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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 Section240.14a-11(c) or
Section240.14a-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/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(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):
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(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
1998
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[ABBOTT LABORATORIES LOGO]
ABBOTT LABORATORIES
100 ABBOTT PARK ROAD
ABBOTT PARK, ILLINOIS 60064-3500 U.S.A.
COVER:
OSCAR AMEZQUITA, A MEXICO CITY DENTIST, SUFFERED FROM CHRONIC GASTROINTESTINAL
PROBLEMS UNTIL THE CAUSE OF HIS CONDITION WAS DIAGNOSED AS HELICOBACTER PYLORI
(H. PYLORI), A BACTERIUM THAT CAUSES ULCERS. TO ERADICATE THE H. PYLORI
BACTERIUM AND HEAL THE ULCER, OSCAR'S DOCTOR PRESCRIBED A TRIPLE-THERAPY REGIMEN
OF OGASTRO-REGISTERED TRADEMARK- (LANSOPRAZOLE), A PROTON PUMP INHIBITOR DRUG
MARKETED BY ABBOTT IN LATIN AMERICA, AND TWO ANTIBIOTICS:
KLARICID-REGISTERED TRADEMARK- (CLARITHROMYCIN), MARKETED BY ABBOTT, AND
AMOXICILLIN. (ABBOTT ALSO MARKETS LANSOPRAZOLE IN CANADA. THE DRUG IS MARKETED
UNDER THE TRADEMARK PREVACID-REGISTERED TRADEMARK- IN THE UNITED STATES BY TAP
PHARMACEUTICALS, ABBOTT'S JOINT VENTURE WITH TAKEDA CHEMICAL INDUSTRIES OF
JAPAN.) WITHIN 10 DAYS OSCAR'S SYMPTOMS HAD DISAPPEARED, AND TODAY HE REMAINS
ULCER FREE. HE AND HIS WIFE LETICIA TOUR THE ANCIENT AZTEC RUINS OF TEOTIHUACAN
OUTSIDE OF MEXICO CITY.
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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 24, 1998 at
9:00 a.m. for the following purposes:
(1) To elect 16 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 1998 Abbott Laboratories
Performance Incentive Plan (Item No. 2 on proxy card);
(3) To ratify the appointment of Arthur Andersen LLP
as auditors of the corporation for 1998 (Item No. 3 on proxy card); and
(4) To transact such other business as may properly
come before the meeting, including consideration of the shareholder proposal on
the CERES Principles, if such proposal is presented at the meeting (Item No. 4
on proxy card).
The board of directors recommends that you vote FOR Items 1, 2, and 3 on the
proxy card. The board of directors OPPOSES the shareholder proposal and
recommends that you vote AGAINST Item 4 on the proxy card.
The close of business February 25, 1998, 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 10, 1998
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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 24,
1998, 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 10, 1998. 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 be solicited by mail or in person by directors, officers, or employees of
the corporation and its subsidiaries. The corporation has retained Georgeson &
Company Inc. to aid in the solicitation of proxies, at an estimated cost of
$14,000 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 25, 1998, will be
entitled to notice of and to vote at the Annual Meeting. As of January 31, 1998,
the corporation had 764,456,112 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 16 nominees hereinafter named. These
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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 16 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 the ratification of
the 1998 Abbott Laboratories Performance Incentive Plan, the ratification of the
appointment of Arthur Andersen LLP as auditors, or the approval of the
shareholder proposal, or where the shareholder has abstained on these matters,
the shares represented by the proxy will be voted as specified. Where no choice
has been specified, the proxy will be voted FOR ratification of the 1998 Abbott
Laboratories Performance Incentive Plan and Arthur Andersen LLP as auditors and
AGAINST the shareholder proposal.
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. Abstentions and withheld votes
have the effect of votes against a 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.
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.
With the exception of matters omitted from this proxy statement pursuant to the
rules of the Securities and Exchange Commission, 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, 1998, the Abbott Laboratories Stock Retirement Trust, c/o Abbott
Laboratories, 100 Abbott Park Road, Abbott Park, Illinois 60064-3500, held
57,106,464 common shares (approximately 7.5 percent of the outstanding common
shares) of the corporation. These shares were held for the individual accounts
of approximately 35,250 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. The
co-trustees are also fiduciaries for certain other employee benefit trusts
maintained by the corporation and have shared voting and/or investment power
with respect to the 296,940 common shares (approximately .04 percent of the
outstanding shares of the corporation) held by those trusts.
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COMMITTEES OF THE BOARD OF DIRECTORS
The board of directors, which held six meetings in 1997, has four committees
established in the corporation's bylaws: the executive committee, audit
committee, compensation committee, and nominations 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 1997. This committee may exercise all the authority of
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the board in the management of the corporation, except for matters expressly
reserved by law for board action.
The audit committee, whose members are W. A. Reynolds, chairman, K. F. Austen,
D. A. Jones, D. A. L. Owen, B. Powell, Jr., and J. R. Walter, held two meetings
in 1997. This committee provides advice and assistance regarding accounting,
auditing, and financial 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 H. L. Fuller, chairman, B. Powell,
Jr., A. B. Rand, W. D. Smithburg, and W. L. Weiss, held three meetings in 1997.
This committee is responsible for setting and administering the policies and
programs that govern both annual compensation and stock ownership programs.
The nominations and board affairs committee, whose members are D. A. Jones,
chairman, K. F. Austen, D. A. L. Owen, A. B. Rand, and W. A. Reynolds, held two
meetings in 1997. This committee develops general criteria regarding the
qualifications and selection of board members and officers, recommends
candidates for such positions to the board of directors, and advises the board
of directors with respect to the conduct of board activities, including
assisting the board in the evaluation of the board's own performance. A
shareholder may recommend persons as potential nominees for director or directly
nominate persons for director by complying with the procedures on page 18.
The average attendance of all directors at board and committee meetings in 1997
was 98 percent.
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INFORMATION CONCERNING NOMINEES FOR DIRECTORS
(ITEM NO. 1 ON PROXY CARD)
Sixteen directors are to be elected to hold office until the next Annual Meeting
or until their successors are elected. All of the nominees, except P. N. Clark,
R. L. Parkinson, Jr., R. S. Roberts, and M. D. White, are currently serving as
directors.
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NOMINEES FOR ELECTION AS DIRECTORS
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K. FRANK AUSTEN, M.D. AGE 69 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.
DUANE L. BURNHAM AGE 56 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 NCR CORPORATION, NORTHERN TRUST
CORPORATION, SARA LEE CORPORATION, EVANSTON NORTHWESTERN HEALTHCARE, 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 CHICAGO COUNCIL ON FOREIGN
RELATIONS.
PAUL N. CLARK AGE 51 DIRECTOR NOMINEE
EXECUTIVE VICE PRESIDENT, ABBOTT LABORATORIES
[PHOTO3] MR. CLARK JOINED ABBOTT IN 1984. HE WAS ELECTED SENIOR VICE PRESIDENT,
PHARMACEUTICAL OPERATIONS IN 1990 AND EXECUTIVE VICE PRESIDENT ON FEBRUARY 13,
1998. MR. CLARK RECEIVED HIS UNDERGRADUATE DEGREE FROM THE UNIVERSITY OF ALABAMA
AND HIS M.B.A. DEGREE FROM DARTMOUTH COLLEGE. HE SERVES AS A MEMBER OF THE BOARD
OF DIRECTORS OF LAKE FOREST HOSPITAL, THE COMPAQ COMPUTER'S BOARD OF ADVISORS,
AND THE NATIONAL BOARD OF VISITORS OF THE UNIVERSITY OF ALABAMA.
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H. LAURANCE FULLER AGE 59 DIRECTOR SINCE 1988
CHAIRMAN AND CHIEF EXECUTIVE OFFICER, AMOCO CORPORATION, CHICAGO, ILLINOIS (INTEGRATED
[PHOTO4] 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.
THOMAS R. HODGSON AGE 56 DIRECTOR SINCE 1985
PRESIDENT AND CHIEF OPERATING OFFICER, ABBOTT LABORATORIES
[PHOTO5] 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 A DIRECTOR OF CASE CORPORATION AND THE
ST. PAUL COMPANIES, INC., AS A TRUSTEE OF RUSH-PRESBYTERIAN-ST. LUKE'S MEDICAL CENTER AND
ON THE ENGINEERING VISITING COMMITTEE AT PURDUE UNIVERSITY.
DAVID A. JONES AGE 66 DIRECTOR SINCE 1982
CHAIRMAN AND RETIRED CHIEF EXECUTIVE OFFICER, HUMANA INC., LOUISVILLE, KENTUCKY (HEALTH
[PHOTO6] PLAN BUSINESS)
MR. JONES IS CO-FOUNDER OF HUMANA INC. AND SERVED AS CHAIRMAN AND CHIEF EXECUTIVE OFFICER
SINCE ITS ORGANIZATION IN 1961 UNTIL HE RETIRED AS CHIEF EXECUTIVE OFFICER ON DECEMBER 1,
1997.
THE RT. HON. LORD OWEN CH AGE 59 DIRECTOR SINCE 1996
PHYSICIAN, POLITICIAN, AND BUSINESSMAN, LONDON, UNITED KINGDOM
[PHOTO7] DAVID OWEN IS A BRITISH SUBJECT. HE WAS A NEUROLOGIST AND RESEARCH FELLOW ON THE MEDICAL
UNIT OF ST. THOMAS' HOSPITAL, LONDON, FROM 1965 THROUGH 1968. 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 RICEMAN INVESTMENT SERVICES (BVI) LIMITED AND EXECUTIVE
CHAIRMAN OF MIDDLESEX HOLDINGS PLC.
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ROBERT L. PARKINSON, JR. AGE 47 DIRECTOR NOMINEE
EXECUTIVE VICE PRESIDENT, ABBOTT LABORATORIES
[PHOTO8] MR. PARKINSON JOINED ABBOTT IN 1976. HE WAS ELECTED VICE PRESIDENT, EUROPEAN OPERATIONS IN
1990, SENIOR VICE PRESIDENT, CHEMICAL AND AGRICULTURAL PRODUCTS IN 1993, SENIOR VICE
PRESIDENT, INTERNATIONAL OPERATIONS IN 1995, AND EXECUTIVE VICE PRESIDENT ON FEBRUARY 13,
1998. MR. PARKINSON RECEIVED BOTH HIS UNDERGRADUATE AND M.B.A. DEGREES FROM LOYOLA
UNIVERSITY OF CHICAGO. HE SERVES AS A MEMBER OF THE BOARD OF DIRECTORS OF NORTHWESTERN
MEMORIAL CORP.
BOONE POWELL, JR. AGE 61 DIRECTOR SINCE 1985
PRESIDENT AND CHIEF EXECUTIVE OFFICER, BAYLOR HEALTH CARE SYSTEM AND BAYLOR UNIVERSITY
[PHOTO9] MEDICAL CENTER, 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 HEALTHWAY INTERACTIVE 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.
ADDISON BARRY RAND AGE 53 DIRECTOR SINCE 1992
EXECUTIVE VICE PRESIDENT, XEROX CORPORATION, STAMFORD, CONNECTICUT (DOCUMENT PROCESSING,
[PHOTO10] 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 60 DIRECTOR SINCE 1980
PRESIDENT, THE UNIVERSITY OF ALABAMA AT BIRMINGHAM, BIRMINGHAM, ALABAMA
[PHOTO11] IN 1997, DR. REYNOLDS WAS APPOINTED PRESIDENT OF THE UNIVERSITY OF ALABAMA AT BIRMINGHAM.
FROM 1990 TO 1997, SHE SERVED AS CHANCELLOR OF THE CITY UNIVERSITY OF NEW YORK. PRIOR TO
THAT, DR. REYNOLDS SERVED AS CHANCELLOR OF THE CALIFORNIA STATE UNIVERSITY, 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.
ROY S. ROBERTS AGE 58 DIRECTOR NOMINEE
VICE PRESIDENT, GENERAL MOTORS CORPORATION (MANUFACTURER OF MOTOR VEHICLES) AND GENERAL
[PHOTO12] MANAGER, PONTIAC-GMC DIVISION, PONTIAC, MICHIGAN
MR. ROBERTS WAS ELECTED VICE PRESIDENT OF GENERAL MOTORS CORPORATION AND GENERAL MANAGER
OF THE PONTIAC-GMC DIVISION IN FEBRUARY 1996. FROM OCTOBER 1992, WHEN HE WAS ELECTED A
CORPORATE OFFICER, TO FEBRUARY 1996 HE WAS GENERAL MANAGER OF THE GMC TRUCK DIVISION. MR.
ROBERTS FIRST JOINED GENERAL MOTORS CORPORATION IN 1977. MR. ROBERTS EARNED A BACHELOR'S
DEGREE FROM WESTERN MICHIGAN UNIVERSITY. HE SERVES AS A DIRECTOR OF BURLINGTON NORTHERN
SANTA FE CORPORATION AND VOLVO HEAVY TRUCK CORPORATION; AS TRUSTEE EMERITUS AT WESTERN
MICHIGAN UNIVERSITY; ON THE NATIONAL BOARD OF DIRECTORS AND EXECUTIVE COMMITTEE FOR THE
BOY SCOUTS OF AMERICA; AND ON THE NATIONAL BOARD OF THE COLLEGE FUND/UNCF.
WILLIAM D. SMITHBURG AGE 59 DIRECTOR SINCE 1982
RETIRED CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER, THE QUAKER OATS COMPANY, CHICAGO,
[PHOTO14] ILLINOIS (WORLDWIDE FOOD MANUFACTURER AND MARKETER OF BEVERAGES AND GRAIN-BASED PRODUCTS)
MR. SMITHBURG RETIRED FROM QUAKER OATS IN OCTOBER 1997. 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
SERVED ON ITS EXECUTIVE COMMITTEE UNTIL HE RETIRED. 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. 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 51 DIRECTOR SINCE 1990
FORMER PRESIDENT AND CHIEF OPERATING OFFICER, AT&T CORPORATION, BASKING RIDGE, NEW JERSEY
[PHOTO15] (TELECOMMUNICATIONS COMPANY); AND FORMER CHAIRMAN AND CHIEF EXECUTIVE OFFICER, R.R.
DONNELLEY & SONS COMPANY (PRINTING COMPANY)
MR. WALTER SERVED AS PRESIDENT AND CHIEF OPERATING OFFICER OF AT&T CORPORATION FROM
OCTOBER 1996 UNTIL JULY 1997. PRIOR TO THAT TIME, MR. WALTER WAS CHAIRMAN AND CHIEF
EXECUTIVE OFFICER OF R.R. DONNELLEY & SONS COMPANY, A 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
SERVED ON ITS BOARD UNTIL OCTOBER OF 1996. HE HOLDS A BACHELOR'S DEGREE FROM MIAMI
UNIVERSITY OF OHIO. MR. WALTER SERVES AS A DIRECTOR OF DAYTON HUDSON CORPORATION, DEERE &
COMPANY, AND LASALLE PARTNERS AND AS A TRUSTEE OF THE ORCHESTRAL ASSOCIATION AND
NORTHWESTERN UNIVERSITY.
WILLIAM L. WEISS AGE 68 DIRECTOR SINCE 1984
CHAIRMAN EMERITUS, AMERITECH CORPORATION, CHICAGO, ILLINOIS (TELECOMMUNICATIONS COMPANY)
[PHOTO16] ON JANUARY 1, 1984, 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, AND THE MUSEUM OF SCIENCE AND INDUSTRY.
MILES D. WHITE AGE 42 DIRECTOR NOMINEE
EXECUTIVE VICE PRESIDENT, ABBOTT LABORATORIES
[PHOTO17] MR. WHITE JOINED ABBOTT IN 1984. HE WAS ELECTED VICE PRESIDENT, DIAGNOSTIC SYSTEMS
OPERATIONS IN 1993, SENIOR VICE PRESIDENT, DIAGNOSTIC OPERATIONS IN 1994, AND EXECUTIVE
VICE PRESIDENT ON FEBRUARY 13, 1998. MR. WHITE RECEIVED BOTH HIS BACHELOR'S DEGREE IN
MECHANICAL ENGINEERING AND M.B.A. DEGREE FROM STANFORD UNIVERSITY. HE SERVES AS A MEMBER
OF THE BOARD OF DIRECTORS OF THE HEALTH INDUSTRY MANUFACTURERS ASSOCIATION AND THE BOARD
OF TRUSTEES OF THE FIELD MUSEUM OF NATURAL HISTORY IN CHICAGO.
</TABLE>
- --------------------------------------------------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
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 which link total shareholder return 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 1997, 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 basic 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 1997, 40% of the
target award was earned for achievement of the corporation's basic 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 have provided an important
part of the equity link to
- --------------------------------------------------------------------------------
9
<PAGE>
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 1997, the committee granted Mr. Burnham, the corporation's Chairman and Chief
Executive Officer, a base salary increase of 4.0% which was consistent with the
corporation's established merit increase program. As reflected in the
corporation's financial statements, Abbott's performance in 1997 included 7.9%
growth in sales, and 12.9% growth in basic earnings per share. In light of this
performance and their overall assessment of his performance, the committee
determined to grant Mr. Burnham a bonus, stock options and restricted stock.
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 continues 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. As a
result, shareholders are being asked to approve a new Performance Incentive Plan
for the Chairman and Chief Executive Officer, the President and Chief Operating
Officer and Senior Officers of the corporation that is designed to meet the
performance-based compensation criteria of the Omnibus Budget Reconciliation Act
of 1993 and to permit deductibility of awards paid under the Performance
Incentive Plan.
COMPENSATION COMMITTEE
H. L. Fuller, chairman, B. Powell, Jr., A. B. Rand, W. D. Smithburg and W. L.
Weiss.
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
Summary Compensation Table
The following table summarizes compensation earned in 1997, 1996, and 1995 by
the Chief Executive Officer and the five other most highly paid executive
officers (the "named officers") in 1997.
<TABLE>
<CAPTION>
Annual Compensation Long-term Compensation
--------------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Other Restricted Securities
Annual Stock Underlying All Other
Name and Salary Compen- Award(s) Options/ Compen-
Principal Position Year ($) Bonus ($) sation ($) ($)(1) SARs (#) sation ($)(6)
- -------------------------------------------------------------------------------------------------------------------
Duane L. Burnham 1997 $877,769 $1,175,000 $ 593,916 $2,335,000(2) 225,000 $ 32,661
Chairman of the Board, 57,788(5)
Chief Executive Officer 1996 846,923 1,055,000 518,747 1,310,625(3) 210,000 30,013
and Director 1995 818,269 1,000,000 413,422 0 195,000 26,987
- -------------------------------------------------------------------------------------------------------------------
Thomas R. Hodgson 1997 628,631 850,000 209,422 1,751,250(2) 160,000 24,089
President, 35,122(5)
Chief Operating Officer 1996 606,554 755,000 148,555 733,950(3) 132,000 22,179
and Director 1995 585,919 725,000 109,061 0 130,000 19,941
- -------------------------------------------------------------------------------------------------------------------
Gary P. Coughlan 1997 445,385 450,000 191,025 1,167,500(2) 40,000 16,177
Senior Vice President, 68,818(5)
Finance and Chief 1996 430,384 430,000 137,999 0 50,000 14,863
Financial Officer 1995 416,923 400,000 104,237 0 40,000 13,399
- -------------------------------------------------------------------------------------------------------------------
Paul N. Clark 1997 393,654 475,000 4,557 1,167,500(2) 40,000 14,560
Executive Vice President 86,330(5)
and Director Nominee 1996 378,654 440,000 1,156 0 50,000 15,119
1995 361,692 415,000 875 0 40,000 13,032
- -------------------------------------------------------------------------------------------------------------------
Robert L. Parkinson, Jr. 1997 393,654 475,000 18,868 1,167,500(2) 40,000 14,910
Executive Vice President 53,723(5)
and Director Nominee 1996 372,500 395,000 18,494 0 50,000 13,453
1995 301,385 365,000 1,572 199,375(4) 40,000 10,130
- -------------------------------------------------------------------------------------------------------------------
Miles D. White 1997 393,654 475,000 34,082 1,167,500(2) 40,000 16,659
Executive Vice President 18,671(5)
and Director Nominee 1996 370,769 350,000 1,387 0 50,000 14,285
1995 297,115 350,000 0 0 40,000 10,630
- -------------------------------------------------------------------------------------------------------------------
<FN>
TABLE FOOTNOTES
(1) The number and value of restricted shares held, respectively, as of
December 31, 1997, were as follows: D. L. Burnham - 60,000 / $3,930,000; T.
R. Hodgson - 41,200 / $2,698,600; G. P. Coughlan - 20,000 / $1,310,000; P.
N. Clark - 20,000 / $1,310,000; R. L. Parkinson, Jr. - 29,000 / $1,899,500;
and M. D. White - 32,000 / $2,096,000. The officers receive all dividends
paid on these shares.
(2) The number of shares covered by these awards are 40,000 for D. L. Burnham;
30,000 for T. R. Hodgson; 20,000 for G. P. Coughlan; 20,000 for P. N.
Clark; 20,000 for R. L. Parkinson, Jr.; and 20,000 for M. D. White. The
shares vest on February 14, 2002.
(3) The number of shares covered by these awards are 30,000 for D. L. Burnham
and 16,800 for T. R. Hodgson. These awards vest in three equal
installments. The first and second installments vested on January 2, 1997,
and January 2, 1998. The third installment will vest on January 4, 1999.
(4) The number of shares covered by this award is 5,000.
(5) These options are replacement stock options. They are described in the
table captioned "Option/SAR Grants in Last Fiscal Year" on page 12.
(6) Employer contributions made to the Stock Retirement Plan and made or
accrued with respect to the 401(k) Supplemental Plan.
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
Stock Options
The following tables summarize the named officers' stock option activity during
1997.
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
- -------------------------------------------------------------------------------------------------- Potential Realizable Value at
% of Total Assumed Annual Rates of Stock
Options/ SARs Price Appreciation for Option
Number of Securities Granted to Term (3):
Underlying Options/ Employees in Exercise or Base Expiration --------------------------------
Name SARs Granted (#)(1) Fiscal Year Price ($/Sh.) Date 5% ($) 10% ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Duane L. Burnham 225,000(2) $58.38 02/13/07 $8,260,845 $20,934,604
Replacement 57,788 4.0% 63.50 02/08/06 1,941,796 4,747,061
Options:
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas R. Hodgson 160,000(2) 58.38 02/13/07 5,874,379 14,886,830
Replacement 35,122 2.8 62.32 02/08/06 1,174,410 2,878,442
Options:
- ------------------------------------------------------------------------------------------------------------------------------------
Gary P. Coughlan 40,000(2) 58.38 02/13/07 1,468,595 3,721,707
Replacement 10,606 1.5 65.54 05/03/00 90,409 188,029
Options: 6,018 65.54 06/07/00 51,299 106,691
17,075 65.54 04/11/01 202,307 430,001
35,119 65.54 04/09/02 551,985 1,203,015
- ------------------------------------------------------------------------------------------------------------------------------------
Paul N. Clark 40,000(2) 58.38 02/13/07 1,468,595 3,721,707
Replacement 2,016 1.8 64.36 06/07/00 17,591 36,667
Options: 15,241 64.36 04/11/01 177,327 376,905
56,464 64.36 04/09/02 871,498 1,889,373
12,609 64.36 04/27/05 353,206 833,155
- ------------------------------------------------------------------------------------------------------------------------------------
Robert L. Parkinson, 40,000(2) 58.38 02/13/07 1,468,595 3,721,707
Jr.
Replacement 3,956 1.3 67.98 04/11/01 48,616 103,333
Options: 28,375 67.98 04/09/02 450,866 979,942
16,739 67.98 02/11/03 328,909 731,362
4,653 67.98 04/27/05 137,672 324,746
- ------------------------------------------------------------------------------------------------------------------------------------
Miles D. White 40,000(2) 58.38 02/13/07 1,468,595 3,721,707
Replacement 1,546 .8 63.82 04/09/02 23,662 51,569
Options: 2,540 63.82 06/04/02 40,845 89,472
9,937 63.82 04/15/03 191,400 428,027
4,648 63.82 06/30/04 112,810 260,403
- ------------------------------------------------------------------------------------------------------------------------------------
Gain for all Shareholders at Assumed Rates for Appreciation (4): $31,475,019,201 $79,763,878,393
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
TABLE FOOTNOTES
(1) Limited stock appreciation rights have been granted in tandem with these
options. These rights are only exercisable for 60 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. These options contain a replacement option
feature. When the option's exercise price is paid (or, in the case of non-
qualified stock options, when the option's exercise price or the withholding
taxes resulting on exercise of that option are paid) with shares of the
corporation's common stock, a replacement option is granted for the number
of shares used to make that payment. The replacement option has an exercise
price equal to the market value of the corporation's common stock on the
date of the original option's exercise and a term expiring on the expiration
date of the original 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, 1997
of 764,094,053 and December 31, 1997 closing market price of $65.50 per
share.
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-end Option/SAR Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-end (#) FY-end ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Duane L. Burnham 140,636 4$,500,795 793,822 / 430,000 $27,072,534 / $6,770,525
- ---------------------------------------------------------------------------------------------------------------
Thomas R. Hodgson 60,507 1,405,592 495,294 / 291,333 16,944,807 / 4,472,983
- ---------------------------------------------------------------------------------------------------------------
Gary P. Coughlan 124,841 5,016,300 79,819 / 155,484 2,367,797 / 1,505,931
- ---------------------------------------------------------------------------------------------------------------
Paul N. Clark 215,208 8,728,369 46,870 / 172,996 1,474,022 / 1,623,517
- ---------------------------------------------------------------------------------------------------------------
Robert L. Parkinson, Jr. 93,870 3,671,749 52,246 / 140,389 1,513,464 / 1,444,167
- ---------------------------------------------------------------------------------------------------------------
Miles D. White 27,783 1,010,877 69,166 / 105,337 2,040,487 / 1,493,038
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
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 supplement pension plan.
- --------------------------------------------------------------------------------
Pension Plan Table
<TABLE>
<CAPTION>
Years of Service
- ------------- -----------------------------------------------------
Remuneration 15 20 25 30 35
<S> <C> <C> <C> <C> <C>
- ------------- -----------------------------------------------------
$ 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
2,700,000 911,250 1,215,000 1,417,500 1,498,500 1,498,500
2,900,000 978,750 1,305,000 1,522,500 1,609,500 1,609,500
3,100,000 1,046,250 1,395,000 1,627,500 1,720,500 1,720,500
- ------------- -----------------------------------------------------
</TABLE>
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 11 and, for D.L. Burnham and T. R. Hodgson, the restricted stock awards
vesting during the year ($436,875 and $244,650, respectively, for 1997).
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 officers who participate in that plan. During 1997,
the following amounts, less applicable tax withholdings, were deposited in such
individual trusts established on behalf of the named officers: D. L. Burnham,
$1,266,816; T. R. Hodgson, $264,666; G. P. Coughlan, $61,447; P. N. Clark,
$1,407,597; R. L. Parkinson, Jr., $156,823; and M. D. White, $65,476. As of
December 31, 1997, the years of service credited under the Plan for the named
officers were as follows: D. L. Burnham - 15; T. R. Hodgson - 25; G. P. Coughlan
- -7; P. N. Clark - 13; R. L. Parkinson, Jr. - 21; and M. D. White - 13.
- --------------------------------------------------------------------------------
Compensation of Directors
Employees of the corporation are not compensated for serving on the board or
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 a 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, paid in the form
of non-qualified stock options, 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
- --------------------------------------------------------------------------------
13
<PAGE>
if invested in common shares of the corporation. Interest is accrued annually on
deferred fees not credited to a stock equivalent account.
If a non-employee director elects to receive any or all of his or her directors'
fees in the form of non-qualified stock options, the fees covered by that
election are converted into stock options based upon an independent appraisal of
the value of the options. The Abbott Laboratories 1996 Incentive Stock Program
was amended in 1997 to provide that these options be granted annually, on the
date of the annual shareholder meeting. Prior to its amendment, the Program
provided that the options be granted on the date the corresponding fees would
otherwise have been paid. The options have a purchase price equal to the fair
market value of the shares covered by the option on the grant date. An option
may be exercised during the ten year period following its grant and provides for
the automatic grant of a replacement stock option if all or any portion of its
exercise price is paid by delivery of common shares of the corporation. The
replacement stock option covers the number of shares surrendered to pay the
original stock option's exercise price, has an exercise price equal to the fair
market value of such shares on the date the replacement stock option is granted,
is exercisable in full six months from the date of grant, and expires on the
expiration date of the original stock option.
Under the 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-two thousand dollars for 1997 and forty-seven thousand dollars for 1998.
In 1997, this was 373 shares. The non-employee directors are entitled to vote
these shares and receive all dividends paid on the shares. The shares are
nontransferable prior to termination, retirement from the board, death, or a
change in control of the corporation.
Prior to its amendment in 1997, the Abbott Laboratories Non-Employee Directors'
Fee Plan provided for retirement benefits consisting of the payment of an amount
equal to the monthly director's fee in effect on the date the director retired
(or, for a director who died, 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 agreed to provide consulting
services to the board. In 1997, the board of directors amended the Plan to stop
the accrual of additional retirement benefits. Each of the non-employee
directors was credited with 120 months of service and given a choice between
having his or her accrued retirement benefit frozen or having its present value
converted into stock equivalent units. The stock equivalent units accrue the
same return as would have been earned if the present value of those retirement
benefits had been invested in common shares of the corporation. These retirement
benefits are non-funded obligations of the corporation.
In 1997, 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, 1999, 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 1997, Dr. Austen received
$50,000 for his consulting services.
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
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
<TABLE>
<CAPTION>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
<S> <C> <C> <C>
ABBOTT LABORATORIES
1992 $100.00
1993 99.93
1994 112.86
1995 147.08
1996 183.12
1997 240.48
ASSUMING $100 INVESTED ON 12/31/92 WITH DIVIDENDS REINVESTED
<CAPTION>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
<S> <C> <C>
S&P HEALTHCARE COMPOSITE S&P 500
1992 $100.00 $100.00
1993 91.60 110.08
1994 103.61 111.53
1995 163.55 153.45
1996 197.49 188.68
1997 283.82 251.63
ASSUMING $100 INVESTED ON 12/31/92 WITH DIVIDENDS REINVESTED
</TABLE>
- --------------------------------------------------------------------------------
Security Ownership of Executive Officers and Directors
The table below reflects the numbers of common shares beneficially owned by the
directors, director nominees, named officers, and all directors and executive
officers of the corporation as a group as of January 31, 1998. 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 pages 13 and
14 and by K. F. Austen under the consulting agreement described on page 14.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
SHARES BENEFICIALLY
OWNED, EXCLUDING EQUIVALENT
NAME OPTIONS (1)(2) STOCK UNITS
<S> <C> <C>
- ---------------------------------------------------------------------
K. Frank Austen, M.D. 11,247 7,765
- ---------------------------------------------------------------------
Duane L. Burnham 684,528 0
- ---------------------------------------------------------------------
Paul N. Clark 193,213 0
- ---------------------------------------------------------------------
Gary P. Coughlan 119,192 0
- ---------------------------------------------------------------------
H. Laurance Fuller 15,315 16,326
- ---------------------------------------------------------------------
Thomas R. Hodgson 464,676 0
- ---------------------------------------------------------------------
David A. Jones 148,311 43,748
- ---------------------------------------------------------------------
The Lord Owen CH 1,920 0
- ---------------------------------------------------------------------
Robert L. Parkinson, Jr. 112,428 0
- ---------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------
SHARES BENEFICIALLY
OWNED, EXCLUDING EQUIVALENT
NAME OPTIONS (1)(2) STOCK UNITS
<S> <C> <C>
- ---------------------------------------------------------------------
Boone Powell, Jr. 11,997 26,850
- ---------------------------------------------------------------------
Addison Barry Rand 5,487 0
- ---------------------------------------------------------------------
W. Ann Reynolds, Ph.D. 12,740 26,509
- ---------------------------------------------------------------------
Roy S. Roberts 1,000 0
- ---------------------------------------------------------------------
William D. Smithburg 20,812 40,543
- ---------------------------------------------------------------------
John R. Walter 9,042 12,038
- ---------------------------------------------------------------------
William L. Weiss 24,047 4,717
- ---------------------------------------------------------------------
Miles D. White 69,178 0
- ---------------------------------------------------------------------
All directors, director
nominees, and executive
officers as a group (3)(4) 3,118,355 178,496
- ---------------------------------------------------------------
</TABLE>
TABLE FOOTNOTES
(1) The table excludes unexercised option shares which are exercisable within 60
days after January 31, 1998 as follows: D. L. Burnham, 212,395; P. N. Clark,
76,871; G. P. Coughlan, 109,820; H. L. Fuller, 4,820; T. R. Hodgson,
592,628; R. L. Parkinson, Jr., 82,247; W. A. Reynolds, 5,162; W. D.
Smithburg, 4,792; J. R. Walter, 4,792; W. L. Weiss, 4,687; M. D. White,
99,167; and all directors and executive officers as a group 1,924,368.
(2) The table includes the shares held in the named officers' accounts in the
Abbott Laboratories Stock Retirement Trust as follows: D. L. Burnham, 5,818;
G. P. Coughlan, 4,509; T. R. Hodgson, 27,782; P. N. Clark, 4,076; R. L.
Parkinson, Jr., 12,211; M. D. White, 4,826 all executive officers as a
group, 205,684. Each officer has shared voting power and sole investment
power with the respect to the shares held in his account.
(3) G. P. Coughlan is a fiduciary of several employee benefit trusts maintained
by the corporation. As such, he has shared voting and/ or investment power
with respect to the common shares held by those trusts. The table does not
include the shares held by the trusts. As of January 31, 1998, these trusts
owned a total of 57,403,404 (7.5%) of the outstanding shares of the
corporation.
(4) Excluding G. P. Coughlan's shared voting and/or investment power over the
shares held by the trusts described in footnote 3, the directors and
executive officers as a group together own beneficially less than one
percent of the outstanding shares of the corporation.
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15
<PAGE>
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
As required under the Securities Exchange Act of 1934, the corporation notes the
following late filings: one report for W. D. Smithburg, covering a sale of
common shares of the corporation, two reports for W. A. Reynolds, each covering
a purchase of common shares of the corporation by her husband's individual
retirement account, and three reports for W. L. Weiss, each covering a purchase
of common shares of the corporation by his wife.
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1998 ABBOTT LABORATORIES PERFORMANCE INCENTIVE PLAN (ITEM NO. 2 ON PROXY CARD)
The board of directors has adopted, subject to ratification by the shareholders,
the 1998 Abbott Laboratories Performance Incentive Plan (the "Plan"). The text
of the Plan is set forth in Exhibit A to this proxy statement. The board of
directors recommends that the shareholders vote FOR ratification of the Plan.
The purpose of the Plan is to attract and retain outstanding individuals as
senior officers of the corporation and its subsidiaries and to furnish an
incentive to such persons to increase profits by providing them with the
opportunity to earn a bonus based on the financial performance of the
corporation. Section 162(m) of the Internal Revenue Code places a limit on the
amount of compensation that may be deducted by the corporation in any tax year
with respect to each of the corporation's five most highly paid executives.
However, certain performance-based compensation that has been approved by
shareholders is not subject to this deduction limit. The Plan is designed to
provide for this type of performance-based compensation and to permit the
corporation to take the corresponding tax deduction.
The Plan will be administered by the compensation committee of the board of
directors. The committee has sole responsibility for selecting participants,
establishing performance objectives, setting award targets, and determining
award amounts. It may adopt rules for the administration of the Plan.
Under the Plan, all bonuses are based on consolidated net earnings. The amount
of a participant's bonus is determined as follows. First, the Plan establishes a
base award allocation. The Plan sets the base award allocation for the Chief
Executive Officer at .0015 of the consolidated net earnings of the corporation
for the fiscal year; the base award allocation for the Chief Operating Officer
at .0010 of consolidated net earnings; and the base award allocation for any
other participant at .00075 of consolidated net earnings. Each base award is
increased by interest, at prevailing market rates, accrued on bonuses deferred
or paid to grantor trusts. The committee then determines the participant's
actual bonus. To do this, the committee adjusts the participant's base award
allocation. The committee may not award a bonus in excess of the maximum amount
determined under the Plan, but may grant a smaller bonus. In determining the
amount of a participant's bonus, the committee will consider the participant's
individual performance.
The size of the 1998 base award allocations cannot be determined at this time.
It is believed, however, that had this Plan been in effect during 1997, the
bonuses received by the named officers would not have been any larger than those
that are set forth opposite their names in the bonus column of the Summary
Compensation Table on page 11.
The board of directors, in its sole discretion and without shareholder approval,
may modify, amend, suspend, or terminate the Plan.
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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 1998.
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.
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SHAREHOLDER PROPOSAL
A shareholder proposal is included in this proxy statement. The corporation is
advised that the proposal will be presented for action at the Annual Meeting.
The proposed resolution and the statement made in support thereof are presented
below. The names and addresses of the shareholders submitting the proposal will
be furnished by the corporation to any person requesting such information. The
board of directors recommends that you vote AGAINST the proposal.
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16
<PAGE>
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SHAREHOLDER PROPOSAL ON THE CERES PRINCIPLES (ITEM NO. 4 ON PROXY CARD)
WHEREAS WE BELIEVE: Responsible implementation of a sound, credible
environmental policy increases long-term shareholder value by raising
efficiency, decreasing clean-up costs, reducing litigation, and enhancing public
image and product attractiveness;
Adherence to public standards for environmental performance gives a company
greater public credibility than standards created by industry alone. For maximum
credibility and usefulness, such standards should specifically meet the concerns
of investors and other stakeholders;
Companies are increasingly being expected by investors to do meaningful,
regular, comprehensive and impartial environmental reports. Standardized
environmental reports enable investors to compare performance over time. They
also attract investment from investors seeking companies which are
environmentally responsible and which minimize risk of environmental liability.
The Coalition for Environmental Responsible Economics (CERES) - which includes
shareholders of this company, public interest representatives, and environmental
experts - consulted with corporations to produce the CERES Principles as
comprehensive public standards for both environmental performance and reporting.
Scores of companies, including Bank America, Baxter International, Bethlehem
Steel, General Motors, H.B. Fuller, ITT Industries, Pennsylvania Power and
Light, Polaroid, and Sun (Sunoco), have endorsed these principles to demonstrate
their commitment to public environmental accountability and standardized
reporting. Fortune 500 endorsers say that the benefits of working with CERES are
public credibility; direct access to major environmental and shareholder
organizations, leadership in designing the rapidly advancing standardization of
environmental disclosure, and measurable value-added for the company's
environmental initiatives;
A Company endorsing the CERES Principles commits to work toward:
<TABLE>
<S> <C> <C> <C>
Protection of the 6. Safe products /
1. services
biosphere 7. Environmental
2. Sustainable natural restoration
resource use 8. Informing the public
3. Waste reduction and 9. Management
disposal commitment
4. Energy conservation 10. Audits and reports
5. Risk reduction
</TABLE>
[Materials on the CERES principles and CERES Report Form are obtainable from
CERES, 711 Atlantic Avenue, Boston, MA 02110, Tel: 617-451-0927, fax:
617-482-2028].
CERES is distinguished from other initiatives for corporate environmental
responsibility by being (1) a successful model of shareholder relations; (2) a
leader in public accountability through standardized environmental reporting;
and (3) a catalyst for significant and measurable environmental improvement
within firms.
RESOLVED: Shareholders request the Company to endorse the CERES Principles as a
part of its commitment to be publicly accountable for its environmental impact.
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PROPONENTS' STATEMENT IN SUPPORT OF SHAREHOLDER PROPOSAL ON THE CERES PRINCIPLES
Many investors support this resolution. Those sponsoring similar resolutions at
various companies have portfolios totaling $75 billion. Furthermore, the number
of public pension funds and foundations supporting this resolution increases
every year. We believe the CERES Principles exceed the European Community
regulation for voluntary participation in verified publicly-reported
eco-management and auditing, and that they also exceed the requirements for ISO
14000 certification.
Your vote FOR this resolution will encourage both scrutiny of our Company's
environmental policies and reports, and adherence to goals supported by
management and shareholders alike. We believe the CERES Principles will protect
both your investment and your environment.
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BOARD OF DIRECTORS STATEMENT IN OPPOSITION TO SHAREHOLDER PROPOSAL ON THE CERES
PRINCIPLES (ITEM NO. 4 ON PROXY CARD)
Your board of directors opposes the shareholder proposal and recommends that you
vote AGAINST the proposal.
Abbott is committed to operating its businesses in an environmentally
responsible manner. Abbott considers environmental responsibility a priority
that helps protect our planet for future generations and that also makes good
business sense. To this end, the corporation's written environmental policy
requires that all Abbott employees and operations throughout the world comply
with applicable environmental laws and regulations. The policy describes the
corporation's commitment to implement environmental management practices and
programs which help to protect human health and the environment, including
continuing efforts to reduce or eliminate waste and the release of pollutants
into the environment, to conserve resources, to reuse and recycle materials
where feasible at every stage of the product life cycle, and to reduce,
eliminate or change the use of materials
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17
<PAGE>
or practices as appropriate which may adversely affect human health and the
environment. The policy also promotes environmental training and education of
employees. The corporation's compliance with its environmental policy
substantially implements the objectives of the CERES Principles.
Abbott has developed this policy because it represents a sound use of the
corporation's resources and is part of the corporation's commitment to being a
responsible member of the communities in which we operate. The corporation is
committed to continuous improvement in this area.
The corporation files hundreds of environmental reports with federal, state, and
local government agencies. Imposing another layer of standards and reports that
would be required as a CERES signatory is duplicative and will unnecessarily
drive up costs.
For these reasons, the board of directors recommends that you vote AGAINST the
proposal.
- --------------------------------------------------
DATE FOR RECEIPT OF 1999 SHAREHOLDER PROPOSALS
Shareholder proposals for presentation at the 1999 Annual Meeting must be
received by the corporation no later than November 10, 1998 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 1999 meeting.
- --------------------------------------------------
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 and board affairs 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.
- --------------------------------------------------------------------------------
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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18
<PAGE>
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1998 ABBOTT LABORATORIES PERFORMANCE INCENTIVE PLAN EXHIBIT A
SECTION 1. ESTABLISHMENT AND PURPOSES
1.1 ESTABLISHMENT OF THE PLAN. Abbott Laboratories ("Abbott") hereby
establishes the "1998 Abbott Laboratories Performance Incentive Plan" (the
"Plan"), as set forth in this document.
Subject to approval by Abbott's shareholders at the 1998 Annual Meeting of
the Shareholders, the Plan shall become effective as of January 1, 1998 (the
"Effective Date") and shall remain in effect as provided in Section 6.1 hereof.
1.2 PURPOSES OF THE PLAN. The purposes of the Plan are to:
(a)Provide flexibility to Abbott in its ability to attract, motivate, and
retain the services of participants in the Plan ("Participants") who make
significant contributions to Abbott's success and to allow Participants
to share in the success of Abbott;
(b)Optimize the profitability and growth of Abbott through incentives which
are consistent with Abbott's goals and which link the performance
objectives of Participants to those of Abbott's shareholders; and
(c)Provide Participants with an incentive for excellence in individual
performance.
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SECTION 2. ADMINISTRATION
2.1 GENERAL. The Plan shall be administered by the Compensation Committee
(the "Committee") appointed by the Board of Directors of Abbott (the "Board").
2.2 AUTHORITY OF THE COMMITTEE. The Committee will have full authority to
administer the Plan, including the authority to interpret and construe any
provision of the Plan, and all rules, regulations and interpretations shall be
conclusive and binding on all persons. The Committee has sole responsibility for
selecting Participants, establishing performance objectives, setting award
targets, and determining award amounts.
2.3 DELEGATION BY THE COMMITTEE. The Committee from time to time may
delegate the performance of certain ministerial functions in connection with the
Plan, such as the keeping of records, to such person or persons as the Committee
may select. The cost of administration of the Plan will be paid by Abbott.
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SECTION 3. ELIGIBILITY AND PARTICIPATION
3.1 ELIGIBILITY AND PARTICIPATION. Eligibility for participation in the
Plan shall be limited to senior officers of Abbott and its subsidiaries.
Participants in the Plan will be determined annually by the Committee from those
senior officers eligible to participate in the Plan.
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SECTION 4. PERFORMANCE OBJECTIVES
4.1 PERFORMANCE OBJECTIVES. The Plan's performance objectives (the
"Performance Objectives") shall be determined with reference to Abbott's
consolidated net earnings prepared in accordance with generally accepted
accounting principles.
4.2 INDIVIDUAL BASE AWARD ALLOCATION--DEFINED. The base award allocation
for the Chief Executive Officer, if a Participant for such fiscal year, shall be
.0015 of the consolidated net earnings of Abbott for that fiscal year. The base
award allocation for the Chief Operating Officer, if a Participant for such
fiscal year, shall be .0010 of the consolidated net earnings of Abbott for that
fiscal year. The base award allocation for any other Participant shall be .00075
of the consolidated net earnings of Abbott for that fiscal year. Each such base
award will be increased by interest, at prevailing market rates, accrued on
awards deferred or paid to grantor trusts.
- --------------------------------------------------------------------------------
SECTION 5. FINAL AWARDS
5.1 FINAL AWARD ALLOCATION. As soon as practical after the close of each
fiscal year, a Participant's final award allocation will be determined solely on
the basis of the Performance Objectives. In determining a Participant's final
award allocation, the Committee will have the discretion to reduce but not
increase a Participant's base award
- --------------------------------------------------------------------------------
A-1
<PAGE>
allocation (as increased by the last sentence of Section 4.2), provided that a
Participant's individual performance will be considered by the Committee in
exercising that discretion.
5.2 PAYMENT OF AWARDS. A Participant's final award allocation will be paid
or deferred in the manner and at the time(s) established by the Committee.
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SECTION 6. DURATION, AMENDMENT, AND TERMINATION
6.1 DURATION OF THE PLAN. The Plan shall commence on the Effective Date, as
described in Section 1.1 hereof, and shall remain in effect until terminated by
the Board.
6.2 AMENDMENT AND TERMINATION. The Board, in its sole discretion, may
modify or amend any or all of the provisions of the Plan at any time and,
without notice, may suspend or terminate it entirely. However, no such
modification may, without the consent of the Participant, reduce the right of a
Participant to a payment or distribution to which the Participant is entitled by
reason of an outstanding award allocation.
- --------------------------------------------------------------------------------
SECTION 7. SUCCESSORS
7.1 OBLIGATIONS. All obligations of Abbott under the Plan with respect to
awards granted hereunder shall be binding on any successor to Abbott, whether
the existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of Abbott.
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A-2
<PAGE>
[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 24, 1998
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 24,
1998.
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.
<PAGE>
PROXY
ABBOTT LABORATORIES
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking previous proxies, acknowledges receipt of the
Notice and Proxy Statement dated March 10, 1998 in connection with the Annual
Meeting of Shareholders of Abbott Laboratories to be held at 9:00 a.m. on
April 24, 1998 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 AND AGAINST ITEM 4.
(IMPORTANT - PLEASE SIGN AND DATE ON OTHER SIDE.)
/ SEE REVERSE SIDE /
<PAGE>
PLEASE COMPLETE AND RETURN THE CARD BELOW.
DETACH HERE
PLEASE MARK
/X/ VOTES AS IN
THIS EXAMPLE.
- -------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ITEMS 1, 2 AND 3.
- -------------------------------------------------------------------------------
1. Election of 16 Directors.
Nominees: K.F. Austen, D.L. Burnham, P.N. Clark, H.L. Fuller,
T.R. Hodgson, D.A. Jones, D.A.L. Owen, R.L. Parkinson, Jr.,
B. Powell, Jr., A.B. Rand, W.A. Reynolds, R.S. Roberts, W.D. Smithburg,
J.R. Walter, W.L. Weiss, and M.D. White
/ / FOR / / WITHHELD
FOR, except vote withheld from the following nominee(s):
- --------------------------------------------------------------------------------
2. Approval of the 1998 Abbott Laboratories Performance Incentive Plan.
/ / FOR / / AGAINST / / ABSTAIN
3. Ratification of Arthur Andersen LLP as auditors.
/ / FOR / / AGAINST / / ABSTAIN
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THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE AGAINST ITEM 4.
- -------------------------------------------------------------------------------
4. Shareholder Proposal - CERES Principles
/ / 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:
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Signature:
- --------------------------------------------
Date:
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