 2017, taxes on earnings from continuing operations also include $435 million of tax expense related to the gain on the sale of the AMO business.

        In 2016, taxes on earnings from continuing operations include the impact of a net tax benefit of approximately $225 million, primarily as a result of the resolution of various tax positions from prior years, partially offset by the unfavorable impact of non-deductible foreign exchange losses related to Venezuela and the adjustment of the Mylan N.V. equity investment, as well as the recognition of deferred taxes associated with the then pending sale of AMO. In 2015, taxes on earnings from continuing operations include $71 million of tax expense related to gain on the disposal of shares of Mylan N.V. stock. The 2015 effective tax rate includes the impact of the R&D tax credit that was made permanent in the U.S. by the Protecting Americans from Tax Hikes Act of 2015.

        Exclusive of these discrete items, tax expense was favorably impacted by lower tax rates and tax exemptions on foreign income primarily derived from operations in Puerto Rico, Switzerland, Ireland, the Netherlands, Costa Rica, and Singapore. Abbott benefits from a combination of favorable statutory tax rules, tax rulings, grants, and exemptions in these tax jurisdictions. See Note 14 to the consolidated financial statements for a full reconciliation of the effective tax rate to the U.S. federal statutory rate.

        Earnings from discontinued operations, net of tax, in 2017 and 2016 reflect the recognition of $109 million and $325 million, respectively, of net tax benefits primarily as a result of the resolution of various tax positions related to prior years. 2015 tax expense related to discontinued operations includes $667 million of tax expense on certain current-year income earned outside of the U.S. that were not designated as permanently reinvested overseas.

Discontinued Operations

        On February 27, 2015, Abbott completed the sale of its developed markets branded generics pharmaceuticals business to Mylan Inc. (Mylan) for equity ownership of a newly formed entity (Mylan N.V.) that combined Mylan's existing business and Abbott's developed markets pharmaceuticals business. Mylan N.V. is publicly traded. Historically, this business was included in Abbott's Established Pharmaceutical Products segment. At the date of the closing, the 110 million Mylan N.V. ordinary shares

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that Abbott received were valued at $5.77 billion and Abbott recorded an after-tax gain on the sale of the business of approximately $1.6 billion. Abbott retained its branded generics pharmaceuticals business in emerging markets. At the close of this transaction, Abbott and Mylan entered into a transition services agreement pursuant to which Abbott and Mylan provided various back office support services to each other on an interim transitional basis for up to 2 years. Certain services were extended for an additional five to ten months. Charges by Abbott under this transition services agreement were recorded as a reduction of the costs to provide the respective service in the applicable expense category in the Consolidated Statement of Earnings. This transitional support does not constitute significant continuing involvement in Mylan's operations. Abbott also entered into manufacturing supply agreements with Mylan related to certain products, with the supply term ranging from 3 to 10 years and requiring a 2 year notice prior to termination. The cash flows associated with these transition services and manufacturing supply agreements are not expected to be significant, and therefore, these cash flows are not direct cash flows of the disposed component under Accounting Standards Codification 205.

        On February 10, 2015, Abbott completed the sale of its animal health business to Zoetis Inc. In the first quarter of 2016, Abbott received an additional $25 million of proceeds due to the expiration of a holdback agreement associated with the sale of this business and reported an after-tax gain of $16 million.

        As a result of the disposition of the above businesses, the prior years' operating results of these businesses up to the date of sale are reported as part of discontinued operations on the Earnings from Discontinued Operations, net of taxes line in the Consolidated Statement of Earnings. Discontinued operations include an allocation of interest expense assuming a uniform ratio of consolidated debt to equity for all of Abbott's historical operations.

        On January 1, 2013, Abbott completed the separation of AbbVie Inc. (AbbVie), which was formed to hold Abbott's research-based proprietary pharmaceuticals business. Abbott has retained all liabilities for all U.S. federal and foreign income taxes on income prior to the separation, as well as certain non-income taxes attributable to AbbVie's business. AbbVie generally will be liable for all other taxes attributable to its business. In 2017, 2016 and 2015, discontinued operations include a favorable adjustment to tax expense of $109 million, $318 million and $3 million, respectively, as a result of the resolution of various tax positions pertaining to AbbVie's operations.

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        The operating results of Abbott's developed markets branded generics pharmaceuticals and animal health businesses, as well as the income tax benefit related to the businesses transferred to AbbVie, which are being reported as discontinued operations are as follows:

 
   Year Ended
December 31 		 
(in millions)
   2017   2016   2015  

Net Sales

                    

Developed markets generics pharmaceuticals and animal health businesses              

   $ —   $ —   $ 256  

AbbVie

     —     —     —  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total

   $ —   $ —   $ 256  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Earnings (Loss) Before Tax

                    

Developed markets generics pharmaceuticals and animal health businesses              

   $ 15   $ (4 ) $ 13  

AbbVie

     —     —     —  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total

   $ 15   $ (4 ) $ 13  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Net Earnings

                    

Developed markets generics pharmaceuticals and animal health businesses              

   $ 15   $ 3   $ 62  

AbbVie

     109     318     3  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total

   $ 124   $ 321   $ 65  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Assets and Liabilities Held for Disposition

        In September 2016, Abbott announced that it entered into a definitive agreement to sell Abbott Medical Optics (AMO), its vision care business, to Johnson & Johnson for $4.325 billion in cash, subject to customary purchase price adjustments for cash, debt and working capital. The decision to sell AMO reflected Abbott's proactive shaping of its portfolio in line with its strategic priorities. In February 2017, Abbott completed the sale of AMO to Johnson & Johnson and recognized a pre-tax gain of $1.163 billion including working capital adjustments, which was reported in the Other (income) expense, net line of the Consolidated Statement of Earnings in 2017. Abbott recorded an after-tax gain of $728 million in 2017 related to the sale of AMO. The operating results of AMO up to the date of sale continued to be included in Earnings from continuing operations as the business did not qualify for reporting as discontinued operations. For 2017, 2016 and 2015, the AMO earnings (losses) before taxes included in Abbott's consolidated earnings were $(18) million, $30 million and $64 million, respectively. Assets and liabilities of AMO were classified as held for disposition in Abbott's Consolidated Balance Sheet as of December 31, 2016.

        As discussed in the Business Acquisitions section, in conjunction with the acquisition of Alere, Abbott sold the Triage MeterPro cardiovascular and toxicology business and the assets and liabilities related to its B-type Natriuretic Peptide assay business run on Beckman Coulter analyzers to Quidel. The legal transfer of certain assets and liabilities related to these businesses did not occur at the close of the sale to Quidel due to, among other factors, the time required to transfer marketing authorizations and other regulatory requirements in various countries. Under the terms of the sale agreement with Abbott, Quidel is subject to the risks and entitled to the benefits generated by these operations and assets. The assets and liabilities presented as held for disposition in the Consolidated Balance Sheet as of December 31, 2017, primarily relate to the businesses sold to Quidel.

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        The following is a summary of the assets and liabilities held for disposition as of December 31, 2017 and 2016:

(in millions)
   December 31,
2017 		  December 31,
2016 		 

Trade receivables, net

   $ 12   $ 222  

Total inventories

     8     240  

Prepaid expenses and other current assets

     —     51  
​ ​ ​ ​ ​ ​ ​ ​

Current assets held for disposition

     20     513  
​ ​ ​ ​ ​ ​ ​ ​

Net property and equipment

     56     247  

Intangible assets, net of amortization

     18     529  

Goodwill

     102     1,966  

Deferred income taxes and other assets

     —     11  
​ ​ ​ ​ ​ ​ ​ ​

Non-current assets held for disposition

     176     2,753  
​ ​ ​ ​ ​ ​ ​ ​

Total assets held for disposition

   $ 196   $ 3,266  
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​

Trade accounts payable

   $ —   $ 71  

Salaries, wages, commissions and other accrued liabilities

     —     174  
​ ​ ​ ​ ​ ​ ​ ​

Current liabilities held for disposition

     —     245  

Post-employment obligations, deferred income taxes and other long-term liabilities

     —     59  
​ ​ ​ ​ ​ ​ ​ ​

Total liabilities held for disposition

   $ —   $ 304  
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​

Research and Development Programs

        Abbott currently has numerous pharmaceutical, medical devices, diagnostic and nutritional products in development.

Research and Development Process

        In the Established Pharmaceuticals segment, the development process focuses on the geographic expansion and continuous improvement of the segment's existing products to provide benefits to patients and customers. As Established Pharmaceuticals does not actively pursue primary research, development usually begins with work on existing products or after the acquisition of an advanced stage licensing opportunity.

        Depending upon the product, the phases of development may include:

        The specific requirements (e.g., scope of clinical trials) for obtaining regulatory approval vary across different countries and geographic regions. The process may range from one year for a bioequivalence study project to 6 or more years for complex formulations, new indications, or geographic expansion in specific countries, such as China.

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        In the Diagnostics segment, the phases of the research and development process include:

        The regulatory requirements for diagnostic products vary across different countries and geographic regions. In the U.S., the FDA classifies diagnostic products into classes (I, II, or III) and the classification determines the regulatory process for approval. While the Diagnostics segment has products in all three classes, the vast majority of its products are categorized as Class I or Class II. Submission of a separate regulatory filing is not required for Class I products. Class II devices typically require pre-market notification to the FDA through a regulatory filing known as a 510(k) submission. Most Class III products are subject to the FDA's Pre-Marketing Approval (PMA) requirements. Other Class III products, such as those used to screen blood, require the submission and approval of a Biological License Application (BLA).

        In the EU, diagnostic products are also categorized into different categories and the regulatory process, which is governed by the European In Vitro Diagnostic Medical Device Directive, depends upon the category. Certain product categories require review and approval by an independent company, known as a Notified Body, before the manufacturer can affix a CE mark to the product to show compliance with the Directive. Other products only require a self-certification process.

        In the Cardiovascular and Neuromodulation segment, the research and development process begins with research on a specific technology that is evaluated for feasibility and commercial viability. If the research program passes that hurdle, it moves forward into development. The development process includes evaluation, selection and qualification of a product design, completion of applicable clinical trials to test the product's safety and efficacy, and validation of the manufacturing process to demonstrate its repeatability and ability to consistently meet pre-determined specifications.

        Similar to the diagnostic products discussed above, in the U.S., cardiovascular and neuromodulation products are classified as Class I, II, or III. Most of Abbott's cardiovascular and neuromodulation products are classified as Class II devices that follow the 510(k) regulatory process or Class III devices that are subject to the PMA process.

        In the EU, cardiovascular and neuromodulation products are also categorized into different classes and the regulatory process, which is governed by the European Medical Device Directive and the Active Implantable Medical Device Directive, varies by class. Each product must bear a CE mark to show compliance with the Directive. Some products require submission of a design dossier to the appropriate regulatory authority for review and approval prior to CE marking of the device. For other products, the company is required to prepare a technical file which includes testing results and clinical evaluations but can self-certify its ability to apply the CE mark to the product. Outside the U.S. and the EU, the regulatory requirements vary across different countries and regions.

        After approval and commercial launch of some cardiovascular and neuromodulation products, post-market trials may be conducted either due to a conditional requirement of the regulatory market approval or with the objective of proving product superiority.

        In the second quarter of 2017, the EU adopted the new Medical Devices Regulation (MDR) and the In Vitro Diagnostic Regulation (IVDR) which replace the existing directives in the EU for medical devices and in vitro diagnostic products. The MDR and IVDR will apply after a three-year and five-year transition

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period, respectively, and will impose additional regulatory requirements on manufacturers of such products.

        In the Nutritional segment, the research and development process generally focuses on identifying and developing ingredients and products that address the nutritional needs of particular populations (e.g., infants and adults) or patients (e.g., people with diabetes). Depending upon the country and/or region, if claims regarding a product's efficacy will be made, clinical studies typically must be conducted.

        In the U.S., the FDA requires that it be notified of proposed new formulations and formulation or packaging changes related to infant formula products. Prior to the launch of an infant formula or product packaging change, the company is required to obtain the FDA's confirmation that it has no objections to the proposed product or packaging. For other nutritional products, notification or pre-approval from the FDA is not required unless the product includes a new food additive. In some countries, regulatory approval may be required for certain nutritional products, including infant formula and medical nutritional products.

Areas of Focus

        In 2018 and beyond, Abbott's significant areas of therapeutic focus will include the following:

Established Pharmaceuticals — Abbott focuses on building country-specific portfolios made up of high-quality medicines that meet the needs of people in emerging markets. More than 400 development projects are active for one or several emerging markets. Over the next several years, Abbott plans to expand its product portfolio in key therapeutic areas with the aim of being among the first to launch new off-patent and differentiated medicines. In addition, Abbott continues to expand existing brands into new markets, implement product enhancements that provide value to patients and acquire strategic products and technology through licensing activities. Abbott is also actively working on the further development of several key brands such as Creon, Duphaston, Duphalac and Influvac. Depending on the product, the activities focus on development of new data, markets, formulations, delivery systems, or indications.

Cardiovascular and Neuromodulation — Abbott's research and development programs focus on:

Diabetes Care — Develop enhancements and additional indications for the FreeStyle Libre continuous glucose monitoring system to help patients improve their ability to manage diabetes.

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Core Laboratory Diagnostics — Abbott continues to commercialize its next-generation blood screening, immunoassay, clinical chemistry and hematology systems, along with assays in various areas including infectious disease, cardiac care, metabolics, oncology, as well as informatics and automation solutions to increase efficiency in laboratories.

Molecular Diagnostics — Several new molecular in vitro diagnostic (IVD) products and a next generation instrument system are in various stages of development and launch.

Rapid Diagnostics — Abbott's research and development programs focus on the development of diagnostic products for cardiometabolic disease, infectious disease and toxicology.

Nutritionals — Abbott is focusing its research and development spend on platforms that span the pediatric, adult and performance nutrition areas: gastro intestinal/immunity health, brain health, mobility and metabolism, and user experience platforms. Numerous new products that build on advances in these platforms are currently under development, including clinical outcome testing, and are expected to be launched over the coming years.

        Given the diversity of Abbott's business, its intention to remain a broad-based healthcare company and the numerous sources for potential future growth, no individual project is expected to be material to cash flows or results of operations over the next five years. Factors considered included research and development expenses projected to be incurred for the project over the next year relative to Abbott's total research and development expenses, as well as qualitative factors, such as marketplace perceptions and impact of a new product on Abbott's overall market position. There were no delays in Abbott's 2017 research and development activities that are expected to have a material impact on operations.

        While the aggregate cost to complete the numerous projects currently in development is expected to be material, the total cost to complete will depend upon Abbott's ability to successfully complete each project, the rate at which each project advances, and the ultimate timing for completion. Given the potential for significant delays and the risk of failure inherent in the development of pharmaceutical, medical device and diagnostic products and technologies, it is not possible to accurately estimate the total cost to complete all projects currently in development. Abbott plans to manage its portfolio of projects to achieve research and development spending that will be competitive in each of the businesses in which it participates, and such spending is expected to approximate 7.5 percent of total Abbott sales in 2018. Abbott does not regularly accumulate or make management decisions based on the total expenses incurred for a particular development phase in a given period.

Goodwill

        At December 31, 2017, goodwill recorded as a result of business combinations totaled $24.0 billion. Goodwill is reviewed for impairment annually in the third quarter or when an event that could result in an impairment occurs, using a quantitative assessment to determine whether it is more likely than not that the fair value of any reporting unit is less than its carrying amount. The income and market approaches are used to calculate the fair value of each reporting unit. The results of the last impairment test indicated that the fair value of each reporting unit was substantially in excess of its carrying value.

Financial Condition

Cash Flow

        Net cash from operating activities amounted to $5.6 billion, $3.2 billion and $3.0 billion in 2017, 2016 and 2015, respectively. The increase in Net cash from operating activities in 2017 was primarily due to the favorable impact of improved working capital management, the acquisition of the St. Jude Medical businesses, and higher segment operating earnings. The increase in Net cash from operating activities in 2016 reflects additional focus on the management of working capital. The income tax component of operating cash flow in 2017 includes the 2017 non-cash impact of $1.46 billion of net tax expense related to

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the estimated impact of U.S. tax reform. The income tax component of operating cash flow in 2016 and 2015 includes $550 million and $70 million, respectively, of non-cash tax benefits primarily related to the favorable resolution of various tax positions pertaining to prior years; 2015 reflects the non-cash impact of approximately $1.1 billion of tax expense associated with the gain on sale of businesses.

        The foreign currency loss related to Venezuela reduced Abbott's cash by approximately $410 million in 2016 and is included in the Effect of exchange rate changes on cash and cash equivalents line within the Consolidated Statement of Cash Flows. Future fluctuations in the strength of the U.S. dollar against foreign currencies are not expected to materially impact Abbott's liquidity.

        While a significant portion of Abbott's cash and cash equivalents at December 31, 2017, are reinvested in foreign subsidiaries, Abbott does not expect such reinvestment to affect its liquidity and capital resources. Due to the enactment of the TCJA, if these funds were needed for operations in the U.S., Abbott does not expect to incur significant additional income taxes in the future to repatriate these funds.

        Abbott funded $645 million in 2017, $582 million in 2016 and $579 million in 2015 to defined benefit pension plans. Abbott expects pension funding of approximately $114 million in 2018 for its pension plans. Abbott expects annual cash flow from operating activities to continue to exceed Abbott's capital expenditures and cash dividends.

Debt and Capital

        At December 31, 2017, Abbott's long-term debt rating was BBB by Standard & Poor's Corporation and Baa3 by Moody's Investors Service (Moody's). In February 2018, Moody's raised Abbott's rating to Baa2 with a positive outlook. Abbott expects to maintain an investment grade rating. Abbott is committed to reducing its debt levels following the recent acquisitions of St. Jude Medical and Alere. On February 16, 2018, the board of directors authorized the redemption of up to $5 billion of currently outstanding long-term notes in addition to the $3.95 billion repaid in January 2018 discussed below.

        Abbott has readily available financial resources, including lines of credit of $5.0 billion which expire in 2019. These lines of credit are part of a 2014 revolving credit agreement that provides Abbott with the ability to borrow up to $5 billion on an unsecured basis. Prior to October 3, 2017, no amounts were previously drawn under the revolving credit agreement. On October 3, 2017, in connection with the Alere acquisition, Abbott borrowed $1.7 billion under these lines of credit. These borrowings were due to be repaid in July 2019 and bore interest based on a Eurodollar rate, plus an applicable margin based on Abbott's credit ratings. In the fourth quarter of 2017, Abbott paid off $550 million of these borrowings. On January 5, 2018, Abbott paid off the remaining balance under these lines of credit ahead of the 2019 due date.

        On July 31, 2017, Abbott entered into a 5-year term loan agreement that allowed Abbott to borrow up to $2.8 billion on an unsecured basis for the acquisition of Alere. On October 3, 2017, Abbott borrowed $2.8 billion under this term loan agreement to finance the acquisition of Alere, to repay certain indebtedness of Abbott and Alere, and to pay fees and expenses in connection with the acquisition. Borrowings under the term loan bore interest based on a Eurodollar rate, plus an applicable margin based on Abbott's credit ratings. Abbott paid off this term loan on January 5, 2018, ahead of its 2022 due date.

        In the fourth quarter of 2017, in conjunction with the acquisition of Alere, Abbott assumed and subsequently repaid $3.0 billion of Alere's debt. In 2017, Abbott also paid off a $479 million yen-denominated short-term borrowing during the year and issued 364-day yen-denominated debt, of which $195 million was outstanding at December 31, 2017.

        In the first quarter of 2017, as part of the acquisition of St. Jude Medical, Abbott assumed outstanding debt previously issued by St. Jude Medical. Abbott exchanged certain St. Jude Medical debt obligations with an aggregate principal amount of approximately $2.9 billion for debt issued by Abbott which consists of: $473.8 million of 2.00% Senior Notes due 2018; $483.7 million of 2.80% Senior Notes due 2020;

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$818.4 million of 3.25% Senior Notes due 2023; $490.7 million of 3.875% Senior Notes due 2025; and $639.1 million of 4.75% Senior Notes due 2043. Following this exchange, approximately $194.2 million of existing St. Jude Medical notes remain outstanding across the five series of existing notes which have the same coupons and maturities as those listed above. There were no significant costs associated with the exchange of debt. In addition, during the first quarter of 2017, Abbott assumed and subsequently repaid approximately $2.8 billion of various St. Jude Medical debt obligations.

        In November 2016, Abbott issued $15.1 billion of medium and long-term debt to primarily fund the cash portion of the acquisition of St. Jude Medical. Abbott issued $2.85 billion of 2.35% Senior Notes due November 22, 2019; $2.85 billion of 2.90% Senior Notes due November 30, 2021; $1.50 billion of 3.40% Senior Notes due November 30, 2023; $3.00 billion of 3.75% Senior Notes due November 30, 2026; $1.65 billion of 4.75% Senior Notes due November 30, 2036; and $3.25 billion of 4.90% Senior Notes due November 30, 2046. In November 2016, Abbott also entered into interest rate swap contracts totaling $3.0 billion related to the new debt; the swaps have the effect of changing Abbott's obligation from a fixed interest rate to a variable interest rate obligation on the related debt instruments.

        In April 2016, Abbott obtained a commitment for a 364-day senior unsecured bridge term loan facility for an amount not to exceed $17.2 billion, comprised of $15.2 billion for a 364-day bridge loan and $2.0 billion for a 120-day bridge loan to provide financing for the acquisition of St. Jude Medical. The $15.2 billion component of the commitment terminated in November 2016 when Abbott issued the $15.1 billion of long-term debt. In December 2016, Abbott formalized the $2.0 billion component and entered into a 120-day bridge term loan facility that provided Abbott the ability to borrow up to $2.0 billion on an unsecured basis to partially fund the St. Jude Medical acquisition. On January 4, 2017, as part of funding the cash portion of the St. Jude Medical acquisition, Abbott borrowed $2.0 billion under the 120-day senior unsecured bridge term loan facility. This facility was repaid during the first quarter of 2017.

        In February 2016, Abbott obtained a commitment for a 364-day senior unsecured bridge term loan facility for an amount not to exceed $9 billion in conjunction with its pending acquisition of Alere. This commitment, which was automatically extended for up to 90 days on January 29, 2017, expired on April 30, 2017 and was not renewed since Abbott did not need this bridge facility to finance the Alere acquisition. The fees associated with the bridge facilities were recognized in interest expense.

        In March 2015, Abbott issued $2.5 billion of long-term debt consisting of $750 million of 2.00% Senior Notes due March 15, 2020; $750 million of 2.55% Senior Notes due March 15, 2022; and $1.0 billion of 2.95% Senior Notes due March 15, 2025. Proceeds from this debt were used to pay down short-term borrowings. In March 2015, Abbott also entered into interest rate swap contracts totaling $2.5 billion. These contracts have the effect of changing Abbott's obligation from a fixed interest rate to a variable interest rate obligation.

        In September 2014, the board of directors authorized the repurchase of up to $3.0 billion of Abbott's common shares from time to time. The 2014 authorization was in addition to the $512 million unused portion of a previous program announced in June 2013. In 2016, Abbott repurchased 10.4 million shares at a cost of $408 million under the program authorized in 2014. In 2015, Abbott repurchased 11.3 million shares at a cost of $512 million under the unused portion of the 2013 authorization and 36.2 million shares at a cost of $1.7 billion under the program authorized in 2014 for a total of 47.5 million shares at a cost of $2.2 billion.

        On April 27, 2016, the board of directors authorized the issuance and sale for general corporate purposes of up to 75 million common shares that would result in proceeds of up to $3 billion. No shares have been issued under this authorization.

        Abbott declared dividends of $1.075 per share in 2017 compared to $1.045 per share in 2016, an increase of approximately 3%. Dividends paid were $1.849 billion in 2017 compared to $1.539 billion in 2016. The year-over-year change in dividends reflects the impact of the increase in the dividend rate and the additional shares issued to finance the St. Jude Medical acquisition.

43

Working Capital

        Working capital was $11.2 billion at December 31, 2017 and $20.1 billion at December 31, 2016. The decrease in working capital in 2017 was due to a $9.2 billion decrease in cash and cash equivalents. Approximately $13.6 billion of the $18.6 billion in cash and cash equivalents at December 31, 2016 was used to fund the cash portion of the acquisition of St. Jude Medical on January 4, 2017.

        Abbott monitors the credit worthiness of customers and establishes an allowance against a trade receivable when it is probable that the balance will not be collected. In addition to closely monitoring economic conditions and budgetary and other fiscal developments, Abbott regularly communicates with its customers regarding the status of receivable balances, including their payment plans and obtains positive confirmation of the validity of the receivables. Abbott also monitors the potential for and periodically has utilized factoring arrangements to mitigate credit risk although the receivables included in such arrangements have historically not been a material amount of total outstanding receivables.

Venezuela Operations

        Since January 2010, Venezuela has been designated as a highly inflationary economy under U.S. GAAP. In 2014 and 2015, the government of Venezuela operated multiple mechanisms to exchange bolivars into U.S. dollars. These mechanisms included the CENCOEX, SICAD, and SIMADI rates, which stood at 6.3, 13.5, and approximately 200, respectively, at December 31, 2015. In 2015, Abbott continued to use the CENCOEX rate of 6.3 Venezuelan bolivars to the U.S. dollar to report the results, financial position, and cash flows related to its operations in Venezuela since Abbott continued to qualify for this exchange rate to pay for the import of various products into Venezuela.

        On February 17, 2016, the Venezuelan government announced that the three-tier exchange rate system would be reduced to two rates renamed the DIPRO and DICOM rates. The DIPRO rate is the official rate for food and medicine imports and was adjusted from 6.3 to 10 bolivars per U.S. dollar. The DICOM rate is a floating market rate published daily by the Venezuelan central bank, which at the end of the first quarter of 2016 was approximately 263 bolivars per U.S. dollar. As a result of decreasing government approvals to convert bolivars to U.S. dollars to pay for intercompany accounts, as well as the accelerating deterioration of economic conditions in the country, Abbott concluded that it was appropriate to move to the DICOM rate at the end of the first quarter of 2016. As a result, Abbott recorded a foreign currency exchange loss of $480 million in 2016 to revalue its net monetary assets in Venezuela. Abbott is continuing to use the DICOM rate to report the results of operations and to remeasure net monetary assets for Venezuela at the end of each quarter. As of December 31, 2017, Abbott's investment in its Venezuelan operations was not significant. As a result, any additional future foreign currency losses related to Venezuela would not be material.

Capital Expenditures

        Capital expenditures of $1.1 billion in 2017, 2016 and 2015 were principally for upgrading and expanding manufacturing and research and development facilities and equipment in various segments, investments in information technology, and laboratory instruments placed with customers.

44

Contractual Obligations

        The table below summarizes Abbott's estimated contractual obligations as of December 31, 2017.

 
   Payments Due By Period  
 
   Total   2018   2019-2020   2021-2022   2023 and
Thereafter 		 
 
   (in millions)
  

Long-term debt, including current maturities (a)

   $ 27,970   $ 508   $ 6,802   $ 6,404   $ 14,256  

Interest on debt obligations (a)

     12,107     1,013     1,773     1,488     7,833  

Operating lease obligations

     1,141     223     317     196     405  

Capitalized auto lease obligations

     37     12     25     —     —  

Purchase commitments (b)

     2,242     2,081     124     29     8  

Other long-term liabilities (c)

     3,997     —     1,439     973     1,585  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total (d)

   $ 47,494   $ 3,837   $ 10,480   $ 9,090   $ 24,087  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
(a)
Amounts reported represent contractual obligations as of December 31, 2017. On January 5, 2018, Abbott repaid long term debt of $1.15 billion due July 10, 2019 and $2.80 billion due November 3, 2022, which reduces future interest obligations on this debt by approximately $475 million over the term of the debt.

(b)
Purchase commitments are for purchases made in the normal course of business to meet operational and capital expenditure requirements.

(c)
Other long-term liabilities include the estimated payments for the transition tax under the TCJA, net of applicable credits.

(d)
Net unrecognized tax benefits totaling approximately $835 million are excluded from the table above as Abbott is unable to reasonably estimate the period of cash settlement with the respective taxing authorities on such items. See Note 14 — Taxes on Earnings from Continuing Operations for further details. The company has employee benefit obligations consisting of pensions and other post-employment benefits, including medical and life, which have been excluded from the table. A discussion of the company's pension and post-retirement plans, including funding matters is included in Note 13 — Post-employment Benefits.

Contingent Obligations

        Abbott has periodically entered into agreements with other companies in the ordinary course of business, such as assignment of product rights, which has resulted in Abbott becoming secondarily liable for obligations that Abbott was previously primarily liable. Since Abbott no longer maintains a business relationship with the other parties, Abbott is unable to develop an estimate of the maximum potential amount of future payments, if any, under these obligations. Based upon past experience, the likelihood of payments under these agreements is remote. In addition, Abbott periodically acquires a business or product rights in which Abbott agrees to pay contingent consideration based on attaining certain thresholds or based on the occurrence of certain events.

Legislative Issues

        Abbott's primary markets are highly competitive and subject to substantial government regulations throughout the world. Abbott expects debate to continue over the availability, method of delivery, and payment for health care products and services. It is not possible to predict the extent to which Abbott 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, and Item 1A, Risk Factors.

45

Recently Issued Accounting Standards

        In August 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-12, Targeted Improvements to Accounting for Hedging Activities, which makes changes to the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The standard becomes effective for Abbott beginning in the first quarter of 2019 and early adoption is permitted. Abbott is currently evaluating the effect that ASU 2017-12 will have on its consolidated financial statements.

        In March 2017, the FASB issued ASU 2017-07, Compensation — Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost which changes the financial statement presentation requirements for pension and other postretirement benefit expense. While service cost will continue to be reported in the same financial statement line items as other current employee compensation costs, the ASU requires all other components of pension and other postretirement benefit expense to be presented separately from service cost, and outside any subtotal of income from operations. The standard becomes effective for Abbott beginning in the first quarter of 2018. When the change in the presentation of the components of pension cost is applied retrospectively to Abbott's 2017 operating results, approximately $160 million of net pension-related income will be moved from the operating lines of the Consolidated Statement of Earnings to non-operating income.

        In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, which requires the recognition of the income tax effects of intercompany sales and transfers of assets, other than inventory, in the period in which the transfer occurs. The standard becomes effective for Abbott beginning in the first quarter of 2018. Abbott does not expect the adoption of the new standard to have a material impact on its consolidated financial statements.

        In February 2016, the FASB issued ASU 2016-02, Leases, which requires lessees to recognize assets and liabilities for most leases on the balance sheet. The standard becomes effective for Abbott beginning in the first quarter of 2019 and early adoption is permitted. Adoption requires application of the new guidance for all periods presented. Abbott is currently evaluating the impact the new guidance will have on its consolidated financial statements.

        In January 2016, the FASB issued ASU 2016-01, Financial Instruments — Recognition and Measurement of Financial Assets and Financial Liabilities, which provides new guidance for the recognition, measurement, presentation, and disclosure of financial assets and liabilities. The standard becomes effective for Abbott beginning in the first quarter of 2018. Abbott does not expect the adoption of the new standard to have a material impact on its consolidated financial statements.

        In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which provides a single comprehensive model for accounting for revenue from contracts with customers and will supersede most existing revenue recognition guidance. The standard becomes effective for Abbott in the first quarter of 2018. Abbott's revenues are primarily comprised of product sales. Abbott completed a thorough evaluation of the new standard including a detailed review of Abbott's revenue streams and contracts. Abbott does not expect the adoption of the new standard to have a material impact on its consolidated financial statements. Abbott will use the modified retrospective method to adopt this standard.

Private Securities Litigation Reform Act of 1995 — A Caution Concerning Forward-Looking Statements

        Under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, Abbott cautions investors that any forward-looking statements or projections made by Abbott, including those made in this document, are subject to risks and uncertainties that may cause actual results to differ materially from those projected. Economic, competitive, governmental, technological and other factors that may affect Abbott's operations are discussed in Item 1A, Risk Factors.

46

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Financial Instruments and Risk Management

Market Price Sensitive Investments

        The fair value of the available-for-sale equity securities held by Abbott was approximately $11 million and $2.7 billion as of December 31, 2017 and 2016, respectively. The year-over-year decrease is primarily due to sale of the remaining ordinary shares of Mylan N.V. that Abbott received in the sale of its developed markets branded generics pharmaceuticals business. As of December 31, 2017, Abbott no longer held an ownership interest in Mylan N.V. All available-for-sale equity securities are subject to potential changes in fair value. A hypothetical 20 percent decrease in the share prices of these investments would decrease their fair value at December 31, 2017 by approximately $2 million. Abbott monitors these investments for other than temporary declines in fair value, and charges impairment losses to income when an other than temporary decline in fair value occurs. Abbott also holds $363 million of investments in mutual funds that are held in a rabbi trust for the purpose of paying benefits under a deferred compensation plan. These investments are classified as trading securities.

Non-Publicly Traded Equity Securities

        Abbott holds equity securities from strategic technology acquisitions that are not traded on public stock exchanges. The carrying value of these investments was approximately $263 million and $151 million as of December 31, 2017 and 2016, respectively. No individual investment is recorded at a value in excess of $67 million. Abbott monitors these investments for other than temporary declines in market value, and charges impairment losses to income when an other than temporary decline in estimated fair value occurs.

Interest Rate Sensitive Financial Instruments

        At December 31, 2017 and 2016, Abbott had interest rate hedge contracts totaling $4.0 billion and $5.5 billion, respectively, to manage its exposure to changes in the fair value of debt. The effect of these hedges is to change the fixed interest rate to a variable rate for the portion of the debt that is hedged. Abbott does not use derivative financial instruments, such as interest rate swaps, to manage its exposure to changes in interest rates for its investment securities. The fair value of long-term debt at December 31, 2017 and 2016 amounted to $29.0 billion and $21.1 billion, respectively (average interest rates of 3.6% and 3.8% as of December 31, 2017 and 2016, respectively) with maturities through 2046. At December 31, 2017 and 2016, the fair value of current and long-term investment securities amounted to approximately $1.1 billion and $3.1 billion, respectively. A hypothetical 100-basis point change in the interest rates would not have a material effect on cash flows, income or fair values. (A 100-basis point change is believed to be a reasonably possible near-term change in rates.)

Foreign Currency Sensitive Financial Instruments

        Certain Abbott foreign subsidiaries enter into foreign currency forward exchange contracts to manage exposures to changes in foreign exchange rates for anticipated intercompany purchases by those subsidiaries whose functional currencies are not the U.S. dollar. These contracts are designated as cash flow hedges of the variability of the cash flows due to changes in foreign currency exchange rates and are marked-to-market with the resulting gains or losses reflected in Accumulated other comprehensive income (loss). Gains or losses will be included in Cost of products sold at the time the products are sold, generally within the next twelve to eighteen months. At December 31, 2017 and 2016, Abbott held $3.3 billion and $2.6 billion, respectively, of such contracts. Contracts held at December 31, 2017 will mature in 2018 or 2019 depending upon the contract. Contracts held at December 31, 2016 matured in 2017 or will mature in 2018 depending upon the contract. At December 31, 2016, $107 million of the notional amount related to AMO, a business that was divested in the first quarter of 2017.

47

        Abbott enters into foreign currency forward exchange contracts to manage its exposure to foreign currency denominated intercompany loans and trade payables and third-party trade payables and receivables. The contracts are marked-to-market, and resulting gains or losses are reflected in income and are generally offset by losses or gains on the foreign currency exposure being managed. At December 31, 2017 and 2016, Abbott held $20.1 billion and $14.9 billion, respectively, of such contracts, which generally mature in the next twelve months. At December 31, 2016, $1.2 billion of the contracts related to AMO, a business that was divested in the first quarter of 2017.

        In March 2017, Abbott repaid its $479 million foreign denominated short-term debt which was designated as a hedge of the net investment in a foreign subsidiary. At December 31, 2016 and 2015, the value of this short-term debt was $454 million and $439 million, respectively, and changes in the fair value of the debt up through the date of repayment due to changes in exchange rates were recorded in Accumulated other comprehensive income (loss), net of tax.

        The following table reflects the total foreign currency forward contracts outstanding at December 31, 2017 and 2016:

 
   2017   2016  
 
   Contract
Amount 		  Weighted
Average
Exchange
Rate 		  Fair and
Carrying Value
Receivable/
(Payable) 		  Contract
Amount 		  Weighted
Average
Exchange
Rate 		  Fair and
Carrying Value
Receivable/
(Payable) 		 
 
   (dollars in millions)
  

Primarily U.S. Dollars
to be exchanged for
the following currencies:

                                      

Euro

   $ 16,877     1.1861   $ (24 ) $ 11,110     1.0570   $ 28  

British Pound

     609     1.3300     (5 )   514     1.2817     15  

Japanese Yen

     1,109     110.5370     15     1,024     110.6955     44  

Canadian Dollar

     597     1.2799     (4 )   639     1.3378     3  

All other currencies

     4,245     N/A     (49 )   4,166     N/A     104  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total

   $ 23,437         $ (67 ) $ 17,453         $ 194  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

48

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 
   Page  

Consolidated Statement of Earnings

     50  

Consolidated Statement of Comprehensive Income

     51  

Consolidated Statement of Cash Flows

     52  

Consolidated Balance Sheet

     53  

Consolidated Statement of Shareholders' Investment

     55  

Notes to Consolidated Financial Statements

     56  

Management Report on Internal Control Over Financial Reporting

     94  

Report of Independent Registered Public Accounting Firm

     95  

Report of Independent Registered Public Accounting Firm

     96  

49


Abbott Laboratories and Subsidiaries

Consolidated Statement of Earnings
(in millions except per share data)

 
   Year Ended December 31  
 
   2017   2016   2015  

Net Sales

   $ 27,390   $ 20,853   $ 20,405  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Cost of products sold, excluding amortization of intangible assets

     12,337     9,024     8,747  

Amortization of intangible assets

     1,975     550     601  

Research and development

     2,235     1,422     1,405  

Selling, general and administrative

     9,117     6,672     6,785  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total Operating Cost and Expenses

     25,664     17,668     17,538  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Operating Earnings

     1,726     3,185     2,867  

Interest expense

     904     431     163  

Interest income

     (124 )   (99 )   (105 )

Net foreign exchange (gain) loss

     (34 )   495     (93 )

Other (income) expense, net

     (1,251 )   945     (281 )
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Earnings from Continuing Operations Before Taxes

     2,231     1,413     3,183  

Taxes on Earnings from Continuing Operations

     1,878     350     577  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Earnings from Continuing Operations

     353     1,063     2,606  

Earnings from Discontinued Operations, net of taxes

    
124		    
321		    
65		  

Gain on sale of Discontinued Operations, net of taxes

     —     16     1,752  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Net Earnings from Discontinued Operations, net of taxes

    
124		    
337		    
1,817 		 
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Net Earnings

   $ 477   $ 1,400   $ 4,423  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Basic Earnings Per Common Share —

                    

Continuing Operations

   $ 0.20   $ 0.71   $ 1.73  

Discontinued Operations

     0.07     0.23     1.21  

Net Earnings

   $ 0.27   $ 0.94   $ 2.94  

Diluted Earnings Per Common Share —

    
 		    
 		    
 		  

Continuing Operations

   $ 0.20   $ 0.71   $ 1.72  

Discontinued Operations

     0.07     0.23     1.20  

Net Earnings

   $ 0.27   $ 0.94   $ 2.92  

Average Number of Common Shares Outstanding Used for Basic Earnings Per Common Share

    
1,740		    
1,477		    
1,496		  

Dilutive Common Stock Options

     9     6     10  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Average Number of Common Shares Outstanding Plus Dilutive Common Stock Options

     1,749     1,483     1,506  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Outstanding Common Stock Options Having No Dilutive Effect

     —     5     1  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

The accompanying notes to consolidated financial statements are an integral part of this statement.

50


Abbott Laboratories and Subsidiaries

Consolidated Statement of Comprehensive Income
(in millions)

 
   Year Ended December 31  
 
   2017   2016   2015  

Net Earnings

   $ 477   $ 1,400   $ 4,423  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Foreign currency translation gain (loss) adjustments

     1,365     (130 )   (2,013 )

Net actuarial gains (losses) and prior service cost and credits and amortization of net actuarial losses and prior service cost and credits, net of taxes of $(61) in 2017, $(125) in 2016 and $101 in 2015

     (243 )   (326 )   252  

Unrealized gains (losses) on marketable equity securities, net of taxes of $(76) in 2017, $(28) in 2016 and $104 in 2015

     64     (134 )   64  

Net (losses) gains on derivative instruments designated as cash flow hedges, net of taxes of $(43) in 2017, $(4) in 2016 and $(9) in 2015

     (134 )   (15 )   (35 )
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Other Comprehensive Income (Loss)

     1,052     (605 )   (1,732 )
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Comprehensive Income

   $ 1,529   $ 795   $ 2,691  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Supplemental Accumulated Other Comprehensive Income (Loss) Information, net of tax as of December 31:

                    

Cumulative foreign currency translation (loss) adjustments

   $ (3,452 ) $ (4,959 ) $ (4,829 )

Net actuarial (losses) and prior service (cost) and credits

     (2,521 )   (2,284 )   (1,958 )

Cumulative unrealized (losses) gains on marketable equity securities

     (5 )   (69 )   65  

Cumulative (losses) gains on derivative instruments designated as cash flow hedges

     (84 )   49     64  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Accumulated other comprehensive income (loss)

   $ (6,062 ) $ (7,263 ) $ (6,658 )
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

The accompanying notes to consolidated financial statements are an integral part of this statement.

51


Abbott Laboratories and Subsidiaries

Consolidated Statement of Cash Flows
(in millions)

 
   Year Ended December 31  
 
   2017   2016   2015  

Cash Flow From (Used in) Operating Activities:

                    

Net earnings

   $ 477   $ 1,400   $ 4,423  

Adjustments to reconcile earnings to net cash from operating activities —

                    

Depreciation

     1,046     803     871  

Amortization of intangible assets

     1,975     550     601  

Share-based compensation

     406     310     292  

Impact of currency devaluation

     —     480     —  

Amortization of inventory step-up

     907     —     —  

Investing and financing (gains) losses, net

     47     86     (18 )

Amortization of bridge financing fees

     5     165     —  

Gains on sale of businesses

     (1,163 )   (25 )   (2,840 )

Mylan N.V. equity investment adjustment

     —     947     —  

Gain on sale of Mylan N.V. shares

     (45 )   —     (207 )

Trade receivables

     (207 )   (177 )   (171 )

Inventories

     249     (98 )   (257 )

Prepaid expenses and other assets

     109     113     57  

Trade accounts payable and other liabilities

     615     (652 )   (742 )

Income taxes

     1,149     (699 )   957  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Net Cash From Operating Activities

     5,570     3,203     2,966  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Cash Flow From (Used in) Investing Activities:

                    

Acquisitions of property and equipment

     (1,135 )   (1,121 )   (1,110 )

Acquisitions of businesses and technologies, net of cash acquired

     (17,183 )   (80 )   (235 )

Proceeds from business dispositions

     6,042     25     230  

Proceeds from the sale of Mylan N.V. shares

     2,704     —     2,290  

Purchases of investment securities

     (210 )   (2,823 )   (4,933 )

Proceeds from sales of investment securities

     129     3,709     4,112  

Other

     35     42     52  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Net Cash From (Used in) Investing Activities

     (9,618 )   (248 )   406  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Cash Flow From (Used in) Financing Activities:

                    

Proceeds from issuance of (repayments of) short-term debt and other

     (1,034 )   (1,767 )   (1,281 )

Proceeds from issuance of long-term debt and debt with maturities over 3 months

     6,742     14,934     2,485  

Repayments of long-term debt and debt with maturities over 3 months

     (8,650 )   (12 )   (57 )

Payment of bridge financing fees

     —     (170 )   —  

Purchase of Alere preferred stock

     (710 )   —     —  

Acquisition and contingent consideration payments related to business acquisitions

     (13 )   (25 )   (17 )

Purchases of common shares

     (117 )   (522 )   (2,237 )

Proceeds from stock options exercised

     350     248     314  

Dividends paid

     (1,849 )   (1,539 )   (1,443 )
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Net Cash From (Used in) Financing Activities

     (5,281 )   11,147     (2,236 )
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Effect of exchange rate changes on cash and cash equivalents

     116     (483 )   (198 )
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Net (Decrease) Increase in Cash and Cash Equivalents

     (9,213 )   13,619     938  

Cash and Cash Equivalents, Beginning of Year

     18,620     5,001     4,063  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Cash and Cash Equivalents, End of Year

   $ 9,407   $ 18,620   $ 5,001  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Supplemental Cash Flow Information:

                    

Income taxes paid

   $ 570   $ 620   $ 631  

Interest paid

     917     181     166  

The accompanying notes to consolidated financial statements are an integral part of this statement.

52


Abbott Laboratories and Subsidiaries

Consolidated Balance Sheet
(dollars in millions)

 
   December 31  
 
   2017   2016  

Assets

              

Current Assets:

              

Cash and cash equivalents

   $ 9,407   $ 18,620  

Investments, primarily bank time deposits and U.S. treasury bills

     203     155  

Trade receivables, less allowances of — 2017: $294; 2016: $250

     5,249     3,248  

Inventories:

              

Finished products

     2,339     1,624  

Work in process

     472     294  

Materials

     790     516  
​ ​ ​ ​ ​ ​ ​ ​

Total inventories

     3,601     2,434  

Other prepaid expenses and receivables

     1,667     1,806  

Current assets held for disposition

     20     513  
​ ​ ​ ​ ​ ​ ​ ​

Total Current Assets

     20,147     26,776  
​ ​ ​ ​ ​ ​ ​ ​

Investments

     883     2,947  

Property and Equipment, at Cost:

              

Land

     526     408  

Buildings

     3,613     2,602  

Equipment

     10,394     8,394  

Construction in progress

     732     962  
​ ​ ​ ​ ​ ​ ​ ​

    15,265     12,366  

Less: accumulated depreciation and amortization

     7,658     6,661  
​ ​ ​ ​ ​ ​ ​ ​

Net Property and Equipment

     7,607     5,705  
​ ​ ​ ​ ​ ​ ​ ​

Intangible Assets, net of amortization

     21,473     4,539  

Goodwill

     24,020     7,683  

Deferred Income Taxes and Other Assets

     1,944     2,263  

Non-current Assets Held for Disposition

     176     2,753  
​ ​ ​ ​ ​ ​ ​ ​

  $ 76,250   $ 52,666  
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​

53


Abbott Laboratories and Subsidiaries

Consolidated Balance Sheet
(dollars in millions)

 
   December 31  
 
   2017   2016  

Liabilities and Shareholders' Investment

              

Current Liabilities:

              

Short-term borrowings

   $ 206   $ 1,322  

Trade accounts payable

     2,402     1,178  

Salaries, wages and commissions

     1,187     752  

Other accrued liabilities

     3,811     2,581  

Dividends payable

     489     391  

Income taxes payable

     309     188  

Current portion of long-term debt

     508     3  

Current liabilities held for disposition

     —     245  
​ ​ ​ ​ ​ ​ ​ ​

Total Current Liabilities

     8,912     6,660  
​ ​ ​ ​ ​ ​ ​ ​

Long-term Debt

     27,210     20,681  

Post-employment obligations and other long-term liabilities

     9,030     4,549  

Non-current liabilities held for disposition

     —     59  

Commitments and Contingencies

              

Shareholders' Investment:

              

Preferred shares, one dollar par value Authorized — 1,000,000 shares, none issued

     —     —  

Common shares, without par value Authorized — 2,400,000,000 shares Issued at stated capital amount — Shares: 2017: 1,965,908,188; 2016: 1,707,475,455

     23,206     13,027  

Common shares held in treasury, at cost — Shares: 2017: 222,305,719; 2016: 234,606,250

     (10,225 )   (10,791 )

Earnings employed in the business

     23,978     25,565  

Accumulated other comprehensive income (loss)

     (6,062 )   (7,263 )
​ ​ ​ ​ ​ ​ ​ ​

Total Abbott Shareholders' Investment

     30,897     20,538  

Noncontrolling Interests in Subsidiaries

     201     179  
​ ​ ​ ​ ​ ​ ​ ​

Total Shareholders' Investment

     31,098     20,717  
​ ​ ​ ​ ​ ​ ​ ​

  $ 76,250   $ 52,666  
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​

The accompanying notes to consolidated financial statements are an integral part of this statement.

54


Abbott Laboratories and Subsidiaries

Consolidated Statement of Shareholders' Investment
(in millions except shares and per share data)

 
   Year Ended December 31  
 
   2017   2016   2015  

Common Shares:

                    

Beginning of Year

                    

Shares: 2017: 1,707,475,455; 2016: 1,702,017,390; 2015: 1,694,929,949

   $ 13,027   $ 12,734   $ 12,383  

Issued under incentive stock programs

                    

Shares: 2017: 8,834,924; 2016: 5,458,065; 2015: 7,087,441

     242     222     289  

Issued for St. Jude Medical acquisition

                    

Shares: 2017: 249,597,809

     9,835     —     —  

Share-based compensation

     406     311     292  

Issuance of restricted stock awards

     (304 )   (240 )   (230 )
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

End of Year

                    

Shares: 2017: 1,965,908,188; 2016: 1,707,475,455; 2015: 1,702,017,390

   $ 23,206   $ 13,027   $ 12,734  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Common Shares Held in Treasury:

                    

Beginning of Year

                    

Shares: 2017: 234,606,250; 2016: 229,352,338; 2015: 186,894,515

   $ (10,791 ) $ (10,622 ) $ (8,678 )

Issued under incentive stock programs

                    

Shares: 2017: 8,696,320; 2016: 5,398,469; 2015: 5,381,586

     400     250     250  

Issued for St. Jude Medical acquisition

                    

Shares: 2017: 3,906,848

     180     —     —  

Purchased

                    

Shares: 2017: 302,637; 2016: 10,652,381; 2015: 47,839,409

     (14 )   (419 )   (2,194 )
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

End of Year

                    

Shares: 2017: 222,305,719; 2016: 234,606,250; 2015: 229,352,338

   $ (10,225 ) $ (10,791 ) $ (10,622 )
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Earnings Employed in the Business:

                    

Beginning of Year

   $ 25,565   $ 25,757   $ 22,874  

Net earnings

     477     1,400     4,423  

Cash dividends declared on common shares (per share — 2017: $1.075; 2016: $1.045; 2015: $0.98)

     (1,947 )   (1,547 )   (1,464 )

Effect of common and treasury share transactions

     (117 )   (45 )   (76 )
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

End of Year

   $ 23,978   $ 25,565   $ 25,757  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Accumulated Other Comprehensive Income (Loss):

                    

Beginning of Year

   $ (7,263 ) $ (6,658 ) $ (5,053 )

Business dispositions / separation

     149     —     127  

Other comprehensive income (loss)

     1,052     (605 )   (1,732 )
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

End of Year

   $ (6,062 ) $ (7,263 ) $ (6,658 )
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Noncontrolling Interests in Subsidiaries:

                    

Beginning of Year

   $ 179   $ 115   $ 113  

Noncontrolling Interests' share of income, business combinations, net of distributions and share repurchases

     22     64     2  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

End of Year

   $ 201   $ 179   $ 115  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

The accompanying notes to consolidated financial statements are an integral part of this statement.

55


Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements

Note 1 — Summary of Significant Accounting Policies

        NATURE OF BUSINESS — Abbott's principal business is the discovery, development, manufacture and sale of a broad line of health care products.

        CHANGES IN PRESENTATION — In September 2016, Abbott announced that it had entered into an agreement to sell Abbott Medical Optics (AMO), its vision care business, to Johnson & Johnson. The transaction closed in February 2017. The operating results of AMO up to the date of sale were reported as part of continuing operations as AMO did not qualify for reporting as a discontinued operation. The assets and liabilities of AMO are reported as held for disposition in Abbott's Consolidated Balance Sheet at December 31, 2016.

        On February 27, 2015, Abbott completed the sale of its developed markets branded generics pharmaceuticals business to Mylan Inc. (Mylan) for equity ownership of a newly formed entity that combined Mylan's existing business and Abbott's developed markets pharmaceuticals business. On February 10, 2015, Abbott completed the sale of its animal health business to Zoetis Inc. The historical operating results of these two businesses up to the date of sale are excluded from Earnings from Continuing Operations and are presented on the Earnings from Discontinued Operations, net of taxes line in Abbott's Consolidated Statement of Earnings. The cash flows of these businesses are included in Abbott's Consolidated Statement of Cash Flows up to the date of disposition. See Note 2 — Discontinued Operations for additional information.

        BASIS OF CONSOLIDATION — The consolidated financial statements include the accounts of the parent company and subsidiaries, after elimination of intercompany transactions.

        USE OF ESTIMATES — The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States and necessarily include amounts based on estimates and assumptions by management. Actual results could differ from those amounts. Significant estimates include amounts for sales rebates; income taxes; pension and other post-employment benefits, including certain asset values that are based on significant unobservable inputs; valuation of intangible assets; litigation; derivative financial instruments; and inventory and accounts receivable exposures.

        FOREIGN CURRENCY TRANSLATION — The statements of earnings of foreign subsidiaries whose functional currencies are other than the U.S. dollar are translated into U.S. dollars using average exchange rates for the period. The net assets of foreign subsidiaries whose functional currencies are other than the U.S. dollar are translated into U.S. dollars using exchange rates as of the balance sheet date. The U.S. dollar effects that arise from translating the net assets of these subsidiaries at changing rates are recorded in the foreign currency translation adjustment account, which is included in equity as a component of Accumulated other comprehensive income (loss). Transaction gains and losses are recorded on the Net foreign exchange (gain) loss line of the Consolidated Statement of Earnings.

        REVENUE RECOGNITION — Revenue from product sales is recognized upon passage of title and risk of loss to customers. Provisions for discounts, rebates and sales incentives to customers, and returns and other adjustments are provided for in the period the related sales are recorded. Sales incentives to customers are not material. Historical data is readily available and reliable, and is used for estimating the amount of the reduction in gross sales. Revenue from the launch of a new product, from an improved version of an existing product, or for shipments in excess of a customer's normal requirements are recorded when the conditions noted above are met. In those situations, management records a returns reserve for such revenue, if necessary. In certain of Abbott's businesses, primarily within diagnostics and medical optics, prior to its divestiture, Abbott participates in selling arrangements that include multiple

56


Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 1 — Summary of Significant Accounting Policies (Continued)

deliverables (e.g., instruments, reagents, procedures, and service agreements). Under these arrangements, Abbott recognizes revenue upon delivery of the product or performance of the service and allocates the revenue based on the relative selling price of each deliverable, which is based primarily on vendor specific objective evidence. Sales of product rights for marketable products are recorded as revenue upon disposition of the rights. Revenue from license of product rights, or for performance of research or selling activities, is recorded over the periods earned.

        In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers, which provides a single comprehensive model for accounting for revenue from contracts with customers and will supersede most existing revenue recognition guidance. The standard becomes effective for Abbott in the first quarter of 2018. Abbott's revenues are primarily comprised of product sales. Abbott completed a thorough evaluation of the new standard including a detailed review of Abbott's revenue streams and contracts. Abbott does not expect the adoption of the new standard to have a material impact on its consolidated financial statements. Abbott will use the modified retrospective method to adopt this standard.

        INCOME TAXES — Deferred income taxes are provided for the tax effect of differences between the tax bases of assets and liabilities and their reported amounts in the financial statements at the enacted statutory rate to be in effect when the taxes are paid. No additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the transition tax related to the U.S. Tax Cuts and Jobs Act, or any additional outside basis differences that exist, as these amounts continue to be indefinitely reinvested in foreign operations. Interest and penalties on income tax obligations are included in taxes on income.

        EARNINGS PER SHARE — Unvested restricted stock units and awards that contain non-forfeitable rights to dividends are treated as participating securities and are included in the computation of earnings per share under the two-class method. Under the two-class method, net earnings are allocated between common shares and participating securities. Earnings from Continuing Operations allocated to common shares in 2017, 2016 and 2015 were $346 million, $1.057 billion and $2.595 billion, respectively. Net earnings allocated to common shares in 2017, 2016 and 2015 were $468 million, $1.393 billion and $4.403 billion, respectively.

        PENSION AND POST-EMPLOYMENT BENEFITS — Abbott accrues for the actuarially determined cost of pension and post-employment benefits over the service attribution periods of the employees. Abbott must develop long-term assumptions, the most significant of which are the health care cost trend rates, discount rates and the expected return on plan assets. Differences between the expected long-term return on plan assets and the actual return are amortized over a five-year period. Actuarial losses and gains are amortized over the remaining service attribution periods of the employees under the corridor method.

        FAIR VALUE MEASUREMENTS — For assets and liabilities that are measured using quoted prices in active markets, total fair value is the published market price per unit multiplied by the number of units held without consideration of transaction costs. Assets and liabilities that are measured using significant other observable inputs are valued by reference to similar assets or liabilities, adjusted for contract restrictions and other terms specific to that asset or liability. For these items, a significant portion of fair value is derived by reference to quoted prices of similar assets or liabilities in active markets. For all remaining assets and liabilities, fair value is derived using a fair value model, such as a discounted cash flow model or Black-Scholes model. Purchased intangible assets are recorded at fair value. The fair value of

57


Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 1 — Summary of Significant Accounting Policies (Continued)

significant purchased intangible assets is based on independent appraisals. Abbott uses a discounted cash flow model to value intangible assets. The discounted cash flow model requires assumptions about the timing and amount of future net cash flows, risk, the cost of capital, terminal values and market participants. Intangible assets are reviewed for impairment on a quarterly basis. Goodwill and indefinite-lived intangible assets are tested for impairment at least annually.

        SHARE-BASED COMPENSATION — The fair value of stock options and restricted stock awards and units are amortized over their requisite service period, which could be shorter than the vesting period if an employee is retirement eligible, with a charge to compensation expense.

        In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 modifies several aspects of the accounting for share-based payment transactions, including the accounting for income taxes and classification on the statement of cash flows. Abbott adopted the standard in the first quarter of 2017 and the following changes were made to the presentation of Abbott's financial statements:

        LITIGATION — Abbott accounts for litigation losses in accordance with FASB ASC No. 450, "Contingencies." Under ASC No. 450, loss contingency provisions are recorded for probable losses at management's best estimate of a loss, or when a best estimate cannot be made, a minimum loss contingency amount is recorded. Legal fees are recorded as incurred.

        CASH, CASH EQUIVALENTS AND INVESTMENTS — Cash equivalents consist of bank time deposits, U.S. government securities money market funds and U.S. treasury bills with original maturities of three months or less. Abbott holds certain investments with a carrying value of approximately $235 million that are accounted for under the equity method of accounting. Investments held in a rabbi trust are accounted for as trading securities. All other investments in marketable equity securities are classified as available-for-sale and are recorded at fair value with any unrealized holding gains or losses, net of tax, included in Accumulated other comprehensive income (loss). Investments in equity securities that are not traded on public stock exchanges are recorded at cost. Investments in debt securities are classified as held-to-maturity, as management has both the intent and ability to hold these securities to maturity, and are reported at cost, net of any unamortized premium or discount. Income relating to these securities is reported as interest income.

        Abbott reviews the carrying value of investments each quarter to determine whether an other than temporary decline in fair value exists. Abbott considers factors affecting the investee, factors affecting the industry the investee operates in and general equity market trends. Abbott considers the length of time an investment's fair value has been below carrying value and the near-term prospects for recovery to carrying value. When Abbott determines that an other than temporary decline has occurred, the investment is written down with a charge to Other (income) expense, net.

58


Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 1 — Summary of Significant Accounting Policies (Continued)

        TRADE RECEIVABLE VALUATIONS — Accounts receivable are stated at their net realizable value. The allowance against gross trade receivables reflects the best estimate of probable losses inherent in the receivables portfolio determined on the basis of historical experience, specific allowances for known troubled accounts and other currently available information. Accounts receivable are charged off after all reasonable means to collect the full amount (including litigation, where appropriate) have been exhausted.

        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 a straight-line basis over the estimated useful lives of the assets. The following table shows estimated useful lives of property and equipment:

Classification
  Estimated Useful Lives

Buildings

   10 to 50 years (average 27 years)

Equipment

   3 to 20 years (average 11 years)

        PRODUCT LIABILITY — Abbott accrues for product liability claims when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated based on existing information. The liabilities are adjusted quarterly as additional information becomes available. Receivables for insurance recoveries for product liability claims are recorded as assets, on an undiscounted basis, when it is probable that a recovery will be realized. Product liability losses are self-insured.

        RESEARCH AND DEVELOPMENT COSTS — Internal research and development costs are expensed as incurred. Clinical trial costs incurred by third parties are expensed as the contracted work is performed. Where contingent milestone payments are due to third parties under research and development arrangements, the milestone payment obligations are expensed when the milestone results are achieved.

        ACQUIRED IN-PROCESS AND COLLABORATIONS RESEARCH AND DEVELOPMENT (IPR&D) — The initial costs of rights to IPR&D projects obtained in an asset acquisition are expensed as IPR&D unless the project has an alternative future use. These costs include initial payments incurred prior to regulatory approval in connection with research and development collaboration agreements that provide rights to develop, manufacture, market and/or sell pharmaceutical products. The fair value of IPR&D projects acquired in a business combination are capitalized and accounted for as indefinite-lived intangible assets until completed and are then amortized over the remaining useful life. Collaborations are not significant.

        CONCENTRATION OF RISK AND GUARANTEES — Due to the nature of its operations, Abbott is not subject to significant concentration risks relating to customers, products or geographic locations. Product warranties are not significant.

        Abbott has no material exposures to off-balance sheet arrangements; no special purpose entities; nor activities that include non-exchange-traded contracts accounted for at fair value. Abbott has periodically entered into agreements in the ordinary course of business, such as assignment of product rights, with other companies, which has resulted in Abbott becoming secondarily liable for obligations that Abbott was previously primarily liable. Since Abbott no longer maintains a business relationship with the other parties, Abbott is unable to develop an estimate of the maximum potential amount of future payments, if any, under these obligations. Based upon past experience, the likelihood of payments under these agreements is

59


Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 1 — Summary of Significant Accounting Policies (Continued)

remote. Abbott periodically acquires a business or product rights in which Abbott agrees to pay contingent consideration based on attaining certain thresholds or based on the occurrence of certain events.

Note 2 — Discontinued Operations

        On February 27, 2015, Abbott completed the sale of its developed markets branded generics pharmaceuticals business to Mylan Inc. (Mylan) for 110 million ordinary shares (or approximately 22%) of a newly formed entity (Mylan N.V.) that combined Mylan's existing business and Abbott's developed markets branded generics pharmaceuticals business. Mylan N.V. is publicly traded. Historically, this business was included in Abbott's Established Pharmaceutical Products segment. Abbott retained its branded generics pharmaceuticals business in emerging markets. At the date of closing, the 110 million Mylan N.V. ordinary shares that Abbott received were valued at $5.77 billion and Abbott recorded an after-tax gain on the sale of the business of approximately $1.6 billion. The shareholder agreement with Mylan N.V. includes voting and other restrictions that prevent Abbott from exercising significant influence over the operating and financial policies of Mylan N.V.

        At the close of this transaction Abbott and Mylan entered into a transition services agreement pursuant to which Abbott and Mylan provided various back office support services to each other on an interim transitional basis for up to 2 years. Certain services were extended for an additional five to ten months. Charges by Abbott under this transition services agreement were recorded as a reduction of the costs to provide the respective service in the applicable expense category in the Consolidated Statement of Earnings. This transition support did not constitute significant continuing involvement in Mylan's operations. Abbott also entered into manufacturing supply agreements with Mylan related to certain products, with the supply term ranging from 3 to 10 years and requiring a 2 year notice prior to termination. The cash flows associated with these transition services and manufacturing supply agreements are not expected to be significant, and therefore, these cash flows are not direct cash flows of the disposed component under Accounting Standards Codification 205.

        In April 2015, Abbott sold 40.25 million of the 110 million ordinary shares of Mylan N.V. received in the sale of the developed markets branded generics pharmaceuticals business to Mylan. Abbott recorded a pretax gain of $207 million on $2.29 billion in net proceeds from the sale of these shares. The gain is recognized in the Other (income) expense line of the 2015 Consolidated Statement of Earnings. As a result of this sale, Abbott's ownership interest in Mylan N.V. decreased to approximately 14%.

        In 2017, Abbott sold 69.75 million ordinary shares of Mylan N.V. and received $2.704 billion in proceeds. Abbott recorded a $45 million gain from the sale of these ordinary shares in 2017, which was recognized in the Other (income) expense, net line of the Consolidated Statement of Earnings. Abbott no longer has an ownership interest in Mylan N.V.

        On February 10, 2015, Abbott completed the sale of its animal health business to Zoetis Inc. Abbott received cash proceeds of $230 million and reported an after tax gain on the sale of approximately $130 million. In the first quarter of 2016, Abbott received an additional $25 million of proceeds due to the expiration of a holdback agreement associated with the sale of this business and reported an after-tax gain of $16 million.

        As a result of the disposition of the above businesses, the operating results of these businesses up to the date of sale are reported as part of discontinued operations on the Earnings from Discontinued Operations, net of taxes line in the Consolidated Statement of Earnings. Discontinued operations include

60


Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 2 — Discontinued Operations (Continued)

an allocation of interest expense assuming a uniform ratio of consolidated debt to equity for all of Abbott's historical operations.

        On January 1, 2013, Abbott completed the separation of AbbVie Inc. (AbbVie), which was formed to hold Abbott's research-based proprietary pharmaceuticals business. Abbott has retained all liabilities for all U.S. federal and foreign income taxes on income prior to the separation, as well as certain non-income taxes attributable to AbbVie's business. AbbVie generally will be liable for all other taxes attributable to its business.

        The operating results of Abbott's developed markets branded generics pharmaceuticals and animal health businesses, as well as the income tax benefit related to the businesses transferred to AbbVie, which are being reported as discontinued operations are as follows:

 
   Year Ended
December 31 		 
(in millions)
   2017   2016   2015  

Net Sales

                    

Developed markets generics pharmaceuticals and animal health businesses

   $ —   $ —   $ 256  

AbbVie

     —     —     —  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total

   $ —   $ —   $ 256  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Earnings (Loss) Before Tax

                    

Developed markets generics pharmaceuticals and animal health businesses

   $ 15   $ (4 ) $ 13  

AbbVie

     —     —     —  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total

   $ 15   $ (4 ) $ 13  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Net Earnings

                    

Developed markets generics pharmaceuticals and animal health businesses

   $ 15   $ 3   $ 62  

AbbVie

     109     318     3  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total

   $ 124   $ 321   $ 65  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

        The net earnings of discontinued operations include income tax benefits of $109 million in 2017, $325 million in 2016 and $52 million in 2015. The tax benefits in 2017 and 2016 primarily relate to the resolution of various tax positions related to AbbVie's operations for years prior to the separation. 2015 includes $48 million of tax benefits related to the resolution of various tax positions related to prior years.

        The sale of the developed markets branded generics pharmaceuticals and animal health business in 2015 resulted in the recognition of a pretax gain of $2.840 billion, tax expense of $1.088 billion and an after tax gain of $1.752 billion. The 2015 tax provision included $667 million of tax expense on certain prior year income earned outside the U.S. related to the developed markets branded generics pharmaceuticals businesses that were not designated as permanently reinvested overseas.

Note 3 — Assets and Liabilities Held for Disposition

        In September 2016, Abbott announced that it entered into a definitive agreement to sell Abbott Medical Optics (AMO), its vision care business, to Johnson & Johnson for $4.325 billion in cash, subject to customary purchase price adjustments for cash, debt and working capital. The decision to sell AMO reflected Abbott's proactive shaping of its portfolio in line with its strategic priorities. In February 2017,

61


Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 3 — Assets and Liabilities Held for Disposition (Continued)

Abbott completed the sale of AMO to Johnson & Johnson and recognized a pre-tax gain of $1.163 billion including working capital adjustments, which was reported in the Other (income) expense, net line of the Consolidated Statement of Earnings in 2017. Abbott recorded an after-tax gain of $728 million in 2017 related to the sale of AMO. The operating results of AMO up to the date of sale continued to be included in Earnings from continuing operations as the business did not qualify for reporting as discontinued operations. For 2017, 2016 and 2015, the AMO earnings (losses) before taxes included in Abbott's consolidated earnings were $(18) million, $30 million and $64 million, respectively. Assets and liabilities of AMO were classified as held for disposition in Abbott's Consolidated Balance Sheet as of December 31, 2016.

        As discussed in Note 6 — Business Acquisitions, in conjunction with the acquisition of Alere Inc. (Alere), Abbott sold the Triage MeterPro cardiovascular and toxicology business and the assets and liabilities related to its B-type Natriuretic Peptide assay business run on Beckman Coulter analyzers to Quidel Corporation (Quidel). The legal transfer of certain assets and liabilities related to these businesses did not occur at the close of the sale to Quidel due to, among other factors, the time required to transfer marketing authorizations and other regulatory requirements in various countries. Under the terms of the sale agreement with Abbott, Quidel is subject to the risks and entitled to the benefits generated by these operations and assets. The assets and liabilities presented as held for disposition in the Consolidated Balance Sheet as of December 31, 2017, primarily relate to the businesses sold to Quidel.

        The following is a summary of the assets and liabilities held for disposition as of December 31, 2017 and 2016:

(in millions)
   December 31,
2017 		  December 31,
2016 		 

Trade receivables, net

   $ 12   $ 222  

Total inventories

     8     240  

Prepaid expenses and other current assets

     —     51  
​ ​ ​ ​ ​ ​ ​ ​

Current assets held for disposition

     20     513  
​ ​ ​ ​ ​ ​ ​ ​

Net property and equipment

     56     247  

Intangible assets, net of amortization

     18     529  

Goodwill

     102     1,966  

Deferred income taxes and other assets

     —     11  
​ ​ ​ ​ ​ ​ ​ ​

Non-current assets held for disposition

     176     2,753  
​ ​ ​ ​ ​ ​ ​ ​

Total assets held for disposition

   $ 196   $ 3,266  
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​

Trade accounts payable

   $ —   $ 71  

Salaries, wages, commissions and other accrued liabilities

     —     174  
​ ​ ​ ​ ​ ​ ​ ​

Current liabilities held for disposition

     —     245  

Post-employment obligations, deferred income taxes and other long-term liabilities

     —     59  
​ ​ ​ ​ ​ ​ ​ ​

Total liabilities held for disposition

   $ —   $ 304  
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​

62


Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 4 — Supplemental Financial Information

        Other (income) expense, net, for 2017 includes a pre-tax gain of $1.163 billion related to the sale of AMO to Jonhson & Johnson. See Note 3 — Assets and Liabilities Held for Disposition for further details. Other (income) expense, net, for 2016 includes expense of $947 million to adjust Abbott's holding of Mylan N.V. ordinary shares due to a decline in the fair value of the securities which was considered by Abbott to be other than temporary. Other (income) expense, net, for 2015 primarily relates to a $207 million gain on the sale of a portion of Abbott's position in Mylan N.V. stock and $79 million of income resulting from a decrease in the fair value of contingent consideration related to a business acquisition.

        The detail of various balance sheet components is as follows:

 
   2017   2016  
 
   (in millions)
  

Long-term Investments:

              

Equity securities

   $ 797   $ 2,906  

Other

     86     41  
​ ​ ​ ​ ​ ​ ​ ​

Total

   $ 883   $ 2,947  
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​

        The decrease in long-term investments relates to the sale in 2017 of the remaining ordinary shares of Mylan N.V. that Abbott held. Abbott sold 69.75 million ordinary shares of Mylan N.V. and received $2.704 billion in proceeds. Abbott recorded a $45 million pre-tax gain in 2017 related to the sale of these ordinary shares, which was recognized in the Other (income) expense, net line of the Consolidated Statement of Earnings. As of December 31, 2017, Abbott no longer has an ownership interest in Mylan N.V.

        Abbott's equity securities as of December 31, 2017, include $363 million of investments in mutual funds that are held in a rabbi trust and were acquired as part of the St. Jude Medical, Inc. (St. Jude Medical) business acquisition. These investments, which are specifically designated as available for the purpose of paying benefits under a deferred compensation plan, are not available for general corporate purposes and are subject to creditor claims in the event of insolvency.

63


Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 4 — Supplemental Financial Information (Continued)

 
   2017   2016  
 
   (in millions)
  

Other Accrued Liabilities:

              

Accrued rebates payable to government agencies

   $ 124   $ 110  

Accrued other rebates (a)

     498     296  

All other

     3,189     2,175  
​ ​ ​ ​ ​ ​ ​ ​

Total

   $ 3,811   $ 2,581  
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
(a)
Accrued wholesaler chargeback rebates of $178 million and $214 million at December 31, 2017 and 2016, respectively, are netted in trade receivables because Abbott's customers are invoiced at a higher catalog price but only remit to Abbott their contract price for the products.
 
   2017   2016  
 
   (in millions)
  

Post-employment Obligations and Other Long-term Liabilities:

              

Defined benefit pension plans and post-employment medical and dental plans for significant plans

   $ 2,169   $ 2,154  

Deferred income taxes

     2,006     356  

All other (b)

     4,855     2,039  
​ ​ ​ ​ ​ ​ ​ ​

Total

   $ 9,030   $ 4,549  
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
(b)
2017 includes approximately $835 million of net unrecognized tax benefits, as well as approximately $100 million of acquisition consideration payable. 2016 includes approximately $560 million of net unrecognized tax benefits, as well as approximately $130 million of acquisition consideration payable.

        Since January 2010, Venezuela has been designated as a highly inflationary economy under U.S. GAAP. In 2014 and 2015, the government of Venezuela operated multiple mechanisms to exchange bolivars into U.S. dollars. These mechanisms included the CENCOEX, SICAD, and SIMADI rates, which stood at 6.3, 13.5, and approximately 200, respectively, at December 31, 2015. In 2015, Abbott continued to use the CENCOEX rate of 6.3 Venezuelan bolivars to the U.S. dollar to report the results, financial position, and cash flows related to its operations in Venezuela since Abbott continued to qualify for this exchange rate to pay for the import of various products into Venezuela.

        On February 17, 2016, the Venezuelan government announced that the three-tier exchange rate system would be reduced to two rates renamed the DIPRO and DICOM rates. The DIPRO rate is the official rate for food and medicine imports and was adjusted from 6.3 to 10 bolivars per U.S. dollar. The DICOM rate is a floating market rate published daily by the Venezuelan central bank, which at the end of the first quarter of 2016 was approximately 263 bolivars per U.S. dollar. As a result of decreasing government approvals to convert bolivars to U.S. dollars to pay for intercompany accounts, as well as the accelerating deterioration of economic conditions in the country, Abbott concluded that it was appropriate to move to the DICOM rate at the end of the first quarter of 2016. As a result, Abbott recorded a foreign currency exchange loss of $480 million in 2016 to revalue its net monetary assets in Venezuela. Abbott is continuing to use the DICOM rate to report the results of operations and to remeasure net monetary assets for Venezuela at the end of each quarter. As of December 31, 2017, Abbott's investment in its Venezuelan operations was not significant. As a result, any additional future foreign currency losses related to Venezuela would not be material.

64


Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 5 — Accumulated Other Comprehensive Income (Loss)

        The components of the changes in accumulated other comprehensive income (loss) from continuing operations, net of income taxes, are as follows: (in millions)

 
   Cumulative
Foreign
Currency
Translation
Adjustments 		  Net
Actuarial
Losses and
Prior Service
Costs and
Credits 		  Cumulative
Unrealized
Gains
(Losses) on
Marketable
Equity
Securities 		  Cumulative
Gains
(Losses) on
Derivative
Instruments
Designated as
Cash Flow
Hedges 		  Total  

Balance at December 31, 2015

   $ (4,829 ) $ (1,958 ) $ 65   $ 64   $ (6,658 )
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Other comprehensive income (loss) before reclassifications

     (130 )   (393 )   (1,109 )   41     (1,591 )

(Income) loss amounts reclassified from accumulated other comprehensive income (a)

     —     67     975     (56 )   986  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Net current period other comprehensive income (loss)

     (130 )   (326 )   (134 )   (15 )   (605 )
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Balance at December 31, 2016

     (4,959 )   (2,284 )   (69 )   49     (7,263 )
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Impact of business dispositions

     142     6     —     1     149  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Other comprehensive income (loss) before reclassifications

     1,365     (333 )   182     (170 )   1,044  

(Income) loss amounts reclassified from accumulated other comprehensive income (a)

     —     90     (118 )   36     8  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Net current period other comprehensive income (loss)

     1,365     (243 )   64     (134 )   1,052  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Balance at December 31, 2017

   $ (3,452 ) $ (2,521 ) $ (5 ) $ (84 ) $ (6,062 )
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
(a)
Reclassified amounts for foreign currency translation adjustments are recorded in the Consolidated Statement of Earnings as Net Foreign exchange (gain) loss; gains (losses) on marketable equity securities are recorded as Other (income) expense and gains/losses related to cash flow hedges are recorded as Cost of product sold. Net actuarial losses and prior service cost is included as a component of net periodic benefit plan cost — see Note 13 for additional information.

Note 6 — Business Acquisitions

        On January 4, 2017, Abbott completed the acquisition of St. Jude Medical, a global medical device manufacturer, for approximately $23.6 billion, including approximately $13.6 billion in cash and approximately $10 billion in Abbott common shares, which represented approximately 254 million shares of Abbott common stock, based on Abbott's closing stock price on the acquisition date. As part of the acquisition, approximately $5.9 billion of St. Jude Medical's debt was assumed, repaid or refinanced by Abbott. The acquisition provides expanded opportunities for future growth and is an important part of the company's ongoing effort to develop a strong, diverse portfolio of devices, diagnostics, nutritionals and branded generic pharmaceuticals. The combined business competes in nearly every area of the cardiovascular device market, as well as in the neuromodulation market.

        Under the terms of the agreement, for each St. Jude Medical common share, St. Jude Medical shareholders received $46.75 in cash and 0.8708 of an Abbott common share. At an Abbott stock price of

65


Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 6 — Business Acquisitions (Continued)

$39.36, which reflects the closing price on January 4, 2017, this represented a value of approximately $81 per St. Jude Medical common share and total purchase consideration of $23.6 billion. The cash portion of the acquisition was funded through a combination of medium and long-term debt issued in November 2016 and a $2.0 billion 120-day senior unsecured bridge term loan facility which was subsequently repaid.

        The final allocation of the fair value of the St. Jude Medical acquisition is shown in the table below.

(in billions)
    
  

Acquired intangible assets, non-deductible

   $ 15.5  

Goodwill, non-deductible

     13.1  

Acquired net tangible assets

     3.0  

Deferred income taxes recorded at acquisition

     (2.7 )

Net debt

     (5.3 )
​ ​ ​ ​ ​

Total final allocation of fair value

   $ 23.6  
​ ​ ​ ​ ​
​ ​ ​ ​ ​
​ ​ ​ ​ ​

        The goodwill is primarily attributable to expected synergies from combining operations, as well as intangible assets that do not qualify for separate recognition. The goodwill is identifiable to the Cardiovascular and Neuromodulation Products reportable segment. The acquired tangible assets consist primarily of trade accounts receivable of approximately $1.1 billion, inventory of approximately $1.7 billion, other current assets of $176 million, property and equipment of approximately $1.5 billion, and other long-term assets of approximately $455 million. The acquired tangible liabilities consist of trade accounts payable and other current liabilities of approximately $1.1 billion and other non-current liabilities of approximately $870 million.

        In 2016, Abbott and St. Jude Medical agreed to sell certain businesses to Terumo Corporation (Terumo) for approximately $1.12 billion. The sale included the St. Jude Medical Angio-Seal™ and Femoseal™ vascular closure and Abbott's Vado® Steerable Sheath businesses. The sale closed on January 20, 2017 and no gain or loss was recorded in the Consolidated Statement of Earnings.

        On October 3, 2017, Abbott acquired Alere Inc. (Alere), a diagnostic device and service provider, for $51.00 per common share in cash, which equated to a purchase price of approximately $4.5 billion. As part of the acquisition, Abbott tendered for Alere's preferred shares for a total value of approximately $0.7 billion. In addition, approximately $3.0 billion of Alere's debt was assumed and subsequently repaid. The acquisition establishes Abbott as a leader in point of care testing, expands Abbott's global diagnostics presence and provides access to new products, channels and geographies. Abbott utilized a combination of cash on hand and debt to fund the acquisition. See Note 10 — Debt and Lines of Credit for further details regarding the debt utilized for the acquisition.

66


Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 6 — Business Acquisitions (Continued)

        The preliminary allocation of the fair value of the Alere acquisition is shown in the table below. The allocation of the fair value of the acquisition will be finalized when the valuation is completed and differences between the preliminary and final allocation could be material.

(in billions)
    
  

Acquired intangible assets, non-deductible

   $ 3.5  

Goodwill, non-deductible

     4.1  

Acquired net tangible assets

     0.9  

Deferred income taxes recorded at acquisition

     (0.7 )

Net debt

     (2.6 )

Preferred stock

     (0.7 )
​ ​ ​ ​ ​

Total preliminary allocation of fair value

   $ 4.5  
​ ​ ​ ​ ​
​ ​ ​ ​ ​
​ ​ ​ ​ ​

        The goodwill is primarily attributable to expected synergies from combining operations, as well as intangible assets that do not qualify for separate recognition. The goodwill is identifiable to the Diagnostic Products reportable segment. The acquired tangible assets consist primarily of trade accounts receivable of approximately $430 million, inventory of approximately $425 million, other current assets of $206 million, property and equipment of approximately $540 million, and other long-term assets of $112 million. The acquired tangible liabilities consist of trade accounts payable and other current liabilities of approximately $625 million and other non-current liabilities of approximately $160 million.

        In the third quarter of 2017, Alere entered into agreements to sell its Triage MeterPro cardiovascular and toxicology business and the assets and liabilities related to its B-type Natriuretic Peptide assay business run on Beckman Coulter analyzers to Quidel Corporation (Quidel). The transactions with Quidel reflect a total purchase price of $400 million payable at the close of the transaction, $240 million payable in six annual installments beginning approximately six months after the close of the transaction, and contingent consideration with a maximum value of $40 million. In the third quarter of 2017, Alere entered into an agreement with Siemens Diagnostics Holding II B.V. (Siemens) to sell its subsidiary, Epocal Inc., for approximately $200 million payable at the close of the transaction. Alere agreed to divest these businesses in connection with the review by the Federal Trade Commission and the European Commission of Abbott's agreement to acquire Alere. The sale to Quidel closed on October 6, 2017, and the sale to Siemens closed on October 31, 2017. No gain or loss on these sales was recorded in the Consolidated Statement of Earnings.

        In 2017, consolidated Abbott results include $6.5 billion of sales and a pre-tax loss of approximately $1.3 billion related to the St. Jude Medical and Alere acquisitions, including approximately $1.5 billion of intangible amortization and $907 million of inventory step-up amortization. The pre-tax loss excludes acquisition, integration and restructuring-related costs.

        If the acquisitions of St. Jude Medical and Alere had occurred at the beginning of 2016, unaudited pro forma consolidated net sales would have been approximately $28.9 billion and the unaudited pro forma consolidated net loss from continuing operations would have been approximately $485 million in 2016. This includes amortization of approximately $940 million of inventory step-up and $1.7 billion of intangibles related to St. Jude Medical and Alere. For 2017, unaudited pro forma consolidated net sales would have been approximately $28.9 billion and unaudited pro forma consolidated net earnings from continuing operations would have been approximately $750 million, which includes $225 million of

67


Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 6 — Business Acquisitions (Continued)

intangible amortization related to Alere. The unaudited pro forma consolidated net earnings from continuing operations for 2017 exclude inventory step-up amortization related to St. Jude Medical and Alere of approximately $907 million which was recorded in 2017 but included in the 2016 unaudited pro forma results as noted above. The unaudited pro forma information is not necessarily indicative of the consolidated results of operations that would have been realized had the St. Jude Medical and Alere acquisitions been completed as of the beginning of 2016, nor is it meant to be indicative of future results of operations that the combined entity will experience.

        On July 17, 2017, Abbott commenced a tender offer to purchase for cash the 1.77 million outstanding shares of Alere's Series B Convertible Perpetual Preferred Stock at a price of $402 per share, plus accrued but unpaid dividends to, but not including, the settlement date of the tender offer. This tender offer was subject to the satisfaction of certain conditions, including Abbott's acquisition of Alere and upon there being validly tendered (and not properly withdrawn) at the expiration date of the tender offer that number of shares of Preferred Stock that equaled at least a majority of the Preferred Stock issued and outstanding at the expiration of the tender offer. The tender offer expired on October 3, 2017. All conditions to the offer were satisfied and Abbott accepted for payment the 1.748 million shares of Preferred Stock that were validly tendered (and not properly withdrawn). The remaining shares were cashed out for an amount equal to the $400.00 per share liquidation preference of such shares, plus accrued but unpaid dividends, without interest. Payment for all of the shares of Preferred Stock was made in the fourth quarter of 2017.

        In August 2015, Abbott completed the acquisition of the equity of Tendyne Holdings, Inc. (Tendyne) that Abbott did not already own for approximately $225 million in cash plus additional payments up to $150 million to be made upon completion of certain regulatory milestones. The acquisition of Tendyne, which is focused on developing minimally invasive mitral valve replacement therapies, allows Abbott to broaden its foundation in the treatment of mitral valve disease. The final allocation of the fair value of the acquisition resulted in non-deductible acquired in-process research and development of approximately $220 million, which is accounted for as an indefinite-lived intangible asset until regulatory approval or discontinuation, non-deductible goodwill of approximately $142 million, deferred tax assets and other net assets of approximately $18 million, deferred tax liabilities of approximately $85 million, and contingent consideration of approximately $70 million. The goodwill is identifiable to the Cardiovascular and Neuromodulation Products segment. If the acquisition of Tendyne had taken place as of the beginning of the comparable prior annual reporting period, consolidated net sales and earnings would not have been significantly different from reported amounts.

Note 7 — Goodwill and Intangible Assets

        The total amount of goodwill reported was $24.0 billion at December 31, 2017 and $7.7 billion at December 31, 2016. The amounts reported at December 31, 2017 and 2016 exclude goodwill reported in non-current assets held for disposition. In 2017, approximately $2.0 billion of goodwill was included as part of the net assets sold in the AMO divestiture. Goodwill increased by $17.2 billion in 2017 due to the completion of the St. Jude Medical and Alere acquisitions, partially offset by a decrease of $1.5 billion due to the sale of certain businesses to Terumo, Quidel and Siemens. Foreign currency translation increased goodwill by $653 million in 2017 and decreased goodwill by $66 million in 2016. Business acquisitions increased goodwill by approximately $79 million during 2016. The amount of goodwill related to reportable segments at December 31, 2017 was $3.2 billion for the Established Pharmaceutical Products segment, $286 million for the Nutritional Products segment, $4.1 billion for the Diagnostic Products segment, and $15.5 billion for the Cardiovascular and Neuromodulation Products segment. The Cardiovascular and

68


Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 7 — Goodwill and Intangible Assets (Continued)

Neuromodulation Products segment includes the amount previously reported under Abbott's Vascular Products segment, as well as the goodwill related to the St. Jude Medical acquisition. In 2017, there was no significant reduction of goodwill relating to impairments.

        The gross amount of amortizable intangible assets, primarily product rights and technology was $25.6 billion and $10.4 billion as of December 31, 2017 and 2016, respectively, and accumulated amortization was $8.1 billion and $6.2 billion as of December 31, 2017 and 2016, respectively. The December 31, 2016 amounts exclude net intangible assets reported in non-current assets held for disposition. As part of the sale of AMO in 2017, approximately $529 million of net intangible assets were included in the net assets sold. In 2017, the gross amount of amortizable intangible assets increased by approximately $14.5 billion due to the completion of the St. Jude Medical and Alere acquisitions, partially offset by a decrease of $210 million due to the sale of certain businesses to Quidel and Siemens. In 2016, intangible assets increased by approximately $104 million related to business acquisitions.

        Indefinite-lived intangible assets, which relate to in-process research and development acquired in a business combination, were approximately $3.9 billion and $349 million at December 31, 2017 and 2016, respectively. In 2017, in-process research and development increased by $4.5 billion due to the completion of the St. Jude Medical and Alere acquisitions, a portion of which became amortizable during the year. In 2017, Abbott also recorded a $53 million impairment of an in-process research and development project related to the Cardiovascular and Neuromodulation Products segment. In 2016, Abbott recorded an impairment of a $59 million in-process research and development project related to a non-reportable segment. Foreign currency translation increased intangible assets by $227 million in 2017 and $6 million in 2016.

        The estimated annual amortization expense for intangible assets recorded at December 31, 2017 is approximately $2.4 billion in 2018, $2.3 billion in 2019, $2.1 billion in 2020, $2.0 billion in 2021 and $2.0 billion in 2022. Amortizable intangible assets are amortized over 2 to 20 years (average 14 years).

Note 8 — Restructuring Plans

        In 2017, Abbott management approved restructuring plans as part of the integration of the acquisitions of St. Jude Medical into the cardiovascular and neuromodulation segment and Alere into the diagnostics segment, in order to leverage economies of scale and reduce costs. In 2017, charges of approximately $187 million, including one-time employee termination benefits were recorded, of which approximately $5 million is recorded in Cost of products sold and approximately $182 million in Selling, general and administrative expense. Abbott also assumed restructuring liabilities of approximately $23 million as part of the St. Jude Medical and Alere acquisitions. The following summarizes the activity in 2017 related to these actions and the status of the related accrual as of December 31, 2017:

(in millions)
    
  

Liabilities assumed as part of business acquisitions

   $ 23  

Restructuring charges

     187  

Payments and other adjustments

     (142 )
​ ​ ​ ​ ​

Accrued balance at December 31, 2017

   $ 68  
​ ​ ​ ​ ​
​ ​ ​ ​ ​
​ ​ ​ ​ ​

69


Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 8 — Restructuring Plans (Continued)

        From 2014 to 2017, Abbott management approved plans to streamline operations in order to reduce costs and improve efficiencies in various Abbott businesses including the nutritional, established pharmaceuticals and vascular businesses. Abbott recorded employee related severance and other charges of approximately $120 million in 2017, $33 million in 2016, and $95 million in 2015. Approximately $7 million in 2017, $9 million in 2016 and $18 million in 2015 are recorded in Cost of products sold, approximately $77 million in 2017, $5 million in 2016 and $34 million in 2015 are recorded in Research and development and approximately $36 million in 2017, $19 million in 2016 and $43 million in 2015 are recorded in Selling, general and administrative expense. Additional charges of approximately $2 million in 2017, $2 million in 2016 and $45 million in 2015 were recorded primarily for accelerated depreciation. The following summarizes the activity for these restructurings:

(in millions)
    
  

Restructuring charges recorded in 2014

   $ 164  

Payments and other adjustments

     (46 )
​ ​ ​ ​ ​

Accrued balance at December 31, 2014

     118  

Restructuring charges

     95  

Payments and other adjustments

     (113 )
​ ​ ​ ​ ​

Accrued balance at December 31, 2015

     100  

Restructuring charges

     33  

Payments and other adjustments

     (67 )
​ ​ ​ ​ ​

Accrued balance at December 31, 2016

     66  

Restructuring charges

     120  

Payments and other adjustments

     (45 )
​ ​ ​ ​ ​

Accrued balance at December 31, 2017

   $ 141  
​ ​ ​ ​ ​
​ ​ ​ ​ ​
​ ​ ​ ​ ​

Note 9 — Incentive Stock Program

        In connection with the completion of the St. Jude Medical acquisition in the first quarter of 2017, unvested St. Jude Medical stock options and restricted stock units were assumed by Abbott and converted into Abbott options and restricted stock units (as applicable) of substantially equivalent value, in accordance with the merger agreement. The number of shares underlying the converted options was 7,364,571 at a weighted average exercise price of $30.50. The number of restricted stock units converted was 2,324,500 at a weighted average grant date fair value of $37.69.

        The 2017 Incentive Stock Program authorizes the granting of nonqualified stock options, restricted stock awards, restricted stock units, performance awards, foreign benefits and other share-based awards. Stock options and restricted stock awards and units comprise the majority of benefits that have been granted and are currently outstanding under this program and a prior program. In 2017, Abbott granted 4,985,970 stock options, 580,203 restricted stock awards and 7,687,009 restricted stock units under this program.

        Under Abbott's stock incentive programs, the purchase price of shares under option must be at least equal to the fair market value of the common stock on the date of grant, and the maximum term of an option is 10 years. Options generally vest equally over three years. Restricted stock awards generally vest between 3 and 5 years and for restricted stock awards that vest over 5 years, no more than one-third of the

70


Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 9 — Incentive Stock Program (Continued)

award vests in any one year upon Abbott reaching a minimum return on equity target. Restricted stock units vest over three years and upon vesting, the recipient receives one share of Abbott stock for each vested restricted stock unit. The aggregate fair market value of restricted stock awards and units is recognized as expense over the requisite service period, which may be shorter than the vesting period if an employee is retirement eligible. Forfeitures are estimated at the time of grant. Restricted stock awards and settlement of vested restricted stock units are issued out of treasury shares. Abbott generally issues new shares for exercises of stock options. As a policy, Abbott does not purchase its shares relating to its share-based programs.

        In April 2017, Abbott's shareholders authorized the 2017 Incentive Stock Program under which a maximum of 170 million shares were available for issuance. At December 31, 2017, approximately 169 million shares remained available for future issuance.

        The number of restricted stock awards and units outstanding and the weighted-average grant-date fair value at December 31, 2017 and December 31, 2016 was 15,518,719 and $42.82 and 13,705,511 and $41.03, respectively. The number of restricted stock awards and units, and the weighted-average grant-date fair value, that were granted, converted, vested and lapsed during 2017 were 8,267,212 and $45.20, 2,324,500 and $37.69, 7,553,969 and $40.77 and 1,224,535 and $41.76, respectively. The fair market value of restricted stock awards and units vested in 2017, 2016 and 2015 was $348 million, $225 million and $312 million, respectively.

 
   Options Outstanding   Exercisable Options  
 
   Shares   Weighted
Average
Exercise
Price 		  Weighted
Average
Remaining
Life (Years) 		  Shares   Weighted
Average
Exercise
Price 		  Weighted
Average
Remaining
Life (Years) 		 

December 31, 2016

     35,888,333   $ 34.17     5.3     23,290,260   $ 30.48     3.5  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Granted

     4,985,970     45.03                          

Converted for St. Jude Medical

     7,364,571     30.50                          

Exercised

     (11,620,026 )   27.85                          

Lapsed

     (805,048 )   39.76                          
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

December 31, 2017

     35,813,800   $ 36.85     5.8     22,216,890   $ 34.54     4.7  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

        The aggregate intrinsic value of options outstanding and exercisable at December 31, 2017 were each $500 million. The total intrinsic value of options exercised in 2017, 2016 and 2015 was $233 million, $98 million and $167 million, respectively. The total unrecognized compensation cost related to all share-based compensation plans at December 31, 2017 amounted to approximately $291 million, which is expected to be recognized over the next three years.

        Total non-cash stock compensation expense charged against income from continuing operations in 2017, 2016 and 2015 for share-based plans totaled approximately $406 million, $310 million and $291 million, respectively, and the tax benefit recognized was approximately $242 million, $100 million and $98 million, respectively. The increase in the 2017 tax benefit primarily relates to the $120 million of tax benefit recorded in income after the adoption of ASU 2016-09. Stock compensation cost capitalized as part of inventory is not significant.

71


Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 9 — Incentive Stock Program (Continued)

        The fair value of an option granted in 2017, 2016 and 2015 was $6.54, $4.38, and $6.67, respectively. The fair value of an option grant was estimated using the Black-Scholes option-pricing model with the following assumptions:

 
   2017   2016   2015  

Risk-free interest rate

     2.1 %   1.4 %   1.8 %

Average life of options (years)

     6.0     6.0     6.0  

Volatility

     18.0 %   17.0 %   17.0 %

Dividend yield

     2.4 %   2.7 %   2.0 %

        The risk-free interest rate is based on the rates available at the time of the grant for zero-coupon U.S. government issues with a remaining term equal to the option's expected life. The average life of an option is based on both historical and projected exercise and lapsing data. Expected volatility is based on implied volatilities from traded options on Abbott's stock and historical volatility of Abbott's stock over the expected life of the option. Dividend yield is based on the option's exercise price and annual dividend rate at the time of grant.

72


Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 10 — Debt and Lines of Credit

        The following is a summary of long-term debt at December 31: (in millions)

 
   2017   2016  

5.125% Notes, due 2019

   $ 947   $ 947  

2.35% Notes, due 2019

     2,850     2,850  

2.50% Line of credit borrowing due 2019

     1,150     —  

2.80% Notes, due 2020

     500     —  

4.125% Notes, due 2020

     597     597  

2.00% Notes, due 2020

     750     750  

2.90% Notes, due 2021

     2,850     2,850  

2.55% Notes, due 2022

     750     750  

2.62% Term loan due 2022

     2,800     —  

3.25% Notes, due 2023

     900     —  

3.40% Notes, due 2023

     1,500     1,500  

3.875% Notes, due 2025

     500     —  

2.95% Notes, due 2025

     1,000     1,000  

3.75% Notes, due 2026

     3,000     3,000  

4.75% Notes, due 2036

     1,650     1,650  

6.15% Notes, due 2037

     547     547  

6.0% Notes, due 2039

     515     515  

5.3% Notes, due 2040

     694     694  

4.75% Notes, due 2043

     700     —  

4.90% Notes, due 2046

     3,250     3,250  

Unamortized debt issuance costs

     (119 )   (117 )

Other, including fair value adjustments relating to interest rate hedge contracts designated as fair value hedges

     (121 )   (102 )
​ ​ ​ ​ ​ ​ ​ ​

Total, net of current maturities

     27,210     20,681  

Current maturities of long-term debt

     508     3  
​ ​ ​ ​ ​ ​ ​ ​

Total carrying amount

   $ 27,718   $ 20,684  
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​

        In the first quarter of 2017, as part of the acquisition of St. Jude Medical, Abbott's long-term debt increased due to the assumption of outstanding debt previously issued by St. Jude Medical. Abbott exchanged certain St. Jude Medical debt obligations with an aggregate principal amount of approximately $2.9 billion for debt issued by Abbott which consists of:

 
   Principal Amount  

2.00% Senior Notes due 2018

   $ 473.8 million  

2.80% Senior Notes due 2020

   $ 483.7 million  

3.25% Senior Notes due 2023

   $ 818.4 million  

3.875% Senior Notes due 2025

   $ 490.7 million  

4.75% Senior Notes due 2043

   $ 639.1 million  

        Following this exchange, approximately $194.2 million of existing St. Jude Medical notes remain outstanding across the five series of existing notes which have the same coupons and maturities as those listed above. There were no significant costs associated with the exchange of debt. In addition, during the

73


Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 10 — Debt and Lines of Credit (Continued)

first quarter of 2017, Abbott assumed and subsequently repaid approximately $2.8 billion of various St. Jude Medical debt obligations.

        On January 4, 2017, as part of funding the cash portion of the St. Jude Medical acquisition, Abbott borrowed $2.0 billion under a 120-day senior unsecured bridge term loan facility. This facility was repaid during the first quarter of 2017.

        In 2017, Abbott issued 364-day yen-denominated debt, of which $195 million was outstanding at December 31, 2017. Abbott also paid off a $479 million yen-denominated short-term borrowing during the year.

        On July 31, 2017, Abbott entered into a 5-year term loan agreement that allowed Abbott to borrow up to $2.8 billion on an unsecured basis for the acquisition of Alere. On October 3, 2017, Abbott borrowed $2.8 billion under this term loan agreement to finance the acquisition of Alere, to repay certain indebtedness of Abbott and Alere, and to pay fees and expenses in connection with the acquisition. Borrowings under the term loan bore interest based on a Eurodollar rate, plus an applicable margin based on Abbott's credit ratings. Abbott paid off this term loan on January 5, 2018.

        On October 3, 2017 Abbott borrowed $1.7 billion under its lines of credit. Proceeds from such borrowing were used to finance the acquisition of Alere, to repay certain indebtedness of Abbott and Alere, and to pay fees and expenses in connection with the acquisition. These lines of credit are part of a 2014 revolving credit agreement that provides Abbott with the ability to borrow up to $5 billion on an unsecured basis. Advances under the revolving credit agreement, including the $1.7 billion borrowing in October 2017, will mature and be payable on July 10, 2019. The $1.7 billion borrowing bore interest based on a Eurodollar rate, plus an applicable margin based on Abbott's credit ratings. Prior to October 3, 2017, no amounts were previously drawn under the revolving credit agreement. In the fourth quarter of 2017, Abbott paid off $550 million on the revolving loan. Abbott paid off the remaining balance on this revolving loan on January 5, 2018.

        In the fourth quarter of 2017, in conjunction with the acquisition of Alere, Abbott assumed and subsequently repaid $3.0 billion of Alere's debt.

        In November 2016, Abbott issued $15.1 billion of medium and long-term debt to primarily fund the cash portion of the acquisition of St. Jude Medical. Abbott issued $2.85 billion of 2.35% Senior Notes due November 22, 2019; $2.85 billion of 2.90% Senior Notes due November 30, 2021; $1.50 billion of 3.40% Senior Notes due November 30, 2023; $3.00 billion of 3.75% Senior Notes due November 30, 2026; $1.65 billion of 4.75% Senior Notes due November 30, 2036; and $3.25 billion of 4.90% Senior Notes due November 30, 2046. In November 2016, Abbott also entered into interest rate swap contracts totaling $3.0 billion related to the new debt, which have the effect of changing Abbott's obligation from a fixed interest rate to a variable interest rate obligation on the related debt instruments.

        In March 2015, Abbott issued $2.5 billion of long-term debt consisting of $750 million of 2.00% Senior Notes due March 15, 2020; $750 million of 2.55% Senior Notes due March 15, 2022; and $1.0 billion of 2.95% Senior Notes due March 15, 2025. Proceeds from this debt were used to pay down short-term borrowings. Abbott also entered into interest rate swap contracts totaling $2.5 billion, of which $1.5 billion was unwound in 2017. These contracts have the effect of changing Abbott's obligation from a fixed interest rate to a variable interest rate obligation.

74


Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 10 — Debt and Lines of Credit (Continued)

        Principal payments required on long-term debt outstanding at December 31, 2017 are $508 million in 2018, $5.0 billion in 2019, $1.8 billion in 2020, $2.9 billion in 2021, $3.6 billion in 2022 and $14.3 billion in 2023 and thereafter.

        At December 31, 2017, Abbott's long-term debt rating was BBB by Standard & Poor's Corporation and Baa3 by Moody's Investors Service (Moody's). In February 2018, Moody's raised Abbott's rating to Baa2 with a positive outlook. Abbott has readily available financial resources, including lines of credit of $5.0 billion which expire in 2019 and that support commercial paper borrowing arrangements. Abbott's weighted-average interest rate on short-term borrowings was 0.3% at December 31, 2017, 0.6% at December 31, 2016 and 0.2% at December 31, 2015.

        In February 2016, Abbott obtained a commitment for a 364-day senior unsecured bridge term loan facility for an amount not to exceed $9 billion in conjunction with its pending acquisition of Alere. This commitment, which was automatically extended for up to 90 days on January 29, 2017, expired on April 30, 2017 and was not renewed since Abbott did not need this bridge facility to finance the Alere acquisition. The fees associated with the bridge facilities were recognized in interest expense.

Note 11 — Financial Instruments, Derivatives and Fair Value Measures

        Certain Abbott foreign subsidiaries enter into foreign currency forward exchange contracts to manage exposures to changes in foreign exchange rates for anticipated intercompany purchases by those subsidiaries whose functional currencies are not the U.S. dollar. These contracts, with notional amounts totaling $3.3 billion at December 31, 2017, and $2.6 billion at December 31, 2016, are designated as cash flow hedges of the variability of the cash flows due to changes in foreign exchange rates and are recorded at fair value. At December 31, 2016, $107 million of the notional amount related to AMO, a business that was divested in the first quarter of 2017. Accumulated gains and losses as of December 31, 2017 will be included in Cost of products sold at the time the products are sold, generally through the next twelve to eighteen months. The amount of hedge ineffectiveness was not significant in 2017, 2016 and 2015.

        Abbott enters into foreign currency forward exchange contracts to manage currency exposures for foreign currency denominated third-party trade payables and receivables, and for intercompany loans and trade accounts payable where the receivable or payable is denominated in a currency other than the functional currency of the entity. For intercompany loans, the contracts require Abbott to sell or buy foreign currencies, primarily European currencies and Japanese yen, in exchange for primarily U.S. dollars and other European currencies. For intercompany and trade payables and receivables, the currency exposures are primarily the U.S. dollar, European currencies and Japanese yen. At December 31, 2017, 2016 and 2015, Abbott held notional amounts of $20.1 billion, $14.9 billion and $14.0 billion, respectively, of such foreign currency forward exchange contracts. At December 31, 2016, $1.2 billion of the contracts related to AMO, a business that was divested in the first quarter of 2017.

        In March 2017, Abbott repaid its $479 million foreign denominated short-term debt which was designated as a hedge of the net investment in a foreign subsidiary. At December 31, 2016 and 2015, the value of this short-term debt was $454 million and $439 million, respectively, and changes in the fair value of the debt up through the date of repayment due to changes in exchange rates were recorded in Accumulated other comprehensive income (loss), net of tax.

75


Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 11 — Financial Instruments, Derivatives and Fair Value Measures (Continued)

        Abbott is a party to interest rate hedge contracts totaling notional amounts of $4.0 billion at December 31, 2017, $5.5 billion at December 31, 2016 and $4.0 billion at December 31, 2015, to manage its exposure to changes in the fair value of fixed-rate debt. These contracts are designated as fair value hedges of the variability of the fair value of fixed-rate debt due to changes in the long-term benchmark interest rates. The effect of the hedge is to change a fixed-rate interest obligation to a variable rate for that portion of the debt. Abbott records the contracts at fair value and adjusts the carrying amount of the fixed-rate debt by an offsetting amount. No hedge ineffectiveness was recorded in income in 2017, 2016 and 2015 for these hedges.

        In the second quarter of 2017, Abbott unwound approximately $1.5 billion in interest rate swaps relating to the 2.00% Note due in 2020 and the 2.55% Note due in 2022. The proceeds received were not significant.

        In December 2016, Abbott unwound approximately $1.5 billion in interest rate swaps relating to the 4.125% Note due in 2020 and the 5.125% Note due in 2019. As part of the unwinding, Abbott received approximately $55 million in cash, which was included in the Cash Flow From Financing Activities section of the Consolidated Statement of Cash Flows in 2016.

        Gross unrealized holding gains (losses) on available-for-sale equity securities totaled $(5) million, $10 million and $171 million at December 31, 2017, 2016 and 2015, respectively.

        The following table summarizes the amounts and location of certain derivative financial instruments as of December 31:

 
   Fair Value — Assets   Fair Value — Liabilities
 
   2017   2016   Balance Sheet Caption   2017   2016   Balance Sheet Caption
 
    
    
   (in millions)
    
    
    

Interest rate swaps designated as fair value hedges

   $  —   $ 8   Deferred income taxes and other assets   $ 93   $ 74   Post-employment obligations and other long-term liabilities

Foreign currency forward exchange contracts —

                                

Hedging instruments

     21     99   Other prepaid expenses and receivables     106     15   Other accrued liabilities

Others not designated as hedges

     117     177   Other prepaid expenses and receivables     99     67   Other accrued liabilities

Debt designated as a hedge of net investment in a foreign subsidiary

     —     —   n/a     —     454   Short-term borrowings
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

  $ 138   $ 284       $ 298   $ 610    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

76


Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 11 — Financial Instruments, Derivatives and Fair Value Measures (Continued)

        The following table summarizes the activity for foreign currency forward exchange contracts designated as cash flow hedges, debt designated as a hedge of net investment in a foreign subsidiary and certain other derivative financial instruments, as well as the amounts and location of income (expense) and gain (loss) reclassified into income. The amount of hedge ineffectiveness was not significant in 2017, 2016 and 2015 for these hedges.

 
   Gain (loss) Recognized in
Other Comprehensive
Income (loss) 		  Income (expense) and
Gain (loss) Reclassified
into Income 		   
 
   Income Statement
Caption
 
   2017   2016   2015   2017   2016   2015
 
   (in millions)
    

Foreign currency forward exchange contracts designated as cash flow hedges

   $ (226 ) $ 49   $ 91   $ (48 ) $ 48   $ 124   Cost of products sold

Debt designated as a hedge of net investment in a foreign subsidiary

     (25 )   (15 )   6     —     —     —   n/a

Interest rate swaps designated as fair value hedges

     n/a     n/a     n/a     (24 )   (127 )   15   Interest expense

        Losses of $64 million, gains of $8 million and losses of $77 million were recognized in 2017, 2016 and 2015, respectively, related to foreign currency forward exchange contracts not designated as hedges. These amounts are reported in the Consolidated Statement of Earnings on the Net foreign exchange (gain) loss line.

        The interest rate swaps are designated as fair value hedges of the variability of the fair value of fixed-rate debt due to changes in the long-term benchmark interest rates. The hedged debt is marked to market, offsetting the effect of marking the interest rate swaps to market.

        The carrying values and fair values of certain financial instruments as of December 31 are shown in the table below. The carrying values of all other financial instruments approximate their estimated fair values. The counterparties to financial instruments consist of select major international financial institutions. Abbott does not expect any losses from nonperformance by these counterparties.

 
   2017   2016  
 
   Carrying
Value 		  Fair
Value 		  Carrying
Value 		  Fair
Value 		 
 
   (in millions)
  

Long-term Investment Securities:

                          

Equity securities

   $ 797   $ 797   $ 2,906   $ 2,906  

Other

     86     86     41     42  

Total Long-term Debt

     (27,718 )   (29,018 )   (20,684 )   (21,147 )

Foreign Currency Forward Exchange Contracts:

                          

Receivable position

     138     138     276     276  

(Payable) position

     (205 )   (205 )   (82 )   (82 )

Interest Rate Hedge Contracts:

                          

Receivable position

     —     —     8     8  

(Payable) position

     (93 )   (93 )   (74 )   (74 )

77


Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 11 — Financial Instruments, Derivatives and Fair Value Measures (Continued)

        The following table summarizes the bases used to measure certain assets and liabilities at fair value on a recurring basis in the balance sheet:

 
    
   Basis of Fair Value Measurement  
 
   Outstanding
Balances 		  Quoted
Prices in
Active Markets 		  Significant Other
Observable
Inputs 		  Significant
Unobservable
Inputs 		 
 
   (in millions)
  

December 31, 2017:

                          

Equity securities

   $ 374   $ 374   $ —   $ —  

Foreign currency forward exchange contracts

     138     —     138     —  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total Assets

   $ 512   $ 374   $ 138   $ —  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Fair value of hedged long-term debt

   $ 3,898   $ —   $ 3,898   $ —  

Interest rate swap financial instruments

     93     —     93     —  

Foreign currency forward exchange contracts

     205     —     205     —  

Contingent consideration related to business combinations

     120     —     —     120  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total Liabilities

   $ 4,316   $ —   $ 4,196   $ 120  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

December 31, 2016:

                          

Equity securities

   $ 2,676   $ 2,676   $ —   $ —  

Interest rate swap financial instruments

     8     —     8     —  

Foreign currency forward exchange contracts

     276     —     276     —  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total Assets

   $ 2,960   $ 2,676   $ 284   $ —  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Fair value of hedged long-term debt

   $ 5,413   $ —   $ 5,413   $ —  

Interest rate swap financial instruments

     74     —     74     —  

Foreign currency forward exchange contracts

     82     —     82     —  

Contingent consideration related to business combinations

     136     —     —     136  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total Liabilities

   $ 5,705   $ —   $ 5,569   $ 136  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

        The decrease in equity securities in 2017 was driven by the sale of the remaining Mylan N.V. ordinary shares held by Abbott. Abbott sold 69.75 million ordinary shares of Mylan N.V. in 2017 which had a value of approximately $2.7 billion. The fair value of the Mylan N.V. equity securities up through the date of sale was determined based on the value of the publicly-traded ordinary shares. The fair value of foreign currency forward exchange contracts is determined using a market approach, which utilizes values for comparable derivative instruments. The fair value of the debt was determined based on the face value of the debt adjusted for the fair value of the interest rate swaps, which is based on a discounted cash flow analysis using significant other observable inputs.

        The fair value of the contingent consideration was determined based on independent appraisals adjusted for the time value of money and other changes in fair value primarily resulting from changes in regulatory timelines. Contingent consideration relates to businesses acquired by Abbott. The maximum amount for certain contingent consideration is not determinable as it is based on a percent of certain sales. Excluding such contingent consideration, the maximum amount estimated to be due is approximately $525 million, which is dependent upon attaining certain sales thresholds or based on the occurrence of certain events, such as regulatory approvals.

78


Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 12 — Litigation and Environmental Matters

        Abbott 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 and state remediation laws and is investigating potential contamination at a number of company-owned locations. Abbott has recorded an estimated cleanup cost for each site for which management believes Abbott has a probable loss exposure. No individual site cleanup exposure is expected to exceed $4 million, and the aggregate cleanup exposure is not expected to exceed $10 million.

        Abbott is involved in various claims and legal proceedings, and Abbott estimates the range of possible loss for its legal proceedings and environmental exposures to be from approximately $115 million to $160 million. The recorded accrual balance at December 31, 2017 for these proceedings and exposures was approximately $135 million. This accrual represents management's best estimate of probable loss, as defined by FASB ASC No. 450, "Contingencies." Within the next year, legal proceedings may occur that may result in a change in the estimated loss accrued by Abbott. While it is not feasible to predict the outcome of all such proceedings and exposures with certainty, management believes that their ultimate disposition should not have a material adverse effect on Abbott's financial position, cash flows, or results of operations.

79


Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 13 — Post-Employment Benefits

        Retirement plans consist of defined benefit, defined contribution and medical and dental plans. Information for Abbott's major defined benefit plans and post-employment medical and dental benefit plans is as follows:

 
   Defined Benefit
Plans 		  Medical and
Dental Plans 		 
(in millions)
   2017   2016   2017   2016  

Projected benefit obligations, January 1

   $ 8,517   $ 7,820   $ 1,274   $ 1,262  

Service cost — benefits earned during the year

     283     263     25     26  

Interest cost on projected benefit obligations

     287     288     45     43  

(Gains) losses, primarily changes in discount rates, plan design changes, law changes and differences between actual and estimated health care costs

     752     645     149     13  

Benefits paid

     (276 )   (242 )   (80 )   (71 )

Other, including foreign currency translation

     390     (257 )   (20 )   1  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Projected benefit obligations, December 31

   $ 9,953   $ 8,517   $ 1,393   $ 1,274  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Plan assets at fair value, January 1

   $ 7,542   $ 6,772   $ 416   $ 441  

Actual return on plans' assets

     1,107     631     65     28  

Company contributions

     645     582     12     10  

Benefits paid

     (276 )   (242 )   (74 )   (63 )

Other, including foreign currency translation

     280     (201 )   —     —  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Plan assets at fair value, December 31

   $ 9,298   $ 7,542   $ 419   $ 416  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Projected benefit obligations greater than plan assets, December 31

   $ (655 ) $ (975 ) $ (974 ) $ (858 )
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Long-term assets

   $ 563   $ 340   $ —   $ —  

Short-term liabilities

     (21 )   (18 )   (2 )   (1 )

Long-term liabilities

     (1,197 )   (1,297 )   (972 )   (857 )
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Net liability

   $ (655 ) $ (975 ) $ (974 ) $ (858 )
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Amounts Recognized in Accumulated Other Comprehensive Income (loss):

                          

Actuarial losses, net

   $ 3,466   $ 3,301   $ 456   $ 373  

Prior service cost (credits)

     (9 )   —     (208 )   (254 )
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total

   $ 3,457   $ 3,301   $ 248   $ 119  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

        The projected benefit obligations for non-U.S. defined benefit plans was $3.0 billion and $2.5 billion at December 31, 2017 and 2016, respectively. The accumulated benefit obligations for all defined benefit plans were $8.9 billion and $7.4 billion at December 31, 2017 and 2016, respectively.

80


Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 13 — Post-Employment Benefits (Continued)

        For plans where the accumulated benefit obligations exceeded plan assets at December 31, 2017 and 2016, the aggregate accumulated benefit obligations, the projected benefit obligations and the aggregate plan assets were as follows:

(in millions)
   2017   2016  

Accumulated benefit obligation

   $ 1,664   $ 1,485  

Projected benefit obligation

     1,892     1,697  

Fair value of plan assets

     696     653  

        The components of the net periodic benefit cost were as follows:

 
   Defined Benefit Plans   Medical and
Dental Plans 		 
 
   2017   2016   2015   2017   2016   2015  
 
   (in millions)
  

Service cost — benefits earned during the year

   $ 283   $ 263   $ 307   $ 25   $ 26   $ 33  

Interest cost on projected benefit obligations

     287     288     314     45     43     52  

Expected return on plans' assets

     (613 )   (565 )   (511 )   (33 )   (35 )   (39 )

Amortization of actuarial losses

     163     129     184     23     16     23  

Amortization of prior service cost (credits)

     1     —     1     (45 )   (45 )   (48 )
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total cost

     121     115     295     15     5     21  

Less: Discontinued operations

     —     —     (3 )   —     —     —  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Net cost — continuing operations

   $ 121   $ 115   $ 292   $ 15   $ 5   $ 21  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

        In 2017, Abbott recognized a $10 million curtailment gain related to the sale of AMO.

        Other comprehensive income (loss) for each respective year includes the amortization of actuarial losses and prior service costs (credits) as noted in the previous table. Other comprehensive income (loss) for each respective year also includes: net actuarial losses of $247 million for defined benefit plans and $97 million for medical and dental plans in 2017; net actuarial losses of $571 million for defined benefit plans and $20 million for medical and dental plans in 2016; net actuarial gains of $37 million for defined benefit plans and $116 million for medical and dental plans in 2015.

        The pretax amount of actuarial losses and prior service cost (credits) included in Accumulated other comprehensive income (loss) at December 31, 2017 that is expected to be recognized in the net periodic benefit cost in 2018 is $213 million and $1 million of expense, respectively, for defined benefit pension plans and $31 million of expense and $45 million of income, respectively, for medical and dental plans.

        The weighted average assumptions used to determine benefit obligations for defined benefit plans and medical and dental plans are as follows:

 
   2017   2016   2015  

Discount rate

     3.4 %   3.9 %   4.3 %

Expected aggregate average long-term change in compensation

     4.4 %   4.3 %   4.4 %

81


Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 13 — Post-Employment Benefits (Continued)

        The weighted average assumptions used to determine the net cost for defined benefit plans and medical and dental plans are as follows:

 
   2017   2016   2015  

Discount rate

     3.9 %   4.3 %   3.9 %

Expected return on plan assets

     7.6 %   7.6 %   7.4 %

Expected aggregate average long-term change in compensation

     4.3 %   4.3 %   4.3 %

        The assumed health care cost trend rates for medical and dental plans at December 31 were as follows:

 
   2017   2016   2015  

Health care cost trend rate assumed for the next year

     9 %   8 %   8 %

Rate that the cost trend rate gradually declines to

     5 %   5 %   5 %

Year that rate reaches the assumed ultimate rate

     2027     2027     2028  

        The discount rates used to measure liabilities were determined based on high-quality fixed income securities that match the duration of the expected retiree benefits. The health care cost trend rates represent Abbott's expected annual rates of change in the cost of health care benefits and are forward projections of health care costs as of the measurement date. A one-percentage point increase/(decrease) in the assumed health care cost trend rate would increase/(decrease) the accumulated post-employment benefit obligations as of December 31, 2017, by $179 million /$(150) million, and the total of the service and interest cost components of net post-employment health care cost for the year then ended by approximately $11 million/$(9) million.

82


Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 13 — Post-Employment Benefits (Continued)

        The following table summarizes the basis used to measure the defined benefit and medical and dental plan assets at fair value:

 
    
   Basis of Fair Value Measurement  
 
   Outstanding
Balances 		  Quoted
Prices in
Active Markets 		  Significant
Other
Observable
Inputs 		  Significant
Unobservable
Inputs 		  Measured at
NAV (k) 		 
 
   (in millions)
  

December 31, 2017:

                                

Equities:

                                

U.S. large cap (a)

   $ 2,506   $ 1,600   $ —   $ —   $ 906  

U.S. mid and small cap (b)

     670     243     —     —     427  

International (c)

     1,937     448     —     —     1,489  

Fixed income securities:

                                

U.S. government securities (d)

     510     11     286     —     213  

Corporate debt instruments (e)

     930     107     411     —     412  

Non-U.S. government securities (f)

     625     222     —     —     403  

Other (g)

     216     93     27     —     96  

Absolute return funds (h)

     1,814     135     —     —     1,679  

Commodities (i)

     60     —     —     4     56  

Cash and Cash Equivalents

     178     12     —     —     166  

Other (j)

     271     7     —     —     264  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

  $ 9,717   $ 2,878   $ 724   $ 4   $ 6,111  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

December 31, 2016:

                                

Equities:

                                

U.S. large cap (a)

   $ 1,889   $ 1,284   $ —   $ —   $ 605  

U.S. mid and small cap (b)

     549     183     —     —     366  

International (c)

     1,345     356     —     —     989  

Fixed income securities:

                                

U.S. government securities (d)

     437     5     258     —     174  

Corporate debt instruments (e)

     813     100     348     —     365  

Non-U.S. government securities (f)

     514     175     —     —     339  

Other (g)

     183     80     20     —     83  

Absolute return funds (h)

     1,891     106     —     —     1,785  

Commodities (i)

     84     —     —     12     72  

Cash and Cash Equivalents

     100     8     —     —     92  

Other (j)

     153     —     —     —     153  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

  $ 7,958   $ 2,297   $ 626   $ 12   $ 5,023  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
(a)
A mix of index funds and actively managed equity accounts that are benchmarked to various large cap indices.

(b)
A mix of index funds and actively managed equity accounts that are benchmarked to various mid and small cap indices.

(c)
A mix of index funds and actively managed pooled investment funds that are benchmarked to various non-U.S. equity indices in both developed and emerging markets.

83


Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 13 — Post-Employment Benefits (Continued)

(d)
A mix of index funds and actively managed accounts that are benchmarked to various U.S. government bond indices.

(e)
A mix of index funds and actively managed accounts that are benchmarked to various corporate bond indices.

(f)
Primarily United Kingdom, Japan, the Netherlands and Irish government-issued bonds.

(g)
Primarily asset backed securities and an actively managed, diversified fixed income vehicle benchmarked to the one-month Libor / Euribor.

(h)
Primarily funds invested by managers that have a global mandate with the flexibility to allocate capital broadly across a wide range of asset classes and strategies including, but not limited to equities, fixed income, commodities, interest rate futures, currencies and other securities to outperform an agreed upon benchmark with specific return and volatility targets.

(i)
Primarily investments in liquid commodity future contracts and private energy funds.

(j)
Primarily investments in private funds, such as private equity, private credit and private real estate.

(k)
In accordance with ASU 2015-07, investments measured at fair value using the NAV practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet.

        Equities that are valued using quoted prices are valued at the published market prices. Equities in a common collective trust or a registered investment company that are valued using significant other observable inputs are valued at the NAV provided by the fund administrator. The NAV is based on the value of the underlying assets owned by the fund minus its liabilities. For approximately half of these funds, investments may be redeemed once per month, with a required 7 to 30 day notice period. For the remaining funds, daily redemption of an investment is allowed. Fixed income securities that are valued using significant other observable inputs are valued at prices obtained from independent financial service industry recognized vendors. Abbott did not have any unfunded commitments related to fixed income funds at December 31, 2017 and 2016. For the majority of these funds, investments may be redeemed either weekly or monthly, with a required 2 to 14 day notice period. For the remaining funds, investments may be generally redeemed daily.

        Absolute return funds and commodities are valued at the NAV provided by the fund administrator. All private funds are valued at the NAV provided by the fund on a one-quarter lag adjusted for known cash flows and significant events through the reporting date. Abbott did not have any unfunded commitments related to absolute return funds at December 31, 2017 and 2016. Investments in these funds may be generally redeemed monthly or quarterly with required notice periods ranging from 5 to 45 days. For approximately $100 million of the absolute return funds, redemptions are subject to a 25% gate. For commodities, investments in the private energy funds cannot be redeemed but the funds will make distributions through liquidation. The estimate of the liquidation period for each fund ranges from 2018 to 2022. Abbott's unfunded commitments in these funds as of December 31, 2017 and 2016 were not significant. Investments in the private funds (excluding private energy funds) cannot be redeemed but the funds will make distributions through liquidation. The estimate of the liquidation period for each fund ranges from 2018 to 2027. Abbott's unfunded commitment in these funds was $489 million and $337 million as of December 31, 2017 and 2016, respectively.

84


Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 13 — Post-Employment Benefits (Continued)

        The investment mix of equity securities, fixed income and other asset allocation strategies is based upon achieving a desired return, as well as balancing higher return, more volatile equity securities with lower return, less volatile fixed income securities. Investment allocations are made across a range of markets, industry sectors, capitalization sizes, and in the case of fixed income securities, maturities and credit quality. The plans do not directly hold any securities of Abbott. There are no known significant concentrations of risk in the plans' assets. Abbott's medical and dental plans' assets are invested in a similar mix as the pension plan assets. The actual asset allocation percentages at year end are consistent with the company's targeted asset allocation percentages.

        The plans' expected return on assets, as shown above is based on management's expectations of long-term average rates of return to be achieved by the underlying investment portfolios. In establishing this assumption, management considers historical and expected returns for the asset classes in which the plans are invested, as well as current economic and capital market conditions.

        Abbott funds its domestic pension plans according to IRS funding limitations. International pension plans are funded according to similar regulations. Abbott funded $645 million in 2017 and $582 million in 2016 to defined pension plans. Abbott expects to contribute approximately $114 million to its pension plans in 2018.

        Total benefit payments expected to be paid to participants, which includes payments funded from company assets, as well as paid from the plans, are as follows:

(in millions)
   Defined
Benefit Plans 		  Medical and
Dental Plans 		 

2018

   $ 278   $ 68  

2019

     289     71  

2020

     307     74  

2021

     324     77  

2022

     344     79  

2023 to 2027

     2,032     421  

        The Abbott Stock Retirement Plan is the principal defined contribution plan. Abbott's contributions to this plan were $79 million in 2017, $83 million in 2016 and $81 million in 2015.

Note 14 — Taxes on Earnings from Continuing Operations

        Taxes on earnings from continuing operations reflect the annual effective rates, including charges for interest and penalties. 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.

        The Tax Cuts and Jobs Act ("TCJA") was enacted in the U.S. on December 22, 2017. The TCJA reduces the U.S. federal corporate tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings.

85


Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 14 — Taxes on Earnings from Continuing Operations (Continued)

        In the fourth quarter of 2017, Abbott recorded an estimate of net tax expense of $1.46 billion for the impact of the TCJA, which is included in Taxes on Earnings from Continuing Operations in the Consolidated Statement of Earnings. The estimate is provisional and includes a charge of approximately $2.89 billion for the transition tax, partially offset by a net benefit of approximately $1.42 billion for the remeasurement of deferred tax assets and liabilities and a net benefit of approximately $10 million related to certain other impacts of the TCJA.

        The one-time transition tax is based on Abbott's total post-1986 earnings and profits (E&P) that were previously deferred from U.S. income taxes. Abbott has not yet completed its calculation of the total post-1986 E&P for its foreign subsidiaries. The tax computation also requires the determination of the amount of post-1986 E&P considered held in cash and other specified assets. This amount may change as Abbott finalizes the calculation of post-1986 foreign E&P previously deferred from U.S. federal taxation and finalizes the amounts held in cash and other specified assets. Abbott plans to elect to pay the transition tax over eight years as allowed by the TCJA.

        Given the significant complexity of the TCJA, Abbott will continue to evaluate and analyze the impact of this legislation. The $1.46 billion estimate is provisional and is based on Abbott's initial analysis of the TCJA and may be materially adjusted in future periods due to among other things, additional analysis performed by Abbott and additional guidance that may be issued by the U.S. Department of Treasury, the Securities and Exchange Commission, or the Financial Accounting Standards Board.

        In 2017, taxes on earnings from continuing operations also include $435 million of tax expense related to the gain on the sale of the AMO business. In 2016, taxes on earnings from continuing operations include the impact of a net tax benefit of approximately $225 million, primarily as a result of the resolution of various tax positions from prior years, partially offset by the unfavorable impact of non-deductible foreign exchange losses related to Venezuela and the adjustment of the Mylan N.V. equity investment, as well as the recognition of deferred taxes associated with the then pending sale of AMO. In 2015, taxes on earnings from continuing operations include a tax cost of $71 million related to the disposal of shares of Mylan N.V. stock.

        No additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the transition tax. Determining the amount of unrecognized deferred tax liability related to any remaining undistributed foreign earnings not subject to the transition tax and additional outside basis difference in these entities is not practicable. In the U.S., Abbott's federal income tax returns through 2013 are settled except for the federal income tax returns of the former Alere consolidated group which are settled through 2012. There are numerous other income tax jurisdictions for which tax returns are not yet settled, none of which are individually significant. Reserves for interest and penalties are not significant.

        Earnings from continuing operations before taxes, and the related provisions for taxes on earnings from continuing operations, were as follows:

(in millions)
   2017   2016   2015  

Earnings From Continuing Operations Before Taxes:

                    

Domestic

   $ 308   $ 306   $ 789  

Foreign

     1,923     1,107     2,394  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total

   $ 2,231   $ 1,413   $ 3,183  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

86


Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 14 — Taxes on Earnings from Continuing Operations (Continued)


(in millions)
   2017   2016   2015  

Taxes on Earnings From Continuing Operations:

                    

Current:

                    

Domestic

   $ 2,260   $ 71   $ 64  

Foreign

     508     406     220  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total current

     2,768     477     284  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Deferred:

                    

Domestic

     (679 )   (147 )   313  

Foreign

     (211 )   20     (20 )
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total deferred

     (890 )   (127 )   293  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total

   $ 1,878   $ 350   $ 577  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

        Differences between the effective income tax rate and the U.S. statutory tax rate were as follows:

 
   2017   2016   2015  

Statutory tax rate on earnings from continuing operations

     35.0 %   35.0 %   35.0 %

Impact of foreign operations

     (16.3 )   (17.8 )   (18.2 )

Impact of TCJA

     65.5     —     —  

Excess tax benefits related to stock compensation

     (5.4 )   —     —  

Research tax credit

     (1.9 )   (1.8 )   (0.6 )

Resolution of certain tax positions pertaining to prior years

     —     (16.1 )   —  

Mylan share adjustment

     —     25.5     —  

State taxes, net of federal benefit

     0.5     (1.3 )   0.3  

Federal tax cost on sale of Mylan N.V. shares

     3.4     —     2.2  

All other, net

     3.4     1.3     (0.6 )
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Effective tax rate on earnings from continuing operations

     84.2 %   24.8 %   18.1 %
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

        Impact of foreign operations is primarily derived from operations in Puerto Rico, Switzerland, Ireland, the Netherlands, Costa Rica, and Singapore. The 2015 effective tax rate includes the impact of the R&D tax credit that was made permanent in the U.S. by the Protecting Americans from Tax Hikes Act of 2015.

87


Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 14 — Taxes on Earnings from Continuing Operations (Continued)

        The tax effect of the differences that give rise to deferred tax assets and liabilities were as follows:

(in millions)
   2017   2016  

Deferred tax assets:

              

Compensation and employee benefits

   $ 881   $ 1,061  

Other, primarily reserves not currently deductible, and NOL's and credit carryforwards          

     2,795     2,384  

Trade receivable reserves

     185     207  

Inventory reserves

     152     157  

Deferred intercompany profit

     249     231  

State income taxes

     62     164  
​ ​ ​ ​ ​ ​ ​ ​

Total deferred tax assets before valuation allowance

     4,324     4,204  

Valuation allowance

     (1,355 )   (189 )
​ ​ ​ ​ ​ ​ ​ ​

Total deferred tax assets

   $ 2,969   $ 4,015  
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​

Deferred tax liabilities:

              

Depreciation

     (200 )   (152 )

Unremitted earnings of foreign subsidiaries

     —     (175 )

Other, primarily the excess of book basis over tax basis of intangible assets

     (3,385 )   (2,018 )
​ ​ ​ ​ ​ ​ ​ ​

Total deferred tax liabilities

     (3,585 )   (2,345 )
​ ​ ​ ​ ​ ​ ​ ​

Total net deferred tax assets (liabilities)

   $ (616 ) $ 1,670  
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​

        Abbott has incurred losses in a foreign jurisdiction where realization of the future economic benefit is so remote that the benefit is not reflected as a deferred tax asset. The increase in the valuation allowance from 2016 to 2017 relates to deferred tax assets recorded in certain entities acquired as part of the acquisition of St. Jude Medical. Abbott does not believe that it is more likely than not that the benefits of these deferred tax assets will be realized.

        The following table summarizes the gross amounts of unrecognized tax benefits without regard to reduction in tax liabilities or additions to deferred tax assets and liabilities if such unrecognized tax benefits were settled:

(in millions)
   2017   2016  

January 1

   $ 972   $ 1,438  

Increase in tax positions due to acquisitions

     479     —  

Increase due to current year tax positions

     187     145  

Increase due to prior year tax positions

     76     101  

Decrease due to prior year tax positions

     (176 )   (703 )

Settlements

     (57 )   (9 )

Lapse of statute

     (41 )   —  
​ ​ ​ ​ ​ ​ ​ ​

December 31

   $ 1,440   $ 972  
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​

88


Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 14 — Taxes on Earnings from Continuing Operations (Continued)

        The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate is approximately $1.36 billion. Abbott believes that it is reasonably possible that the recorded amount of gross unrecognized tax benefits may decrease within a range of $150 million to $300 million, including cash adjustments, within the next twelve months as a result of concluding various domestic and international tax matters.

Note 15 — Segment and Geographic Area Information

        Abbott's principal business is the discovery, development, manufacture and sale of a broad line of health care products. Abbott's products are generally sold directly to retailers, wholesalers, hospitals, health care facilities, laboratories, physicians' offices and government agencies throughout the world. On January 4, 2017, Abbott completed the acquisition of St. Jude Medical. Beginning with the first quarter of 2017, Abbott's cardiovascular and neuromodulation business includes the results of its historical Vascular Products segment and the results of the businesses acquired from St. Jude Medical from the date of acquisition. On October 3, 2017, Abbott completed the acquisition of Alere. Beginning with the fourth quarter of 2017, Abbott's Diagnostic Products reportable segment includes the results of Alere from the date of acquisition.

        Abbott's reportable segments are as follows:

        Established Pharmaceutical Products —  International sales of a broad line of branded generic pharmaceutical products.

        Nutritional Products —  Worldwide sales of a broad line of adult and pediatric nutritional products.

        Diagnostic Products —  Worldwide sales of diagnostic systems and tests for blood banks, hospitals, commercial laboratories and alternate-care testing sites. For segment reporting purposes, the Core Laboratories Diagnostics, Molecular Diagnostics, Point of Care, Rapid Diagnostics and Ibis diagnostic divisions are aggregated and reported as the Diagnostic Products segment. Rapid Diagnostics is the business acquired from Alere.

        Cardiovascular and Neuromodulation Products —  Worldwide sales of rhythm management, electrophysiology, heart failure, vascular, structural heart and neuromodulation products.

        Non-reportable segments include AMO through the date of sale and Diabetes Care.

        Abbott's underlying accounting records are maintained on a legal entity basis for government and public reporting requirements. Segment disclosures are on a performance basis consistent with internal management reporting. The cost of some corporate functions and the cost of certain employee benefits are charged to segments at predetermined rates that approximate cost. Remaining costs, if any, are not allocated to segments. In addition, intangible asset amortization is not allocated to operating segments, and intangible assets and goodwill are not included in the measure of each segment's assets.

89


Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 15 — Segment and Geographic Area Information (Continued)

The following segment information has been prepared in accordance with the internal accounting policies of Abbott, as described above, and are not presented in accordance with generally accepted accounting principles applied to the consolidated financial statements.

 
   Net Sales to External Customers (a)   Operating Earnings (a)  
(in millions)
   2017   2016   2015   2017   2016   2015  

Established Pharmaceuticals

   $ 4,287   $ 3,859   $ 3,720   $ 848   $ 723   $ 658  

Nutritionals

     6,925     6,899     6,975     1,589     1,660     1,741  

Diagnostics

     5,616     4,813     4,646     1,468     1,194     1,171  

Cardiovascular and Neuromodulation

     8,911     2,896     2,792     2,720     1,037     1,061  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total Reportable Segments

     25,739     18,467     18,133   $ 6,625   $ 4,614   $ 4,631  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Other

     1,651     2,386     2,272                    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total

   $ 27,390   $ 20,853   $ 20,405                    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
(a)
Net sales were unfavorably affected by the relatively stronger U.S. dollar in 2016 and 2015. Operating earnings were unfavorably affected by the impact of foreign exchange in 2017, 2016 and 2015.
 
   2017   2016   2015  
 
   (in millions)
  

Total Reportable Segment Operating Earnings

   $ 6,625   $ 4,614   $ 4,631  

Corporate functions and benefit plans costs

     (506 )   (411 )   (416 )

Non-reportable segments

     306     304     268  

Net interest expense

     (780 )   (332 )   (58 )

Share-based compensation

     (406 )   (310 )   (291 )

Amortization of intangible assets

     (1,975 )   (550 )   (601 )

Other, net (b)

     (1,033 )   (1,902 )   (350 )
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Earnings from Continuing Operations before Taxes

   $ 2,231   $ 1,413   $ 3,183  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
(b)
Other, net includes inventory step-up amortization, integration costs associated with the acquisition of St. Jude Medical and Alere, and restructuring charges, partially offset by the gain on the sale of the AMO business in 2017. In 2016, Other, net includes the $947 million adjustment of the Mylan equity investment and $480 million of foreign currency exchange loss related to operations in Venezuela. Charges for restructuring actions and other cost reduction initiatives were approximately $384 million in 2017, $167 million in 2016 and $310 million in 2015. 2015 includes a $207 million pre-tax gain on the sale of a portion of the Mylan N.V. ordinary shares.

90


Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 15 — Segment and Geographic Area Information (Continued)

 
   Depreciation   Additions to
Property, Plant
and Equipment (c) 		  Total Assets  
(in millions)
   2017   2016   2015   2017   2016   2015   2017   2016   2015  

Established Pharmaceuticals

   $ 90   $ 71   $ 83   $ 181   $ 150   $ 112   $ 2,728   $ 2,486   $ 2,210  

Nutritionals

     164     160     157     147     199     139     3,160     3,189     3,187  

Diagnostics

     300     267     310     374     379     319     4,226     2,945     2,844  

Cardiovascular and Neuromodulation

     298     69     74     206     23     32     5,074     1,425     1,536  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total Reportable Segments

     852     567     624     908     751     602   $ 15,188   $ 10,045   $ 9,777  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Other

     194     236     247     227     370     508                    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total

   $ 1,046   $ 803   $ 871   $ 1,135   $ 1,121   $ 1,110                    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
(c)
Amounts exclude property, plant and equipment acquired through business acquisitions.
 
   2017   2016   2015  
 
   (in millions)
  

Total Reportable Segment Assets

   $ 15,188   $ 10,045   $ 9,777  

Cash and investments

     10,493     21,722     10,166  

Non-reportable segments

     740     1,280     1,267  

Goodwill and intangible assets (d)

     45,493     12,222     15,200  

All other (d)

     4,336     7,397     4,837  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total Assets

   $ 76,250   $ 52,666   $ 41,247  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
(d)
Goodwill and intangible assets related to AMO are included in the All other line in 2016.

91


Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 15 — Segment and Geographic Area Information (Continued)

 
   Net Sales to External
Customers (e) 		 
 
   2017   2016   2015  
 
   (in millions)
  

United States

   $ 9,673   $ 6,486   $ 6,270  

China

     2,146     1,728     1,796  

Germany

     1,366     1,044     1,004  

Japan

     1,255     924     895  

India

     1,237     1,114     1,053  

The Netherlands

     929     830     855  

Switzerland

     841     766     784  

Russia

     664     554     483  

France

     628     352     375  

Brazil

     541     410     381  

Italy

     507     365     383  

United Kingdom

     498     377     430  

Colombia

     494     424     388  

Canada

     443     408     428  

Vietnam

     427     434     331  

All Other Countries

     5,741     4,637     4,549  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Consolidated

   $ 27,390   $ 20,853   $ 20,405  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
(e)
Sales by country are based on the country that sold the product.

        Long-lived assets on a geographic basis primarily include property, plant and equipment. It excludes goodwill, intangible assets, deferred tax assets, and financial instruments. At December 31, 2017 and 2016, Long-lived assets totaled $8.9 billion and $6.6 billion, respectively, and in the United States such assets totaled $4.5 billion and $3.1 billion, respectively. Long-lived asset balances associated with other countries were not material on an individual country basis in either of the two years.

92


Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 16 — Quarterly Results (Unaudited)

(in millions except per share data)
   2017   2016  

First Quarter

              

Continuing Operations:

              

Net Sales

   $ 6,335   $ 4,885  

Gross Profit

     2,769     2,601  

Earnings from Continuing Operations

     386     56  

Basic Earnings per Common Share

     0.22     0.04  

Diluted Earnings per Common Share

     0.22     0.04  

Net Earnings

     419     316  

Basic Earnings Per Common Share (a)

     0.24     0.21  

Diluted Earnings Per Common Share (a)

     0.24     0.21  

Market Price Per Share-High

     45.84     44.05  

Market Price Per Share-Low

     38.34     36.00  

Second Quarter

    
 		    
 		  

Continuing Operations:

              

Net Sales

   $ 6,637   $ 5,333  

Gross Profit

     3,072     2,901  

Earnings from Continuing Operations

     270     599  

Basic Earnings per Common Share

     0.15     0.40  

Diluted Earnings per Common Share

     0.15     0.40  

Net Earnings

     283     615  

Basic Earnings Per Common Share (a)

     0.16     0.41  

Diluted Earnings Per Common Share (a)

     0.16     0.41  

Market Price Per Share-High

     49.59     44.58  

Market Price Per Share-Low

     42.31     36.76  

Third Quarter

    
 		    
 		  

Continuing Operations:

              

Net Sales

   $ 6,829   $ 5,302  

Gross Profit

     3,471     2,877  

Earnings (Loss) from Continuing Operations

     561     (357 )

Basic Earnings (Loss) per Common Share

     0.32     (0.24 )

Diluted Earnings (Loss) per Common Share

     0.32     (0.24 )

Net Earnings (Loss)

     603     (329 )

Basic Earnings (Loss) Per Common Share (a)

     0.34     (0.22 )

Diluted Earnings (Loss) Per Common Share (a)

     0.34     (0.22 )

Market Price Per Share-High

     54.80     45.79  

Market Price Per Share-Low

     47.83     39.16  

Fourth Quarter

    
 		    
 		  

Continuing Operations:

              

Net Sales

   $ 7,589   $ 5,333  

Gross Profit

     3,766     2,900  

Earnings (Loss) from Continuing Operations

     (864 )   765  

Basic Earnings (Loss) per Common Share

     (0.50 )   0.51  

Diluted Earnings (Loss) per Common Share

     (0.50 )   0.51  

Net Earnings (Loss)

     (828 )   798  

Basic Earnings (Loss) Per Common Share (a)

     (0.48 )   0.54  

Diluted Earnings (Loss) Per Common Share (a)

     (0.48 )   0.53  

Market Price Per Share-High

     57.77     43.78  

Market Price Per Share-Low

     53.20     37.38  
(a)
The sum of the four quarters of earnings per share for 2017 and 2016 may not add to the full year earnings per share amount due to rounding and/or the use of quarter-to-date weighted average shares to calculate the earnings per share amount in each respective quarter.

93

Management Report on Internal Control Over Financial Reporting

        The management of Abbott Laboratories is responsible for establishing and maintaining adequate internal control over financial reporting. Abbott's internal control system was designed to provide reasonable assurance to the company's management and board of directors regarding the preparation and fair presentation of published financial statements.

        All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

        Abbott's management assessed the effectiveness of the company's internal control over financial reporting as of December 31, 2017. In making this assessment, it used the criteria set forth in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. As allowed by SEC guidance, management excluded from its assessment the October 2017 acquisition of Alere Inc. which accounted for approximately 13% of Abbott's total assets and 2% of Abbott's total net sales from continuing operations as of and for the year ended December 31, 2017. Based on our assessment, we believe that, as of December 31, 2017, the company's internal control over financial reporting was effective based on those criteria.

        Abbott's independent registered public accounting firm has issued an audit report on their assessment of the effectiveness of the company's internal control over financial reporting. This report appears on page 96.

Miles D. White
Chairman of the Board and Chief Executive Officer

Brian B. Yoor
Executive Vice President, Finance and Chief Financial Officer

Robert E. Funck
Vice President, Controller

February 16, 2018

94

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Abbott Laboratories

Opinion on the Financial Statements

        We have audited the accompanying consolidated balance sheets of Abbott Laboratories and subsidiaries (the Company) as of December 31, 2017 and 2016, the related consolidated statements of earnings, comprehensive income, shareholders' investment and cash flows for each of the three years in the period ended December 31, 2017, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2017 and 2016, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with U.S. generally accepted accounting principles.

        We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 16, 2018 expressed an unqualified opinion thereon.

Basis for Opinion

        These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

        We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as the Company's auditor since 2013.

Chicago, Illinois
February 16, 2018

95

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Abbott Laboratories

Opinion on Internal Control over Financial Reporting

        We have audited Abbott Laboratories and subsidiaries' internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Abbott Laboratories and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on the COSO criteria.

        As indicated in the accompanying Management Report on Internal Control Over Financial Reporting, management's assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Alere Inc., which is included in the 2017 consolidated financial statements of the Company and constituted approximately 13% of total assets at December 31, 2017 and 2% of total net sales from continuing operations for the year then ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Alere Inc.

        We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2017 and 2016, the related consolidated statements of earnings, comprehensive income, shareholders' investment and cash flows for each of the three years in the period ended December 31, 2017, and the related notes of the Company and our report dated February 16, 2018 expressed an unqualified opinion thereon.

Basis for Opinion

        The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

        We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

        Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

        A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to

96

permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Chicago, Illinois
February 16, 2018

97

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

        None.

ITEM 9A.    CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

        Evaluation of disclosure controls and procedures.    The Chief Executive Officer, Miles D. White, and the Chief Financial Officer, Brian B. Yoor, evaluated the effectiveness of Abbott Laboratories' disclosure controls and procedures as of the end of the period covered by this report, and concluded that Abbott Laboratories' disclosure controls and procedures were effective to ensure that information Abbott is required to disclose in the reports that it files or submits with the Securities and Exchange Commission under the Securities Exchange Act of 1934 (the Exchange Act) is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms, and to ensure that information required to be disclosed by Abbott in the reports that it files or submits under the Exchange Act is accumulated and communicated to Abbott's management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Internal Control Over Financial Reporting

        Management's annual report on internal control over financial reporting.    Management's report on Abbott's internal control over financial reporting is included on page 94 hereof. The report of Abbott's independent registered public accounting firm related to their assessment of the effectiveness of internal control over financial reporting is included on page 96 hereof.

        Changes in internal control over financial reporting.    On October 3, 2017, Abbott completed the acquisition of Alere Inc. During the quarter ended December 31, 2017, there were no other changes in Abbott's internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, Abbott's internal control over financial reporting.

ITEM 9B.    OTHER INFORMATION

        None.

98


 PART III

ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

        Incorporated herein by reference are "Nominees for Election as Directors," "Committees of the Board of Directors," "Section 16(a) Beneficial Ownership Reporting Compliance," and "Procedure for Recommendation and Nomination of Directors and Transaction of Business at Annual Meeting" to be included in the 2018 Abbott Laboratories Proxy Statement. The 2018 Proxy Statement will be filed on or about March 16, 2018. Also incorporated herein by reference is the text found under the caption, "Executive Officers of the Registrant" on pages 16 through 19 hereof.

        Abbott has adopted a code of ethics that applies to its principal executive officer, principal financial officer, and principal accounting officer and controller. That code is part of Abbott's code of business conduct which is available free of charge through Abbott's investor relations website (www.abbottinvestor.com). Abbott intends to include on its website any amendment to, or waiver from, a provision of its code of ethics that applies to Abbott's principal executive officer, principal financial officer, and principal accounting officer and controller that relates to any element of the code of ethics definition enumerated in Item 406(b) of Regulation S-K.

ITEM 11.    EXECUTIVE COMPENSATION

        The material to be included in the 2018 Proxy Statement under the headings "2017 Director Compensation" and "Executive Compensation" is incorporated herein by reference. The 2018 Proxy Statement will be filed on or about March 16, 2018.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

(a)
Equity Compensation Plan Information.

The following table presents information as of December 31, 2017 about our compensation plans under which Abbott common shares have been authorized for issuance.

Plan Category
  (a)
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights 		  (b)
Weighted average
exercise price
of outstanding
options, warrants
and rights 		  (c)
Number of
securities remaining
available for
future issuance
under equity
compensation
plans (excluding
securities reflected
in column (a)) 		 

Equity compensation plans approved by security holders (1)

     30,913,341   $ 42.69     183,546,308  

Equity compensation plans not approved by security holders

     0     —     0  

Total (1)(2)

     30,913,341   $ 42.69     183,546,308  
(1)   (i)   Abbott Laboratories 1996 Incentive Stock Program.    Benefits under the 1996 Program include stock options intended to qualify for special tax treatment under Section 422 of the Internal Revenue Code, stock options that do not qualify for that special tax treatment ("non-qualified stock options"), restricted stock, restricted stock units, stock appreciation rights, performance awards, and foreign qualified benefits. The shares that remain available for issuance under the 1996 Program may be issued in connection with any one of these benefits and may be either authorized but unissued shares or treasury shares (except that restricted stock awards may be satisfied only from treasury shares).

99

        If there is a lapse, expiration, termination, forfeiture or cancellation of any benefit granted under the 1996 Program without the issuance of shares or payment of cash thereunder, the shares subject to or reserved for that benefit, or so reacquired, may again be used for new stock options, rights, or awards of any type authorized under the Abbott Laboratories 2009 Incentive Stock Program (the "2009 Program"). If shares are issued under any benefit under the 1996 Program and thereafter are reacquired by Abbott pursuant to rights reserved upon their issuance, or pursuant to the payment of the purchase price of shares under stock options by delivery of other common shares of Abbott, the shares subject to or reserved for that benefit, or so reacquired, may not again be used for new stock options, rights, or awards of any type authorized under the 1996 Program.

 
 
 
 
In April 2009, the 1996 Program was replaced by the 2009 Program. No further awards will be granted under the 1996 Program.

 
 
(ii)
 
Abbott Laboratories 2009 Incentive Stock Program.    Benefits under the 2009 Program include non-qualified stock options, restricted stock, restricted stock units, performance awards, other share-based awards (including stock appreciation rights, dividend equivalents and recognition awards), awards to non-employee directors, and foreign benefits. The shares that remain available for issuance under the 2009 Program may be issued in connection with any one of these benefits and may be either authorized but unissued shares or treasury shares (except that restricted stock awards are satisfied from treasury shares).

 
 
 
 
If there is a lapse, expiration, termination, forfeiture or cancellation of any benefit granted under the 2009 Program without the issuance of shares or payment of cash thereunder, the shares subject to or reserved for that benefit, or so reacquired, may again be used for new stock options, rights, or awards of any type authorized under the Abbott Laboratories 2017 Incentive Stock Program (the "2017 Program"). If shares are issued under any benefit under the 2009 Program and thereafter are reacquired by Abbott pursuant to rights reserved upon their issuance, or pursuant to the payment of the purchase price of shares under stock options by delivery of other common shares of Abbott, the shares subject to or reserved for that benefit, or so reacquired, may not again be used for new stock options, rights, or awards of any type authorized under the 2009 Program.

 
 
 
 
In April 2017, the 2009 Program was replaced by the 2017 Program. No further awards will be granted under the 2009 Program.

 
 
(iii)
 
Abbott Laboratories 2017 Incentive Stock Program.    Benefits under the 2017 Program include non-qualified stock options, restricted stock, restricted stock units, performance awards, other share-based awards (including stock appreciation rights, dividend equivalents and recognition awards), awards to non-employee directors, and foreign benefits. The shares that remain available for issuance under the 2017 Program may be issued in connection with any one of these benefits and may be either authorized but unissued shares or treasury shares (except that restricted stock awards are satisfied from treasury shares).

 
 
 
 
If there is a lapse, expiration, termination, forfeiture or cancellation of any benefit granted under the 2017 Program without the issuance of shares or payment of cash thereunder, the shares subject to or reserved for that benefit, or so reacquired, may again be used for new stock options, rights, or awards of any type authorized under the 2017 Program. If shares are issued under any benefit under the 2017 Program and thereafter are reacquired by Abbott pursuant to rights reserved upon their issuance, or pursuant to the payment of the purchase price of shares under stock options by delivery of other common shares of Abbott, the shares subject to or reserved for that benefit, or so reacquired, may not again be used for new stock options, rights, or awards of any type authorized under the 2017 Program.

100

    (iv)   Abbott Laboratories Employee Stock Purchase Plan for Non-U.S. Employees.    Eligible employees of participating non-U.S. affiliates of Abbott may participate in this plan. An eligible employee may authorize payroll deductions at the rate of 1% to 10% of eligible compensation (in multiples of one percent) subject to a limit of US $12,500 during any purchase cycle.

 
 
 
 
Purchase cycles are generally six months long and usually begin on August 1 and February 1. On the last day of each purchase cycle, Abbott uses participant contributions to acquire Abbott common shares. The shares may be either authorized but unissued shares, treasury shares, or shares acquired on the open market. The purchase price is typically 85% of the lower of the fair market value of the shares on the purchase date or on the first day of that purchase cycle. As the number of shares subject to outstanding options is indeterminable, columns (a) and (b) of the above table do not include information on the Employee Stock Purchase Plan. As of December 31, 2017, an aggregate of 14,877,472 common shares were available for future issuance under the Employee Stock Purchase Plan, including shares subject to purchase during the current purchase cycle.

 
 
 
 
In April 2017, the 2009 Employee Stock Purchase Plan for Non-U.S. Employees was amended and restated as the Abbott Laboratories 2017 Employee Stock Purchase Plan for Non-U.S. Employees.

(2)
 
 
 
Not included in the table:

 
 
(i)
 
Advanced Medical Optics, Inc. Plan.    In 2009, in connection with its acquisition of Advanced Medical Optics, Inc., Abbott assumed options outstanding under the AMO's 2004 Stock Incentive Plan, as amended and restated. As of December 31, 2017, 10,227 options remained outstanding under this plan. These options have a weighted average purchase price of $26.87. No further awards will be granted under the plan.

 
 
(ii)
 
St. Jude Medical, Inc. Plans.    In 2017, in connection with the acquisition of St. Jude Medical, Inc., Abbott assumed options outstanding under the St. Jude Medical, Inc. 2007 Stock Incentive Plan, as Amended and Restated (2014). As of December 31, 2017, 4,890,232 options remained outstanding under these plans. These options have a weighted average purchase price of $30.42. No further awards will be granted under these plans.

For additional information concerning the Abbott Laboratories 1996 Incentive Stock Program, the Abbott Laboratories 2009 Incentive Stock Program, the Abbott Laboratories 2017 Incentive Stock Program, and the Abbott Laboratories 2017 Employee Stock Purchase Plan for Non-U.S. Employees, see the discussion in Note 9 entitled "Incentive Stock Program" of the Notes to Consolidated Financial Statements included under Item 8, "Financial Statements and Supplementary Data."

(b)
Information Concerning Security Ownership.    Incorporated herein by reference is the material under the heading "Security Ownership of Executive Officers and Directors" and "Information Concerning Security Ownership" in the 2018 Proxy Statement. The 2018 Proxy Statement will be filed on or about March 16, 2018.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

        The material to be included in the 2018 Proxy Statement under the headings "The Board of Directors," "Committees of the Board of Directors," and "Approval Process for Related Person Transactions" is incorporated herein by reference. The 2018 Proxy Statement will be filed on or about March 16, 2018.

101

ITEM 14.    PRINCIPAL ACCOUNTING FEES AND SERVICES

        The material to be included in the 2018 Proxy Statement under the headings "Audit Fees and Non-Audit Fees" and "Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of the Independent Auditor" is incorporated herein by reference. The 2018 Proxy Statement will be filed on or about March 16, 2018.

102


 PART IV

ITEM 15.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)
Documents filed as part of this Form 10-K.

(1)
Financial Statements:    See Item 8, "Financial Statements and Supplementary Data," on page 49 hereof, for a list of financial statements.

(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 of Abbott Laboratories:
 
Abbott Laboratories Financial Statement Schedules
  Page No.  
 

Valuation and Qualifying Accounts (Schedule II)

     106  
 

Schedules I, III, IV, and V are not submitted because they are not applicable or not required

        
 

Report of Independent Registered Public Accounting Firm

     107  
 

Individual Financial Statements of businesses acquired by the registrant have been omitted pursuant to Rule 3.05 of Regulation S-X

        
(b)
Exhibits filed (see Exhibit Index on pages 108 through 117).

(c)
Financial Statement Schedule filed (page 106).

ITEM 16.    FORM 10-K SUMMARY

        None.

103


 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/ MILES D. WHITE
 Miles D. White
Chairman of the Board and
Chief Executive Officer

 
 
Date: February 16, 2018

        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 on February 16, 2018 in the capacities indicated below.

/s/ MILES D. WHITE
 Miles D. White
Chairman of the Board, Chief Executive Officer
and Director of Abbott Laboratories
(principal executive officer)		   /s/ BRIAN B. YOOR
 Brian B. Yoor
Executive Vice President, Finance and Chief
Financial Officer (principal financial officer)

/s/ ROBERT E. FUNCK
 Robert E. Funck
Vice President and Controller
(principal accounting officer)
 
 

/s/ ROBERT J. ALPERN, M.D.
 Robert J. Alpern, M.D.
Director of Abbott Laboratories
 
/s/ ROXANNE S. AUSTIN
 Roxanne S. Austin
Director of Abbott Laboratories

/s/ SALLY E. BLOUNT, PH.D.
 Sally E. Blount, Ph.D.
Director of Abbott Laboratories
 
/s/ EDWARD M. LIDDY
 Edward M. Liddy
Director of Abbott Laboratories

/s/ NANCY MCKINSTRY
 Nancy McKinstry
Director of Abbott Laboratories
 
/s/ PHEBE N. NOVAKOVIC
 Phebe N. Novakovic
Director of Abbott Laboratories

104

/s/ WILLIAM A. OSBORN
 William A. Osborn
Director of Abbott Laboratories		   /s/ SAMUEL C. SCOTT III
 Samuel C. Scott III
Director of Abbott Laboratories

/s/ DANIEL J. STARKS
 Daniel J. Starks
Director of Abbott Laboratories
 
/s/ JOHN G. STRATTON
 John G. Stratton
Director of Abbott Laboratories

/s/ GLENN F. TILTON
 Glenn F. Tilton
Director of Abbott Laboratories
 
 

105


 ABBOTT LABORATORIES AND SUBSIDIARIES
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
(in millions of dollars)

Allowances for Doubtful
Accounts and Product Returns
  Balance
at Beginning
of Year 		  Provisions/
Charges
to Income 		  Amounts
Charged Off
and Other
Deductions 		  Balance at
End of Year 		 

2017

   $ 250   $ 105   $ (61 ) $ 294  

2016

     337     92     (179 )   250  

2015

     310     225     (198 )   337  

106


 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of Abbott Laboratories

Opinion on the Financial Statement Schedule

We have audited the consolidated financial statements of Abbott Laboratories and subsidiaries (the Company) as of December 31, 2017 and 2016, and for each of the three years in the period ended December 31, 2017, and have issued our report thereon dated February 16, 2018 (included elsewhere in this Annual Report on Form 10-K). Our audits also included the financial statement schedule listed in Item 15(a)(2) of this Annual Report on Form 10-K. In our opinion, the financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects the information set forth therein.

Basis for Opinion

This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's schedule based on our audits. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

Chicago, Illinois
February 16, 2018

107


 EXHIBIT INDEX
ABBOTT LABORATORIES
ANNUAL REPORT
FORM 10-K
2017

 
   10-K
Exhibit
Table
Item No. 		   

    2.1  

*Agreement and Plan of Merger dated as of January 30, 2016, among Alere Inc. and Abbott Laboratories, filed as Exhibit 2.1 to the Abbott Laboratories Current Report on Form 8-K dated January 30, 2016.



 
 

2.2
 


*Amendment to Agreement and Plan of Merger, dated as of April 13, 2017, among Alere Inc., Abbott Laboratories and Angel Sub, Inc., filed as Exhibit 2.1 to the Abbott Laboratories Current Report on Form 8-K dated April 14, 2017.



 
 

2.3
 


*Agreement and Plan of Merger, dated as of April 27, 2016, by and among Abbott Laboratories, St. Jude Medical, Inc., Vault Merger Sub,  Inc. and Vault Merger Sub, LLC, filed as Exhibit 2.1 to the Abbott Laboratories Current Report on Form 8-K dated April 27, 2016.



 
 

2.4
 


*Stock Purchase Agreement, dated as of September 14, 2016, by and between Abbott Laboratories and Chace LLC and, solely for certain purposes, Johnson & Johnson, filed as Exhibit 2.1 to the Abbott Laboratories Current Report on Form 8-K dated September 14, 2016.

       

Certain schedules and exhibits have been omitted from these filings pursuant to Item 601(b)(2) of Regulation S-K. Abbott will furnish supplemental copies of any such schedules or exhibits to the U.S. Securities and Exchange Commission upon request.



 
 

3.1
 


*Articles of Incorporation, Abbott Laboratories, filed as Exhibit 3.1 to the Abbott Laboratories Quarterly Report on Form 10-Q for the quarter ended March 31, 1998.



 
 

3.2
 


*By-Laws of Abbott Laboratories, as amended and restated effective June 29, 2017, filed as Exhibit 3.1 to the Abbott Laboratories Current Report on Form 8-K dated June 29, 2017.



 
 

4.1
 


*Indenture dated as of February 9, 2001, between Abbott Laboratories and The Bank of New York Mellon Trust Company, N.A. (as successor to J.P. Morgan Trust Company, National Association, successor to Bank One Trust Company, N.A.) (including form of Security), filed as Exhibit 4.1 to the Abbott Laboratories Registration Statement on Form S-3 dated February 12, 2001.



 
 

4.2
 


*Supplemental Indenture dated as of February 27, 2006, between Abbott Laboratories and The Bank of New York Mellon Trust Company, N.A. (as successor to J.P. Morgan Trust Company, National Association), filed as Exhibit 4.2 to the Abbott Laboratories Registration Statement on Form S-3 dated February 28, 2006.



 
 

4.3
 


*Form of $1,000,000,000 6.150% Note due 2037, filed as Exhibit 99.6 to the Abbott Laboratories Current Report on Form 8-K dated November 6, 2007.



 
 

4.4
 


*Actions of the Authorized Officers with respect to Abbott's 5.150% Notes due 2012, 5.600% Notes due 2017 and 6.150% Notes due 2037, filed as Exhibit 99.3 to the Abbott Laboratories Current Report on Form 8-K dated November 6, 2007.



 
 

4.5
 


*Form of $2,000,000,000 5.125% Note due 2019, filed as Exhibit 99.4 to the Abbott Laboratories Current Report on Form 8-K dated February 26, 2009.

108

 
   10-K
Exhibit
Table
Item No. 		   

    4.6  

*Form of $1,000,000,000 6.000% Note due 2039, filed as Exhibit 99.5 to the Abbott Laboratories Current Report on Form 8-K dated February 26, 2009.



 
 

4.7
 


*Actions of the Authorized Officers with respect to Abbott's 5.125% Note due 2019 and 6.000% Note due 2039, filed as Exhibit 99.3 to the Abbott Laboratories Current Report on Form 8-K dated February 26, 2009.



 
 

4.8
 


*Form of 2020 Note, filed as Exhibit 99.5 to the Abbott Laboratories Current Report on Form 8-K dated May 27, 2010.



 
 

4.9
 


*Form of 2040 Note, filed as Exhibit 99.6 to the Abbott Laboratories Current Report on Form 8-K dated May 27, 2010.



 
 

4.10
 


*Actions of the Authorized Officers with respect to Abbott's 2.70% Notes, 4.125% Notes and 5.30% Notes, filed as Exhibit 99.3 to the Abbott Laboratories Current Report on Form 8-K dated May 27, 2010.



 
 

4.11
 


*Indenture, dated as of March 10, 2015, between Abbott Laboratories and U.S. Bank National Association (including form of Security), filed as Exhibit 4.1 to the Abbott Laboratories Current Report on Form 8-K dated March 5, 2015.



 
 

4.12
 


*Form of 2.000% Note due 2020, filed as Exhibit 99.4 to the Abbott Laboratories Current Report on Form 8-K dated March 5, 2015.



 
 

4.13
 


*Form of 2.550% Note due 2022, filed as Exhibit 99.5 to the Abbott Laboratories Current Report on Form 8-K dated March 5, 2015.



 
 

4.14
 


*Form of 2.950% Note due 2025, filed as Exhibit 99.6 to the Abbott Laboratories Current Report on Form 8-K dated March 5, 2015.



 
 

4.15
 


*Actions of the Authorized Officers with respect to Abbott's 2.000% Notes, 2.550% Notes and 2.950% Notes, filed as Exhibit 99.3 to the Abbott Laboratories Current Report on Form 8-K dated March 5, 2015.



 
 

4.16
 


*Form of 2.350% Notes due 2019, filed as Exhibit 4.2 to the Abbott Laboratories Current Report on Form 8-K dated November 22, 2016.



 
 

4.17
 


*Form of 2.900% Notes due 2021, filed as Exhibit 4.3 to the Abbott Laboratories Current Report on Form 8-K dated November 22, 2016.



 
 

4.18
 


*Form of 3.400% Notes due 2023, filed as Exhibit 4.4 to the Abbott Laboratories Current Report on Form 8-K dated November 22, 2016.



 
 

4.19
 


*Form of 3.750% Notes due 2026, filed as Exhibit 4.5 to the Abbott Laboratories Current Report on Form 8-K dated November 22, 2016.



 
 

4.20
 


*Form of 4.750% Notes due 2036, filed as Exhibit 4.6 to the Abbott Laboratories Current Report on Form 8-K dated November 22, 2016.



 
 

4.21
 


*Form of 4.900% Notes due 2046, filed as Exhibit 4.7 to the Abbott Laboratories Current Report on Form 8-K dated November 22, 2016.



 
 

4.22
 


*Officers' Certificate Pursuant to Sections 3.1 and 3.3 of the Indenture with respect to 2.350% Notes due 2019, 2.900% Notes due 2021, 3.400% Notes due 2023, 3.750% Notes due 2026, 4.750% Notes due 2036 and 4.900% Notes due 2046 (including forms of notes), filed as Exhibit 4.22 to the Abbott Laboratories 2017 Annual Report on Form 10-K.

109

 
   10-K
Exhibit
Table
Item No. 		   

    4.23  

*Form of 2.000% Notes due 2018, filed as Exhibit 4.2 to the Abbott Laboratories Current Report on Form 8-K dated March 22, 2017.



 
 

4.24
 


*Form of 2.800% Notes due 2020, filed as Exhibit 4.3 to the Abbott Laboratories Current Report on Form 8-K dated March 22, 2017.



 
 

4.25
 


*Form of 3.25% Notes due 2023, filed as Exhibit 4.4 to the Abbott Laboratories Current Report on Form 8-K dated March 22, 2017.



 
 

4.26
 


*Form of 3.875% Notes due 2025, filed as Exhibit 4.5 to the Abbott Laboratories Current Report on Form 8-K dated March 22, 2017.



 
 

4.27
 


*Form of 4.75% Notes due 2043, filed as Exhibit 4.6 to the Abbott Laboratories Current Report on Form 8-K dated March 22, 2017.



 
 

4.28
 


*Officers' Certificate Pursuant to Sections 3.1 and 3.3 of the Indenture with respect to 2.000% Notes due 2018, 2.800% Notes due 2020, 3.25% Notes due 2023, 3.875% Notes due 2025, and 4.75% Notes due 2043 (including form of notes), filed as Exhibit 4.7 to the Abbott Laboratories Quarterly Report on Form 10-Q for the period ended March 31, 2017.



 
 

4.29
 


†Indenture, dated as of July 28, 2009, between St. Jude Medical, LLC (successor to St. Jude Medical, Inc.) and U.S. Bank National Association, as trustee, filed as Exhibit 4.1 to the St. Jude Medical, Inc. Current Report on Form 8-K dated July 28, 2009.



 
 

4.30
 


†Fourth Supplemental Indenture, dated as of April 2, 2013, between St. Jude Medical, LLC (successor to St. Jude Medical,  Inc.) and U.S. Bank National Association, as trustee, relating to St. Jude Medical, LLC's 3.25% Senior Notes due 2023 and 4.75% Senior Notes due 2043 (including forms of notes), filed as Exhibit 4.1 to the St. Jude Medical,  Inc. Current Report on Form 8-K dated April 2, 2013.



 
 

4.31
 


†Fifth Supplemental Indenture, dated as of September 23, 2015, between St. Jude Medical, LLC (successor to St. Jude Medical,  Inc.) and U.S. Bank National Association, as trustee, relating to St. Jude Medical, LLC's 2.000% Senior Notes due 2018, 2.800% Senior Notes due 2020 and 3.875% Senior Notes due 2025, filed as Exhibit 4.1 to the St. Jude Medical, Inc. Current Report on Form 8-K dated September 23, 2015.



 
 

4.32
 


†Sixth Supplemental Indenture, dated as of January 4, 2017, among St. Jude Medical, Inc., St. Jude Medical, LLC and U.S. Bank National Association, as trustee, filed as Exhibit 4.1 to the St. Jude Medical, LLC Current Report on Form 8-K dated January 4, 2017.

       

Other debt instruments are omitted in accordance with Item 601(b)(4)(iii)(A) of Regulation S-K. Copies of such agreements will be furnished to the Securities and Exchange Commission upon request.



 
 

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
 


Abbott Laboratories Deferred Compensation Plan, as amended.**



 
 

10.3
 


*Abbott Laboratories 401(k) Supplemental Plan, as amended and restated, filed as Exhibit 10.3 to the 2012 Abbott Laboratories Annual Report on Form 10-K.**



 
 

10.4
 


*Abbott Laboratories Supplemental Pension Plan, as amended and restated, filed as Exhibit 10.4 to the 2014 Abbott Laboratories Annual Report on Form 10-K.**

110

 
   10-K
Exhibit
Table
Item No. 		   

    10.5  

*1986 Abbott Laboratories Management Incentive Plan, as amended and restated, filed as Exhibit 10.5 to the 2014 Abbott Laboratories Annual Report on Form 10-K.**



 
 

10.6
 


*1998 Abbott Laboratories Performance Incentive Plan, as amended, filed as Exhibit 10.6 to the 2014 Abbott Laboratories Annual Report on Form 10-K.**



 
 

10.7
 


*Rules for the 1998 Abbott Laboratories Performance Incentive Plan, as amended and restated, filed as Exhibit 10.7 to the 2012 Abbott Laboratories Annual Report on Form 10-K.**



 
 

10.8
 


*Abbott Laboratories 1996 Incentive Stock Program, as amended and restated through the 6th Amendment February 20, 2009, filed as Exhibit 10.11 to the Abbott Laboratories Quarterly Report on Form 10-Q for the quarter ended March 31, 2009.**



 
 

10.9
 


*Abbott Laboratories 2009 Incentive Stock Program, as amended and restated, filed as Exhibit 10.9 to the 2014 Abbott Laboratories Annual Report on Form 10-K.**



 
 

10.10
 


*Abbott Laboratories 2017 Incentive Stock Program (incorporated by reference to Exhibit B of Abbott's Definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on March 17, 2017)



 
 

10.11
 


*Abbott Laboratories Non-Employee Directors' Fee Plan, as amended and restated, filed as Exhibit 10.10 to the 2016 Abbott Laboratories Annual Report on Form 10-K.**



 
 

10.12
 


*Form of Non-Employee Director Restricted Stock Unit Agreement under Abbott Laboratories 1996 Incentive Stock Program, filed as Exhibit 10.2 to the Abbott Laboratories Current Report on Form 8-K dated December 10, 2004.**



 
 

10.13
 


*Form of Employee Stock Option Agreement for a new Non-Qualified Stock Option under the Abbott Laboratories 1996 Incentive Stock Program granted on or after February 18, 2005, filed as Exhibit 10.2 to the Abbott Laboratories Current Report on Form 8-K dated February 18, 2005.**



 
 

10.14
 


*Form of Non-Qualified Stock Option Agreement for an award of non-qualified stock options under the Abbott Laboratories 1996 Incentive Stock Program granted on or after February 17, 2006, filed as Exhibit 10.4 to the Abbott Laboratories Current Report on Form 8-K dated February 16, 2006.**



 
 

10.15
 


*Form of Non-Qualified Stock Option Agreement for an award of non-qualified stock options under the Abbott Laboratories 1996 Incentive Stock Program granted on or after February 20, 2009, filed as Exhibit 10.3 to the Abbott Laboratories Current Report on Form 8-K dated February 20, 2009.**



 
 

10.16
 


*Form of Non-Employee Director Non-Qualified Stock Option Agreement, filed as Exhibit 10.2 to the Abbott Laboratories Current Report on Form 8-K dated April 24, 2009.**



 
 

10.17
 


*Form of Non-Employee Director Restricted Stock Unit Agreement, filed as Exhibit 10.3 to the Abbott Laboratories Current Report on Form 8-K dated April 24, 2009.**



 
 

10.18
 


*Form of Non-Qualified Stock Option Agreement (ratably vested), filed as Exhibit 10.5 to the Abbott Laboratories Current Report on Form 8-K dated April 24, 2009.**



 
 

10.19
 


*Form of Restricted Stock Unit Agreement (ratably vested), filed as Exhibit 10.37 to the 2013 Abbott Laboratories Annual Report on Form 10-K.**



 
 

10.20
 


*Form of Restricted Stock Unit Agreement for foreign employees (ratably vested), filed as Exhibit 10.38 to the 2013 Abbott Laboratories Annual Report on Form 10-K.**

111

 
   10-K
Exhibit
Table
Item No. 		   

    10.21  

*Form of Performance Restricted Stock Unit Agreement for foreign employees (annual performance based), filed as Exhibit 10.39 to the 2013 Abbott Laboratories Annual Report on Form 10-K.**



 
 

10.22
 


*Form of Performance Restricted Stock Unit Agreement for foreign executive officers (annual performance based), filed as Exhibit 10.40 to the 2013 Abbott Laboratories Annual Report on Form 10-K.**



 
 

10.23
 


*Form of Performance Restricted Stock Unit Agreement for foreign employees (interim performance based), filed as Exhibit 10.41 to the 2013 Abbott Laboratories Annual Report on Form 10-K.**



 
 

10.24
 


*Form of Performance Restricted Stock Unit Agreement for foreign executive officers (interim performance based), filed as Exhibit 10.42 to the 2013 Abbott Laboratories Annual Report on Form 10-K.**



 
 

10.25
 


*Form of Restricted Stock Unit Agreement (cliff vested), filed as Exhibit 10.43 to the 2013 Abbott Laboratories Annual Report on Form 10-K.**



 
 

10.26
 


*Form of Restricted Stock Unit Agreement for executive officers (cliff vested), filed as Exhibit 10.44 to the 2013 Abbott Laboratories Annual Report on Form 10-K.**



 
 

10.27
 


*Form of Restricted Stock Unit Agreement for foreign employees (cliff vested), filed as Exhibit 10.45 to the 2013 Abbott Laboratories Annual Report on Form 10-K.**



 
 

10.28
 


*Form of Restricted Stock Unit Agreement for foreign executive officers (cliff vested), filed as Exhibit 10.46 to the 2013 Abbott Laboratories Annual Report on Form 10-K.**



 
 

10.29
 


*Form of Non-Employee Director Restricted Stock Unit Agreement, filed as Exhibit 10.47 to the 2013 Abbott Laboratories Annual Report on Form 10-K.**



 
 

10.30
 


*Form of Non-Employee Director Restricted Stock Unit Agreement for foreign non-employee directors, filed as Exhibit 10.48 to the 2013 Abbott Laboratories Annual Report on Form 10-K.**



 
 

10.31
 


*Form of Restricted Stock Unit Agreement for Participants in France, filed as Exhibit 10.49 to the 2013 Abbott Laboratories Annual Report on Form 10-K.**



 
 

10.32
 


*Form of Restricted Stock Agreement (ratably vested), filed as Exhibit 10.50 to the 2013 Abbott Laboratories Annual Report on Form 10-K.**



 
 

10.33
 


*Form of Restricted Stock Agreement for executive officers (ratably vested), filed as Exhibit 10.51 to the 2013 Abbott Laboratories Annual Report on Form 10-K.**



 
 

10.34
 


*Form of Performance Restricted Stock Agreement (annual performance based), filed as Exhibit 10.52 to the 2013 Abbott Laboratories Annual Report on Form 10-K.**



 
 

10.35
 


*Form of Performance Restricted Stock Agreement for executive officers (annual performance based), filed as Exhibit 10.53 to the 2013 Abbott Laboratories Annual Report on Form 10-K.**



 
 

10.36
 


*Form of Performance Restricted Stock Agreement (interim performance based), filed as Exhibit 10.54 to the 2013 Abbott Laboratories Annual Report on Form 10-K.**



 
 

10.37
 


*Form of Performance Restricted Stock Agreement for executive officers (interim performance based), filed as Exhibit 10.55 to the 2013 Abbott Laboratories Annual Report on Form 10-K.**

112

 
   10-K
Exhibit
Table
Item No. 		   

    10.38  

*Form of Restricted Stock Agreement (cliff vested), filed as Exhibit 10.56 to the 2013 Abbott Laboratories Annual Report on Form 10-K.**



 
 

10.39
 


*Form of Restricted Stock Agreement for executive officers (cliff vested), filed as Exhibit 10.57 to the 2013 Abbott Laboratories Annual Report on Form 10-K.**



 
 

10.40
 


*Form of Non-Qualified Stock Option Agreement, filed as Exhibit 10.58 to the 2013 Abbott Laboratories Annual Report on Form 10-K.**



 
 

10.41
 


*Form of Non-Qualified Stock Option Agreement for executive officers, filed as Exhibit 10.59 to the 2013 Abbott Laboratories Annual Report on Form 10-K.**



 
 

10.42
 


*Form of Non-Qualified Stock Option Agreement for foreign employees, filed as Exhibit 10.60 to the 2013 Abbott Laboratories Annual Report on Form 10-K.**



 
 

10.43
 


*Form of Non-Qualified Stock Option Agreement for foreign executive officers, filed as Exhibit 10.61 to the 2013 Abbott Laboratories Annual Report on Form 10-K.**



 
 

10.44
 


*Form of Non-Employee Director Non-Qualified Stock Option Agreement, filed as Exhibit 10.64 to the 2013 Abbott Laboratories Annual Report on Form 10-K.**



 
 

10.45
 


*Form of Non-Employee Director Non-Qualified Stock Option Agreement for foreign non-employee directors, filed as Exhibit 10.65 to the 2013 Abbott Laboratories Annual Report on Form 10-K.**



 
 

10.46
 


*Form of UK Option Award Agreement, filed as Exhibit 10.66 to the 2013 Abbott Laboratories Annual Report on Form 10-K.**



 
 

10.47
 


*Form of UK Option Award Agreement for executive officers, filed as Exhibit 10.67 to the 2013 Abbott Laboratories Annual Report on Form 10-K.**



 
 

10.48
 


*Form of Restricted Stock Unit Agreement (ratably vested) under the Abbott Laboratories 2017 Incentive Stock Program, filed as Exhibit 10.2 to the Abbott Laboratories Current Report on Form 8-K dated April 28, 2017.**



 
 

10.49
 


*Form of Restricted Stock Unit Agreement for foreign employees (ratably vested) under the Abbott Laboratories 2017 Incentive Stock Program, filed as Exhibit 10.3 to the Abbott Laboratories Current Report on Form 8-K dated April 28, 2017.**



 
 

10.50
 


*Form of Restricted Stock Unit Agreement (cliff vested) under the Abbott Laboratories 2017 Incentive Stock Program, filed as Exhibit 10.4 to the Abbott Laboratories Current Report on Form 8-K dated April 28, 2017.**



 
 

10.51
 


*Form of Restricted Stock Unit Agreement for foreign employees (cliff vested) under the Abbott Laboratories 2017 Incentive Stock Program, filed as Exhibit 10.5 to the Abbott Laboratories Current Report on Form 8-K dated April 28, 2017.**



 
 

10.52
 


*Form of Performance Restricted Stock Unit Agreement for foreign employees (annual performance based) under the Abbott Laboratories 2017 Incentive Stock Program, filed as Exhibit 10.6 to the Abbott Laboratories Current Report on Form 8-K dated April 28, 2017.**



 
 

10.53
 


*Form of Performance Restricted Stock Unit Agreement for foreign employees (interim performance based) under the Abbott Laboratories 2017 Incentive Stock Program, filed as Exhibit 10.7 to the Abbott Laboratories Current Report on Form 8-K dated April 28, 2017.**

113

 
   10-K
Exhibit
Table
Item No. 		   

    10.54  

*Form of Restricted Stock Agreement (ratably vested) under the Abbott Laboratories 2017 Incentive Stock Program, filed as Exhibit 10.8 to the Abbott Laboratories Current Report on Form 8-K dated April 28, 2017.**



 
 

10.55
 


*Form of Restricted Stock Agreement (cliff vested) under the Abbott Laboratories 2017 Incentive Stock Program, filed as Exhibit 10.9 to the Abbott Laboratories Current Report on Form 8-K dated April 28, 2017.**



 
 

10.56
 


*Form of Performance Restricted Stock Agreement (annual performance based) under the Abbott Laboratories 2017 Incentive Stock Program, filed as Exhibit 10.10 to the Abbott Laboratories Current Report on Form 8-K dated April 28, 2017.**



 
 

10.57
 


*Form of Performance Restricted Stock Agreement (interim performance based) under the Abbott Laboratories 2017 Incentive Stock Program, filed as Exhibit 10.11 to the Abbott Laboratories Current Report on Form 8-K dated April 28, 2017.**



 
 

10.58
 


*Form of Non-Qualified Stock Option Agreement under the Abbott Laboratories 2017 Incentive Stock Program, filed as Exhibit 10.12 to the Abbott Laboratories Current Report on Form 8-K dated April 28, 2017.**



 
 

10.59
 


*Form of Non-Qualified Stock Option Agreement for foreign employees under the Abbott Laboratories 2017 Incentive Stock Program, filed as Exhibit 10.13 to the Abbott Laboratories Current Report on Form 8-K dated April 28, 2017.**



 
 

10.60
 


*Form of Restricted Stock Unit Agreement for executive officers (cliff vested) under the Abbott Laboratories 2017 Incentive Stock Program, filed as Exhibit 10.14 to the Abbott Laboratories Current Report on Form 8-K dated April 28, 2017.**



 
 

10.61
 


*Form of Restricted Stock Unit Agreement for foreign executive officers (cliff vested) under the Abbott Laboratories 2017 Incentive Stock Program, filed as Exhibit 10.15 to the Abbott Laboratories Current Report on Form 8-K dated April 28, 2017.**



 
 

10.62
 


*Form of Performance Restricted Stock Unit Agreement for foreign executive officers (annual performance based) under the Abbott Laboratories 2017 Incentive Stock Program, filed as Exhibit 10.16 to the Abbott Laboratories Current Report on Form 8-K dated April 28, 2017.**



 
 

10.63
 


*Form of Performance Restricted Stock Unit Agreement for foreign executive officers (interim performance based) under the Abbott Laboratories 2017 Incentive Stock Program, filed as Exhibit 10.17 to the Abbott Laboratories Current Report on Form 8-K dated April 28, 2017.**



 
 

10.64
 


*Form of Restricted Stock Agreement for executive officers (ratably vested) under the Abbott Laboratories 2017 Incentive Stock Program, filed as Exhibit 10.18 to the Abbott Laboratories Current Report on Form 8-K dated April 28, 2017.**



 
 

10.65
 


*Form of Restricted Stock Agreement for executive officers (cliff vested) under the Abbott Laboratories 2017 Incentive Stock Program, filed as Exhibit 10.19 to the Abbott Laboratories Current Report on Form 8-K dated April 28, 2017.**



 
 

10.66
 


*Form of Performance Restricted Stock Agreement for executive officers (annual performance based) under the Abbott Laboratories 2017 Incentive Stock Program, filed as Exhibit 10.20 to the Abbott Laboratories Current Report on Form 8-K dated April 28, 2017.**



 
 

10.67
 


*Form of Performance Restricted Stock Agreement for executive officers (interim performance based) under the Abbott Laboratories 2017 Incentive Stock Program, filed as Exhibit 10.21 to the Abbott Laboratories Current Report on Form 8-K dated April 28, 2017.**

114

 
   10-K
Exhibit
Table
Item No. 		   

    10.68  

*Form of Non-Qualified Stock Option Agreement for executive officers under the Abbott Laboratories 2017 Incentive Stock Program, filed as Exhibit 10.22 to the Abbott Laboratories Current Report on Form 8-K dated April 28, 2017.**



 
 

10.69
 


*Form of Non-Qualified Stock Option Agreement for foreign executive officers under the Abbott Laboratories 2017 Incentive Stock Program, filed as Exhibit 10.23 to the Abbott Laboratories Current Report on Form 8-K dated April 28, 2017.**



 
 

10.70
 


*Form of Non-Employee Director Restricted Stock Unit Agreement under the Abbott Laboratories 2017 Incentive Stock Program, filed as Exhibit 10.24 to the Abbott Laboratories Current Report on Form 8-K dated April 28, 2017.**



 
 

10.71
 


*Form of Non-Employee Director Restricted Stock Unit Agreement for foreign non-employee directors under the Abbott Laboratories 2017 Incentive Stock Program, filed as Exhibit 10.25 to the Abbott Laboratories Current Report on Form 8-K dated April 28, 2017.**



 
 

10.72
 


*Form of Non-Employee Director Non-Qualified Stock Option Agreement under the Abbott Laboratories 2017 Incentive Stock Program, filed as Exhibit 10.26 to the Abbott Laboratories Current Report on Form 8-K dated April 28, 2017.**



 
 

10.73
 


*Form of Non-Employee Director Non-Qualified Stock Option Agreement for foreign non-employee directors under the Abbott Laboratories 2017 Incentive Stock Program, filed as Exhibit 10.27 to the Abbott Laboratories Current Report on Form 8-K dated April 28, 2017.**



 
 

10.74
 


*Form of Agreement Regarding Change in Control by and between Abbott Laboratories and its named executive officers (other than Mr. White), filed as Exhibit 10.1 to the Abbott Laboratories Current Report on Form 8-K dated November 30, 2012.**



 
 

10.75
 


*Form of Extension of Agreement Regarding Change in Control by and between Abbott Laboratories and its named executive officers (other than Mr. White), extending the agreement term to December 31, 2018, filed as Exhibit 10.49 to the 2016 Abbott Laboratories Annual Report on Form 10-K.**



 
 

10.76
 


*Form of Time Sharing Agreement between Abbott Laboratories, Inc. and M.D. White, filed as Exhibit 10.6 to the Abbott Laboratories Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.**



 
 

10.77
 


*2004 Stock Incentive Plan, as amended and restated, filed as Exhibit 4.5 to the Abbott Laboratories Registration Statement on Form S-8 dated March 20, 2009.**



 
 

10.78
 


†St. Jude Medical, Inc. 2016 Stock Incentive Plan, filed as Exhibit 10.1 to the St. Jude Medical, Inc. Current Report on Form 8-K dated October 27, 2016.**



 
 

10.79
 


†St. Jude Medical, Inc. 2007 Stock Incentive Plan, as amended and restated (2014), filed as Exhibit 10.22 to St. Jude Medical,  Inc. Annual Report on Form 10-K for the year ended January 3, 2015 dated February 26, 2015.**



 
 

10.80
 


†Form of Non-Qualified Stock Option Agreement (Global) and related Notice of Non-Qualified Stock Option Grant for stock options granted on or after December 10, 2012 under the St. Jude Medical, Inc. 2007 Stock Incentive Plan, filed as Exhibit 10.24 to the St. Jude Medical, Inc. Annual Report on Form 10-K for the year ended December 29, 2012 dated February 26, 2013.**

115

 
   10-K
Exhibit
Table
Item No. 		   

    10.81  

†Form of Non-Qualified Stock Option Agreement for Non-Employee Directors and related Notice of Non-Qualified Stock Option Grant for stock options granted on or after December 10, 2012 under the St. Jude Medical, Inc. 2007 Stock Incentive Plan, filed as Exhibit 10.25 to the St. Jude Medical, Inc. Annual Report on Form 10-K for the year ended December 29, 2012, dated February 26, 2013.**



 
 

10.82
 


†Form of Restricted Stock Units Award Agreement (Global) and related Restricted Stock Units Award Certificate for restricted stock units granted on or after December 10, 2012 under the St. Jude Medical, Inc. 2007 Stock Incentive Plan, filed as Exhibit 10.27 to the St. Jude Medical, Inc. Annual Report on Form 10-K for the year ended December 29, 2012, dated February 26, 2013.**



 
 

10.83
 


Management Savings Plan, as amended and restated.**



 
 

10.84
 


*Retention Agreement by and between Mr. Michael T. Rousseau and Abbott Laboratories, dated July 22, 2016, filed as Exhibit 10.59 to the 2016 Abbott Laboratories Annual Report on Form 10-K.**



 
 

10.85
 


*Retention Agreement by and between Eric S. Fain and Abbott Laboratories, dated July 27, 2016, filed as Exhibit 10.60 to the 2016 Abbott Laboratories Annual Report on Form 10-K.**



 
 

10.86
 


*120-Day Bridge Term Loan Agreement, dated as of December 13, 2016, among Abbott Laboratories, the guarantors referred to therein, Bank of America, N.A., as administrative agent, and the other lenders party thereto, filed as Exhibit 10.61 to the 2016 Abbott Laboratories Annual Report on Form 10-K.



 
 

10.87
 


*Amended and Restated Term Loan Agreement, dated as of January 4, 2017, among St. Jude Medical, LLC, the guarantors from time to time party thereto, the lenders from time to time party thereto, and Bank of America, N.A., as administrative agent, filed as Exhibit 10.62 to the 2016 Abbott Laboratories Annual Report on Form 10-K.



 
 

10.88
 


Term Loan Agreement, dated as of July 31, 2017, by and among Abbott, the lenders from time to time party thereto, and Bank of America, N.A., as administrative agent.



 
 

10.89
 


First Amendment to Term Loan Agreement, dated as of September 29, 2017, by and among Abbott, the lenders from time to time party thereto, and Bank of America, N.A., as administrative agent.



 
 

10.90
 


*Five Year Credit Agreement, dated as of July 10, 2014, by and among Abbott, the lenders from time to time party thereto, and Bank of America, N.A., as administrative agent, filed as Exhibit 10.3 to the Abbott Laboratories Quarterly Report on Form 10-Q for the period ended September 30, 2017.



 
 

12
 


Computation of Ratio of Earnings to Fixed Charges.



 
 

21
 


Subsidiaries of Abbott Laboratories.



 
 

23.1
 


Consent of Independent Registered Public Accounting Firm.



 
 

31.1
 


Certification of Chief Executive Officer Required by Rule 13a-14(a) (17 CFR 240.13a-14(a)).



 
 

31.2
 


Certification of Chief Financial Officer Required by Rule 13a-14(a) (17 CFR 240.13a-14(a)).

       

Exhibits 32.1 and 32.2 are furnished herewith and should not be deemed to be "filed" under the Securities Exchange Act of 1934.

116

 
   10-K
Exhibit
Table
Item No. 		   

    32.1  

Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



 
 

32.2
 


Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



 
 

101
 


The following financial statements and notes from the Abbott Laboratories Annual Report on Form 10-K for the year ended December 31, 2017 filed on February 16, 2018, formatted in XBRL: (i) Consolidated Statement of Earnings; (ii) Consolidated Statement of Comprehensive Income; (iii) Consolidated Statement of Cash Flows; (iv) Consolidated Balance Sheet; (v) Consolidated Statement of Shareholders' Investment; and (vi) the notes to the consolidated financial statements.
*
Incorporated herein by reference. Commission file number 1-2189.

**
Denotes management contract or compensatory plan or arrangement required to be filed as an exhibit hereto.

†
Incorporated herein by reference. Commission file number 1-12441.

        Abbott will furnish copies of any of the above exhibits to a shareholder upon written request to the Secretary, Abbott Laboratories, 100 Abbott Park Road, Abbott Park, Illinois 60064-6400.

117



Exhibit 10.2

 

ABBOTT LABORATORIES

 

DEFERRED COMPENSATION PLAN

 

ARTICLE I

 

Introduction

 

Section 1.1                                    Purpose.  The Plan is designed to assist the Employers in attracting and retaining key employees by providing those employees with the opportunity to defer the receipt of a portion of their compensation and to have that deferred compensation treated as if it were invested pending its distribution by the Plan.

 

Section 1.2                                    ERISA.  The Plan is intended to be exempt from Parts 2, 3, and 4 of Title I of ERISA and, therefore, participation in the Plan is limited to a select group of management and highly compensated employees, within the meaning of Sections 201(2), 301(a)3 and 401(a)(1) of ERISA.

 

Section 1.3                                    Employers.

 

(a)                                  After the Effective Date, any Subsidiary of the Company that is not then an Employer may adopt the Plan with the Company’s consent as described in Section 13.12.

 

(b)                                 Each Employer shall be liable to the Company for an amount equal to the Plan benefits earned by its Eligible Employees.  Where an Eligible Employee has been employed by more than one Employer, the Plan Administrator shall allocate the liability to the Company associated with that Eligible Employee’s Plan benefits among his or her Employers.  The Plan Administrator shall establish procedures for determining the time at which and manner in which the Employers shall pay this liability to the Company.

 

Section 1.4                                    Grandfathered Amounts.  Notwithstanding anything in this Plan to the contrary, any amounts under this Plan that were earned and vested before January 1, 2005 (as determined in accordance with Code Section 409A) (“Grandfathered Amounts”) shall be subject to the terms and conditions of the Plan as administered and as in effect on October 3, 2004.  Amendments made to the Plan pursuant to this amendment and restatement or otherwise shall not affect the Grandfathered Amounts unless expressly provided for in the amendment.  The terms and conditions applicable to the Grandfathered Amounts are set forth in Appendix A attached hereto.

 

Section 1.5                                    Effective Date.  The Plan has been amended and restated, effective as of December 15, 2017.

 

ARTICLE II

 

Definitions

 

When used in this Plan, unless the context clearly requires a different meaning, the following words and terms shall have the meanings set forth below.  Whenever appropriate, words used in the singular shall be deemed to include the plural, and vice versa, and the masculine gender shall be deemed to include the feminine gender.

 

Section 2.1                                    Account.  “Account(s)” means the account(s) established for record keeping purposes for each Participant pursuant to Article VI.

 

Section 2.2                                    Base Compensation.  “Base Compensation” means the Participant’s total compensation earned in a Plan Year for personal service actually rendered to an Employer, including sales bonuses, sales incentives and sales commissions (excluding Eligible Bonuses, all other bonuses, commissions, relocation expenses, reimbursements, expense allowances, fringe benefits (cash or noncash), welfare benefits (whether or not those amounts are includible in gross income) and other non-regular forms of compensation) before deductions for (i) Deferral Elections made pursuant to Section 4.1or (ii) contributions made on the Participant’s behalf to any

 

1


 

Employer 401(k) Plan or to any cafeteria plan under Section 125 of the Internal Revenue Code of 1986, as amended (the “Code”) maintained by an Employer. Notwithstanding the foregoing, the Plan Administrator or its delegate may designate amounts to be included in or excluded from Base Compensation.

 

Section 2.3                                    Beneficiary.  “Beneficiary” means the person, persons or entity designated by the Participant to receive any benefits payable under the Plan pursuant to Article IX.

 

Section 2.4                                    Board of Review.  “Board of Review” means the Abbott Laboratories Employee Benefit Board of Review appointed and acting under the Abbott Laboratories Annuity Retirement Plan and having the powers and duties described in this Plan.

 

Section 2.5                                    Company.  “Company” means Abbott Laboratories, its successors, any organization into which or with which Abbott Laboratories may merge or consolidate or to which all or substantially all of its assets may be transferred.

 

Section 2.6                                    Deferral Election.  “Deferral Election” means an election under the Plan by a Participant to defer the receipt of a portion of his or her Eligible Compensation made on a Deferral Election Form.

 

Section 2.7                                    Deferral Election Form.  “Deferral Election Form” means the form provided to the Participant by the Plan pursuant to Section 4.1 on which the Participant makes his or her Deferral Election.

 

Section 2.8                                    Deferral Account.  “Deferral Account(s)” means the account(s) established for record keeping purposes for each Participant’s Deferral Election pursuant to Section 6.1.

 

Section 2.9                                    Disability.  The date of “Disability” of a Participant means that, the date on which the Participant is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve months, eligible to receive income replacement benefits under the terms of the Abbott Laboratories Extended Disability Plan (“EDP”) or, for a Participant whose Employer does not participate in the EDP, such similar accident and health plan, providing income replacement benefits, in which his or her Employer participates, for a period of six months.

 

Section 2.10                             Distribution Election.  “Distribution Election” is defined in Section 4.3(a).

 

Section 2.11                             Distribution Election Form.  “Distribution Election Form” means the form provided to the Participant by the Plan pursuant to Section 4.3 on which the Participant specifies the time at which the amounts credited to one of the Participant’s Account(s) are to be distributed and their method of payment.

 

Section 2.12                             Effective Date.  “Effective Date” is defined in Section 1.5.

 

Section 2.13                             Eligibility Date.  “Eligibility Date” is defined in Section 3.1(b).

 

Section 2.14                             Eligible Bonus.  “Eligible Bonus” means an annual cash incentive bonus for a Plan Year that the Plan Administrator, or its delegate, has designated as being eligible for deferral under the Plan.  As of the Effective Date, cash bonuses paid under the Abbott Laboratories Cash Profit Sharing Plan or any Employer’s annual incentive bonus plan with a performance period commencing on January 1 and ending on December 31 of the applicable Plan Year are eligible for deferral under the Plan.

 

Section 2.15                             Eligible Compensation.  “Eligible Compensation” means the Participant’s Base Compensation and Eligible Bonuses.

 

Section 2.16                             Eligible Employee.  “Eligible Employee” means any person employed by an Employer who is both

 

(i)                                     a United States employee or an expatriate who is based and paid in the United States, and

 

2


 

(ii)                                  shown as having a grade level of 20 (or equivalent level of compensation if on a different pay grade system) or higher on his or her Employer’s Human Resource System

 

and who is not (a) both an officer of the Company and eligible to participate in the Abbott Laboratories 401(k) Supplemental Plan, except as contemplated by Section 3.1 hereof for the Plan Year in which the person is first named an officer, (b) an individual who provides services to an Employer under a contract, arrangement or understanding with either the individual directly or with an agency or leasing organization that treats the individual as either an independent contractor or an employee of such agency or leasing organization, even if such individual is subsequently determined (by an Employer, the Internal Revenue Service, any other governmental agency, judicial action, or otherwise) to have been a common law employee of an Employer rather than an independent contractor or employee of such agency or leasing organization, or (c) any Employee who is employed by an Employer located in Puerto Rico, other than any person designated as a “U.S. Expatriate” on the records of an Employer. Notwithstanding the above, or any provisions to the contrary, no Green Group Employee (as defined in Section 3.3 below) will be an Eligible Employee under the Plan.

 

For all Plan purposes, an individual shall be an “Eligible Employee” for any Plan Year only if during that Plan Year an Employer treats that individual as its employee for purposes of employment taxes and wage withholding for Federal income taxes, even if such individual is subsequently determined (by an Employer, the Internal Revenue Service, any other governmental agency, judicial action, or otherwise) to have been a common law employee of an Employer in that Plan Year.

 

Section 2.17                             Employer.  “Employer” shall mean the Company, the participating Employers on the Effective Date, and any Subsidiary of the Company that subsequently adopts the Plan in the manner provided in Section 13.12.

 

Section 2.18                             Employer Contribution.  “Employer Contribution” means the contribution deemed to have been made by an Employer pursuant to Section 5.1.

 

Section 2.19                             Employer Contribution Account.  “Employer Contribution Account(s)” means the account(s) established for record keeping purposes for each Participant’s Employer Contributions pursuant to Section 6.1.

 

Section 2.20                             Employer 401(k) Plan.  “Employer 401(k) Plan” means any defined contribution retirement plan that is maintained by an Employer, qualified under Code Section 401(a), and includes a cash or deferred arrangement under Code Section 401(k).  The term shall specifically include, but not be limited to, the Abbott Laboratories 401(k) Plan and the Abbott Laboratories Stock Retirement Plan.

 

Section 2.21                             ERISA.  “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

Section 2.22                             Hardship Distribution.  “Hardship Distribution” is defined in Section 8.5(a).

 

Section 2.23                             In-Service Distribution.  “In-Service Distribution” is defined in Section 4.3.

 

Section 2.24                             Initial Election.  “Initial Election” is defined in Section 4.3(a).

 

Section 2.25                             Investment Election.  “Investment Election” is defined in Section 4.2(a).

 

Section 2.26                             Investment Election Form.  “Investment Election Form” means the form provided to the Participant by the Plan pursuant to Section 4.2 on which the Participant specifies the Investment Funds in which the Participant’s Account(s) are to be deemed to be invested.

 

Section 2.27                             Investment Fund(s).  “Investment Fund(s)” means one or more of the funds selected by the Plan Administrator pursuant to Section 4.2.

 

3


 

Section 2.28                             Investment Fund Subaccounts.  “Investment Fund Subaccounts” is defined in Section 6.1(b).

 

Section 2.29                             Matching DCP Deferral.  “Matching DCP Deferral” for a Participant for a Plan Year is an amount equal to the total dollar amount of the Participant’s deferrals for the Plan Year pursuant to Employee Deferral Elections under Section 4.1(b), but in no event shall a Participant’s Matching DCP Deferral for a Plan Year exceed the amount by which (a) the Participant’s Base Compensation for the Plan Year up to the limit on compensation as defined in Code Section 401(a)(17) exceeds (b) the Participant’s Base Compensation for the Plan Year less the total dollar amount deferred pursuant to Employee Deferral Elections under Section 4.1(b) for the Plan Year.

 

Section 2.30                             Participant.  “Participant” means any Eligible Employee who elects to participate in this Plan by filing a Deferral Election, Investment Fund Election, and Distribution Election as provided in Article IV.

 

Section 2.31                             Plan.  “Plan” means the Abbott Laboratories Deferred Compensation Plan.

 

Section 2.32                             Plan Administrator.  “Plan Administrator” means the Board of Review.

 

Section 2.33                             Plan Year.  “Plan Year” means a twelve-month period beginning January 1 and ending the following December 31.

 

Section 2.34                             Rate of Return.  “Rate of Return” means, for each Investment Fund, an amount equal to the net gain or net loss (expressed as a percentage) on the assets of that Investment Fund.

 

Section 2.35                             Retirement. “Retirement” means a Termination of Employment after having satisfied the age and service requirements of (a), (b), or (c) below, as applicable:

 

(a)                                 for the Participant hired before 2004, the date on which the Participant attains age 50 and completes 10 years of vesting service; or

 

(b)                                 for the Participant hired after 2003, the date on which the Participant attains age 55 and completes 10 years of vesting service; or age 65; or

 

(c)                                  with respect to a Participant covered by Supplement I of the Abbott Laboratories Annuity Retirement Plan (“ARP”) as Abbott Retained Employees (as such term is defined in the ARP), the date on which the Participant attains age 55 and completes 5 years of vesting service (as such term is described in the AbbVie Pension Plan for Former BASF and Former Solvay Employees).

 

For purposes of this Section 2.35, “vesting service” shall have the meaning set forth in the ARP for a Participant who is covered by the ARP, and shall have the meaning set forth in the Employer 401(k) Plan in which the Participant is eligible to participate for a Participant who is not covered by the ARP.  Except as otherwise provided by the Administrator, for purposes of this Section 2.35, the hire date of any employee of a business entity, part or all of which is or was acquired by or becomes a part of, a participating employer, will be considered the date that the business entity was acquired by or became a part of the participating employer, and vesting service prior to such date shall be credited only to the extent provided by the Administrator.

 

Section 2.36                             Subsequent Election.  “Subsequent Election” is defined in Section 4.2(a).

 

Section 2.37                             Subsidiary.  “Subsidiary” shall mean any corporation, limited liability company, partnership, joint venture, or business trust organized in the United States 50 percent or more of the voting stock of which is owned, directly or indirectly, by the Company.

 

Section 2.38                             Termination of Employment.  “Termination of Employment” means the cessation of a Participant’s services as an employee, whether voluntary or involuntary, for any reason other than death; provided, that the Participant shall not be considered to have terminated employment for purposes of the Plan until he or she

 

4


 

would be considered to have incurred a “separation from service” from the Employer within the meaning of Code Section 409A.

 

Section 2.39                             Unforeseeable Emergency.  “Unforeseeable Emergency” means a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse or a dependent of the Participant, loss of the Participant’s property due to casualty (including the need to rebuild a home following damage to a home not otherwise covered by insurance, for example, not as a result of a natural disaster), or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant as determined by the Plan Administrator.

 

ARTICLE III

 

Participation

 

Section 3.1                                    Participation.

 

(a)                                 Except as provided in Sections 3.1(b) and (c), an Eligible Employee may become a Participant by making a Deferral Election, Investment Fund Election, and Distribution Election pursuant to Article IV on or before the deadline set by the Plan Administrator pursuant to Section 4.4.

 

(b)                                 A newly hired individual who is an Eligible Employee shall become eligible to participate in the Plan on the first day of the month next following the month after the individual’s date of hire (the “Eligibility Date”); provided, that in no event shall such individual begin to participate in the plan later than 90 days following his or her date of hire.  Notwithstanding the election requirements of Section 3.1(a), a newly Eligible Employee who was not eligible to participate in any other plan that would be aggregated with the Plan under Treasury Regulation §1.409A-1(c) may make a Deferral Election, Investment Fund Election and Distribution Election pursuant to Article IV within the thirty (30) day period immediately following the Eligibility Date.  Any such election shall become effective for Eligible Compensation earned no earlier than the first payroll period commencing after receipt of the election by the Plan Administrator and shall be irrevocable for the remainder of the Plan Year.

 

(c)                                  An individual who becomes an Eligible Employee as a result of a job promotion or transfer may only make a Deferral Election, Investment Fund Election and Distribution Election pursuant to Article IV with respect to Eligible Compensation to be earned in the Plan Year next following the year of such promotion or transfer.  Any such election shall be made in accordance with Article IV and shall become effective for Eligible Compensation earned in the Plan Year following the year in which the election is made.

 

Section 3.2                                    Termination of Participation.  A Participant who ceases to be an Eligible Employee due to a Termination of Employment will remain a Participant but (i) may no longer make Deferral Elections with respect to any Plan Year following the year of such termination and (ii) all deferrals under the Plan shall cease as of the date of the Participant’s Termination of Employment.  A Participant who ceases to be an Eligible Employee due to a job promotion (or demotion) may no longer make Deferral Elections with respect to any Plan Year following the year of such promotion or demotion but the Participant’s Deferral Elections for the Plan Year in which such promotion or demotion occurs shall remain irrevocable.  A Participant shall remain a Participant until (i) his or her death or (ii) his or her Accounts have been distributed.

 

Section 3.3                                    Special Rules for Employees of the Green Group.  An Eligible Employee hired or rehired by a participating division of an Employer who transfers to the Green Group may continue to participate in the Plan as an Eligible Employee, provided that such individual otherwise meets the requirements of Sections 2.16 and 3.1.  This Section 3.3 shall also apply with respect to an Eligible Employee who transfers from an Employer to a foreign controlled group member, foreign affiliate or foreign branch, who later returns to service in the United States with the Green Group, and otherwise meets the requirements of Sections 2.16 and 3.1.  Notwithstanding any provision to the contrary, any employee who terminates from employment and is subsequently rehired (i) by Alere Inc. or its subsidiaries (and any successor entities) (collectively, “Alere”), on or after October 3, 2017, or (ii) by the Rapid Diagnostics division (and any successor divisions, businesses and groups) (collectively, “Rapid Diagnostics”) (including but not limited to Alere), on or after January 1, 2018, shall not be an Eligible Employee upon such rehire.

 

5


 

“Green Group” means, effective October 3, 2017, Alere, and effective January 1, 2018, Rapid Diagnostics.  The Green Group consists of divisions that do not participate in the Plan; provided, however, that Subsidiaries of the Company that employ Green Group Employees may be Employers solely to the extent that they employ Eligible Employees of participating divisions or an Eligible Employee who transferred from an Employer as described above.

 

“Green Group Employee” means an employee who (even if later transferred to an Employer):  (i) is an employee of Alere on October 3, 2017, or is hired or rehired by Alere after October 3, 2017; (ii) is hired or rehired within Rapid Diagnostics (including, but not limited to, Alere) on or after January 1, 2018; or (iii) transfers to an Employer from a foreign controlled group member, foreign affiliate or foreign branch, but previously worked in the United States as a Green Group Employee.

 

ARTICLE IV

 

Election Forms

 

Section 4.1                                    Deferral Elections.

 

(a)                                 Participants shall make their Deferral Elections annually on a form provided by the Plan Administrator (a “Deferral Election Form”). Each Deferral Election shall apply to only a single Plan Year.

 

(b)                                 On his or her Deferral Election Form, the Participant shall specify the amount (expressed as a percentage) of his or her Base Compensation and the amount (also expressed as a percentage) of his or her Eligible Bonuses that the Participant elects to defer for that Plan Year together with such other information as the Plan Administrator may, in its sole and absolute discretion, require.

 

(c)                                  For any Plan Year, a Participant may elect to defer:

 

(i)                                     between five percent (5%) and seventy-five percent (75%) of his or her Base Compensation (in whole percentage increments), and

 

(ii)                                  between five percent (5%) and one hundred percent (100%) of his or her Eligible Bonus (in whole percentage increments);

 

provided, however, that in no event may a Participant elect to defer his or her Eligible Compensation to the extent that his or her remaining compensation would be insufficient to satisfy all applicable withholding taxes and contributions required under Employer sponsored benefit plans in which the Participant participates.

 

(d)                                 A Participant may revoke his or her Deferral Election and file a subsequent Deferral Election at any time prior to the deadline for the receipt of election forms set by the Plan Administrator pursuant to Section 4.4.  The latest Deferral Election filed prior to such deadline shall take effect for the applicable Plan Year, and all prior Deferral Elections shall be considered null and void.  A Participant may not revoke his or her Deferral Election at any time after the deadline for making such Deferral Election set by the Plan Administrator pursuant to Section 4.4.  Notwithstanding the foregoing, an Eligible Employee who submits a deferral election for the same Plan Year under any other nonqualified deferred compensation plan maintained by the Company or any Subsidiary shall be deemed to have revoked any Deferral Election previously filed under the Plan, and all prior Deferral Elections shall be considered null and void; provided, that such other deferral election must be submitted in accordance with the rules of such other plan and in any event no later than December 31 immediately preceding the Plan Year for which it is to be effective, and any Deferral Election filed under the Plan subsequent to such other plan deferral election shall render such other plan deferral election null and void.

 

Section 4.2                                    Investment Elections.  The Plan Administrator shall, from time to time, make available investment options (the “Investment Funds”) that serve as benchmark funds for the amounts a Participant defers under the Plan.  A Participant’s Plan deferrals shall not actually be invested in the Investment Funds and the Participant shall not be considered a shareholder of any of the Investment Funds he or she selects by virtue of participation in the Plan.  Instead, the Participant’s Plan deferrals shall be considered invested in, and his or her Plan

 

6


 

Account shall reflect such Investment Fund’s Rate of Return. A Participant’s election of investments shall be subject to the following rules:

 

(a)                                 Participants shall make their investment elections on an Investment Election Form provided by the Plan Administrator (an “Investment Election”).

 

(b)                                 The Investment Election Form completed by the Participant shall apply only to the Eligible Compensation being deferred in a single Plan Year and shall specify the Investment Funds in which the deferrals for each such Plan Year are to be deemed to be invested, and the portion (expressed in whole percentage increments) of the deferrals for such Plan Year that are to be deemed to be invested in each such Investment Fund, and shall continue in effect until revoked or changed as permitted by the Plan Administrator.

 

Section 4.3                                    Distribution Elections.

 

(a)                                 Participants shall make their distribution elections in accordance with the Distribution Election Form provided by the Plan Administrator (a “Distribution Election”) as permitted or required by such form.  Each Distribution Election (the “Initial Election”) shall apply only to the Eligible Compensation being deferred in a single Plan Year and must be made by the deadline set by the Plan Administrator pursuant to Section 4.4, at which time the Initial Election shall be irrevocable, subject to Section 4.3(c).

 

(b)                                 On the Distribution Election Form:

 

(i)                                     Mandatory Retirement Election.  In all cases, the Participant shall select the method of payment from among the methods of payment described in Section 8.3(a) to apply in the event payment is made upon Retirement pursuant to this Distribution Election in accordance with Sections 8.3 or 8.4 or upon Disability in accordance with Section 8.7.

 

(ii)                                  Optional In-Service Distribution Election.  The Participant shall also have the option to elect that the Eligible Compensation being deferred for that Plan Year shall be paid to the Participant while he or she is still employed by an Employer (an “In-Service Distribution”).  If the Participant elects to receive an In-Service Distribution of the Eligible Compensation being deferred, then the Participant shall also select the year in which the payments are to be made.  A Participant may not elect to receive an In-Service Distribution in a Plan Year that is less than two (2) years after the end of the Plan Year in which the Eligible Compensation is earned.

 

(c)                                  Notwithstanding anything to the contrary in Section 4.3, a Participant may change the form of distribution or his or her Distribution Election (a “Subsequent Election”) to the extent permitted by the Plan Administrator and Code Section 409A(a)(4)(C), including the requirements that such Subsequent Election:

 

(i)                                     shall not take effect until at least 12 months after the date on which the Subsequent Election is filed with the Plan Administrator;

 

(ii)                                  shall result in the first distribution subject to such Subsequent Election being made at least five years after the date such distribution would otherwise have been paid pursuant to the previous election; and

 

(iii)                               shall be filed with the Plan Administrator at least 12 months before the date the first scheduled distribution is to be paid pursuant to the previous election.

 

Section 4.4                                    Deadline for Submitting Election Forms.  The Plan Administrator may set a deadline or deadlines for the receipt of the election forms required under the Plan; provided, however, that, except as provided in Section 3.1(b), such forms must be filed on or before the end of the year immediately preceding the Plan Year for which it is to be effective.

 

7


 

ARTICLE V

 

Employer Contributions

 

Section 5.1                                    Employer Contributions.  Each Participant who makes a Deferral Election will be credited with an Employer Contribution equal to 5% of the Participant’s Matching DCP Deferral.  The Plan Administrator may, however, in his or her discretion, otherwise set the amount of the Employer Contribution, subject to and not in excess of applicable limits imposed by the Internal Revenue Service.

 

Section 5.2                                    Allocation of Employer Contributions.  A Participant’s Employer Contribution for a Plan Year shall be allocated among the same Investment Funds and in the same proportion as the Participant has elected for his or her deferrals for that Plan Year.

 

Section 5.3                                    Distribution of Employer Contributions.  An Employer Contribution for a Plan Year shall be distributed to the Participant according to the election made by the Participant governing his or her deferrals for that same Plan Year.

 

ARTICLE VI

 

Maintenance and Crediting of Accounts

 

Section 6.1                                    Maintenance of Accounts.

 

(a)                                 The Plan shall maintain a separate Account for each Deferral Election (a “Deferral Account”) made by and each Employer Contribution (an “Employer Contribution Account”) made for a Participant.  A Participant’s Accounts shall reflect the Participant’s Investment Fund Elections and Distribution Elections made pursuant to Article IV, any Employer Contributions made on behalf of the Participant pursuant to Article V, adjustments to the Account made pursuant to this Article VI, and distributions made with respect to the Account pursuant to Article VIII.  The Accounts shall be used solely as a device for the measurement and determination of the amounts to be paid to the Participants pursuant to this Plan and shall not constitute or be treated as a trust fund of any kind.

 

(b)                                 Each Account shall be divided into separate subaccounts (“Investment Fund Subaccounts”), each of which corresponds to the Investment Fund selected by the Participant pursuant to Section 4.2(b).

 

Section 6.2                                    Crediting of Accounts.

 

(a)                                 No later than five (5) business days following the end of each pay period, the Plan shall credit each Participant’s Investment Fund Subaccounts to reflect amounts deferred from the Participant’s Eligible Compensation during that pay period and the Investment Fund Election made by the Participant with respect to that Eligible Compensation.

 

(b)                                 At the end of each Plan Year, the Plan shall credit each Participant’s Investment Fund Subaccounts to reflect any Employer Contribution deemed to have been made on behalf of the Participant for that Plan Year and the allocation of that contribution among the Investment Funds pursuant to Section 4.2.

 

(c)                                  The Plan Administrator shall adjust each Investment Fund Subaccount to reflect any transfers under the Plan to or from that Investment Fund Subaccount, as of the end of each business day to reflect any distributions under the Plan made with respect to that Investment Fund Subaccount, and the Rate of Return on the related Investment Fund.

 

Section 6.3                                    Statement of Accounts.  Each Participant shall be issued quarterly statements of his or her Account(s) in such form as the Plan Administrator deems desirable, setting forth the balance to the credit of such Participant in his or her Account(s) as of the end of the most recently completed quarter.

 

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ARTICLE VII

 

Vesting and Forfeitures

 

Section 7.1                                    Deferral Accounts.  A Participant’s Deferral Accounts shall be one hundred percent (100%) vested and non-forfeitable at all times.

 

Section 7.2                                    Employer Contribution Account.

 

(a)                                 A Participant’s Employer Contribution Account shall become vested according to the same vesting schedule that applies to the matching contributions made by the Participant’s Employer on behalf of the Participant under the Employer 401(k) Plan in which the Participant participates.

 

(b)                                 If a Participant’s employment with the Employers terminates (whether voluntarily or involuntarily) before the Participant’s Employer Contribution Account becomes one hundred percent (100%) vested and non-forfeitable, then the Participant shall forfeit that portion of his or her Employer Contribution Account that is not fully vested and non-forfeitable.

 

ARTICLE VIII

 

Distribution of Benefits

 

Section 8.1                                    Distribution of Benefits in the Event of a Termination of Employment.  If a Participant elects to receive his or her Plan benefits as an In-Service Distribution, then in the event of that Participant’s Termination of Employment (other than due to Retirement) prior to receiving that In-Service Distribution, the Company shall pay that Participant’s Plan benefits in a lump-sum to the Participant within 90 days following his or her Termination of Employment.  If a Participant elects to receive his or her Plan benefits upon Retirement, then in the event of that Participant’s Termination of Employment prior to the date the Participant attains eligibility for Retirement, the Company shall pay that Participant’s Plan benefits in a lump-sum to the Participant within 90 days following his or her Termination of Employment.

 

Section 8.2                                    In-Service Distributions.  Subject to the provisions of Section 8.6, the Company shall pay In-Service Distributions in a lump-sum to the Participant on the first business day in February of the year designated by the Participant on his or her Distribution Election Form.

 

Section 8.3                                    Distribution of Benefits in the Event of Retirement.

 

(a)                                 If, pursuant to Section 4.3, a Participant has elected to receive his or her Plan benefits for a Plan Year upon his or her Retirement, then the Company shall pay the Participant his or her Plan benefits commencing on the first business day in February next following the date of the Participant’s Retirement in any of the following forms pursuant to the Participant’s Initial Election or Subsequent Election, as applicable:

 

(i)                                     in substantially equal quarterly or annual installments to the Participant over fifteen (15) years; or

 

(ii)                                  in substantially equal quarterly or annual installments to the Participant over ten (10) years; or

 

(iii)                               in substantially equal quarterly or annual installments to the Participant over five (5) years; or

 

(iv)                              in a lump-sum; or

 

(v)                                 if no such election is on file with the Plan Administrator, in substantially equal quarterly installments to the Participant over ten (10) years.

 

Quarterly installments shall be paid on the first business day of each calendar quarter and annual installments shall be paid on the first business day of each calendar year.

 

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(b)                                 Notwithstanding the foregoing, if the total sum of (i) a Participant’s Deferral Accounts (as adjusted for amounts accrued but not yet credited) in this Plan and (ii) deferrals of compensation under any other agreement, method, program or arrangement which must be aggregated with this Plan under Treasury Regulations section 1.409A-1(c)(2), is less than the applicable dollar amount under Code Section 402(g)(1)(B) in effect for the Plan Year in which such date occurs ($18,500 for the 2018 Plan Year), the balance of such Participant’s Deferral Accounts in this Plan shall be paid in a single lump sum as soon as administratively practicable following such date. Payment shall terminate and liquidate the Participant’s interest in the Plan and any other aggregated agreement, method, program or arrangement.

 

Section 8.4                                    Distribution of Benefits on the Earlier to Occur of a Participant’s Retirement or a Specified Date.

 

If a Participant has elected to receive his or her Plan benefits on a specified date pursuant to Section 4.3(b)(ii), if the Participant’s Retirement occurs prior to such specified date,

 

(a)                                 For amounts deferred with respect to Plan Years beginning prior to January 1, 2008, the Company shall pay the Participant his or her Plan benefits in a lump sum on the first business day in February next following the Participant’s Retirement; and

 

(b)                                 For amounts deferred with respect to Plan Years beginning on or after January 1, 2008, the Company shall pay the Participant his or her Plan benefits in accordance with Section 8.3(a), subject to Section 8.3(b).

 

Section 8.5                                    Distributions Due to Unforeseeable Emergency.

 

(a)                                 A Participant may receive the early payment of all or part of the balance in his or her Account(s) in the event of an Unforeseeable Emergency (a “Hardship Distribution”) subject to the following restrictions:

 

(i)                                     The Participant has requested the Hardship Distribution from the Plan Administrator on a form provided by or in the format requested by the Plan Administrator;

 

(ii)                                  The Plan Administrator has determined that an Unforeseeable Emergency has occurred;

 

(iii)                               The Plan Administrator determines the amount of the Hardship Distribution, which amount will be limited to the amount reasonably necessary to satisfy the emergency need (including any amounts necessary to pay any Federal, state, local or foreign income taxes or penalties reasonably anticipated to result from the Hardship Distribution); and

 

(iv)                              The Hardship Distribution shall be distributed in a lump-sum within 30 days following determination by the Plan Administrator of the amount of the Hardship Distribution.

 

(b)                                 The circumstances that would constitute a Unforeseeable Emergency will depend on the facts and circumstances of each case, but, in any case, a Hardship Distribution may not be made to the extent that such hardship may be relieved through (i) reimbursement or compensation by insurance or otherwise, (ii) liquidation of the Participant’s assets, to the extent that liquidation of the Participant’s assets would not itself cause severe financial hardship, or (iii) by cessation of deferrals under this Plan in compliance with Code Section 409A.

 

Section 8.6                                    Distribution of Benefits in the Event of Death.  In the event of a Participant’s death prior to the complete distribution of his or her Accounts, the Company shall distribute his or her total Plan benefits to his or her Beneficiary in a lump sum within 90 days after the date of the Participant’s death.

 

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Section 8.7                                    Distribution of Benefits in the Event of Disability.  In the event of a Participant’s Disability, the Company shall pay the Participant his or her Plan benefits commencing on the first business day in February next following the date of the Participant’s Disability in the form set forth below:

 

(a)                                 For any Participant who has elected to receive his or her Plan benefits upon Retirement, pursuant to the Participant’s Distribution Election to receive his or her Plan benefits in one of the Retirement forms permitted under Section 8.3(a), subject to Section 8.3(b).

 

(b)                                 For a Participant who has elected to receive his or her Plan benefits as an In-Service Distribution, if the Participant’s Disability occurs prior to the date specified in such Distribution Election:

 

(i)                                     For amounts deferred with respect to Plan Years beginning on or subsequent to January 1, 2008, pursuant to the Participant’s Distribution Election to receive his or her Plan benefits in one of the Retirement forms permitted under Section 8.3(a), subject to Section 8.3(b).

 

(ii)                                  For amounts deferred with respect to all Plan Years beginning prior to January 1, 2008, pursuant to the Participant’s Distribution Election to receive his or her Plan benefits in a lump sum under Section 4.3(b)(ii).

 

Section 8.8                                    Postponing or Amending Distributions.  A Participant may postpone a scheduled distribution or amend the form of distribution specified in Section 8.2, Section 8.3(a) or Section 8.4 only by making a Subsequent Election pursuant to the terms of Section 4.3(c).

 

Section 8.9                                    Distribution of Benefits Pursuant to a Domestic Relations Order. The Company shall pay all or a portion of a Participant’s Plan benefits in a lump sum to any person other than the Participant pursuant to the terms of a domestic relations order. For this purpose, a domestic relations order means a judgment, decree or order (including approval of a property settlement agreement) which relates to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child or other dependent of the Participant and which is made pursuant to a state domestic relations law (including a community property law).

 

ARTICLE IX

 

Beneficiary Designation

 

Section 9.1                                    Beneficiary Designation.  Each Participant shall have the right, at any time, to designate any person, persons or entity as his or her Beneficiary or Beneficiaries. A Beneficiary designation shall be made, and may be amended, by the Participant by filing a designation with the Plan Administrator, on such form and in accordance with such procedures as the Plan Administrator may establish from time to time.

 

Section 9.2                                    Failure to Designate a Beneficiary.  If a Participant or Beneficiary fails to designate a Beneficiary as provided above, or if all designated Beneficiaries predecease the Participant or his or her Beneficiary, then the Participant’s Beneficiary shall be deemed to be, in the following order:

 

(i)                                     to the spouse of such person, if any; or

 

(ii)                                  to the deceased person’s estate.

 

Section 9.3                                    Facility of Payment.  When, in the Plan Administrator’s opinion, a Participant or Beneficiary is under a legal disability or is incapacitated in any way so as to be unable to manage his or her financial affairs, the Plan Administrator may make any benefit payments to the Participant or Beneficiary’s legal representative, or spouse, or the Plan Administrator may apply the payment for the benefit of the Participant or Beneficiary in any way the Plan Administrator considers advisable, in each case, without subjecting the Participant or Beneficiary to accelerated taxation and/or tax penalties under Code Section 409A.

 

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ARTICLE X

 

Administration of Plan

 

Section 10.1                             Plan Administrator.  The Board of Review, or such person as the Board of Review shall designate pursuant to Section 10.3, shall serve as the Plan Administrator of the Plan. The administration of the Plan shall be under the supervision of the Plan Administrator. It shall be a principal duty of the Plan Administrator to see that the Plan is carried out, in accordance with its terms, for the exclusive benefit of persons entitled to participate in the Plan without discrimination among them. Benefits under the Plan shall be paid only if the Plan Administrator decides, in his or her discretion, that the applicant is entitled to them. The Plan Administrator will have full power to administer the Plan in all of its details, subject to applicable requirements of law. For this purpose, the Plan Administrator’s powers will include but will not be limited to, the following authority, in addition to all other powers provided by this Plan:

 

(i)                                     To make and enforce such rules and regulations as it deems necessary or proper for the efficient administration of the Plan, including the establishment of any claims procedures that may be required by applicable provisions of law;

 

(ii)                                  To exercise discretion in interpreting the Plan, any interpretation to be reviewed under the arbitrary and capricious standard;

 

(iii)                               To exercise discretion in deciding all questions concerning the Plan and the eligibility of any person to participate in the Plan; such decision to be reviewed under the arbitrary and capricious standard;

 

(iv)                              To appoint such agents, counsel, accountants, consultants and other persons as may be required to assist in administering the Plan;

 

(v)                                 To allocate and delegate its responsibilities under the Plan and to designate other persons to carry out any of its responsibilities under the Plan, any such allocations, delegation or designation to be in writing;

 

(vi)                              To determine the amount and type of benefits to which any Participant or Beneficiary shall be entitled hereunder, including the method and date for all valuations under the Plan;

 

(vii)                           To receive from the Employers and from Participants such information as shall be necessary for the proper administration of the Plan or any of its programs;

 

(viii)                        To maintain or cause to be maintained all the necessary records for the administration of the Plan;

 

(ix)                              To receive, review and keep on file (as it deems convenient and proper) reports of benefit payments made by the Plan;

 

(x)                                 To determine and allocate among the Employers the liability to the Company associated with Plan benefits in accordance with Section 1.3 and to determine the time at which and manner in which that liability shall be paid to the Company;

 

(xi)                              To make, or cause to be made, equitable adjustments for any mistakes or errors made in the administration of the Plan; and

 

(xii)                           To do all other acts which the Plan Administrator deems necessary or proper to accomplish and implement its responsibilities under the Plan.

 

Section 10.2                             Reliance on Tables, etc.  In administering the Plan, the Plan Administrator will be entitled to the extent permitted by law to rely conclusively on all tables, valuations, certificates, opinions and reports which

 

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are furnished by, or in accordance with the instructions of accountants, counsel, or other experts employed or engaged by the Plan Administrator.

 

Section 10.3                             Delegation.  The Board of Review shall have the authority to appoint another corporation or one or more other persons to serve as the Plan Administrator hereunder, in which event such corporation or person (or persons) shall exercise all of the powers, duties, responsibilities, and obligations of the Plan Administrator hereunder.

 

Section 10.4                             Operations.  The day to day operation of the Plan will be handled by the person or persons designated by the Plan Administrator.

 

Section 10.5                             Uniform Rules.  The Plan Administrator shall administer the Plan on a reasonable and nondiscriminatory basis and shall apply uniform rules to all similarly situated Participants.

 

Section 10.6                             Plan Administrator’s Decisions Final.  Any interpretation of the provisions of the Plan (including but not limited to the provisions of any of its Programs) and any decision on any matter within the discretion of the Plan Administrator made by the Plan Administrator in good faith shall be binding on all persons. A misstatement or other mistake of fact shall be corrected when it becomes known and the Plan Administrator shall make such adjustment on account thereof as it considers equitable and practicable. Neither the Plan Administrator nor any Employer shall be liable in any manner for any determination of fact made in good faith.

 

ARTICLE XI

 

Claims for Benefits

 

Section 11.1                             Claims and Review Procedures.  The Plan Administrator shall adopt procedures for the filing and review of claims in accordance with Section 503 of ERISA.

 

ARTICLE XII

 

Amendment and Termination of Plan

 

Section 12.1                             Amendment.  The Company may amend this Plan, in whole or in part, at any time provided, however, that no amendment shall be effective to decrease the balance in any Account as accrued at the time of such amendment. Any amendment which would allow officers of the Company to participate in the Plan shall require the approval of the Abbott Laboratories Board of Directors. Any amendment which increases the total cost of the Plan to the Employers in excess of $250,000 in each of the three full calendar years next following the date of the amendment shall be approved by the Board of Review.  The Executive Vice President, Human Resources of the Company shall approve all other amendments to the Plan and the extension of the Plan to any division or Subsidiary of the Company.

 

Section 12.2                             Termination.  The Board of Review may at any time terminate the Plan with respect to future Deferral Elections.  The Board of Review may also terminate and liquidate the Plan in its entirety; provided that such termination and liquidation are consistent with the provisions of Code Section 409A.  Upon any such termination, the Company shall pay to the Participant the benefits the Participant is entitled to receive under the Plan, determined as of the termination date, in compliance with Code Section 409A.

 

ARTICLE XIII

 

Miscellaneous

 

Section 13.1                             Unfunded Plan.  This Plan is intended to be an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees, within the meaning of Sections 201, 301 and 401 of ERISA and therefore meant to be exempt from Parts 2, 3 and 4 of Title I of ERISA.  All payments pursuant to the Plan shall be made from the general funds of the Company and no special or separate fund shall be established or other segregation of assets made to assure payment.

 

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No Participant or other person shall have under any circumstances any interest in any particular property or assets of the Company as a result of participating in the Plan.

 

Section 13.2                             Nonassignability.  Except as specifically set forth in the Plan with respect to the designation of Beneficiaries, neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable and non-transferable.  No part of the amounts payable shall, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant’s or any other person’s bankruptcy or insolvency.

 

Section 13.3                             Validity and Severability.  The invalidity or unenforceability of any provision of this Plan shall not affect the validity or enforceability of any other provision of this Plan, which shall remain in full force and effect, and any prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

Section 13.4                             Governing Law.  The validity, interpretation, construction and performance of this Plan shall in all respects be governed by the laws of the State of Illinois, without reference to principles of conflict of law, except to the extent preempted by federal law.

 

Section 13.5                             Employment Status.  This Plan does not constitute a contract of employment or impose on the Participant or the Company any obligation for the Participant to remain an employee of the Company or change the status of the Participant’s employment or the policies of the Company and its affiliates regarding termination of employment.

 

Section 13.6                             Underlying Incentive Plans and Programs.  Nothing in this Plan shall prevent the Company from modifying, amending or terminating the compensation or the incentive plans and programs pursuant to which Eligible Bonuses or Eligible Compensation are earned and which are deferred under this Plan.

 

Section 13.7                             Successors of the Company.  The rights and obligations of the Company under the Plan shall inure to the benefit of, and shall be binding upon, the successors and assigns of the Company.

 

Section 13.8                             Waiver of Breach.  The waiver by the Company of any breach of any provision of the Plan by the Participant shall not operate or be construed as a waiver of any subsequent breach by the Participant.

 

Section 13.9                             Notice.  Any notice or filing required or permitted to be given to the Company under the Plan shall be sufficient if in writing and hand-delivered, or sent by first class mail to the principal office of the Company, directed to the attention of the Plan Administrator. Such notice shall be deemed given as of the date of delivery, or, if delivery is made by mail, as of the date shown on the postmark.

 

Section 13.10                      Waiver of Notice. Any notice required under the Plan may be waived by the person entitled to such notice.

 

Section 13.11                      Evidence.  Evidence required of anyone under the Plan may be by certificate, affidavit, document or other information which the person acting on it considers pertinent and reliable, and signed, made or presented by the proper party or parties.

 

Section 13.12                      Additional Employers. Subject to the consent of the Board of Review, any Subsidiary of the Company may adopt the Plan by filing a written instrument to that effect with the Company.

 

Section 13.13                      Separation and Distribution Agreement of 2004.  The provisions of this Section 13.13 shall apply to an Eligible Employee who is a Participant in the Plan and who transfers from employment with the Company or an Employer to Hospira, Inc. or to a subsidiary of Hospira, Inc. (collectively, the “Hospira Companies”) as a result of the transactions contemplated by that certain Separation and Distribution Agreement by and between Abbott Laboratories and Hospira, Inc., dated as of April 12, 2004 (the “Distribution

 

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Agreement”), and such transfer of employment is made in accordance with and subject to the terms of the Employee Benefits Agreement as described in the Distribution Agreement (each such transferred Participant referred to herein as a “Transferred Hospira Participant”).

 

(a)                                 A Transferred Hospira Participant’s transfer of employment to the Hospira Companies will not be considered as a termination of employment as a result of Termination of Employment, Retirement or Disability for purposes of determining eligibility for distributions under Article VII of the Plan.  Such Transferred Hospira Participant’s termination of employment resulting from Termination of Employment, Retirement or Disability shall occur only upon his or her subsequent termination of employment from the Hospira Companies (and Termination of Employment, Retirement and Disability with respect to such Transferred Hospira Participants shall mean such events in relation to the Hospira Companies rather than in relation to the Company and the Employers);

 

(b)                                 Following his or her transfer to employment with the Hospira Companies, a Transferred Hospira Participant will remain a participant but will not be eligible to make Deferral Elections.  A Transferred Hospira Participant shall remain a Participant until (i) his or her death or (ii) his or her Accounts have been distributed in accordance with the Plan and in accordance with the Transferred Hospira Participant’s elections regarding the manner of distribution of such Accounts.

 

Section 13.14                      Section 409A.  To the extent applicable, it is intended that the Plan comply with the provisions of Code Section 409A.  The Plan will be administered and interpreted in a manner consistent with this intent, and any provision that would cause the Plan to fail to satisfy Code Section 409A will have no force and effect until amended to comply therewith (which amendment may be retroactive to the extent permitted by Code Section 409A).  Notwithstanding anything contained herein to the contrary, to the extent required to avoid accelerated taxation and/or tax penalties under Code Section 409A and applicable guidance issued thereunder, amounts that would otherwise be payable pursuant to the Plan during the six-month period immediately following the Participant’s Termination of Employment or Retirement shall instead be paid on the first business day after the date that is six months following the Participant’s Termination of Employment or Retirement (or upon the Participant’s death, if earlier), plus, to the extent subject to a six-month delay, a return equal to the Rate of Return that would be achieved if such amounts were invested in accordance with the Participant’s Investment Elections under Section 4.2 from the respective dates on which such amounts would otherwise have been paid until the actual date of payment.

 

SUPPLEMENT B

 

TRANSFER OF LIABILITIES FROM THE

ABBOTT DEFERRED COMPENSATION PLAN FOR FORMER EMPLOYEES OF SOLVAY

 

B-1.                         Purpose and Effect.  The purpose of this Supplement B is to provide for the transfer of liabilities from the Abbott Deferred Compensation Plan for Former Employees of Solvay, as it may be amended (the “Solvay DCP”), to this Plan with respect to certain Abbott Retained Employees and Abbott LTD Participants as set forth in the EMA (the “Solvay DCP Participants”).  The Solvay DCP is not open to new contributions, so the purpose of this Supplement B is to facilitate the administration of any Abbott Retained Employee and Abbott LTD Participant accounts that are transferred into the Plan (the “Deferred Compensation Accounts”) from the Solvay DCP until such time as they are fully distributed.  Except as specifically provided in this Supplement B to document certain benefits, rights and features of the Solvay DCP Plan, the Plan terms shall apply to the Deferred Compensation Accounts.

 

B-2.                         Transfer of Liabilities from Solvay DCP.  As soon as practicable on or after January 1, 2013, and subject to such terms and conditions as the Plan Administrator may establish, all liabilities attributable to the Solvay DCP Participants shall be transferred from the Solvay DCP to this Plan.  The Plan shall credit each such Solvay DCP Participant’s account with (a) the amount deferred by such individual into the Solvay DCP as of the applicable transfer date, plus (b) any employer contributions, whether vested or unvested, deemed to have been made in relation to the amount described in (a), including, in each case, any earnings thereon.

 

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B-3.                         Distribution Elections.  Distribution elections made under the Solvay DCP with respect to transferred amounts described in Section B-2 above shall be recognized, implemented and honored by the Plan and such amounts shall be distributable to the applicable Solvay DCP Participant in accordance with such elections.  Elections with respect to amounts deferred under this Plan on or after January 1, 2013 shall be in accordance with Article IV and other applicable provisions of this Plan.

 

B-4.                         Earnings Equivalents.  Earnings equivalents shall be credited to each Deferred Compensation Account on the basis determined by the Plan Administrator from time to time.  A Solvay DCP Participant’s election for the deemed investment of the amounts in his or her Deferred Compensation Account shall be made in accordance with such rules and procedures as the Plan Administrator may adopt from time to time.

 

B-5.                         Vesting and Forfeiture.

 

(a)                                 A Solvay DCP Participant’s right to future payment of his or her Deferred Compensation Account attributable to deferral contributions, together with the earnings equivalents thereon, shall always be 100% vested and nonforfeitable.  Subject to paragraph (b) below, a Solvay DCP Participant’s right to future payment of his or her Deferred Compensation Account attributable to employer contributions, together with the earnings equivalents thereon, shall be vested and nonforfeitable based on his or her service with Abbott Laboratories.

 

(b)                                 If a Solvay DCP Participant is terminated for cause, including but not limited to conviction of a felony, acts involving moral turpitude, offensive personal conduct, dishonesty, disloyalty, disorderly conduct, vandalism, violation of the rules of the Company, revealing trade secrets, insubordination, interference with production, or any other act or course of action deemed detrimental to the Company by the Plan Administrator, then the only amount which the Solvay DCP Participant will receive will be that amount attributable to his or her deferral contributions and the earnings equivalents attributable thereto. This amount, valued as of the most recent valuation date administratively practicable before the distribution, will be distributed in accordance with the provisions of the Plan.  The balance of his or her Deferred Compensation Account will be forfeited concurrent with the distribution.

 

B-6.                       Distributions.

 

(a)                                 Unless otherwise provided in the Plan or in paragraph (b) below, in the event that a Solvay DCP Participant has a Termination of Employment, he or she shall receive, in the form of a lump sum distribution 75 days after the date of Termination of Employment, an amount equal to the value of his or her vested Deferred Compensation Account as of the most recent valuation date administratively practicable before the distribution. Notwithstanding the foregoing, but subject to the Plan terms and paragraph (b) below, the Solvay DCP Participant may elect to receive the value of his or her vested Deferred Compensation Account in any one of the following alternative forms:

 

(1)                                 a lump sum distribution 75 days after the date of Termination of Employment or, if later, January 1 of the calendar year following the calendar year in which he or she has a Termination of Employment;

 

(2)                                 annual installments over a five year period beginning 75 days after the date of Termination of Employment; or

 

(3)                                 annual installments over a ten year period beginning 75 days after the date of Termination of Employment.

 

Any election (or any change or revocation of an election) shall not be effective unless it is accepted by the Plan Administrator at least 12 months prior to the date of Termination of Employment and results in a further deferral of payment (or the commencement of payment) of the Solvay DCP Participant’s Deferred Compensation Account of at least five years (unless payment is on account of death).  In the event the value of a Deferred Compensation Account is not distributed in a lump sum within 75 days after a Solvay DCP Participant’s Termination of Employment, the amounts credited to such Deferred Compensation Account shall continue to be credited for earnings equivalents in accordance with Section B-4 until the latest valuation date administratively practicable before such amounts are distributed;

 

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(b)                                 In the event that there is a change of control of the Company, as defined under Code Section 409A, then each Solvay DCP Participant shall receive, in the form of a lump sum distribution made 75 days after the change of control occurs, an amount equal to the value of his or her vested Deferred Compensation Account as of the most recent valuation date administratively practicable before distribution.  Notwithstanding the foregoing, accelerated distributions under this paragraph (b) shall be limited to the extent necessary to prevent the Solvay DCP Participant from receiving any “excess parachute payment” as described in Code Section 280 or any successor section thereto, provided that the determination of what shall constitute an “excess parachute payment” shall be made by the Plan Administrator, and provided further that such limitation may be applied by the Plan Administrator only if and to the extent such limitation of acceleration does not cause a violation of Code Section 409A.  In the event that a portion of the benefit otherwise payable under this paragraph (b) may not be accelerated pursuant to the limitations of the immediately preceding sentence, the payments which would be due latest in time shall be accelerated first, to the extent required to comply with Code Section 409A.

 

B-7.                         Use of Terms.  Terms used in this Supplement B have the meanings of those terms as set forth in the Plan, unless they are defined in this Supplement B.  All of the terms and provisions of the Plan shall apply to this Supplement B except that where the terms of the Plan and this Supplement B conflict, the terms of this Supplement B shall govern.

 

1.                                      The Plan shall otherwise remain unchanged and in full force and effect.

 

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Exhibit 10.83

 

MANAGEMENT SAVINGS PLAN

 

ARTICLE I

 

Establishment and Purpose

 

St. Jude Medical, LLC (the “Company”) hereby amends and restates the Management Savings Plan (the “Plan”), effective January 1, 2016, in order to incorporate changes made to the Plan since its last restatement and to streamline Plan provisions.  The purpose of the Plan is to attract and retain key employees by providing opportunities to defer receipt of salary, bonus, and other specified compensation. The Plan is not intended to meet the qualification requirements of Code Section 401(a), but is intended to meet the requirements of Code Section 409A, and shall be operated and interpreted consistent with that intent.

 

The Plan constitutes an unsecured promise by a Participating Employer to pay benefits in the future. Participants in the Plan shall have the status of general unsecured creditors of the Company or the Adopting Employer, as applicable. Each Participating Employer shall be solely responsible for payment of the benefits of its employees and their beneficiaries. The Plan is unfunded for Federal tax purposes and is intended to be an unfunded arrangement for eligible employees who are part of a select group of management or highly compensated employees of the Employer within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA. Any amounts set aside to defray the liabilities assumed by the Company or an Adopting Employer will remain the general assets of the Company or the Adopting Employer and shall remain subject to the claims of the Company’s or the Adopting Employer’s creditors until such amounts are distributed to the Participants.

 

ARTICLE II

 

Definitions

 

Section 2.1                                    Account.  Account means a bookkeeping account maintained by the Plan Administration Committee to record the payment obligation of a Participating Employer to a Participant as determined under the terms of the Plan. The Plan Administration Committee may maintain an Account to record the total obligation to a Participant and component Accounts to reflect amounts payable at different times and in different forms. Reference to an Account means any such Account established by the Plan Administration Committee, as the context requires. Accounts are intended to constitute unfunded obligations within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA.

 

Section 2.2                                    Account Balance. Account Balance means, with respect to any Account, the total payment obligation owed to a Participant from such Account as of the most recent Valuation Date.

 

Section 2.3                                    Adopting Employer. Adopting Employer means an Affiliate who, with the consent of the Company, has adopted the Plan for the benefit of its eligible employees and who files a declaration with the Company agreeing to be bound by the terms of the Plan and agreeing to bear its allocable share of the costs and expenses incurred in the operation and administration of the Plan.

 

Section 2.4                                    Affiliate. Affiliate means a corporation, trade or business that, together with the Company, is treated as a single employer under Code Section 414(b) or (c).

 

Section 2.5                                    Beneficiary. Beneficiary means a natural person, estate, or trust designated by a Participant to receive payments to which a Beneficiary is entitled in accordance with provisions of the Plan.

 

Section 2.6                                    Bonus. Bonus means any compensation in addition to Eligible Base Compensation, Commissions, and payments made pursuant to the MICP/Other Annual Bonus, paid to a Participant as an employee on a regular, recurring basis under any of the bonus or incentive plans maintained by the Company for one or more specified performance periods.  The Plan Administration Committee’s classification of a remuneration item as included in or excluded from Bonus shall be conclusive for the purpose of the foregoing rules.

 

Section 2.7                                    Business Day. Business Day means each day on which the New York Stock Exchange is open for business.

 


 

Section 2.8                                    Change in Control. Change in Control means the first to occur of the following events:

 

(a)                                 Any individual, entity or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) becomes the “beneficial owner” (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of either (i) the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this paragraph (a), the following acquisitions shall not constitute a Change in Control:  (i) any acquisition directly from the Company, or approved by the Incumbent Directors, following which such Person owns not more than 50% of the Outstanding Company Common Stock or the Outstanding Company Voting Securities, (ii) any acquisition by an underwriter temporarily holding securities pursuant to an offering of such securities, (iii) any acquisition by the Company, (iv) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (v) any acquisition pursuant to a transaction which complies with clauses (i), (ii), and (iii) of paragraph (c) below; or

 

(b)                                 Individuals who, as of January 1, 2016, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to January 1, 2016, whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the Incumbent Directors then comprising the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or

 

(c)                                  Consummation of a reorganization, merger or consolidation (or similar corporate transaction) involving the Company or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets or stock of another entity (a “Business Combination”), in each case, unless, immediately following such Business Combination, (i) 50% or more of, respectively, the then outstanding shares of common stock and the total voting power of (A) the corporation resulting from such Business Combination (the “Surviving Corporation”), or (B) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of 80% of the voting securities eligible to elect directors of the Surviving Corporation (the “Parent Corporation”), is represented by Outstanding Company Common Stock and Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Outstanding Company Common Stock or Outstanding Company Voting Securities, as the case may be, were converted pursuant to such Business Combination), and such beneficial ownership of common stock or voting power among the holders thereof is in substantially the same proportion as the beneficial ownership of Outstanding Company Common Stock and the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (ii) no person (other than any employee benefit plan or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation) is or becomes the beneficial owner, directly or indirectly, of 30% or more of the outstanding shares of common stock and the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation), unless such acquisition is pursuant to a Business Combination that is an acquisition by the Company or a subsidiary of the Company of the assets or stock of another entity that is approved by the Incumbent Directors, following which such person owns not more than 50% of such outstanding shares and of voting power, and (iii) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) following the consummation of the Business Combination were Incumbent Directors at the time of the Board’s approval of the execution of the initial agreement providing for such Business Combination.

 

Notwithstanding the foregoing, a Change in Control of the Company shall not be deemed to occur solely because any person acquires beneficial ownership of more than 30% of the Outstanding Company Common Stock or Outstanding Company Voting Securities as a result of the acquisition of Outstanding Company Common Stock or Outstanding Company Voting Securities by the Company which reduces the number of shares of Outstanding Company Common Stock or Outstanding Company Voting Securities; provided, that if after such acquisition by the Company such person becomes the beneficial owner of additional shares of Outstanding Company Common Stock or Outstanding Company Voting Securities that increases the percentage of Outstanding Company Common Stock

 


 

or Outstanding Company Voting Securities beneficially owned by such person, a Change in Control of the Company shall then occur.

 

Section 2.9                                    Claimant. Claimant means a Participant or Beneficiary filing a claim under Article XI of this Plan.

 

Section 2.10                             Code. Code means the Internal Revenue Code of 1986, as amended from time to time.

 

Section 2.11                             Code Section 409A. Code Section 409A means section 409A of the Code, and regulations and other guidance issued by the Treasury Department and Internal Revenue Service thereunder.

 

Section 2.12                             Commissions.  Commissions means any compensation in addition to Eligible Base Compensation, Bonus, and payments made pursuant to the MICP/Other Annual Bonus, paid to a Participant as an employee under any employment or compensation agreement or incentive arrangement in connection with the sales of the products of the Company provided (i) a substantial portion of Participant’s services to the Company consists of the direct sale of a product or a service to a customer that is not related or treated as related to the Company or to the Participant (under Treas. Reg. Sections 1.409A-1(f)(2)(ii) and (iv)); (ii) the amount the Company pays to the Participant that consists either of a portion of the purchase price for the product or service or of an amount substantially all of which is calculated by reference to volume of sales; and (iii) payment is either contingent upon the Company receiving payment from an unrelated customer (as described in clause (i) above) for the product or services or, if consistently applied as to all similarly situated service providers, is contingent upon the closing of a sales transaction and such other requirements as the Company may specify before the closing of the sales transaction.  The Plan Administration Committee’s classification of a remuneration item as included in or excluded from Commissions shall be conclusive for the purpose of the foregoing rules.

 

Section 2.13                             Committee. Committee means the Abbott Laboratories Employee Benefit Board of Review appointed and acting under the Abbott Laboratories Annuity Retirement Plan and having the powers and duties described in this Plan.

 

Section 2.14                             Company. Company means St. Jude Medical, LLC, and any successor thereto.

 

Section 2.15                             Compensation Deferral Agreement. Compensation Deferral Agreement means an agreement between a Participant and a Participating Employer that specifies: (i) the amount of each component of compensation that the Participant has elected to defer to the Plan in accordance with the provisions of Article IV, and (ii) the Payment Schedule applicable to one or more Accounts.

 

Section 2.16                             Deferral. Deferral means a credit to a Participant’s Account(s) that records that portion of the Participant’s compensation that the Participant has elected to defer to the Plan in accordance with the provisions of Article IV. Unless the context of the Plan clearly indicates otherwise, a reference to Deferrals includes Earnings attributable to such Deferrals.

 

Section 2.17                             Deferred Compensation Account. Deferred Compensation Account means the Account established for a Participant to record his or her Deferrals made to the Plan with respect to services performed prior to January 1, 2015.  Such Account also includes any deferrals transferred from the St. Jude Medical S.C., Inc., U.S. Division Representative Principals and Sales Associates Deferred Compensation Plan.

 

Section 2.18                             Discretionary Amount Account. Discretionary Amount Account means the Account established for a Participant to record discretionary Company contributions credited on his or her behalf to the Plan with respect to periods commencing prior to January 1, 2015. Such Account also includes any discretionary amounts transferred from the St. Jude Medical S.C., Inc., U.S. Division Representative Principals and Sales Associates Deferred Compensation Plan.

 

Section 2.19                             Earnings. Earnings means an adjustment to the value of an Account in accordance with Article VII.

 

Section 2.20                             Effective Date. Effective Date of this amendment and restatement means January 1, 2016.

 


 

Section 2.21                             Eligible Base Compensation.  Eligible Base Compensation means, for a Participant for any period, except as provided in the succeeding paragraphs of this subsection, the sum of all remuneration paid to the Participant during such period for service as an employee of a Participating Employer as base salary and wages, and short-term disability benefits, and shall be determined without regard to Code Section 401(a)(17) and without regard to amounts deferred pursuant to Code Sections 401(k), 125, and 132(f)(4).  Notwithstanding the foregoing, a Participant’s Eligible Base Compensation will not include:

 

(a)                                 amounts deferred or paid under an agreement between the Participating Employer and the Participant that is not a plan qualified under Code Section 401(a), other than this plan;

 

(b)                                 contributions made or benefits (other than short-term disability benefits) paid by the Participating Employer under any other employee benefit plan;

 

(c)                                  any remuneration not paid in cash (or remuneration otherwise imputed as income, e.g., value of taxable life insurance coverage);

 

(d)                                 severance pay;

 

(e)                                  reimbursements, allowances, moving expense payments, relocation cost-of-living payments, tax gross-ups and other similar equalization payments;

 

(f)                                   paid time off payments; and

 

(g)                                  all bonus, incentive, retention or commission-based remuneration of any kind (including, but not limited to, awards and spot bonus payments).

 

The Plan Administration Committee’s classification of a remuneration item as included in or excluded from Eligible Base Compensation shall be conclusive for the purpose of the foregoing rules.

 

Section 2.22                             Eligible Employee. Eligible Employee means an Employee who (i) for the Plan Year or the preceding Plan Year had annual compensation from the Company or another Participating Employer in excess of $150,000 taking into account Eligible Base Compensation, Bonus, Commissions, and amounts paid pursuant to and in accordance with the MICP/Other Annual Bonus or (ii) is designated by the Committee as eligible, provided in either case the employee is a member of a ‘select group of management or highly compensated employees of a Participating Employer within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA.’ Notwithstanding the foregoing, effective for calendars years beginning on and after January 1, 2018:

 

(a)                                 no Employee will be eligible to participate in the Plan unless such Employee (x) is a Participant with an Account Balance in the Plan as of December 31, 2017, or (y) had a Compensation Deferral Agreement in effect during calendar year 2017; and

 

(b)                                 if a Participant is shown as having a grade level less than or equal to grade 19 (or equivalent level if on a different pay grade system) on the applicable Employer’s Human Resource System, and does not elect to defer compensation for a year by timely submitting a Compensation Deferral Agreement in accordance with Sections 4.1 and 4.2, then such Participant shall not be permitted to elect to defer compensation for any future years.

 

Section 2.23                             Employee. Employee means a common-law employee of an Employer.

 

Section 2.24                             Employer. Employer means the Company and each Affiliate.

 

Section 2.25                             ERISA. ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time.

 

Section 2.26                             Matching Amount Account. Matching Amount Account means the Account established for a Participant to record Company matching contributions credited on his or her behalf to the Plan with respect to periods commencing prior to January 1, 2015. Such Account also includes any matching amounts transferred from

 


 

the St. Jude Medical S.C., Inc., U.S. Division Representative Principals and Sales Associates Deferred Compensation Plan.

 

Section 2.27                             MICP/Other Annual Bonus.  MICP means the Management Incentive Compensation Plan of the Company, as may be hereafter amended, or any successor thereto. Other Annual Bonus means a payment made to a Participant as an employee on an annual basis under any of the bonus or incentive plans maintained by the Company.

 

Section 2.28                             Participant. Participant means an Eligible Employee who has an Account Balance greater than zero.

 

Section 2.29                             Participating Employer.  Participating Employer means the Company and each Adopting Employer.

 

Section 2.30                             Payment Schedule.  Payment Schedule means the date as of which payment of an Account under the Plan will commence and the form in which payment of such Account will be made.

 

Section 2.31                             Plan.  Generally, the term Plan means the “Management Savings Plan” as documented herein and as may be amended from time to time hereafter. However, to the extent permitted or required under Code Section 409A, the term Plan may in the appropriate context also mean a portion of the Plan that is treated as a single plan under Treas. Reg. Section 1.409A-1(c), or the Plan or portion of the Plan and any other nonqualified deferred compensation plan or portion thereof that is treated as a single plan under such section.

 

Section 2.32                             Plan Administration Committee.   The Plan Administration Committee means the Committee or its delegate.

 

Section 2.33                             [RESERVED]

 

Section 2.34                             Plan Year.  Plan Year means January 1 through December 31.

 

Section 2.35                             Pre-2015 Account.  Pre-2015 Account means an Account consisting of all of a Participant’s Deferred Compensation Accounts, Discretionary Amount Accounts, and Matching Amount Accounts.

 

Section 2.36                             Retirement Savings Plan.  Retirement Savings Plan means the St. Jude Medical, Inc. Retirement Savings Plan, as in effect prior to its freeze and merger with and into the Abbott Laboratories Stock Retirement Plan.

 

Section 2.37                             Retirement/Termination Account. Retirement/Termination Account means an Account established by the Plan Administration Committee to record amounts payable to a Participant upon Separation from Service.  Retirement/Termination Accounts consist solely of Deferrals made for services performed on or after January 1, 2015, and any Company contributions made for periods commencing on or after January 1, 2015.  A Participant may have no more than two Retirement/Termination Accounts, a Primary Retirement/Termination Account which shall be automatically established for a Participant upon his or her initial participation in the Plan (or on January 1, 2015, if later), and a Secondary Retirement/Termination Account which may be established by the Participant on any Compensation Deferral Agreement filed in accordance with Article IV.

 

Section 2.38                             Separation from Service.  Separation from Service means an Employee’s termination of employment with the Employer.  Whether a Separation from Service has occurred shall be determined by the Plan Administration Committee in accordance with Code Section 409A.

 

Except in the case of an Employee on a bona fide leave of absence as provided below, an Employee is deemed to have incurred a Separation from Service if the Employer and the Employee reasonably anticipated that the level of services to be performed by the Employee after a date certain would be reduced to 20% or less of the average services rendered by the Employee during the immediately preceding 36-month period (or the total period of employment, if less than 36 months), disregarding periods during which the Employee was on a bona fide leave of absence.

 


 

An Employee who is absent from work due to military leave, sick leave, or other bona fide leave of absence shall incur a Separation from Service on the first date immediately following the later of: (i) the six month anniversary of the commencement of the leave, or (ii) the expiration of the Employee’s right, if any, to reemployment under statute or contract. Notwithstanding the preceding, however, an Employee who is absent from work due to a physical or mental impairment that is expected to result in death or last for a continuous period of at least six months and that prevents the Employee from performing the duties of his position of employment or a similar position shall incur a Separation from Service on the first date immediately following the 29-month anniversary of the commencement of the leave, unless the Company or the Participant terminates the leave before that date.

 

For purposes of determining whether a Separation from Service has occurred, the Employer means the Employer as defined in Section 2.24 of the Plan, except that in applying Code sections 1563(a)(1), (2) and (3) for purposes of determining whether another organization is an Affiliate of the Company under Code Section 414(b), and in applying Treasury Regulation Section 1.414(c)-2 for purposes of determining whether another organization is an Affiliate of the Company under Code Section 414(c), “at least 50 percent” shall be used instead of “at least 80 percent” each place it appears in those sections.

 

The Plan Administration Committee specifically reserves the right to determine whether a sale or other disposition of substantial assets to an unrelated party constitutes a Separation from Service with respect to a Participant providing services to the seller immediately prior to the transaction and providing services to the buyer after the transaction.

 

Section 2.39                             Specified Date Account. Specified Date Account means an Account established by the Plan Administration Committee to record the amounts payable at a future date as specified in the Participant’s Compensation Deferral Agreement. A Specified Date Account may be identified in enrollment materials as an “In-Service Account” or such other name as established by the Plan Administration Committee without affecting the meaning thereof. Specified Date Accounts consist solely of Deferrals made for services performed on or after January 1, 2015.  A Participant may have no more than five Specified Date Accounts at any one time.

 

Section 2.40                             Specified Employee. Specified Employee means an Employee who, as of the date of his or her Separation from Service, is a “key employee” of the Company or any Affiliate, any stock of which is actively traded on an established securities market or otherwise.

 

An Employee is a key employee if he or she meets the requirements of Code Section 416(i)(1)(A)(i), (ii), or (iii) (applied in accordance with applicable regulations thereunder and without regard to Code Section 416(i)(5)) at any time during the 12-month period ending on the Specified Employee Identification Date. Such Employee shall be treated as a key employee for the entire 12-month period beginning on the Specified Employee Effective Date.

 

For purposes of determining whether an Employee is a Specified Employee, the compensation of the Employee shall be determined in accordance with the definition of compensation provided under Treas. Reg. Section 1.415(c)-2(d)(3) (wages within the meaning of Code section 3401(a) for purposes of income tax withholding at the source, plus amounts excludible from gross income under section 125(a), 132(f)(4), 402(e)(3), 402(h)(1)(B), 402(k) or 457(b), without regard to rules that limit the remuneration included in wages based on the nature or location of the employment or the services performed); provided, however, that, with respect to a nonresident alien who is not a Participant in the Plan, compensation shall not include compensation that is not includible in the gross income of the Employee under Code Sections 872, 893, 894, 911, 931 and 933, provided such compensation is not effectively connected with the conduct of a trade or business within the United States.

 

Notwithstanding anything in this paragraph to the contrary: (i) if a different definition of compensation has been designated by the Company with respect to another nonqualified deferred compensation plan in which a key employee participates, the definition of compensation shall be the definition provided in Treas. Reg. Section 1.409A-1(i)(2), and (ii) the Company may through action that is legally binding with respect to all nonqualified deferred compensation plans maintained by the Company, elect to use a different definition of compensation.

 

In the event of corporate transactions described in Treas. Reg. Section 1.409A-1(i)6), the identification of Specified Employees shall be determined in accordance with the default rules described therein, unless the Employer elects to utilize the available alternative methodology through designations made within the timeframes specified therein.

 


 

Section 2.41                             Specified Employee Identification Date. Specified Employee Identification Date means December 31, unless the Employer has elected a different date through action that is legally binding with respect to all nonqualified deferred compensation plans maintained by the Employer.

 

Section 2.42                             Specified Employee Effective Date. Specified Employee Effective Date means the first day of the fourth month following the Specified Employee Identification Date, or such earlier date as is selected by the Plan Administration Committee.

 

Section 2.43                             SRP.  SRP means the Abbott Laboratories Stock Retirement Plan, as amended from time to time.

 

Section 2.44                             Substantial Risk of Forfeiture. Substantial Risk of Forfeiture has the meaning specified in Treas. Reg. Section 1.409A-1(d).

 

Section 2.45                             Unforeseeable Emergency. Unforeseeable Emergency means a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, the Participant’s dependent (as defined in Code section 152, without regard to section 152(b)(l), (b)(2), and (d)(l)(B)), or a Beneficiary; loss of the Participant’s property due to casualty (including the need to rebuild a home following damage to a home not otherwise covered by insurance, for example, as a result of a natural disaster); or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.  The types of events which may qualify as an Unforeseeable Emergency may be limited by the Plan Administrative Committee or by the Divisional Vice President, Compensation and Benefits, of Abbott Laboratories (or, in the event that no individual holds such title, then the individual performing the duties of such title) (“DVP, Compensation and Benefits”).

 

Section 2.46                             Valuation Date. Valuation Date means each Business Day.

 

Section 2.47                             Year of Vesting Service.  Year of Vesting Service means a year of vesting service as defined in the Retirement Savings Plan; for calendar years beginning on and after January 1, 2018, Year of Vesting Service means a year of vesting service as defined in the SRP.

 

ARTICLE III

 

Eligibility and Participation

 

Section 3.1                                    Eligibility and Participation. For calendar years beginning prior to January 1, 2018, an Employee shall be eligible to participate in the Plan on the first day of the calendar quarter that is administratively feasible following the date he or she becomes an Eligible Employee.

 

Section 3.2                                    Duration. A Participant shall be eligible to defer compensation and receive allocations of Company Contributions, subject to the terms of the Plan, for as long as such Participant remains an Eligible Employee. In the event a Participant has, for the current Plan Year, or is expected in good faith to have for the next Plan Year, compensation from the Company or another Participating Employer equal to or less than $100,000, or the Compensation Committee, in its sole and absolute discretion, determines that a Participant is no longer an Eligible Employee, and the Participant has not Separated from Service, the Participant will not be allowed to submit future Compensation Deferral Agreements but may otherwise exercise all of the rights of a Participant under the Plan with respect to his or her Account(s). On and after a Separation from Service, a Participant shall remain a Participant as long as his or her Account Balance is greater than zero (0), and during such time may continue to make allocation elections as provided in Section 7.4. An individual shall cease being a Participant in the Plan when all benefits under the Plan to which he or she is entitled have been paid.

 

Section 3.3                                    Rehires.  An Eligible Employee who Separates from Service and who subsequently resumes performing services for the Employer in the same calendar year will have his or her Compensation Deferral Agreement for such year, if any, reinstated, but his or her eligibility to participate in the Plan in years subsequent to the year of rehire shall be governed by the provisions of Section 3.1.  An Eligible Employee who Separates from Service and who subsequently resumes performing services for the Employer in a calendar year other than the

 


 

calendar year in which he or she Separated from Service will be eligible to participate in the Plan upon rehire solely in accordance with the provisions of Section 3.1.

 

ARTICLE IV

 

Deferrals

 

Section 4.1                                    Deferral Elections, Generally.

 

(a)                                 A Participant may elect to defer compensation by submitting a Compensation Deferral Agreement during the enrollment periods established by the Plan Administration Committee and in the manner specified by the Plan Administration Committee, but in any event, in accordance with Section 4.2. A Compensation Deferral Agreement that is not timely filed with respect to a service period or component of compensation, or that is submitted by a Participant who Separates from Service prior to the latest date such agreement would become irrevocable under Section 409A, shall be considered null and void and shall not take effect. The Plan Administration Committee may modify any Compensation Deferral Agreement prior to the date the election becomes irrevocable under the rules of Section 4.2.

 

(b)                                 The Plan Administration Committee may permit different deferral amounts for each component of compensation and may establish a minimum or maximum deferral amount for each such component. Unless otherwise specified by the Plan Administration Committee in the Compensation Deferral Agreement, Participants may defer up to 80% of their Eligible Base Compensation and up to 100% of Bonus, Commissions, or payments under the MICP/Other Annual Bonus. A Compensation Deferral Agreement may also specify the investment allocation described in Section 7.4.

 

(c)                                  Deferrals of cash compensation shall be calculated with respect to the gross cash compensation payable to the Participant prior to any deductions or withholdings, but shall be reduced by the Plan Administration Committee as necessary so that it does not exceed 100% of the cash compensation of the Participant remaining after deduction of all required income and employment taxes, 401(k) and other employee benefit deductions, and other deductions required by law. Changes to payroll withholdings that affect the amount of compensation being deferred to the Plan shall be allowed only to the extent permissible under Code Section 409A.

 

(d)                                 The Participant shall specify on his or her Compensation Deferral Agreement the amount of Deferrals and whether to allocate Deferrals to one or more Retirement/Termination Accounts or to one or more Specified Date Accounts. If no designation is made, Deferrals shall be allocated to the Primary Retirement/Termination Account. A Participant may also specify in his or her Compensation Deferral Agreement the form in which amounts allocated to his or her Plan Accounts shall be distributed. If the form of payment is not specified for one or more Accounts, amounts allocated to such Account shall be distributed in a single lump sum.

 

Section 4.2                                    Timing Requirements for Compensation Deferral Agreements.

 

(a)                                 First Year of Eligibility. In the case of the first year in which an Eligible Employee becomes eligible to participate in the Plan, the Plan Administration Committee may permit him or her to submit a Compensation Deferral Agreement during the enrollment period established by the Plan Administration Committee, which enrollment period shall not extend beyond the date which is 30 days after the date he or she is first eligible to participate.   Any Compensation Deferral Agreement described in this paragraph becomes irrevocable 30 days after the effective date of the individual’s eligibility to participate in the Plan.

 

A Compensation Deferral Agreement filed under this paragraph applies to compensation earned for pay periods beginning in the first calendar quarter commencing after the end of the enrollment period specified by the Plan Administration Committee or such later date as the Plan Administration Committee may designate.  Notwithstanding anything to the contrary herein, a Compensation Deferral Agreement filed under this paragraph that takes effect on a date other than the first day of a Plan Year shall not apply to MICP/Other Annual Bonus payments earned such year.

 

An Eligible Employee who Separates from Service and who subsequently resumes performing services for the Employer in the same calendar year will not be allowed to submit a new Compensation Deferral Agreement under this paragraph if he or she had a Compensation Deferral Agreement in effect for such year, but shall instead

 


 

have his or her prior Compensation Deferral Agreement reinstated for such year.

 

(b)                                 Prior Year Election. Except as otherwise provided in this Section 4.2, the Plan Administration Committee may permit an Eligible Employee to defer Compensation for a year by filing a Compensation Deferral Agreement no later than December 31 of the year prior to the year in which the Compensation to be deferred is earned. A Compensation Deferral Agreement filed under this paragraph shall become irrevocable on December 31 immediately preceding the year for which it is to be effective.

 

(c)                                  Certain Forfeitable Rights. With respect to a legally binding right to a payment in a subsequent year that is subject to a forfeiture condition requiring the Participant’s continued services for a period of at least 12 months from the date the Participant obtains the legally binding right, the Plan Administration Committee may permit an Eligible Employee to defer such compensation by filing a Compensation Deferral Agreement on or before the 30th day after the legally binding right to the compensation accrues, provided that the Compensation Deferral Agreement is submitted at least 12 months in advance of the earliest date on which the forfeiture condition could lapse. The Compensation Deferral Agreement described in this paragraph becomes irrevocable after such 30th day. If the forfeiture condition applicable to the payment lapses before the end of such 12-month period as a result of the Participant’s death or disability (as defined in Treas. Reg. Section 1.409A-3(i)(4)) or upon a change in control event (as described in Treas. Reg. Section 1.409A-3(i)(5)), the Compensation Deferral Agreement will be void unless it would be considered timely under another rule described in this Section.

 

(d)                                 “Evergreen” Deferral Elections. The Plan Administration Committee, in its discretion, may provide that Compensation Deferral Agreements will continue in effect for subsequent years or performance periods by communicating that intention to Participants. Such “evergreen” Compensation Deferral Agreements will become effective with respect to an item of compensation on the date such election becomes irrevocable under this Section 4.2. An evergreen Compensation Deferral Agreement may be terminated or modified prospectively with respect to Compensation for which such election remains revocable under this Section 4.2. A Participant whose Compensation Deferral Agreement is cancelled in accordance with Section 4.6 will be required to file a new Compensation Deferral Agreement under this Article IV in order to recommence Deferrals under the Plan.

 

Section 4.3                                    Allocation of Deferrals. A Compensation Deferral Agreement may allocate Deferrals to one or more Specified Date Accounts and/or to one or both Retirement/Termination Accounts. The Plan Administration Committee may, in its discretion, establish a minimum deferral period for the establishment of a Specified Date Account (for example, the second Plan Year following the year compensation is first allocated to such accounts.). In the event a Participant’s Compensation Deferral Agreement allocates compensation to a Specified Date Account that does not satisfy the minimum deferral period established by the Plan Administration Committee (if any), the compensation shall be allocated to the Retirement/Termination Account of the Participant with the shortest payment duration.

 

Section 4.4                                    Deductions from Pay. The Plan Administration Committee has the authority to determine the payroll practices under which any component of compensation subject to a Compensation Deferral Agreement will be deducted from a Participant’s compensation.  To the extent the Plan Administration Committee allows Deferrals from compensation equal to corrective distributions received from a qualified 401(k) plan of the Employer, Deferrals equal to the amount of the corrective distribution shall be deducted from the first payment of compensation made on or after the date such corrective distribution is issued to the Participant, and shall be deducted from subsequent compensation payments only to the extent the first compensation payment is insufficient to fully fund the Deferral.

 

Section 4.5                                    Vesting. Participant Deferrals shall be 100% vested at all times.

 

Section 4.6                                    Cancellation of Deferrals. The Plan Administration Committee may cancel a Participant’s Deferrals: (i) for the balance of the Plan Year in which an Unforeseeable Emergency occurs, and (ii) if the Participant receives a hardship distribution under the Employer’s qualified 401(k) plan, through the end of the Plan Year in which the six month anniversary of the hardship distribution falls. To the extent Deferrals are cancelled under (i) or (ii), no subsequent Compensation Deferral Agreement may take effect prior to the first day of the Plan Year that begins on or after the 12-month anniversary of the emergency payment or hardship distribution.

 


 

ARTICLE V

 

Company Contributions

 

Section 5.1                                    Matching Contributions. For each Plan Year, the Participating Employer may, from time to time in its sole and absolute discretion, credit Matching Contributions to the Account of a Participant who has completed a Year of Vesting Service and is employed on the last day of such Plan Year.  Such contributions shall be based on whether a matching contribution is made by the Company under the Retirement Savings Plan with respect to that Plan Year and, if a contribution is made, the amount of such contribution.

 

(a)                                 The rate of matching contributions made by the Company, if any, with respect to elective deferrals under the Retirement Savings Plan, multiplied by

 

(b)                                 The amount the Participant elected to defer for the Plan Year in accordance with the Participant’s election under Section 4.2 up to 3% of the first one hundred thousand dollars ($100,000) of the Participant’s compensation for the Plan Year that exceeds the compensation limit under Code Section 401(a)(17) for such year;

 

provided, however, that the total of Matching Contributions under this Plan and matching contributions the Company made or would have made under the Qualified Plan if the Participant made the maximum elective deferrals permitted for highly compensated employees under that plan shall not exceed 100% of the matching contribution that would have been provided under the Retirement Savings Plan absent any plan-based restrictions that reflect limits on qualified plan contributions under the Code and based upon compensation as defined under the Retirement Savings Plan.  Matching Contributions credited on or after January 1, 2015, shall be credited to a Participant’s Primary Retirement/Termination Account.  Notwithstanding the foregoing, for calendar years beginning on and after January 1, 2018, “SRP” shall be substituted for “Retirement Savings Plan” where such references appear throughout this Section 5.1.

 

Section 5.2                                    Discretionary Company Contributions. The Participating Employer may, from time to time in its sole and absolute discretion, make Discretionary Contributions for a Plan Year to the account of one or more Participants, provided the Participant is an employee of the Company or another Participating Employer as of the last day of the Plan Year and determined in accordance with the provisions of this Section 5.2.  Authorization for any Discretionary Contributions pursuant to this Section 5.2 shall be by written resolution duly authorized by the Compensation Committee, which resolution shall specify the amount of the contribution (whether in terms of dollars, percentage of net profits, or percentage of Participant compensation), the period to which the Discretionary Contribution is to be allocated, and any other terms applicable to such contribution.  Unless otherwise specified, such resolution shall apply only to the contribution so authorized, and shall not authorize any such Discretionary Contribution for any future period.  In the event no resolution is adopted by the Compensation Committee or its delegate, no Discretionary Contribution shall be authorized or presumed.  All Discretionary Contributions will be credited to a Participant’s Primary Retirement/Termination Account.

 

Section 5.3                                    Vesting. Except as may be otherwise provided by the Participating Employer, Company Contributions described in Sections 5.1 and 5.2, above, and the Earnings thereon, shall become vested based on the Participant’s Years of Vesting Service, as follows:

 

Years of Vesting Service

 

Vested Percentage

 

 

 

 

 

Less than one

 

0

%

At least one but less than two

 

20

%

At least two but less than three

 

40

%

At least three but less than four

 

60

%

At least four but less than five

 

80

%

Five or more

 

100

%

 

All Company Contributions shall become 100% vested upon the occurrence of a Change in Control.  The Participating Employer may, at any time, in its sole discretion, increase a Participant’s vested interest in a Company Contribution. The portion of a Participant’s Accounts that remains unvested upon his or her Separation from Service after the application of the terms of this Section 5.3 shall be forfeited. The provisions of this Section 5.3 shall apply to any amounts credited to a Participant’s Matching Amounts Account or Discretionary Amounts Account, including discretionary amounts and matching amounts transferred from the St. Jude Medical S.C., Inc., U.S.

 


 

Division Representative Principals and Sales Associates Deferred Compensation Plan that were not vested as of the date the transfer occurred; transferred amounts that were vested as of the date of transfer shall continue to be fully vested.

 

Notwithstanding anything to the contrary herein:

 

(a)                                 Except as otherwise provided by written agreement between a Participant and the Company, notwithstanding any provision in this Article V to the contrary, the Participant’s vested interest in any amounts credited under the Plan shall not be accelerated to the extent that the Company determines that such acceleration would cause the deduction limitations of Code §280G to become effective.  The provisions of this paragraph (a) shall take precedence over the provisions of any other agreement between the Participant and the Company to which the deduction limitation of Code §280G applies, and shall result in any reduction under the deduction limitations of Code §280G being applied first to the Participant’s Accounts under this Plan before any other reduction as a result of the limitations of Code §280G.

 

(b)                                 In the event that vesting of any amounts credited under the Plan is not accelerated pursuant to such a determination, the Participant may request independent verification of the calculations of the Company with respect to the application of Code §280G.  In such case, the Company must provide to the Participant within 30 business days of such a request an opinion from a national accounting firm selected by the Participant, to the effect that, in the opinion of that accounting firm that any limitation in the vested percentage hereunder is necessary to avoid the limits of Code §280G, and containing supporting calculations, or, in the absence of such an opinion, shall cause such amounts to become fully vested.  The cost of such opinion shall be paid for by the Company.

 

(c)                                  Any amounts credited under the Plan that are not accelerated due to such a determination shall continue to be subject to the Vesting Schedule of this Section 5.3 without regard to the acceleration provisions thereof.

 

ARTICLE VI

 

Payments from Accounts

 

A Participant’s Accounts shall be distributed in accordance with the provisions of this Article VI.

 

Section 6.1                                    Retirement/Termination Accounts shall be distributed commencing the first calendar quarter that begins after Separation from Service, based on the value of the Account(s) as determined under Article VII.  Payment shall be made in a single lump sum, unless the Participant elects on the Compensation Deferral Agreement with which the Account was established to have such Account paid in quarterly installments over a period of two to fifteen years.  Notwithstanding anything to the contrary in this Section 6.1, if at the time a Participant Separates from Service he or she has fewer than five Years of Vesting Service or the total of all of his Accounts is $25,000 or less, all of his Accounts will be distributed in a single lump sum.

 

Notwithstanding anything to the contrary in this Section 6.1, payment to a Participant who is a Specified Employee as of the date such Participant incurs a Separation from Service will be made or begin in the first calendar quarter following the six-month anniversary of the Participant’s Separation from Service (or within 90 days of the Participant’s date of death, if earlier).

 

Section 6.2                                    Specified Date Accounts shall be distributed in January of the year selected by the Participant, based on the value of the Account(s) as determined under Article VII.  Payment shall be made in a single lump sum, unless the Participant elects on the Compensation Deferral Agreement with which the Account was established to have such Account paid in annual installments over a period of up to five years.

 

In the event a Participant Separates from Service before his or her Specified Date Account(s) has been fully distributed, any remaining balances shall be distributed in a single lump sum, unless the Participant elects, on the Compensation Deferral Agreement with which the Account was established, to have such remaining balances distributed in accordance with his or her Primary Retirement/Termination Account payment elections.  Payment shall be made at the time specified in Section 6.1.

 

 

Section 6.3                                    Pre-2015 Accounts (other than a Deferred Compensation Account(s)s payable at a scheduled date) shall be distributed commencing the first calendar quarter that begins after Separation from Service, based on the value of the Account(s) as determined under Article VII.  Payment shall be made in a single lump sum, unless the Participant elects on the Compensation Deferral Agreement with which the Account was established to have such Account paid in quarterly installments over a period of five, ten or fifteen years.  Notwithstanding anything to the contrary in this Section 6.3, if at the time a Participant Separates from Service he or she has fewer than five Years of Vesting Service or the total of all of his Accounts is $25,000 or less, all of his Accounts will be distributed in a single lump sum.

 

Notwithstanding anything to the contrary in this Section 6.3, payment to a Participant who is a Specified Employee as of the date such Participant incurs a Separation from Service will be made or begin in the first calendar quarter following the six-month anniversary of the Participant’s Separation from Service (or within 90 days of the Participant’s date of death, if earlier).

 

The portion of a Participant’s Pre-2015 Account consisting of Deferred Compensation Accounts that are payable upon a scheduled date shall be paid in a single lump sum in January of the year specified, based on the value of the Account(s) as determined under Article VII. In the event a Participant Separates from Service before such Account(s) are distributed, such Account(s) shall be distributed in accordance with the form and timing of payments applicable to his or her Discretionary and Match Amount Accounts for the year the deferrals were made.

 

Section 6.4                                    Death.  Notwithstanding anything to the contrary in this Article VI, upon the death of the Participant, all Retirement/Termination Accounts, Specified Date Accounts, and Pre-2015 Accounts shall be paid to his or her Beneficiary in a single lump sum within 90 days of the date of the Participant’s death.

 

(a)                                 Designation of Beneficiary in General.  The Participant shall designate one or more primary and/or contingent Beneficiaries on the forms provided by the Plan Administration Committee or on such terms and conditions as the Plan Administration Committee may prescribe.  No such designation shall become effective unless filed with and accepted by the Plan Administration Committee during the Participant’s lifetime.  Any designation shall remain in effect until a new designation is filed with the Plan Administration Committee; provided, however, that in the event a Participant designates his or her spouse as a Beneficiary, such designation shall be automatically revoked upon the dissolution of the marriage unless, following such dissolution, the Participant submits a new designation naming the former spouse as a Beneficiary.  A Participant may from time to time change his or her designated Beneficiary without the consent of a previously-designated Beneficiary by filing a new designation with the Plan Administration Committee.

 

(b)                                 No Beneficiary.  If a designated Beneficiary does not survive the Participant, or if there is no valid Beneficiary designation, amounts payable under the Plan upon the death of the Participant shall be paid to the first of the following classes of individuals with a member surviving the Participant and (except in the case of surviving issue) in equal shares if there is more than one member in such class:

 

(i)                                     Participant’s surviving spouse

 

(ii)                                  Participant’s surviving issue per stirpes and not per capita

 

(iii)                               Participant’s surviving parents

 

(iv)                              Participant’s surviving brothers and sisters

 

(v)                                 Participant’s estate.

 

(c)                                  Disclaimers by Beneficiaries.  A Beneficiary entitled to a distribution of all or a portion of the benefits which may be payable with respect to the Participant under the Plan may disclaim an interest therein subject to the following requirements.  To be eligible to disclaim, a Beneficiary must be a natural person, must not have received a distribution of all or any portion of the benefits which may be payable with respect to the Participant under the Plan at the time such disclaimer is executed and delivered, and must have attained at least age 21 years as of the date of the Participant’s death.  Any disclaimer must be in writing and must be executed personally by the Beneficiary before a notary public.  A disclaimer shall state that the Beneficiary’s entire interest in the undistributed

 


 

benefits payable with respect to the Participant under the Plan is disclaimed or shall specify what portion thereof is disclaimed.  To be effective, duplicate original executed copies of the disclaimer must be both executed and actually delivered to the Company after the date of the Participant’s death but not later than 60 days after the date of the Participant’s death.  A disclaimer shall be irrevocable when delivered to the Company.  A disclaimer shall be considered to be delivered to the Company only when actually received and acknowledged by the Company.  The Company shall be the sole judge of the content, interpretation and validity of a purported disclaimer.  Upon the filing of a valid disclaimer, the Beneficiary shall be considered not to have survived the Participant as to the interest disclaimed.  A disclaimer by a Beneficiary shall not be considered to be a transfer of an interest in violation of the provisions of the Plan and shall not be considered to be an assignment or alienation of benefits in violation of federal law prohibiting the assignment or alienation of benefits under this Plan.  No other form of attempted disclaimer shall be recognized by the Company.

 

(d)                                 Definitions.  When used herein and, unless the Participant has otherwise specified in the Participant’s Beneficiary designation, when used in a Beneficiary designation, “issue” means all persons who are lineal descendants of the person whose issue are referred to, including legally adopted descendants and their descendants but not including illegitimate descendants and their descendants; “child” means an issue of the first generation; “per stirpes” means in equal shares among living children of the person whose issue are referred to and the issue (taken collectively) of each deceased child of such person, with such issue taking by right of representation of such deceased child; and “survive” and “surviving” mean living after the death of the Participant.

 

(e)                                  Special Rules.  Unless the Participant has otherwise specified in the Participant’s Beneficiary designation, the following rules shall apply:

 

(i)                                     If there is not sufficient evidence that a Beneficiary was living at the time of the death of the Participant, it shall be deemed that the Beneficiary was not living at the time of the death of the Participant.

 

(ii)                                  The automatic Beneficiaries specified in subsection (b) of this Section 6.4 and the Beneficiaries designated by the Participant shall become fixed at the time of the Participant’s death so that, if a Beneficiary survives the Participant but dies before the receipt of all payments due such Beneficiary hereunder, such remaining payments shall be payable to the representative of such Beneficiary’s estate.

 

(iii)                               If the Participant designates as a Beneficiary the person who is the Participant’s spouse on the date of the designation, either by name or by relationship, or both, the dissolution, annulment or other legal termination of the marriage between the Participant and such person shall automatically revoke such designation.  (The foregoing shall not prevent the Participant from designating a former spouse as a Beneficiary on a form executed by the Participant and received by the Company after the date of the legal termination of the marriage between the Participant and such former spouse, and during the Participant’s lifetime.)

 

(iv)                              Any designation of a nonspouse Beneficiary by name that is accompanied by a description of relationship to the Participant shall be given effect without regard to whether the relationship to the Participant exists either then or at the Participant’s death.

 

(v)                                 Any designation of a Beneficiary only by statement of relationship to the Participant shall be effective only to designate the person or persons standing in such relationship to the Participant at the Participant’s death.

 

(f)                                   Validity of Designation.  A Beneficiary designation is permanently void if it either is executed or is filed by a Participant who, at the time of such execution or filing, is then a minor under the law of the state of the Participant’s legal residence.  The Company shall be the sole judge of the content, interpretation and validity of a purported Beneficiary designation.

 

(g)                                  No Spousal Rights.  Prior to the death of the Participant, no spouse or surviving spouse of a Participant and no person designated to be a Beneficiary shall have any rights or interest in the benefits credited

 


 

under this Plan including, but not limited to, the right to be the sole Beneficiary or to consent to the designation of Beneficiaries (or the changing of designated Beneficiaries) by the Participant.

 

Section 6.5                                    Unforeseeable Emergency.  A Participant who experiences an Unforeseeable Emergency may submit a written request to the Divisional Vice President, Compensation and Benefits to receive payment of all or any portion of his or her vested Accounts. If an emergency payment is approved by the Divisional Vice President, Compensation and Benefits, (i) the amount of the payment shall not exceed the amount reasonably necessary to satisfy the need, taking into account the additional compensation that is available to the Participant as the result of cancellation of deferrals to the Plan, including amounts necessary to pay any taxes or penalties that the Participant reasonably anticipates will result from the payment, and (ii) deferrals shall be cancelled for the time specified in Section 4.6. Emergency payments shall be paid in a single lump sum within the 90-day period following the date the payment is approved by the Divisional Vice President, Compensation and Benefits, and shall be subtracted from the Participant’s Accounts in the following order: (i) from any Specified Date Accounts, beginning with the Specified Date Account with the latest payment commencement date, (ii) then from Deferred Compensation Accounts scheduled to be paid at a specified date, beginning with the Account with the latest payment commencement date, (iii) then from any Retirement/Termination Accounts, beginning with the Account with the longest payment period, and (iv) finally from any Pre-2015 Accounts scheduled to be paid at Separation from Service, beginning with the Account with the longest payment period.

 

Section 6.6                                    Small Balances.  Notwithstanding anything to the contrary in this Article VI, the Plan Administration Committee may direct in writing an immediate lump sum payment of the Participant’s Accounts if the balance of such Accounts, combined with any other amounts required to be treated as deferred under a single plan pursuant to Code Section 409A, does not exceed the applicable dollar amount under Code Section 402(g)(1)(B), provided any other such aggregated amounts are also distributed in a lump sum at the same time. Such lump sum payment shall automatically be made if the balance of such Accounts does not exceed the applicable dollar amount under Code Section 402(g)(1)(B) at the time the Participant Separates from Service.

 

Section 6.7                                    Administrative Discretion with Regard to Timing of Payments.  Notwithstanding anything to the contrary in this Article VI, the Plan Administration Committee may make a payment at the time specified in the preceding paragraphs or at a later date that falls in the same calendar year as the specified time or, if later, by the 15th day of the third calendar month following the time specified, provided the Participant is not permitted, directly or indirectly, to designate the taxable year in which payment will be made.  Further, the Plan Administration Committee may make a payment up to 30 days preceding the time specified in the preceding paragraphs, provided the Participant is not permitted, directly or indirectly, to designate the taxable year in which the payment will be made.  To the extent the Plan Administration Committee exercises its discretion hereunder, payment of the Account shall be based on the value of the Account as of the date specified by the Plan Administration Committee, which shall be no earlier than the end of the month preceding payment and shall be no later than the Business Date preceding the date of payment.

 

Section 6.8                                    Acceleration of or Delay in Payments. Notwithstanding anything to the contrary in this Article VI, the Plan Administration Committee, in its sole and absolute discretion, may elect to accelerate the time or form of payment of an Account, provided such acceleration is permitted under Treas. Reg. Section 1.409A-3(j)(4). The Plan Administration Committee may also, in its sole and absolute discretion, delay the time for payment of an Account, to the extent permitted under Treas. Reg. Section 1.409A-2(b)(7).

 

Section 6.9                                    Rules Applicable to Installment Payments.  If a Payment Schedule specifies installment payments, annual payments will be made beginning as of the payment commencement date for such installments and shall continue on each anniversary thereof until the number of installment payments specified in the Payment Schedule has been paid. The amount of each installment payment shall be determined by dividing (a) by (b), where (a) equals the Account Balance as of the Valuation Date and (b) equals the remaining number of installment payments.  For purposes of Section 6.10, installment payments will be treated as a single form of payment. If an Account is payable in installments, the Account will continue to be credited with Earnings in accordance with Article VII hereof until the Account is completely distributed.

 

Section 6.10                             Modifications to Payment Schedules.  A Participant may not modify the Payment Schedule elected by him or her with respect to a Retirement/Termination Account, nor with respect to that portion of the Pre-2015 Account scheduled to be paid upon Separation from Service.  A Participant may make one

 


 

modification to the Payment Schedule of each Specified Date Account, and to that portion of any Deferred Compensation Accounts that are distributable upon a scheduled date, consistent with the permissible Payment Schedules available under the Plan, provided such modification complies with the requirements of this Section 6.10.

 

(a)                                 Time of Election. The date on which a modification election is submitted to the Plan Administration Committee must be at least 12 months prior to the date on which payment is scheduled to commence under the Payment Schedule in effect prior to the modification.

 

(b)                                 Date of Payment under Modified Payment Schedule. The date payments are to commence under the modified Payment Schedule must be no earlier than five years after the date payment would have commenced under the original Payment Schedule, unless the modification relates to amounts payable upon death or Disability. Under no circumstances may a modification election result in an acceleration of payments in violation of Code Section 409A.

 

(c)                                  Effective Date. A modification election submitted in accordance with this Section 6.10 is irrevocable 12 months after the date it is received by the Plan Administration Committee.

 

(d)                                 Effect on Accounts. An election to modify a Payment Schedule is specific to the Account or payment event to which it applies, and shall not be construed to affect the Payment Schedules of any other Accounts.

 

ARTICLE VII

 

Valuation of Account Balances; Investments

 

Section 7.1                                    Valuation. Deferrals shall be credited to appropriate Accounts on the date such compensation would have been paid to the Participant absent the Compensation Deferral Agreement. Company Contributions shall be credited to the Retirement/Termination Account at the times related contributions are credited to the SRP or, if there are no related contributions, at the times determined by the Compensation Committee. Valuation of Accounts shall be performed under procedures approved by the Plan Administration Committee.

 

Section 7.2                                    Earnings Credit. Each Account will be credited with Earnings on each Business Day, based upon the Participant’s investment allocation among a menu of investment options selected in advance by the Plan Administration Committee, in accordance with the provisions of this Article VII (“investment allocation”).  Earnings on amounts deferred or credited to the Plan shall accrue as soon as administratively feasible following the date of deferral or crediting.  Earnings shall no longer accrue as of a date no later than seven business days prior to the date an amount is distributed from a Participant’s Account.

 

Section 7.3                                    Investment Options. Investment options will be determined by the Plan Administration Committee. The Plan Administration Committee, in its sole discretion, shall be permitted to add or remove investment options from the Plan menu from time to time, provided that any such additions or removals of investment options shall not be effective with respect to any period prior to the effective date of such change.

 

Section 7.4                                    Investment Allocations. A Participant’s investment allocation constitutes a deemed, not actual, investment among the investment options comprising the investment menu. At no time shall a Participant have any real or beneficial ownership in any investment option included in the investment menu, nor shall the Participating Employer or any trustee acting on its behalf have any obligation to purchase actual securities as a result of a Participant’s investment allocation. A Participant’s investment allocation shall be used solely for purposes of adjusting the value of a Participant’s Account Balances.

 

A Participant shall specify an investment allocation for each of his Accounts in accordance with procedures established by the Plan Administration Committee.  Allocation among the investment options must be designated in increments of 1%. The Participant’s investment allocation will become effective on the same Business Day or, in the case of investment allocations received after a time specified by the Plan Administration Committee, the next Business Day.

 

A Participant may change an investment allocation on any Business Day, both with respect to future credits to the Plan and with respect to existing Account Balances, in accordance with procedures adopted by the Plan

 


 

Administration Committee. Changes shall become effective on the same Business Day or, in the case of investment allocations received after a time specified by the Plan Administration Committee, the next Business Day, and shall be applied prospectively.

 

Section 7.5                                    Unallocated Deferrals and Accounts.  If the Participant fails to make an investment allocation with respect to an Account, such Account may be deemed allocated to a default investment option, if any, established by the Plan Administration Committee.

 

ARTICLE VIII

 

Administration

 

Section 8.1                                    Role of the Company.  The Company is the sponsor of the plan.

 

Section 8.2                                    Role of the Committee. The Committee, or any committee or position of the Company designated by the Committee, shall have the following duties and responsibilities:

 

(a)                                 to amend or terminate the Plan, pursuant to Article IX;

 

(b)                                 to annually determine the amount of any Company contributions, pursuant to Article V; and

 

(c)                                  to approve the merger or spin-off of the Plan or any portion of the Plan.

 

Section 8.3                                    Role of the Plan Administration Committee. The Plan Administration Committee, or any committee or position of the Company designated by the Plan Administration Committee, shall serve as the plan administrator. It shall be a principal duty of the plan administrator to see that the Plan is carried out, in accordance with its terms, for the exclusive benefit of persons entitled to participate in the Plan without discrimination among them. Benefits under the Plan shall be paid only if the plan administrator decides, in his or her discretion, that the applicant is entitled to them. For this purpose, the plan administrator’s powers will include but will not be limited to, the following authority, in addition to all other powers provided by this Plan:

 

(a)                                 to make and enforce such rules and regulations as it deems necessary or proper for the efficient administration of the Plan, including the establishment of any claims procedures that may be required by applicable provisions of law;

 

(b)                                 to exercise discretion in interpreting the Plan, any interpretation to be reviewed under the arbitrary and capricious standard;

 

(c)                                  to exercise discretion in deciding all questions concerning the Plan and the eligibility of any person to participate in the Plan; such decision to be reviewed under the arbitrary and capricious standard;

 

(d)                                 to appoint such agents, counsel, accountants, consultants and other persons as may be required to assist in administering the Plan;

 

(e)                                  to allocate and delegate its responsibilities under the Plan and to designate other persons to carry out any of its responsibilities under the Plan, any such allocations, delegation or designation to be in writing;

 

(f)                                   to determine the amount and type of benefits to which any Participant or Beneficiary shall be entitled hereunder, including the method and date for all valuations under the Plan;

 

(g)                                  to receive from the Employers and from Participants such information as shall be necessary for the proper administration of the Plan or any of its programs;

 

(h)                                 to maintain or cause to be maintained all the necessary records for the administration of the Plan;

 

(i)                                     to receive, review and keep on file (as it deems convenient and proper) reports of benefit payments made by the Plan;

 


 

(j)                                    to determine and allocate among the Employers the liability to the Company associated with Plan benefits in accordance with the Plan and to determine the time at which and manner in which that liability shall be paid to the Company;

 

(k)                                 to make, or cause to be made, equitable adjustments for any mistakes or errors made in the administration of the Plan; and

 

(l)                                     to do all other acts which the plan administrator deems necessary or proper to accomplish and implement its responsibilities under the Plan.

 

Section 8.4                                    Role of the Benefit Administrator.  The Benefit Administrator is the contractual service provider to the Plan appointed by the Plan Administration Committee to assist the Plan Administration Committee in the administration of the Plan as provided in this Article VIII and the Plan Administration Committee in the designation of the investment options as provided in Article VII.  The Benefit Administrator’s duties shall be stated in contractual agreements with the Plan Administration Committee, including, for example, serving as:  record keeper for participant accounts in the Plan; manager of the call center and websites that support the Plan; and provider of administrative forms, notices and communications to participants.  The Benefit Administrator shall perform such services in accordance with the terms of its contractual agreement(s) with the Plan Administration Committee and/or the Plan Administration Committee.

 

Section 8.5                                    [RESERVED]

 

Section 8.6                                    Compensation.  No member of the Plan Administration or Plan Administration Committees shall receive any compensation from the Trust for services provided.

 

Section 8.7                                    Indemnity.  The Company shall, to the greatest extent permitted by applicable law, indemnify each member of the Plan Administration and Plan Administration Committees, and any other employee of the Company, including any officer, who in the performance of his or her duties as an employee exercises any discretion or control over the administration of the Plan or its assets against any and all claims, loss, damages, expenses (including counsel fees approved by the respective committee), and liability (including any amounts paid in settlement with the respective committee’s approval) arising from any loss or damage or depreciation which may result in connection with the execution of the respective committee’s duties or the exercise of the respective committee’s discretion or from any other action or failure to act hereunder.

 

ARTICLE IX

 

Amendment and Termination

 

Section 9.1                                    Amendment and Termination. The Company may at any time and from time to time amend the Plan or may terminate the Plan as provided in this Article IX. Each Participating Employer may also terminate its participation in the Plan.

 

Section 9.2                                    Amendments. The Company may amend the Plan, in whole or in part, at any time, provided, however, that no amendment shall have a materially adverse impact on a Participant’s reasonably expected economic benefit attributable to compensation deferred by the Participant prior to January 4, 2017. Any amendment which increases the total cost of the Plan to an Employer in excess of $250,000 in each of the three full calendar years next following the date of the amendment shall be approved by the Plan Administration Committee. The Executive Vice President, Human Resources of Abbott Laboratories (or, in the event that no individual holds such title, then the individual performing the duties of such title) shall approve all other amendments to the Plan.

 

Section 9.3                                    Termination. The Committee may at any time terminate the Plan with respect to future Deferrals. The Committee may also terminate and liquidate the Plan in its entirety; provided that such termination and liquidation are consistent with the provisions of Code Section 409A. Upon any such termination, the Company shall pay to the Participant the benefits the Participant is entitled to receive under the Plan, determined as of the termination date, in compliance with Code Section 409A.

 


 

Section 9.4                                    Accounts Taxable Under Code Section 409A. The Plan is intended to constitute a plan of deferred compensation that meets the requirements for deferral of income taxation under Code Section 409A. The Plan Administration Committee, pursuant to its authority to interpret the Plan, may sever from the Plan or any Compensation Deferral Agreement any provision or exercise of a right that otherwise would result in a violation of Code Section 409A.

 

ARTICLE X

 

Informal Funding

 

Section 10.1                             General Assets. Obligations established under the terms of the Plan may be satisfied from the general funds of the Participating Employers, or a trust described in this Article X. No Participant, spouse or Beneficiary shall have any right, title or interest whatever in assets of the Participating Employers. Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship, between the Participating Employers and any Employee, spouse, or Beneficiary. To the extent that any person acquires a right to receive payments hereunder, such rights are no greater than the right of an unsecured general creditor of the Participating Employer.

 

Section 10.2                             Rabbi Trust. A Participating Employer may, in its sole discretion, establish a grantor trust, commonly known as a rabbi trust, as a vehicle for accumulating assets to pay benefits under the Plan. Payments under the Plan may be paid from the general assets of the Participating Employer or from the assets of any such rabbi trust. Payment from any such source shall reduce the obligation owed to the Participant or Beneficiary under the Plan.

 

If a rabbi trust is in existence upon the occurrence of a Change in Control, each Participating Employer shall contribute in cash or liquid securities such amounts as are necessary so that the value of assets after making the contributions equals the total value of all Account Balances.

 

ARTICLE XI

 

Claims

 

Section 11.1                             Filing a Claim. Any controversy or claim arising out of or relating to the Plan shall be filed in writing with the Plan Administration Committee which shall make all determinations concerning such claim. Any claim filed with the Plan Administration Committee and any decision by the Plan Administration Committee denying such claim shall be in writing and shall be delivered to the Participant or Beneficiary filing the claim (the “Claimant”).

 

(a)                                 In General. Notice of a denial of benefits will be provided within 90 days of the Plan Administration Committee’s receipt of the Claimant’s claim for benefits. If the Plan Administration Committee determines that it needs additional time to review the claim, the Plan Administration Committee will provide the Claimant with a notice of the extension before the end of the initial 90-day period. The extension will not be more than 90 days from the end of the initial 90-day period and the notice of extension will explain the special circumstances that require the extension and the date by which the Plan Administration Committee expects to make a decision.

 

(b)                                 Contents of Notice. If a claim for benefits is completely or partially denied, notice of such denial shall be in writing and shall set forth the reasons for denial in plain language. The notice shall: (i) cite the pertinent provisions of the Plan document, and (ii) explain, where appropriate, how the Claimant can perfect the claim, including a description of any additional material or information necessary to complete the claim and why such material or information is necessary. The claim denial also shall include an explanation of the claims review procedures and the time limits applicable to such procedures, including a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA following an adverse decision on review.

 

Section 11.2                             Appeal of Denied Claims. A Claimant whose claim has been completely or partially denied shall be entitled to appeal the claim denial by filing a written appeal with the Plan Administration Committee.  A Claimant who timely requests a review of the denied claim (or his or her authorized representative) may review, upon request and free of charge, copies of all documents, records and other information relevant to the

 


 

denial and may submit written comments, documents, records and other information relevant to the claim to the Plan Administration Committee. All written comments, documents, records, and other information shall be considered “relevant” if the information: (i) was relied upon in making a benefits determination, (ii) was submitted, considered or generated in the course of making a benefits decision regardless of whether it was relied upon to make the decision, or (iii) demonstrates compliance with administrative processes and safeguards established for making benefit decisions. The Plan Administration Committee may, in its sole discretion and if it deems appropriate or necessary, decide to hold a hearing with respect to the claim appeal.

 

(a)                                 In General. Appeal of a denied benefits claim must be filed in writing with the Plan Administration Committee no later than 60 days after receipt of the written notification of such claim denial. The Plan Administration Committee shall make its decision regarding the merits of the denied claim within 60 days following receipt of the appeal (or within 120 days after such receipt, in a case where there are special circumstances requiring extension of time for reviewing the appealed claim). If an extension of time for reviewing the appeal is required because of special circumstances, written notice of the extension shall be furnished to the Claimant prior to the commencement of the extension. The notice will indicate the special circumstances requiring the extension of time and the date by which the Plan Administration Committee expects to render the determination on review. The review will take into account comments, documents, records and other information submitted by the Claimant relating to the claim without regard to whether such information was submitted or considered in the initial benefit determination.

 

(b)                                 Contents of Notice. If a benefits claim is completely or partially denied on review, notice of such denial shall be in writing and shall set forth the reasons for denial in plain language.

 

The decision on review shall set forth: (i) the specific reason or reasons for the denial, (ii) specific references to the pertinent Plan provisions on which the denial is based, (iii) a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to and copies of all documents, records, or other information relevant (as defined above) to the Claimant’s claim, and (iv) a statement describing any voluntary appeal procedures offered by the plan and a statement of the Claimant’s right to bring an action under Section 502(a) of ERISA.

 

Section 11.3                             Claims Appeals Upon Change in Control. Upon a Change in Control, the Plan Administration Committee, as constituted immediately prior to such Change in Control, shall continue to act as the entity designated to hear appeals under this Article XI.  Upon such Change in Control, the Company may not remove any member of the Plan Administration Committee, but may replace resigning members if 2/3rds of the members of the Board of Directors of the Company and a majority of Participants and Beneficiaries with Account Balances consent to the replacement.

 

The Plan Administration Committee shall have the exclusive authority at the appeals stage to interpret the terms of the Plan and resolve appeals under the Claims Procedure.

 

Each Participating Employer shall, with respect to the Plan Administration Committee identified under this Section: (i) pay its proportionate share of all reasonable expenses and fees of the Plan Administration Committee, (ii) indemnify the Plan Administration Committee (including individual committee members) against any costs, expenses and liabilities including, without limitation, attorneys’ fees and expenses arising in connection with the performance of the Plan Administration Committee hereunder, except with respect to matters resulting from the Plan Administration Committee’s gross negligence or willful misconduct, and (iii) supply full and timely information to the Plan Administration Committee on all matters related to the Plan, any rabbi trust, Participants, Beneficiaries and Accounts as the Plan Administration Committee may reasonably require.

 

Section 11.4                             Legal Action. A Claimant may not bring any legal action, including commencement of any arbitration, relating to a claim for benefits under the Plan unless and until the Claimant has followed the claims procedures under the Plan and exhausted his or her administrative remedies under such claims procedures.

 

If a Participant or Beneficiary prevails in a legal proceeding brought under the Plan to enforce the rights of such Participant or any other similarly situated Participant or Beneficiary, in whole or in part, the Participating Employer shall reimburse such Participant or Beneficiary for all legal costs, expenses, attorneys’ fees and such other liabilities incurred as a result of such proceedings. If the legal proceeding is brought in connection with a Change in Control, or a “change in control” as defined in a rabbi trust described in Section 10.2, the Participant or Beneficiary

 


 

may file a claim directly with the trustee for reimbursement of such costs, expenses and fees. For purposes of the preceding sentence, the amount of the claim shall be treated as if it were an addition to the Participant’s or Beneficiary’s Account Balance and will be included in determining the Participating Employer’s trust funding obligation under Section 10.2.

 

Section 11.5                             Committee Discretion. All interpretations, determinations and decisions of the Plan Administration Committee with respect to any claim shall be made in its sole discretion, and shall be final and conclusive. Notwithstanding anything to the contrary herein, the Compensation Committee may, at any time and from time to time, without any further action of the Plan Administration Committee, exercise the powers and duties of the Plan Administration Committee under the Plan.

 

Section 11.6                             Arbitration.

 

(a)                                 Prior to Change in Control. If, prior to a Change in Control, any claim or controversy between a Participating Employer and a Participant or Beneficiary is not resolved through the claims procedure set forth in Article XI, such claim shall be submitted to and resolved exclusively by expedited binding arbitration by a single arbitrator.  Arbitration shall be conducted in accordance with the following procedures:

 

The complaining party shall promptly send written notice to the other party identifying the matter in dispute and the proposed remedy. Following the giving of such notice, the parties shall meet and attempt in good faith to resolve the matter. In the event the parties are unable to resolve the matter within 21 days, the parties shall meet and attempt in good faith to select a single arbitrator acceptable to both parties. If a single arbitrator is not selected by mutual consent within ten Business Days following the giving of the written notice of dispute, an arbitrator shall be selected from a list of nine persons each of whom shall be an attorney who is either engaged in the active practice of law or recognized arbitrator and who, in either event, is experienced in serving as an arbitrator in disputes between employers and employees, which list shall be provided by the main office of either JAMS, the American Arbitration Association (“AAA”) or the Federal Mediation and Conciliation Service. If, within three Business Days of the parties’ receipt of such list, the parties are unable to agree on an arbitrator from the list, then the parties shall each strike names alternatively from the list, with the first to strike being determined by the flip of a coin. After each party has had four strikes, the remaining name on the list shall be the arbitrator. If such person is unable to serve for any reason, the parties shall repeat this process until an arbitrator is selected.

 

Unless the parties agree otherwise, within 60 days of the selection of the arbitrator, a hearing shall be conducted before such arbitrator at a time and a place agreed upon by the parties. In the event the parties are unable to agree upon the time or place of the arbitration, the time and place shall be designated by the arbitrator after consultation with the parties. Within 30 days of the conclusion of the arbitration hearing, the arbitrator shall issue an award, accompanied by a written decision explaining the basis for the arbitrator’s award.

 

In any arbitration hereunder, the Participating Employer shall pay all administrative fees of the arbitration and all fees of the arbitrator, except that the Participant or Beneficiary may, if he/she/it wishes, pay up to one-half of those amounts. Each party shall pay its own attorneys’ fees, costs, and expenses, unless the arbitrator orders otherwise. The prevailing party in such arbitration, as determined by the arbitrator, and in any enforcement or other court proceedings, shall be entitled, to the extent permitted by law, to reimbursement from the other party for all of the prevailing party’s costs (including but not limited to the arbitrator’s compensation), expenses, and attorneys’ fees. The arbitrator shall have no authority to add to or to modify this Plan, shall apply all applicable law, and shall have no lesser and no greater remedial authority than would a court of law resolving the same claim or controversy. The arbitrator shall have no authority to add to or to modify this Plan, shall apply all applicable law, and shall have no lesser and no greater remedial authority than would a court of law resolving the same claim or controversy. The arbitrator shall, upon an appropriate motion, dismiss any claim without an evidentiary hearing if the party bringing the motion establishes that it would be entitled to summary judgment if the matter had been pursued in court litigation.

 

The parties shall be entitled to discovery as follows: Each party may take no more than three depositions. The Participating Employer may depose the Participant or Beneficiary plus two other witnesses, and the Participant or Beneficiary may depose the Participating Employer, pursuant to Rule 30(b)(6) of the Federal Rules of Civil Procedure, plus two other witnesses. Each party may make such reasonable document discovery requests as are allowed in the discretion of the arbitrator.

 


 

The decision of the arbitrator shall be final, binding, and non-appealable, and may be enforced as a final judgment in any court of competent jurisdiction.

 

This arbitration provision of the Plan shall extend to claims against any parent, subsidiary, or affiliate of each party, and, when acting within such capacity, any officer, director, shareholder, Participant, Beneficiary, or agent of any party, or of any of the above, and shall apply as well to claims arising out of state and federal statutes and local ordinances as well as to claims arising under the common law or under this Plan.

 

Notwithstanding the foregoing, and unless otherwise agreed between the parties, either party may apply to a court for provisional relief, including a temporary restraining order or preliminary injunction, on the ground that the arbitration award to which the applicant may be entitled may be rendered ineffectual without provisional relief.

 

Any arbitration hereunder shall be conducted in accordance with the Federal Arbitration Act: provided, however, that, in the event of any inconsistency between the rules and procedures of the Act and the terms of this Plan, the terms of this Plan shall prevail.

 

If any of the provisions of this Section 11.6(a) are determined to be unlawful or otherwise unenforceable, in the whole part, such determination shall not affect the validity of the remainder of this section and this section shall be reformed to the extent necessary to carry out its provisions to the greatest extent possible and to insure that the resolution of all conflicts between the parties, including those arising out of statutory claims, shall be resolved by neutral, binding arbitration. If a court should find that the provisions of this Section 11.6(a) are not absolutely binding, then the parties intend any arbitration decision and award to be fully admissible in evidence in any subsequent action, given great weight by any finder of fact and treated as determinative to the maximum extent permitted by law.

 

The parties do not agree to arbitrate any putative class action or any other representative action. The parties agree to arbitrate only the claims(s) of a single Participant or Beneficiary.

 

(b)                                 Upon Change in Control. If, upon the occurrence of a Change in Control, any dispute, controversy or claim arises between a Participant or Beneficiary and the Participating Employer out of or relating to or concerning the provisions of the Plan, such dispute, controversy or claim shall be finally settled by a court of competent jurisdiction which, notwithstanding any other provision of the Plan, shall apply a de novo standard of review to any determination made by the Company or its Board of Directors, a Participating Employer, the Plan Administration Committee, the Plan Administration Committee, or the Compensation Committee.

 

ARTICLE XII

 

General Provisions

 

Section 12.1                             Assignment. No interest of any Participant, or Beneficiary under this Plan and no benefit payable hereunder shall be assigned as security for a loan, and any such purported assignment shall be null, void and of no effect, nor shall any such interest or any such benefit be subject in any manner, either voluntarily or involuntarily, through court order or otherwise, to anticipation, sale, transfer, assignment or encumbrance by or through any Participant or Beneficiary.

 

The Company may assign any or all of its liabilities under this Plan in connection with any restructuring, recapitalization, sale of assets or other similar transactions affecting a Participating Employer without the consent of the Participant.

 

Section 12.2                             No Legal or Equitable Rights or Interest. No Participant or other person shall have any legal or equitable rights or interest in this Plan that are not expressly granted in this Plan. Participation in this Plan does not give any person any right to be retained in the service of the Participating Employer. The right and power of a Participating Employer to dismiss or discharge an Employee is expressly reserved. The Participating Employers make no representations or warranties as to the tax consequences to a Participant or a Participant’s beneficiaries resulting from a deferral of income pursuant to the Plan.

 

Section 12.3                             No Employment Contract. Nothing contained herein shall be construed to constitute a contract of employment between an Employee and a Participating Employer.

 


 

Section 12.4                             Notice. Any notice or filing required or permitted to be given to the Plan Administration Committee or the Company under the Plan shall be sufficient if in writing and hand-delivered, or sent by first class mail to the principal office of Abbott Laboratories, directed to the attention of the Plan Administration Committee. Such notice shall be deemed given as of the date of delivery, or, if delivery is made by mail, as of the date shown on the postmark.

 

Section 12.5                             Headings. The headings of Sections are included solely for convenience of reference, and if there is any conflict between such headings and the text of this Plan, the text shall control.

 

Section 12.6                             Invalid or Unenforceable Provisions. If any provision of this Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof and the Plan Administration Committee may elect in its sole discretion to construe such invalid or unenforceable provisions in a manner that conforms to applicable law or as if such provisions, to the extent invalid or unenforceable, had not been included.

 

Section 12.7                             Lost Participants or Beneficiaries. Any Participant or Beneficiary who is entitled to a benefit from the Plan has the duty to keep the Plan Administration Committee advised of his or her current mailing address. If benefit payments are returned to the Plan or are not presented for payment after a reasonable amount of time, the Plan Administration Committee shall presume that the payee is missing. The Plan Administration Committee, after making such efforts as in its discretion it deems reasonable and appropriate to locate the payee, shall stop payment on any uncashed checks and may discontinue making future payments until contact with the payee is restored.

 

Section 12.8                             Facility of Payment to a Minor.  If a distribution is to be made to a minor, or to a person who is otherwise incompetent, then the Plan Administration Committee may, in its discretion, make such distribution: (i) to the legal guardian, or if none, to a parent of a minor payee with whom the payee maintains his or her residence, or (ii) to the conservator or guardian or, if none, to the person having custody of an incompetent payee. Any such distribution shall fully discharge the Plan Administration Committee, the Compensation Committee, the Company, and the Plan from further liability on account thereof.

 

Section 12.9                             Governing Law and Venue. To the extent not preempted by ERISA, the laws of the State of Minnesota shall govern the construction and administration of the Plan.  All litigation in any way related to the Plan (including but not limited to any and all claims for benefits) must be filed in the United States District Court for the District of Minnesota.

 



Exhibit 10.88

 

EXECUTION VERSION

 

 

 

 

 

Published Deal CUSIP Number:  00281EAS8

Published Term Loan CUSIP Number:  00281EAT6

 

TERM LOAN AGREEMENT

 

Dated as of July 31, 2017

 

among

 

ABBOTT LABORATORIES

as the Borrower,

 

The Guarantors Referred to Herein,

 

BANK OF AMERICA, N.A.,

as Administrative Agent and Lender,

 

and

 

The Other Lenders Party Hereto

 

* * * *

 

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,

MORGAN STANLEY SENIOR FUNDING, INC. and

BARCLAYS BANK PLC,

as Joint Lead Arrangers and Joint Bookrunners,

 

MORGAN STANLEY SENIOR FUNDING, INC. and

BARCLAYS BANK PLC,

as Syndication Agents

 

 

 

 


 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

 

ARTICLE I

 

 

 

 

 

DEFINITIONS AND ACCOUNTING TERMS

 

 

 

 

SECTION 1.01

Certain Defined Terms

1

 

 

 

SECTION 1.02

Computation of Time Periods

24

 

 

 

SECTION 1.03

Accounting Terms

24

 

 

 

SECTION 1.04

Times of Day

24

 

 

 

 

ARTICLE II

 

 

 

 

 

THE COMMITMENTS AND LOANS

 

 

 

 

SECTION 2.01

The Loans

24

 

 

 

SECTION 2.02

Borrowings, Conversions and Continuations of the Loans

24

 

 

 

SECTION 2.03

Termination or Reduction of Aggregate Commitments

26

 

 

 

SECTION 2.04

Prepayments

26

 

 

 

SECTION 2.05

[Reserved]

27

 

 

 

SECTION 2.06

Repayment of Loans

27

 

 

 

SECTION 2.07

Interest

27

 

 

 

SECTION 2.08

Fees

28

 

 

 

SECTION 2.09

Computation of Interest and Fees

28

 

 

 

SECTION 2.10

Evidence of Debt

29

 

 

 

SECTION 2.11

Payments Generally; Administrative Agent’s Clawback

29

 

 

 

SECTION 2.12

Sharing of Payments

31

 

 

 

SECTION 2.13

[Reserved]

31

 

 

 

SECTION 2.14

Use of Proceeds

31

 


 

SECTION 2.15

Defaulting Lenders

31

 

 

 

SECTION 2.16

Taxes

33

 

 

 

SECTION 2.17

Illegality

38

 

 

 

SECTION 2.18

Inability to Determine Rates

38

 

 

 

SECTION 2.19

Increased Costs; Reserves on Eurodollar Rate Loans

39

 

 

 

SECTION 2.20

Compensation for Losses

41

 

 

 

SECTION 2.21

Mitigation Obligations; Replacement of Lenders

41

 

 

 

SECTION 2.22

Survival

42

 

 

 

 

ARTICLE III

 

 

 

 

 

CONDITIONS PRECEDENT

 

 

 

 

SECTION 3.01

Conditions Precedent to Effectiveness

42

 

 

 

SECTION 3.02

Conditions to Funding on the Closing Date

42

 

 

 

SECTION 3.03

Certain Funds Period

44

 

 

 

 

ARTICLE IV

 

 

 

 

 

REPRESENTATIONS AND WARRANTIES

 

 

 

 

SECTION 4.01

Representations and Warranties of the Borrower

44

 

 

 

SECTION 4.02

Representations and Warranties of the Lenders

49

 

 

 

 

ARTICLE V

 

 

 

 

 

COVENANTS

 

 

 

 

SECTION 5.01

Affirmative Covenants

49

 

 

 

SECTION 5.02

Negative Covenants

52

 

 

 

SECTION 5.03

Financial Covenants

59

 

 

 

 

ARTICLE VI

 

 

 

 

 

EVENTS OF DEFAULT

 

 

 

 

SECTION 6.01

Events of Default

59

 

ii


 

SECTION 6.02

Application of Funds

61

 

 

 

 

ARTICLE VII

 

 

 

 

 

THE ADMINISTRATIVE AGENT

 

 

 

 

SECTION 7.01

Authorization and Action

62

 

 

 

SECTION 7.02

Administrative Agent Individually

62

 

 

 

SECTION 7.03

Duties of Administrative Agent; Exculpatory Provisions

62

 

 

 

SECTION 7.04

Reliance by Administrative Agent

64

 

 

 

SECTION 7.05

Delegation of Duties

64

 

 

 

SECTION 7.06

Resignation of Administrative Agent

64

 

 

 

SECTION 7.07

Non-Reliance on Administrative Agent and Other Lenders

65

 

 

 

SECTION 7.08

Other Agents

65

 

 

 

 

ARTICLE VIII

 

 

 

 

 

MISCELLANEOUS

 

 

 

 

SECTION 8.01

Amendments, Etc.

66

 

 

 

SECTION 8.02

Notices, Etc.

67

 

 

 

SECTION 8.03

No Waiver; Remedies

69

 

 

 

SECTION 8.04

Expenses; Indemnity; Damage Waiver

69

 

 

 

SECTION 8.05

Right of Setoff

71

 

 

 

SECTION 8.06

Binding Effect

71

 

 

 

SECTION 8.07

Assignments and Participations

71

 

 

 

SECTION 8.08

Confidentiality

76

 

 

 

SECTION 8.09

Governing Law

77

 

 

 

SECTION 8.10

Execution in Counterparts

77

 

 

 

SECTION 8.11

Integration

77

 

 

 

SECTION 8.12

Jurisdiction, Etc.

77

 

iii


 

SECTION 8.13

PATRIOT Act Notice

78

 

 

 

SECTION 8.14

No Advisory or Fiduciary Responsibility

78

 

 

 

SECTION 8.15

Replacement of Lenders

79

 

 

 

SECTION 8.16

Waiver of Jury Trial

79

 

 

 

SECTION 8.17

Payments Set Aside

79

 

 

 

SECTION 8.18

Acknowledgment and Consent to Bail-In of EEA Financial Institutions

80

 

 

 

 

ARTICLE IX

 

 

 

 

 

GUARANTEE

 

 

 

 

SECTION 9.01

Guarantors

80

 

 

 

SECTION 9.02

Guarantee

81

 

 

 

SECTION 9.03

Guaranty Absolute

81

 

 

 

SECTION 9.04

Waivers

82

 

 

 

SECTION 9.05

Continuing Guaranty

82

 

 

 

SECTION 9.06

Release of Guarantors

83

 

SCHEDULES

 

Schedule I

 

-

 

Administrative Agent’s Office; Certain Addresses for Notices

Schedule 2.01

 

-

 

Commitments and Pro Rata Shares

Schedule 4.01(f)

 

-

 

Legal Proceedings

Schedule 5.02(a)(i)

 

-

 

Existing Debt

Schedule 5.02(b)(ii)

 

-

 

Existing Liens

 

EXHIBITS

 

Exhibit A

 

-

 

Form of Loan Notice

Exhibit B

 

-

 

Form of Assignment and Assumption

Exhibit C

 

-

 

Form of Solvency Certificate

Exhibit D

 

-

 

Form of Note

Exhibits E-1 — E-4

 

-

 

Forms of U.S. Tax Compliance Certificate

Exhibit F

 

-

 

Form of Prepayment Notice

 

iv

 

TERM LOAN AGREEMENT

 

This TERM LOAN AGREEMENT (this “Agreement”) is dated as of July 31, 2017, among ABBOTT LABORATORIES, an Illinois corporation (together with its successors and assigns, the “Borrower”), each Guarantor from time to time party hereto, each Lender from time to time party hereto (collectively, the “Lenders” and each individually, a “Lender”), and BANK OF AMERICA, N.A., as Administrative Agent and Lender.

 

WHEREAS, the Borrower, pursuant to the Alere Acquisition Agreement (as defined below), intends to acquire (the “Alere Acquisition”) all of the outstanding shares of common stock of Alere Inc., a Delaware corporation (“Alere” and, together with its Subsidiaries (as defined below), the “Acquired Business”), through the merger of Angel Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of the Borrower (“Merger Sub”), with and into Alere, with Alere surviving such merger, for the aggregate cash consideration set forth in the Alere Acquisition Agreement (as defined below).

 

NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth in this Agreement, and for good and valuable consideration, the receipt of which is hereby acknowledged, the Borrower, the Administrative Agent and the Lenders hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS AND ACCOUNTING TERMS

 

SECTION 1.01     Certain Defined Terms.

 

As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

 

“Acquired Business” has the meaning set forth in the recitals hereto.

 

“Administrative Agent” means Bank of America in its capacity as administrative agent under any of the Loan Documents, or any successor administrative agent.

 

“Administrative Agent’s Office” means the Administrative Agent’s address and, as appropriate, account as set forth on Schedule I, or such other address or account as the Administrative Agent may from time to time notify to the Borrower and the Lenders.

 

“Administrative Questionnaire” means an administrative questionnaire in the form supplied by the Administrative Agent.

 

“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person.  For purposes of this definition, the term “control” (including the terms “controlling”, “controlled by” and “under common control with”) of a Person means the possession, direct or indirect, of the power to vote 10% or more of the

 

1


 

Voting Stock of such Person or to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock, by contract or otherwise.

 

“Agent Parties” has the meaning specified in Section 8.02.

 

“Aggregate Commitment” means the Commitments of all of the Lenders hereunder.  The principal amount of the Aggregate Commitment in effect on the Effective Date is TWO BILLION EIGHT HUNDRED MILLION DOLLARS ($2,800,000,000).

 

“Agreement” has the meaning specified in the introductory paragraph hereto.

 

“Agreement Value” means, with respect to any Hedge Agreement at any date of determination, the amount, if any, that would be payable to any bank thereunder in respect of the “agreement value” under such Hedge Agreement if such Hedge Agreement were terminated on such date, calculated as provided in the International Swap Dealers Association, Inc. Code of Standard Wording, Assumptions and Provisions for Swaps, 1986 Edition.

 

“Alere” has the meaning set forth in the recitals hereto.

 

“Alere Acquisition” has the meaning set forth in the recitals hereto.

 

“Alere Acquisition Agreement” means that certain Agreement and Plan of Merger, dated as of January 30, 2016, as amended by that certain Amendment to Agreement and Plan of Merger, dated as of April 13, 2017 (including the exhibits, joinder and schedules thereto), by and among the Borrower, Merger Sub and Alere.

 

“Alere Acquisition Agreement Representations” means the representations made by or with respect to the Acquired Business in the Alere Acquisition Agreement as are material to the interests of the Lenders, but only to the extent that the Borrower has (or a Subsidiary of it has) the right (taking into account any applicable cure provisions) to terminate its (or their) obligations under the Alere Acquisition Agreement, or to decline to consummate the Alere Acquisition pursuant to the Alere Acquisition Agreement, as a result of a breach of such representations in the Alere Acquisition Agreement.

 

“Alere Acquisition Date” means the date of the consummation of the Alere Acquisition.

 

“Alere Transactions” means the Alere Acquisition and the financing transactions in connection therewith, including the entering into and the borrowings under the

 

2


 

Facility, the repayment of certain existing indebtedness of the Borrower and Acquired Business and the payment of certain fees and expenses in connection therewith.

 

“Applicable Rate” means, for any Type of Loan at any time, the percentage rate per annum which is applicable at such time with respect to Loans of such Type by reference to the then applicable Debt Ratings of the Borrower as set forth below:

 

 

 

Debt

 

Applicable Rate

 

Level

 

Ratings
(Moody’s/
S&P)

 

Base
Rate
Loans

 

Eurodollar
Rate Loans

 

I

 

>A2/A

 

0 bps

 

87.5 bps

 

II

 

A3/A-

 

0 bps

 

100.0 bps

 

III

 

Baa 1/BBB+

 

12.5 bps

 

112.5 bps

 

IV

 

Baa2/BBB

 

25.0 bps

 

125.0 bps

 

V

 

Baa3/BBB-

 

37.5 bps

 

137.5 bps

 

VI

 

< Ba1/ BB+

 

75.0 bps

 

175.0 bps

 

 

“Debt Rating” means, as of any date of determination, the rating as determined by S&P or Moody’s (collectively, the “Debt Ratings”) of the Borrower’s non-credit-enhanced, senior unsecured long-term debt; provided, that (a) if only one of S&P and Moody’s shall have in effect a Debt Rating, the Applicable Rate shall be determined by reference to the available Debt Rating; (b) if neither S&P nor Moody’s shall have in effect a Debt Rating, the Applicable Rate shall be set in accordance with Level VI until such time as either S&P or Moody’s shall have in effect a Debt Rating; (c) if the Debt Ratings established by S&P and Moody’s shall fall within different levels, the Applicable Rate shall be based upon the higher of such Debt Ratings, except that in the event that the lower of such Debt Ratings is more than one level below the higher of such Debt Ratings, the Applicable Rate shall be based upon the level immediately above the lower of such Debt Ratings; (d) if any Debt Rating established by S&P or Moody’s shall be changed, such change shall be effective as of the date on which such change is first announced publicly by the rating agency making such change and (e) if S&P or Moody’s shall change the basis on which Debt Ratings are established, each reference to the Debt Ratings announced by S&P or Moody’s, as the case may be, shall refer to the then equivalent rating by S&P or Moody’s, as the case may be.

 

“Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

 

“Assignee Group” means two or more Eligible Assignees that are Affiliates of one another or two or more Approved Funds managed by the same investment advisor.

 

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“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an Eligible Assignee, and accepted by the Administrative Agent, in substantially the form of Exhibit B hereto.

 

“Attorney Costs” means and includes all reasonable fees, expenses and disbursements of any law firm or other external counsel and, without duplication, the allocated cost of internal legal services and all expenses and disbursements of internal counsel.

 

“Attributable Debt” means (except as otherwise provided in this paragraph), as to any particular lease under which any Person is at the time liable for a term of more than 12 months, at any date as of which the amount thereof is to be determined (the “determination date”), the total net amount of rent required to be paid by such Person under such lease during the remaining term thereof (excluding any subsequent renewal or other extension options held by the lessee), discounted from the respective due dates thereof to the determination date at the rate of 8% per annum, compounded monthly.  The net amount of rent required to be paid under any such lease for any such period shall be the aggregate amount of the rent payable by the lessee with respect to such period after excluding amounts required to be paid on account of maintenance and repairs, services, insurance, taxes, assessments, water rates and similar charges and contingent rents (such as those based on sales or monetary inflation).  If (a) any such lease is terminable by the lessee upon the payment of a penalty, (b) the terms of such lease provide that the termination right is not exercisable until after the determination date and (c) the amount of such penalty discounted to the determination date at the rate of 8% per annum compounded monthly is less than the net amount of rentals payable after the time as of which such termination could occur (the “termination time”) discounted to the determination date at the rate of 8% per annum compounded monthly, then such discounted penalty amount shall be used instead of such discounted amount of net rentals payable after the termination time in calculating the Attributable Debt for such lease.  If (i) any such lease is terminable by the lessee upon the payment of a penalty, (ii) such termination right is exercisable on the determination date and (iii) the amount of the net rentals payable under such lease after the determination date discounted to the determination date at the rate of 8% per annum compounded monthly is greater than the amount of such penalty, the Attributable Debt for such lease as of such determination date shall be equal to the amount of such penalty.

 

“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEA Financial Institution.

 

“Bail-In Legislation” means, with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule.

 

“Bank of America” means Bank of America, N.A. and its successors.

 

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“Base Rate” means for any day a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate plus 1/2 of 1%, (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its “prime rate,” and (c) the Eurodollar Rate plus 1.00%.  The “prime rate” is a rate set by Bank of America based upon various factors including Bank of America’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate.  Any change in such prime rate announced by Bank of America shall take effect at the opening of business on the day specified in the public announcement of such change.

 

“Base Rate Loan” means a Loan that bears interest based on the Base Rate.

 

“Borrowed Debt” means any Debt for money borrowed, including without limitation loans, hybrid securities, debt convertible into Equity Interests and any Debt represented by notes, bonds, debentures or other similar evidences of Debt for money borrowed.

 

“Borrower” has the meaning specified in the introductory paragraph hereto.

 

“Borrower Materials” has the meaning specified in Section 5.01(i).

 

“Borrowing” means a borrowing consisting of simultaneous Loans of the same Type and, in the case of Eurodollar Rate Loans, having the same Interest Period made by each of the Lenders pursuant to Section 2.01.

 

“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, New York City or the state where the Administrative Agent’s Office is located and, if such day relates to any Eurodollar Rate Loan, means any such day on which dealings in Dollar deposits are conducted by and between banks in the London interbank eurodollar market.

 

“Cash Management Agreement” means any agreement to provide cash management services, including treasury, depository, overdraft, credit or debit card, electronic funds transfer and other cash management arrangements in a pooling arrangement.

 

“Certain Funds Period” has the meaning set forth in Section 3.03.

 

“CERCLIS” means the Comprehensive Environmental Response, Compensation and Liability Information System maintained by the U.S. Environmental Protection Agency.

 

“Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority or (c) the making or issuance of any request, rule, guideline or directive (whether or not

 

5


 

having the force of law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.

 

“Closing Date” means the date on which the conditions precedent set forth in Section 3.02 have been satisfied (or waived in accordance with Section 8.01).

 

“Commitment” means, as to each Lender, such Lender’s commitment to make a Loan on the Closing Date pursuant to Section 2.01 in an aggregate principal amount not to exceed the amount set forth opposite such Lender’s name in Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement.

 

“Commitment Fee” has the meaning set forth in Section 2.08(a).

 

“Consolidated” refers to the consolidation of accounts in accordance with GAAP.

 

“Consolidated Debt” means, as of any date of determination, the aggregate amount of indebtedness for borrowed money, including indebtedness for borrowed money represented by notes, bonds, debentures or other similar evidences of indebtedness for borrowed money, of the Borrower and its Subsidiaries on a Consolidated basis in accordance with GAAP.

 

“Consolidated Group” means the Borrower and its Subsidiaries.

 

“Consolidated Interest Coverage Ratio” means, as of the last day of any period of four consecutive fiscal quarters of the Borrower, the ratio of (a) EBITDA for such period to (b) Interest Expense for such period.

 

“Consolidated Net Assets” means, as of any date of determination, the aggregate amount of assets of the Borrower and its Subsidiaries (less applicable reserves and other properly deductible items) after deducting therefrom all current liabilities, as of the last day of the most recent fiscal quarter prior to such date for which financial statements have been furnished to the Lenders pursuant to Section 5.01(i), as set forth in such financial statements (giving pro forma effect to any Material Asset Acquisition or Material Asset Sale of property of the Borrower or any of its Subsidiaries that has occurred since the end of such fiscal quarter as if such Material Asset Acquisition or Material Asset Sale had occurred on the last day of such fiscal quarter).

 

“Consolidated Net Worth” means, at any date of determination, (a) total assets of the Borrower and its Subsidiaries (including, without limitation, all items that are treated

 

6


 

as intangibles in accordance with GAAP) at such date less (b) total liabilities of the Borrower and its Subsidiaries (including, without limitation, all deferred taxes) at such date, in each case determined on a Consolidated basis in accordance with GAAP.

 

“Continuing Director” means, for any period, an individual who is a member of the board of directors of the Borrower on the first day of such period or whose election to the board of directors of the Borrower is approved by a majority of the other Continuing Directors.

 

“Debt” of any Person means, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of property or services (other than trade payables incurred in the ordinary course of such Person’s business), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all obligations of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all obligations of such Person as lessee under leases that have been or should be, in accordance with GAAP, recorded as capital leases, (f) all obligations, contingent or otherwise, of such Person in respect of acceptances, letters of credit or similar extensions of credit, (g) all obligations of such Person in respect of Hedge Agreements, (h) all Debt of others referred to in clauses (a) through (g) above or clause (i) below directly guaranteed in any manner by such Person, or the payment of which is otherwise provided for by such Person, and (i) all Debt referred to in clauses (a) through (h) above secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Debt.

 

“Debt Rating” has the meaning set forth in the definition of “Applicable Rate”.

 

“Debtor Relief Laws” means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

 

“Default” means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both.

 

“Default Rate” means an interest rate equal to (i) the Base Rate plus (ii) the Applicable Rate, if any, applicable to Base Rate Loans plus (iii) 2% per annum; provided, however, that with respect to a Eurodollar Rate Loan, the Default Rate shall be an interest rate equal to the interest rate (including any Applicable Rate) otherwise applicable to such Loan plus 2% per annum, in each case to the fullest extent permitted by applicable Laws.

 

7


 

“Defaulting Lender” means, subject to Section 2.15(b), any Lender that (a) has failed to (i) fund all or any portion of its Loans within two Business Days of the date such Loans were required to be funded hereunder unless such Lender notifies the Administrative Agent and the Borrower in writing that such failure is the result of such Lender’s determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied, or (ii) pay to the Administrative Agent or any other Lender any other amount required to be paid by it hereunder within two Business Days of the date when due, (b) has notified the Borrower or the Administrative Agent in writing that it does not intend to comply with its funding obligations hereunder, or has made a public statement to that effect (unless such writing or public statement relates to such Lender’s obligation to fund a Loan hereunder and states that such position is based on such Lender’s determination that a condition precedent to funding (which condition precedent, together with any applicable default, shall be specifically identified in such writing or public statement) cannot be satisfied), (c) has failed, within three Business Days after written request by the Administrative Agent or the Borrower, to confirm in writing to the Administrative Agent and the Borrower that it will comply with its prospective funding obligations hereunder (provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by the Administrative Agent and the Borrower), or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under any Debtor Relief Law, (ii) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity or (iii) become the subject of a Bail-in Action; provided that a Lender shall not be a Defaulting Lender solely by virtue of (A) the ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority or (B) in the case of a solvent Person, the precautionary appointment of an administrator, guardian or custodian or similar official by a Governmental Authority under or based on the law of the country where such Person is organized if the applicable law of such jurisdiction requires that such appointment not be publicly disclosed, so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any determination by the Administrative Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above, and of the effective date of such status, shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 2.15(b))  as of the date established therefor by the Administrative Agent in a written notice of such determination, which shall be delivered by the Administrative Agent to the Borrower and all Lenders promptly following such determination.

 

“Designated Jurisdiction” means any country, region or territory that is, or has a government that is, subject to comprehensive country-wide economic or financial

 

8


 

sanctions or trade embargoes imposed, administered or enforced by any Person listed in the definition of “Sanctions” (the Designated Jurisdictions as of the Effective Date being Crimea, Cuba, Iran, Syria, Sudan and North Korea).

 

“Dollars” and the “$” means lawful money of the United States.

 

“Domestic Subsidiary” means any Subsidiary of the Borrower substantially all the property of which is located, or substantially all of the business of which is carried on, within the United States (excluding its territories and possessions and Puerto Rico), provided, however, that the term shall not include any Subsidiary of the Borrower which (i) is engaged principally in the financing of operations outside of the United States or in leasing personal property or financing inventory, receivables or other property or (ii) does not own a Principal Domestic Property.

 

“EBITDA” means, for any period, the Consolidated net income of the Borrower and its Consolidated Subsidiaries for such period plus, (A) to the extent deducted in computing such Consolidated net income for such period, the sum (without duplication) of (a) income and franchise tax expense, (b) Interest Expense, (c) depreciation and amortization, (d) net after-tax losses (including all fees and expenses or charges relating thereto) on sales of assets outside of the ordinary course of business and net after-tax losses from discontinued operations, (e) any net after-tax losses (including all fees and expenses or charges relating thereto) on the retirement of debt, (f) (i) non-cash extraordinary, unusual or otherwise non-recurring losses, expenses, fees and charges (including non-cash losses, expenses, fees and charges incurred in connection with any issuance of debt or equity, acquisitions, investments, restructuring activities, asset sales or divestitures permitted hereunder, and any non-cash integration and restructuring costs in connection with the St. Jude Transactions and the transactions contemplated by the Alere Acquisition Agreement (the “Specified Transactions”)) and (ii) cash extraordinary, unusual or otherwise non-recurring losses, expenses, fees and charges (including cash losses, expenses, fees and charges incurred in connection with any issuance of debt or equity, acquisitions, investments, restructuring activities, asset sales or divestitures permitted hereunder and any cash integration and restructuring costs in connection with the Specified Transactions) not to exceed 10% of EBITDA for such period, (g) all actual fees and expenses incurred in connection with the Specified Transactions and (h) non-cash stock compensation expense and minus (B) to the extent added in computing such Consolidated net income for such period, (a) net after-tax gains on sale of assets outside the ordinary course of business and net-after tax gains from discontinued operations, (b) any net after-tax gains on the retirement of debt and (c) extraordinary, unusual or otherwise non-recurring gains.

 

If the Borrower or any Subsidiary thereof engages in any Material Asset Acquisition or any Material Asset Sale, during any period in respect of which EBITDA is to be determined hereunder, such EBITDA will be determined on a pro forma basis as if such Material Asset Acquisition or such Material Asset Sale occurred on the first day of the relevant period.  For purposes of this definition, (i) “Material Asset Sale” means any disposition of property or series of related dispositions of property that involves consideration (including noncash consideration) with a fair market value in excess of

 

9


 

$750,000,000 and (ii) “Material Asset Acquisition” means (x) the Alere Transactions, (y) the St. Jude Transactions and (z) any other acquisition (whether by purchase, merger, consolidation or otherwise) of the assets or property of any other Person that involves consideration (including non-cash consideration) with a fair market value in excess of $750,000,000.

 

“EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.

 

“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.

 

“EEA Resolution Authority” means any public administrative authority or any Person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.

 

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

 

“Eligible Assignee” means any Person that meets the requirements to be an assignee under Section 8.07(b)(iii) and (v) (subject to such consents, if any, as may be required under Section 8.07(b)(iii)).

 

“Environmental Action” means any action, suit, demand, demand letter, claim, notice of noncompliance or violation, notice of liability or potential liability, investigation, proceeding, consent order or consent agreement relating in any way to any Environmental Law, Environmental Permit or Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment, including, without limitation, (a) by any governmental or regulatory authority for enforcement, cleanup, removal, response, remedial or other actions or damages and (b) by any governmental or regulatory authority or any third party for damages, contribution, indemnification, cost recovery, compensation or injunctive relief.

 

“Environmental Law” means any federal, state, local or foreign statute, law, ordinance, rule, regulation, code, order, judgment, decree or judicial or agency interpretation, policy or guidance relating to pollution or protection of the environment, health, safety or natural resources, including, without limitation, those relating to the use, handling, transportation, treatment, storage, disposal, release or discharge of Hazardous Materials.

 

“Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or

 

10

 

indemnities), of the Borrower or any of its Subsidiaries directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

 

“Environmental Permit” means any permit, approval, identification number, license or other authorization required under any Environmental Law.

 

“Equity Interests” means any shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity interest.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder.

 

“ERISA Affiliate” means any Person that for purposes of Title IV of ERISA is a member of the Borrower’s controlled group, or under common control with the Borrower, within the meaning of Section 414 of the Internal Revenue Code.

 

“ERISA Event” means:

 

(a)                                 (i) the occurrence of a reportable event, within the meaning of Section 4043 of ERISA, with respect to any Plan unless the 30-day notice requirement with respect to such event has been waived by the PBGC, or (ii) the requirements of subsection (1) of Section 4043(b) of ERISA (without regard to subsection (2) of such Section) are being met with a contributing sponsor, as defined in Section 4001(a)(13) of ERISA, of a Plan, and an event described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably expected to occur with respect to such Plan within the following 30 days;

 

(b)                                 the application for a minimum funding waiver with respect to a Plan;

 

(c)                                  the provision by the administrator of any Plan of a notice of intent to terminate such Plan pursuant to Section 4041(a)(2) of ERISA (including any such notice with respect to a plan amendment referred to in Section 4041(e) of ERISA);

 

(d)                                 the cessation of operations at a facility of the Borrower or any ERISA Affiliate in the circumstances described in Section 4062(e) of ERISA;

 

11


 

(e)                                  the withdrawal by the Borrower or any ERISA Affiliate from a Multiple Employer Plan during a plan year for which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA;

 

(f)                                   the conditions for the imposition of a lien under Section 303(k) of ERISA shall have been met with respect to any Plan; or

 

(g)                                  the institution by the PBGC of proceedings to terminate a Plan pursuant to Section 4042 of ERISA, or the occurrence of any event or condition described in Section 4042 of ERISA that could constitute grounds for the termination of, or the appointment of a trustee to administer, a Plan.

 

“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor Person), as in effect from time to time.

 

“Eurocurrency Liabilities” has the meaning specified in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time.

 

“Eurodollar Rate” means,

 

(a)                                 for any Interest Period with respect to a Eurodollar Rate Loan, the rate per annum equal to the London Interbank Offered Rate, or a comparable or successor rate which rate is approved by the Administrative Agent, as published on the applicable Bloomberg screen page (or such other commercially available source providing such quotations as may be designated by the Administrative Agent from time to time) (in such case, the “LIBOR Rate”) at or about 11:00 a.m., London time, two (2) Business Days prior to the commencement of such Interest Period, for Dollar deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period (provided that if the LIBOR Rate shall be less than zero, such rate shall be deemed zero for purposes of this Agreement);

 

(b)                                 for any interest calculation with respect to a Base Rate Loan on any date, the rate per annum equal to the LIBOR Rate, at or about 11:00 a.m., London time, two (2) Business Days prior to such date for Dollar deposits with a term of one (1) month commencing that day; and

 

(c)                                  if the Eurodollar Rate shall be less than zero, such rate shall be deemed zero for purposes of this Agreement;

 

provided that to the extent a comparable or successor rate is approved by the Administrative Agent in connection herewith, the approved rate shall be applied in a manner consistent with market practice; provided, further that to the extent such market practice is not administratively feasible for the Administrative Agent, such approved rate shall be applied in a manner as otherwise reasonably determined by the Administrative Agent.

 

“Eurodollar Rate Loan” means a Loan that bears interest at a rate based on clause (a) of the definition of “Eurodollar Rate”.

 

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“Events of Default” has the meaning specified in Section 6.01.

 

“Excluded Taxes” means any of the following Taxes imposed on or with respect to any Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its Lending Office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan or Commitment pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Loan or Commitment (other than pursuant to an assignment request by the Borrower under Section 8.15) or (ii) such Lender changes its Lending Office, except in each case to the extent that, pursuant to Section 2.16(a)(ii), (a)(iii) or (c), amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its Lending Office, (c) Taxes attributable to such Recipient’s failure to comply with Section 2.16(e) and (d) any U.S. federal withholding Taxes imposed pursuant to FATCA.

 

“Facility” means the up to $2,800,000,000 term loan facility established hereunder.

 

“FATCA” means Sections 1471 through 1474 of the Internal Revenue Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreements entered into pursuant to Section 1471(b)(1) of the Internal Revenue Code, any published intergovernmental agreement entered into in connection with the implementation of such Sections of the Internal Revenue Code and any fiscal or regulatory legislation adopted pursuant to such published intergovernmental agreements.

 

“Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to Bank of America on such day on such transactions as determined by the Administrative Agent and (c) if the Federal Funds Rate shall be less than zero, such rate shall be deemed zero for purposes of this Agreement.

 

“Fee Letter” means the Amended and Restated Fee Letter dated as of July 27, 2017 among the Borrower, the Lead Arrangers and the Administrative Agent.

 

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“Foreign Lender” means (a) if the Borrower is a U.S. Person, a Lender that is not a U.S. Person, and (b) if the Borrower is not a U.S. Person, a Lender that is resident or organized under the laws of a jurisdiction other than that in which the Borrower is resident for tax purposes.  For purposes of this definition, the United States, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

 

“Fund” means any Person (other than a natural Person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its activities.

 

“Funded Debt” means (i) the Loans and (ii) Debt of the Borrower (other than Debt in respect of the Loans or Debt subordinated in right of payment to the Loans) or Debt of any wholly-owned Domestic Subsidiary, for money borrowed, having a stated maturity of more than 12 months from the date of application of sale/leaseback proceeds or which is extendible at the option of the obligor thereon to a date more than 12 months from the date of such application.

 

“GAAP” has the meaning specified in Section 1.03.

 

“Governmental Authority” means any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, administrative tribunal, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

 

“Guarantee” has the meaning specified in Section 9.02.

 

“Guaranteed Obligations” has the meaning specified in Section 9.02.

 

“Guarantors” means after the Effective Date, any Subsidiary of the Borrower that becomes a Guarantor pursuant to Section 9.01; provided that upon the release or discharge of any Subsidiary from its Guarantee in accordance with the terms of this Agreement, such Person shall cease to be a Guarantor; provided, further, that as of the Effective Date, there shall be no Guarantors under this Agreement or any other Loan Document.

 

“Hazardous Materials” means (a) petroleum and petroleum products, byproducts or breakdown products, radioactive materials, asbestos-containing materials, polychlorinated biphenyls and radon gas and (b) any other chemicals, materials or substances designated, classified or regulated as “hazardous” or “toxic” or as a “pollutant” or “contaminant” under any Environmental Law.

 

“Hedge Agreements” means interest rate swap, cap or collar agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts and other similar agreements.

 

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“HSBC Entity” means any entity containing “Hongkong and Shanghai Banking Corporation” or “HSBC” in its name; Bank of Communications; Hang Seng Bank; or Saudi British Bank.

 

“Impacted Loans” has the meaning specified in Section 2.18.

 

“Indemnified Person” has the meaning specified in Section 8.04(b).

 

“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of the Loan Parties under any Loan Document and (b) to the extent not otherwise described in clause (a), Other Taxes.

 

“Information” has the meaning specified in Section 8.08.

 

“Information Memorandum” means the information memorandum dated July 7, 2017 used by the Lead Arrangers in connection with the Alere Transactions.

 

“Interest Expense” means, for any period, the interest expense of the Borrower and its Consolidated Subsidiaries for such period determined on a Consolidated basis in accordance with GAAP, excluding (i) non-cash interest expense attributable to the movement in mark-to-market valuation under Hedge Agreements, (ii) non-cash interest expense attributable to the amortization of gains or losses resulting from the termination of Hedge Agreements prior to or reasonably contemporaneously with the Alere Acquisition Date, (iii) any make whole or prepayment premiums, write offs or Hedge Agreement termination costs and similar premiums and costs related to the Alere Transactions or the St. Jude Transactions, (iv) amortization of deferred financing fees and (v) expensing of bridge or other financing fees of the Borrower and its Subsidiaries.

 

“Interest Payment Date” means, (a) as to any Loan other than a Base Rate Loan, the last day of each Interest Period applicable to such Loan and the Maturity Date; provided, however, that if any Interest Period for a Eurodollar Rate Loan exceeds three months, the respective dates that fall every three months after the beginning of such Interest Period shall also be Interest Payment Dates; and (b) as to any Base Rate Loan, the last Business Day of each March, June, September and December and the Maturity Date.

 

“Interest Period” means, as to each Eurodollar Rate Loan, the period commencing on the date such Eurodollar Rate Loan is disbursed or converted to or continued as a Eurodollar Rate Loan and ending on the date one, two, three or six months thereafter (in each case, subject to availability), as selected by the Borrower in its Loan Notice; provided that:

 

(a)                                 any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless, in the case of a Eurodollar Rate Loan, such Business Day falls in another calendar

 

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month, in which case such Interest Period shall end on the next preceding Business Day;

 

(b)                                 any Interest Period pertaining to a Eurodollar Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and

 

(c)                                  no Interest Period shall extend beyond the Maturity Date.

 

“Internal Revenue Code” or the “Code” means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and the rulings issued thereunder.

 

“IRS” means the United States Internal Revenue Service.

 

“Laws” means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law.

 

“Lead Arrangers” means Merrill Lynch, Pierce, Fenner & Smith Incorporated (or any other registered broker-dealer wholly-owned by Bank of America Corporation to which all or substantially all of Bank of America Corporation’s or any of its subsidiaries’ investment banking, commercial lending services or related businesses may be transferred following the date of this Agreement), Morgan Stanley Senior Funding, Inc. and Barclays Bank PLC.

 

“Lenders” has the meaning specified in the introductory paragraph hereto.

 

“Lending Office” means, as to any Lender, the office or offices of such Lender described as such in such Lender’s Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the Borrower and the Administrative Agent.

 

“LIBOR Rate” has the meaning specified in the definition of Eurodollar Rate.

 

“Lien” means any lien, security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property.

 

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“Loan” means any loan made by the Lenders to the Borrower pursuant to Section 2.01.  A Loan may be a Base Rate Loan or a Eurodollar Rate Loan, each of which shall be a “Type” of Loan.

 

“Loan Documents” means this Agreement, any joinder document pursuant to which a Subsidiary of the Borrower joins this Agreement as a Guarantor, the Fee Letter and any Notes, security agreements or other documents entered into in connection herewith.

 

“Loan Notice” means a notice of (a) a Borrowing, (b) a conversion of Loans from one Type to the other, or (c) a continuation of Eurodollar Rate Loans, pursuant to Section 2.02(a), which shall be substantially in the form of Exhibit A or such other form as may be approved by the Administrative Agent (including any form on an electronic platform or electronic transmission system as shall be approved by the Administrative Agent), appropriately completed and signed by a Responsible Officer of the Borrower.

 

“Loan Parties” means the Borrower and each Guarantor (if any).

 

“Material Adverse Effect” means a material adverse effect on (a) the financial condition or results of operations of the Borrower or the Borrower and its Subsidiaries taken as a whole, (b) the rights and remedies of the Administrative Agent or any Lender under this Agreement, taken as a whole, or (c) the ability of the Loan Parties to perform their obligations under this Agreement.

 

“Material Asset Acquisition” has the meaning specified in the definition of “EBITDA”.

 

“Material Asset Sale” has the meaning specified in the definition of “EBITDA”.

 

“Material Debt” means any Debt instrument of any Loan Party evidencing Borrowed Debt (or commitments to provide the same) in excess for any such instrument of $250,000,000 in aggregate principal amount outstanding or committed (including the Revolving Credit Agreement).

 

“Maturity Date” means, as applicable, the earlier of (i) the date that is five (5) years after the Closing Date and (ii) the date on which the maturity of the Loans is accelerated in accordance with the terms hereof, provided, however, if such date is not a Business Day, the next preceding Business Day.

 

“Merger Sub” has the meaning set forth in the recitals hereto.

 

“Moody’s” means Moody’s Investors Service, Inc. (or any successor thereof).

 

“Multiemployer Plan” means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions.

 

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“Multiple Employer Plan” means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the Borrower or any ERISA Affiliate and at least one Person other than the Borrower and the ERISA Affiliates or (b) was so maintained and in respect of which the Borrower or any ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated.

 

“Non-Consenting Lender” means any Lender that does not approve any consent, waiver or amendment that (a) requires the approval of all Lenders or all affected Lenders in accordance with the terms of Section 8.01 and (b) has been approved by the Required Lenders.

 

“Non-Defaulting Lender” means, at any time, each Lender that is not a Defaulting Lender at such time.

 

“Note” means a promissory note made by the Borrower in favor of a Lender evidencing Loans made by such Lender, substantially in the form of Exhibit D.

 

“NPL” means the National Priorities List under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time.

 

“Obligations” means all advances to, and debts, liabilities, obligations, covenants and duties of, the Borrower arising under any Loan Document or otherwise with respect to any Loan, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against the Borrower or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding.

 

“OFAC” means the U.S. Treasury Department’s Office of Foreign Assets Control.

 

“Organization Documents” means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.

 

“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction

 

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imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).

 

“Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 2.21).

 

“Participant” has the meaning specified in Section 8.07(d).

 

“Participant Register” has the meaning specified in Section 8.07(d).

 

“PATRIOT Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Title III of Pub.  L. 107-56, signed into law October 26, 2001.

 

“Payment Date” has the meaning specified in Section 2.06.

 

“PBGC” means the Pension Benefit Guaranty Corporation (or any successor thereto).

 

“Permitted Receivables Facility” means one or more accounts receivable securitization arrangements which provide for (i) the sale of accounts receivable and any related property by the Borrower and/or any of its Subsidiaries to a financing party or a special purpose vehicle and (ii) if a special purpose vehicle is used in any such arrangements, the granting of a security interest in accounts receivables and any related property by such special purpose vehicle and/or the granting of a security interest by the Borrower or such Subsidiary in any such related property.

 

“Permitted Refinancing” means, with respect to any Debt or other obligation, any replacement, refinancing, refunding, renewal or extension of such Debt or other obligation that does not increase the outstanding principal amount thereof (except in respect of unpaid premiums (if any), unpaid interest (including post-petition interest) and fees, expenses and charges resulting from any such replacement, refinancing, refunding, renewal or extension).

 

“Person” means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture, limited liability company or other entity, or a government or any political subdivision or agency thereof.

 

“Plan” means a Single Employer Plan or a Multiple Employer Plan.

 

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“Platform” has the meaning specified in Section 5.01(i).

 

“Principal Domestic Property” means any building, structure or other facility, together with the land upon which it is erected and fixtures comprising a part thereof, used primarily for manufacturing, processing, research, warehousing or distribution and located in the United States (excluding its territories and possessions and Puerto Rico) owned or leased by a member of the Consolidated Group the net book value of which on the date as of which the determination is being made exceeds 2% of Consolidated Net Assets, other than any such building structure or other facility or portion of any thereof (a) which is an air or water pollution control facility financed by obligations issued by a State or local governmental unit or (b) which the Chief Executive Officer, any President, the Chief Financial Officer, the Controller or the Treasurer of the Borrower determines in good faith is not of material importance to the total business conducted, or assets owned, by the Consolidated Group taken as a whole.

 

“Pro Rata Share” means, with respect to each Lender at any time, a fraction (expressed as a percentage, carried out to the ninth decimal place), (i) prior to the funding of the Loans on the Closing Date, the numerator of which is the amount of the Commitments of such Lender at such time, subject to adjustment as provided in Section 2.15, and the denominator of which is the amount of the Aggregate Commitments of all Lenders at such time and (ii) on or after the funding of the Loans on the Closing Date, the numerator of which is the amount of the Loans outstanding of such Lender at such time and the denominator of which is the amount of the sum of the Loans of all Lenders outstanding at such time.  The initial Pro Rata Share of each Lender is set forth opposite the name of such Lender on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable.

 

“Proceeding” has the meaning specified in Section 8.04(b).

 

“Projections” shall mean the projections (if any) of the Borrower and its Subsidiaries included in the Information Memorandum and any other projections and any forward looking statements (including statements with respect to booked business) of such entities furnished to the Lenders or the Administrative Agent by or on behalf of the Borrower prior to the Closing Date.

 

“Recipient” means the Administrative Agent, any Lender or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder.

 

“Register” has the meaning specified in Section 8.07(c).

 

“Related Parties” means, with respect to any Person, such Person’s Affiliates, and the partners, directors, officers, employees, agents, trustees, administrators, managers, advisors and representatives of such Person and of such Person’s Affiliates.

 

“Related Person” means, as to any Indemnified Person, (a) any controlling Person, controlled Affiliate or Subsidiary of such Indemnified Person, (b) the respective directors, officers or employees of such Indemnified Person or any of its Subsidiaries,

 

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controlled Affiliates or controlling Persons and (c) the respective agents and advisors of such Indemnified Person or any of its Subsidiaries, controlled Affiliates or controlling Persons.

 

“Removal Effective Date” has the meaning specified in Section 7.06(b).

 

“Required Lenders” means, at any time, Lenders having a Pro Rata Share representing (i) prior to the funding of the Loans on the Closing Date, more than 50% of the Aggregate Commitments and (ii) on or after the funding of the Loans on the Closing Date, more than 50% in the aggregate of the Loans outstanding; provided that, if there is only one Lender, only the consent of that Lender shall be required.  The Pro Rata Share of any Defaulting Lender and all of its Commitments and/or Loans outstanding shall be disregarded in determining Required Lenders at any time.

 

“Resignation Effective Date” has the meaning specified in Section 7.06(a).

 

“Responsible Officer” means the Chief Executive Officer, the Chief Financial Officer, the Treasurer, the Controller, any Assistant Treasurer and the General Counsel of the Borrower (or other executive officer of the Borrower performing similar functions), or any other officer of the Borrower responsible for overseeing or reviewing compliance with this Agreement, and solely for purposes of the delivery of incumbency certificates pursuant to Section 3.01, the Secretary or any Assistant Secretary of the Borrower.  Any document delivered hereunder that is signed by a Responsible Officer of the Borrower shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of the Borrower and such Responsible Officer shall be conclusively presumed to have acted on behalf of the Borrower.

 

“Revolving Credit Agreement” means the U.S.$5,000,000,000 Five Year Credit Agreement, dated as of July 10, 2014, among the Borrower, the lenders party thereto and the Administrative Agent, as amended, restated or otherwise modified from time to time.

 

“S&P” means Standard & Poor’s Ratings Services (or any successor thereof).

 

“Sale and Leaseback Transaction” has the meaning specified in Section 5.02(d).

 

“Sanction(s)” means any economic or trade sanction enacted, imposed, administered or enforced by the United States Government (including, without limitation, the U.S. Department of State and OFAC), the United Nations Security Council, the European Union, Her Majesty’s Treasury or other relevant sanctions authority.

 

“Significant Subsidiary” means any Subsidiary of the Borrower that constitutes a “significant subsidiary” under Regulation S-X promulgated by the Securities and Exchange Commission, as in effect from time to time.

 

“Single Employer Plan” means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the Borrower or any ERISA Affiliate and no Person other than the Borrower and the ERISA Affiliates or

 

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(b) was so maintained and in respect of which the Borrower or any ERISA Affiliate could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated.

 

“Solvent” means that, on and as of the Closing Date and immediately after giving effect to the consummation of the Alere Transactions, (a) the (i) the fair value of the assets of the Borrower and its Subsidiaries on a consolidated basis, at a fair valuation, will exceed the debts and liabilities, direct, subordinated, contingent or otherwise, of the Borrower and its Subsidiaries on a consolidated basis; (ii) the present fair saleable value of the property of the Borrower and its Subsidiaries on a consolidated basis will be greater than the amount that will be required to pay the probable liability of the Borrower and its Subsidiaries on a consolidated basis on their debts and other liabilities, direct, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (iii) the Borrower and its Subsidiaries on a consolidated basis will be able to pay their debts and liabilities, direct, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (iv) the Borrower and its Subsidiaries on a consolidated basis will not have unreasonably small capital with which to conduct the businesses in which they are engaged as such businesses are now conducted and are proposed to be conducted following the Closing Date and (b) the Borrower does not intend to, and the Borrower does not believe that it or any of its Subsidiaries will, incur debts beyond its ability to pay such debts as they mature, taking into account the timing and amounts of cash to be received by it or any such Subsidiary and the timing and amounts of cash to be payable on or in respect of its debts or the debts of any such Subsidiary.

 

“Specified Representations” mean the representations and warranties under Sections 4.01(a); 4.01(b)(i); 4.01(b)(ii); 4.01(b)(iii)(A); 4.01(b)(iii)(B) (limited to conflicts with any Material Debt and without giving effect to any “material adverse effect” qualification); 4.01(d); 4.01(e); 4.01(g) (with respect to the Borrower only); 4.01(o) (with respect to the Borrower only); 4.01(q)(ii); 4.01(s)(ii) (solely with respect to the Borrower and the PATRIOT Act); and 4.01(t).

 

“St. Jude” means St. Jude Medical, Inc., a Minnesota corporation.

 

“St. Jude Acquisition” means the acquisition of St. Jude by the Borrower on January 4, 2017.

 

“St. Jude Transactions” means the St. Jude Acquisition and the financing transactions in connection therewith, the repayment of certain existing indebtedness of the Borrower and St. Jude and the payment of certain fees and expenses in connection therewith.

 

“Subsidiary” means, with respect to any Person, any corporation, partnership, joint venture, limited liability company, trust or estate of which (or in which) more than 50% of (a) the issued and outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have

 

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voting power upon the occurrence of any contingency), (b) the interest in the capital or profits of such limited liability company, partnership or joint venture or (c) the beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person’s other Subsidiaries.

 

“Target Material Adverse Effect” means a “Material Adverse Effect” (as defined in the Alere Acquisition Agreement as in effect on April 13, 2017).

 

“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

 

“Termination Date” means the earliest to occur of (a) 11:59 p.m. New York City time on September 30, (b) the consummation of the Alere Acquisition without the use of the Facility and (c) the date of any termination in accordance with the terms of the Alere Acquisition Agreement of the Borrower’s obligations under the Alere Acquisition Agreement to consummate the Alere Acquisition.

 

“Total Capitalization” means Consolidated Debt plus Consolidated Net Worth.

 

“Type” means, with respect to a Loan, its character as a Base Rate Loan or a Eurodollar Rate Loan.

 

“United States” and “U.S.” each means the United States of America.

 

“U.S. Person” means any Person that is a “United States person” as defined in Section 7701(a)(30) of the Code.

 

“U.S. Tax Compliance Certificate” has the meaning specified in Section 2.16(e)(ii)(B)(III).

 

“Voting Stock” means shares of capital stock issued by a corporation, or equivalent interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency.

 

“Withdrawal Liability” has the meaning specified in Part I of Subtitle E of Title IV of ERISA.

 

“Write-Down and Conversion Powers” means, with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA

 

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Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule.

 

SECTION 1.02              Computation of Time Periods.  In this Agreement, in the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including”, the word “through” means “through and including” and each of the words “to” and “until” mean “to but excluding”.

 

SECTION 1.03              Accounting Terms.  Except as otherwise expressly provided herein, all accounting terms not specifically defined herein shall be construed in accordance with, and all financial data (including financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, generally accepted accounting principles as in effect in the United States from time to time (“GAAP”).  If at any time any change in GAAP would affect the calculation of any covenant set forth herein and either the Borrower or the Required Lenders shall so request, the Administrative Agent, the Lenders and the Borrower shall negotiate in good faith to amend such covenant to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders); provided that, until so amended, (i) such covenant shall continue to be calculated in accordance with GAAP prior to such change and (ii) the Borrower shall provide to the Administrative Agent and the Lenders, concurrently with the delivery of any financial statements or reports with respect to such covenant, statements setting forth a reconciliation between calculations of such covenant made before and after giving effect to such change in GAAP.

 

SECTION 1.04              Times of Day.  Unless otherwise specified, all references herein to times of day shall be references to Central time (daylight or standard, as applicable).

 

ARTICLE II

 

THE COMMITMENTS AND LOANS

 

SECTION 2.01     The Loans.  Subject to the terms and conditions set forth herein, each Lender severally agrees to make a Loan to the Borrower, in a single drawing on the Closing Date, the proceeds of which shall be used in accordance with Section 2.14; provided that the outstanding principal amount of such Loan made by such Lender shall not exceed such Lender’s Commitment in effect immediately prior to making such Loan.  The Loans shall be made ratably among the Lenders in accordance with their Pro Rata Share of Commitments.  Any amount borrowed under this Section 2.01 and subsequently repaid or prepaid may not be reborrowed.  Each Lender’s  Commitment shall terminate immediately and without further action on the earlier of (i) the Closing Date, after giving effect to the funding of such Lender’s Commitment on the Closing Date and (ii) the Termination Date.  Loans may be Base Rate Loans or Eurodollar Rate Loans, as further provided herein.

 

SECTION 2.02              Borrowings, Conversions and Continuations of the Loans.

 

(a)                                 Each Borrowing, each conversion of Loans from one Type to the other, and each continuation of Eurodollar Rate Loans shall be made upon the Borrower’s notice to the Administrative Agent, which may be given by (A) telephone, or (B) a Loan Notice; provided that

 

24


 

any telephonic notice by the Borrower must be confirmed immediately by delivery to the Administrative Agent of a Loan Notice.  Each Loan Notice must be received by the Administrative Agent not later than 12:00 p.m., (i) two Business Days prior to the requested date of any Borrowing of Eurodollar Rate Loans or three Business Days prior to the requested date of any conversion to or continuation of Eurodollar Rate Loans or of any conversion of Eurodollar Rate Loans to Base Rate Loans, and (ii) on the requested date of any Borrowing of Base Rate Loans.  Each Borrowing of, conversion to or continuation of Eurodollar Rate Loans shall be in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof.  Each Borrowing of or conversion to Base Rate Loans shall be in a principal amount of $500,000 or a whole multiple of $100,000 in excess thereof.  Each Loan Notice shall specify (i) whether the Borrower is requesting a Borrowing, a conversion of Loans from one Type to the other, or a continuation of Eurodollar Rate Loans, (ii) the requested date of the Borrowing, conversion or continuation, as the case may be (which shall be a Business Day), (iii) the principal amount of Loans to be borrowed, converted or continued, (iv) the Type of Loans to be borrowed (or to which Type the existing Loans are to be converted), and (v) if applicable, the duration of the Interest Period with respect thereto.  If the Borrower fails to specify a Type of Loan in a Loan Notice or if the Borrower fails to give a timely notice requesting a conversion or continuation, then the applicable Loans shall be made as, or converted to, Base Rate Loans.  Any such automatic conversion to Base Rate Loans shall be effective as of the last day of the Interest Period then in effect with respect to the applicable Eurodollar Rate Loans.  If the Borrower requests a Borrowing of, conversion to, or continuation of Eurodollar Rate Loans in any such Loan Notice, but fails to specify an Interest Period, it will be deemed to have specified an Interest Period of one month.  Each Loan Notice requesting a Borrowing on the Closing Date may be revoked (or, in the alternative, be modified to reduce the aggregate amount of such requested Borrowing) by the Borrower by notice to the Administrative Agent at any time prior to 8:00 a.m. on the date designated for such Borrowing in the applicable Loan Notice; provided, that the Borrower shall compensate any Lender upon demand in accordance with the provisions of Section 2.20(b) for any loss, cost or expense incurred by such Lender as a result of any such revocation or modification of a Loan Notice requesting a Borrowing on the Closing Date.

 

(b)                                 Following receipt of a Loan Notice, the Administrative Agent shall promptly notify each Lender of the amount of its Pro Rata Share of the applicable Loans, and if no timely notice of a conversion or continuation is provided by the Borrower, the Administrative Agent shall notify each Lender of the details of any automatic conversion to Base Rate Loans described in the preceding subsection.  In the case of a Borrowing, each Lender shall make the amount of its Loan available to the Administrative Agent in immediately available funds at the Administrative Agent’s Office not later than (i) in the case of Eurodollar Rate Loans, 12:00 p.m. on the Business Day specified in the applicable Loan Notice or (ii) in the case of Base Rate Loans, 2:00 p.m. on the Business Day specified in the applicable Loan Notice.  Upon satisfaction of the applicable conditions set forth in Section 3.02, the Administrative Agent shall make all funds so received available to the Borrower in like funds as received by the Administrative Agent either by (i) crediting the account of the Borrower on the books of Bank of America with the amount of such funds or (ii) wire transfer of such funds, in each case in accordance with instructions provided to (and reasonably acceptable to) the Administrative Agent by the Borrower.

 

25


 

(c)                                  Except as otherwise provided herein, a Eurodollar Rate Loan may be continued or converted only on the last day of an Interest Period for such Eurodollar Rate Loan.  During the existence of a Default, no Loans may be requested as, converted to or continued as Eurodollar Rate Loans without the consent of the Required Lenders.

 

(d)                                 The Administrative Agent shall promptly notify the Borrower and the Lenders of the interest rate applicable to any Interest Period for Eurodollar Rate Loans upon determination of such interest rate.  The determination of the Eurodollar Rate by the Administrative Agent shall be conclusive in the absence of manifest error.  At any time that Base Rate Loans are outstanding, the Administrative Agent shall notify the Borrower and the Lenders of any change in Bank of America’s prime rate used in determining the Base Rate promptly following the public announcement of such change.

 

(e)                                  After giving effect to all Borrowings, all conversions of Loans from one Type to the other, and all continuations of Loans as the same Type, there shall not be more than ten Interest Periods in effect with respect to Loans in the aggregate.

 

SECTION 2.03              Termination or Reduction of Aggregate Commitments.

 

(a)                                 Optional Reductions. The Borrower may, upon notice to the Administrative Agent, terminate the Aggregate Commitments, or from time to time permanently reduce the Aggregate Commitments; provided, that (i) any such notice shall be received by the Administrative Agent not later than 12:00 noon three (3) Business Days prior to the date of such termination or reduction, (ii) any such partial reduction shall be in an aggregate amount of $5,000,000 or any whole multiple of $1,000,000 in excess thereof or, if less, the Aggregate Commitments and (iii) any such notice may state that such notice is conditioned upon the consummation of another transaction, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. The Administrative Agent will promptly notify the Lenders of any such termination or reduction of the Commitments.

 

SECTION 2.04              Prepayments.

 

(a)                                 The Borrower may, upon notice to the Administrative Agent, at any time or from time to time voluntarily prepay ratably any Loans then outstanding in whole or in part without premium or penalty; provided that such notice must be (i) in substantially the form of Exhibit F hereto (or such other form reasonably acceptable to the Administrative Agent) and (ii) received by the Administrative Agent not later than 12:00 noon (A) three (3) Business Days prior to any date of prepayment of Eurodollar Rate Loans and (B) on the date of prepayment of Base Rate Loans; (iii) any prepayment of Eurodollar Rate Loans shall be in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof; and (iv) any prepayment of Base Rate Loans shall be in a principal amount of $500,000 or a whole multiple of $100,000 in excess thereof or, in each case, if less, the entire principal amount thereof then outstanding.  Each such notice shall specify the date and amount of such prepayment and the Type(s) of Loans to be prepaid and, if Eurodollar Rate Loans are to be prepaid, the Interest Period(s) of such Loans.  The Administrative Agent will promptly notify each applicable Lender of its receipt of each such notice, and of the amount of such Lender’s Pro Rata Share of such prepayment.  If such notice is

 

26


 

given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein; provided, that a notice of prepayment delivered by the Borrower may state that such notice is conditioned upon the consummation of another transaction, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied; provided, further that the Borrower shall compensate and hold harmless any Lender from any loss, cost or expense incurred by such Lender in accordance with Section 2.20 as a result of the failure to make such prepayment.  Any prepayment of a Eurodollar Rate Loan shall be accompanied by all accrued interest thereon, together with any additional amounts required pursuant to Section 2.20.

 

SECTION 2.05              [Reserved].

 

SECTION 2.06              Repayment of Loans.  The Borrower hereby unconditionally promises to repay the outstanding Loans as follows: (a) to the Administrative Agent for the ratable account of each Lender on the last Business Day of the first full calendar quarter following the Closing Date and on the last Business Day of each successive calendar quarter thereafter prior to the Maturity Date (each, a “Payment Date”), the applicable percentage determined in accordance with the grid set forth below on the aggregate principal amount of the Loans made on the Closing Date and (b) to the Administrative Agent for the ratable account of the Lenders on the Maturity Date, the remaining outstanding principal amount of Loans made to the Borrower on the Closing Date then outstanding.

 

Amortization Periods

 

Applicable
Percentage
Per Payment Date

 

Each of the first four Payment Dates

 

0.00

%

Each of the fifth through twelfth Payment Dates

 

1.25

%

Each Payment Date thereafter, up to the Maturity Date

 

2.50

%

 

SECTION 2.07              Interest.

 

(a)                                 Subject to the provisions of subsection (b) below, (i) each Eurodollar Rate Loan shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the Eurodollar Rate for such Interest Period plus the Applicable Rate; and (ii) each Base Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Rate.

 

(b)                                 If any amount payable by the Borrower under any Loan Document is not paid when due (without regard to any applicable grace periods), whether at stated maturity, by acceleration or otherwise, such amount shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws.  Furthermore, if required by the Required Lenders and after written notice to the

 

27


 

Borrower, while any Event of Default exists, the Borrower shall pay interest on all overdue amounts hereunder at a fluctuating interest rate per annum at all times equal to the Default Rate applicable thereto to the fullest extent permitted by applicable Laws.  Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be due and payable upon demand.

 

(c)                                  Interest on each Loan shall be due and payable in arrears on each Interest Payment Date applicable thereto and at such other times as may be specified herein.  Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law.

 

SECTION 2.08              Fees.

 

(a)                                 Commitment Fee. The Borrower shall pay to the Administrative Agent, for the ratable benefit of each Lender (as determined by each Lender’s respective Pro Rata Share of the Aggregate Commitments as in effect from time to time), a commitment fee (the “Commitment Fee”) as indicated in the table immediately below equal to the applicable percentage per annum corresponding to the Debt Ratings (giving effect to the Alere Transactions) from time to time, applied to the Aggregate Commitments from time to time remaining, accruing from the Effective Date until the earliest of (A) the Termination Date, (B) the date on which the Borrower voluntarily terminates all of the Commitments hereunder and (C) the Closing Date, payable on such earliest date.

 

Level

 

Debt
Ratings
(Moody’s/
S&P)

 

Commitment Fee

 

I

 

>A2/A

 

8.0 bps

 

II

 

A3/A-

 

10.0 bps

 

III

 

Baa 1/BBB+

 

12.5 bps

 

IV

 

Baa2/BBB

 

15.0 bps

 

V

 

Baa3/BBB-

 

20.0 bps

 

VI

 

< Ba1/ BB+

 

25.0 bps

 

 

(b)                                 Administrative Agency Fee.  The Borrower shall pay to the Administrative Agent, for its own account, the administrative agency fee in the amount and at the time specified in the Fee Letter.

 

SECTION 2.09              Computation of Interest and Fees.  All computations of interest for Base Rate Loans (including Base Rate Loans determined by reference to the Eurodollar Rate) shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed.  All other computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed (which results in more fees or interest, as applicable, being paid than if

 

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computed on the basis of a 365-day year).  Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid.  Each determination by the Administrative Agent of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.

 

SECTION 2.10              Evidence of Debt.

 

(a)                                 The Loans made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and by the Administrative Agent in the ordinary course of business.  The accounts or records maintained by the Administrative Agent and each Lender shall be conclusive absent manifest error of the amount of the Loans made by the Lenders to the Borrower and the interest and payments thereon.  Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Loans.  Upon the request of any Lender made through the Administrative Agent, the Borrower shall execute and deliver to such Lender (through the Administrative Agent) a Note, which shall evidence such Lender’s Loans in addition to such accounts or records.  Each Lender may attach schedules to its Note and endorse thereon the date, Type (if applicable), amount and maturity of its Loans and payments with respect thereto.

 

(b)                                 In the event of any conflict between the Register and a Lender’s records, the records as in the Register shall control in the absence of manifest error.

 

SECTION 2.11              Payments Generally; Administrative Agent’s Clawback.

 

(a)                                 All payments to be made by the Borrower shall be made free and clear of and without condition or deduction for any counterclaim, defense, recoupment or set-off.  Except as otherwise expressly provided herein, all payments by the Borrower hereunder shall be made to the Administrative Agent, for the account of the respective Lenders to which such payment is owed, at the Administrative Agent’s Office in Dollars and in immediately available funds not later than 2:00 p.m. on the date specified herein.  The Administrative Agent will promptly distribute to each Lender its Pro Rata Share (or other applicable share as provided herein) of such payment in like funds as received by wire transfer to such Lender’s Lending Office.  All payments received by the Administrative Agent after 2:00 p.m. shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue.  If any payment to be made by the Borrower, other than with respect to the Maturity Date, shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be.

 

(b)                                 (i)  Funding by Lenders; Presumption by Administrative Agent.  Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing of Eurodollar Rate Loans (or, in the case of any Borrowing of Base Rate Loans, prior to 2:00 p.m. on the date of such Borrowing) that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with Section

 

29


 

 2.02 (or, in the case of a Borrowing of Base Rate Loans, that such Lender has made such share available in accordance with and at the time required by Section 2.02) and may, in reliance upon such assumption, make available to the Borrower a corresponding amount.  In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount in immediately available funds with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (A) in the case of a payment to be made by such Lender, the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation, plus any administrative, processing or similar fees customarily charged by the Administrative Agent in connection with the foregoing, and (B) in the case of a payment to be made by the Borrower, the interest rate applicable to Base Rate Loans.  If the Borrower and such Lender shall pay such interest to the Administrative Agent for the same or an overlapping period, the Administrative Agent shall promptly remit to the Borrower the amount of such interest paid by the Borrower for such period.  If such Lender pays its share of the applicable Borrowing to the Administrative Agent, then the amount so paid shall constitute such Lender’s Loan included in such Borrowing.  Any payment by the Borrower shall be without prejudice to any claim the Borrower may have against a Lender that shall have failed to make such payment to the Administrative Agent.

 

(ii)                                  Payments by Borrower; Presumptions by Administrative Agent.  Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders the amount due.  In such event, if the Borrower has not in fact made such payment, then each of the Lenders severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender in immediately available funds with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

 

A notice of the Administrative Agent to any Lender or the Borrower with respect to any amount owing under this subsection (b) shall be conclusive, absent manifest error.

 

(c)                                  Failure to Satisfy Conditions Precedent.  If any Lender makes available to the Administrative Agent funds for any Loan to be made by such Lender as provided in the foregoing provisions of this Article II, and such funds are not made available to the Borrower by the Administrative Agent because the conditions to the applicable Borrowing set forth in Article III are not satisfied or waived in accordance with the terms hereof, the Administrative Agent shall return such funds promptly (in like funds as received from such Lender) to such Lender, without interest.

 

(d)                                 Obligations of Lenders Several.  The obligations of the Lenders hereunder to make Loans and to make payments pursuant to Section 8.04(c) are several and not joint.  The

 

30

 

failure of any Lender to make any Loan, to fund any such participation or to make any payment under Section 8.04(c) on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Loan, to purchase its participation or to make its payment under Section 8.04(c).

 

(e)                                  Funding Source. Nothing herein shall be deemed to obligate any Lender to obtain the funds for any Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for any Loan in any particular place or manner.

 

SECTION 2.12              Sharing of Payments.  If, other than as expressly provided elsewhere herein, any Lender shall obtain on account of the Loans made by it, any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) in excess of its ratable share (or other share contemplated hereunder) thereof, such Lender shall immediately (a) notify the Administrative Agent of such fact, and (b) purchase from the other Lenders such participations in the Loans made by them as shall be necessary to cause such purchasing Lender to share the excess payment in respect of such Loans or such participations, as the case may be, pro rata with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from the purchasing Lender under any of the circumstances described in Section 8.17 (including pursuant to any settlement entered into by the purchasing Lender in its discretion), such purchase shall to that extent be rescinded and each other Lender shall repay to the purchasing Lender the purchase price paid therefor, together with an amount equal to such paying Lender’s ratable share (according to the proportion of (i) the amount of such paying Lender’s required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered, without further interest thereon.  The Borrower agrees that any Lender so purchasing a participation from another Lender may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off, but subject to Section 8.05) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation.  The Administrative Agent will keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased under this Section 2.12 and will in each case notify the Lenders following any such purchases or repayments.  Each Lender that purchases a participation pursuant to this Section 2.12 shall from and after such purchase have the right to give all notices, requests, demands, directions and other communications under this Agreement with respect to the portion of the Obligations purchased to the same extent as though the purchasing Lender were the original owner of the Obligations purchased.

 

SECTION 2.13              [Reserved].

 

SECTION 2.14              Use of Proceeds.  The Borrower shall use the proceeds of the Loans to finance the Alere Transactions; provided that no outstanding loans from any HSBC Entity to the Borrower or any of the Borrower’s Subsidiaries shall be repaid with the proceeds of any Loans made by HSBC Bank USA, N.A.

 

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SECTION 2.15              Defaulting Lenders.

 

(a)                                 Adjustments.  Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then, until such time as that Lender is no longer a Defaulting Lender, to the extent permitted by applicable Law:

 

(i)                                     Waivers and Amendments.  Such Defaulting Lender’s right to approve or disapprove any amendment, waiver or consent with respect to this Agreement shall be restricted as set forth in the definition of “Required Lenders” and Section 8.01.

 

(ii)                                  Defaulting Lender Waterfall.  Any payment of principal, interest, fees or other amounts received by the Administrative Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Article VI or otherwise) or received by the Administrative Agent from a Defaulting Lender pursuant to Section 8.05 shall be applied at such time or times as may be determined by the Administrative Agent as follows: first, to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder; second, as the Borrower may request (so long as no Default exists), to the funding of any Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Administrative Agent; third, if so determined by the Administrative Agent and the Borrower, to be held in a deposit account and released pro rata in order to satisfy such Defaulting Lender’s potential future funding obligations with respect to Loans under this Agreement; fourth, to the payment of any amounts owing to the Lenders as a result of any judgment of a court of competent jurisdiction obtained by any Lender against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; fifth, so long as no Default exists, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; and sixth, to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if (x) such payment is a payment of the principal amount of any Loans in respect of which such Defaulting Lender has not fully funded its appropriate share, and (y) such Loans were made at a time when the conditions set forth in Section 3.02 were satisfied or waived, such payment shall be applied solely to pay the Loans of all Non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Loans of such Defaulting Lender until such time as all Loans are held by the Lenders pro rata in accordance with the Commitments hereunder. Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto.

 

(iii)                               Certain Fees.  No Defaulting Lender will be entitled to any fees accruing pursuant to Section 2.08(a).

 

(b)                                 Defaulting Lender Cure.  If the Borrower and the Administrative Agent agree in writing in their sole discretion that a Defaulting Lender should no longer be deemed to be a Defaulting Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein, that Lender will, to the extent applicable, purchase that portion of outstanding Loans of the other

 

32


 

Lenders or take such other actions as the Administrative Agent may determine to be necessary to cause the Loans to be held on a pro rata basis by the Lenders in accordance with their Pro Rata Shares, whereupon that Lender will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while that Lender was a Defaulting Lender; and provided, further, that subject to Section 8.18, except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender.

 

SECTION 2.16              Taxes.

 

(a)                                 Payments Free of Taxes; Obligation to Withhold; Payments on Account of Taxes.

 

(i)                                     Any and all payments by or on account of any obligation of any Loan Party under any Loan Document shall be made without deduction or withholding for any Taxes, except as required by applicable Laws.  If any applicable Laws (as determined in the good faith discretion of the Administrative Agent) require the deduction or withholding of any Tax from any such payment by the Administrative Agent or any Loan Party, then the Administrative Agent or the applicable Loan Party shall be entitled to make such deduction or withholding, upon the basis of the information and documentation to be delivered pursuant to subsection (e) below.

 

(ii)                                  If any Loan Party or the Administrative Agent shall be required by the Code to withhold or deduct any Taxes, including both United States Federal backup withholding and withholding taxes, from any payment, then (A) the Administrative Agent shall withhold or make such deductions as are determined by the Administrative Agent to be required based upon the information and documentation it has received pursuant to subsection (e) below, (B) the Administrative Agent shall timely pay the full amount withheld or deducted to the relevant Governmental Authority in accordance with the Code, and (C) to the extent that the withholding or deduction is made on account of Indemnified Taxes, the sum payable by the applicable Loan Party shall be increased as necessary so that after any required withholding or the making of all required deductions (including deductions applicable to additional sums payable under this Section 2.16) the applicable Recipient receives an amount equal to the sum it would have received had no such withholding or deduction been made.

 

(iii)                               If any Loan Party or the Administrative Agent shall be required by any applicable Laws other than the Code to withhold or deduct any Taxes from any payment, then (A) the applicable Loan Party or the Administrative Agent, as required by such Laws, shall withhold or make such deductions as are determined by it to be required based upon the information and documentation it has received pursuant to subsection (e) below, (B) the applicable Loan Party or the Administrative Agent, to the extent required by such Laws, shall timely pay the full amount withheld or deducted to the relevant Governmental Authority in accordance with such Laws, and (C) to the extent that the withholding or deduction is made on account of Indemnified Taxes, the sum payable by the applicable Loan Party shall be increased as necessary so that after any required withholding or the making of all required deductions (including deductions applicable to

 

33


 

additional sums payable under this Section 2.16) the applicable Recipient receives an amount equal to the sum it would have received had no such withholding or deduction been made.

 

(b)                                 Payment of Other Taxes by a Loan Party.  Without limiting the provisions of subsection (a) above, the Loan Parties shall timely pay to the relevant Governmental Authority in accordance with applicable law, or at the option of the Administrative Agent timely reimburse it for the payment of, any Other Taxes.

 

(c)                                  Tax Indemnifications.  (i)  Each Loan Party shall, and does hereby, jointly and severally indemnify each Recipient, and shall make payment in respect thereof within 30 days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 2.16) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.  Each of the Loan Parties shall, and does hereby, jointly and severally indemnify the Administrative Agent, and shall make payment in respect thereof within 30 days after demand therefor, for any amount which a Lender for any reason fails to pay indefeasibly to the Administrative Agent as required pursuant to Section 2.16(c)(ii) below.

 

(ii)                                  Each Lender shall, and does hereby, severally indemnify, and shall make payment in respect thereof within 10 days after demand therefor, (x) the Administrative Agent against any Indemnified Taxes attributable to such Lender (but only to the extent that the Loan Parties have not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the Loan Parties to do so), (y) the Administrative Agent against any Taxes attributable to such Lender’s failure to comply with the provisions of Section 8.07(d) relating to the maintenance of a Participant Register and (z) the Administrative Agent against any Excluded Taxes attributable to such Lender that are payable or paid by the Administrative Agent or any Loan Party in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error.  Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under this Agreement or any other Loan Document against any amount due to the Administrative Agent under this clause (ii).

 

(d)                                 Evidence of Payments.  Upon request by the Borrower or the Administrative Agent, as the case may be, after any payment of Taxes by any Loan Party or by the Administrative Agent to a Governmental Authority as provided in this Section 2.16, the applicable Loan Party shall deliver to the Administrative Agent or the Administrative Agent shall deliver to the applicable Loan Party, as the case may be, the original or a certified copy of a

 

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receipt issued by such Governmental Authority evidencing such payment, a copy of any return required by Laws to report such payment or other evidence of such payment reasonably satisfactory to the applicable Loan Party or the Administrative Agent, as the case may be.

 

(e)                                  Status of Lenders; Tax Documentation.

 

(i)                                     Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to the Borrower and the Administrative Agent, at the time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation reasonably requested by the Borrower or the Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding.  In addition, any Lender, if reasonably requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable the applicable Loan Party or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements.  Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 2.16(e)(ii)(A), (ii)(B) and (ii)(D) below) shall not be required if in the Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.

 

(ii)                                  Without limiting the generality of the foregoing, in the event that any of the Loan Parties is a U.S. Person,

 

(A)                               any Lender that is a U.S. Person shall deliver to the Borrower and the Administrative Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed originals of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding tax;

 

(B)                               any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), whichever of the following is applicable:

 

(I)                                   in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to payments of interest under any Loan Document, executed originals of IRS Form W-8BEN-E (or W-8BEN, as applicable) establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such

 

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tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN-E (or W-8BEN, as applicable) establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;

 

(II)                              executed originals of IRS Form W-8ECI;

 

(III)                         in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit E-1 to the effect that such Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of any of the Loan Parties within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y) executed originals of IRS Form W-8BEN-E (or W-8BEN, as applicable); or

 

(IV)                          to the extent a Foreign Lender is not the beneficial owner, executed originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN-E (or W-8BEN, as applicable), a U.S. Tax Compliance Certificate substantially in the form of Exhibit E-2 or Exhibit E-3, IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit E-4 on behalf of each such direct and indirect partner;

 

(C)                               any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed originals of any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower or the Administrative Agent to determine the withholding or deduction required to be made; and

 

(D)                               if a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as

 

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applicable), such Lender shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the applicable Loan Party and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment.  Solely for purposes of this clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

 

(iii)                               Each Lender agrees that if any form or certification it previously delivered pursuant to this Section 2.16 expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower and the Administrative Agent in writing of its legal inability to do so.

 

(f)                                   Treatment of Certain Refunds.  Unless required by applicable Laws, at no time shall the Administrative Agent have any obligation to file for or otherwise pursue on behalf of a Lender or have any obligation to pay to any Lender any refund of Taxes withheld or deducted from funds paid for the account of such Lender.  If any Recipient determines, in its sole discretion, that it has received a refund of any Taxes as to which it has been indemnified by any Loan Party or with respect to which the applicable Loan Party has paid additional amounts pursuant to this Section 2.16, it shall pay to the applicable Loan Party an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the applicable Loan Party under this Section 2.16 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) incurred by such Recipient, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that the applicable Loan Party, upon the request of the Recipient, agrees to repay the amount paid over to the applicable Loan Party (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Recipient in the event the Recipient is required to repay such refund to such Governmental Authority.  Notwithstanding anything to the contrary in this subsection, in no event will the applicable Recipient be required to pay any amount to any Loan Party pursuant to this subsection the payment of which would place the Recipient in a less favorable net after-Tax position than such Recipient would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid.  This subsection shall not be construed to require any Recipient to make available its tax returns (or any other information relating to its taxes that it deems confidential) to any Loan Party or any other Person.

 

(g)                                  Survival.  Each party’s obligations under this Section 2.16 shall survive the resignation or replacement of the Administrative Agent or any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all other Obligations.

 

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(h)                                 FATCA.  For purposes of determining withholding Taxes imposed under FATCA, from and after the effective date of the Amendment, the Borrower and the Administrative Agent shall treat (and the Lenders hereby authorize the Administrative Agent to treat) this Agreement as not qualifying as a “grandfathered obligation” within the meaning of Treasury Regulation Section 1.1471-2(b)(2)(i).

 

SECTION 2.17              Illegality.  If any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make, maintain or fund Loans whose interest is determined by reference to the Eurodollar Rate, or to determine or charge interest rates based upon the Eurodollar Rate, or any Governmental Authority has imposed material restrictions on the authority of such Lender to purchase or sell, or to take deposits of, Dollars in the London interbank market, then, on notice thereof by such Lender to the Borrower through the Administrative Agent, (i) any obligation of such Lender to make or continue Eurodollar Rate Loans or to convert Base Rate Loans to Eurodollar Rate Loans shall be suspended, and (ii) if such notice asserts the illegality of such Lender making or maintaining Base Rate Loans the interest rate on which is determined by reference to the Eurodollar Rate component of the Base Rate, the interest rate on which Base Rate Loans of such Lender shall, if necessary to avoid such illegality, be determined by the Administrative Agent without reference to the Eurodollar Rate component of the Base Rate, in each case until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist.  Upon receipt of such notice, (x) the Borrower shall, upon demand from such Lender (with a copy to the Administrative Agent), prepay or, if applicable, convert all Eurodollar Rate Loans of such Lender to Base Rate Loans (the interest rate on which Base Rate Loans of such Lender shall, if necessary to avoid such illegality, be determined by the Administrative Agent without reference to the Eurodollar Rate component of the Base Rate), either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurodollar Rate Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such Eurodollar Rate Loans and (y) if such notice asserts the illegality of such Lender determining or charging interest rates based upon the Eurodollar Rate, the Administrative Agent shall during the period of such suspension compute the Base Rate applicable to such Lender without reference to the Eurodollar Rate component thereof until the Administrative Agent is advised in writing by such Lender that it is no longer illegal for such Lender to determine or charge interest rates based upon the Eurodollar Rate.  Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted.

 

SECTION 2.18              Inability to Determine Rates.  If in connection with any request for a Eurodollar Rate Loan or a conversion to or continuation thereof, (a) the Administrative Agent determines that (i) Dollar deposits are not being offered to banks in the London interbank eurodollar market for the applicable amount and Interest Period of such Eurodollar Rate Loan, or (ii) adequate and reasonable means do not exist for determining the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Loan or in connection with an existing or proposed Base Rate Loan (in each case with respect to clause (a)(i) above, “Impacted Loans”), or (b) the Required Lenders determine that for any reason the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Loan does not adequately and fairly reflect the cost to such Lenders of funding such Loan, the Administrative Agent will promptly so notify the Borrower and each Lender.  Thereafter, (x) the obligation of

 

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the Lenders to make or maintain Eurodollar Rate Loans shall be suspended (to the extent of the affected Eurodollar Rate Loans or Interest Periods), and (y) in the event of a determination described in the preceding sentence with respect to the Eurodollar Rate component of the Base Rate, the utilization of the Eurodollar Rate component in determining the Base Rate shall be suspended, in each case until the Administrative Agent (upon the instruction of the Required Lenders) revokes such notice.  Upon receipt of such notice, the Borrower may revoke any pending request for a Borrowing of, conversion to or continuation of Eurodollar Rate Loans (to the extent of the affected Eurodollar Rate Loans or Interest Periods) or, failing that, will be deemed to have converted such request into a request for a Borrowing of Base Rate Loans in the amount specified therein.

 

Notwithstanding the foregoing, if the Administrative Agent has made the determination described in clause (a)(i) of this Section 2.18, the Administrative Agent, in consultation with the Borrower and the affected Lenders, may establish an alternative interest rate for the Impacted Loans, in which case, such alternative rate of interest shall apply with respect to the Impacted Loans until (1) the Administrative Agent revokes the notice delivered with respect to the Impacted Loans under clause (a) of the first sentence of this Section 2.18, (2) the Required Lenders notify the Administrative Agent and the Borrower that such alternative interest rate does not adequately and fairly reflect the cost to such Lenders of funding the Impacted Loans, or (3) any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for such Lender or its applicable Lending Office to make, maintain or fund Loans whose interest is determined by reference to such alternative rate of interest or to determine or charge interest rates based upon such rate or any Governmental Authority has imposed material restrictions on the authority of such Lender to do any of the foregoing and provides the Administrative Agent and the Borrower written notice thereof.

 

SECTION 2.19              Increased Costs; Reserves on Eurodollar Rate Loans.

 

(a)                                 Increased Costs Generally.  If any Change in Law shall:

 

(i)                                     impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender (except any reserve requirement contemplated by Section 2.19(e));

 

(ii)                                  subject any Recipient to any Taxes (other than (A) Indemnified Taxes and (B) Taxes described in clauses (b) through (d) of the definition of Excluded Taxes) on its Loans, Loan principal, Commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or

 

(iii)                               impose on any Lender or the London interbank market any other condition, cost or expense affecting this Agreement or Eurodollar Rate Loans made by such Lender;

 

and the result of any of the foregoing shall be to increase the cost to such Lender of making, converting to, continuing or maintaining any Loan the interest on which is determined by reference to the Eurodollar Rate (or of maintaining its obligation to make any such Loan), or to

 

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reduce the amount of any sum received or receivable by such Lender (whether of principal, interest or any other amount) then, upon request of such Lender, the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered.

 

(b)                                 Capital Requirements.  If any Lender determines that any Change in Law affecting such Lender or any Lending Office of such Lender or such Lender’s holding company, if any, regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on such Lender’s capital or on the capital of such Lender’s holding company, if any, as a consequence of this Agreement, the Commitments of such Lender or the Loans made by such Lender to a level below that which such Lender or such Lender’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s policies and the policies of such Lender’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender’s holding company for any such reduction suffered.

 

(c)                                  Certificates for Reimbursement; Reimbursement Limitation.  A certificate of a Lender (i) setting forth the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in subsection (a) or (b) of this Section 2.19 and (ii) stating in reasonable detail the basis for the charges and the method of computation, and delivered to the Borrower shall be conclusive absent manifest error.  The Borrower shall pay such Lender the amount shown as due on any such certificate within thirty days after receipt thereof.  Notwithstanding any other provisions of this Section 2.19, no Lender shall demand compensation for any increased cost, charge or reduction under subsection (a) and (b) of this Section 2.19 if it shall not at the time be the general policy of such Lender to demand such compensation in similar circumstances under comparable provisions of other credit agreements, and each Lender shall in good faith endeavor to allocate increased costs or reductions fairly among all of its affected commitments and loans (whether or not it seeks compensation from all affected borrowers).

 

(d)                                 Delay in Requests.  Failure or delay on the part of any Lender to demand compensation pursuant to the foregoing provisions of this Section 2.19 shall not constitute a waiver of such Lender’s right to demand such compensation, provided that the Borrower shall not be required to compensate a Lender pursuant to the foregoing provisions of this Section 2.19 for any increased costs incurred or reductions suffered more than three months prior to the date that such Lender notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the three-month period referred to above shall be extended to include the period of retroactive effect thereof, such that the three-month period shall commence upon the date of effectiveness of such Change in Law).

 

(e)                                  Reserves on Eurodollar Rate Loans.  The Borrower shall pay to each Lender, as long as such Lender shall be required to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits (currently known as Eurocurrency Liabilities), additional interest on the unpaid principal amount of each Eurodollar Rate Loan

 

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equal to the actual costs of such reserves allocated to such Loan by such Lender (as determined by such Lender in good faith, which determination shall be conclusive), which shall be due and payable on each date on which interest is payable on such Loan, provided the Borrower shall have received at least 10 days’ prior notice (with a copy to the Administrative Agent) of such additional interest from such Lender.  If a Lender fails to give notice 10 days prior to the relevant Interest Payment Date, but such Lender gives notice within 30 days after such Interest Payment Date, such additional interest shall be due and payable 10 days from receipt of such notice.

 

SECTION 2.20              Compensation for Losses.  Upon demand of any Lender (with a copy to the Administrative Agent) from time to time, the Borrower shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense incurred by it as a result of:

 

(a)                                 any continuation, conversion, payment or prepayment of any Loan other than a Base Rate Loan on a day other than the last day of the Interest Period for such Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise);

 

(b)                                 any failure by the Borrower (for a reason other than the failure of such Lender to make a Loan) to prepay, borrow, continue or convert any Loan other than a Base Rate Loan on the date or in the amount notified by the Borrower; or

 

(c)                                  any assignment of a Eurodollar Rate Loan on a day other than the last day of the Interest Period therefor as a result of a request by the Borrower pursuant to Section 8.15;

 

including any loss of anticipated profits and any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Loan or from fees payable to terminate the deposits from which such funds were obtained.  The Borrower shall also pay any customary administrative fees charged by such Lender for services actually performed in connection with the foregoing.

 

For purposes of calculating amounts payable by the Borrower to the Lenders under this Section 2.20, each Lender shall be deemed to have funded each Eurodollar Rate Loan made by it at the Eurodollar Rate for such Loan by a matching deposit or other borrowing in the London interbank eurodollar market for a comparable amount and for a comparable period, whether or not such Eurodollar Rate Loan was in fact so funded.

 

SECTION 2.21              Mitigation Obligations; Replacement of Lenders.

 

(a)                                 Designation of a Different Lending Office.  If any Lender requests compensation under Section 2.19, or the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.16, or if any Lender gives a notice pursuant to Section 2.17, then such Lender shall use reasonable efforts to designate a different Lending Office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the good faith judgment of such Lender such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.16 or 2.19, as the case may be, in the future, or eliminate the need for the notice pursuant to Section 2.17, as applicable, and (ii) in each case, would not subject such Lender to any unreimbursed cost or expense and would not otherwise be materially

 

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disadvantageous to such Lender.  The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

 

(b)                                 Replacement of Lenders.  If any Lender requests compensation under Section 2.19, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.16, the Borrower may replace such Lender in accordance with Section 8.15.

 

SECTION 2.22              Survival.  All of the Borrower’s obligations under Section 2.16 through Section 2.21 shall survive termination of all Commitments, repayment of all Obligations hereunder, and resignation of the Administrative Agent.

 

ARTICLE III

 

CONDITIONS PRECEDENT

 

SECTION 3.01.  Conditions Precedent to Effectiveness.  This Agreement shall become effective on and as of the first date on which the following conditions precedent have been satisfied (or waived in accordance with Section 8.01) on or prior to the Termination Date (such date, the “Effective Date”):

 

(a)           The Administrative Agent (or its counsel) shall have received from each party hereto a counterpart of this Agreement and the other Loan Documents required to be signed on such date signed on behalf of such party.

 

(b)           On the Effective Date, the Administrative Agent shall have received a certificate signed by a Responsible Officer of the Borrower, dated the Effective Date, certifying that:

 

(i)            The representations and warranties of the Borrower set forth in Section 4.01 are true and correct in all material respects on and as of the Effective Date; provided, that to the extent that such representations and warranties specifically refer to an earlier date, they are true and correct in all material respects as of such earlier date; provided, further, that any representation and warranty that is qualified as to “materiality”, “Material Adverse Effect” or similar language shall be true and correct in all respects on the Effective Date or on such earlier date, as the case may be.

 

(ii)           As of the Effective Date, no event has occurred and is continuing, or shall occur as a result of the occurrence of the Effective Date, that constitutes a Default.

 

(iii)          Since December 31, 2016, there shall not have occurred any event or condition that has had or would be reasonably expected to have, either individually or in the aggregate, a Material Adverse Effect.

 

(c)           The Administrative Agent (on behalf of the Lead Arrangers and the Lenders) shall have received all fees and invoiced expenses required to be paid on or prior to the Effective Date by the Borrower pursuant to this Agreement and the other Loan Documents, and, with respect to expenses, to the extent invoiced to the Borrower at least three Business Days prior to the Effective Date.

 

(d)           The Administrative Agent (or its counsel) shall have received a certificate of the Borrower, dated the Effective Date, executed by a Responsible Officer of the Borrower, and attaching (A) certified copies of resolutions or other action and incumbency certificates evidencing the identity, authority and capacity of such Responsible Officer authorized to act as a Responsible Officer on behalf of the Borrower, in connection with this Agreement and the other Loan Documents and (B) certified copies of the Organization Documents of the Borrower, and (to the extent such concept applies to such entity) certificates of good standing in the jurisdiction of organization of the Borrower.

 

(e)           The Administrative Agent shall have received, at least three (3) Business Days prior to the Effective Date, all documentation and other information required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including, without limitation, the PATRIOT Act, requested in writing by the Administrative Agent (on behalf of any Lender) at least ten (10) business days prior to the Effective Date.

 

Promptly upon the occurrence thereof, the Administrative Agent shall notify the Borrower and the Lenders that the Effective Date has occurred, and such notice shall be conclusive and binding.

 

SECTION 3.02              Conditions to Funding on the Closing Date.  The obligation of each Lender to make a Loan in an amount equal to its Commitment on the Closing Date is subject to the satisfaction (or waiver in accordance with Section 8.01) of the following conditions on or prior to the Termination Date, and no other conditions:

 

(a)                                 The Effective Date shall have occurred.

 

(b)                                 The Administrative Agent shall have received for the Borrower (i) U.S. GAAP audited consolidated balance sheets and related statements of earnings, comprehensive income, shareholders’ equity and cash flows for the fiscal years ended December 31, 2016, December 31, 2015 and December 31, 2014, and for any subsequent fiscal year ended at least 60 days prior to the Closing Date and (ii) U.S. GAAP unaudited consolidated balance sheets and related statements of earnings, comprehensive income and cash flows for each subsequent fiscal quarter ended at least 40 days before the Closing Date (in each case, except as permitted by the rules promulgated by the U.S. Securities and Exchange Commission and subject to normal year-end adjustments and absence of footnotes).  The Borrower’s filing of any required audited financial statements on Form 10-K or required unaudited financial statements on Form 10-Q will satisfy the requirements under clauses (b)(i) or (b)(ii), as applicable, of this paragraph.  The Administrative Agent, on behalf of the Lenders, hereby acknowledges receipt of the financial statements in the foregoing clauses (b)(i) and (b)(ii) for the fiscal years ended December 31, 2016, December 31, 2015 and December 31, 2014 and the fiscal quarter ended March 31, 2017.

 

(c)                                  The Alere Acquisition shall have been, or shall substantially concurrently be, consummated in accordance with the terms of the Alere Acquisition Agreement as in effect on the Effective Date without giving effect to any amendments, modifications, supplements or waivers by the Borrower thereto or consents

 

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by the Borrower thereunder that are materially adverse to the Lenders without the Lead Arrangers’ prior written consent, it being understood that (i) any decrease in the cash portion of the consideration for the Alere Acquisition that is accompanied by a dollar-for-dollar reduction in Commitments in respect of the Facility of not more than 15% of the total consideration for the Alere Acquisition shall be deemed to be not materially adverse to the Lenders, (ii) any increase in the cash portion of the consideration for the Alere Acquisition that, together with any other increases since July 7, 2017, exceeds 10% of the purchase price shall be deemed to be materially adverse to the Lenders and (iii) any waiver or modification of Sections 8.06(v) and 8.15 of the Alere Acquisition Agreement (as in effect on April 13, 2017) shall be deemed to be materially adverse to the Lenders.

 

(d)                                 The Administrative Agent shall have received a solvency certificate from the chief financial officer of the Borrower in the form attached hereto as Exhibit C certifying that the Borrower and its Subsidiaries, on a consolidated basis after giving effect to the Alere Transactions, are Solvent.

 

(e)                                  The Administrative Agent shall have received a favorable opinion letter of (i) John A. Berry, Divisional Vice President, Associate General Counsel and Assistant Secretary of the Borrower and (ii) Wachtell, Lipton, Rosen & Katz, as New York counsel to the Borrower (or, in each case, such other counsel as may be reasonably acceptable to the Administrative Agent), in each case in the form agreed on or prior to the Effective Date.

 

(f)                                   Each of the Alere Acquisition Agreement Representations and the Specified Representations shall be true and correct in all material respects as of the Closing Date; provided that any representation and warranty that is qualified as to “materiality,” “Material Adverse Effect” or similar language shall be true and correct (after giving effect to any qualification therein) in all respects as of such date.

 

(g)                                  Since January 30, 2016, there shall not have been any effect, change, event or occurrence that, individually or in the aggregate, has had or would reasonably be expected to have a Target Material Adverse Effect.

 

(h)                                 No Event of Default specified in Section 6.01(a) or Section 6.01(e) of this Agreement with respect to the Borrower exists (after giving pro forma effect to the Alere Acquisition) or would result from the effectiveness of this Agreement.

 

(i)                                     The Administrative Agent shall have received a certificate of a Responsible Officer of the Borrower certifying as to the satisfaction of the conditions set forth in clauses (c), (f), (g) and (h) of this Section 3.02.

 

(j)                                    The Administrative Agent (on behalf of the Lead Arrangers and the Lenders) shall have received all fees and invoiced expenses required to be paid on or prior to the Closing Date by the Borrower pursuant this Agreement and the other Loan Documents, and, with respect to expenses, to the extent invoiced to the Borrower at least three (3) Business Days prior to the Closing Date.

 

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(k)                                 The Administrative Agent shall have received a Loan Notice in accordance with Section 2.02(a).

 

(l)                                     The Administrative Agent shall have received, at least three (3) business days prior to the Closing Date, all documentation and other information required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including, without limitation, the PATRIOT Act, requested in writing by the Administrative Agent (on behalf of any Lender) at least ten (10) business days prior to the Closing Date.

 

SECTION 3.03              Certain Funds Period.  During the period from and including the date on which counterparts of this Agreement signed by the parties hereto (and counterparts to any other Loan Document entered into concurrently with the Agreement) are delivered to the Administrative Agent to and including the earlier to occur of (x) the Closing Date, after giving effect to the funding of Loans on such date and (y) the Termination Date (such period, the “Certain Funds Period”), and notwithstanding (i) that any representation made on such date or on the Effective Date or the Closing Date (excluding the Specified Representations and/or Alere Acquisition Agreement Representations given as a condition to the Closing Date) was incorrect, (ii) any failure by the Borrower to comply with the affirmative covenants, negative covenants and financial covenant, (iii) any provision to the contrary in any Loan Document or otherwise or (iv) that any condition to the occurrence of the Effective Date may subsequently be determined not to have been satisfied, neither the Administrative Agent nor any Lender shall be entitled to (1) cancel any of its Commitments hereunder, (2) rescind, terminate or cancel any Loan Document or exercise any right or remedy or make or enforce any claim under the Loan Documents or otherwise it may have to the extent to do so would prevent, limit or delay the making of its Loan, (3) refuse to participate in making its Loan on the Closing Date; provided that the applicable conditions precedent to the making of the Loan set forth in Section 3.02 have been satisfied, or (4) exercise any right of set-off or counterclaim in respect of its Loan to the extent to do so would prevent, limit or delay the making of its Loan.  Notwithstanding anything to the contrary contained herein, (A) the rights and remedies of the Lenders and the Administrative Agent shall not be limited in the event that any applicable condition precedent set forth in Section 3.02 is not satisfied on the Closing Date and (B) immediately after the expiration of the Certain Funds Period, all of the rights, remedies and entitlements of the Administrative Agent and the Lenders shall be available notwithstanding that such rights were not available prior to such time as a result of the foregoing.

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES

 

SECTION 4.01              Representations and Warranties of the Borrower.  The Borrower represents and warrants to the Administrative Agent and each of the Lenders, on each of the Effective Date (other than with respect to Section 4.01(t)) and the Closing Date (it being understood that the conditions to the Effective Date and Closing Date are solely those set out in Section 3.01 and 3.02, respectively) that:

 

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(a)                                 Each Loan Party is duly organized, validly existing and (to the extent such concept applies to such entity) in good standing under the laws of such Loan Party’s jurisdiction of organization.

 

(b)                                 The execution, delivery and performance by each Loan Party of this Agreement and the other Loan Documents to which such Loan Party is a party, and the consummation of the transactions contemplated hereby and thereby, (i) are within such Loan Party’s powers, (ii) have been duly authorized by all necessary action, (iii) do not contravene (A) such Loan Party’s charter or by-laws or other organizational documents or (B) any law, regulation or contractual restriction binding on or affecting such Loan Party and (iv) will not result in or require the creation or imposition of any Lien upon or with respect to any of the properties of the Consolidated Group, except, in the case of clause (iii)(B) and (iv), as would not be reasonably expected to have a Material Adverse Effect.

 

(c)                                  No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or, except as would not be reasonably expected to have a Material Adverse Effect, any other third party is required for the due execution, delivery and performance by any Loan Party of this Agreement or the other Loan Documents, as applicable.

 

(d)                                 This Agreement and the other Loan Documents, as applicable, have been duly executed and delivered by each applicable Loan Party.  This Agreement and the other Loan Documents, as applicable, are the legal, valid and binding obligation of the Loan Parties party thereto, enforceable against such Loan Parties in accordance with its terms, except as affected by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and general principles of equity (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing.

 

(e)                                  The Consolidated balance sheet of the Borrower and its Subsidiaries as at December 31, 2016 and, if applicable, the last day of each subsequent fiscal year for which the Borrower has most recently filed financial statements on Form 10-K, and the related Consolidated statements of earnings, comprehensive income and cash flows of the Borrower and its Subsidiaries for the fiscal year then ended, accompanied by an opinion of Ernst & Young LLP or other independent public accountants of recognized national standing, and, if applicable, the Consolidated balance sheet of the Borrower and its Subsidiaries as at March 31, 2017 and, if applicable, the last day of the most recent fiscal quarter ended after such date for which the Borrower has most recently filed financial statements on Form 10-Q subsequent to such fiscal year, and the related Consolidated statements of income and cash flows of the Borrower and its Subsidiaries for the year-to-date period then ended, if applicable, duly certified, as applicable, by the Executive Vice President, Finance and Chief Financial Officer of the Borrower, copies of which have been furnished to each Lender, fairly present, in all material respects, the Consolidated financial condition of the Borrower and its Subsidiaries as at such dates and the Consolidated results of the operations of the Borrower and its Subsidiaries for the periods ended on such dates, all in accordance with

 

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GAAP (subject, in the case of the Consolidated balance sheet included in any Form 10-Q and the related statements of earnings, comprehensive income and cash flows, to the absence of footnotes and year-end audit adjustments); provided that information required to be furnished pursuant to this Section 4.01(e) shall be deemed to have been furnished if such information, or one or more annual or quarterly or other reports or proxy statements containing such information, shall have been posted and be available on the website of the Securities and Exchange Commission at http://www.sec.gov (and a confirming electronic correspondence is delivered or caused to be delivered by the Borrower to the Administrative Agent providing notice of such availability).

 

(f)                                   There is no action, suit, investigation, litigation or proceeding (including, without limitation, any Environmental Action), affecting the Consolidated Group pending or, to the knowledge of the Borrower, threatened before any court, governmental agency or arbitrator that would reasonably be expected to be adversely determined, and if so determined, (a) would reasonably be expected to have a material adverse effect on the financial condition or results of operations of the Consolidated Group taken as a whole (other than the litigation set forth on Schedule 4.01(f) attached hereto) or (b) would adversely affect the legality, validity and enforceability of any material provision of this Agreement in any material respect.

 

(g)                                  After giving effect to the Alere Transactions, not more than 25 percent of the value of the assets of the Borrower and of the Consolidated Group, on a Consolidated basis, subject to the provisions of Section 5.02(b), will be margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System).

 

(h)                                 All written information (other than the Projections (if any) and information of a general economic or industry nature) (but only, with respect to written information related to Alere and its Subsidiaries prior to the Closing Date, to the best of the Borrower’s knowledge), taken as a whole, that has been furnished to the Administrative Agent or the Lenders by the Borrower or its representatives in connection with the Alere Transactions is correct in all material respects and does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein, taken as a whole, not misleading in light of the circumstances under which such statements were made.  The Projections (if any) that have been furnished by the Borrower to any Lenders or the Administrative Agent in connection with the Alere Transactions have been prepared in good faith based upon assumptions believed by the Borrower to be reasonable as of the date when made (it being understood that (i) the Projections (if any) are subject to significant uncertainties and contingencies, many of which are beyond the Borrower’s control, (ii) the Projections (if any), by their nature, are inherently uncertain and no assurances are being given that the results reflected in the Projections (if any) will be achieved and (iii) actual results may differ from the Projections (if any) and such differences may be material).

 

(i)                                     No ERISA Event has occurred or is reasonably expected to occur with respect to any Plan which would reasonably be expected to have a Material Adverse Effect.

 

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(j)                                    As of the last annual actuarial valuation date prior to the Effective Date or Closing Date, as applicable, the Abbott Laboratories Annuity Retirement Plan was not in at-risk status (as defined in Section 430(i)(4) of the Internal Revenue Code) and no other Plan subject to ERISA was in at-risk status (as defined in Section 430(i)(4) of the Internal Revenue Code), and since such annual actuarial valuation date there has been no material adverse change in the funding status of any Plan subject to ERISA that would reasonably be expected to cause such Plan to be in at-risk status (as defined in Section 430(i)(4) of the Internal Revenue Code).

 

(k)                                 Neither the Borrower nor any ERISA Affiliate (i) is reasonably expected to incur any Withdrawal Liability to any Multiemployer Plan or has incurred any such Withdrawal Liability that has not been satisfied in full or (ii) has been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization (within the meaning of Section 4241 of ERISA), insolvent (within the meaning of Section 4245 of ERISA) or has been determined to be in “endangered” or “critical” status (within the meaning of Section 432 of the Internal Revenue Code or Section 305 of ERISA), and no such Multiemployer Plan is reasonably expected to be in reorganization, insolvent or in “endangered” or “critical” status.  The Borrower is not and will not be (i) an employee benefit plan subject to Title I of ERISA, (ii) a plan or account subject to Section 4975 of the Code; (iii) an entity deemed to hold “plan assets” of any such plans or accounts for purposes of ERISA or the Code; or (iv) a “governmental plan” within the meaning of ERISA.

 

(l)                                     (i) The operations and properties of the Consolidated Group comply in all respects with all applicable Environmental Laws and Environmental Permits except to the extent that the failure to so comply, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect; (ii) all past non-compliance with such Environmental Laws and Environmental Permits has been resolved without any ongoing obligations or costs except to the extent that such non-compliance, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect; and (iii) no circumstances exist that would be reasonably expected to (A) form the basis of an Environmental Action against a member of the Consolidated Group or any of its properties that, either individually or in the aggregate, would have a Material Adverse Effect or (B) cause any such property to be subject to any restrictions on ownership, occupancy, use or transferability under any Environmental Law that, either individually or in the aggregate, would have a Material Adverse Effect.

 

(m)                             (i) None of the properties currently or formerly owned or operated by a member of the Consolidated Group is listed or proposed for listing on the NPL or on the CERCLIS or any analogous foreign, state or local list or, to the best knowledge of the Borrower, is adjacent to any such property other than such properties of a member of the Consolidated Group that, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect; (ii) there are no, and never have been any, underground or aboveground storage tanks or any surface impoundments, septic tanks, pits, sumps or lagoons in which Hazardous Materials are being or have been treated, stored or disposed of on any property currently owned or operated by any member of the Consolidated Group or, to the best knowledge of the Borrower, on any property formerly

 

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owned or operated by a member of the Consolidated Group that, either individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect; (iii) there is no asbestos or asbestos-containing material on any property currently owned or operated by a member of the Consolidated Group that, either individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect; and (iv) Hazardous Materials have not been released, discharged or disposed of on any property currently or formerly owned or operated by a member of the Consolidated Group or, to the best knowledge of the Borrower, on any adjoining property that, either individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect.

 

(n)                                 No member of the Consolidated Group is undertaking, and no member of the Consolidated Group has completed, either individually or together with other potentially responsible parties, any investigation or assessment or remedial or response action relating to any actual or threatened release, discharge or disposal of Hazardous Materials at any site, location or operation, either voluntarily or pursuant to the order of any governmental or regulatory authority or the requirements of any Environmental Law that, either individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect; and all Hazardous Materials generated, used, treated, handled or stored at, or transported to or from, any property currently or formerly owned or operated by a member of the Consolidated Group have been disposed of in a manner that, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.

 

(o)                                 No member of the Consolidated Group is, or is required to register as, an “investment company,” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company” (each as defined in the Investment Company Act of 1940, as amended).

 

(p)                                 The Loans and all related obligations of the Borrower under this Agreement rank pari passu with all other unsecured obligations of the Borrower that are not, by their terms, expressly subordinate to the obligations of the Borrower hereunder.

 

(q)                                 (i) The proceeds of the Loans will be used in accordance with Section 2.14 and (ii) the Borrower will not directly or, to the knowledge of the Borrower, indirectly (A) use the proceeds of any Borrowing for any purpose that would breach the United States Foreign Corrupt Practices Act of 1977, the UK Bribery Act of 2010, or other similar applicable legislation in other jurisdictions or (B) use the proceeds of any Borrowing, or lend, contribute or otherwise make available such proceeds to any Subsidiary, joint venture partner or other individual or entity, to fund any activities of or business with any individual or entity that, at the time of such funding, is (1) the subject of Sanctions or (2) in any Designated Jurisdiction, in each case in violation of Sanctions.

 

(r)                                    Neither the Borrower nor any of its Subsidiaries or, to the knowledge of senior management of the Borrower, any director, officer, employee or agent of the Borrower or any of its Subsidiaries is an individual or entity currently the

 

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subject of any Sanctions, and neither the Borrower nor any of its Subsidiaries is located, organized or resident in a Designated Jurisdiction in violation of any Sanction.

 

(s)                                   The Borrower and its Subsidiaries (i) have conducted their businesses in compliance with applicable anti-corruption laws, except to the extent that failure to so comply would not be reasonably expected to have Material Adverse Effect; and (ii) have instituted and maintained policies and procedures reasonably designed to promote and achieve compliance with such laws and with the PATRIOT Act.

 

(t)                                    The Borrower is Solvent.

 

SECTION 4.02              Representations and Warranties of the Lenders.  Each Lender as of the Closing Date represents and warrants as of the Closing Date to the Administrative Agent, each Lead Arranger and their respective Affiliates, and not, for the avoidance of doubt, for the benefit of the Borrower or any other Loan Party, that such Lender is not and will not be (i) an employee benefit plan subject to Title I of ERISA, (ii) a plan or account subject to Section 4975 of the Code; (iii) an entity deemed to hold “plan assets” of any such plans or accounts for purposes of ERISA or the Code; or (iv) a “governmental plan” within the meaning of ERISA.

 

ARTICLE V

 

COVENANTS

 

SECTION 5.01              Affirmative Covenants.  From and after the Effective Date, so long as any Lender shall have any Commitment hereunder or any Loan shall remain unpaid, the Borrower will:

 

(a)                                 Compliance with Laws, Etc. Comply, and cause each of its Subsidiaries to comply, with all applicable laws, rules, regulations and orders (such compliance to include, without limitation, compliance with ERISA and Environmental Laws), except to the extent that the failure to so comply, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.

 

(b)                                 Payment of Taxes, Etc. Pay and discharge, or cause to be paid and discharged, before the same shall become delinquent, all taxes, assessments and governmental charges levied or imposed upon a member of the Consolidated Group or upon the income, profits or property of a member of the Consolidated Group, in each case except to the extent that (i) the amount, applicability or validity thereof is being contested in good faith and by proper proceedings or (ii) the failure to pay such taxes, assessments and charges, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.

 

(c)                                  Maintenance of Insurance.  Maintain, and cause each of its Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations (or pursuant to self-insurance arrangements) in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar

 

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properties in the same general areas in which any member of the Consolidated Group operates.

 

(d)                                 Preservation of Existence, Etc.  Do, or cause to be done, all things necessary to preserve and keep in full force and effect its (i) existence and (ii) rights (charter and statutory) and franchises; provided, however, that the Borrower may consummate any merger or consolidation permitted under Section 5.02(c); and provided further that the Borrower shall not be required to preserve any such right or franchise if the management of the Borrower shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Borrower and that the loss thereof is not disadvantageous in any material respect to the Lenders.

 

(e)                                  Visitation Rights.  At any reasonable time and from time to time during normal business hours, upon reasonable notice to the Borrower, permit the Administrative Agent or any of the Lenders, or any agents or representatives thereof, to examine and make copies of and abstracts from the records and books of account, and visit the properties, of the Borrower, and to discuss the affairs, finances and accounts of the Borrower and/or any of its Subsidiaries with any of the members of the senior treasury staff of the Borrower.

 

(f)                                   Keeping of Books.  Keep, and cause each of its Subsidiaries to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Borrower and each such Subsidiary sufficient to permit the preparation of financial statements in accordance with GAAP.

 

(g)                                  Maintenance of Properties, Etc. Cause all of its properties that are used or useful in the conduct of its business or the business of any of its Subsidiaries to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment, and cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Borrower may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times, except, in each case, where the failure to do so would not reasonably be expected to result in a Material Adverse Effect.

 

(h)                                 Transactions with Affiliates.  Conduct, and cause each of its Subsidiaries to conduct, all material transactions otherwise permitted under this Agreement with any of their Affiliates (excluding the members of the Consolidated Group) on terms that are fair and reasonable and no less favorable to the Borrower or such Subsidiary than it would obtain in a comparable arm’s-length transaction with a Person not an Affiliate; provided that the provisions of this Section 5.01(h) shall not apply to the following:

 

(i)                                     the payment of dividends or other distributions (whether in cash, securities or other property) with respect to any equity interests in a member of the Consolidated Group, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any

 

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such equity interests in such Person or any option, warrant or other right to acquire any such equity interests in such Person;

 

(ii)                                  payment of, or other consideration in respect of, compensation to, the making of loans to and payment of fees and expenses of and indemnities to officers, directors, employees or consultants of a member of the Consolidated Group and payment, or other consideration in respect of, directors’ and officers’ indemnities;

 

(iii)                               transactions pursuant to any agreement to which a member of the Consolidated Group is a party on the Effective Date; or

 

(iv)                              transactions with joint ventures for the purchase or sale of property or other assets and services entered into in the ordinary course of business and in a manner consistent with past practices.

 

(i)                                     Reporting Requirements.  Furnish to the Administrative Agent for further distribution to the Lenders:

 

(i)                                     as soon as available and in any event within 50 days after the end of each of the first three quarters of each fiscal year of the Borrower, a Consolidated balance sheet of the Consolidated Group as of the end of such quarter and Consolidated statements of income and cash flows of the Consolidated Group for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, duly certified by the Chief Financial Officer, the Controller or the Treasurer of the Borrower as having been prepared in accordance with GAAP (subject to the absence of footnotes and year-end audit adjustments);

 

(ii)                                  as soon as available and in any event within 100 days after the end of each fiscal year of the Borrower, a copy of the annual audit report for such year for the Consolidated Group, containing a Consolidated balance sheet of the Consolidated Group as of the end of such fiscal year and Consolidated statements of income and cash flows of the Consolidated Group for such fiscal year, in each case accompanied by an unqualified opinion or an opinion reasonably acceptable to the Required Lenders by Ernst & Young LLP or other independent public accountants of recognized national standing;

 

(iii)                               simultaneously with each delivery of the financial statements referred to in subclauses (i)(i) and (i)(ii) of this Section 5.01, a certificate of the Chief Financial Officer, the Controller or the Treasurer of the Borrower as to compliance with the terms of this Agreement and setting forth in reasonable detail the calculations necessary to demonstrate compliance with Section 5.03;

 

(iv)                              as soon as possible and in any event within five days after any Responsible Officer shall have obtained knowledge of the occurrence of each Default continuing on the date of such statement, a statement of the Chief

 

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Financial Officer, the Controller or the Treasurer of the Borrower setting forth details of such Default and the action that the Borrower has taken and proposes to take with respect thereto;

 

(v)                                 promptly after the sending or filing thereof, copies of all reports that the Borrower sends to any of its securityholders, and copies of all reports and registration statements that members of the Consolidated Group file with the Securities and Exchange Commission or any national securities exchange;

 

(vi)                              promptly after a Responsible Officer obtains knowledge of the commencement thereof, notice of all actions, suits, investigations, litigations and proceedings before any court, governmental agency or arbitrator affecting the Consolidated Group of the type described in Section 4.01(f)(b); and

 

(vii)                           such other information respecting the Consolidated Group as any Lender through the Administrative Agent may from time to time reasonably request.

 

Information required to be delivered pursuant to subsections (i), (ii) and (v) of this Section 5.01(i) shall be deemed to have been delivered if such information, or one or more annual or quarterly or other reports or proxy statements containing such information, shall have been posted and be available on the website of the Securities and Exchange Commission at http://www.sec.gov (and a confirming electronic correspondence is delivered or caused to be delivered by the Borrower to the Administrative Agent providing notice of such availability). The Borrower hereby acknowledges that the Administrative Agent and/or the Lead Arrangers will make available to the Lenders materials and/or information provided by or on behalf of the Borrower hereunder (collectively, “Borrower Materials”) by posting the Borrower Materials on IntraLinks or another similar secure electronic system (the “Platform”).

 

(j)                                    Anti-Corruption Laws.  Maintain policies and procedures with respect to itself and its Subsidiaries reasonably designed to promote and achieve compliance with applicable anti-corruption laws.

 

SECTION 5.02              Negative Covenants.  From and after the Effective Date, so long as any Lender shall have any Commitment hereunder or any Loan shall remain unpaid, the Borrower will not:

 

(a)                                 Non-Guarantor Subsidiary Debt. Permit any Subsidiary which is not a Guarantor to create, incur, assume or suffer to exist any Debt, except:

 

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(i)                                     (A) Debt outstanding on the Effective Date and, to the extent any such Debt exceeds $25,000,000 in principal amount, listed on Schedule 5.02(a)(i), and (B) any Permitted Refinancing in respect thereof;

 

(ii)                                  Debt of any Subsidiary to the Borrower or to any other Subsidiary;

 

(iii)                               [Reserved];

 

(iv)                              [Reserved];

 

(v)                                 (A) Debt incurred to finance the acquisition, construction, repair, replacement or improvement of any fixed or capital assets, including any Debt assumed in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof; provided, that (i) such Debt is incurred prior to or within two hundred seventy (270) days after such acquisition or the completion of such construction, repair, replacement or improvement, (ii) such acquisition is not of all or substantially all of the assets of, or a business unit, line of business or division of, another Person and (iii) the aggregate principal amount of Debt outstanding under this clause (v) (when taken together, without duplication, with the amount of obligations outstanding secured by Liens pursuant to Section 5.02(b)(xiv)) shall not exceed 1.05% of Consolidated Net Assets at any time, and (B) any Permitted Refinancing in respect thereof;

 

(vi)                              [Reserved];

 

(vii)                           Debt under Hedge Agreements entered into for non-speculative purposes;

 

(viii)                        Debt in respect of bid, performance, surety, stay, customs, appeal or replevin bonds or performance and completion guarantees and similar obligations issued or incurred in the ordinary course of business, including guarantees or obligations of any Subsidiary with respect to letters of credit, bank guarantees or similar instruments supporting such obligation, in each case, not in connection with indebtedness for borrowed money;

 

(ix)                              Debt in respect of judgments, decrees, attachments or awards that do not constitute an Event of Default under Section 6.01(f);

 

(x)                                 Debt incurred pursuant to a Permitted Receivables Facility; provided, however, that the sum of the aggregate net unrecovered investment and the aggregate outstanding advances from the financing parties under such accounts receivable securitization arrangements shall not exceed at any time $500,000,000;

 

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(xi)                              Debt consisting of bona fide purchase price adjustments, earn-outs, indemnification obligations, obligations under deferred compensation or similar arrangements and similar items incurred in connection with acquisitions and asset sales;

 

(xii)                           [Reserved];

 

(xiii)                        other Debt in an aggregate amount (when taken together, without duplication, with the amount of obligations of all Subsidiaries secured by Liens pursuant to Section 5.02(b)(xxii)) not to exceed 15% of Consolidated Net Assets at any time; and

 

(xiv)                       all premiums (if any), interest (including post-petition interest), fees, expenses, charges and additional or contingent interest on obligations described in clauses (i) through (xiii) of this Section 5.02(a).

 

(b)                                 Liens.  Create, incur, assume or suffer to exist, or permit any Subsidiary to create, incur, assume or suffer to exist, any Lien upon any of its property or assets, whether now owned or hereafter acquired, other than the following:

 

(i)                                     Liens securing the Obligations;

 

(ii)                                  Liens existing on the Effective Date and, to the extent securing obligations in excess of $25,000,000, listed on Schedule 5.02(b)(ii), and any replacements, renewals or extensions thereof; provided, that (A) such Liens shall not subsequently apply to any other property or assets of the Borrower or any Subsidiary other than (x) after-acquired property that is affixed or incorporated into the property or asset covered by such Lien and (y) proceeds and products thereof and (B) such Liens shall secure only those obligations that it secures on the Effective Date and Permitted Refinancing thereof;

 

(iii)                               Liens on any amounts held by a trustee or other escrow agent under any indenture or other debt agreement issued in escrow pursuant to customary escrow arrangements pending the release thereof, or under any indenture or other debt agreement pursuant to customary discharge, redemption or defeasance provisions;

 

(iv)                              Liens for Taxes not yet delinquent, that remain payable without penalty and that are not overdue for a period of more than sixty (60) days, or which are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP;

 

(v)                                 carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens arising in the ordinary course of business which are not delinquent for a period of more than 60 days or which are being contested in good faith and by appropriate proceedings diligently conducted;

 

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(vi)                              pledges or deposits in connection with workers’ compensation,  unemployment insurance and other social security legislation, in each case incurred or made in the ordinary course of business or required by law;

 

(vii)                           pledges or deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business (including deposits to secure letters of credit issued to secure any such obligation);

 

(viii)                        easements, rights-of-way, zoning restrictions and other similar encumbrances required by law or incurred in the ordinary course of business affecting real property which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the applicable Person;

 

(ix)                              Liens securing judgments for the payment of money or securing appeal or other surety bonds related to such judgments that do not constitute and Event of Default;

 

(x)                                 customary rights of setoff upon deposit accounts and securities accounts of cash in favor of banks or other depository institutions and securities intermediaries; provided, that (A) such deposit account or securities account is not a dedicated cash collateral account and is not subject to restrictions against access by the Borrower or any of its Subsidiaries owning the affected deposit account or other funds maintained with a creditor depository institution in excess of those set forth by regulations promulgated by the Board of Governors of the Federal Reserve System of the United States or any foreign regulatory agency performing an equivalent function, and (B) such deposit account or securities account is not intended by the Borrower or any of its Subsidiaries to provide collateral (other than such as is ancillary to the establishment of such deposit account or securities account) to the depository institution;

 

(xi)                              Liens arising under Cash Management Agreement pooling arrangements;

 

(xii)                           any interest or title of a lessor under any lease entered into by the Borrower or any of its Subsidiaries in the ordinary course of its business and covering only the assets so leased;

 

(xiii)                        Liens on accounts receivable and related property, in each case subject to a Permitted Receivables Facility and created in connection with such Permitted Receivables Facility;

 

(xiv)                       Liens on fixed or capital assets acquired, constructed, repaired, replaced or improved by the Borrower or any Subsidiary; provided, that (A) such

 

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acquisition is not of all or substantially all of the assets of, or a business unit, line of business or division of, another Person, (B) such security interests secure obligations incurred to fund the acquisition of such assets in an aggregate principal amount (when taken together, without duplication, with the amount of Debt outstanding pursuant to Section 5.02(a)(v)) not to exceed 1.05% of Consolidated Net Assets at any time, and any Permitted Refinancing in respect thereof, (C) such security interests and the obligations secured thereby are incurred prior to or within two hundred seventy (270) days after such acquisition or the completion of such construction, repair or replacement or improvement, (D) the obligations secured thereby do not exceed the cost of acquiring, constructing or improving such fixed or capital assets and (E) such security interests shall not apply to any other property or asset of the Borrower or any Subsidiary, except for accessions to such fixed or capital assets covered by such Lien and the proceeds and products thereof and of the fixed or capital assets financed by such Debt; provided, further, that individual financings of fixed or capital assets provided by one lender may be cross-collateralized to other financings of fixed or capital assets provided by such lender;

 

(xv)                          licenses, operating leases or subleases permitted hereunder granted to other Persons in the ordinary course of business not interfering in any material respect with the business of the Borrower or any of its Subsidiaries;

 

(xvi)                       Liens arising from precautionary UCC financing statement filings with respect to operating leases or consignment arrangements entered into by the Borrower or any of its Subsidiaries in the ordinary course of business;

 

(xvii)                    any Lien existing on any property or asset prior to the acquisition thereof by the Borrower or any Subsidiary or existing on any property or asset of any Person that becomes a Subsidiary after the Effective Date prior to the time such Person becomes a Subsidiary; provided, that (A) such Lien is not created in contemplation of or in connection with such acquisition or such Person becoming a Subsidiary, as the case may be, (B) such Lien shall not apply to any other property or asset of the Borrower or any other Subsidiary (other than the proceeds or products of the property or asset covered by such Lien and other than improvements and after-acquired property that is affixed or incorporated into the property or asset covered by such Lien) and (C) such Lien shall secure only those obligations which it secures on the date of such acquisition or the date such Person becomes a Subsidiary, as the case may be, and any Permitted Refinancing in respect of such obligations;

 

(xviii)                 Liens on cash, cash equivalents or other assets securing Debt under Hedge Agreements entered into for non-speculative purposes;

 

(xix)                       Liens on any property or asset of the Borrower or any Subsidiary in favor of any Loan Party and Liens on any property or asset of any Subsidiary of the Borrower that is not a Loan Party in favor of any other Subsidiary of the Borrower that is not a Loan Party;

 

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(xx)                          Liens, pledges or deposits made in the ordinary course of business to secure liability to insurance carriers providing property, casualty or liability insurance to the Borrower or any Subsidiary;

 

(xxi)                       Liens on any property or asset of any Subsidiary that is not a Loan Party securing Debt of such Subsidiary that is otherwise permitted under Section 5.02(a) (other than Section 5.02(a)(xiii)); and

 

(xxii)                    other Liens; provided, that the aggregate principal amount of obligations secured by Liens outstanding pursuant to this clause (xxii) (when taken together, without duplication, with the amount of Debt outstanding pursuant to Section 5.02(a)(xiii)) would not exceed 15% of Consolidated Net Assets at any time.

 

(c)                                  Mergers, Etc. Merge or consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to, any Person, or permit any of its Subsidiaries to do so, except that:

 

(i)                                     any Subsidiary of the Borrower (other than any Loan Party) may merge or consolidate with or into, or dispose of assets to, any other Subsidiary of the Borrower or the Borrower;

 

(ii)                                  any Subsidiary of the Borrower that is a Guarantor may merge or consolidate with or into, or convey, transfer, lease or otherwise dispose of all or substantially all of its assets (whether now owned or hereafter acquired) to, any other Subsidiary of the Borrower or the Borrower (provided, however, that the surviving entity or such transferee, if not a Guarantor hereunder or the Borrower, shall become a Guarantor hereunder in accordance with Section 9.01);

 

(iii)                               the Borrower and its Subsidiaries may consummate the acquisition of the Acquired Business pursuant to the Alere Acquisition Agreement;

 

(iv)                              the Borrower may merge or consolidate with or into any other Person so long as (A) the Borrower is the surviving Person or (B) the surviving entity shall succeed, by agreement reasonably satisfactory in form and substance to the Required Lenders, to all of the businesses and operations of the Borrower and shall assume all of the rights and obligations of the Borrower under this Agreement and the other Loan Documents (provided, however, that no Lender shall be required to lend to a surviving entity that is organized in a foreign jurisdiction that is not reasonably acceptable to such Lender if such Lender is not lending to similarly situated companies in such foreign jurisdiction at such time);

 

(v)                                 any Subsidiary of the Borrower may merge or consolidate with or into, or convey, transfer, lease or otherwise dispose of all or substantially all of its assets (whether now owned or hereafter acquired) to, another Person (other than the Borrower or any Subsidiary thereof) so long as (A) the consideration received

 

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in respect of such merger, consolidation, conveyance, transfer, lease or other disposition is at least equal to the fair market value of such assets and (B) no Material Adverse Effect would reasonably be expected to result from such merger, consolidation, conveyance, transfer, lease or other disposition;

 

provided, in the cases of clause (i), (ii), (iv) and (v) of this Section 5.02(c), that no Default shall have occurred and be continuing at the time of such proposed transaction or would result therefrom.

 

(d)                                 Sales and Leaseback.  Enter into, or permit any Domestic Subsidiary to enter into, any arrangement with any bank, insurance company or other lender or investor (not including any member of the Consolidated Group) or to which any such lender or investor is a party, providing for the leasing by the Borrower or any Domestic Subsidiary for a period, including renewals, in excess of three years of any Principal Domestic Property which has been or is to be sold or transferred, more than 120 days after the acquisition thereof or the completion of construction and commencement of full operation thereof, by the Borrower or any Domestic Subsidiary to such lender or investor or to any person to whom funds have been or are to be advanced by such lender or investor on the security of such Principal Domestic Property (any such arrangement being referred to herein as a “Sale and Leaseback Transaction”) unless either:

 

(i)                                     the Borrower or such Domestic Subsidiary could incur indebtedness for borrowed money secured by a Lien pursuant to Section 5.02(b) on the Principal Domestic Property to be leased back in an amount equal to the Attributable Debt with respect to such Sale and Leaseback Transaction at the time the Borrower or such Domestic Subsidiary enters into such Sale and Leaseback Transaction, or

 

(ii)                                  the Borrower, within 120 days after the sale or transfer shall have been made by the Borrower or by such Domestic Subsidiary, applies an amount equal to the greater of (A) the net proceeds of the sale of the Principal Domestic Property sold and leased back pursuant to such Sale and Leaseback Transaction or (B) the fair market value of the Principal Domestic Property so sold and leased back at the time of entering into such Sale and Leaseback Transaction (as determined by any two of the following:  the Chief Executive Officer, any President, the Chief Financial Officer, the Controller or the Treasurer of the Borrower) to the retirement of Funded Debt; provided that the amount to be applied to the retirement of Funded Debt shall be reduced by (1) the principal amount of any Loans paid or prepaid within 120 days after such sale or transfer and (2) the principal amount of such Funded Debt voluntarily retired by the Borrower within 120 days after such sale or transfer. Notwithstanding the foregoing, no retirement referred to in this Section 5.02(d)(ii) may be effected by payment at maturity or pursuant to any mandatory sinking fund payment or any mandatory prepayment provision.

 

(e)                                  Accounting Changes.  Change its fiscal year-end from December 31 of each calendar year.

 

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(f)                                   Change in Nature of Business.  Make any material change in the nature of the business of the Consolidated Group, taken as a whole, from that carried out at the Effective Date; it being understood that this Section 5.02(f) shall not prohibit members of the Consolidated Group from conducting any business or business activities incidental or related to the business of the Borrower, Alere or their Subsidiaries as carried on as of the Effective Date or any business or activity that is reasonably similar or complementary thereto or a reasonable extension, development or expansion thereof or ancillary thereto.

 

(g)                                  Use of Proceeds. Directly or, to the knowledge of the Borrower, indirectly (x) use the proceeds of any Borrowing for any purpose that would breach the United States Foreign Corrupt Practices Act of 1977, the UK Bribery Act of 2010, or other similar applicable legislation in other jurisdictions or (y) use the proceeds of any Borrowing, or lend, contribute or otherwise make available such proceeds to any Subsidiary, joint venture partner or other individual or entity, to fund any activities of or business with any individual or entity that, at the time of such funding, is (1) the subject of Sanctions or (2) in any Designated Jurisdiction, in each case in violation of Sanctions.

 

SECTION 5.03              Financial Covenants.  Permit, as of the last day of each fiscal quarter of the Borrower (commencing with the first full fiscal quarter-end date occurring after the Closing Date):

 

(a)                                 The ratio of Consolidated Debt to Total Capitalization to exceed 0.60:1.00.

 

(b)                                 The Consolidated Interest Coverage Ratio to be less than 3.00:1.00.

 

ARTICLE VI

 

EVENTS OF DEFAULT

 

SECTION 6.01              Events of Default.  If, on or after the Effective Date, any of the following events (“Events of Default”) shall occur and be continuing:

 

(a)                                 The Borrower shall fail (i) to pay any principal of any Loan when the same becomes due and payable or (ii) to pay any interest on any Loan or make any payment of fees or other amounts payable under this Agreement within five Business Days after the same becomes due and payable; or

 

(b)                                 Any representation or warranty made by the Borrower herein or by any Loan Party (or any Loan Party’s officers) in connection with this Agreement shall prove to have been incorrect in any material respect when made; or

 

(c)                                  (i) The Borrower shall fail to perform or observe any term, covenant or agreement contained in Section 5.01(d)(i), 5.01(i)(iv), 5.02(a), 5.02(b), 5.02(c), 5.02(d), 5.02(f), 5.02(g)(y) (to the extent the use of proceeds would result in a violation of Sanctions by a Lender, the Lead Arrangers or the Administrative Agent) or 5.03 or (ii) the Borrower shall fail to perform or observe any term, covenant or agreement contained

 

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in Section 5.01(e) or clauses (i)-(iii) or (v)-(vii) of Section 5.01(i) if such failure shall remain unremedied for 10 Business Days after written notice thereof shall have been given to the Borrower by the Administrative Agent or any Lender, or (iii) the Borrower shall fail to perform or observe any other term, covenant or agreement contained in this Agreement on its part to be performed or observed if such failure shall remain unremedied for 30 days after written notice thereof shall have been given to the Borrower by the Administrative Agent or any Lender; or

 

(d)                                 A member of the Consolidated Group shall fail to pay any principal of or premium or interest on any Debt that is outstanding in a principal amount, or, in the case of any Hedge Agreement, having a maximum Agreement Value, of at least $250,000,000 in the aggregate (but excluding Debt outstanding hereunder) of such member of the Consolidated Group, when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Debt; or any such Debt shall be declared to be due and payable, or required to be prepaid or redeemed, purchased or defeased, or an offer to prepay, redeem, purchase or defease such Debt shall be required to be made, in each case prior to the stated maturity thereof (other than due to any (x) regularly scheduled required prepayment or redemption or (y) prepayment of Debt which is mandatory under the terms of the documentation governing such Debt by reason of the receipt of net cash proceeds of other Debt, of dispositions (including, without limitation, as the result of casualty events and governmental takings) or of equity issuances or by reason of excess cash flow); or

 

(e)                                  The Borrower or any Significant Subsidiary shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Borrower or any Significant Subsidiary seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), such proceeding shall remain undismissed or unstayed for a period of 60 days; or the Borrower or any Significant Subsidiary shall take any corporate action to authorize any of the actions set forth above in this Section 6.01(e); or

 

(f)                                   Any one or more judgments or orders for the payment of money in excess of $250,000,000 shall be rendered against a member of the Consolidated Group and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 60 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or

 

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otherwise, shall not be in effect; provided, however, that, for purposes of determining whether an Event of Default has occurred under this Section 6.01(f), the amount of any such judgment or order shall be reduced to the extent that (A) such judgment or order is covered by a valid and binding policy of insurance between the defendant and the insurer covering payment thereof and (B) such insurer, which shall be rated at least “A” by A.M. Best Company, has been notified of, and has not disputed the claim made for payment of, such judgment or order; or

 

(g)           (i) Any Person or two or more Persons acting in concert shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended), directly or indirectly, of Voting Stock of the Borrower (or other securities convertible into or exchangeable for such Voting Stock) representing 30% or more of the combined voting power of all Voting Stock of the Borrower (on a fully diluted basis) or (ii) during any period of up to 24 consecutive months, commencing before or after the date of this Agreement, a majority of the members of the board of directors of the Borrower shall not be Continuing Directors; or

 

(h)           The Borrower or any of its ERISA Affiliates shall incur, or shall be reasonably likely to incur, liability in excess of $250,000,000 in the aggregate as a result of one or more of the following:  (i) the occurrence of any ERISA Event; (ii) the partial or complete withdrawal of the Borrower or any ERISA Affiliate from a Multiemployer Plan; or (iii) the reorganization or termination of a Multiemployer Plan;

 

then, and in any such event (but subject to Section 3.03), the Administrative Agent shall at the request, or may with the consent, of the Required Lenders, by notice to the Borrower, other than during the Certain Funds Period, declare the Loans, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Loans, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to the Borrower under the Federal Bankruptcy Code, (A) the Commitment of each Lender shall automatically be terminated and (B) the Loans, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower.

 

SECTION 6.02     Application of Funds.  After the exercise of remedies provided for in Section 6.01 (or after the Loans have automatically become immediately due and payable as set forth in the last proviso to Section 6.01), any amounts received on account of the Obligations shall, subject to the provisions of Section 2.15, be applied by the Administrative Agent in the following order:

 

First, to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts (including Attorney Costs and amounts payable under Section 2.16 through Section 2.21) payable to the Administrative Agent in its capacity as such;

 

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Second, to payment of that portion of the Obligations constituting fees, indemnities and other amounts (other than principal and interest) payable to the Lenders (including Attorney Costs and amounts payable under Section 2.16 through Section 2.21), ratably among them in proportion to the amounts described in this clause Second payable to them;

 

Third, to payment of that portion of the Obligations constituting accrued and unpaid interest on the Loans and other Obligations, ratably among the Lenders in proportion to the respective amounts described in this clause Third payable to them;

 

Fourth, to payment of that portion of the Obligations constituting unpaid principal of the Loans, ratably among the Lenders in proportion to the respective amounts described in this clause Fourth held by them; and

 

Last, the balance, if any, after all of the Obligations have been indefeasibly paid in full, to the Borrower or as otherwise required by Law.

 

ARTICLE VII

 

THE ADMINISTRATIVE AGENT

 

SECTION 7.01     Authorization and Action.  Each Lender hereby irrevocably appoints Bank of America to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto.  The provisions of this Article VII (other than the third sentence of Section 7.04 and Section 7.06) are solely for the benefit of the Administrative Agent and the Lenders, and no Loan Party shall have rights as a third party beneficiary of any of such provisions (other than the third sentence of Section 7.04 and Section 7.06).  It is understood and agreed that the use of the term “agent” herein or in any other Loan Documents (or any other similar term) with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable Law. Instead such term is used as a matter of market custom, and is intended to create or reflect only an administrative relationship between contracting parties.

 

SECTION 7.02     Administrative Agent Individually.  The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent hereunder in its individual capacity as a Lender.  Such Person and its Affiliates may accept deposits from, own securities of, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with any member of the Consolidated Group or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor to the Lenders.

 

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SECTION 7.03     Duties of Administrative Agent; Exculpatory Provisions.

 

(a)           The Administrative Agent’s duties hereunder and under the other Loan Documents are solely ministerial and administrative in nature, and the Administrative Agent shall not have any duties or obligations except those expressly set forth herein or in any other Loan Document.  Without limiting the generality of the foregoing, the Administrative Agent (i) shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (ii) shall not have any duty to take any discretionary action or exercise any discretionary powers but shall be required to act or refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the written direction of the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in any other Loan Document); provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent or any of its Affiliates to liability or that is contrary to any Loan Document or applicable law, including for the avoidance of doubt, any action that may be in violation of the automatic stay under any Debtor Relief Law or that may effect a forfeiture, modification or termination of property of a Defaulting Lender in violation of any Debtor Relief Law and (iii) shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to any Loan Party or any of its Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent or any of its Affiliates in any capacity.

 

(b)           The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Section 6.01 or 8.01) or (ii) in the absence of its own gross negligence or willful misconduct as determined by a court of competent jurisdiction by final and nonappealable judgment. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until the Borrower or any Lender shall have given notice to the Administrative Agent describing such Default.

 

(c)           The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty, representation or other information made or supplied in or in connection with this Agreement, any other Loan Document or the Information Memorandum, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith or the adequacy, accuracy and/or completeness of the information contained therein, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document or (v) the satisfaction of any condition set forth in Article III or elsewhere herein, other than (but subject to the foregoing clause (ii)) to confirm receipt of items expressly required to be delivered to the Administrative Agent.

 

(d)           Nothing in this Agreement or any other Loan Document shall require the Administrative Agent or any of its Related Parties to carry out any “know-your-customer” or other checks in relation to any person on behalf of any Lender, and each Lender confirms to the Administrative Agent that it is solely responsible for any such checks it is required to carry out

 

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and that it may not rely on any statement in relation to such checks made by the Administrative Agent or any of its Related Parties.

 

SECTION 7.04     Reliance by Administrative Agent.  The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person.  The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon.  In determining compliance with any condition hereunder to the Effective Date or Closing Date, as applicable, each Lender shall be deemed to have consented to, approved or accepted such condition unless an officer of the Administrative Agent responsible for the transactions contemplated hereby shall have received notice to the contrary from such Lender prior to the Effective Date or Closing Date, as applicable. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

 

SECTION 7.05     Delegation of Duties.  The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder by or through any one or more sub agents appointed by the Administrative Agent.  The Administrative Agent and any such sub agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties.  Each such sub agent and the Related Parties of the Administrative Agent and each such sub agent shall be entitled to the benefits of all provisions of this Article VII and Section 8.04 (as though such sub-agents were the “Administrative Agent” under this Agreement) as if set forth in full herein with respect thereto.  The Administrative Agent shall not be responsible to any Lender for the negligence or misconduct of any sub-agents except to the extent that a court of competent jurisdiction determines in a final and nonappealable judgment that the Administrative Agent acted with gross negligence or willful misconduct in the selection of such sub-agents.

 

SECTION 7.06     Resignation of Administrative Agent.

 

(a)           The Administrative Agent may at any time give notice of its resignation to the Lenders and the Borrower. Upon receipt of any such notice of resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor, which shall be a bank with an office in the United States, or an Affiliate of any such bank with an office in the United States.  If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation (or such earlier day as shall be agreed by the Required Lenders) (the “Resignation Effective Date”), then the retiring Administrative Agent may (but shall not be obligated to), on behalf of the Lenders and in consultation with the Borrower, appoint a successor Administrative Agent meeting the qualifications set forth above. Whether or not a successor has been appointed, such resignation shall become effective in accordance with such notice on the Resignation Effective Date.

 

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(b)           If the Person serving as Administrative Agent is a Defaulting Lender pursuant to clause (d) of the definition thereof, such Person shall automatically and without the taking of any action by any Person, be removed as Administrative Agent on the date that is 30 days following the date such Person became a Defaulting Lender (or such earlier day as shall be agreed by the Required Lenders) (the “Removal Effective Date”).  In connection therewith, the Required Lenders, in consultation with the Borrower, shall appoint a successor.  If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment on or prior to the Removal Effective Date, then such removal shall nonetheless become effective in accordance with such notice on the Removal Effective Date.

 

(c)           With effect from the Resignation Effective Date or the Removal Effective Date (as applicable) (i) the retiring or removed Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents and (ii) except for any indemnity payments owed to the retiring or removed Administrative Agent, all payments, communications and determinations to be made by, to or through the Administrative Agent shall instead be made by or to each Lender directly, until such time, if any, as the Required Lenders appoint a successor Administrative Agent as provided for above. Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring or removed Administrative Agent (other than any rights to indemnity payments or other amounts owed to the retiring or removed Administrative Agent), and the retiring or removed Administrative Agent shall be discharged from all of its duties and obligations hereunder and under the other Loan Documents (if not already discharged therefrom as provided above in this Section). The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor.  After the retiring or removed Administrative Agent’s resignation or removal hereunder and under the other Loan Documents, the provisions of this Article VII and Section 8.04 shall continue in effect for the benefit of such retiring or removed Administrative Agent, its sub agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring or removed Administrative Agent was acting as Administrative Agent.

 

SECTION 7.07     Non-Reliance on Administrative Agent and Other Lenders.  Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement.  Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.

 

SECTION 7.08     Other Agents.  None of the Lenders identified on the facing page or signature pages of this Agreement as a “joint lead arranger” or “joint book runner” shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders as such.  Without limiting the foregoing, none of the Lenders so identified shall have or be deemed to have any fiduciary relationship with any Lender.  Each

 

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Lender acknowledges that it has not relied, and will not rely, on any of the Lenders so identified in deciding to enter into this Agreement or in taking or not taking action hereunder.

 

ARTICLE VIII

 

MISCELLANEOUS

 

SECTION 8.01     Amendments, Etc.  No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by any Loan Party therefrom, shall be effective unless in writing signed by the Required Lenders and each Loan Party, and acknowledged by the Administrative Agent, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such amendment, waiver or consent shall:

 

(a)           extend or increase the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 6.01) without the written consent of such Lender;

 

(b)           postpone any date fixed by this Agreement or any other Loan Document for any payment of principal, interest, fees or other amounts due to the Lenders (or any of them) hereunder or under any other Loan Document without the written consent of each Lender directly affected thereby;

 

(c)           reduce the principal of, or the rate of interest specified herein on any Loan or (subject to clause (iii) of the third proviso to this Section 8.01) any fees or other amounts payable hereunder or under any other Loan Document, without the written consent of each Lender directly affected thereby; provided, however, that only the consent of the Required Lenders shall be necessary to amend the definition of “Default Rate” or to waive any obligation of the Borrower to pay interest at the Default Rate;

 

(d)           change Section 6.02 in a manner that would alter the pro rata sharing of payments required thereby without the written consent of each Lender; or

 

(e)           change any provision of this Section 8.01 or Section 2.12 or the definition of “Required Lenders” or “Pro Rata Share” or any other provision hereof specifying the number or percentage of Lenders required to amend, waive or otherwise modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender.

 

and, provided further, that (i) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above, affect the rights or duties of the Administrative Agent under this Agreement or any other Loan Document; (ii) the Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed only by the parties thereto; and (iii) any amendment or waiver with respect to Section 8.18 shall require the consent of any Lender that is an EEA Financial Institution. Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any

 

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amendment, waiver or consent hereunder (and any amendment, waiver or consent which by its terms requires the consent of all Lenders or each affected Lender may be effected with the consent of the applicable Lenders other than Defaulting Lenders), except that (x) the Commitment of any Defaulting Lender may not be increased or extended without the consent of such Lender and (y) any waiver, amendment or modification requiring the consent of all Lenders or each affected Lender that by its terms affects any Defaulting Lender more adversely than other affected Lenders shall require the consent of such Defaulting Lender.

 

SECTION 8.02     Notices, Etc.  (a)  Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in subsection (b) below), all notices and other communications provided for hereunder shall be in writing (including telecopier) and mailed, telecopied or delivered, if to the Borrower or the Administrative Agent, to the address, telecopier number, electronic mail address or telephone number specified for such Person on Schedule I; or, as to the Borrower or the Administrative Agent, at such other address as shall be designated by such party in a written notice to the other parties and, as to each other party, at such other address as shall be designated by such party in a written notice to the Borrower and the Administrative Agent. Notices and other communications sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices and other communications sent by facsimile shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient).  Notices and other communications delivered through electronic communications to the extent provided in subsection (b) below, shall be effective as provided in such subsection (b).

 

(b)           Electronic Communications.  Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communication (including e-mail, FpML messaging and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent, provided that the foregoing shall not apply to notices to any Lender pursuant to Article II if such Lender has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication.  The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications.

 

Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.

 

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(c)           THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE.”  THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE BORROWER MATERIALS OR THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE BORROWER MATERIALS.  NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY AGENT PARTY IN CONNECTION WITH THE BORROWER MATERIALS OR THE PLATFORM.  In no event shall the Administrative Agent or any of its Related Parties (collectively, the “Agent Parties”) have any liability to any Loan Party or any Lender or any other Person for losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract or otherwise) arising out of the Borrower’s or the Administrative Agent’s transmission of Borrower Materials or notices through the platform, any other electronic platform or electronic messaging service, or through the Internet, except to the extent that such losses, claims, damages, liabilities or expenses are determined by a court of competent jurisdiction by a final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Agent Party; provided, however, that in no event shall any Agent Party have any liability to the Borrower, any other Loan Party or any Lender or any other Person for indirect, special, incidental, consequential or punitive damages (as opposed to direct or actual damages).

 

(d)           Each of the Borrower and the Administrative Agent may change its address, facsimile or telephone number for notices and other communications hereunder by notice to the other parties hereto.  Each Lender may change its address, facsimile or telephone number for notices and other communications hereunder by notice to the Borrower and the Administrative Agent.  In addition, each Lender agrees to notify the Administrative Agent from time to time to ensure that the Administrative Agent has on record (i) an effective address, contact name, telephone number, facsimile number and electronic mail address to which notices and other communications may be sent and (ii) accurate wire instructions for such Lender.

 

(e)           The Administrative Agent and the Lenders shall be entitled to rely and act upon any notices (including telephonic notices and Loan Notices) reasonably believed to have been given by or on behalf of the Borrower even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof.  The Borrower shall indemnify the Administrative Agent, each Lender and the Related Parties of each of them from all losses, costs, expenses and liabilities resulting from the reasonable reliance by such Person on each notice reasonably believed to have been given by or on behalf of the Borrower.  All telephonic notices to and other telephonic communications with the Administrative Agent may be recorded by the Administrative Agent, and each of the parties hereto hereby consents to such recording.  With respect to notices and other communications hereunder from the Borrower to any Lender, the Borrower shall provide such notices and other communications to the Administrative Agent, and the Administrative Agent shall promptly deliver such notices and other communications to any such Lender in accordance with subsection (b) above or otherwise.

 

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SECTION 8.03     No Waiver; Remedies.  No failure on the part of any Lender or the Administrative Agent to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right.  The remedies herein provided are cumulative and not exclusive of any remedies provided by applicable law.

 

SECTION 8.04     Expenses; Indemnity; Damage Waiver.

 

(a)           Costs and Expenses. The Borrower shall pay upon demand (i) all reasonable and documented or invoiced out-of-pocket fees and expenses incurred by the Administrative Agent and its respective Affiliates (including, but not limited to, the reasonable and documented or invoiced fees, charges and disbursements of counsel which shall be limited to the reasonable and documented or invoiced out-of-pocket fees and other charges of one counsel to the Administrative Agent and its respective Affiliates, and, if necessary, of one local counsel to the Administrative Agent and its respective Affiliates in each relevant jurisdiction, and due diligence expenses), in connection with the syndication of the credit facilities provided for herein, the preparation, negotiation, execution, delivery and administration of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated) and (ii) all out of pocket expenses incurred by the Administrative Agent or any Lender (including, but not limited to, the reasonable and documented or invoiced fees, charges and disbursements of counsel which shall be limited to the reasonable and documented or invoiced out-of-pocket fees and other charges of one counsel to the Lenders and the Administrative Agent, and, if necessary, of one local counsel to the Lenders, retained by the Administrative Agent in each relevant jurisdiction (and, solely in the case of an actual or potential conflict of interest, of one additional counsel (and, if reasonably necessary, one additional local counsel in any relevant jurisdiction) for all such affected Lenders), and due diligence expenses), in connection with the enforcement or protection of its rights (A) in connection with this Agreement and the other Loan Documents, including its rights under this Section 8.04, or (B) in connection with the Loans made hereunder, including all such out of pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans.

 

(b)           Indemnification by the Borrower. The Borrower shall indemnify the Administrative Agent (and any sub-agent thereof) and each Lender, and each Related Party of any of the foregoing Persons and any successors or assigns (each such Person being called an “Indemnified Person”) against, and hold each Indemnified Person harmless from, all losses, claims, damages, liabilities and related expenses to which any Indemnified Person may become subject resulting from or in connection with this Agreement, the other Loan Documents, the use of the proceeds under this Agreement, the Alere Transactions or any related transaction, any actual or alleged presence of Hazardous Materials on any property of the Consolidated Group or any Environmental Liability related in any way to the Borrower or any of its Subsidiaries or any claim, litigation, investigation or proceeding relating to any of the foregoing, regardless of whether any Indemnified Person is a party thereto and regardless of whether brought by a third party or by the Borrower or any of its Affiliates (any of the foregoing, a “Proceeding”), and shall reimburse each Indemnified Person upon demand for any legal or other expenses incurred in connection with investigating, defending, preparing to defend or participating in any such

 

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Proceeding, provided that (i) the foregoing indemnity will not, as to any Indemnified Person, apply to losses, claims, damages, liabilities or related expenses (A) to the extent they are found by a final, non-appealable judgment of a court of competent jurisdiction to result from the bad faith, willful misconduct or gross negligence of such Indemnified Person or any of its Related Persons, (B) to the extent resulting from any Proceeding that does not involve an act or omission of the Borrower or any of its Affiliates and that is brought by an Indemnified Person solely against another Indemnified Person, other than claims against any the Administrative Agent or the Lead Arrangers in its capacity in fulfilling its role as an administrative agent or lead arranger under this Agreement or (C) to the extent resulting from a material breach by such Indemnified Person or any Related Person thereof of its obligations hereunder as found by a final, non-appealable judgment by a court of competent jurisdiction and (ii) the Borrower’s obligation to reimburse legal expenses pursuant to this Section 8.04(b) shall be limited to the fees, charges and disbursements of one counsel to all Indemnified Persons (and, if reasonably necessary, one local counsel in any relevant jurisdiction) and, solely in the case of an actual or potential conflict of interest, of one additional counsel (and, if reasonably necessary, one additional local counsel in any relevant jurisdiction). Without limiting the provisions of Section 2.16(c), this Section 8.04(b) shall not apply with respect to Taxes other than any Taxes that represent losses, claims, damages, etc. arising from any non-Tax claim.

 

(c)           Reimbursement by Lenders. To the extent that the Borrower for any reason fails to indefeasibly pay any amount required under subsection (a) or (b) of this Section 8.04 to be paid by it to the Administrative Agent (or any sub-agent thereof) or any Related Party of any of the foregoing, each Lender severally agrees to pay to the Administrative Agent (or any such sub-agent) or such Related Party, as the case may be, such Lender’s Pro Rata Share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount (including any such unpaid amount in respect of a claim asserted by such Lender), such payment to be made severally among them based on such Lenders’ pro rata share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought based on each Lender’s Pro Rata Share at such time), provided, further that, the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent (or any such sub-agent) in its capacity as such, or against any Related Party of any of the foregoing acting for the Administrative Agent (or any such sub-agent) in connection with such capacity. The obligations of the Lenders under this subsection (c) are subject to the provisions of Section 2.11(d).

 

(d)           Waiver of Consequential Damages, Etc. To the fullest extent permitted by applicable law, the Borrower shall not assert, and hereby waives, and acknowledges that no other Person shall have, any claim against any Indemnified Person, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or the use of the proceeds thereof. No Indemnified Person referred to in subsection (b) above shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed to such unintended recipients by such Indemnified Person through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby other than for direct or actual damages resulting from the gross

 

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negligence, bad faith or willful misconduct of such Indemnified Person as determined by a final and nonappealable judgment of a court of competent jurisdiction.

 

(e)                                  Payments. All amounts due under this Section 8.04 shall be payable not later than ten Business Days after demand therefor.

 

(f)                                   Survival. The agreements in this Section 8.04 and the indemnity provisions of Section 8.02(e) shall survive the resignation of the Administrative Agent, the replacement of any Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all the other Obligations.

 

SECTION 8.05              Right of Setoff.  If an Event of Default shall have occurred and be continuing, each Lender and each of their respective Affiliates is hereby authorized at any time and from time to time, without prior notice to any Loan Party, any such notice being waived by such Loan Party, to the fullest extent permitted by applicable law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by such Lender or any such Affiliate to or for the credit or the account of any Loan Party against any and all of the obligations of such Loan Party now or hereafter existing under this Agreement or any other Loan Document to such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement or any other Loan Document and although such obligations of such Loan Party may be contingent or unmatured or are owed to a branch or office of such Lender different from the branch or office holding such deposit or obligated on such indebtedness; provided, that in the event that any Defaulting Lender shall exercise any such right of setoff on any amounts due on Obligations hereunder, (x) all amounts so set off shall be paid over immediately to the Administrative Agent for further application in accordance with the provisions of Section 2.15 and, pending such payment, shall be segregated by such Defaulting Lender from its other funds and deemed held in trust for the benefit of the Administrative Agent and the Lenders, and (y) the Defaulting Lender shall provide promptly to the Administrative Agent a statement describing in reasonable detail the Obligations owing to such Defaulting Lender as to which it exercised such right of setoff.  Each Lender agrees to notify the Borrower and the Administrative Agent promptly after any such setoff and application, provided that the failure to give such notice shall not affect the validity of such setoff and application.

 

SECTION 8.06              Binding Effect.  This Agreement shall become effective upon the Effective Date and, thereafter, shall be binding upon and inure to the benefit of, and be enforceable by, each Loan Party, the Administrative Agent and each Lender and their respective successors and permitted assigns, except that no Loan Party shall have any right to assign its rights hereunder or any interest herein without the prior written consent of each of the Lenders, and any purported assignment without such consent shall be null and void.

 

SECTION 8.07              Assignments and Participations.

 

(a)                                 Successors and Assigns Generally. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder (except as contemplated by Section 5.02(c)) without the prior

 

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written consent of the Administrative Agent and each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an assignee in accordance with the provisions of subsection (b) of this Section 8.07, (ii) by way of participation in accordance with the provisions of subsection (d) of this Section 8.07 or (iii) by way of pledge or assignment of a security interest subject to the restrictions of subsection (e) of this Section 8.07 (and any other attempted assignment or transfer by any party hereto shall be null and void).  Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section 8.07 and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

 

(b)                                 Any Lender may at any time assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans); provided that any such assignment shall be subject to the following conditions:

 

(i) Minimum Amounts.

 

(A) in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment and the Loans at the time owing to it or contemporaneous assignments to related Approved Funds that equal at least the amount specified in paragraph (b)(i)(B) of this Section 8.07 in the aggregate or in the case of an assignment to a Lender, an Affiliate of a Lender or, following the Closing Date, an Approved Fund, no minimum amount need be assigned; and

 

(B) in any case not described in subsection (b)(i)(A) of this Section 8.07, the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) or, if the Commitment is not then in effect, the principal outstanding balance of the Loans of the assigning Lender subject to each such assignment, determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of the Trade Date, shall not be less than $10,000,000 unless each of the Administrative Agent and, so long as, with respect to assignments of Loans (but not with respect to assignments of Commitments) no Event of Default has occurred and is continuing, the Borrower otherwise consents in writing (each such consent not to be unreasonably withheld or delayed); provided, however, that concurrent assignments to members of an Assignee Group and concurrent assignments from members of an Assignee Group to a single Eligible Assignee (or to an Eligible Assignee and members of its Assignee Group) will be treated as a single assignment for purposes of determining whether such minimum amount has been met.

 

(ii) Proportionate Amounts. Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Loans or the Commitment assigned.

 

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(iii) Required Consents. No consent shall be required for any assignment except to the extent required by subsection (b)(i)(B) of this Section 8.07 and, in addition:

 

(A) the written consent of the Borrower (such consent not to be unreasonably withheld or delayed) shall be required unless (1) with respect to assignments of Loans (but not with respect to assignments of Commitments) an Event of Default under Section 6.01(a), (e) or (f) has occurred and is continuing at the time of such assignment or (2) such assignment is to a Lender, an Affiliate of a Lender (provided, that the Borrower’s written consent will be required in the case of an assignment of Commitments to an Affiliate of a Lender prior to the Closing Date)  or, following the Closing Date, an Approved Fund; provided that, if after the Closing Date, the written consent of the Borrower to an assignment is required hereunder, then the Borrower shall be deemed to have given its consent ten Business Days after the date written notice thereof was delivered by the Administrative Agent to the Borrower, unless such consent is expressly refused by the Borrower prior to such tenth Business Day; and

 

(B) the consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed) shall be required if such assignment is to a Person that is not a Lender, an Affiliate of such Lender or an Approved Fund with respect to such Lender.

 

(iv) Assignment and Assumption. The parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee in the amount of $3,500; provided, however, that the Administrative Agent may, in its sole discretion, elect to waive such processing and recordation fee in the case of any assignment. The assignee, if it is not a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire.

 

(v) No Assignment to Certain Persons. No such assignment shall be made (A) to the Borrower or any of the Borrower’s Affiliates or Subsidiaries, or (B) to any Defaulting Lender or any of its Subsidiaries, or any Person who, upon becoming a Lender hereunder, would constitute any of the foregoing Persons described in this clause (B), or (C) to a natural person.

 

(vi) Certain Additional Payments. In connection with any assignment of rights and obligations of any Defaulting Lender hereunder, no such assignment shall be effective unless and until, in addition to the other conditions thereto set forth herein, the parties to the assignment shall make such additional payments to the Administrative Agent in an aggregate amount sufficient, upon distribution thereof as appropriate (which may be outright payment, purchases by the assignee of participations or subparticipations, or other compensating actions, including funding, with the consent of the Borrower and the Administrative Agent, the applicable pro rata share of Loans previously requested but not funded by the Defaulting Lender, to each of which the applicable assignee and assignor hereby irrevocably consent), to (x) pay and satisfy in full all payment liabilities then owed by such Defaulting Lender to the Administrative Agent or any Lender hereunder (and interest accrued thereon) and (y) acquire (and fund

 

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as appropriate) its full pro rata share of all Loans in accordance with its Pro Rata Share. Notwithstanding the foregoing, in the event that any assignment of rights and obligations of any Defaulting Lender hereunder shall become effective under applicable Law without compliance with the provisions of this paragraph, then the assignee of such interest shall be deemed to be a Defaulting Lender for all purposes of this Agreement until such compliance occurs.

 

Subject to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c) of this Section 8.07, from and after the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 2.16, 2.19, 2.20, and 8.04 with respect to facts and circumstances occurring prior to the effective date of such assignment; provided that, except to the extent otherwise expressly agreed by the affected parties, no assignment by a Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from the Lender’s having been a Defaulting Lender. Upon request, the Borrower (at its expense) shall execute and deliver a Note to the assignee Lender, at which time any existing Note assigned to such Lender shall be redelivered to the Borrower. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with subsection (d) of this Section 8.07.

 

(c)                                  Register. The Administrative Agent, acting solely for this purpose as an agent of the Borrower (and such agency being solely for tax purposes), shall maintain at the Administrative Agent’s Office a copy of each Assignment and Assumption delivered to it (or the equivalent thereof in electronic form) and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts (and stated interest) of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive absent manifest error, and the Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

 

(d)                                 Participations. Any Lender may at any time, without the consent of, or notice to, the Borrower or the Administrative Agent, sell participations to any Person (other than a natural person, a Defaulting Lender or the Borrower or any of the Borrower’s Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of

 

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such obligations and (iii) the Borrower, the Administrative Agent and the Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. For the avoidance of doubt, each Lender shall be responsible for the indemnity under Section 8.04(c) without regard to the existence of any participation; provided, however, that, without impacting the indemnification requirement, any Lender may proceed against its Participant in accordance with the underlying participant agreement.

 

Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in the first proviso to Section 8.01 that affects such Participant. The Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.16, 2.19 and 2.20 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to subsection (b) of this Section 8.07 (it being understood that the documentation required under Section 2.16(e) shall be delivered to the Lender who sells the participation) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to subsection (b) of this Section 8.07; provided that such Participant (A) agrees to be subject to the provisions of Sections 2.21 and 8.15 as if it were an assignee under subsection (b) of this Section 8.07 and (B) shall not be entitled to receive any greater payment under Sections 2.16 or 2.19, with respect to any participation, than the Lender from whom it acquired the applicable participation would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation. Each Lender that sells a participation agrees, at the Borrower’s request and expense, to use reasonable efforts to cooperate with the Borrower to effectuate the provisions of Section 2.21 with respect to any Participant. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 8.05 as though it were a Lender.  Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under the Loan Documents (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any Commitments, Loans or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such Commitment, Loan or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.

 

(e)                                  Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank or other central bank; provided that no such pledge or assignment shall

 

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release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

 

(f)                                   Electronic Execution of Assignments and Certain Other Documents.  The words “execute,” “execution,” “signed,” “signature,” and words of like import in or related to any document to be signed in connection with this Agreement and the transactions contemplated hereby (including without limitation Assignment and Assumptions, amendments or other modifications, Loan Notices, waivers and consents) shall be deemed to include electronic signatures, the electronic matching of assignment terms and contract formations on electronic platforms approved by the Administrative Agent, or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act; provided that notwithstanding anything contained herein to the contrary the Administrative Agent is under no obligation to agree to accept electronic signatures in any form or in any format unless expressly agreed to by the Administrative Agent pursuant to procedures approved by it.

 

SECTION 8.08              Confidentiality.  Each of the Administrative Agent and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its and its Affiliates’ respective managers, administrators, trustees, partners, directors, officers, employees, agents, advisors and other representatives (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent required or requested by any regulatory authority purporting to have jurisdiction over it or its Affiliates (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal or administrative process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or any action or proceeding relating to this Agreement or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section 8.08, to (i) any assignee of or participant in, or any prospective assignee of or participant in, any of its rights or obligations under this Agreement, (ii) any actual or prospective party (or its managers, administrators, trustees, partners, directors, officers, employees, agents, advisors and other representatives) to any swap or derivative or similar transaction under which payments are to be made by reference to the Borrower and their obligations, this Agreement or payments hereunder, (iii) any rating agency, or (iv) the CUSIP Service Bureau or any similar organization, (g) with the consent of the Borrower, (h) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section or (y) becomes available to the Administrative Agent, any Lender or any of their respective Affiliates on a non-confidential basis from a source other than the Borrower, (i) to market data collectors or providers of similar services to the banking industry or (j) to service providers engaged by the Administrative Agent or any Lender in connection with the administration of this Agreement and the other Loan Documents (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential).

 

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For purposes of this Section 8.08, “Information” means all information received from the Borrower or any of its Subsidiaries relating to the Borrower or any of its Subsidiaries or any of their respective businesses, other than any such information that is available to the Administrative Agent or any Lender on a non-confidential basis prior to disclosure by the Borrower or any of its Subsidiaries, provided that, in the case of information received from the Borrower or any of its Subsidiaries after the Effective Date, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

 

SECTION 8.09              Governing Law.  This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York; provided, that (a) the interpretation of Target Material Adverse Effect and whether a Target Material Adverse Effect has occurred, (b) the accuracy of any Alere Acquisition Agreement Representation and whether as a result of a breach thereof the Borrower (or any of its Subsidiaries) has the right (taking into account any applicable cure provisions) to terminate its (or their) obligations under the Alere Acquisition Agreement, or to decline to consummate the Alere Acquisition pursuant to the Alere Acquisition Agreement and (c) whether the Alere Acquisition has been consummated in accordance with the Alere Acquisition Agreement, shall be governed and construed in accordance with the laws of the State of Delaware applicable to contracts executed in and to be performed entirely within that State, regardless of the laws that might otherwise govern under any applicable conflict of laws principles.

 

SECTION 8.10              Execution in Counterparts.  This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

 

SECTION 8.11              Integration.  This Agreement, together with the other Loan Documents, comprises the complete and integrated agreement of the parties on the subject matter hereof and thereof and supersedes all prior agreements, written or oral, on such subject matter. In the event of any conflict between the provisions of this Agreement and those of any other Loan Document, the provisions of this Agreement shall control; provided that the inclusion of supplemental rights or remedies in favor of the Administrative Agent or the Lenders in any other Loan Document shall not be deemed a conflict with this Agreement. Each Loan Document was drafted with the joint participation of the respective parties thereto and shall be construed neither against nor in favor of any party, but rather in accordance with the fair meaning thereof.

 

SECTION 8.12              Jurisdiction, Etc.  (a)  Each of the Loan Parties and the other parties hereto irrevocably and unconditionally agrees that it will not commence any action, litigation or proceeding of any kind or description, whether in law or equity, whether in contract or in tort or otherwise, against any party hereto or any Related Party of the foregoing in any way relating to this Agreement or any other Loan Document or the transactions relating hereto or thereto, in any forum other than the courts of the State of New York sitting in New York County, and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, and each of the Loan Parties and the other parties hereto irrevocably and

 

77


 

unconditionally submits to the jurisdiction of such courts and agrees that all claims in respect of any such action, litigation or proceeding may be heard and determined in such New York State court or, to the fullest extent permitted by applicable law, in such federal court. Each of the Loan Parties and the other parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

 

(b)                                 Each of the Loan Parties and the other parties hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any New York State or federal court.  Each of the Loan Parties and the other parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

 

(c)                                  Each of the Loan Parties and the other parties hereto irrevocably consents to service of process in the manner provided for notices in Section 8.02(a).  Nothing in this Agreement will affect the right of any party hereto to serve process in any other manner permitted by applicable law.

 

SECTION 8.13              PATRIOT Act Notice.  Each Lender and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies each Loan Party that pursuant to the requirements of the PATRIOT Act, it is required to obtain, verify and record information that identifies each Loan Party, which information includes the name and address of each Loan Party and other information that will allow such Lender or the Administrative Agent, as applicable, to identify each Loan Party in accordance with the PATRIOT Act.  Each Loan Party shall provide, to the extent commercially reasonable, such information and take such actions as are reasonably requested by the Administrative Agent or any Lenders in order to assist the Administrative Agent and the Lenders in maintaining compliance with the PATRIOT Act.

 

SECTION 8.14              No Advisory or Fiduciary Responsibility.  In its capacity as the Administrative Agent or a Lender, (a) neither the Administrative Agent nor any Lender has any responsibility except as set forth herein and (b) neither the Administrative Agent nor any Lender shall be subject to any fiduciary duties or other implied duties (to the extent permitted by law to be waived).  Each Loan Party agrees that it will not take any position or bring any claim against the Administrative Agent or any Lender that is contrary to the preceding sentence.

 

In connection with all aspects of each transaction contemplated hereby (including in connection with any amendment, waiver or other modification hereof), each Loan Party acknowledges and agrees that:  (i) the arranging and other services regarding this Agreement provided by the Administrative Agent and the Lenders are arm’s-length commercial transactions between the Loan Parties and their respective Affiliates, on the one hand, and the Administrative Agent and the Lenders, on the other hand; (ii) the Administrative Agent and each Lender is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor or agent for any Loan Party or any of its Affiliates, or any other Person; and (iii) the Administrative Agent, the Lenders and each of their respective Affiliates may be engaged in a broad range of transactions that involve

 

78


 

interests that differ from those of the Loan Parties and their Affiliates, and no Administrative Agent or Lender has any obligation to disclose any of such interests to any Loan Party or its Affiliates.

 

SECTION 8.15              Replacement of Lenders.  If the Borrower is entitled to replace a Lender pursuant to the provisions of Section 2.21, or if any Lender is a Defaulting Lender or a Non-Consenting Lender, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Sections 8.07), all of its interests, rights (other than its existing rights to payments pursuant to Sections 2.16 and 2.19) and obligations under this Agreement and the related Loan Documents to an Eligible Assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that:

 

(a)                                 the Borrower shall have paid to the Administrative Agent the assignment fee (if any) specified in Section 8.07(b) (except as otherwise provided herein);

 

(b)                                 such Lender shall have received payment of an amount equal to 100% of the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 2.20) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts);

 

(c)                                  in the case of any such assignment resulting from a claim for compensation under Section 2.19 or payments required to be made pursuant to Section 2.16, such assignment will result in a reduction in such compensation or payments thereafter;

 

(d)                                 such assignment does not conflict with applicable Laws; and

 

(e)                                  in the case of an assignment resulting from a Lender becoming a Non-Consenting Lender, the applicable assignee shall have consented to the applicable amendment, waiver or consent.

 

A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

 

SECTION 8.16              Waiver of Jury Trial.  Each Loan Party, the Administrative Agent and the Lenders hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Agreement or the actions of the Administrative Agent or any Lender in the negotiation, administration, performance or enforcement thereof.

 

SECTION 8.17              Payments Set Aside.  To the extent that any payment by or on behalf of any Loan Party is made to the Administrative Agent or any Lender, or the Administrative Agent or any Lender exercises its right of set-off, and such payment or the proceeds of such set-off or any part thereof is subsequently invalidated, declared to be fraudulent

 

79


 

or preferential, set aside or required (including pursuant to any settlement entered into by the Administrative Agent or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such set-off had not occurred, and (b) each Lender severally agrees to pay to the Administrative Agent upon demand its applicable share (without duplication) of any amount so recovered from or repaid by the Administrative Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in effect.  The obligations of the Lenders under clause (b) of the preceding sentence shall survive the payment in full of the Obligations and the termination of this Agreement.

 

SECTION 8.18              Acknowledgment and Consent to Bail-In of EEA Financial Institutions.  Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any EEA Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the Write-Down and Conversion Powers of an EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:

 

(a)                                 the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an EEA Financial Institution; and

 

(b)                                 the effects of any Bail-In Action on any such liability, including, if applicable: (i)  a reduction in full or in part or cancellation of any such liability; (ii) a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such EEA Financial Institution, its parent entity, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or (iii) the variation of the terms of such liability in connection with the exercise of the Write-Down and Conversion Powers of any EEA Resolution Authority.

 

ARTICLE IX

 

GUARANTEE

 

SECTION 9.01              Guarantors.  Any time after the Effective Date, the Borrower, in consultation with the Administrative Agent, may cause any Subsidiary of the Borrower to guarantee the obligations of the Borrower hereunder by delivering to the Administrative Agent customary joinder documentation reasonably acceptable to the Administrative Agent, and pursuant to which such Person shall become a “Guarantor” for all purposes under this Agreement and each other Loan Document and shall be bound by all of the obligations and shall have all of the rights of a “Guarantor” under this Agreement and each other Loan Document including, without limitation, providing the guarantee of the Guaranteed Obligations as set forth in this Article IX.

 

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SECTION 9.02              Guarantee.  Upon becoming a Guarantor pursuant to Section 9.01, each Guarantor, on a joint and several basis, unconditionally guarantees (the undertaking of each Guarantor contained in this Article IX being the “Guarantee”) the punctual payment when due, whether at stated maturity, by acceleration or otherwise, of all Obligations of the Borrower now or hereafter existing under this Agreement, whether for principal, interest, fees, expenses or otherwise, which Obligations shall include such indebtedness, obligations, and liabilities which may be or hereafter become unenforceable or shall be an allowed or disallowed claim under any proceeding or case commenced by or against the Borrower under any Debtor Relief Laws, and shall include interest that accrues after the commencement of any proceeding under any Debtor Relief Laws (such obligations, collectively, being the “Guaranteed Obligations”), and any and all expenses (including counsel fees and expenses) incurred by the Administrative Agent or the Lenders in enforcing any rights under the Guarantee. Each Guarantee is a guaranty of payment and not of collection.  Upon becoming a Guarantor pursuant to Section 9.01, each Guarantor agrees that, as between each Guarantor and the Administrative Agent, the Guaranteed Obligations may be declared to be due and payable for purposes of the Guarantee notwithstanding any stay, injunction or other prohibition which may prevent, delay or vitiate any declaration as regards the Borrower and that in the event of a declaration or attempted declaration, the Guaranteed Obligations shall immediately become due and payable by Guarantors for purposes of the Guarantee.  Anything contained herein to the contrary notwithstanding, the obligations of each Guarantor hereunder at any time shall be limited to an aggregate amount equal to the largest amount that would not render such Guarantor’s obligations hereunder subject to avoidance as a fraudulent transfer or conveyance under Section 548 of the Bankruptcy Code (Title 11, United States Code) or any comparable provisions of any similar federal or state law.

 

SECTION 9.03              Guaranty Absolute.  Upon becoming a Guarantor pursuant to Section 9.01, each Guarantor guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of this Agreement, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Administrative Agent or the Lenders with respect thereto. The liability of each Guarantor under the Guarantee shall be absolute and unconditional irrespective of:

 

(a)                                 any lack of validity, enforceability or genuineness of any provision of this Agreement, any Guaranteed Obligations or any other agreement or instrument relating thereto;

 

(b)                                 any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations, or any other amendment or waiver of or any consent to departure from this Agreement;

 

(c)                                  any exchange, release or non-perfection of any collateral, or any release or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Guaranteed Obligations;

 

(d)                                 any law or regulation of any jurisdiction or any other event affecting any term of a Guaranteed Obligation; or

 

81


 

(e)                                  any other circumstance which might otherwise constitute a defense available to, or a discharge of, any Guarantor or the Borrower.

 

The Guarantee shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by the Administrative Agent or any Lender upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, all as though such payment had not been made.

 

SECTION 9.04              Waivers.

 

(a)                                 Upon becoming a Guarantor pursuant to Section 9.01, each Guarantor waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Guaranteed Obligations and the Guarantee and any requirement that the Administrative Agent or any Lender protect, secure, perfect or insure any security interest or lien or any property subject thereto or exhaust any right or take any action against the Borrower or any other Person or any collateral.

 

(b)                                 Upon becoming a Guarantor pursuant to Section 9.01, each Guarantor irrevocably waives any claims or other rights that it may now or hereafter acquire against the Borrower that arise from the existence, payment, performance or enforcement of the obligations of any Guarantor under the Guarantee, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of the Administrative Agent or any Lender against the Borrower or any collateral, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from the Borrower, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right.  If any amount shall be paid to any Guarantor in violation of the preceding sentence at any time prior to the later of the payment in full of the Guaranteed Obligations and all other amounts payable under the Guarantee and the Maturity Date, such amount shall be held in trust for the benefit of the Administrative Agent and the Lenders and shall forthwith be paid to the Administrative Agent to be credited and applied to the Guaranteed Obligations and all other amounts payable under the Guarantee, whether matured or unmatured, in accordance with the terms of this Agreement and the Guarantee, or to be held as collateral for any Guaranteed Obligations or other amounts payable under the Guarantee thereafter arising.  Upon becoming a Guarantor pursuant to Section 9.01, each Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by this Agreement and the Guarantee and that the waiver set forth in this Section 9.04(b) is knowingly made in contemplation of such benefits.

 

SECTION 9.05              Continuing Guaranty.  Each Guarantee is a continuing guaranty and shall (i) remain in full force and effect until payment in full of the Guaranteed Obligations (including any and all Guaranteed Obligations which remain outstanding after the Maturity Date) and all other amounts payable under the Guarantee, (ii) be binding upon each Guarantor and its successors and assigns, and (iii) inure to the benefit of and be enforceable by the Lenders, the Administrative Agent and their respective successors, transferees and assigns.

 

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SECTION 9.06              Release of Guarantors.  If (a) in compliance with the terms and provisions of this Agreement, any Guarantor ceases to constitute a Subsidiary of the Borrower or (b) after giving effect to the release of any Guarantor, there is no Default under this Agreement, then such Guarantor shall, in the discretion of the Borrower upon notice in writing to the Administrative Agent, automatically be released from its obligations under this Agreement or any other Loan Document, including the Guarantee set forth in this Article IX, and thereafter such Person shall no longer constitute a Guarantor under this Agreement or any other Loan Documents.

 

At the request of the Borrower, the Administrative Agent shall, at the Borrower’s expense, execute such documents as are necessary to acknowledge any such release in accordance with this Section 9.06, so long as the Borrower shall have provided the Administrative Agent a certificate, signed by a Responsible Officer of the Borrower, certifying as to satisfaction of the requirements set forth above and the release of such Guarantor’s Guarantee in compliance with this Agreement.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

83


 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.

 

 

ABBOTT LABORATORIES

 

 

 

 

 

 

 

By:

/s/ Brian B. Yoor

 

Name:

Brian B. Yoor

 

Title:

Executive Vice President, Finance and Chief Financial Officer

 

[Signature Page — Term Loan Agreement]

 


 

 

BANK OF AMERICA, N.A.,

 

as Administrative Agent

 

 

 

By:

/s/ Gerund N. Diamond

 

 

Name:

Gerund N. Diamond

 

 

Title:

Assistant Vice President

 

[Signature Page — Term Loan Agreement]

 


 

 

BANK OF AMERICA, N.A.

 

as a Lender

 

 

 

By:

/s/ Darren Merten

 

 

Name:

Darren Merten

 

 

Title:

Vice President

 

[Signature Page — Term Loan Agreement]

 

 

 

BARCLAYS BANK PLC,

 

as a Lender

 

 

 

 

 

By:

/s/ Ritam Bhalla

 

 

Name:

Ritam Bhalla

 

 

Title:

Director

 

[Signature Page — Term Loan Agreement]

 


 

 

MORGAN STANLEY BANK, N.A.,

 

as a Lender

 

 

 

 

 

By:

/s/ Michael King

 

 

Name:

Michael King

 

 

Title:

Authorized Signatory

 

[Signature Page — Term Loan Agreement]

 


 

 

BNP Paribas,

 

as a Lender

 

 

 

 

 

By:

/s/ Christopher Sked

 

 

Name:

Christopher Sked

 

 

Title:

Managing Director

 

 

 

By:

/s/ Ade Adedeji

 

 

Name:

Ade Adedeji

 

 

Title:

Vice President

 

[Signature Page — Term Loan Agreement]

 


 

 

CITIBANK, N.A.,

 

as a Lender

 

 

 

 

 

By:

/s/ Pranjal Gambhir

 

 

Name:

Pranjal Gambhir

 

 

Title:

Vice President

 

[Signature Page — Term Loan Agreement]

 


 

 

DEUTSCHE BANK AG NEW YORK

 

BRANCH,

 

as a Lender

 

 

 

 

 

By:

/s/ Ming K. Chu

 

 

Name:

Ming K. Chu

 

 

Title:

Director

 

 

 

By:

/s/ Virginia Cosenza

 

 

Name:

Virginia Cosenza

 

 

Title:

Vice President

 

[Signature Page — Term Loan Agreement]

 

 

 

SOCIETE GENERALE,

 

as a Lender

 

 

 

 

 

By:

/s/ Joseph Moreno

 

 

Name:

Joseph Moreno

 

 

Title:

Managing Director

 

[Signature Page — Term Loan Agreement]

 


 

 

THE BANK OF TOKYO-MITSUBISHI,

 

UFJ, LTD.,

 

as a Lender

 

 

 

 

 

By:

/s/ Jaime Johnson

 

 

Name:

Jaime Johnson

 

 

Title:

Director

 

[Signature Page — Term Loan Agreement]

 


 

 

HSBC Bank USA, N.A.,

 

as a Lender

 

 

 

 

 

By:

/s/ Iain Stewart

 

 

Name:

Iain Stewart

 

 

Title:

Managing Director

 

[Signature Page — Term Loan Agreement]

 


 

 

SANTANDER BANK, N.A.,

 

as a Lender

 

 

 

 

 

By:

/s/ Andres Barbosa

 

 

Name:

Andres Barbosa

 

 

Title:

Executive Director

 

[Signature Page — Term Loan Agreement]

 


 

 

Standard Chartered Bank,

 

as a Lender

 

 

 

 

 

By:

/s/ Daniel Mattern

 

 

Name:

Daniel Mattern

 

 

Title:

Associate Director

 

[Signature Page — Term Loan Agreement]

 

 

 

GOLDMAN SACHS BANK USA,

 

as a Lender

 

 

 

 

 

By:

/s/ Josh Rosenthal

 

 

Name:

Josh Rosenthal

 

 

Title:

Authorized Signatory

 

[Signature Page — Term Loan Agreement]

 


 

 

THE NORTHERN TRUST COMPANY,

 

as a Lender

 

 

 

 

 

By:

/s/ John Lascody

 

 

Name:

John Lascody

 

 

Title:

Vice President

 

[Signature Page — Term Loan Agreement]

 


 

 

BANCO BILBAO VIZCAYA

 

ARGENTARIA, S.A. NEW YORK

 

BRANCH,

 

as a Lender

 

 

 

 

 

By:

/s/ Diane Gigliotti

 

 

Name:

Diane Gigliotti

 

 

Title:

Director

 

 

 

By:

/s/ Cara Younger

 

 

Name:

Cara Younger

 

 

Title:

Director

 

[Signature Page — Term Loan Agreement]

 


 

 

ING BANK N.V., DUBLIN BRANCH,

 

as a Lender

 

 

 

 

 

By:

/s/ Sean Hassett

 

 

Name:

Sean Hassett

 

 

Title:

Director

 

 

 

By:

/s/ Cormac Langford

 

 

Name:

Cormac Langford

 

 

Title:

Director

 

[Signature Page — Term Loan Agreement]

 


 

 

INTESA SANPAOLO BANK

 

LUXEMBOURG S.A.,

 

as a Lender

 

 

 

 

 

By:

/s/ Antonio Greppi

 

 

Name:

Antonio Greppi

 

 

Title:

Head of Corporate & Financial Institutions

 

 

 

By:

/s/ Paolo Enrico Pernice

 

 

Name:

Paolo Enrico Pernice

 

 

Title:

Chief Financial Officer

 

[Signature Page — Term Loan Agreement]

 

 

 

Mizuho Bank (USA),

 

as a Lender

 

 

 

 

 

By:

/s/ Bertram H. Tang

 

 

Name:

Bertram H. Tang

 

 

Title:

Director & Team Leader

 

[Signature Page — Term Loan Agreement]

 


 

 

ROYAL BANK OF CANADA,

 

as a Lender

 

 

 

 

 

By:

/s/ Steven T. Bachman

 

 

Name:

Steven T. Bachman

 

 

Title:

Authorized Signatory

 

[Signature Page — Term Loan Agreement]

 


 

 

Svenska Handelsbanken AB (publ), New

 

York Branch,

 

as a Lender

 

 

 

 

 

By:

/s/ Steve Cox

 

 

Name:

Steve Cox

 

 

Title:

Senior Vice President

 

 

 

By:

/s/ Mark Emmett

 

 

Name:

Mark Emmett

 

 

Title:

Vice President

 

 

[Signature Page — Term Loan Agreement]

 


 

 

U.S. Bank National Association,

 

as a Lender

 

 

 

 

 

By:

/s/ David C. Mruk

 

 

Name:

David C. Mruk

 

 

Title:

SVP

 

[Signature Page — Term Loan Agreement]

 



Exhibit 10.89

 

EXECUTION VERSION

 

This FIRST AMENDMENT, dated as of September 29, 2017 (this “Amendment Agreement”), to that certain Term Loan Agreement, dated as of July 31, 2017 (as amended from time to time prior to the date hereof, the “Existing Credit Agreement”; and the Existing Credit Agreement as amended by the Amendments (as defined below), the “Amended Credit Agreement”), by and among Abbott Laboratories, as Borrower (the “Borrower”), the lenders party thereto (the “Lenders”), and Bank of America, N.A., as administrative agent (the “Administrative Agent”), is made by and among the Borrower, the Lenders and the Administrative Agent.  Unless otherwise defined herein, terms defined in the Amended Credit Agreement (as defined below) and used herein shall have the meanings given to them in the Amended Credit Agreement.

 

WHEREAS, the Effective Date occurred on July 31, 2017;

 

WHEREAS, the Borrower has requested certain amendments to the Existing Credit Agreement;

 

WHEREAS, in order to effect the requested amendments, the Borrower and the Lenders desire to amend, as of the Amendment Effective Date (as defined below), the Existing Credit Agreement, subject to the terms and conditions set forth herein;

 

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

Section 1.  Amendment of the Existing Credit Agreement.  Each of the parties hereto agrees that, subject to the satisfaction of the conditions set forth in Section 3 below, the Credit Agreement shall be amended to delete the stricken text (indicated textually in the same manner as the following example: stricken text) and to add the double-underlined text (indicated textually in the same manner as the following example:  double-underlined text) as set forth in the pages of the Credit Agreement attached as Exhibit A hereto.

 

Section 2.  Representations and Warranties.  To induce the Administrative Agent and the Lenders to enter into this Amendment Agreement, the Borrower hereby represents and warrants to the Administrative Agent and the Lenders on the date hereof that:

 

(a)   As of the Amendment Effective Date, no event has occurred and is continuing, or shall occur as a result of the occurrence of the Amendment Effective Date, that constitutes a Default.

 

(b)   Each of the representations and warranties of the Borrower set forth in Section 4.01 of the Amended Credit Agreement are true and correct in all material respects on and as of the Amendment Effective Date; provided, that to the extent that such representations and warranties specifically refer to an earlier date, they are true and correct in all material respects as of such earlier date; provided, further, that any representation and warranty that is qualified as to “materiality”, “Material Adverse Effect” or similar language shall be true and correct in all respects on the Amendment Effective Date or on such earlier date, as the case may be.

 


 

Section 3.  Effectiveness of this Amendment Agreement and the Amended Credit Agreement.  The effectiveness of this Amendment Agreement and the amendment of the Existing Credit Agreement set forth herein are all subject to the Administrative Agent’s (or its counsel’s) receipt of either (x) a counterpart of this Amendment Agreement signed on behalf of the Borrower, the Administrative Agent and each Lender or (y) customary written evidence reasonably satisfactory to the Administrative Agent (which may include telecopy or electronic transmission of a signed signature page of this Amendment Agreement) that such party has signed a counterpart of this Amendment Agreement (the date on which such condition shall first be satisfied, the “Amendment Effective Date”).

 

Section 4.  Effect of Amendment.

 

(a)        Except as expressly set forth herein or in the Amended Credit Agreement, this Amendment Agreement shall not by implication or otherwise limit, impair, constitute a waiver of or otherwise affect the rights and remedies of the Lenders or the Administrative Agent under the Existing Credit Agreement or any other Loan Document and shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Existing Credit Agreement or any other provision of the Existing Credit Agreement or of any other Loan Document, all of which, subject to the terms of the Amended Credit Agreement, are ratified and affirmed in all respects and shall continue in full force and effect.  Nothing herein shall be deemed to entitle the Borrower to a consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Existing Credit Agreement, Amended Credit Agreement or any other Loan Document in similar or different circumstances.

 

(b)        On and after the Amendment Effective Date, each reference to the “Credit Agreement” in any other Loan Document shall be deemed a reference to the Amended Credit Agreement.  This Amendment Agreement shall constitute a “Loan Document” for all purposes of the Amended Credit Agreement and the other Loan Documents.

 

Section 5.  Governing Law.  THIS AMENDMENT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER ANY APPLICABLE CONFLICT OF LAWS PRINCIPLES.

 

Section 6.  Counterparts.  This Amendment Agreement may be executed in any number of counterparts (and by different parties hereto in separate counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract.  Delivery of an executed counterpart of a signature page of this Amendment Agreement by telecopy or electronic transmission shall be as effective as delivery of a manually executed counterpart hereof.

 

Section 7.  Headings.  Section headings in this Amendment Agreement are for convenience of reference only, and shall not govern the interpretation of any of the provisions of this Amendment Agreement.

 

[Remainder of page intentionally blank; signature pages follow]

 

2


 

IN WITNESS WHEREOF, the parties hereto have executed this Amendment Agreement as of the date first written above.

 

 

ABBOTT LABORATORIES

 

 

 

 

 

By:

  /s/ Karen M. Peterson

 

 

Name:  Karen M. Peterson

 

 

Title:    Vice President, Treasurer

 

[Signature Page — First Amendment to Term Loan Agreement]

 


 

 

BANK OF AMERICA, N.A.,

 

as Administrative Agent

 

 

 

By:

  /s/ Gerund Diamond

 

 

Name:  Gerund Diamond

 

 

Title:     Assistant Vice President

 

[Signature Page — First Amendment to Term Loan Agreement]

 


 

 

BANK OF AMERICA, N.A.

 

as a Lender

 

 

 

By:

  /s/ Darren Merten

 

 

Name: Darren Merten

 

 

Title:   Vice President

 

[Signature Page — First Amendment to Term Loan Agreement]

 


 

 

Barclays Bank PLC,

 

as a Lender

 

 

 

By:

  /s/ Jake Lam

 

 

Name:  Jake Lam

 

 

Title:    Assistant Vice President

 

[Signature Page — First Amendment to Term Loan Agreement]

 


 

 

Morgan Stanley Bank, N.A.,

 

as a Lender

 

 

 

By:

  /s/ Alice Lee

 

 

Name: Alice Lee

 

 

Title:   Authorized Signatory

 

[Signature Page — First Amendment to Term Loan Agreement]

 

 

 

BNP PARIBAS,

 

as a Lender

 

 

 

 

 

By:

  /s/ Michael Pearce

 

 

Name:  Michael Pearce

 

 

Title:    Managing Director

 

 

 

 

 

 

 

By:

  /s/ Michael Hoffman

 

 

Name:  Michael Hoffman

 

 

Title:    Director

 

[Signature Page — First Amendment to Term Loan Agreement]

 


 

 

CITIBANK, N.A.,

 

as a Lender

 

 

 

 

 

By:

  /s/ Pranjal Gambhir

 

 

Name: Pranjal Gambhir

 

 

Title:   Vice President

 

[Signature Page — First Amendment to Term Loan Agreement]

 


 

 

DEUTSCHE BANK AG NEW YORK BRANCH,

 

as a Lender

 

 

 

 

 

By:

  /s/ Ming K. Chu

 

 

Name: Ming K. Chu

 

 

Title:   Director

 

 

 

 

 

 

 

By:

  /s/ Virginia Cosenza

 

 

Name: Virginia Cosenza

 

 

Title:   Vice President

 

[Signature Page — First Amendment to Term Loan Agreement]

 


 

 

SOCIETE GENERALE,

 

as a Lender

 

 

 

 

 

By:

  /s/ Joseph Moreno

 

 

Name: Joseph Moreno

 

 

Title:   Managing Director

 

[Signature Page — First Amendment to Term Loan Agreement]

 


 

 

THE BANK OF TOKYO-MITSUBISHI, UFJ, LTD.,

 

as a Lender

 

 

 

 

 

By:

  /s/ Jaime Johnson

 

 

Name: Jaime Johnson

 

 

Title:   Director

 

[Signature Page — First Amendment to Term Loan Agreement]

 


 

 

HSBC Bank USA, N.A.,

 

as a Lender

 

 

 

 

 

By:

  /s/ Roderick Feltzer

 

 

Name: Roderick Feltzer

 

 

Title:  Vice President

 

[Signature Page — First Amendment to Term Loan Agreement]

 


 

 

SANTANDER BANK, N.A.,

 

as a Lender

 

 

 

 

 

By:

  /s/ Andres Barbosa

 

 

Name: Andres Barbosa

 

 

Title:   Executive Director

 

[Signature Page — First Amendment to Term Loan Agreement]

 

 

 

Standard Chartered Bank,

 

as a Lender

 

 

 

 

 

By:

  /s/ Daniel Mattern

 

 

Name: Daniel Mattern

 

 

Title:   Associate Director

 

[Signature Page — First Amendment to Term Loan Agreement]

 


 

 

GOLDMAN SACHS BANK USA,

 

as a Lender

 

 

 

 

 

By:

  /s/ Chris Lam

 

 

Name: Chris Lam

 

 

Title:   Authorized Signatory

 

[Signature Page — First Amendment to Term Loan Agreement]

 


 

 

THE NORTHERN TRUST COMPANY,

 

as a Lender

 

 

 

 

 

By:

  /s/ John Lascody

 

 

Name: John Lascody

 

 

Title:   Vice President

 

[Signature Page — First Amendment to Term Loan Agreement]

 


 

 

BANCO BILBAO VIZCAYA ARGENTARIA, S.A. NEW YORK BRANCH,

 

as a Lender

 

 

 

 

 

By:

  /s/ Brian Crowley

 

 

Name: Brian Crowley

 

 

Title:   Managing Director

 

 

 

 

 

 

 

By:

  /s/ Cara Younger

 

 

Name: Cara Younger

 

 

Title:   Director

 

[Signature Page — First Amendment to Term Loan Agreement]

 


 

 

ING BANK N.V., DUBLIN BRANCH,

 

as a Lender

 

 

 

 

 

By:

  /s/ Cormac Langford

 

 

Name: Cormac Langford

 

 

Title:   Director

 

 

 

 

 

 

 

By:

  /s/ Sean Hassett

 

 

Name: Sean Hassett

 

 

Title:   Director

 

[Signature Page — First Amendment to Term Loan Agreement]

 


 

 

INTESA SANPAOLO BANK LUXEMBOURG S.A.,

 

as a Lender

 

 

 

 

 

By:

  /s/ Paolo Enrico Pernice

 

 

Name: Paolo Enrico Pernice

 

 

Title:   Chief Financial Officer

 

 

 

 

 

 

 

By:

  /s/ Cristiano Patalocchi

 

 

Name: Cristiano Patalocchi

 

 

Title:   Chief Risk Officer

 

[Signature Page — First Amendment to Term Loan Agreement]

 


 

 

Mizuho Bank (USA),

 

as a Lender

 

 

 

 

 

By:

  /s/ Bertram H. Tang

 

 

Name: Bertram H. Tang

 

 

Title:   Director & Team Leader

 

[Signature Page — First Amendment to Term Loan Agreement]

 

 

 

ROYAL BANK OF CANADA,

 

as a Lender

 

 

 

 

 

By:

  /s/ Steven T. Bachman

 

 

Name: Steven T. Bachman

 

 

Title:   Authorized Signatory

 

[Signature Page — First Amendment to Term Loan Agreement]

 


 

 

Svenska Handelsbanken AB (publ), New York Branch,

 

as a Lender

 

 

 

 

 

By:

/s/ Mark Emmett

 

 

Name: Mark Emmett

 

 

Title:   Vice President

 

 

 

 

 

 

 

By:

/s/ Steve Cox

 

 

Name: Steve Cox

 

 

Title:   Senior Vice President

 

[Signature Page — First Amendment to Term Loan Agreement]

 


 

 

U.S. Bank National Association,

 

as a Lender

 

 

 

 

 

By:

/s/ Ryan M. Black

 

 

Name: Ryan M. Black

 

 

Title:   AVP

 

[Signature Page — First Amendment to Term Loan Agreement]

 


 

EXHIBIT A

 

 

“St. Jude” means St. Jude Medical, Inc., a Minnesota corporation.

 

“St. Jude Acquisition” means the acquisition of St. Jude by the Borrower on January 4, 2017.

 

“St. Jude Transactions” means the St. Jude Acquisition and the financing transactions in connection therewith, the repayment of certain existing indebtedness of the Borrower and St. Jude and the payment of certain fees and expenses in connection therewith.

 

“Subsidiary” means, with respect to any Person, any corporation, partnership, joint venture, limited liability company, trust or estate of which (or in which) more than 50% of (a) the issued and outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits of such limited liability company, partnership or joint venture or (c) the beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person’s other Subsidiaries.

 

“Target Material Adverse Effect” means a “Material Adverse Effect” (as defined in the Alere Acquisition Agreement as in effect on April 13, 2017).

 

“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

 

“Termination Date” means the earliest to occur of (a) 11:59 p.m. New York City time on September 30,October 3, 2017, (b) the consummation of the Alere Acquisition without the use of the Facility and (c) the date of any termination in accordance with the terms of the Alere Acquisition Agreement of the Borrower’s obligations under the Alere Acquisition Agreement to consummate the Alere Acquisition.

 

“Total Capitalization” means Consolidated Debt plus Consolidated Net Worth.

 

“Type” means, with respect to a Loan, its character as a Base Rate Loan or a Eurodollar Rate Loan.

 

“United States” and “U.S.” each means the United States of America.

 

“U.S. Person” means any Person that is a “United States person” as defined in Section 7701(a)(30) of the Code.

 

“U.S. Tax Compliance Certificate” has the meaning specified in Section 2.16(e)(ii)(B)(III).

 

23


 

copies of the Organization Documents of the Borrower, and (to the extent such concept applies to such entity) certificates of good standing in the jurisdiction of organization of the Borrower.

 

(e)                                  The Administrative Agent shall have received, at least three (3) Business Days prior to the Effective Date, all documentation and other information required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including, without limitation, the PATRIOT Act, requested in writing by the Administrative Agent (on behalf of any Lender) at least ten (10) business days prior to the Effective Date.

 

Promptly upon the occurrence thereof, the Administrative Agent shall notify the Borrower and the Lenders that the Effective Date has occurred, and such notice shall be conclusive and binding.

 

SECTION 3.02              Conditions to Funding on the Closing Date. The obligation of each Lender to make a Loan in an amount equal to its Commitment on the Closing Date is subject to the satisfaction (or waiver in accordance with Section 8.01) of the following conditions on or prior to the Termination Date, and no other conditions:

 

(a)                                 The Effective Date shall have occurred.

 

(b)                                 The Administrative Agent shall have received for the Borrower (i) U.S. GAAP audited consolidated balance sheets and related statements of earnings, comprehensive income, shareholders’ equity and cash flows for the fiscal years ended December 31, 2016, December 31, 2015 and December 31, 2014, and for any subsequent fiscal year ended at least 60 days prior to the Closing Date and (ii) U.S. GAAP unaudited consolidated balance sheets and related statements of earnings, comprehensive income and cash flows for each subsequent fiscal quarter ended at least 40 days before the Closing Date (in each case, except as permitted by the rules promulgated by the U.S. Securities and Exchange Commission and subject to normal year-end adjustments and absence of footnotes). The Borrower’s filing of any required audited financial statements on Form 10-K or required unaudited financial statements on Form 10-Q will satisfy the requirements under clauses (b)(i) or (b)(ii), as applicable, of this paragraph. The Administrative Agent, on behalf of the Lenders, hereby acknowledges receipt of the financial statements in the foregoing clauses (b)(i) and (b)(ii) for the fiscal years ended December 31, 2016, December 31, 2015 and December 31, 2014 and the fiscal quarterquarters ended March 31, 2017 and June 30, 2017.

 

(c)                                  The Alere Acquisition shall have been, or shall substantially concurrently be, consummated in accordance with the terms of the Alere Acquisition Agreement as in effect on the Effective Date without giving effect to any amendments, modifications, supplements or waivers by the Borrower thereto or consents by the Borrower thereunder that are materially adverse to the Lenders without the Lead Arrangers’ prior written consent, it being understood that (i) any decrease in the cash portion of the consideration for the Alere Acquisition that is accompanied by a

 

44


 

dollar-for-dollar reduction in Commitments in respect of the Facility of not more than 15% of the total consideration for the Alere Acquisition shall be deemed to be not materially adverse to the Lenders, (ii) any increase in the cash portion of the consideration for the Alere Acquisition that, together with any other increases since July 7, 2017, exceeds 10% of the purchase price shall be deemed to be materially adverse to the Lenders and, (iii) any waiver or modification of Sections 8.06(v) and 8.15 of the Alere Acquisition Agreement (as in effect on April 13, 2017) shall be deemed to be materially adverse to the Lenders and (iv) to the extent constituting an amendment, modification, supplement or waiver by the Borrower to the Alere Acquisition Agreement or a consent by the Borrower thereunder, the Borrower’s election not to terminate or not to seek to terminate the Alere Acquisition Agreement pursuant to Section 7.01(b)(i) of the Alere Acquisition Agreement (as in effect on April 13, 2017) shall be deemed to be not materially adverse to the Lenders.

 

(d)                                      The Administrative Agent shall have received a solvency certificate from the chief financial officer of the Borrower in the form attached hereto as Exhibit C certifying that the Borrower and its Subsidiaries, on a consolidated basis after giving effect to the Alere Transactions, are Solvent.

 

(e)                                       The Administrative Agent shall have received a favorable opinion letter of (i) John A. Berry, Divisional Vice President, Associate General Counsel and Assistant Secretary of the Borrower and (ii) Wachtell, Lipton, Rosen & Katz, as New York counsel to the Borrower (or, in each case, such other counsel as may be reasonably acceptable to the Administrative Agent), in each case in the form agreed on or prior to the Effective Date.

 

(f)                                        Each of the Alere Acquisition Agreement Representations and the Specified Representations shall be true and correct in all material respects as of the Closing Date; provided that any representation and warranty that is qualified as to “materiality,” “Material Adverse Effect” or similar language shall be true and correct (after giving effect to any qualification therein) in all respects as of such date.

 

(g)                                       Since January 30, 2016, there shall not have been any effect, change, event or occurrence that, individually or in the aggregate, has had or would reasonably be expected to have a Target Material Adverse Effect.

 

(h)                                      No Event of Default specified in Section 6.01(a) or Section 6.01(e) of this Agreement with respect to the Borrower exists (after giving pro forma effect to the Alere Acquisition) or would result from the effectiveness of this Agreement.

 

(i)                                          The Administrative Agent shall have received a certificate of a Responsible Officer of the Borrower certifying as to the satisfaction of the conditions set forth in clauses (c), (f), (g) and (h) of this Section 3.02.

 

(j)                                         The Administrative Agent (on behalf of the Lead Arrangers and the Lenders) shall have received all fees and invoiced expenses required to be paid on or

 

45



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Exhibit 12

Abbott Laboratories
Computation of Ratio of Earnings to Fixed Charges
(Unaudited)
(dollars in millions)

 
   2017   2016   2015   2014   2013  

EARNINGS FROM CONTINUING OPERATIONS

   $ 353   $ 1,063   $ 2,606   $ 1,721   $ 1,988  

ADD (DEDUCT)

    
 		    
 		    
 		    
 		    
 		  

Taxes on earnings from continuing operations              

     1,878     350     577     797     53  

Amortization of capitalized interest, net of capitalized interest

     (11 )   (8 )   (3 )   (3 )   (6 )

Noncontrolling interest

     25     20     17     13     13  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

EARNINGS FROM CONTINUING OPERATIONS AS ADJUSTED

   $ 2,245   $ 1,425   $ 3,197   $ 2,528   $ 2,048  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

FIXED CHARGES

                                

Interest on long-term and short-term debt

     904     431     163     150     145  

Capitalized interest cost

     27     22     15     13     15  

Rental expense representative of an interest factor

     112     97     85     87     90  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

TOTAL FIXED CHARGES

   $ 1,043   $ 550   $ 263   $ 250   $ 250  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

TOTAL ADJUSTED EARNINGS FROM CONTINUING OPERATIONS AVAILABLE FOR PAYMENT OF FIXED CHARGES

   $ 3,288   $ 1,975   $ 3,460   $ 2,778   $ 2,298  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

RATIO OF EARNINGS FROM CONTINUING OPERATIONS TO FIXED CHARGES

     3.2     3.6     13.1     11.1     9.2  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

NOTE: For the purpose of calculating this ratio, (i) earnings from continuing operations have been calculated by adjusting earnings from continuing operations for taxes on earnings from continuing operations; interest expense; amortization of capitalized interest, net of capitalized interest; noncontrolling interests; and the portion of rentals representative of the interest factor, (ii) Abbott considers one-third of rental expense to be the amount representing return on capital, and (iii) fixed charges comprise total interest expense, including capitalized interest and such portion of rentals.



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Abbott Laboratories Computation of Ratio of Earnings to Fixed Charges (Unaudited) (dollars in millions)

Exhibit 21

 

SUBSIDIARIES OF ABBOTT LABORATORIES

 

The following is a list of subsidiaries of Abbott Laboratories as of December 31, 2017.  Abbott Laboratories is not a subsidiary of any other corporation.  Where ownership of a subsidiary is less than 100% by Abbott Laboratories or an Abbott Laboratories’ subsidiary, such has been noted by an asterisk (*).

 

Domestic Subsidiaries

 

Incorporation

Abbott Biologicals, LLC

 

Delaware

Abbott Cardiovascular Inc.

 

Delaware

Abbott Cardiovascular Systems Inc.

 

California

Abbott Delaware Inc.

 

Delaware

Abbott Diabetes Care Inc.

 

Delaware

Abbott Diabetes Care Sales Corporation

 

Delaware

Abbott Equity Investments LLC

 

Delaware

Abbott Health Products, LLC

 

Delaware

Abbott Holdings LLC

 

Delaware

Abbott Informatics Corporation

 

Florida

Abbott International LLC

 

Delaware

Abbott Laboratories Inc.

 

Delaware

Abbott Laboratories International LLC

 

Illinois

Abbott Laboratories Pacific Ltd.

 

Illinois

Abbott Laboratories Residential Development Fund, Inc.

 

Illinois

Abbott Laboratories Services Corp.

 

Illinois

Abbott Management LLC

 

Delaware

Abbott Molecular Inc.

 

Delaware

Abbott Nutrition Manufacturing Inc.

 

Delaware

Abbott Point of Care Inc.

 

Delaware

Abbott Procurement LLC

 

Delaware

Abbott Products Operations, LLC

 

Delaware

Abbott Resources Inc.

 

Delaware

Abbott Resources International Inc.

 

Delaware

Abbott Universal LLC

 

Delaware

Abbott Vascular Inc.

 

Delaware

Abbott Vascular Solutions Inc.

 

Indiana

Abbott Ventures Inc.

 

Delaware

Advanced Neuromodulation Systems, Inc.

 

Texas

AGA Medical Corporation

 

Minnesota

AGA Medical Holdings, Inc.

 

Delaware

Alere Connect, LLC

 

Delaware

Alere Holdco, Inc.

 

Delaware

Alere Home Monitoring, Inc.

 

Delaware

Alere Inc.

 

Delaware

Alere Informatics, Inc.

 

Virginia

Alere International Holding Corp.

 

Delaware

Alere North America, LLC

 

Delaware

Alere Phoenix ACQ, Inc.

 

Delaware

Alere San Diego, Inc.

 

Delaware

Alere Scarborough, Inc.

 

Delaware

Alere Toxicology Services, Inc.

 

Louisiana

Alere Toxicology, Inc.

 

Florida

Alere US Holdings, LLC

 

Delaware

Amedica Biotech, Inc.

 

California

Ameditech Inc.

 

California

American Medical Supplies, Inc.

 

Florida

AML Medical, LLC

 

Delaware

APK Advanced Medical Technologies LLC

 

Georgia

Arriva Medical, LLC

 

Florida

ATS Laboratories, Inc.

 

Delaware

Avee Laboratories Inc.

 

Florida

Bioabsorbable Vascular Solutions, Inc.

 

Delaware

Biohealth LLC

 

Delaware

Biosite Incorporated

 

Delaware

Branan Medical Corporation

 

Nevada

California Property Holdings III LLC

 

California

California Property Holdings III Trust

 

Delaware

CardioMEMS LLC

 

Delaware

Continuum Services LLC

 

Delaware

Epocal (US), Inc.

 

Delaware

eScreen, Inc.

 

Delaware

Evalve International, Inc.

 

Delaware

Evalve, Inc.

 

Delaware

First Check Diagnostics, LLC

 

Delaware

Fournier Pharma Corp.

 

Delaware

Global Analytical Development LLC

 

Florida

Hi-Tronics Designs, Inc.

 

New Jersey

Ibis Biosciences LLC

 

Delaware

 


 

IDEV Technologies, Inc.

 

Delaware

IMTC Technologies, Inc.

 

Delaware

Innovacon, Inc.

 

Delaware

Instant Tech Subsidiary Acquisition Inc.

 

Delaware

Instant Technologies, Inc.

 

Virginia

Integrated Vascular Systems, Inc.

 

Delaware

Inverness Medical Innovations SK, LLC

 

Delaware

Inverness Medical Investments, LLC

 

Delaware

Inverness Medical, LLC

 

Delaware

Ionian Technologies, LLC

 

Delaware

Irvine Biomedical, Inc.

 

California

Laboratory Specialists of America, Inc.

 

Oklahoma

Lake Forest Investments LLC

 

Delaware

Lightlab Imaging, Inc.

 

Delaware

MediGuide, LLC

 

Delaware

Midwest Properties LLC

 

Delaware

Murex Diagnostics, Inc.

 

Delaware

Natural Supplement Association, Incorporated

 

Colorado

NeuroTherm LLC

 

Delaware

North Shore Properties, Inc.

 

Delaware

Pacesetter, Inc.

 

Delaware

PBM-Selfcare, LLC

 

Delaware *

PDD II, LLC

 

Delaware

PDD, LLC

 

Delaware

Pembrooke Occupational Health, Inc.

 

Virginia

Quality Assured Services, Inc.

 

Florida

Redwood Toxicology Laboratory, Inc.

 

California

RF Medical Holdings LLC

 

Delaware

RTL Holdings, Inc.

 

Delaware

Sealing Solutions, Inc.

 

Georgia

Selfcare Technology, Inc.

 

Delaware

SJM International, Inc.

 

Delaware

SJM Thunder Holding Company

 

Delaware

SPDH, Inc.

 

Delaware

Spinal Modulation LLC

 

Delaware

St. Jude Medical ATG, Inc.

 

Minnesota

St. Jude Medical Business Services, Inc.

 

Delaware

St. Jude Medical Europe, Inc.

 

Delaware

St. Jude Medical S.C., Inc.

 

Minnesota

St. Jude Medical, Atrial Fibrillation Division, Inc.

 

Minnesota

St. Jude Medical, Cardiology Division, Inc.

 

Delaware

St. Jude Medical, LLC

 

Delaware

Standing Stone, LLC

 

Delaware

Swan-Myers, Incorporated

 

Indiana

TC1 LLC

 

Delaware

Tendyne Holdings, Inc.

 

Delaware

Tendyne Medical, Inc.

 

Delaware

Thoratec Delaware LLC

 

Delaware

Thoratec LLC

 

California

Tobal Products Incorporated

 

Illinois

Topera, Inc.

 

Delaware

US CD LLC

 

Delaware *

X Technologies Inc.

 

Delaware

ZonePerfect Nutrition Company

 

Delaware

 

 

 

Foreign Subsidiaries

 

Incorporation

Abbott Products Algerie EURL

 

Algeria

Abbott Laboratories Argentina Sociedad Anónima

 

Argentina

Alere S.A.

 

Argentina

Atlas Farmacéutica S.A.

 

Argentina

Laboratorio Internacional Argentino S.A.

 

Argentina

Metropolitana Farmacéutica S.A.

 

Argentina

Murex Argentina S.A.

 

Argentina *

Novamedi S.A.

 

Argentina *

Polygon Labs S.A.

 

Argentina

St. Jude Medical Argentina S.A.

 

Argentina

Abbott Australasia Pty Ltd

 

Australia

Alere Holdings Pty Limited

 

Australia

Inverness Medical Innovations Australia Pty, Ltd.

 

Australia

St. Jude Medical Australia Pty. Ltd.

 

Australia

Abbott Gesellschaft m.b.H.

 

Austria

Abbott Medical Austria Ges.m.b.H.

 

Austria

Alere GmbH

 

Austria

Normann Pharma-Handels GmbH

 

Austria

St. Jude Medical Export Ges.m.b.H.

 

Austria

 


 

W&R Pharma Handels GmbH

 

Austria

Abbott Bahamas Overseas Businesses Corporation

 

Bahamas

Abbott Holdings Limited

 

Bahamas

Abbott Laboratories (Bangladesh) Limited

 

Bangladesh *

Alere Bangladesh Limited

 

Bangladesh *

Murex Diagnostics International Inc.

 

Barbados

Abbott Belgian Investments SPRL

 

Belgium

Abbott S.A.

 

Belgium

Abbott Vascular International BVBA

 

Belgium

AGA Medical Belgium SPRL

 

Belgium

Alere Health BVBA

 

Belgium

Alere Medical BVBA

 

Belgium

Endocardial Solutions NV/SA

 

Belgium

SJM Coordination Center BVBA

 

Belgium

St. Jude Medical Belgium

 

Belgium

Abbott Bermuda Holding Ltd.

 

Bermuda

Abbott Diagnostics International, Ltd.

 

Bermuda

Abbott Healthcare (Puerto Rico) Ltd.

 

Bermuda

Abbott International Holdings Limited

 

Bermuda

Abbott Ireland

 

Bermuda

Abbott Strategic Opportunities Limited

 

Bermuda

Alere Holdings Bermuda Limited

 

Bermuda

Andland Overseas Ltd.

 

Bermuda

ATS Bermuda Holdings Limited

 

Bermuda

Pharmatech Boliviana, S.A.

 

Bolivia

Abbott društvo sa ogranicenom odgovornošcu za trgovinu i usluge [Abbott d.o.o. (Bosnia & Herzegovina)]

 

Bosnia and Herzegovina

Abbott Laboratórios do Brasil Ltda.

 

Brazil

Farmacologia Em Aquicultura Veterinária Ltda.

 

Brazil

St. Jude Medical Brasil Ltda.

 

Brazil

Alere S/A

 

Brazil *

American Pharmacist Inc.

 

British Virgin Islands

Rich Horizons International Limited

 

British Virgin Islands

Abbott (Cambodia) LLC

 

Cambodia

Abbott Informatics Canada, Inc

 

Canada

Abbott International Corporation

 

Canada

Abbott Laboratories, Limited - Laboratoires Abbott, Limitée

 

Canada

Abbott Point of Care Canada Limited

 

Canada

Abbott Products Canada Inc.

 

Canada

Abbott Products Inc.

 

Canada

Alere ULC

 

Canada

eScreen Canada ULC

 

Canada

Inverness Canadian Acquisition Corporation

 

Canada

St. Jude Medical Canada, Inc.

 

Canada

Abbott Laboratories (Chile) Holdco (Dos) SpA

 

Chile

Abbott Laboratories (Chile) Holdco SpA

 

Chile

Abbott Laboratories de Chile Limitada

 

Chile

Aquagestion Capacitación S.A.

 

Chile

Aquagestion S.A.

 

Chile

CFR Chile S.A.

 

Chile

Esprit de Vie S.A.

 

Chile

Farmacología en Aquacultura Veterinaria FAV S.A.

 

Chile

Igloo Zone Chile S.A.

 

Chile

Instituto de Criopreservación de Chile S.A.

 

Chile

Inversiones K2 SpA

 

Chile

Laboratorios Lafi Limitada

 

Chile

Laboratorios Recalcine S.A.

 

Chile

Novasalud.com S.A.

 

Chile

Recben Xenerics Farmaceutica Limitada

 

Chile

Antares S.A.

 

Chile *

Banco de Vida S.A.

 

Chile *

Bioalgae S.A.

 

Chile *

Consorcio Tecnológico en Biomedicina Clinico-Molecular S.A.

 

Chile *

Dextech S.A.

 

Chile *

Vida Cell Inversiones S.A.

 

Chile *

Vida Cell S.A.

 

Chile *

Abbott (Guangzhou) Nutritionals Co., Ltd.

 

China

Abbott (Jiaxing) Nutrition Co., Ltd.

 

China

Abbott Laboratories Trading (Shanghai) Co., Ltd.

 

China

Abbott Medical Devices Manufacture Trading (Shanghai) Company Limited

 

China

Abbott Medical Devices Trading (Shanghai) Co., Ltd.

 

China

ABON Biopharm (Hangzhou) Co., Ltd.

 

China

Alere (Shanghai) Diagnostics Co., Ltd.

 

China *

Alere (Shanghai) Healthcare Management Co., Ltd.

 

China

Alere (Shanghai) Medical Sales Co., Ltd.

 

China

Alere (Shanghai) Technology Co., Ltd.

 

China

Alere China Co., Ltd.

 

China

 


 

Inverness Medical (Beijing) Co., Ltd.

 

China

Shandong Abbott Dairy Product Co., Ltd.

 

China

Shanghai Abbott Medical Devices Science and Technology Co., Ltd.

 

China

Shanghai Abbott Pharmaceutical Co., Ltd.

 

China

Shanghai Si Fa Pharmaceutical Company Limited

 

China

St. Jude Medical (Shanghai) Co., Ltd.

 

China

Abbott Laboratories de Colombia, S.A.

 

Colombia

Alere Colombia S.A.

 

Colombia

American Generics S.A.S.

 

Colombia

Distribuciones Uquifa S.A.S.

 

Colombia

Focus Pharmaceutical S.A.S.

 

Colombia

Laboratorio Franco Colombiano Lafrancol S.A.S.

 

Colombia

Laboratorio Synthesis S.A.S.

 

Colombia

Laboratorios Naturmedik S.A.S.

 

Colombia

Laboratorios Pauly Pharmaceutical S.A.S.

 

Colombia

Lafrancol Internacional S.A.S

 

Colombia

St. Jude Medical Colombia, Ltda.

 

Colombia

Abbott Healthcare Costa Rica, S.A.

 

Costa Rica

Abbott Vascular Limitada

 

Costa Rica

Gynopharm Sociedad Anonima

 

Costa Rica

St. Jude Medical Costa Rica Limitada

 

Costa Rica

Abbott Laboratories d.o.o.

 

Croatia

Abbott Overseas Cyprus Limited

 

Cyprus

Arvis Investments Limited

 

Cyprus

Abbott Laboratories, s.r.o.

 

Czech Republic

Alere s.r.o.

 

Czech Republic

Abbott Laboratories A/S

 

Denmark

Abbott Medical Danmark A/S

 

Denmark

Alere A/S

 

Denmark

Inversiones Komodo, S.R.L.

 

Dominican Republic

Lafrancol Dominicana, S.A.S.

 

Dominican Republic

Abbott Laboratorios del Ecuador Cia. Ltda.

 

Ecuador

Fadapharma del Ecuador S.A.

 

Ecuador

Farmacologia en Aquacultura Veterinaria FAV Ecuador S.A.

 

Ecuador

Laboratorio Franco Colombiano del Ecuador S.A.

 

Ecuador

Laboratorios Transpharm S.A.

 

Ecuador

Nutravida S.A.

 

Ecuador

Western Pharmaceuticals S.A.

 

Ecuador

Abbott Healthcare LLC

 

Egypt

Abbott Limited Egypt LLC

 

Egypt

Abbott Products Egypt LLC

 

Egypt

Abbott Products Limited

 

Egypt

Abbott Sociedad Anonima de Capital Variable

 

El Salvador

CFR Interamericas EL Salvador, Sociedad Anónima de Capital Variable

 

El Salvador

St. Jude Medical Estonia OU

 

Estonia

Abbott Medical Finland Oy

 

Finland

Abbott Oy

 

Finland

Alere Oy Ab

 

Finland

Abbott France S.A.S.

 

France

Abbott Informatics France

 

France

Abbott Medical France SAS

 

France

Abbott Products Distribution SAS

 

France

Alere S.A.S.

 

France

Laboratoires Fournier S.A.S.

 

France

Orgenics France S.A.S.

 

France

Vivalsol

 

France

Abbott Diagnostics GmbH

 

Germany

Abbott GmbH & Co. KG

 

Germany

Abbott Holding GmbH

 

Germany

Abbott Informatics Germany GmbH

 

Germany

Abbott Laboratories GmbH

 

Germany

Abbott Management GmbH

 

Germany

Abbott Medical GmbH

 

Germany

Abbott Vascular Deutschland GmbH

 

Germany

Abbott Vascular Instruments Deutschland GmbH

 

Germany

Alere Diagnostics GmbH

 

Germany

Alere DoA Holding GmbH

 

Germany

Alere GmbH

 

Germany

Alere Holding GmbH

 

Germany

Alere Technologies GmbH

 

Germany

Diagnostik Nord GmbH

 

Germany

Fournier Pharma GmbH

 

Germany

Gabmed GmbH

 

Germany

IDev Technologies GmbH in Liquidation

 

Germany

 


 

Topera GmbH in Liquidation

 

Germany

Abbott Established Products Holdings (Gibraltar) Limited

 

Gibraltar

Abbott Holding (Gibraltar) Limited

 

Gibraltar

Abbott Holding Subsidiary (Gibraltar) Limited

 

Gibraltar

Abbott Laboratories(Hellas) Societe Anonyme

 

Greece

SJM Ελλάς Εμπορική Εταιρεία Περιορισμένης Ευθύνης” [SJM Hellas Limited Liability Trading Company (Greece)]

 

Greece

Abbott Laboratorios, S.A.

 

Guatemala

Lafrancol Guatemala S.A. Sociedad Anónima

 

Guatemala

Negocios Denia, Sociedad Anónima

 

Guatemala

Comercializadora y Distribuidora CFR Interamericas Honduras S.A.

 

Honduras

Abbott Informatics Asia Pacific Limited

 

Hong Kong

Abbott Laboratories Limited

 

Hong Kong

Alere HK Holdings, Limited

 

Hong Kong

Inverness Medical Innovations Hong Kong Limited

 

Hong Kong

Lung Fung Hong (China) Limited

 

Hong Kong

St. Jude Medical (Hong Kong) Limited

 

Hong Kong

Abbott Hungary Korlátolt Felelősségű Társaság

 

Hungary

St.Jude Medical Orvostechnikai Eszköz Importáló Nagy- és Kiskereskedelmi Korlátolt Felelősségű Társaság [St. Jude Medical Kft.]

 

Hungary

Abbott Healthcare Private Limited

 

India

Abbott India Limited

 

India *

Alere Medical Private Limited

 

India

Inverness Medical Shimla Private Limited

 

India

St. Jude Medical India Private Limited

 

India

PT Alere Health

 

Indonesia

PT. Abbott Products Indonesia

 

Indonesia

PT. Abbott Indonesia

 

Indonesia *

Abbott Ireland Limited

 

Ireland

Abbott Laboratories Vascular Enterprises

 

Ireland

Abbott Laboratories, Ireland, Limited

 

Ireland

Abbott Mature Products International Unlimited Company

 

Ireland

Abbott Mature Products Management Limited

 

Ireland

Abbott Medical Ireland Limited

 

Ireland

Abbott Nutrition Limited

 

Ireland

Abbott Products Unlimited Company

 

Ireland

Alere International Limited

 

Ireland

Alere Technologies Holdings Limited

 

Ireland

Apica Cardiovascular Limited

 

Ireland

Salviac Limited

 

Ireland

Abbott Informatics Technologies Ltd

 

Israel

Abbott Medical Laboratories LTD

 

Israel

Alere Connected Health Ltd.

 

Israel

MediGuide Ltd.

 

Israel

Orgenics Ltd.

 

Israel *

Abbott Medical Italia S.p.A.

 

Italy

Abbott S.r.l.

 

Italy

Alere S.r.l.

 

Italy

Alere Toxicology S.r.l.

 

Italy

Abbott West Indies Limited

 

Jamaica *

Abbott Japan Co., Ltd.

 

Japan

Abbott Vascular Japan Co., Ltd

 

Japan

St. Jude Medical Asia Pacific Holdings GK

 

Japan

St. Jude Medical Japan Co,. Ltd.

 

Japan

アリーアメディカル株式会社 [Alere Medical Co., Ltd.]

 

Japan

Abbott Kazakhstan Limited Liability Partnership

 

Kazakhstan

Veropharm Limited Liability Partnership

 

Kazakhstan

Abbott Korea Limited

 

Republic of Korea

St. Jude Medical Korea YH

 

Republic of Korea

에이엘알홀딩스 유한회사 [ALR Holdings]

 

Republic of Korea

엘리어헬스케어 주식회사 [Alere Healthcare Inc.]

 

Republic of Korea

주식회사 에스디 [Standard Diagnostics, Inc.]

 

Republic of Korea

“Abbott Laboratories Baltics”

 

Latvia

Abbott Middle East S.A.R.L.

 

Lebanon

UAB “Abbott Laboratories”

 

Lithuania

UAB “St. Jude Medical Baltic”

 

Lithuania

Abbott Bulgaria Luxembourg S.à r.l.

 

Luxembourg

Abbott Healthcare Luxembourg S.à r.l.

 

Luxembourg

Abbott Holding Subsidiary (Gibraltar) Limited Luxembourg S.C.S.

 

Luxembourg

Abbott International Luxembourg S.à r.l.

 

Luxembourg

Abbott Investments Luxembourg S.à r.l.

 

Luxembourg

Abbott Nederland Luxembourg S.à r.l.

 

Luxembourg

Abbott Overseas Luxembourg S.à r.l.

 

Luxembourg

Abbott Poland Luxembourg S.à r.l.

 

Luxembourg

Abbott Products Luxembourg S.à r.l.

 

Luxembourg

Abbott South Africa Luxembourg S.à r.l.

 

Luxembourg

St. Jude Medical International Holding

 

Luxembourg

 


 

St. Jude Medical Luxembourg

 

Luxembourg

St. Jude Medical Luxembourg Holding II

 

Luxembourg

St. Jude Medical Luxembourg Holding NT

 

Luxembourg

St. Jude Medical Luxembourg Holding SMI S.à r.l.

 

Luxembourg

St. Jude Medical Luxembourg Holding TC S.à r.l.

 

Luxembourg

Abbott Laboratories (Malaysia) Sdn. Bhd.

 

Malaysia

Alere Health Sdn Bhd

 

Malaysia

St. Jude Medical (Malaysia) Sdn. Bhd.

 

Malaysia

St. Jude Medical Operations (Malaysia) Sdn. Bhd.

 

Malaysia

Yissum Holding Limited

 

Malta

Abbott Laboratories de México, S.A. de C.V.

 

Mexico

SJ Medical Mexico, S de R.L. de C.V.

 

Mexico

St. Jude Medical Mexico Business Services, S. de R.L. de C.V.

 

Mexico

Abbott Morocco SARL

 

Morocco

Abbott Laboratories (Mozambique), Limitada

 

Mozambique

Abbott B.V.

 

Netherlands

Abbott Biologicals B.V.

 

Netherlands

Abbott Healthcare B.V.

 

Netherlands

Abbott Healthcare Products B.V.

 

Netherlands

Abbott Holdings B.V.

 

Netherlands

Abbott Informatics Netherlands B.V.

 

Netherlands

Abbott Knoll Investments B.V.

 

Netherlands

Abbott Laboratories B.V.

 

Netherlands

Abbott Laboratories Finance B.V.

 

Netherlands

Abbott Laboratories Products B.V.

 

Netherlands

Abbott Logistics B.V.

 

Netherlands

Abbott Nederland C.V.

 

Netherlands

Abbott Netherlands Investments B.V.

 

Netherlands

Abbott Products B.V.

 

Netherlands

Abbott Vascular Netherlands B.V.

 

Netherlands

Alere Health B.V.

 

Netherlands

Alere Health Services B.V.

 

Netherlands *

Brandex Europe C.V.

 

Netherlands

Duphar International Research B.V.

 

Netherlands

Framed B.V.

 

Netherlands

IDev Technologies B.V. in liquidation

 

Netherlands

IMTC Finance B.V.

 

Netherlands

IMTC Holdings B.V.

 

Netherlands

Nether Pharma N.P. C.V.

 

Netherlands

Orgenics International Holdings B.V.

 

Netherlands

St. Jude Medical Holdings B.V.

 

Netherlands

St. Jude Medical Nederland B.V.

 

Netherlands

Abbott Laboratories NZ Limited

 

New Zealand

Alere Limited (New Zealand)

 

New Zealand

St. Jude Medical New Zealand Limited

 

New Zealand

CFR Interamericas Nicaragua, Sociedad Anónima

 

Nicaragua

Alere Healthcare Nigeria Limited

 

Nigeria

Abbott Medical Norway AS

 

Norway

Abbott Norge AS

 

Norway

Alere AS

 

Norway

Alere Technologies AS

 

Norway

Axis-Shield AD III AS

 

Norway

Axis-Shield AD IV AS

 

Norway

Axis-Shield AS

 

Norway

Scanax AS

 

Norway

Abbott Laboratories (Pakistan) Limited

 

Pakistan *

Alere Medical Pakistan (Private) Limited

 

Pakistan

Abbott Laboratories, C.A.

 

Panama

Abbott Overseas, S.A.

 

Panama

Caripharm Inc.

 

Panama

CFR Interamericas Panamá S.A.

 

Panama

Forestcreek Overseas S.A.

 

Panama

Golnorth Investments S.A.

 

Panama

Gynopharm de Centroamérica S.A.

 

Panama

Ramses Business Corp.

 

Panama

Saboya Enterprises Corporation

 

Panama

Fada Pharma Paraguay Sociedad Anonima

 

Paraguay

Pharma International Sociedad Anonima

 

Paraguay

Abbott Laboratories Sociedad Anónima

 

Peru

Farmindustria S.A.

 

Peru

Inmobiliaria Naknek S.A.C.

 

Peru

Lafrancol Perú S.R.L

 

Peru

Neosalud S.A.C.

 

Peru

Abbott Laboratories (Philippines)

 

Philippines

Abbott Products (Philippines), Inc.

 

Philippines

 


 

Arriva Medical Philippines, Inc.

 

Philippines

Union-Madison Realty Company, Inc.

 

Philippines *

Alere Philippines, Inc.

 

Philippines *

Abbott Holdings Poland Spółka z ograniczoną odpowiedzialnością

 

Poland

Abbott Laboratories Poland Spółka z ograniczoną odpowiedzialnością

 

Poland

Abbott Medical spółka z ograniczoną odpowiedzialnością

 

Poland

Abbott Laboratórios, Lda

 

Portugal

Abbott Medical (Portugal) Distribuicao de Produtos Medicos Lda

 

Portugal

Alere Lda

 

Portugal

Abbott Laboratories (Puerto Rico) Incorporated

 

Puerto Rico

St. Jude Medical Puerto Rico LLC

 

Puerto Rico

Abbott Products Romania S.R.L.

 

Romania

Abbott Products Limited Liability Company

 

Russian Federation

Garden Hills LLC

 

Russian Federation

Limited Liability Company “VEROPHARM”

 

Russian Federation

Limited liability company Abbott Laboratories

 

Russian Federation

LLC “VeroInPharm”

 

Russian Federation

OJSC “Voronezhkhimpharm”

 

Russian Federation

SC “VEROPHARM”

 

Russian Federation

Abbott Saudi Arabia Trading Company

 

Saudi Arabia *

St. Jude Medical Balkan d.o.o.

 

Serbia

Abbott Informatics Singapore Pte. Limited

 

Singapore

Abbott Laboratories (Singapore) Private Limited

 

Singapore

Abbott Manufacturing Singapore Private Limited

 

Singapore

Abbott Operations Singapore Pte. Ltd.

 

Singapore

Alere Pte Ltd

 

Singapore

St. Jude Medical (Singapore) Pte. Ltd.

 

Singapore

Abbott Laboratories Slovakia s.r.o.

 

Slovakia

Abbott Laboratories družba za farmacijo in diagnostiko d.o.o. [Abbott Laboratories d.o.o. (Slovenia)]

 

Slovenia

Abbott Laboratories South Africa (Pty) Ltd.

 

South Africa

Alere Healthcare (Pty) Limited

 

South Africa

Murex Biotech South Africa

 

South Africa

Pantech (RF) (PTY) LTD

 

South Africa

Abbott Doral Investments, S.L.

 

Spain

Abbott Informatics Spain, S.A.

 

Spain

Abbott Laboratories, S.A.

 

Spain

Abbott Medical España, S.A.

 

Spain

Abbott Products (Spain), S.L.U.

 

Spain

Alere Healthcare, S.L.

 

Spain

Alere Spain, S.L.

 

Spain

Farmaceutica Mont Blanc, S.L.

 

Spain

Igloo Zone, S.L.

 

Spain

Omnilab Iberia, Sociedad Limitada

 

Spain

Abbott Medical Sweden AB

 

Sweden

Abbott Scandinavia AB

 

Sweden

Alere AB

 

Sweden

Alere Toxicology AB

 

Sweden

Colibri Medical Aktiebolag

 

Sweden

European Drug Testing Service EDTS AB

 

Sweden

St. Jude Medical AB

 

Sweden

St. Jude Medical Systems AB

 

Sweden

Abbott AG

 

Switzerland

Abbott Finance Company SA

 

Switzerland

Abbott Laboratories SA

 

Switzerland

Abbott Medical (Schweiz) AG

 

Switzerland

Abbott Products Operations AG

 

Switzerland

Alere GmbH

 

Switzerland

Alere Switzerland GmbH

 

Switzerland

St. Jude Medical GVA Sàrl

 

Switzerland

Thoratec Switzerland GmbH

 

Switzerland

SPD Swiss Precision Diagnostics GmbH

 

Switzerland *

Alere Health Corp.

 

Taiwan Province of China

St. Jude Medical Taiwan Co.

 

Taiwan Province of China

Abbott Fund Tanzania Limited

 

Tanzania

Abbott Laboratories Limited

 

Thailand

St. Jude Medical (Thailand) Co., Ltd.

 

Thailand

Abbott Products Tunisie S.A.R.L.

 

Tunisia

Abbott Laboratuarlari Ithalat Ihracat ve Ticaret Ltd.Sti

 

Turkey

St. Jude Medical Turkey Medikal Ürünler Ticaret Limited Sirketi

 

Turkey

Limited Liability Company “Abbott Ukraine”

 

Ukraine

Товариство з обмеженою відповідальністю «Верофарм» (ТОВ «Верофарм») [Veropharm LLC (Ukraine)]

 

Ukraine

St. Jude Medical Middle East DMCC

 

United Arab Emirates

Abbott (UK) Finance Limited

 

United Kingdom

Abbott (UK) Holdings Limited

 

United Kingdom

Abbott Asia Holdings Limited

 

United Kingdom

 


 

Abbott Asia Investments Limited

 

United Kingdom

Abbott Australasia Holdings Limited

 

United Kingdom

Abbott Capital India Limited

 

United Kingdom

Abbott Diabetes Care Limited

 

United Kingdom

Abbott Equity Holdings Unlimited

 

United Kingdom

Abbott Healthcare Products Ltd

 

United Kingdom

Abbott Iberian Investments (2) Limited

 

United Kingdom

Abbott Iberian Investments Limited

 

United Kingdom

Abbott Informatics Europe Limited

 

United Kingdom

Abbott Laboratories Limited

 

United Kingdom

Abbott Laboratories Trustee Company Limited

 

United Kingdom

Abbott Vascular Devices (2) Limited

 

United Kingdom

Abbott Vascular Devices Limited

 

United Kingdom

Alere AS Holdings Limited

 

United Kingdom

Alere BBI Holdings Limited

 

United Kingdom

Alere Connected Health Limited

 

United Kingdom

Alere Healthcare Connections Limited

 

United Kingdom

Alere Limited

 

United Kingdom

Alere Technologies Limited

 

United Kingdom

Alere Toxicology plc

 

United Kingdom

Alere UK Holdings Limited

 

United Kingdom

Alere UK Subco Limited

 

United Kingdom

Alisoc Investment & Co

 

United Kingdom

Axis-Shield Diagnostics Limited

 

United Kingdom

Axis-Shield Ltd.

 

United Kingdom

BBI Animal Health Limited

 

United Kingdom

BBI Diagnostics Group 2 Public Limited Company

 

United Kingdom

British Colloids Limited

 

United Kingdom

Concateno South Limited

 

United Kingdom

Concateno UK Limited

 

United Kingdom

Cozart Limited

 

United Kingdom

European Chemicals & Co

 

United Kingdom

Forensics Limited

 

United Kingdom

Fournier Pharmaceuticals Limited

 

United Kingdom

Globapharm & CO LP

 

United Kingdom

Gynocare Limited

 

United Kingdom

IG Innovations Limited

 

United Kingdom

Knoll UK Investments Unlimited

 

United Kingdom

Mansbridge Pharmaceuticals Limited

 

United Kingdom

Medscreen Holdings Limited

 

United Kingdom

Murex Biotech Limited

 

United Kingdom

Sinensix & Co.

 

United Kingdom

SPD Development Company Limited

 

United Kingdom *

St. Jude Medical U.K. Limited

 

United Kingdom

Thoratec Europe Limited

 

United Kingdom

TwistDX Limited

 

United Kingdom

Unipath Limited (dba Alere International/aka Cranfield)

 

United Kingdom

Unipath Management Limited

 

United Kingdom

Unipath Pension Trustee Limited

 

United Kingdom

Abbott Laboratories Uruguay S.A.

 

Uruguay

Abbott Operations Uruguay S.R.L.

 

Uruguay

Bosque Bonito S.A.

 

Uruguay

European Services S.A.

 

Uruguay

Fernwood Investment S.A.

 

Uruguay

Kangshenyunga S.A.

 

Uruguay

Penagos S.A.

 

Uruguay

Pharmaceutical Technologies (Pharmatech) S.A.

 

Uruguay

Tremora S.A.

 

Uruguay

Tuenir S.A.

 

Uruguay

Abbott Laboratories, C.A.

 

Venezuela

Gynopharm de Venezuela, C.A.

 

Venezuela

3A Nutrition (Vietnam) Company Limited

 

Viet Nam

Domesco Medical Import-Export Joint-Stock Corporation

 

Viet Nam *

Glomed Pharmaceutical Company Limited

 

Viet Nam

Abbott Trading Company, Inc.

 

Virgin Islands, U.S.

 



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Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

        We consent to the incorporation by reference in the following Registration Statements:

of our reports dated February 16, 2018, with respect to the consolidated financial statements, schedule and the effectiveness of internal control over financial reporting of Abbott Laboratories and subsidiaries, included in this Annual Report (Form 10-K) of Abbott Laboratories and subsidiaries for the year ended December 31, 2017.

/s/ Ernst & Young LLP

Chicago, Illinois
February 16, 2018



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CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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Exhibit 31.1

Certification of Chief Executive Officer
Required by Rule 13a-14(a) (17 CFR 240.13a-14(a))

I, Miles D. White, certify that:

/s/ MILES D. WHITE
 Miles D. White,
Chairman of the Board and
Chief Executive Officer		    

Date: February 16, 2018
 
 



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Certification of Chief Executive Officer Required by Rule 13a-14(a) (17 CFR 240.13a-14(a))

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Exhibit 31.2

Certification of Chief Financial Officer
Required by Rule 13a-14(a) (17 CFR 240.13a-14(a))

I, Brian B. Yoor, certify that:

/s/ BRIAN B. YOOR
 Brian B. Yoor,
Executive Vice President, Finance
and Chief Financial Officer		    

Date: February 16, 2018
 
 



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Certification of Chief Financial Officer Required by Rule 13a-14(a) (17 CFR 240.13a-14(a))

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Exhibit 32.1

Certification Pursuant To
18 U.S.C. Section 1350
As Adopted Pursuant To
Section 906 of the Sarbanes-Oxley Act of 2002

        In connection with the Annual Report of Abbott Laboratories (the "Company") on Form 10-K for the period ended December 31, 2017 as filed with the Securities and Exchange Commission (the "Report"), I, Miles D. White, Chairman of the Board and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

/s/ MILES D. WHITE
 Miles D. White,
Chairman of the Board and
Chief Executive Officer		    

Date: February 16, 2018
 
 

A signed original of this written statement required by Section 906 has been provided to Abbott Laboratories and will be retained by Abbott Laboratories and furnished to the Securities and Exchange Commission or its staff upon request.



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Certification Pursuant To 18 U.S.C. Section 1350 As Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002

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Exhibit 32.2

Certification Pursuant To
18 U.S.C. Section 1350
As Adopted Pursuant To
Section 906 of the Sarbanes-Oxley Act of 2002

        In connection with the Annual Report of Abbott Laboratories (the "Company") on Form 10-K for the period ended December 31, 2017 as filed with the Securities and Exchange Commission (the "Report"), I, Brian B. Yoor, Executive Vice President, Finance and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

/s/ BRIAN B. YOOR
 Brian B. Yoor,
Executive Vice President, Finance
and Chief Financial Officer		    

Date: February 16, 2018
 
 

A signed original of this written statement required by Section 906 has been provided to Abbott Laboratories and will be retained by Abbott Laboratories and furnished to the Securities and Exchange Commission or its staff upon request.



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Certification Pursuant To 18 U.S.C. Section 1350 As Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002