SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
ABBOTT LABORATORIES
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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ABBOTT LABORATORIES
NOTICE OF
ANNUAL MEETING
OF SHAREHOLDERS
AND
PROXY STATEMENT
1996
[ABBOTT LABORATORIES LOGO]
ABBOTT LABORATORIES
100 ABBOTT PARK ROAD
ABBOTT PARK, ILLINOIS 60064-3500 U.S.A.
COVER:
LAST YEAR, IVANA SEDOVA OF THE CZECH REPUBLIC WAS OVERCOME WITH SEVERE ABDOMINAL
PAIN. SHE COULDN'T WORK AT HER ACCOUNTING PRACTICE AND HAD DIFFICULTY TAKING
CARE OF HER FAMILY. IVANA WAS TREATED FOR FLU, BUT HER CONDITION WORSENED.
INITIAL TESTS FOR HEPATITIS WERE NEGATIVE. IVANA'S HEALTH CONTINUED TO FAIL, AND
SHE WAS HOSPITALIZED. USING ABBOTT'S AxSYM-Registered Trademark- IMMUNOASSAY
DIAGNOSTIC SYSTEM, THE HOSPITAL LAB RAN MORE SENSITIVE TESTS THAT DETECT
HEPATITIS IN ITS EARLY STAGES. IVANA WAS QUICKLY DIAGNOSED WITH ACUTE HEPATITIS
B. SHE RECEIVED APPROPRIATE TREATMENT AND SOON WAS ABLE TO RESUME HER NORMAL
ACTIVITIES. IVANA IS PICTURED HERE ON THE MEDIEVAL CHARLES BRIDGE IN THE CZECH
CAPITAL OF PRAGUE. CENTRAL EUROPE IS ONE OF MANY EMERGING MARKETS AROUND THE
WORLD WHERE ABBOTT IS GROWING ITS BUSINESS RAPIDLY.
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YOUR VOTE
IS IMPORTANT
PLEASE SIGN AND PROMPTLY RETURN YOUR
PROXY IN THE ENCLOSED ENVELOPE.
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
The Annual Meeting of the Shareholders of Abbott Laboratories will be held at
the corporation's headquarters, 100 Abbott Park Road, at the intersection of
Route 137 and Waukegan Road, Lake County, Illinois, on Friday, April 26, 1996 at
9:00 a.m. for the following purposes:
(1) To elect thirteen directors to hold office until the
next Annual Meeting or until their successors are elected (Item No. 1 on proxy
card);
(2) To approve the Abbott Laboratories 1996 Incentive
Stock Program (Item No. 2 on the proxy card);
(3) To ratify the appointment of Arthur Andersen LLP
as auditors of the corporation for 1996 (Item No. 3 on proxy card); and
(4) To transact such other business as may properly
come before the meeting.
The board of directors recommends that you vote FOR Items 1, 2, and 3 on the
proxy card.
The close of business February 27, 1996 has been fixed as the record date for
determining the shareholders entitled to receive notice of, and to vote at, the
Annual Meeting.
Admission to the meeting will be by admission card only. If you plan to attend,
please complete and return the reservation form on the back cover, and an
admission card will be sent to you.
By order of the board of directors.
JOSE M. DE LASA
SECRETARY
March 11, 1996
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ABBOTT LABORATORIES
PROXY STATEMENT
SOLICITATION OF PROXIES
The accompanying proxy is solicited on behalf of the board of directors for use
at the Annual Meeting of Shareholders. The meeting will be held on April 26,
1996 at the corporation's headquarters, 100 Abbott Park Road, at the
intersection of Route 137 and Waukegan Road, Lake County, Illinois. This proxy
statement and the accompanying proxy card are being mailed to shareholders on or
about March 11, 1996. The corporation will bear the cost of making solicitations
from its shareholders and will reimburse banks and brokerage firms for
out-of-pocket expenses incurred in connection with this solicitation. Proxies
may also be solicited by mail or in person by directors, officers, or employees
of the corporation and its subsidiaries. The corporation has also retained
Georgeson & Company Inc. to aid in the solicitation of proxies, at an estimated
cost of $42,000 plus reimbursement for reasonable out-of-pocket expenses.
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VOTING SECURITIES AND RECORD DATE
Shareholders of record at the close of business on February 27, 1996 will be
entitled to notice of, and to vote at, the Annual Meeting. As of January 31,
1996, the corporation had 786,075,095 outstanding common shares, which are the
only outstanding voting securities.
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VOTING OF PROXIES
A shareholder may vote in person, by a duly executed proxy, or through an
authorized representative. The bylaws provide that a shareholder may authorize
no more than three persons as proxies to attend and vote at the meeting. Proxies
may be revoked at any time prior to the meeting. This may be done by written
notice delivered to the secretary of the corporation, or by signing and
delivering a proxy with a later date.
All shareholders have cumulative voting rights in the election of directors and
one vote per share on all other matters. Cumulative voting allows a shareholder
to multiply the number of shares owned by the number of directors to be elected
and to cast the total for one nominee or distribute the votes among the nominees
as the shareholder desires. Nominees who receive the greatest number of votes
will be elected.
Unless authority is withheld in accordance with instructions on the proxy, the
persons named in the proxy will vote the shares covered by proxies they receive
to elect the 13 nominees hereinafter named. These
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1
shares may be voted cumulatively so that one or more of the nominees may receive
fewer votes than the other nominees (or no votes at all). Should a nominee
become unavailable to serve, the shares will be voted for a substitute
designated by the board of directors, or for fewer than 13 nominees if, in the
judgment of the proxy holders, such action is necessary or desirable.
Where a shareholder has specified a choice for or against approval of either the
Abbott Laboratories 1996 Incentive Stock Program or ratification of Arthur
Andersen LLP as auditors, the shares represented by the proxy will be voted as
specified. Where no choice has been specified, the proxy will be voted FOR
approval of the Abbott Laboratories 1996 Incentive Stock Program and FOR
ratification of Arthur Andersen LLP as auditors.
A majority of the outstanding shares, entitled to vote on a matter, represented
in person or by proxy, shall constitute a quorum for consideration of such
matter at the meeting. The affirmative vote of a majority of the shares
represented at the meeting and entitled to vote on a matter shall be the act of
the shareholders with respect to that matter.
A proxy may indicate that all or a portion of the shares represented by such
proxy are not being voted with respect to a particular matter. This could occur,
for example, when a broker or bank is not permitted to vote stock held in street
name on certain matters in the absence of instructions from the beneficial owner
of the stock. These "non-voted shares" will be considered shares not present
and, therefore, not entitled to vote on such matter, although these shares may
be considered present and entitled to vote for other purposes. Non-voted shares
will not affect the determination of the outcome of the vote on any matter to be
decided at the meeting.
The favorable vote of a majority of the shares represented at the meeting and
entitled to vote on these matters are required for approval of these matters.
Abstentions and withheld votes have the effect of votes against a matter.
It is the corporation's policy that all proxies, ballots and voting tabulations
that reveal how a particular shareholder has voted be kept confidential and not
be disclosed except: (i) where disclosure may be required by law or regulation,
(ii) where disclosure may be necessary in order for the corporation to assert or
defend claims, (iii) where a shareholder writes comments on his or her proxy
card, (iv) where a shareholder expressly requests disclosure, (v) to allow the
inspectors of election to certify the results of a vote, or (vi) in limited
circumstances such as a contested election or proxy solicitation not approved
and recommended by the board of directors.
The inspectors of election and the tabulators of all proxies, ballots and voting
tabulations that identify shareholders are independent and are not employees of
the corporation.
The board of directors is not aware of any other issue which may properly be
brought before the meeting. If other matters are properly brought before the
meeting, the accompanying proxy will be voted in accordance with the judgment of
the proxy holders.
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INFORMATION CONCERNING SECURITY OWNERSHIP
On January 31, 1996, the Abbott Laboratories Stock Retirement Trust, c/o Abbott
Laboratories, 100 Abbott Park Road, Abbott Park, Illinois 60064-3500, held
64,482,761 common shares (approximately 8.2 percent of the outstanding common
shares) of the corporation. These shares were held for the individual accounts
of approximately 37,467 employees and other plan participants who participate in
the Abbott Laboratories Stock Retirement Plan. The Stock Retirement Trust is
administered by both a trustee and three co-trustees. The trustee of the Trust
is Putnam Fiduciary Trust Company. The co-trustees are G. P. Coughlan, T. C.
Freyman, and E. M. Walvoord, officers of the corporation. The voting power with
respect to the shares owned by the Trust is held by and shared among the
co-trustees. The co-trustees must solicit and follow voting instructions from
the participants, if the co-trustees determine that a matter to be voted on at a
shareholder meeting could materially affect the interests of participants. The
individual participants have investment power over these shares, as provided by
the terms of the Trust. The Trust Agreement is of unlimited duration.
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COMMITTEES OF THE BOARD OF DIRECTORS
The board of directors, which held six meetings in 1995, has five committees
established in the corporation's bylaws: the executive committee, audit
committee, compensation committee, nominations committee, and board affairs
committee.
The executive committee, whose members are D. L. Burnham, chairman, H. L.
Fuller, W. D. Smithburg, J. R. Walter, and W. L. Weiss, did not hold any
meetings in 1995. This committee may exercise all the authority of the board in
the management of the corporation, except for matters expressly reserved by law
for board action.
The audit committee, whose members are J. R. Walter, chairman, H. L. Fuller, The
Lord Hayhoe PC, A. F. Jacobson, D. A. Jones, and W. A. Reynolds, held two
meetings in 1995. This committee provides advice and assistance regarding
accounting, auditing, and financial
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2
reporting practices of the corporation. Each year, it recommends to the board a
firm of independent public accountants to serve as auditors. The audit committee
reviews with such auditors the scope and results of their audit, fees for
services, and independence in servicing the corporation. The committee also
meets with the corporation's internal auditors to evaluate the effectiveness of
the work they perform.
The compensation committee, whose members are W. D. Smithburg, chairman, K. F.
Austen, H. L. Fuller, A. F. Jacobson, B. Powell, Jr., A. B. Rand, J. R. Walter,
and W. L. Weiss held four meetings in 1995. This committee is responsible for
setting and administering the policies and programs that govern both annual
compensation and stock ownership programs.
The nominations committee, whose members are W. A. Reynolds, chairman, K. F.
Austen, D. A. Jones, B. Powell, Jr., A. B. Rand, W. D. Smithburg, and W. L.
Weiss, held two meetings in 1995. This committee develops general criteria
regarding the qualifications and selection of board members and officers, and
recommends candidates for such positions to the board of directors. A
shareholder may recommend persons as potential nominees for director or directly
nominate persons for director by complying with the procedures on pages 19 and
20.
The board affairs committee, whose members are W. L. Weiss, chairman, K. F.
Austen, H. L. Fuller, The Lord Hayhoe PC, A. F. Jacobson, and D. A. Jones held
five meetings in 1995. This committee is responsible for advising the board of
directors with respect to the conduct of the board activities.
The average attendance of all directors at board and committee meetings in 1995
was 97 percent.
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INFORMATION CONCERNING NOMINEES FOR DIRECTORS
(ITEM NO. 1 ON PROXY CARD)
Thirteen directors are to be elected to hold office until the next Annual
Meeting or until their successors are elected. All but one of the nominees, The
Lord Owen, are currently serving as directors. The Lord Hayhoe is not standing
for reelection.
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NOMINEES FOR ELECTION AS DIRECTORS
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K. FRANK AUSTEN, M.D. AGE 67 DIRECTOR SINCE 1983
PROFESSOR OF MEDICINE, HARVARD MEDICAL SCHOOL, BOSTON, MASSACHUSETTS
[PHOTO1] DR. AUSTEN IS THE THEODORE B. BAYLES PROFESSOR OF MEDICINE ON THE FACULTY OF
HARVARD MEDICAL SCHOOL. DR. AUSTEN IS A DIRECTOR OF HUMANA INC., A TRUSTEE OF
AMHERST COLLEGE AND A MEMBER OF THE NATIONAL ACADEMY OF SCIENCES AND OF THE
AMERICAN ACADEMY OF ARTS AND SCIENCES. HE HAS SERVED AS PRESIDENT OF THE AMERICAN
ASSOCIATION OF IMMUNOLOGISTS, THE AMERICAN ACADEMY OF ALLERGY AND IMMUNOLOGY, AND
THE ASSOCIATION OF AMERICAN PHYSICIANS.
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DUANE L. BURNHAM AGE 54 DIRECTOR SINCE 1985
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER, ABBOTT LABORATORIES
[PHOTO2] MR. BURNHAM JOINED ABBOTT IN 1982. HE WAS ELECTED VICE CHAIRMAN IN 1986, CHIEF
EXECUTIVE OFFICER IN 1989, AND CHAIRMAN OF THE BOARD IN 1990. MR. BURNHAM
RECEIVED BOTH HIS UNDERGRADUATE AND M.B.A. DEGREES FROM THE UNIVERSITY OF
MINNESOTA. HE SERVES AS A DIRECTOR OF SARA LEE CORPORATION, EVANSTON HOSPITAL
CORPORATION, THE LYRIC OPERA OF CHICAGO, AND THE HEALTHCARE LEADERSHIP COUNCIL;
AS A TRUSTEE OF NORTHWESTERN UNIVERSITY AND THE MUSEUM OF SCIENCE AND INDUSTRY;
AS A MEMBER OF THE BUSINESS ROUNDTABLE; AND AS CHAIRMAN OF THE EMERGENCY
COMMITTEE FOR AMERICAN TRADE.
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H. LAURANCE FULLER AGE 57 DIRECTOR SINCE 1988
CHAIRMAN AND CHIEF EXECUTIVE OFFICER, AMOCO CORPORATION, CHICAGO, ILLINOIS
[PHOTO3] (INTEGRATED PETROLEUM AND CHEMICALS COMPANY)
MR. FULLER WAS ELECTED PRESIDENT OF AMOCO CORPORATION IN 1983 AND CHAIRMAN AND
CHIEF EXECUTIVE OFFICER IN 1991. HE IS A MEMBER OF AMOCO CORPORATION'S EXECUTIVE
COMMITTEE AND HAS BEEN A DIRECTOR OF AMOCO SINCE 1981, WHEN HE BECAME EXECUTIVE
VICE PRESIDENT. FROM 1978 UNTIL 1981, MR. FULLER WAS PRESIDENT OF AMOCO OIL
COMPANY, WHICH WAS RESPONSIBLE FOR AMOCO CORPORATION'S PETROLEUM REFINING,
MARKETING, AND TRANSPORTATION OPERATIONS. HE IS A DIRECTOR OF THE CHASE MANHATTAN
CORPORATION AND THE CHASE MANHATTAN BANK, N.A., MOTOROLA, INC., THE AMERICAN
PETROLEUM INSTITUTE, AND THE REHABILITATION INSTITUTE OF CHICAGO; AND A TRUSTEE
OF THE ORCHESTRAL ASSOCIATION AND NORTHWESTERN UNIVERSITY.
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THOMAS R. HODGSON AGE 54 DIRECTOR SINCE 1985
PRESIDENT AND CHIEF OPERATING OFFICER, ABBOTT LABORATORIES
[PHOTO4] MR. HODGSON JOINED ABBOTT IN 1972. HE WAS ELECTED EXECUTIVE VICE PRESIDENT IN
1985, AND PRESIDENT AND CHIEF OPERATING OFFICER IN 1990. MR. HODGSON HAS A B.S.
DEGREE FROM PURDUE UNIVERSITY, AN M.S.E. DEGREE IN CHEMICAL ENGINEERING FROM THE
UNIVERSITY OF MICHIGAN, AN M.B.A. DEGREE FROM HARVARD BUSINESS SCHOOL, AND WAS
AWARDED AN HONORARY DOCTORATE OF ENGINEERING FROM PURDUE UNIVERSITY. HE SERVES AS
TRUSTEE OF RUSH-PRESBYTERIAN-ST. LUKE'S MEDICAL CENTER AND ON THE COLLEGE OF
ENGINEERING NATIONAL ADVISORY BOARD AT THE UNIVERSITY OF MICHIGAN.
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ALLEN F. JACOBSON AGE 69 DIRECTOR SINCE 1993
RETIRED CHAIRMAN AND CHIEF EXECUTIVE OFFICER, MINNESOTA MINING & MANUFACTURING COMPANY,
[PHOTO5] ST. PAUL, MINNESOTA (MANUFACTURER OF INDUSTRIAL, IMAGING AND HEALTH CARE PRODUCTS)
MR. JACOBSON SERVES AS A DIRECTOR OF MINNESOTA MINING & MANUFACTURING COMPANY; HE SERVED
AS CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER FROM 1986 TO 1991. MR. JACOBSON ALSO
SERVES AS A DIRECTOR OF SARA LEE CORPORATION, DELUXE CORPORATION, MOBIL CORPORATION,
NORTHERN STATES POWER COMPANY, POTLATCH CORPORATION, PRUDENTIAL INSURANCE COMPANY, SILICON
GRAPHICS, INC., US WEST, INC., AND VALMONT INDUSTRIES, INC. HE IS A MEMBER OF THE NATIONAL
ACADEMY OF ENGINEERING.
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DAVID A. JONES AGE 64 DIRECTOR SINCE 1982
CHAIRMAN AND CHIEF EXECUTIVE OFFICER, HUMANA INC., LOUISVILLE, KENTUCKY (HEALTH PLAN
[PHOTO6] BUSINESS)
MR. JONES IS CO-FOUNDER OF HUMANA INC. AND HAS BEEN CHAIRMAN AND CHIEF EXECUTIVE OFFICER
SINCE ITS ORGANIZATION IN 1961. HE RECEIVED A B.S. DEGREE FROM THE UNIVERSITY OF
LOUISVILLE AND A J.D. DEGREE FROM YALE UNIVERSITY.
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THE LORD OWEN CH AGE 57 DIRECTOR NOMINEE
BRITISH MEMBER OF PARLIAMENT, LONDON, UNITED KINGDOM
[PHOTO7] DAVID OWEN IS A BRITISH SUBJECT. HE SERVED AS A MEMBER OF PARLIAMENT FOR PLYMOUTH IN THE
HOUSE OF COMMONS FROM 1966 UNTIL HE RETIRED IN MAY OF 1992. IN 1992 HE WAS CREATED A LIFE
PEER AND WAS MADE A MEMBER OF THE HOUSE OF LORDS. IN AUGUST OF 1992 THE EUROPEAN UNION, AS
PART OF ITS PEACE SEEKING EFFORTS IN THE BALKANS, APPOINTED HIM CO-CHAIRMAN OF THE
INTERNATIONAL CONFERENCE ON FORMER YUGOSLAVIA. HE STEPPED DOWN FROM THAT POST IN JUNE OF
1995. LORD OWEN WAS SECRETARY FOR FOREIGN AND COMMONWEALTH AFFAIRS FROM 1977 TO 1979 AND
MINISTER OF HEALTH FROM 1974 TO 1976. HE IS CURRENTLY A DIRECTOR OF COATS VIYELLA PLC AND
EXECUTIVE CHAIRMAN OF MIDDLESEX HOLDINGS PLC.
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BOONE POWELL, JR. AGE 59 DIRECTOR SINCE 1985
PRESIDENT AND CHIEF EXECUTIVE OFFICER, BAYLOR HEALTH CARE SYSTEM AND BAYLOR UNIVERSITY
[PHOTO8] MEDICAL CENTER, AND VICE PRESIDENT, BAYLOR UNIVERSITY, DALLAS, TEXAS
MR. POWELL HAS BEEN ASSOCIATED WITH BAYLOR UNIVERSITY MEDICAL CENTER SINCE 1980 WHEN HE
WAS NAMED PRESIDENT AND CHIEF EXECUTIVE OFFICER. PRIOR TO JOINING BAYLOR, HE WAS PRESIDENT
OF HENDRICK MEDICAL CENTER IN ABILENE, TEXAS. MR. POWELL SERVES AS AN ACTIVE MEMBER OF
VOLUNTARY HOSPITALS OF AMERICA. HE IS A DIRECTOR OF COMERICA BANK-TEXAS, PHYSICIAN
RELIANCE NETWORK AND CABLE HEALTHCARE AND A FELLOW OF THE AMERICAN COLLEGE OF HEALTH CARE
EXECUTIVES. MR. POWELL IS A GRADUATE OF BAYLOR UNIVERSITY. HE RECEIVED A MASTER'S DEGREE
IN HOSPITAL ADMINISTRATION FROM THE UNIVERSITY OF CALIFORNIA AND HAS BEEN AWARDED FIVE
HONORARY DOCTORATE DEGREES.
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ADDISON BARRY RAND AGE 51 DIRECTOR SINCE 1992
EXECUTIVE VICE PRESIDENT, XEROX CORPORATION, STAMFORD, CONNECTICUT (DOCUMENT PROCESSING,
[PHOTO9] INSURANCE AND FINANCIAL SERVICES COMPANY)
MR. RAND JOINED XEROX CORPORATION IN 1968. HE WAS ELECTED A CORPORATE OFFICER IN 1985,
NAMED PRESIDENT OF THE COMPANY'S U.S. MARKETING GROUP IN 1986, AND APPOINTED TO HIS
PRESENT POSITION IN 1992. MR. RAND EARNED A BACHELOR'S DEGREE FROM AMERICAN UNIVERSITY AND
MASTER'S DEGREES IN BUSINESS ADMINISTRATION AND MANAGEMENT SCIENCES FROM STANFORD
UNIVERSITY. HE HAS ALSO BEEN AWARDED SEVERAL HONORARY DOCTORATE DEGREES. MR. RAND SERVES
AS A DIRECTOR OF AMERITECH CORPORATION AND HONEYWELL, INC. HE IS ALSO A MEMBER OF THE
BOARD OF OVERSEERS OF THE ROCHESTER PHILHARMONIC ORCHESTRA AND A MEMBER OF THE STANFORD
UNIVERSITY GRADUATE SCHOOL OF BUSINESS ADVISORY COUNCIL. IN 1993 HE WAS ELECTED TO THE
NATIONAL SALES/MARKETING HALL OF FAME.
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W. ANN REYNOLDS, PH.D. AGE 58 DIRECTOR SINCE 1980
CHANCELLOR, THE CITY UNIVERSITY OF NEW YORK, NEW YORK, NEW YORK
[PHOTO10] DR. REYNOLDS WAS APPOINTED CHANCELLOR OF THE CITY UNIVERSITY OF NEW YORK IN 1990, AFTER
SERVING AS CHANCELLOR OF THE CALIFORNIA STATE UNIVERSITY SINCE 1982. PRIOR TO THAT, DR.
REYNOLDS SERVED AS CHIEF ACADEMIC OFFICER OF OHIO STATE UNIVERSITY AND ASSOCIATE VICE
CHANCELLOR FOR RESEARCH AND DEAN OF THE GRADUATE COLLEGE OF THE UNIVERSITY OF ILLINOIS
MEDICAL CENTER. SHE ALSO HELD APPOINTMENTS AS PROFESSOR OF ANATOMY, RESEARCH PROFESSOR OF
OBSTETRICS AND GYNECOLOGY, AND ACTING ASSOCIATE DEAN FOR ACADEMIC AFFAIRS AT THE
UNIVERSITY OF ILLINOIS COLLEGE OF MEDICINE. DR. REYNOLDS IS A GRADUATE OF EMPORIA STATE
UNIVERSITY (KANSAS) AND HOLDS M.S. AND PH.D. DEGREES IN ZOOLOGY FROM THE UNIVERSITY OF
IOWA. SHE IS ALSO A DIRECTOR OF HUMANA INC., MAYTAG CORPORATION, AND OWENS-CORNING
FIBERGLAS CORP.
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WILLIAM D. SMITHBURG AGE 57 DIRECTOR SINCE 1982
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER, THE QUAKER OATS COMPANY, CHICAGO,
[PHOTO11] ILLINOIS (WORLDWIDE FOOD MANUFACTURER AND MARKETER OF BEVERAGES AND GRAIN-BASED PRODUCTS)
MR. SMITHBURG JOINED QUAKER OATS IN 1966 AND BECAME PRESIDENT AND CHIEF EXECUTIVE OFFICER
IN 1981, AND CHAIRMAN AND CHIEF EXECUTIVE OFFICER IN 1983 AND ALSO SERVED AS PRESIDENT
FROM NOVEMBER 1990 TO JANUARY 1993 AND AGAIN FROM NOVEMBER 1995. MR. SMITHBURG WAS ELECTED
TO THE QUAKER BOARD IN 1978 AND SERVES ON ITS EXECUTIVE COMMITTEE. HE IS ALSO A DIRECTOR
OF NORTHERN TRUST CORPORATION, CORNING INCORPORATED, AND PRIME CAPITAL CORP. HE IS A
MEMBER OF THE BOARD OF TRUSTEES OF NORTHWESTERN UNIVERSITY AND A DIRECTOR OF NORTHWESTERN
MEMORIAL CORPORATION. MR. SMITHBURG EARNED A B.S. DEGREE FROM DEPAUL UNIVERSITY AND AN
M.B.A. DEGREE FROM NORTHWESTERN UNIVERSITY.
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JOHN R. WALTER AGE 49 DIRECTOR SINCE 1990
CHAIRMAN AND CHIEF EXECUTIVE OFFICER, R.R. DONNELLEY & SONS COMPANY, CHICAGO, ILLINOIS
[PHOTO12] (PRINTING COMPANY)
MR. WALTER JOINED R.R. DONNELLEY & SONS COMPANY IN 1969 AND WAS NAMED GROUP PRESIDENT IN
1985 AND EXECUTIVE VICE PRESIDENT IN 1986. HE WAS ELECTED PRESIDENT IN 1987 AND CHAIRMAN
OF THE BOARD AND CHIEF EXECUTIVE OFFICER IN 1989. MR. WALTER WAS ELECTED TO THE DONNELLEY
BOARD IN 1987 AND IS CHAIRMAN OF ITS EXECUTIVE COMMITTEE. HE HOLDS A BACHELOR'S DEGREE
FROM MIAMI UNIVERSITY OF OHIO. MR. WALTER SERVES AS A DIRECTOR OF DAYTON HUDSON
CORPORATION, DEERE & COMPANY, EVANSTON (ILLINOIS) HOSPITAL, AND AS A TRUSTEE OF THE
ORCHESTRAL ASSOCIATION AND NORTHWESTERN UNIVERSITY.
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WILLIAM L. WEISS AGE 66 DIRECTOR SINCE 1984
CHAIRMAN EMERITUS, AMERITECH CORPORATION, CHICAGO, ILLINOIS (TELECOMMUNICATIONS COMPANY)
[PHOTO13] IN 1983, MR. WEISS BECAME CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF AMERITECH CORPORATION
AND SERVED IN THAT CAPACITY UNTIL JANUARY 1994 WHEN HE WAS NAMED CHAIRMAN OF THE BOARD. HE
HAS BEEN CHAIRMAN EMERITUS SINCE MAY 1994. PRIOR TO THAT, HE WAS CHAIRMAN AND CHIEF
EXECUTIVE OFFICER (1982-83) AND PRESIDENT AND CHIEF EXECUTIVE OFFICER (1981-82) OF
ILLINOIS BELL TELEPHONE COMPANY. PREVIOUSLY, HE WAS PRESIDENT OF INDIANA BELL TELEPHONE
COMPANY (1978-81) AND SERVED IN VARIOUS OTHER CAPACITIES WITH THE BELL SYSTEM. MR. WEISS
IS A DIRECTOR OF THE QUAKER OATS COMPANY, MERRILL LYNCH & CO., INC., AND TENNECO
CORPORATION. HE IS ALSO A TRUSTEE OF NORTHWESTERN UNIVERSITY, THE PENNSYLVANIA STATE
UNIVERSITY, THE ORCHESTRAL ASSOCIATION, THE LYRIC OPERA OF CHICAGO, AND THE MUSEUM OF
SCIENCE AND INDUSTRY.
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EXECUTIVE COMPENSATION
Report of the Compensation Committee
The compensation committee of the board of directors is composed entirely of
directors who have never been employees of the corporation. The committee is
responsible for setting and administering the policies and programs that govern
both annual compensation and stock ownership programs.
The foundation of the executive compensation program is based on principles
designed to align compensation with the corporation's business strategy, values
and management initiatives. The program:
- Integrates compensation programs with both the corporation's annual and
long-term strategic planning and measurement processes.
- Supports a performance-oriented environment that rewards actual
performance that is related to both goals and performance of the
corporation as compared to that of industry performance levels.
- Helps attract and retain key executives critical to the long-term success
of the corporation.
The key components of the compensation program are base salary, annual incentive
award, and equity participation. These components are administered with the goal
of providing total compensation that is competitive in the marketplace,
recognizes meaningful differences in individual performance and offers the
opportunity to earn above average rewards when merited by individual and
corporate performance.
The marketplace is defined by comparing the corporation to a group of major
corporations with similar characteristics, including industry and technology
emphasis. These companies are included in the Standard and Poor's Healthcare
Composite Index. A select group of non-healthcare companies chosen for size and
performance comparability to the corporation is used as a secondary source of
comparison.
Using compensation survey data from the comparison groups, a target for total
compensation and each of its elements, base, incentive, and equity-based
compensation is established. The intent is to deliver total compensation that
will be in the upper range of pay practices of peer companies when merited by
the corporation's performance. To achieve this objective, a substantial portion
of executive pay is delivered through performance-related variable compensation
programs which are based upon achievement of the corporation's goals. Each year
the committee reviews the elements of executive compensation to ensure that the
total compensation program, and each of its elements, meets the overall
objectives discussed above.
In 1995, total compensation was paid to executives based on individual
performance and on the extent to which the business plans for their areas of
responsibility were achieved or exceeded. On balance, performance goals were
substantially met or exceeded and therefore compensation was paid accordingly.
Base compensation was determined by an assessment of each executive's
performance, current salary in relation to the salary range designated for the
job, experience, and potential for advancement as well as by the performance of
the corporation. While many aspects of performance can be measured in financial
terms, the committee also evaluated the success of the management team in areas
of performance that cannot be measured by traditional accounting tools,
including the development and execution of strategic plans, the development of
management and employees, and the exercise of leadership within the industry and
in the communities that Abbott serves. All of these factors were collectively
taken into account by management and the compensation committee in determining
the appropriate level of base compensation and annual increases.
The Abbott Management Incentive Plan is designed to reward executives when the
corporation achieves certain financial objectives and when each executive's area
of responsibility meets its predetermined goals. These goals include financial
elements such as profitability, total sales, and earnings per share and
non-financial elements such as the achievement of selected strategic goals and
the successful development of human resources. Each year, individual incentive
targets are established for incentive plan participants based on competitive
survey data from the group of companies discussed above. As noted above, targets
are set to deliver total compensation between the mid and upper range of
competitive practice as warranted by corporate performance. For 1995, 40% of the
target award was earned for achievement of the corporation's earning per share
goal. The remainder of the targeted incentive was earned based on the
committee's overall assessment of each participant's achievement of the
predetermined goals discussed above.
The corporation has provided forms of equity participation as a key part of its
total program for motivating and rewarding executives and managers for many
years. Grants of stock options and restricted stock
- --------------------------------------------------------------------------------
8
have provided an important part of the equity link to shareholders. Through
these vehicles, the corporation has encouraged its executives to obtain and hold
the corporation's stock. Targeted award ranges for stock options and restricted
stock opportunities are determined taking into account competitive practice
among the comparison companies noted above. Equity participation targets are set
based on established salary ranges and level of performance. As noted above, the
target ranges are established such that equity participation opportunities will
be in the mid-to-upper range of pay practices of peer companies when merited by
corporation and individual performance.
Actual individual awards are determined based on the established competitive
target range and the committee's overall assessment of individual performance.
The committee considers the amounts of options and restricted stock previously
granted and the aggregate size of current awards in deciding to award additional
options and restricted stock.
In 1995, the committee granted Mr. Burnham, the corporation's Chairman and Chief
Executive Officer, a base salary increase of 3.5% which was consistent with the
corporation's established merit increase program. As reflected in the
corporation's financial statements, Abbott's performance in 1995 included 9.4%
growth in sales and 13.4% growth in earnings per share. In light of this
performance and their overall assessment of his performance, the committee
determined to grant Mr. Burnham a bonus and stock option grant.
It is the committee's policy to establish and maintain compensation programs for
executive officers which operate in the best interests of the corporation and
its stockholders in achieving the corporation's long-term business objectives.
To that end, the committee will continue to assess the impact of the Omnibus
Budget Reconciliation Act of 1993 on its executive compensation strategy and
take action to assure that appropriate levels of deductibility are maintained.
COMPENSATION COMMITTEE
W. D. Smithburg, chairman, K. F. Austen, H. L. Fuller, A. F. Jacobson, B.
Powell, Jr., A. B. Rand, J. R. Walter, and W. L. Weiss.
- --------------------------------------------------------------------------------
9
- --------------------------------------------------------------------------------
Summary Compensation Table
The following table summarizes compensation earned in 1995, 1994 and 1993 by the
Chief Executive Officer and the four other most highly paid executive officers
(the "named officers") in 1995.
Annual Compensation Long-term Compensation
--------------------------------- ----------------------
Other Restricted Securities
Annual Stock Underlying All Other
Name and Salary Compen- Award Options/ Compen-
Principal Position Year ($) Bonus ($) sation ($) ($)(1) SARs (#) sation ($)(3)
- ---------------------------------------------------------------------------------------------------------------
Duane L. Burnham 1995 $818,269 $1,000,000 $ 413,422 $ 0 195,000 $ 26,987
Chairman of the Board, 1994 794,269 800,000 207,556 0 195,000 25,471
Chief Executive Officer and
Director 1993 772,615 725,000 192,449 787,500(2) 195,000 24,306
- ---------------------------------------------------------------------------------------------------------------
Thomas R. Hodgson 1995 585,919 725,000 109,061 0 130,000 19,941
President, 1994 569,438 650,000 58,311 0 130,002 18,847
Chief Operating Officer and
Director 1993 554,146 605,000 62,036 472,500(2) 130,002 17,857
- ---------------------------------------------------------------------------------------------------------------
Paul N. Clark 1995 361,692 415,000 875 0 40,000 13,032
Senior Vice President 1994 342,692 390,000 1,100 0 0 10,920
Pharmaceutical Operations 1993 332,692 362,500 7,552 0 0 8,722
- ---------------------------------------------------------------------------------------------------------------
Gary P. Coughlan 1995 416,923 400,000 104,237 0 40,000 13,399
Senior Vice President 1994 406,923 380,000 40,684 0 0 12,715
Finance and Chief Financial
Officer 1993 395,385 360,000 27,627 0 0 12,220
- ---------------------------------------------------------------------------------------------------------------
John G. Kringel 1995 363,365 365,000 85,810 0 40,000 12,062
Senior Vice President 1994 352,692 350,000 25,276 0 0 11,383
Hospital Products 1993 342,692 350,000 15,378 0 0 10,853
- ---------------------------------------------------------------------------------------------------------------
TABLE FOOTNOTES
(1) The number and value of restricted shares held, respectively, as of
December 31, 1995 were as follows: D. L. Burnham - 34,000/$1,415,250; T. R.
Hodgson - 22,000/$915,750; P. N. Clark - 9,600/$399,600; G. P. Coughlan -
9,600/$399,600; and J. G. Kringel - 9,600/$399,600. The officers receive
all dividends paid on these shares.
(2) The number of shares covered by these awards are 30,000 for D. L. Burnham
and 18,000 for T. R. Hodgson. These awards vested in three equal
installments on January 10, 1994, 1995, and 1996.
(3) Employer contributions made to the Stock Retirement Plan and made or
accrued with respect to the 401(k) Supplemental Plan.
- --------------------------------------------------------------------------------
10
- --------------------------------------------------------------------------------
Stock Options
The following tables summarize the named officers' stock option activity during
1995.
Option/SAR Grants in Last Fiscal Year
Individual Grants
- -------------------------------------------------------------------------------------------------- Potential Realizable Value at
% of Total Assumed Annual Rates of Stock
Options/ SARs Price Appreciation for Option
Number of Securities Granted to Term (3):
Underlying Options/ Employees in Exercise or Base Expiration --------------------------------
Name SARs Granted (#)(1) Fiscal Year Price ($/Sh.) Date (2) 5% ($) 10% ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Duane L. Burnham 195,000 3.3% $39.14 4/28/05 $4,799,915 $12,163,917
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas R. Hodgson 130,000 2.2 39.14 4/28/05 3,199,944 8,109,278
- ------------------------------------------------------------------------------------------------------------------------------------
Paul N. Clark 40,000 0.7 39.14 4/28/05 984,598 2,495,162
- ------------------------------------------------------------------------------------------------------------------------------------
Gary P. Coughlan 40,000 0.7 39.14 4/28/05 984,598 2,495,162
- ------------------------------------------------------------------------------------------------------------------------------------
John G. Kringel 40,000 0.7 39.14 4/28/05 984,598 2,495,162
- ------------------------------------------------------------------------------------------------------------------------------------
Gain for all
Shareholders at
Assumed Rates for
Appreciation (4): $20,609,924,866 $52,229,550,045
- ---------------------------------------------------------------------------------------------------------------------------------
TABLE FOOTNOTES
(1) Limited stock appreciation rights have been granted in tandem with these
options. These rights are only exercisable for sixty days following a change
in control of the corporation. Upon exercise, the optionee must surrender
the related option and will receive a payment, in cash, in an amount equal
to the difference between the option's price and the fair market value of
the shares subject to the option.
(2) One-third of the shares covered by these options are exercisable after one
year; two-thirds after two years; and all after three years.
(3) The dollar amounts under these columns are the result of calculations at the
5% and 10% rates required by the SEC and, therefore, are not intended to
forecast possible future appreciation, if any, of the stock price.
(4) Amounts were determined using total shares outstanding at December 31, 1995
of 787,306,832 and December 31, 1995 closing market price of $41.625 per
share.
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-end Option/SAR Values
Number of Securities
Underlying Value of Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-end (#) FY-end ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
- ---------------------------------------------------------------------------------------------------------------
Duane L. Burnham 0 $ 0 441,670 / 430,000 $7,021,613 / $3,602,625
- ---------------------------------------------------------------------------------------------------------------
Thomas R. Hodgson 10,002 199,365 236,674 / 283,338 3,366,852 / 2,368,677
- ---------------------------------------------------------------------------------------------------------------
Paul N. Clark 0 0 190,736 / 68,008 3,999,905 / 353,902
- ---------------------------------------------------------------------------------------------------------------
Gary P. Coughlan 0 0 134,218 / 67,108 2,198,054 / 345,804
- ---------------------------------------------------------------------------------------------------------------
John G. Kringel 0 0 90,490 / 65,244 1,176,411 / 329,033
- ---------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Annuity Retirement Plan
The corporation and certain subsidiaries maintain a defined benefit pension plan
known as the Abbott Laboratories Annuity Retirement Plan covering most employees
in the United States, age 21 or older. Pension benefits are generally based on
service and eligible earnings for the 60 consecutive months within the final 120
months of employment for which eligible earnings were highest. Pension benefits
are partially offset for Social Security benefits.
The following table shows the estimated annual benefits payable to employees
upon normal retirement. The amounts shown are computed on a straight life
annuity basis without giving effect to Social Security offsets and include
supplemental benefits under a nonqualified supplemental pension plan.
- --------------------------------------------------------------------------------
11
- --------------------------------------------------------------------------------
Pension Plan Table
Years of Service
- ------------- -----------------------------------------------------
Remuneration 15 20 25 30 35
- ------------- -----------------------------------------------------
$ 700,000 $ 236,250 $ 315,000 $ 367,500 $ 388,500 $ 388,500
900,000 303,750 405,000 472,500 499,500 499,500
1,100,000 371,250 495,000 577,500 610,500 610,500
1,300,000 438,750 585,000 682,500 721,500 721,500
1,500,000 506,250 675,000 787,500 832,500 832,500
1,700,000 573,750 765,000 892,500 943,500 943,500
1,900,000 641,250 855,000 997,500 1,054,500 1,054,500
2,100,000 708,750 945,000 1,102,500 1,165,500 1,165,500
2,300,000 776,250 1,035,000 1,207,500 1,276,500 1,276,500
2,500,000 843,750 1,125,000 1,312,500 1,387,500 1,387,500
- ------------- -----------------------------------------------------
The table above covers the aggregate pension accrued under both the Annuity
Retirement Plan and the supplemental pension plan. The compensation considered
in determining the pensions payable to the named officers is the compensation
shown in the "Salary" and "Bonus" columns of the Summary Compensation Table on
page 10. One-third of the restricted stock awards granted to D. L. Burnham and
T. R. Hodgson in 1993 will also be included in the 1995 calculation of their
respective pensions. Pensions accrued under the Annuity Retirement Plan are
funded through the Abbott Laboratories Annuity Retirement Trust, established on
behalf of all participants in that plan. Pensions accrued under the nonqualified
supplemental pension plan with present values exceeding $100,000 are funded
through individual trusts established on behalf of the participants in that
plan. During 1995, the following amounts, less applicable tax withholdings, were
deposited in such individual trusts established on behalf of the named officers:
D. L. Burnham, $787,696; T. R. Hodgson, $675,858; P. N. Clark, $74,078; G. P.
Coughlan, $178,869; and J. G. Kringel, $262,100. As of December 31, 1995, the
years of service credited under the Plan for the named officers were as follows:
D. L. Burnham - 13; T. R. Hodgson - 23; P. N. Clark -11; G. P. Coughlan - 5; and
J. G. Kringel - 15.
- --------------------------------------------------------------------------------
Compensation of Directors
Employees of the corporation are not compensated for serving on the board or on
board committees. Non-employee directors are compensated under the Abbott
Laboratories Non-Employee Directors' Fee Plan in the amounts of $4,167 for each
month of service as director and $667 for each month of service as chairman of a
board committee ($1,600 for each month of service as chairman of the executive
committee).
Fees earned under this Plan are paid in cash to the director, or deferred (as a
non-funded obligation of the corporation or paid into a secular trust
established by the director) until payments commence (generally at age 65 or
upon retirement from the board of directors). If the fees are deferred, the
director may elect to have the fees credited to a stock equivalent account under
which the fees accrue the same return they would have earned if invested in
common shares of the corporation. Interest is accrued annually on deferred fees
not credited to a stock equivalent account.
Under the Plan, the corporation may grant a director who retires from the board
a retirement benefit, and such benefit will be payable to the surviving spouse
of any director who dies while serving as a director. The retirement benefit
consists of payment of an amount equal to the monthly director's fee in effect
on the date the director retires (or, for a director who dies, the fee in effect
on the date of death) for a period equal to his or her service on the board to a
maximum of 120 months. In return for the retirement benefit, the director agrees
to provide consulting services to the board.
Under the Abbott Laboratories 1991 Incentive Stock Program, each non-employee
director who is elected to the board of directors at the annual shareholder
meeting receives a restricted stock award with a fair market value on the date
of the award closest to, but not exceeding, twenty thousand dollars. In 1995,
this was 511 shares. The shares are nontransferable prior to termination,
retirement from the board, death, or a change in control of the corporation. The
non-employee directors are entitled to vote the shares and receive all dividends
paid on the shares. The Abbott Laboratories 1996 Incentive Stock Program and the
compensation which the non-employee directors will receive under that Plan, if
it is approved by the shareholders, are described on pages 14 through 19.
In 1995, K. F. Austen, a non-employee director, performed services for the
corporation pursuant to a consulting agreement in the areas of research and
development, new technology and immunopharmacology. The consulting agreement,
which expires on March 31, 1998, provides that the fees he earns under the
agreement may receive the same treatment as fees earned under the Abbott
Laboratories Non-Employee Directors' Fee Plan. In 1995, Dr. Austen received
$50,000 for his consulting services.
- --------------------------------------------------------------------------------
Compensation Committee
The persons who served as members of the compensation committee of the
corporation's board of directors during 1995 are named on page 3, "Committees of
the Board of Directors."
- --------------------------------------------------------------------------------
12
- --------------------------------------------------------------------------------
Performance Graph
The following graph compares the change in the corporation's cumulative total
shareholder return on its common shares with the Standard and Poor's 500 Stock
Index and the Standard and Poor's Healthcare Composite Index.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
S&P 500 INDEX ABBOTT LABORATORIES S&P HEALTH CARE COMPOSITE
Dec90 100 100 100
Dec91 130.47 155.93 154.01
Dec92 140.41 140.12 128.92
Dec93 154.56 140.02 118.09
Dec94 156.6 158.14 133.58
Dec95 215.45 206.08 210.85
- --------------------------------------------------------------------------------
Security Ownership of Officers and Directors
The table below reflects the numbers of common shares beneficially owned by the
directors, director nominee, the named officers, and all directors and executive
officers of the corporation as a group as of January 31, 1996. It also reflects
the number of equivalent stock units held by non-employee directors under the
Abbott Laboratories Non-Employee Directors' Fee Plan described on page 12 and by
K. F. Austen under the consulting agreement described on page 12.
- ---------------------------------------------------------------------
SHARES BENEFICIALLY
OWNED, EXCLUDING EQUIVALENT
NAME OPTIONS (1)(2) STOCK UNITS
- ---------------------------------------------------------------------
K. Frank Austen, M.D. 10,337 5,906
- ---------------------------------------------------------------------
Duane L. Burnham 402,674 0
- ---------------------------------------------------------------------
Paul N. Clark 94,327 0
- ---------------------------------------------------------------------
Gary P. Coughlan 70,226 0
- ---------------------------------------------------------------------
H. Laurance Fuller 14,405 15,144
- ---------------------------------------------------------------------
The Lord Hayhoe PC 6,605 0
- ---------------------------------------------------------------------
Thomas R. Hodgson 410,545 0
- ---------------------------------------------------------------------
Allen F. Jacobson 3,999 4,184
- ---------------------------------------------------------------------
David A. Jones 147,401 40,216
- ---------------------------------------------------------------
- ---------------------------------------------------------------------
SHARES BENEFICIALLY
OWNED, EXCLUDING EQUIVALENT
NAME OPTIONS (1)(2) STOCK UNITS
- ---------------------------------------------------------------------
John G. Kringel 123,790 0
- ---------------------------------------------------------------------
The Lord Owen CH 500 0
- ---------------------------------------------------------------------
Boone Powell, Jr. 11,087 24,022
- ---------------------------------------------------------------------
Addison Barry Rand 4,426 0
- ---------------------------------------------------------------------
W. Ann Reynolds, Ph.D. 11,504 24,862
- ---------------------------------------------------------------------
William D. Smithburg 19,367 38,387
- ---------------------------------------------------------------------
John R. Walter 7,337 10,916
- ---------------------------------------------------------------------
William L. Weiss 21,937 4,545
- ---------------------------------------------------------------------
All directors and executive
officers as a group (34
persons) (3)(4) 2,268,214 168,182
- ---------------------------------------------------------------
TABLE FOOTNOTES
(1) The number of unexercised option shares which were exercisable within 60
days after January 31, 1996 were: D. L. Burnham, 441,670; T. R. Hodgson,
236,674; P. N. Clark, 190,736; G. P. Coughlan, 134,218; J. G. Kringel,
90,490; and all executive officers as a group (22 persons), 2,269,276.
(2) The table includes the shares held in the named officers' accounts in the
Abbott Laboratories Stock Retirement Trust as follows: D. L. Burnham, 5,250;
T. R. Hodgson, 26,421; P. N. Clark, 3,430; G. P. Coughlan, 3,722; and J. G.
Kringel, 11,259. Each officer has shared voting power and sole investment
power with respect to the shares held in his account.
(3) G. P. Coughlan is a co-trustee of the Abbott Laboratories Stock Retirement
Trust and has shared voting power with respect to all of the common shares
owned by that trust. The table does not include the shares held by the
trust. As of January 31, 1996 the Abbott Laboratories Stock Retirement Trust
owned 64,482,761 shares (8.2%) of the outstanding shares of the corporation.
(4) Excluding G. P. Coughlan's shared voting power over the shares held by the
Abbott Laboratories Stock Retirement Trust (see footnote 3) the directors
and executive officers as a group together own beneficially less than one
percent of the outstanding shares of the corporation.
- --------------------------------------------------------------------------------
13
- ---------------------------------------------------------------
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
The corporation believes that during 1995 its officers and directors complied
with all filing requirements under Section 16(a) of the Securities Exchange Act
of 1934, except as follows. Two reports covering purchases of common shares of
the corporation in 1995 by William D. Smithburg, a director of the corporation,
were filed late.
- --------------------------------------------------
ABBOTT LABORATORIES 1996 INCENTIVE STOCK PROGRAM
(ITEM NO. 2 ON PROXY CARD)
The board of directors has adopted, subject to ratification by the
shareholders, a new 1996 Incentive Stock Program (the "Program"). The text of
the Program, which will replace the 1991 Incentive Stock Program, is set forth
in Exhibit A to this proxy statement. The board of directors recommends that the
shareholders vote FOR the ratification of the Program.
The purpose of the Program is to attract and retain outstanding individuals as
directors, officers and other employees of the corporation and its subsidiaries
and to furnish an incentive to such persons to increase profits by providing
them with the opportunity to acquire common shares of the corporation, or to
receive monetary payments based on the value of such shares or on the financial
performance of the corporation, or both, on advantageous terms and to further
align such persons' interests with those of the corporation's other shareholders
through compensation that is based on the value of the corporation's common
shares. The Program is designed to permit the corporation to provide several
different forms of benefits to meet competitive conditions and the particular
circumstances of the individuals who may be eligible to receive benefits. To
accomplish this purpose, the Program authorizes the grant of several different
forms of benefits including incentive stock options, non-qualified stock
options, stock appreciation rights, limited stock appreciation rights,
restricted stock awards, performance units, performance shares, and foreign
qualified benefits (the "Benefits").
The Program authorizes the granting of options and other Benefits with respect
to an aggregate of: (i) 5,000,000 common shares of the corporation, plus (ii) an
annual additional authorization of seven-tenths of one percent (0.7%) of the
total common shares of the corporation issued and outstanding on the first day
of each calendar year beginning with 1996, plus (iii) shares authorized but
unissued under the prior programs; subject in each case to adjustments as
provided below. Based on the corporation's common shares issued and outstanding
as of January 1, 1996, the annual additional authorization for 1996 will be
5,511,147 common shares. Any common shares reserved under an annual additional
authorization for any calendar year as to which options or other Benefits have
not been awarded as of the end of such calendar year are available for issuance
under Benefits granted in subsequent years. The 5,000,000 shares initially
reserved under the Program, plus the annual additional authorization for 1996 of
common shares, equals approximately 1.3 percent of the corporation's outstanding
common shares as of January 31, 1996. On January 31, 1996, the closing price of
the corporation's common shares on the New York Stock Exchange was $42.50.
As of January 31, 1996, options to purchase 28,783,436 common shares were
outstanding and 6,538,798 shares were reserved and available for additional
grants under the 1991 Program and its predecessor, the 1986 Program
(collectively, the "Prior Programs"). Following approval of the Program by the
shareholders, Benefits will no longer be granted under the 1991 Program, but the
shares reserved and not issued thereunder will be added to the shares authorized
and reserved for Benefits under the Program. (At the time of shareholder
approval of the 1991 Program, similar provision was made with respect to shares
reserved but not issued under the 1986 Program.)
The common shares covered by the Program may be either authorized but unissued
shares or treasury shares (except that restricted stock awards may be satisfied
only from treasury shares). If there is a lapse, expiration, termination, or
cancellation of any Benefit granted under the Program or under the Prior
Programs without the issuance of shares or payment of cash thereunder, or if
shares are issued under any Benefit under the Program or a Prior Program and
thereafter are reacquired by the corporation pursuant to rights reserved upon
the issuance thereof, or pursuant to the payment of the purchase price of shares
under stock options by delivery of other common shares of the corporation, the
shares subject to or reserved for such Benefit, or so reacquired, may again be
used for new options, rights, or awards of any type authorized under the
Program. However, the common shares issued under the Program, which are not
reacquired by the corporation pursuant to rights reserved upon the issuance
thereof or pursuant to payment of the purchase price of shares under stock
options by delivery of other common shares of the corporation, may not exceed
the total number of shares reserved for issuance under the Program.
In the event of the exercise of a stock appreciation right or a limited stock
appreciation right, the number of shares reserved for issuance under the Program
shall be reduced by the number of common shares covered by the option or portion
thereof which is surrendered in
- --------------------------------------------------------------------------------
14
connection with such exercise. The number of shares reserved for issuance under
the Program also shall be reduced by the largest whole number obtained by
dividing the monetary value of performance units granted at the commencement of
a performance period by the market value of a common share at such time.
Except as provided by the Committee, Benefits granted under the Program will
be exercisable only by the holder during the holder's lifetime; provided,
however, that such Benefits will be transferable by will or by the laws of
descent and distribution.
The following summary of certain provisions of the Program is qualified in its
entirety by reference to the copy of the Program set forth in Exhibit A to this
proxy statement.
- --------------------------------------------------
Administration
The Program provides that grants of options and other Benefits and other
determinations under the Program shall be made by the compensation committee of
the board of directors or such other committee consisting entirely of persons
who are both: (i) "disinterested persons" as defined in Rule 16b-3 of the
Securities Exchange Commission; and (ii) "outside directors" as defined under
Section 162(m) of the Internal Revenue Code of 1986, (the "Committee") except
that the Committee may delegate its authority to the extent consistent with
applicable law and Securities and Exchange Commission ("SEC") rules, and except
that the Chief Executive Officer may grant options and restricted stock awards
other than to directors and executive officers, subject to ratification by the
Committee.
- --------------------------------------------------
Eligibility
Officers and other employees of the corporation and its subsidiaries (including
the persons named in the table on page 10 and directors who are employees)
selected by the Committee will be eligible to receive options and other Benefits
under the Program. Directors who are not employees of the corporation or its
subsidiaries shall also be participants in the Program solely for purposes of
receiving certain restricted stock awards and non-qualified stock options (see
discussion on pages 17 and 18).
There are limits imposed on shares covered by restricted stock awards and
non-qualified stock options that may be granted to non-employee directors (see
pages 17 and 18). The maximum number of shares with respect to which incentive
stock options, non-qualified stock options, stock appreciation rights and
limited stock appreciation rights may be granted to any one participant, in
aggregate, in any one calendar year, is one million shares. There is no maximum
number of persons eligible to receive options and other Benefits under the
Program. The Program provides that the aggregate fair market value (determined
as of the time the option is granted) of the common shares with respect to which
incentive stock options may become exercisable for the first time by any
individual during any calendar year may not exceed $100,000. However, in no
event shall incentive stock options be granted with respect to more than
75,000,000 shares (plus any shares acquired by the corporation pursuant to
payment of the purchase price of shares under incentive stock options by
delivery of other common shares of the corporation). It is currently estimated
that the group of eligible employees under the Program will approximate 1,650
persons, with appropriate adjustments for any significant change in size or
operations of the corporation in the future. No determination has been made
under the Program regarding the identity of the persons to whom options or other
Benefits may be granted or the number of shares which may be allocated to any
specific person or persons.
- --------------------------------------------------
Duration
The Program will continue in effect until terminated by the board of directors,
except that no incentive stock option may be granted more than ten years after
the date of adoption of the Program by the board of directors.
- --------------------------------------------------
Adjustments
The Program provides for adjustment in the number of shares reserved and in the
shares covered by each outstanding Benefit in the event of a stock dividend or
stock split and for continuation of Benefits and other equitable adjustment in
the event of reorganization, sale, merger, consolidation, spin-off, or similar
occurrence.
- --------------------------------------------------
Options
The Program provides that the purchase price of any incentive stock option or
non-qualified stock option shall be at least 100 percent of the fair market
value of the common shares at the time the option is granted. The Committee may
provide for the payment of the purchase price in cash, by delivery of other
common shares of the corporation having a market value equal to the purchase
price of such shares, or by any other method, such as delivery of short-term,
unsecured promissory notes. A participant may pay the purchase price by delivery
of an exercise notice accompanied by a copy of irrevocable instructions to a
broker to deliver promptly to the corporation sale or loan proceeds to pay the
purchase price. The Committee may also permit pyramiding by optionees.
Pyramiding occurs when an optionee exercises stock options in increasing
portions by using each
- --------------------------------------------------------------------------------
15
portion and the appreciation inherent in the shares obtained to exercise a
larger portion of the option. Theoretically, by using this approach, an optionee
could purchase one share for cash and continue to use the shares obtained to
exercise the entire option in successively larger exercises. The result could be
that the optionee would receive shares of stock equal in value to the entire
spread between market price and option purchase price with only a minimal cash
payment.
The Committee may permit or require a participant to pay all or a portion of
the federal, state and local taxes, including FICA and medicare withholding tax,
arising in connection with the exercise of a non-qualified stock option, the
vesting of a restricted stock award or the receipt or exercise of any other
Benefit, by having the corporation withhold shares or by delivering shares
received in connection with the Benefit or previously acquired, having a fair
market value approximating the amount to be withheld.
The Committee may add conditions and limitations to any Benefit granted to any
participant who is subject to Section 16 of the Securities Exchange Act of 1934,
as amended, or to any feature of such Benefit as the Committee deems necessary
or desirable to comply with such Section and the rules thereunder, or to obtain
an exemption therefrom.
The Committee may grant stock options under the Program and under the 1991
Program that provide for the automatic grant of replacement stock options if all
or any portion of the purchase price or taxes incurred in connection with the
exercise are paid by delivery or withholding of common shares of the
corporation. The replacement stock option will cover the number of shares
surrendered to pay the purchase price, surrendered or withheld to pay the
participant's tax liability, if any, will have an exercise price equal to the
fair market value of such shares on the date the replacement stock option is
granted, will be exercisable in full six months from the date of grant and will
expire on the expiration date of the original stock option.
The period of any option will be determined by the Committee, but no option
may be exercised earlier than six months, nor after the expiration of ten years,
from the date it is granted. The Program contains special rules covering the
time of exercise in case of retirement, death, disability, or other termination
of employment. The Program also provides that, notwithstanding any other
provision, upon the occurrence of a "Change in Control" (as defined in the
Program) of the corporation, all stock options (whether or not then exercisable)
shall become fully exercisable as of the date of the Change in Control.
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Stock Appreciation Rights
A stock appreciation right will permit the holder of an option to elect to
surrender any option or portion thereof which is then exercisable and receive in
exchange therefor common shares, cash, or a combination thereof. Such cash,
stock, or combination shall have an aggregate value equal to the excess of the
fair market value on the date of such election of one common share over the
purchase price specified in such option multiplied by the number of shares
covered by such option or portion thereof which is so surrendered.
A stock appreciation right may be granted with respect to a stock option
either at the time of its grant or afterwards and may be granted with respect to
stock options granted under both the Program and the Prior Programs. A stock
appreciation right may be granted to an employee regardless of whether such
employee has been granted a limited stock appreciation right with respect to the
same stock option; provided, however, that a stock appreciation right may not be
exercised during any period that a limited stock appreciation right with respect
to the same stock option may be exercised. A stock appreciation right granted to
a participant who is subject to Section 16 of the Securities Exchange Act of
1934, as amended, may be exercised only after six months from its grant date
(unless such exercise would not affect the exemption under Rule 16b-3 of the
Securities and Exchange Commission). A stock appreciation right shall be
exercisable upon such additional terms and conditions as may be prescribed by
the Committee in its sole discretion, but in no event shall it be exercisable
after the expiration of the related stock option. The Program provides that upon
the occurrence of a Change in Control of the corporation, all stock appreciation
rights shall become fully exercisable as of the date of the Change in Control
(subject to the six month holding requirement described above).
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Limited Stock Appreciation Rights
The Program also permits the grant of limited stock appreciation rights to the
holder of any option previously granted under the Program or any Prior Program.
A limited stock appreciation right may be granted to an employee regardless of
whether such employee has been granted a stock appreciation right with respect
to the same stock option. A limited stock appreciation right will permit the
holder of an option to surrender the option or portion thereof which is then
exercisable and receive in exchange therefor cash in an amount equal to the
excess of the fair market value on the date of such election of one common share
over the purchase price specified in such option multiplied by the number of
shares covered by such option or portion thereof which
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16
is so surrendered. A limited stock appreciation right granted to a participant
who is subject to Section 16 of the Securities Exchange Act of 1934, as amended,
may be exercised only after six months from its date of grant (unless such
exercise would not affect the exemption under Rule 16b-3 of the Securities and
Exchange Commission) and only during the sixty-day period commencing with the
day following the date of a Change in Control of the corporation or, if later,
the first date on which such exercise would be exempt under SEC Rule 16b-3. In
addition, a limited stock appreciation right shall be exercisable upon such
additional terms and conditions as may be prescribed by the Committee, in its
sole discretion, but in no event shall it be exercisable after the expiration of
the related stock option. The Program provides that upon the occurrence of a
Change in Control of the corporation, all limited stock appreciation rights
shall become fully exercisable as of the date of the Change in Control (subject
to the six month holding requirement described above).
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Restricted Stock Awards
Restricted stock awards will consist of common shares transferred to
participants, without other payment therefor, as additional compensation for
their services to the corporation or one of its subsidiaries. Restricted stock
awards shall be subject to such terms and conditions as the Committee determines
are appropriate, including without limitation, restrictions on the sale or other
disposition of such shares and rights of the corporation to reacquire such
shares upon termination of the participant's employment within specified
periods. Subject to such other restrictions as are imposed by the Committee, the
common shares covered by a restricted stock award granted to a participant who
is subject to Section 16 of the Securities Exchange Act of 1934, as amended, may
be sold or otherwise disposed of only after six months from the grant date of
the award (unless such sale would not affect the exemption under Rule 16b-3 of
the Securities and Exchange Commission). The Program provides that upon the
occurrence of a Change in Control of the corporation, all terms and conditions
of all restricted stock awards then outstanding shall be deemed to be satisfied
as of the date of the Change in Control. No more than ten percent (10%) of the
total shares available for issuance in connection with Benefits granted in any
calendar year may be issued as restricted stock awards, including restricted
stock awards granted to non-employee directors as described on pages 17 and 18.
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Performance Awards
The Program permits the grant of performance awards in the form of performance
units or performance shares. Performance units consist of monetary awards and
performance shares consist of common shares or awards denominated in common
shares, which may be earned in whole or in part if the corporation achieves
certain goals established by the Committee over a designated period of time. The
goals established by the Committee shall be based on any one or a combination of
earnings per share, return on equity, return on assets, total shareholder
return, net operating income, cash flow, increase in revenue, economic value
added, increase in share price or cash flow return on investment. Partial
achievement of goals may result in payment or vesting corresponding to the
degree of achievement. Payment of an award earned may be in cash or in common
shares, or in a combination of both, and may be made when earned, or vested and
deferred, as the Committee in its sole discretion determines. Deferred awards
shall earn interest on the terms and at a rate determined by the Committee. The
maximum amount which may be granted under all performance awards for any one
year for any one participant is five million dollars. The Program provides that
upon the occurrence of a Change in Control of the corporation, all performance
awards then outstanding shall be deemed to have been fully earned and are
immediately payable, in cash, as of the date of the Change in Control.
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Foreign Qualified Benefits
Benefits under the Program may also be granted to such officers and employees of
the corporation and its subsidiaries who are residing in foreign jurisdictions
as the Committee in its sole discretion may determine from time to time. The
Committee may adopt such supplements to the Program as may be necessary to
comply with the applicable laws of such foreign jurisdictions and to afford such
employees favorable treatment under such laws; provided, however, that no
Benefit shall be granted under any such supplement with terms or conditions
which are inconsistent with the provisions set forth under the Program.
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Restricted Stock Awards and Options for Non-Employee Directors
The Program also provides that restricted stock awards will automatically be
granted each person elected a director of the corporation at the annual
shareholders meeting in any of the years 1996 through 2005 who is not an
employee of the corporation or one of its subsidiaries ("non-employee
directors"). The awards will be granted on the dates the persons are elected as
directors, and each award shall cover a number of common shares with a fair
market value on the grant date closest to, but not in excess of, Twenty-Two
Thousand Dollars ($22,000) for awards made in years 1996 through 2000 and
Twenty-Five Thousand Dollars ($25,000) for awards made in years 2001 through
2005. The shares covered by the awards may not be sold, assigned, transferred,
pledged, hypothecated, or
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17
otherwise disposed of for six months after their grant dates (unless such sales
would not affect the exemption under Rule 16b-3 of the Securities and Exchange
Commission) nor until the earlier of the date the director terminates or retires
from the board of directors or the occurrence of a Change in Control.
The program also permits non-employee directors to elect to receive any or all
of their directors' fees earned during the second half of 1996 and in subsequent
years in the form of non-qualified stock options. The fees earned in any year
that are covered by any such election shall be converted to stock options based
on an independent appraisal for such year of the value of such options. The
number of shares covered by such options granted in 1996 shall be three times
the fees covered by the election, divided by the fair market value of such
shares on the grant date. Such options shall be granted on the date the
corresponding fees would otherwise be paid and at a purchase price equal to the
fair market value of the shares covered by the option on the grant date. Each
such option shall be fully exercisable after six months from the grant date and
shall not be exercisable after ten years from the grant date.
The following table shows the number of shares that would have been granted to
non-employee directors as restricted stock awards and the number of common
shares covered by options that could be received by non-employee directors in
lieu of directors' fees earned during 1996 had the Program been in effect since
the beginning of the year:
Restricted
Stock Number of
Name and Position Awards Option Shares
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Non-Employee Director Group......... 5,731 41,385
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While the above table assumes that all fees earned in 1996 would be converted
to stock options, the Program allows only fees earned in the second half of 1996
and fees earned in subsequent years to be converted to options. The table also
assumes that all non-employee directors will elect to receive all of the fees
they earn during 1996 in the form of stock options. These amounts are based on
the current level of fees and assume a share price for the purpose of converting
fees to options of $42.1875, the average of the high and low trading prices of
common shares on the New York Stock Exchange Composite Index on January 31,
1996. With respect to the restricted stock awards, the table is calculated on
the basis of the trading prices on January 31, 1996. The actual number of
restricted stock awards will depend on the fair market value of the common
shares on April 26, 1996, the date of the Annual Meeting of Shareholders.
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Amendments and Discontinuance
The Program is subject to amendment or termination by the board of directors
without shareholder approval as deemed in the best interests of the corporation.
However, no such amendment shall, without the consent of the holder, reduce the
amount of any Benefit or adversely change the terms and conditions thereof, nor
shall any such amendment result in any Committee member losing his or her status
as a "disinterested person" with respect to any employee benefit plan of the
corporation, or the Program or any award thereunder losing its exempt status,
under Rule 16b-3 of the Securities and Exchange Commission.
The terms and conditions applicable to any Benefits granted and outstanding
may at any time be amended, modified, or canceled by mutual agreement between
the Committee and the participant so long as any amendment or modification does
not increase the number of common shares issuable under the Program. The
Committee may, at any time and in its sole discretion, declare any or all stock
options and stock appreciation rights then outstanding under the Program or the
Prior Programs to be exercisable and any or all outstanding restricted stock
awards to be vested, whether or not such options, rights or awards are otherwise
exercisable or vested.
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Federal Income Tax Consequences
Under existing law and regulations, the grant of non-qualified stock options,
limited stock appreciation rights and stock appreciation rights will not result
in income taxable to the employee or director or provide a deduction to the
corporation. However, the exercise of a non-qualified stock option, a stock
appreciation right or a limited stock appreciation right results in taxable
income to the holder, and the corporation is entitled to a corresponding
deduction. At the time of the exercise of a non-qualified stock option, the
amount so taxable and so deductible will be the excess of the fair market value
of the shares purchased over their option price. Upon the exercise of a stock
appreciation right or limited stock appreciation right, the participant will be
taxed at ordinary income tax rates on the amount of the cash and the fair market
value of the shares received by the employee, and the corporation will be
entitled to a corresponding deduction.
Under the Internal Revenue Code of 1986 (the "Code"), no income is recognized
by an optionee when an incentive stock option is granted or exercised. If the
holder holds the shares received on exercise of an incentive stock option for at
least two years from the date of grant and one year from date of exercise, any
gain realized by the holder on the disposition of the stock will be accorded
long-term capital gain treatment, and no deduction is allowed to the
corporation. If the
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18
holding period requirements are not satisfied, the employee will recognize
ordinary income at the time of disposition equal to the lesser of (i) the gain
realized on the disposition, or (ii) the difference between the option price and
the fair market value of the shares on the date of exercise. Any additional gain
on the disposition not reflected above will be long-term or short-term capital
gain, depending upon the length of time the shares are held. The corporation is
entitled to an income tax deduction equal to the amount of ordinary income
recognized by the employee.
An employee or nonemployee director who is granted a restricted stock award
will not be taxed upon the acquisition of such shares so long as the interest in
such shares is subject to a "substantial risk of forfeiture" within the meaning
of Section 83 of the Code. Upon lapse or release of the restrictions, the
recipient will be taxed at ordinary income tax rates on an amount equal to the
current fair market value of the shares. Any awards that are not subject to a
substantial risk of forfeiture, will be taxed at the time of grant. The
corporation will be entitled to a corresponding deduction when the value of the
award is included in the recipient's taxable income. The basis of restricted
shares held after lapse or termination of restrictions will be equal to their
fair market value on the date of lapse or termination of restrictions, and upon
subsequent disposition any further gain or loss will be long-term or short-term
capital gain or loss, depending upon the length of time the shares are held.
An employee or nonemployee director may elect to be taxed at ordinary income
tax rates on the full fair market value of the restricted shares at the time of
transfer. If the election is made, the basis of the shares so acquired will be
equal to the fair market value at the time of transfer. If the election is made,
no tax will be payable upon the subsequent lapse or release of the restrictions,
and any gain or loss upon disposition will be a capital gain or loss.
A participant will realize ordinary income as a result of performance awards
at the time common shares are transferred or cash is paid in an amount equal to
the value of the shares delivered plus the cash paid.
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SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
(ITEM NO. 3 ON PROXY CARD)
The bylaws of the corporation provide that, upon the recommendation of the audit
committee, the board of directors shall appoint annually a firm of independent
public accountants to serve as auditors, and that such appointment shall be
submitted for ratification by the shareholders at the Annual Meeting. The board
has appointed Arthur Andersen LLP to act as auditors for the current year. This
firm has served as auditors of the corporation since 1963. The board of
directors recommends a vote FOR ratification of the selection of Arthur Andersen
LLP as independent public accountants for 1996.
Representatives of Arthur Andersen LLP are expected to be present at the Annual
Meeting and will be given the opportunity to make a statement if they desire to
do so. They will also be available to respond to appropriate questions.
- --------------------------------------------------
DATE FOR RECEIPT OF 1997 SHAREHOLDER
PROPOSALS
Shareholder proposals for presentation at the 1997 Annual Meeting must be
received by the corporation no later than November 13, 1996 and must otherwise
comply with the applicable requirements of the Securities and Exchange
Commission to be considered for inclusion in the proxy statement and proxy for
the 1997 meeting.
- --------------------------------------------------
OTHER MATTERS
Over the course of the past year, the corporation advanced defense costs on
behalf of a number of current and former officers and directors in connection
with ABBOTT LABORATORIES DERIVATIVE LITIGATION. This is a consolidated
shareholder derivative action instituted in May and June of 1993 against all of
the corporation's present directors (other than Allen F. Jacobson) and a former
executive officer that was pending in the Circuit Court of Cook County,
Illinois. The complaint sought to hold the defendants liable for an amount
exceeding $140 million, in connection with the corporation's settlement of
certain antitrust litigation arising out of its marketing of infant formula,
plus additional unspecified damages, on the ground that the defendants had a
duty to prevent or correct the conduct that gave rise to the underlying claims.
On December 15, 1995, the Circuit Court of Cook County dismissed the action.
Plaintiffs have filed a notice of appeal.
- --------------------------------------------------
PROCEDURE FOR RECOMMENDATION AND
NOMINATION OF DIRECTORS AND TRANSACTION OF
BUSINESS AT ANNUAL MEETINGS
A shareholder may recommend persons as potential nominees for director by
submitting the names of such persons in writing to the chairman of the
nominations
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19
committee or the secretary of the corporation. Recommendations should be
accompanied by a statement of qualifications and confirmation of the person's
willingness to serve.
A shareholder may directly nominate persons for director only by complying with
the following procedure: the shareholder must submit the names of such persons
in writing to the secretary of the corporation not earlier than the October 1
nor later than the February 15 prior to the date of the Annual Meeting. The
nominations must be accompanied by a statement setting forth the name, age,
business address, residence address, principal occupation, qualifications, and
number of shares of the corporation owned by the nominee and the name, record
address, and number of shares of the corporation owned by the shareholder making
the nomination.
A shareholder may properly bring business before the Annual Meeting of
Shareholders only by complying with the following procedure: the shareholder
must submit to the secretary of the corporation, not earlier than the October 1
nor later than the February 15 prior to the date of the Annual Meeting, a
written statement describing the business to be discussed, the reasons for
conducting such business at the Annual Meeting, the name, record address, and
number of shares of the corporation owned by the shareholder making the
submission, and a description of any material interest of the shareholder in
such business.
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GENERAL
It is important that proxies be returned promptly. Shareholders are urged,
regardless of the number of shares owned, to sign and return their proxy card in
the enclosed business reply envelope.
The Annual Meeting will be held at the corporation's headquarters, 100 Abbott
Park Road, located at the intersection of Route 137 and Waukegan Road, Lake
County, Illinois. Admission to the meeting will be by admission card only. A
shareholder planning to attend the meeting should promptly complete and return
the reservation form to assure timely receipt of an admission card.
By order of the board of directors.
JOSE M. DE LASA
SECRETARY
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20
ABBOTT LABORATORIES 1996 INCENTIVE STOCK PROGRAM EXHIBIT A
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1. PURPOSE. The purpose of the Abbott Laboratories 1996 Incentive Stock
Program (the "Program") is to attract and retain outstanding directors, officers
and other employees of Abbott Laboratories (the "Company") and its subsidiaries,
and to furnish incentives to such persons by providing opportunities to acquire
common shares of the Company, or monetary payments based on the value of such
shares or the financial performance of the Company, or both, on advantageous
terms as herein provided and to further align such persons' interests with those
of the Company's other shareholders through compensation that is based on the
value of the Company's common shares.
2. ADMINISTRATION. The Program will be administered by a committee (the
"Committee") of at least two persons which shall be either the Compensation
Committee of the Board of Directors of the Company or such other committee
comprised entirely of persons who are both: (i) "disinterested persons" as
defined in Rule 16b-3 of the Securities and Exchange Commission; and (ii)
"outside directors" as defined under Section 162(m) of the Internal Revenue Code
of 1986, as amended; or any successor provision, as the Board of Directors may
from time to time designate. The Committee shall interpret the Program,
prescribe, amend and rescind rules and regulations relating thereto and make all
other determinations necessary or advisable for the administration of the
Program. A majority of the members of the Committee shall constitute a quorum
and all determinations of the Committee shall be made by a majority of its
members. Any determination of the Committee under the Program may be made
without notice of meeting of the Committee by a writing signed by all of the
Committee members. The Committee may, from time to time, delegate any or all of
its duties, powers and authority to any officer or officers of the Company,
except to the extent such delegation would be inconsistent with Rule 16b-3 of
the Securities and Exchange Commission or other applicable law, rule or
regulation. The Chief Executive Officer of the Company may, on behalf of the
Committee, grant stock options and restricted stock awards under the Program,
other than to persons subject to Section 16 of the Securities Exchange Act of
1934. All such grants by the Chief Executive Officer must be reported to, and
ratified by, the Committee within twelve months of the grant date but, if
ratified, shall be effective as of the grant date.
3. PARTICIPANTS. Participants in the Program will consist of such officers and
other employees of the Company and its subsidiaries as the Committee in its sole
discretion may designate from time to time to receive Benefits hereunder. The
Committee's designation of a participant in any year shall not require the
Committee to designate such person to receive a Benefit in any other year. The
Committee shall consider such factors as it deems pertinent in selecting
participants and in determining the type and amount of their respective
Benefits, including without limitation (i) the financial condition of the
Company; (ii) anticipated profits for the current or future years; (iii)
contributions of participants to the profitability and development of the
Company; (iv) prior awards to participants; and (v) other compensation provided
to participants. Non-Employee Directors shall also be participants in the
Program solely for purposes of receiving Restricted Stock Awards under paragraph
13 and Non-qualified Stock Options under paragraph 14. The term "Non-Employee
Director" shall mean a member of the Board of Directors who is not a full-time
employee of the Company or any of its subsidiaries.
4. TYPES OF BENEFITS. Benefits under the Program may be granted in any one or
a combination of (a) Incentive Stock Options; (b) Non-qualified Stock Options;
(c) Stock Appreciation Rights; (d) Limited Stock Appreciation Rights; (e)
Restricted Stock Awards; (f) Performance Awards; and (g) Foreign Qualified
Benefits, all as described below.
5. SHARES RESERVED UNDER THE PROGRAM. There is hereby reserved for issuance
under the Program: (i) an aggregate of Five Million (5,000,000) common shares;
plus (ii) an authorization for each calendar year (the "Annual Authorization")
from and including 1996, of seven-tenths of one percent (0.7%) of the total
common shares of the Company issued and outstanding as of the first day of such
calendar year; which may be newly issued or treasury shares. The shares hereby
reserved are in addition to the shares previously reserved under the Company's
1981 Incentive Stock Program, 1986 Incentive Stock Program and 1991 Incentive
Stock Program (the "Prior Programs"). Any common shares reserved for issuance
under the Prior Programs in excess of the number of shares as to which options
or other Benefits have been awarded on the date of shareholder approval of this
Program, plus any such shares as to which options or other Benefits granted
under the Prior Programs may lapse, expire, terminate or be canceled after such
date, shall also be reserved and available for issuance in connection with
Benefits under this Program. Any common shares reserved under the Program for
any calendar year under an Annual Authorization as to which options or other
Benefits have not been awarded as of the end of such calendar year shall be
available for issuance in connection with Benefits granted in subsequent years.
If there is a lapse, expiration, termination or cancellation of any Benefit
granted hereunder without the issuance of shares or payment of cash thereunder,
or if shares are issued under any Benefit and thereafter are reacquired by the
Company pursuant to rights reserved upon the issuance thereof, or shares are
reacquired pursuant to the payment of the purchase price of shares under stock
options by delivery of other common shares of the Company, the shares subject to
or reserved for such Benefit, or so reacquired, may again be used for new
options, rights or awards of any sort authorized under this Program; provided,
however, that in no event may the number of common shares issued under this
Program, and not
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A-1
- --------------------------------------------------------------------------------
reacquired by the Company pursuant to rights reserved upon the issuance thereof
or pursuant to the payment of the purchase price of shares under stock options
by delivery of other common shares of the Company, exceed the total number of
shares reserved for issuance hereunder.
6. INCENTIVE STOCK OPTIONS. Incentive Stock Options will consist of options to
purchase common shares at purchase prices not less than One Hundred percent
(100%) of the Fair Market Value of such common shares on the date of grant. An
Incentive Stock Option will not be exercisable after the expiration of ten (10)
years from the date such option is granted. In the event of termination of
employment for any reason other than retirement, disability or death, the right
of the optionee to exercise an Incentive Stock Option shall terminate upon the
earlier of the end of the original term of the option or three (3) months after
the optionee's last day of work for the Company and its subsidiaries. In the
event of termination of employment due to retirement or disability, or if the
optionee should die while employed, the right of the optionee or his or her
successor in interest to exercise an Incentive Stock Option shall terminate upon
the end of the original term of the option. If the optionee should die within
three (3) months after termination of employment for any reason other than
retirement or disability, the right of his or her successor in interest to
exercise an Incentive Stock Option shall terminate upon the earlier of the end
of the original term of the option or three (3) months after the date of such
death. To the extent the aggregate fair market value (determined as of the time
the Option is granted) of the common shares with respect to which any Incentive
Stock Option is exercisable for the first time by any individual during any
calendar year (under all option plans of the Company and its subsidiary
corporations) exceeds $100,000, the excess shall be treated as a Non-qualified
Stock Option. An Incentive Stock Option shall be exercisable as determined by
the Committee, but in no event earlier than six (6) months from its grant date.
7. NON-QUALIFIED STOCK OPTIONS. Non-qualified Stock Options will consist of
options to purchase common shares at purchase prices not less than One Hundred
percent (100%) of the Fair Market Value of such common shares on the date of
grant. A Non-qualified Stock Option will not be exercisable after the expiration
of ten (10) years from the date such option is granted. In the event of
termination of employment for any reason other than retirement, disability or
death, the right of the optionee to exercise a Non-qualified Stock Option shall
terminate upon the earlier of the end of the original term of the option or
three (3) months after the optionee's last day of work for the Company and its
subsidiaries. In the event of termination of employment due to retirement or
disability, or if the optionee should die while employed, the right of the
optionee or his or her successor in interest to exercise a Non-qualified Stock
Option shall terminate upon the end of the original term of the option. If the
optionee should die within three (3) months after termination of employment for
any reason other than retirement or disability, the right of his or her
successor in interest to exercise a Non-qualified Stock Option shall terminate
upon the earlier of the end of the original term of the option or three (3)
months after the date of such death. A Non-qualified Stock Option shall be
exercisable as determined by the Committee, but in no event earlier than six (6)
months from its grant date.
8. STOCK APPRECIATION RIGHTS. The Committee may, in its discretion, grant a
Stock Appreciation Right to the holder of any stock option granted hereunder or
under the Prior Programs. Such Stock Appreciation Rights shall be subject to
such terms and conditions consistent with the Program as the Committee shall
impose from time to time, including the following:
(a) A Stock Appreciation Right may be granted with respect to a stock option
at the time of its grant or at any time thereafter up to six (6) months prior
to its expiration.
(b) Stock Appreciation Rights will permit the holder to surrender any
related stock option or portion thereof which is then exercisable and to elect
to receive in exchange therefor cash in an amount equal to:
(i) The excess of the Fair Market Value on the date of such election of
one common share over the option price multiplied by
(ii) The number of shares covered by such option or portion thereof which
is so surrendered.
(c) A Stock Appreciation Right granted to a participant who is subject to
Section 16 of the Securities Exchange Act of 1934, as amended, may be
exercised only after six (6) months from its grant date (unless such exercise
would not affect the exemption under Rule 16b-3 of the Securities and Exchange
Commission).
(d) A Stock Appreciation Right may be granted to a participant regardless of
whether such participant has been granted a Limited Stock Appreciation Right
with respect to the same stock option. However, a Stock Appreciation Right may
not be exercised during any period that a Limited Stock Appreciation Right
with respect to the same stock option may be exercised.
(e) In the event of the exercise of a Stock Appreciation Right, the number
of shares reserved for issuance hereunder shall be reduced by the number of
shares covered by the stock option or portion thereof surrendered.
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A-2
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9. LIMITED STOCK APPRECIATION RIGHTS. The Committee may, in its discretion,
grant a Limited Stock Appreciation Right to the holder of any stock option
granted hereunder or under the Prior Programs. Such Limited Stock Appreciation
Rights shall be subject to such terms and conditions consistent with the Program
as the Committee shall impose from time to time, including the following:
(a) A Limited Stock Appreciation Right may be granted with respect to a
stock option at the time of its grant or at any time thereafter up to six (6)
months prior to its expiration.
(b) A Limited Stock Appreciation Right will permit the holder to surrender
any related stock option or portion thereof which is then exercisable and to
receive in exchange therefor cash in an amount equal to:
(i) The excess of the Fair Market Value on the date of such election of
one common share over the option price multiplied by
(ii) The number of shares covered by such option or portion thereof which
is so surrendered.
(c) A Limited Stock Appreciation Right granted to a participant who is
subject to Section 16 of the Securities Exchange Act of 1934, as amended, may
be exercised only after six (6) months from its grant date (unless such
exercise would not affect the exemption under Rule 16b-3 of the Securities and
Exchange Commission) and only during the sixty (60) day period commencing on
the later of: (i) the day following the date of a Change in Control; or (ii)
the first date on which such exercise would be exempt under Rule 16b-3 of the
Securities and Exchange Commission.
(d) A Limited Stock Appreciation Right may be granted to a participant
regardless of whether such participant has been granted a Stock Appreciation
Right with respect to the same stock option.
(e) In the event of the exercise of a Limited Stock Appreciation Right, the
number of shares reserved for issuance hereunder shall be reduced by the
number of shares covered by the stock option or portion thereof surrendered.
10. RESTRICTED STOCK AWARDS. Restricted Stock Awards will consist of common
shares transferred to participants without other payment therefor as additional
compensation for their services to the Company or any of its subsidiaries.
Restricted Stock Awards granted under this paragraph 10 shall be satisfied from
the Company's available treasury shares. Restricted Stock Awards shall be
subject to such terms and conditions as the Committee determines appropriate,
including, without limitation, restrictions on the sale or other disposition of
such shares and rights of the Company to reacquire such shares upon termination
of the participant's employment within specified periods. Subject to such other
restrictions as are imposed by the Committee, the common shares covered by a
Restricted Stock Award granted to a participant who is subject to Section 16 of
the Securities Exchange Act of 1934, as amended, may be sold or otherwise
disposed of only after six (6) months from the grant date of the award (unless
such sale would not affect the exemption under Rule 16b-3 of the Securities and
Exchange Commission). No more than ten percent (10%) of the total number of
shares available for grant in any calendar year may be issued as Restricted
Stock Awards under paragraphs 10 and 13 in that year.
11. PERFORMANCE AWARDS. Performance Awards in the form of Performance Units or
Performance Shares may be granted to any participant in the Program. Performance
Units shall consist of monetary awards which may be earned in whole or in part
if the Company achieves certain goals established by the Committee over a
designated period of time. Performance Shares shall consist of common shares or
awards denominated in common shares which may be earned in whole or in part if
the Company achieves certain goals established by the Committee over a
designated period of time. The goals established by the Committee shall be based
on any one, or combination of, earnings per share, return on equity, return on
assets, total shareholder return, net operating income, cash flow, increase in
revenue, economic value added, increase in share price or cash flow return on
investment. Partial achievement of the goal(s) may result in a payment or
vesting corresponding to the degree of achievement. Payment of an award earned
may be in cash or in common shares or in a combination of both, and may be made
when earned, or may be vested and deferred, as the Committee in its sole
discretion determines. The maximum amount which may be granted under all
Performance Awards for any one year for any one participant shall be Five
Million Dollars ($5,000,000). This limit shall be applied to Performance Shares
by multiplying the number of Performance Shares granted by the fair market value
of one common share on the date of the award. This paragraph 11 is intended to
comply with the performance-based compensation requirements of Section 162(m) of
the Internal Revenue Code of 1986, as amended, and shall be interpreted in
accordance with the rules and regulations thereunder.
12. FOREIGN QUALIFIED BENEFITS. Benefits under the Program may be granted to
such employees of the Company and its subsidiaries who are residing in foreign
jurisdictions as the Committee in its sole discretion may determine from time to
time. The Committee may adopt such supplements to the Program as may be
necessary to comply with the applicable laws of such foreign jurisdictions and
to afford participants favorable treatment under such laws; provided, however,
that no Benefit shall be granted under any such supplement with terms or
conditions which are inconsistent with the provisions as set forth under the
Program.
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13. RESTRICTED STOCK AWARDS FOR NON-EMPLOYEE DIRECTORS.
(a) Each person elected a Non-Employee Director at an annual shareholders
meeting in any of the years 1996 through 2005 shall receive a Restricted Stock
Award on the dates of their election covering a number of common shares with a
fair market value on the date of the award closest to, but not in excess of,
Twenty-Two Thousand Dollars ($22,000) for awards made in years 1996 through
2000 and Twenty-Five Thousand Dollars ($25,000) for awards made in years 2001
through 2005.
(b) ISSUANCE OF CERTIFICATES. As soon as practicable following the date of
the award the Company shall issue certificates ("Certificates") to the
Non-Employee Director receiving the award, representing the number of common
shares covered by the award. Each Certificate shall bear a legend describing the
restrictions on such shares imposed by this paragraph 13.
(c) RIGHTS. Upon issuance of the Certificates, the directors in whose names
they are registered shall, subject to the restrictions of this paragraph 13,
have all of the rights of a shareholder with respect to the shares represented
by the Certificates, including the right to vote such shares and receive cash
dividends and other distributions thereon.
(d) RESTRICTED PERIOD. The shares covered by awards granted under this
paragraph 13 may not be sold or otherwise disposed of within six (6) months
following their grant date (unless such sale would not affect the exemption
under Rule 16b-3 of the Securities and Exchange Commission) and in addition
shall be subject to the restrictions of this paragraph 13 for a period (the
"Restricted Period") commencing with the date of the award and ending on the
earliest of the following events:
(i) The date the director terminates or retires from the Board;
(ii) The date the director dies; or
(iii) The date of occurrence of a Change in Control (as defined in
paragraph 21(c)).
(e) RESTRICTIONS. All shares covered by awards granted under this paragraph
13 shall be subject to the following restrictions during the Restricted Period:
(i) The shares may not be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of.
(ii) Any additional common shares of the Company or other securities or
property issued with respect to shares covered by awards granted under this
paragraph 13 as a result of any stock dividend, stock split or
reorganization, shall be subject to the restrictions and other provisions of
this paragraph 13.
(iii) A director shall not be entitled to receive any shares prior to
completion of all actions deemed appropriate by the Company to comply with
federal or state securities laws and stock exchange requirements.
(f) Except in the event of conflict, all provisions of the Program shall
apply to this paragraph 13. In the event of any conflict between the
provisions of the Program and this paragraph 13, this paragraph 13 shall
control. Those provisions of paragraph 17 which authorize the Committee to
declare outstanding restricted stock awards to be vested and to amend or
modify the terms of Benefits shall not apply to awards granted under this
paragraph 13. Restricted Stock Awards granted under this paragraph 13 shall be
satisfied from the Company's available treasury shares.
14. NON-QUALIFIED STOCK OPTIONS FOR NON-EMPLOYEE DIRECTORS.
(a) Each Non-Employee Director may elect to receive any or all of his or her
fees earned during the second half of 1996 and each subsequent calendar year
under Section 3 of the Abbott Laboratories Non-Employee Directors' Fee Plan
(the "Directors' Fee Plan") in the form of Non-qualified Stock Options under
this Section 14. Each such election shall be irrevocable, and must be made in
writing and filed with the Secretary of the Company by December 31, 1995 (for
fees earned in the second half of 1996) and (for fees earned in subsequent
calendar years) by June 30 of the calendar year preceding the calendar year in
which such fees are earned (or such later date as may be permissible under
Rule 16b-3 of the Securities and Exchange Commission, but in no event later
than December 31 of such preceding calendar year).
(b) A Non-Employee Director may file a new election each calendar year
applicable to fees earned in the immediately succeeding calendar year. If no
new election or revocation of a prior election is received by June 30 of any
calendar year (or such later date as may be permissible under paragraph (a)),
the election, if any, in effect for such calendar year shall continue in
effect for the immediately succeeding calendar year. Any election made under
this Section 14 shall take precedence over any election made by the director
for the same period, under the Directors' Fee Plan, to the extent necessary to
resolve any conflict between such elections. If a director does not elect to
receive his or her fees in the form of Non-qualified Stock Options, the fees
due such director shall be paid or deferred as provided in the Directors' Fee
Plan and any applicable election thereunder by the director.
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A-4
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(c) The number of common shares covered by each Non-qualified Stock Option
granted in any year under this Section 14 shall be determined based on an
independent appraisal for such year of the intrinsic value of options granted
hereunder and the amount of fees covered by the director's election for such
year. The number of common shares covered by options granted in 1996 (as
determined under this procedure) shall be the number of whole shares equal to
(i) the product of three (3) times the amount of fees which the director has
elected under paragraph (a) to receive in the form of Non-qualified Stock
Options, divided by (ii) One Hundred percent (100%) of the Fair Market Value
of one common share on the grant date. Any fraction of a share shall be
disregarded, and the remaining amount of the fees corresponding to such option
shall be paid as provided in the Directors' Fee Plan and any applicable
election thereunder by the director.
(d) Each Non-qualified Stock Option due a director under this Section 14
shall be issued as of the date the corresponding fees otherwise due the
director would have been paid under the Directors' Fee Plan and at a purchase
price equal to One Hundred percent (100%) of the Fair Market Value of the
common shares covered by such option on the grant date. Each such option shall
be fully exercisable after six (6) months from the grant date, and shall not
be exercisable after the expiration of ten (10) years from the grant date.
Each such option shall contain provisions allowing payment of the purchase
price, and any taxes due on the exercise, by delivery of other common shares
of the Company (or, in the case of payment of taxes, by withholding of
shares).
15. NONTRANSFERABILITY. Except as provided by the Committee, each stock option
and stock appreciation right granted under this Program shall not be
transferable other than by will or the laws of descent and distribution, and
shall be exercisable, during the participant's lifetime, only by the participant
or the participant's guardian or legal representative.
16. OTHER PROVISIONS. The award of any Benefit under the Program may also be
subject to other provisions (whether or not applicable to the Benefit awarded to
any other participant) as the Committee determines appropriate, including,
without limitation, provisions for the purchase of common shares under stock
options in installments, provisions for the payment of the purchase price of
shares under stock options by delivery of other common shares of the Company
having a then market value equal to the purchase price of such shares,
restrictions on resale or other disposition, such provisions as may be
appropriate to comply with federal or state securities laws and stock exchange
requirements and understandings or conditions as to the participant's employment
in addition to those specifically provided for under the Program.
In the case of a participant who is subject to Section 16(a) and 16(b) of the
Securities Exchange Act of 1934, the Committee may, at any time, add such
conditions and limitations to any Benefit granted to such participant, or any
feature of any such Benefit, as the Committee, in its sole discretion, deems
necessary or desirable to comply with Section 16(a) or 16(b) and the rules and
regulations thereunder or to obtain any exemption therefrom.
A participant may pay the purchase price of shares under stock options by
delivery of a properly executed exercise notice together with a copy of
irrevocable instructions to a broker to deliver promptly to the Company the
amount of sale or loan proceeds to pay the purchase price. To facilitate the
foregoing, the Company may enter into agreements for coordinated procedures with
one or more brokerage firms.
The Committee may, in its discretion and subject to such rules as it may
adopt, permit or require a participant to pay all or a portion of the federal,
state and local taxes, including FICA and medicare withholding tax, arising in
connection with the following transactions: (a) the exercise of a Non-qualified
Stock Option; (b) the lapse of restrictions on common shares received as a
Restricted Stock Award; or (c) the receipt or exercise of any other Benefit; by
(i) having the Company withhold common shares, (ii) tendering back common shares
received in connection with such Benefit or (iii) delivering other previously
acquired common shares of the Company having a fair market value approximately
equal to the amount to be withheld.
The Committee may grant stock options under the Program (and, for stock
options granted prior to shareholder approval of this Program, under the
Company's 1991 Incentive Stock Program) that provide for the grant of
replacement stock options if all or any portion of the purchase price or taxes
incurred in connection with the exercise, are paid by delivery (or, in the case
of payment of taxes, by withholding of shares) of other common shares of the
Company. The replacement stock option shall cover the number of common shares
surrendered to pay the purchase price, plus the number of shares surrendered or
withheld to satisfy the participant's tax liability, shall have an exercise
price equal to One Hundred percent (100%) of the Fair Market Value of such
common shares on the date such replacement stock option is granted, shall first
be exercisable six months from the date of grant of the replacement stock option
and shall have an expiration date equal to the expiration date of the original
stock option.
17. TERM OF PROGRAM AND AMENDMENT, MODIFICATION, CANCELLATION OR ACCELERATION
OF BENEFITS. The Program shall continue in effect until terminated by the Board
of Directors of the Company, except that no Incentive Stock Option shall be
granted more than ten (10) years after the date of adoption of this Program. The
terms and conditions applicable to any
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A-5
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Benefits may at any time be amended, modified or canceled by mutual agreement
between the Committee and the participant or such other persons as may then have
an interest therein, so long as any amendment or modification does not increase
the number of common shares issuable under this Program; and provided further,
that the Committee may, at any time and in its sole discretion, declare any or
all stock options and stock appreciation rights then outstanding under this
Program or the Prior Programs to be exercisable and any or all then outstanding
Restricted Stock Awards to be vested, whether or not such options, rights or
awards are then otherwise exercisable or vested.
18. AMENDMENT TO PRIOR PROGRAMS. No options or other Benefits shall be granted
under the Prior Programs on or after the date of shareholder approval of this
Program.
19. INDIVIDUAL LIMIT ON OPTIONS AND STOCK APPRECIATION RIGHTS; AGGREGATE LIMIT
ON INCENTIVE STOCK OPTIONS. The maximum number of shares with respect to which
Incentive Stock Options, Non-qualified Stock Options, Stock Appreciation Rights
and Limited Stock Appreciation Rights may be granted to any one participant, in
aggregate in any one calendar year, shall be One Million (1,000,000) shares.
Incentive Stock Options with respect to no more than the lesser of (i)
Seventy-Five Million (75,000,000) shares (plus any shares acquired by the
Company pursuant to payment of the purchase price of shares under incentive
stock options by delivery of other common shares of the Company), or (ii) the
total number of shares reserved under paragraph 5 may be issued under the Plan.
20. TAXES. The Company shall be entitled to withhold the amount of any tax
attributable to any amount payable or shares deliverable under the Program after
giving the person entitled to receive such amount or shares notice as far in
advance as practicable, and the Company may defer making payment or delivery if
any such tax may be pending unless and until indemnified to its satisfaction.
21. DEFINITIONS.
(a) FAIR MARKET VALUE. The Fair Market Value of the Company's common shares
shall be the average of the highest and lowest sales prices of such shares as
reported on the New York Stock Exchange Composite Reporting System for the date
as of which the determination is to be made or in the absence of reported sales
on that date, the average of such reported highest and lowest sales prices for
the next preceding date on which reported sales occurred; provided that, in the
case of any Limited Stock Appreciation Right (other than a right related to an
Incentive Stock Option), the Fair Market Value shall be the higher of:
(i) The highest daily closing price of the Company's common shares during
the sixty (60) day period following the Change in Control; or
(ii) The highest gross price paid or to be paid for the Company's common
shares in any of the transactions described in paragraphs 21(c)(i) and
21(c)(ii).
(b) SUBSIDIARY. The term "subsidiary" for all purposes other than the
Incentive Stock Option provisions in paragraph 6, shall mean any corporation,
partnership, joint venture or business trust, fifty percent (50%) or more of the
control of which is owned, directly or indirectly, by the Company. For Incentive
Stock Option purposes the term "subsidiary" shall be defined as provided in
Internal Revenue Code Section 424(f).
(c) CHANGE IN CONTROL. A "Change in Control" shall be deemed to have
occurred on the earliest of the following dates:
(i) The date any entity or person (including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934 (the "Exchange
Act")) shall have become the beneficial owner of, or shall have obtained
voting control over, thirty percent (30%) or more of the outstanding common
shares of the Company;
(ii) The date the shareholders of the Company approve a definitive
agreement (A) to merge or consolidate the Company with or into another
corporation, or to merge another corporation into the Company, in which the
Company is not the continuing or surviving corporation or pursuant to which
any common shares of the Company would be converted into cash, securities of
another corporation, or other property, other than a merger or consolidation
of the Company in which holders of common shares immediately prior to the
merger have the same proportionate ownership of common stock of the
surviving corporation or its parent corporation immediately after the merger
as immediately before, or (B) to sell or otherwise dispose of substantially
all the assets of the Company; or
(iii) The date there shall have been a change in a majority of the Board
of Directors of the Company within a twelve (12) month period unless the
nomination for election by the Company's shareholders of each new director
was approved by the vote of two-thirds of the directors then still in office
who were in office at the beginning of the twelve (12) month period.
(d) DISABILITY. The term "disability" for all purposes of the Program shall
mean the participant's disability as defined in subsection 4.1(a) of the Abbott
Laboratories Extended Disability Plan for twelve (12) consecutive months.
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A-6
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22. ADJUSTMENT PROVISIONS.
(a) If the Company shall at any time change the number of issued common
shares without new consideration to the Company (such as by stock dividends or
stock splits), the total number of shares reserved for issuance under this
Program, the individual and aggregate limits described in paragraph 19, and
the number of shares covered by each outstanding Benefit shall be adjusted so
that the aggregate consideration payable to the Company and the value of each
such Benefit shall not be changed. The Committee shall also have the right to
provide for the continuation of Benefits or for other equitable adjustments
after changes in the Company or in the common shares resulting from
reorganization, sale, merger, consolidation, spin-off or similar occurrence.
(b) Notwithstanding any other provision of this Program, and without
affecting the number of shares otherwise reserved or available hereunder, the
Committee may authorize the issuance or assumption of Benefits in connection
with any merger, consolidation, acquisition of property or stock, or
reorganization upon such terms and conditions as it may deem appropriate.
(c) Subject to the six month holding requirements of paragraphs 6, 7, 8(c),
9(c), 10 and 13(d) but notwithstanding any other provision of this Program or
the Prior Programs, upon the occurrence of a Change in Control:
(i) All stock options then outstanding under this Program or the Prior
Programs shall become fully exercisable as of the date of the Change in
Control, whether or not then otherwise exercisable;
(ii) All Stock Appreciation Rights and Limited Stock Appreciation Rights
then outstanding shall become fully exercisable as of the date of the Change
in Control, whether or not then otherwise exercisable;
(iii) All terms and conditions of all Restricted Stock Awards then
outstanding shall be deemed satisfied as of the date of the Change in
Control; and
(iv) All Performance Awards then outstanding shall be deemed to have been
fully earned and to be immediately payable, in cash, as of the date of the
Change in Control.
23. AMENDMENT AND TERMINATION OF PROGRAM. The Board of Directors of the
Company may amend the Program from time to time or terminate the Program at any
time, but no such action shall reduce the then existing amount of any
participant's Benefit or adversely change the terms and conditions thereof
without the participant's consent. To the extent required for compliance with
Rule 16b-3 of the Securities and Exchange Commission, paragraph 13 of the
Program may not be amended more frequently than once every six months other than
to comport with changes in the Internal Revenue Code of 1986, as amended, or the
rules thereunder, and no amendment of the Program shall result in any Committee
member losing his or her status as a "disinterested person" as defined in Rule
16b-3 of the Securities and Exchange Commission with respect to any employee
benefit plan of the Company or result in the Program or awards thereunder losing
their exempt status under said Rule 16b-3.
24. SHAREHOLDER APPROVAL. The Program was adopted by the Board of Directors of
the Company on October 13, 1995. The Program and any Benefit granted thereunder
shall be null and void if shareholder approval is not obtained by October 12,
1996.
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A-7
[LOGO]
ABBOTT LABORATORIES
100 ABBOTT PARK ROAD
ABBOTT PARK, ILLINOIS 60064-3500 U.S.A.
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
AND PROXY STATEMENT
MEETING DATE
APRIL 26, 1996
YOUR VOTE IS IMPORTANT!
Please sign and promptly return your
proxy in the enclosed envelope.
RESERVATION FORM FOR ANNUAL MEETING
I am a shareholder of Abbott Laboratories and
plan to attend the Annual Meeting to be held
at the corporation's headquarters, 100 Abbott
Park Road, located at the intersection of
Route 137 and Waukegan Road, Lake County,
Illinois at 9:00 a.m. on Friday, April 26,
1996.
Please send me an admission card.
Name _________________________________________________________________________
Please Print
Address ______________________________________________________________________
City __________________________ State ____ Zip Code __________________________
Area code and phone number ___________________________________________________
Please complete and return this form in the business reply envelope provided,
if you plan to attend the meeting. If you hold your Abbott shares through a
broker, it is suggested that you return this form directly to the corporation
(rather than through your broker) to ensure timely receipt of an admission
card.
/X/ Please mark votes as in this example.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ITEMS 1,2 AND 3.
1. Election of 13 Directors.
Nominees: K.F. Austen, D.L. Burnham,
H.L. Fuller, T.R. Hodgson, A.F. Jacobson,
D.A. Jones, D.A.L. Owen, B. Powell, Jr.,
A.B. Rand, W. A. Reynolds,
W.D. Smithburg, J.R. Walter, and W.L. Weiss
FOR / / WITHHELD / /
FOR, except vote withheld from the following nominee(s):
- -------------------------------------------------
2. Approval of the Abbott Laboratories 1996 Incentive Stock Program.
FOR / / AGAINST / / ABSTAIN / /
3. Ratification of Arthur Andersen LLP as auditors.
FOR / / AGAINST / / ABSTAIN / /
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
Each joint tenant should sign; executors, administrators, trustees, etc.
should give full title and, where more than one is named, a majority should
sign.
Please read other side before signing.
Signature: Date: Signature: Date:
-------------------- ----- ------------------ -----
ABBOTT LABORATORIES
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY
The undersigned, revoking previous proxies, acknowledges receipt of the
Notice and Proxy Statement dated March 11, 1996 in connection with the Annual
Meeting of Shareholders of Abbott Laboratories to be held at 9:00 a.m. on
April 26, 1996 at the corporation's headquarters, and hereby appoints DUANE
L. BURNHAM and JOSE M. DE LASA, or either of them, proxy for the undersigned,
with power of substitution, to represent and vote all shares of the
undersigned upon all matters properly coming before the Annual Meeting or any
adjournments thereof.
INSTRUCTIONS: THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR ITEMS 1, 2 AND 3.
(IMPORTANT -- PLEASE SIGN AND DATE ON OTHER SIDE.) SEE REVERSE SIDE
