Exhibit 10.34
AGREEMENT
REGARDING
CHANGE IN CONTROL
THIS AGREEMENT
(“Agreement”), is made and entered into as of
[ ],
2008 (the “Effective Date”) by and between Abbott
Laboratories (the “Company”) and
(the “Executive;
WITNESSETH THAT:
WHEREAS, the Company considers it
essential to the best interests of its shareholders to foster the
continuous employment of key management personnel, and the Board of
Directors of the Company (the “Board”) recognizes that,
as is the case with many publicly held corporations, a change in
control might occur and that such possibility, and the uncertainty
and questions which it may raise among management, may result in
the departure or distraction of management personnel to the
detriment of the Company and its shareholders; and
WHEREAS, the Board has determined
that appropriate steps should be taken to reinforce and encourage
the continued attention and dedication of members of the
Company’s management, including the Executive, to their
assigned duties without distraction in the face of potentially
disturbing circumstances arising from the possibility of a change
in control of the Company;
NOW, THEREFORE, to induce the
Executive to remain in the employ of the Company and in
consideration of the premises and mutual covenants set forth
herein, IT IS HEREBY AGREED by and between the parties as
follows:
1.
AGREEMENT TERM. The initial
“Agreement Term” shall begin on the Effective Date and
shall continue through December 31, 2009. As of
December 31, 2009, and as of each December 31 thereafter,
the Agreement Term shall extend automatically to the third
anniversary thereof unless the Company gives notice to the
Executive prior to the date of such extension that the Agreement
Term will not be extended. Notwithstanding the foregoing, if a
Change in Control (as defined in Section 7 below) occurs
during the Agreement Term, the Agreement Term shall continue
through and terminate on the second anniversary of the date on
which the Change in Control occurs.
2.
ENTITLEMENT TO CHANGE IN CONTROL
BENEFITS. The Executive shall be entitled to the Change in Control
Benefits described in Section 3 hereof if the
Executive’s employment by the Company is terminated during
the Agreement Term but after a Change in Control (i) by the
Company for any reason other than Permanent Disability or Cause, or
(ii) by the Executive for Good Reason [or (iii) by the
Executive for any reason during the 30-day period commencing on the
first date which is six months after the date of the Change in
Control]. For purposes of this Agreement:
(a)
A termination of the
Executive’s employment shall be treated as a termination by
reason of “Permanent Disability” only if, by reason of
any medically determinable physical or mental impairment that can
be expected to result in death or can be expected to last for
a
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continuous period of not less than
twelve months, the Executive is unable to engage in any substantial
gainful activity or is receiving income replacement benefits under
an accident and health plan provided by the Company for a period of
not less than three months.
(b)
The term “Cause” shall
mean the willful engaging by the Executive in illegal conduct or
gross misconduct which is demonstrably and materially injurious to
the Company. For purposes of this Agreement, no act, or failure to
act, on the Executive’s part shall be deemed
“willful” unless done, or omitted to be done, by the
Executive not in good faith and without reasonable belief that the
Executive’s action or omission was in the best interest of
the Company. Notwithstanding the foregoing, the Executive shall not
be deemed to have been terminated for Cause unless and until the
Company delivers to the Executive a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters of
the entire membership of the Board at a meeting of the Board called
and held for such purpose (after reasonable notice to the Executive
and an opportunity for the Executive, together with counsel, to be
heard before the Board) finding that, in the good faith opinion of
the Board, the Executive was guilty of conduct set forth above and
specifying the particulars thereof in detail.
(c)
The term “Good Reason”
shall mean the occurrence of any of the following circumstances
without the Executive’s express written consent:
(i)
a significant adverse change in the
nature, scope or status of the Executive’s position,
authorities or duties from those in effect immediately prior to the
Change in Control, including, without limitation, if the Executive
was, immediately prior to the Change in Control, an executive
officer of a public company, the Executive ceasing to be an
executive officer of a public company;
(ii)
the failure by the Company to pay
the Executive any portion of the Executive’s current
compensation, or to pay the Executive any portion of any
installment of deferred compensation under any deferred
compensation program of the Company, within seven (7) days of
the date such compensation is due;
(iii)
a reduction in the Executive’s
annual base salary (or a material change in the frequency of
payment) as in effect immediately prior to the Change in Control as
the same may be increased from time to time;
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(iv)
the failure by the Company to award
the Executive an annual bonus in any year which is at least equal
to the annual bonus, awarded to the Executive under the annual
bonus plan of the Company for the year immediately preceding the
year of the Change in Control;
(v)
the failure by the Company to award
the Executive equity-based incentive compensation (such as stock
options, shares of restricted stock, or other equity-based
compensation) on a periodic basis consistent with the
Company’s practices with respect to timing, value and terms
prior to the Change in Control;
(vi)
the failure by the Company to
continue to provide the Executive with the welfare benefits, fringe
benefits and perquisites enjoyed by the Executive immediately prior
to the Change in Control under any of the Company’s plans or
policies, including, but not limited to, those plans and policies
providing pension, life insurance, medical, health and accident,
disability, vacation, executive automobile, executive tax or
financial advice benefits or club dues;
(vii)
the relocation of the
Company’s principal executive offices to a location more than
thirty-five miles from the location of such offices immediately
prior to the Change in Control or the Company requiring the
Executive to be based anywhere other than the location where the
Executive primarily performs services for the Company immediately
prior to the Change in Control except for required travel to the
Company’s business to an extent substantially consistent with
the Executive’s business travel obligations immediately prior
to the Change in Control; or
(viii)
the failure of the Company to obtain
a satisfactory agreement from any successor to the Company to
assume and agree to perform this Agreement as contemplated by
Section 16.
For purposes of any determination
regarding the existence of Good Reason, any good faith
determination by the Executive that Good Reason exists shall be
conclusive.
3.
CHANGE IN CONTROL BENEFITS. In
the event of a termination of employment entitling the Executive to
benefits in accordance with Section 2, the Executive shall
receive the following:
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(a)
The Executive shall be entitled to
receive the following employee welfare benefits: medical, accident,
dental, prescription, and life insurance coverage for the Executive
(and, where applicable under the Company’s welfare benefit
plans, the Executive’s family) through the second anniversary
of the Executive’s date of termination of employment, or, if
earlier, the date on which the Executive becomes employed by
another employer. The benefits provided by the Company shall be no
less favorable in terms of coverage and cost to the Executive than
those provided under the Company’s welfare benefit plans
applicable to the Executive (and, where applicable, the
Executive’s family) prior to the Change in Control,
determined as if the Executive remained in the employ of the
Company through such second anniversary. For purposes of
determining eligibility of the Executive for retiree welfare
benefits, the Executive shall be considered to have remained in the
employ of the Company through such second anniversary.
(b)
If the Executive’s date of
termination occurs after the end of a performance period applicable
to an annual incentive (bonus) award, and prior to the payment of
the award for the period, the Executive shall be entitled to a lump
sum payment in cash no later than twenty (20) business days after
the date of termination equal to the greatest of (i) the
Executive’s annual incentive (bonus) award for that period,
as determined under the terms of that incentive award arrangement,
(ii) the Executive’s annual incentive (bonus) award for
that period, with the determination of the amount of such award
based on an assumption that the target level of performance had
been achieved or (iii) the Executive’s average annual
incentive (bonus) award for the three annual performance periods
preceding that period (provided that if the Executive was not a
participant in the incentive award arrangement for any of those
three prior years, the averaging period shall be reduced from three
years to the number of years during the three year period in which
the Executive was a participant; and further provided that if the
Executive’s award for any such year was reduced because the
Executive was not a participant for the full year, such amount
shall be annualized for purposes of the computation in this clause
(iii)).
(c)
For any annual incentive (bonus)
plan or arrangement in which the Executive participates for the
performance period in which the Executive’s termination of
employment occurs, the Executive shall be entitled to a lump sum
payment in cash no later than twenty (20) business days after the
date of termination equal to the greater of (i) the
Executive’s annual incentive (bonus) award for the
performance period that includes the date of termination, with the
determination of the amount of such award based on an assumption
that the target level of performance has been achieved or
(ii) the
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Executive’s average annual
incentive (bonus) award for the three annual performance periods
preceding the performance period that includes the date of
termination (provided that if the Executive was not a participant
in the incentive award arrangement for any of those three prior
years, the averaging period shall be reduced from three years to
the number of years during the three year period in which the
Executive was a participant; and further provided that if the
Executive’s award for any such year was reduced because the
Executive was not a participant for the full year, such amount
shall be annualized for purposes of the computation in this clause
(ii)); provided that such payment shall be subject to a pro-rata
reduction to reflect the number of days in the performance period
following the date of termination. The amount payable under this
Section 3(c) shall be in lieu of any amounts that may
otherwise be due to the Executive with respect to any annual
incentive (bonus) plan or arrangement in which the Executive
participates for the performance period in which the
Executive’s date of termination occurs.
(d)
The Executive shall be entitled to a
lump sum payment in cash no later than twenty (20) business days
after the Executive’s date of termination equal to the sum
of:
(i)
an amount equal to three times the
Executive’s annual salary rate in effect on the date of the
Change in Control or, or if greater, as in effect immediately prior
to the date of termination; plus
(ii)
an amount equal to three times the
greater of (x) the Executive’s annual incentive (bonus)
award for the performance period that includes the date of the
Executive’s termination of employment, with the determination
of the amount of such award based on an assumption that the target
level of performance has been achieved or (y) the
Executive’s average annual incentive (bonus) award for the
three annual performance periods preceding the performance period
that includes the date of termination (provided that if the
Executive was not a participant in the incentive award arrangement
for any of those three prior years, the averaging period shall be
reduced from three years to the number of years during the three
year period in which the Executive was a participant; and further
provided that if the Executive’s award for any such year was
reduced because the Executive was not a participant for the full
year, such amount shall be annualized for purposes of the
computation in this subsection (ii)); plus
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(iii)
the lump sum present value of the
difference between the Enhanced Supplemental Plan Benefits (as
defined below) and the total benefit to which the Executive is then
entitled under the Abbott Laboratories Supplemental Pension Plan
(the “Supplemental Plan”). The Enhanced Supplemental
Plan Benefits shall mean the benefits under the Supplemental Plan
determined as if the Executive had been credited for benefit
accrual purposes with two additional years of service and two
additional years of eligible earnings at the higher of the
Executive’s eligible earnings on the date of termination or
the Executive’s eligible earnings on the date of the Change
in Control and, for purposes of determining the Executive’s
eligibility for subsidized early retirement benefits, determined as
if the Executive were two years older than the Executive’s
actual age on the date of termination. For purposes of the
determination of the Enhanced Supplemental Plan Benefits,
“eligible earnings” shall include salary, annual
incentive (bonus) awards and all other forms of compensation used
to calculate benefits under the Supplemental Plan. The amounts of
the annual incentive (bonus) awards shall be calculated, to the
extent applicable, in accordance with Sections 3(b) and
3(c) above. The Enhanced Supplemental Plan Benefits shall be
determined without regard to any termination or amendment
(including any amendment affecting actuarial factors) of such plan
or of any other plan, which is adopted on or after a Change in
Control or in contemplation of a Change in Control and shall be
paid in accordance with the terms of that plan and the
Executive’s elections under that plan.
The amounts payable under Sections
3(d)(i) and 3(d)(ii) shall be inclusive of the amounts,
if any, to which the Executive would otherwise be entitled as
severance or notice pay under any severance pay plan, or by law and
shall be in addition to (and not inclusive of) any amount payable
under any written agreement(s) directly between the Executive
and the Company or any of its subsidiaries.
(e)
If the Executive has previously made
a timely election with respect to bonuses payable under the 1986
Abbott Laboratories Management Incentive Plan, the 1998 Abbott
Laboratories Performance Incentive Plan, or any successor plans
thereto, all or any portion of the amounts payable under Sections
3(b) and 3(c) (less applicable tax withholding) shall be
paid directly to a grantor trust established by the Executive to
the same extent as and
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pursuant to such election no later
than twenty (20) business days after the Executive’s date of
termination.
(f)
The Company shall provide the
Executive with outplacement services and tax and financial
counseling suitable to the Executive’s position through the
second anniversary of the date of the Executive’s termination
of employment, or, if earlier, the date on which the Executive
becomes employed by another employer.
If the Executive is a participant in
the 1998 Abbott Laboratories Performance Incentive Plan or any
successor thereto, the Executive’s annual incentive (bonus)
award for the performance period which includes the date of
termination under Sections 3(c) and 3(d)(ii) above and,
if applicable, for the period preceding the date of termination
under Section 3(b) shall, be determined under the bonus
levels communicated in writing to the Executive by the Company for
such year and shall not be the Executive’s individual base
award allocation as defined in Section 4.2 of the 1998 Abbott
Laboratories Performance Incentive Plan (or any corresponding
provision of any successor plan).
4.
MITIGATION. The Executive shall not
be required to mitigate the amount of any payment provided for in
this Agreement by seeking other employment or otherwise. Except as
set forth in Section 3(a) with respect to benefits, the
Company shall not be entitled to set off against the amounts
payable to the Executive under this Agreement any amounts owed to
the Company by the Executive, any amounts earned by the Executive
in other employment after the Executive’s termination of
employment with the Company, or any amounts which might have been
earned by the Executive in other employment had the Executive
sought such other employment.
5.
MAKE-WHOLE PAYMENTS. If any payment
or benefit to which the Executive (or any person on account of the
Executive) is entitled, whether under this Agreement or otherwise,
in connection with a Change in Control or the Executive’s
termination of employment (a “Payment”) constitutes a
“parachute payment” within the meaning of section 280G
of the Internal Revenue Code of 1986, as amended (the
“Code”), and as a result thereof the Executive is
subject to a tax under Code Section 4999, or any successor
thereto, (an “Excise Tax”), the Company shall pay to
the Executive an additional amount (the “Make-Whole
Amount”) which is intended to make the Executive whole for
such Excise Tax. The Make-Whole Amount shall be equal to
(i) the amount of the Excise Tax, plus (ii) the aggregate
amount of any interest, penalties, fines or additions to any tax
which are imposed in connection with the imposition of such Excise
Tax, plus (iii) all income, excise and other applicable taxes
imposed on the Executive under the laws of any Federal, state or
local government or taxing authority by reason of the payments
required under clauses (i) and (ii) and this clause
(iii).
(a)
For purposes of determining the
Make-Whole Amount, the Executive shall be deemed to be taxed at the
highest marginal rate under all applicable local, state, federal
and foreign income tax laws for the year in which the Make-Whole
Amount is paid. The Make-Whole Amount payable with respect to
an Excise Tax shall
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be paid by the Company coincident
with the Payment with respect to which the Excise Tax
relates.
(b)
All calculations under this
Section 5 shall be made initially by the Company and the
Company shall provide prompt written notice thereof to the
Executive to enable the Executive to timely file all applicable tax
returns. Upon request of the Executive, the Company shall provide
the Executive with sufficient tax and compensation data to enable
the Executive or the Executive’s tax advisor to independently
make the calculations described in subsection (a) above and
the Company shall reimburse the Executive for reasonable fees and
expenses incurred for any such verification.
(c)
If the Executive gives written
notice to the Company of any objection to the results of the
Company’s calculations within sixty (60) days of the
Executive’s receipt of written notice thereof, the dispute
shall be referred for determination to independent tax counsel
selected by the Company and reasonably acceptable to the Executive
(“Tax Counsel”). The Company shall pay all fees and
expenses of such Tax Counsel. Pending such determination by Tax
Counsel, the Company shall pay the Executive the Make-Whole Amount
as determined by it in good faith. The Company shall pay the
Executive any additional amount determined by Tax Counsel to be due
under this Section 5 (together with interest thereon at a rate
equal to 120% of the Federal short-term rate determined under Code
Section 1274(d)) promptly after such determination.
(d)
The determination by Tax Counsel
shall be conclusive and binding upon all parties unless the
Internal Revenue Service, a court of competent jurisdiction, or
such other duly empowered governmental body or agency (a “Tax
Authority”) determines that the Executive owes a greater or
lesser amount of Excise Tax with respect to any Payment than the
amount determined by Tax Counsel.
(e)
If a Taxing Authority makes a claim
against the Executive which, if successful, would require the
Company to make a payment under this Section 5, the Executive
agrees to contest the claim with counsel reasonably satisfactory to
the Company, on request of the Company subject to the following
conditions:
(i)
The Executive shall notify the
Company of any such claim within ten (10) days of becoming
aware thereof. In the event that the Company desires the claim to
be contested, it shall promptly (but in no event more than thirty
(30) days after the notice from the Executive or such shorter time
as
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the Taxing Authority may specify for
responding to such claim) request the Executive to contest the
claim. The Executive shall not make any payment of any tax which is
the subject of the claim before the Executive has given the notice
or during the 30-day period thereafter unless the Executive
receives written instructions from the Company to make such
payment, in which case the Executive will act promptly in
accordance with such instructions.
(ii)
If the Company so requests, the
Executive will contest the claim by either paying the tax claimed
and suing for a refund in the appropriate court or contesting the
claim in the United States Tax Court or other appropriate court, as
directed by the Company; provided, however, that the Executive
shall be entitled to prompt reimbursement from the Company of any
amount paid at the Company’s request by the Executive to
contest the claim that the applicable court ultimately determines
to be an Excise Tax. If directed by the Company in writing the
Executive will take all action necessar
