CLASSIFICATION SHEET BUREAU D'IMPOSITION SOC. 6 ENTREE This document relates to the following request: 2 5 NOV. 2009 November 25, 2009 References: VCO/ROIM/LTTY/Q57090 l 5M-GYVN Abbott Investments Luxembourg S.a r.l. [2009/24/022081 Abbott Internationa l Luxembourg S.a r.l. l2009/24/09547] r I. Key topics: Convertible Preferred Equity Certificates 2. Name of the advisor : PwC 4. Name of t_h_e..._pr_o..._ je_ct_: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ___. 5. Amount intended to be invested: Approx. USD 3,698 Mio 6. Date of implementation: Last quarter 2009 2 5 NOV. 2009 For the attention of Mr Marius Kohl Administration des Contributions Directes Bureau d'lmposition des societes V I 18, rue du Fort Wedell L - 2982 Luxembourg <( 00 PriccwalerhouscCoopcrs Sodttt ~ ruponsabililt limih!r Rhiseur d'entrtpriscs 400, route d'Esch B.P. 1443 L-1014 Luxembourg 'Ielcphone +352 494848- 1 Facsimile+352 494848-2900 www.pwc.com/lu ~info~ ®'lu.pw-c.com_ BUREAU D'IMPOSITION SOC. 6 E'NTREE November 25, 2009 References: VCO/ROIM/LITY/Q57090 l 5M-GYVN Abbott Investments Luxembourg S.a r.L (2009/24/022081 Abbott International Luxembourg S.a r.I. (2009/24/095471 Issuance of CPECs by Abbott Investments L uxembourg S.a r.l Dear Mr Kohl, In om capacity of tax consultant of the above-mentioned client, we arc pleased to submit hereafter the tax treatment applicable to the transactions foreseen by our client. This letter aims at confinning the conclusions reached during our meeting dated June 24, 2009 dwing which we discussed certain characteristics of Convertible Preferred Equity Certificates to be issued by Abbott Investments Luxembourg S.a r.l. A. Facts A. I Background 1. The Abbott group is a leading provider of innovative health care products and is devoted to discovering new medicines, new technologies and new ways to manage health. 2. The parent of the group, Abbott Laboratories, is a US resident company and the group is present in a large number of countries. 3. In 2009, the holding and financing structure of the Abbott group was reshaped in order to allow for tax efficient future business acquisitions by Abbott Laboratories and a cost-effective financing of group activities (please refer to the Advance Tax Agreements dated May 13, 2009 (Ref: VCO/ ROIM/LTTY/Q5709003M-GYVN) - attached in Enclosure 1 to this letter). ll.C.S. Luxembourg H 65 477 - TVA LU17564447 A.2 Restructuring B. 4. Abbott Investments Luxembourg S.a r.l envisages redeeming up to 85% of the outstanding shares held by Abbott International Luxembourg S.a r.l in exchange for Convertible Preferred Equity Certificates (referred as "CPECs") amounting to around USD 3,698 Mio. 5. ln addition, Abbott Investments Luxembourg S.a r.l, Abbott [ntemational Luxembourg S.a r.l and Abbott Overseas Luxembourg S.a r.l contemplate forming a Luxembourg fiscal unity as from the financial year starting 151 December 2010. Abbott International Luxembourg S.a r.l would be the parent company. In this respect, a separate letter requesting for the application of the tax unity regime between the above-mentioned companies will be sent to you. 6. For your information, you will find attached in Enclosure 2 to this letter, a simplified organization chart upon completion of these restructurings. Tax analysis B.1 Luxembourg tax treatment of the CPECs to be issued by Abbott Investments Luxembourg S.a r.1 7. Based on the characteristics of the CPEC agreement (a draft version is attached in Enclosure 3 to this letter) to be concluded by Abbott lntemational Luxembourg S.a r.1 and Abbott Investments Luxembourg S.a r.l., the CPECs will be treated as debt for Luxembourg corporate income tax, municipal business tax, and net wealth tax purposes. Therefore, the interest expenses will be fully tax deductible at the level of Abbott Investments Luxembourg S.a r.l and not be subject to withholding tax (see our technical analysis on the debt characterization of the CPECs instrnment provided in Enclosure 4). 8. However, interest expenses on the CPECs directly linked to Abbott Investments Luxembourg S.a r.l's participations exempt in application of Article 166 of the Luxembourg Income Tax Law (referred as "LITL'') and the Grand Ducal Regulation of 21 December 2001 for the application of Article 166 of the LlTL will be subject to the recapture mechanism. 9. Interest income on the CPECs to be received by Abbott International Luxembomg S.a r.l will be taxable, but will be offset using available current year and carry forward losses. (2) We remain at your disposal should you need any further inf01mation and would like to thank you for the attention that you will give to our request. Yours sincerely, Va cry Civilio Pa1tncr Razvan Bruno Ifrim Senior Manager Enclosures: Enclosure 1: Enclosure I: Enclosure 3: Enclosure 4: Advance Tax Agreement dated May 13, 2009 Simplified organization chart upon completion Draft version of the CPEC agreement Luxembourg tax treatment of the CPECs to be issued by Abbott Investments Luxembourg S.a r.l. 1711s tax agreement ts based on rite facts as presemed to PrlcewarerhouseCoopers Sitrl as at the date the adwce was gil'en 71te agreement 1s dependent on spt'c(/ic facts and circumstances and may not be approprwte to another parry than tire one for wlrich it was prepared. '/111s tax agreement was prepared witlr only tlte interests of Abbou group In mind. and was 1101 planned or earned out 111 co111emplmlon of any use by any other party. PricewaterlrouseCoopers SOrl. its partners. employees and or 11i.:e111s. neither owe nor ucapt a1111d111y ofcare or an.Y responsihility to cmy olher party. whether in contract or in tort (including without limitmion. negligence or breaclr ofs1111111ory duty) lro11·e1•er ansmg, and situ/I nor be liable in respect ofany loss. damage or expense Qf wlu11e1•er nature wlriclt 1s caused IQ tmy 01her par1y (3) WCWYERHOUSECOOPERS Enclosure Advance Tax Agreement dated May 13, 2009 Hi CLASSIFICATION SHEET This document relates to the following request: I May 13, 2009 I References: VCO/ROIM/LTTY/Q5709003M-GYVN Abbott Investments L uxembourg S.a r.l. - Tax number in process Abbott International Luxembourg S.a r.I. - Tax number in process Abbott Overseas Luxembourg S.a r.I. - Tax number in process Abbott Holding Subsidiary (Gibraltar) Limited Luxembourg S.C.S - Tax number in process 1. Key topics: Master Facility Agreement, spread, permanent establishment, priority allocation, fiscal uni 2. Name of the advisor : PwC ~~~~~~~~ 3. Corporate group's name, o:.:.r..::f-= u•:.:..: 1d=-s:..pi;..::o.:.:c ns:;..: ·o"'r.;...; "': A ;...;;;;..; bb"'"o''""t.t;___ _ __ _ _ _ _ _ _ _ _ _ _ __. 4. Name of the project: I S. Amount intended to be invested: SO Bio ;;...;:..~=.:c~..;;..;;...~~~~~~----~~~~~~-~·~~--' 6. Date of implementation: For the attention of Mr Marius Kohl Administration des Contributions Directcs Bureau d'lmposition des socictes VI 18, rue du fort Wedell L - 2982 Luxembourg PriccwatcrhouscCoopcrs Societe a respo nsabililc limltcc Reviscur d'cnlrcpriscs 400, route d'Esch B.P. 1443 Lr I014 Luxembourg Telephone+ 352 494848-1 Facsimile +352 494848-2900 www.pwc.com/lu info@lu.pwc.com May I 3, 2009 References: VCO/ROlM/LTTY/Q5709003M-GYVN Abbott Investments Luxembourg S.ar.l. - Tax number in process Abbott International Luxembourg S.ar.l. - Tax number in process Abbott Overseas Luxembourg S.ar.I. - Tax number in process Abbott Holding Subsidiary (Gibraltar) Limited Luxembourg S.C .S - Tax number in process Dear Mr Kohl, Further to our discussion dated January 14, 2009 and, at the request of the Abbott group, we would like to confirm your approval and/or obtain your comments on the Luxembourg tax treatment described in this letter in relation to operations to be carried out in Luxembourg in the future. A Facts A.1 Background 1. The Abbott group is a leading provider of innovative health care products and is devoted to discovering new medicines, new technologies and new ways to manage health. 2. The parent of the group, Abbott Laboratories (referred as "Abbott Labs"), is a US resident company and the group is present in a large number of countries. The holding and financing structures of the group are cu1Tently being reshaped in order to allow for tax efficient future business acquisitions by Abbott Labs and a cost-effective financing of group activities. R.C.S. Luxembourg B6S 477 - l'Vi\ LU17564447 A.2 Restructuring B 3. Prior to the reorganization, the Abbott group did not have any Luxembourg entities. 4. For your information, you will find attached in Enclosure l to this letter, a simplified organization chart summarizing the structure prior to this reorganization. 5. The relevant restructuring steps from a Luxembourg income tax perspective, as well as a simplified organizational chart upon completion of the reorganization are attached in Enclosure 2 to this letter. Tax analysis B.l Luxembourg tax residency of Abbott Investments Luxembourg S.a r.1, Abbott International Luxembourg S.ar.l and Abbott Overseas Luxembourg S.a r.1 6. According to article 159 of the Luxembourg Income Tax Law ("LITL"), capital companies that have either their registered office or their place of central administration in Luxembourg are subject to corporate income tax on their profits. Article 159 LITL provides that a limited liability company (societe a responsabilite limitee - referred as "S.a r.l") qualifies as a capital company. 7. Abbott Investments Luxembourg S.a r.l, Abbott International Luxembourg S.a r.l and Abbott Overseas Luxembourg S.ar.l (referred as "Lux S.a r.ls") will be S.a r.ls, and will have their statutory seats located in Luxembourg. 8. Moreover, the Lux S.a r. ls will have their place of central administration in Luxembourg to the extent that their shareholders' meetings and their board meetings w ill be held in Luxembourg, that the main management decisions will be effectively taken in Luxembourg and that their accounting will be done in Luxembourg. 9. As a result, the Lux S.a r.ls will be considered as fully taxable Luxembourg-resident capital companies. Tax residency certificates will be issued upon request. I 0. Copies of the articles of association of the Lux S.a r.ls arc attached m Enclosure 3 to this letter. (2) B.2 B.3 Tax treatment of Abbott Holding Subsidiary (Gibraltar) Limited Luxembourg S.C.S and its partners I l. Given its tax transparent character, Abbott Holding Subsidiary (Gibraltar) Limited Luxembourg S.C.S (referred as "Lux S.C.S") will not be subject to corporate income tax or net wealth tax in its own name (article 175 LITL and article 11 bis Loi d' Adaptation). 12. The two partners of Lux S.C.S, i.e. Abbott Holding (Gibraltar) Limited and Abbott IIolding Subsidiary (Gibraltar) Limited (both incorporated w1dcr the law of Gibraltar - referred respectively as "GibCo l" and "GibCo2") , will not be tax resident in Luxembourg and will not hold their interest in Lux S.C.S through a permanent establishment in Luxembourg. 13. As Lux S.C.S will not exploit a commercial enterprise in Luxembourg, neither Lux S.C.S nor its partners will be subject to corporate income tax (referred as "CIT"), municipaJ business tax (referred as "MBT"), or net wealth tax (referred as ''NWT"), in Luxembourg. 14. The analysis of the tax treatment of Lux S.C.S and of its partners is detailed in Enclosure 4. 15. A copy of the articles of association of Lux S.C.S is attached in Enclosure 5 to this letter. Withholding tax on dividends payments made by Abbott International Luxembourg S.ar.1 to Lux S.C.S 16. Due to the tax transparency of Lux S.C.S, dividend payments made by Abbott lnternationaJ Luxembourg S.Ar. l to Lux S.C.S will be regarded for Luxembourg tax purposes as payments made directly to its non-resident partners Gibco I and Gibco 2. 17. Since the Gibraltar companies are falling under the application of the Council Directive 90/435/EEC, the dividend distribution that will be carried out by Abbott International Luxembourg S.ar.l will not be subject to any Luxembourg withholding tax provided that the Gibraltar companies comply with the minimum threshold and holding period requirement provided by article 147 LITL (detailed in Enclosure 6). 18. The analysis of the eligibility of Gibraltar companies to the benefit of the Council Directive 90/435/EEC is detailed in Enclosure 7. (3) B.4 Master Facility Agreement (referred as "MFA") 19. Further to Step 78 of the envisaged restructuring (please refer to Enclosure 2), a MFA will be put in place between Lux S.C.S and Abbott International Luxembourg S.a r.l. 20. A copy of the executed MFA is attached in Enclosure 8 to this letter.. B.4.1 Tax treatment of the MFA 21. The MFA will be considered debt for CIT, MBT and NWT purposes, and interest thereon will be considered fully tax deductible (see Enclosure 9 for a description of the MFA). B.4.2 Financial on-lending activity 22. Taking into account the features of the financial on-lending activity covered in the Tranche A and B of the MFA, Abbott International Luxembourg S.a r.l will be deemed to realize an appropriate and acceptable profit with respect to Articles 56 of the LITL and 164 (3) of the LITL if it realizes a margin (after deduction of the charges incurred by Abbott International Luxembourg S.a r.I) in respect of this activity that will depend on the amount involved in the financing operations (see Enclosure 9 for further details). 23. Tranche C of the MFA, which will be financing participations held by Abbott international Luxembourg S.a r.l, will bear an ann's length interest rate of 7,6573% on the principal average amount allocated to this tranche (i.e., 0.5 times the aggregate of (i) the Tranche C amount as of the first day of the relevant accounting period and (ii) the Tranche C amount as of the last day of the relevant accounting period). B.4.3 Treatment of Interest Payments under the MFA 24. Neither the payments of interest (or the accruing of interest), nor the reimbursement of the principal amount of the MFA will be treated as dividend distributions in the meaning of Articles 97 and 146 (l)-(3) of the LITL. Hence, these payments (or accruals) will not be subject to withholding tax pursuant to Luxembourg domestic law. Interest payments will be fully tax deductible at the level of Abbott International Luxembourg S.a r.I.. (4) 25. Only interest paid in connection with Tranche C of the MFA (i.e., financing of shareholdings qualifying for the Luxembourg participation exemption regime) may be subject to the recapture mechanism provided by Article 166(5) of the LITL and article 1 (2) of the Grand-Ducal Decree of 21 December 2001 in execution to Article 166 of the LITL. 26. The Luxembourg thin capitalization rules will be respected at the level of Abbott International Luxembourg S.a r.l since its shares held in Abbott Investments Luxembourg S.a r.I and Abbott Overseas Luxembourg S.a r.I will be financed up to 85% by tranche C of the MF A. 8.4.4 Net wealth tax 8.5 B.6 27. For NWT purposes, the non-qualifying financial assets (i.e. all the assets at the exclusion of the assets qualifying for the Luxembourg participation exemption regime), in so far as they arc not financed by a specific debt, will be deemed to be financed in priority by Tranche A or Tranche B of the MFA. The equity of Abbott International Luxembourg S.a r.I will be deemed to finance by priority participations qualifying for the Luxembourg participation exemption regime. 28. Finally, depending on the additional investments that may be made during the existence of U1c structure, the MFA could be amended to include new tranches. Should it be the case, we will update you on this. Tax treatment of the potential reimbursement of share capital of Abbott Investments Luxembourg S.a r.l 29. If undertaken, this reimbursement of share capital should not trigger any impact from a Luxembourg tax perspective. 30. The analysis of the tax treatment of the reimbursement of share capital of Abbott Investments Luxembourg S.a r.1 should it arise is detailed in Enclosure I 0. Financing of Abbott Investments Luxembourg S.a r.l 31. For the sake of clarity and for simplification purposes at the level of Abbott Investments Luxembourg S.a r.1, for CIT, MBT and NWT purposes, any potential debts financing Abbott Investments Luxembourg S.a r.l will be deemed to finance in priority first other assets than participations qualifying for the Luxembourg participation exemption regime, then participations qualifying for the Luxembourg participation exemption regime. (5) B.7 Application of the Luxembourg participation exemption to Lux S.a r.ls B.7.1 At the level of Abbott International Luxembourg S.a r.1 32. Abbott International Luxembourg S.a r.l will benefit from the Luxembourg participation exemption regime in Luxembourg for its qualifying participations in Abbott lnvestments Luxembourg S.a r.l and Abbott Overseas Luxembourg S.a r.l with respect to dividends and capital gains derived in relation to their qualifying participations, provided Abbott International Luxembourg S.a r.l has held or comm its to hold a participation of at least 10% (or with an acquisition price of at least EUR 1.2 M for dividends and EUR 6 million for capital gain) in each above mentioned company for an uninterrupted period of at least 12 months pursuant to Article 166 of the LITL and the Grand Ducal Regulation of21 December 2001 for the application of Article 166 of the LITL. 33. Expenses directly linked to Abbott International Luxembourg S.a r.l ' s exempt participations in Abbott [nvestments Luxembourg S.a r.l and Abbott Overseas Luxembourg S.a r.l (mainly interest expenses on Tranche C of the MFA) could be subject to the recapture mechanism. Please refer to Enclosure 1 1 for further details in this respect. B.7.2 At the level of Abbott Overseas Luxembour g S.a r.l 34. Further to Step 4, Step 60A, Step 60B, and Step 62FF of the envisaged restructuring (please refer to Enclosure 2), Abbott Overseas Luxembourg S.a r.l will hold a 100% participation (totally equity financed) in Abbott Overseas Sub Holding (Cyprus) Limited. 35. Abbott Overseas Sub Holding (Cyprus) Limited has one of the fonns listed under Art. 2 of the Parent/Subsidiary Directive and will be subject to corporate income tax in Cyprus. 36. Accordingly, Abbott Overseas Luxembourg S.ar.l will benefit from the Luxembourg participation exemption regime in Luxembourg for its participation in Abbott Overseas Sub Holding (Cyprus) Limited with respect to dividends and capital gains derived therefrom, provided Abbott Overseas Luxembourg S.Ar.1 has held or commits to hold a participation of at least 10% (or with an acquisition price of at least EUR 1.2 M for dividends and EUR 6 million for capital gain) in the relevant above mentioned company for an uninten-upted period of at least 12 months pursuant to Article 166 of the LITL and the Grand Ducal Regulation of 21 December 2001 for the application of Article 166 of the LITL. 37. The participation in Abbott Overseas Sub Holding (Cyprus) Limited being fully equity financed at the level of Abbott Overseas Luxembourg S.a r.l, the recapture mechanism will not apply. (6) 38. Please refer to Enclosure 11 for further details in this respect. B.7.3 At the level of Abbott Investments Luxembourg S.a r.I B.8 B.9 39. Further to Step 16 to Step 57 and Step 63 to Step 73 of the envisaged restructuring (please refer to Enclosure 2), Abbott Investments Luxembourg S.a r.l will hold participation in CFCs. 40. Provided that conditions of Article 166 of the LITL a nd the Grand Ducal Regulation of 21 December 200 l for the application of Article 166 of the LITL are fulfilled, Abbott Investments Luxembourg S.a r.I will benefit from the Luxembourg participation exemption regime in Luxembourg for its qualifying pruticipations in CFCs with respect to dividends and capital gains derived in relation to its qualifying participations. 41. Expenses directly linked to Abbott Investments Luxembourg S.a r.l's exempt participations in CFCs would be subject to the recapture mechanism. 42. Please refer to Enclosure 11 fo r further details in this respect. Debt-to-equity ratio of Lux S.a r.ls for the financing of their participations 43. lt is the practice of the Luxembourg tax authorities to accept that participations held by Luxembourg companies arc financed by intra-group debt up to 85%. Other assets may be fully financed by intra-group debt. 44. Please note that the Luxembourg thin capitalization rules will be respected at the level of the Lux S.a r.ls. Functional currency 45. The accounts and the share capital of the Lux S.a r.ls will be denominated in USO. 46. Furthermore, USO will be the functional currency of the Lux S.a r.ls for tax purposes as from the date of their incorporation for a period of at least l 0 years. This implies that their tax returns will be established on the basis of the yearly net profits converted into EUR by using the year-end market EUR/USO rate. (7) Taking into account the importance of the above for our client, we would appreciate your written confirmation of the above treatment. We remain at your entire disposal should you require any further infonn ation. We thank you in advance for the attention you will pay to our request. Yours faithfully, Valery Civilio Partner Razvan Bruno Ifrim Manager For approval L e prepose du bureau d'imposition Societes VT Marius Kohl Luxembourg, 2009 Enclosures: Enclosure I : Enclosure 2: Enclosure 3: Enclosure 4: Enclosure 5: Enclosure 6: Enclosure 7: Enclosure 8: Enclosure 9: Enclosure 10: Enclosure 11: Simplified existing structure Proposed restructuring steps and simplified final structure Articles of association of Abbott Investments Luxembourg S.ar.l, Abbott International Luxembourg S.ar.l and Abbott Overseas Luxembourg S.ar.I Analysis of the tax treatment of Lux S.C.S and of its partners Articles of association of Abbott I Iolding Subsidiary (Gibraltar) Limited Luxembourg S.C.S Article 147 LITL Status of the Gibraltar compani es Master Facility Agreement Tax treatment of the Master Facility Agreement Tax treatment of the reimbursement of share capital of Abbott Investments Luxembourg S.ar.l Luxembourg participation exemption regime 'lYtis 1ax agre<•ml'nt is based on tire facts as prese111ed to Price111aterlro11seCoopers Sari as at tire dale 1/re cuMce was gil'e11. '/1t<' agreement is dependent on specific facts and circumstances and may not be appropriate to another party than tire one for which 11 ll'aS prepared 'niis 1a.r a'?reement was prepared with only 1he interests of Abbou group in mind. and was not planned or carried 0111 m con1empla1ion of any use by any other party. PricewaterhouseCoopers Sari. its parmers, employees and or agents. neither ow<· nor accept any d111y of care or any responsibility 10 any oilier party, whether In contract or In tort (i11c/11ding 111/tho111 /i111i1<11io11. negligence or breach ofstatutory duty) however arising, and shall 1101 be liable in respect ofany loss. damage or expe11Se of whatever na111re ll'hich is ca11sed 10 any other party. (8) Enclosure l Simplified pre-reorganisation structure Abbott Laboratories (US) CfCs Abbott Health Products Inc. (Delaware) Abbott Universal Ltd. (Delaware) Abbott Hospitals Limited (Bahamas) (9) Enclosure 2 Restructuring steps and simplified final structure A. Restructuring steps The relevant steps from a Luxembourg tax perspective arc the following: Step 2: Abbott Labs will incorporate Abbott Investments Luxembourg S.a r.l Step 3: Abbott Health Products Inc. will incorporate Abbott Overseas Luxembourg S.a r.l Step 4: Abbott Overseas Luxembourg S.ar.1 will incorporate Abbott Overseas Sub Holding (Cyprus) Limited. Step 6: Abbott Universal Ltd. will form Abbott Holding (Gibraltar) Limited. Step 7: Abbott Holding (Gibraltar) Limited will fonn Abbott Holding Subsidiary (Gibraltar) Limited Step 9: Abbott I Iolding (Gibraltar) Limited and Abbott Holding Subsidiary (Gibraltar) Limited will form Abbott Holding Subsidiary (Gibraltar) Limited Luxembourg S.C.S. Step 11 : Abbott Holding Subsidiary (Gibraltar) Limited Luxembourg S.C.S will form Abbott International Luxembourg S.a r.l Step 14: Abbott Labs wi ll contribute Abbott Universal Ltd. to Abbott Health Products Inc. Step 16 to Step 57: Abbott Labs will contribute E.U/non E.U entities (referred as "CFCs") to Abbott Investments Luxembourg S.a r.l in exchange for shares. Step 58: Abbott Labs will contribute Abbott Investments Luxembourg S.a r.l to Abbott Health Products Inc. Step 59A: Abbott Health Products Inc. will contribute Abbott Hospitals Limited to Abbott Overseas Luxembourg S.a r.l Step 598: Abbott Health Products lnc. wi ll contribute Abbott Diagnostics International Limited to Abbott Overseas Luxembourg S.a r.1 (I 0) Step 60A: Abbott Overseas Luxembourg S.a r.l will contribute Abbott Hospitals Limited to Abbott Overseas S ub Holding (Cyprus) Limited. Step 608: Abbott Overseas Luxembourg S.a r.l will contribute Abbott Diagnostics International Limited to Abbott Overseas Sub Holding (Cyprus) Limited. Step 61: Abbott Health Products Inc. will contribute Abbott Overseas Luxembourg S.a r.l and Abbott Investments Luxembourg S.a r. l to Abbott Universal Ltd. Step 62CC: Abbott Universal Ltd. will contribute Abbott C.V. to Abbott Overseas Luxembourg S.a r.l Step 62FF: Abbott Overseas Luxembourg S.a r.l will contribute Abbott C.V. to Abbott Overseas Sub Holding (Cyprus) Limited. Step 63 to Step 73: Abbott Universal Ltd. will contribute others CFCs to Abbott Investments Luxembourg S.ar.l in exchange for shares. Step 74: Abbott Universal Ltd. will contribute Abbott Investments Luxembourg S.a r.l and Abbott Overseas Luxembourg S.a r.l to Abbott Holding (Gibraltar) Limi ted. Step 75: Abbott Holding (Gibraltar) Limited will contribute I% of Abbott Investments Luxembourg S.a r.I and Abbott Overseas Luxembourg S.a r.l to Abbott Holding Subsidiary (Gibraltar) Limited. Step 76: Abbott Holding Subsidiary (Gibraltar) Limited will contribute 1% of Abbott Investments Luxembourg S.a r.l and Abbott Overseas Luxembourg S.a r.l to Abbott I Iolding Subsidiary (Gibraltar) Limited Luxembourg S.C.S. Step 77: Abbott Holding (Gibraltar) Limited will contribute 99% of Abbott Investments Luxembourg S.a r.l and Abbott Overseas Luxembourg S.a r.l to Abbott I lolding Subsid iary (Gibraltar) Limited Luxembourg S.C.S. Step 78: Abbott Holding Subsidiary (Gibraltar/US) Limited Luxembourg S.C.S. will conttibute 15% and sell 85% of Abbott Investments Luxembourg S.8.r.l and Abbott Overseas Luxembo urg S.a r.1 to Abbott International Luxembourg S.ar.l in exchange for shares and a note payable issued under a Master Facility Agreement. Step 79: Abbott Investments Luxembourg S.a r.l, Abbott International Luxembourg S.a r.l and Abbott Overseas Luxembourg S.a r.l may form a Luxembourg fiscal unity. Abbott International Luxembourg S.a r.l will be the parent company. (11 ) At a later stage, Abbott Investments Luxembourg S.a r.1 may redeem part of the outstanding shares held by Abbott International Luxembourg S.a r.l in exchange for (Convertible) Preferred Equity Certificates (referred as "(C)PECs") or Preferred Equity Certificates (referred as "PECs"). Should it be the case, we will revert to you on the applicable tax treatment of such instruments. Finally, at the same moment as the above mentioned share redemption note that Abbott Investments Luxembourg S.a r.l could also grant intra-group loans and therefore would hold receivables towards its subsidiaries. (12) B. Simplified proposed structure of the group Abbott Laboratories (US) Abbott Health Products Inc. (Delaware) Abbott Universal Ltd. (Delaware) Abbott Holding Gibraltar Ltd. (Gibraltar) 99% Abbott Holding Subsidiary Gibraltar Ltd (Gibraltar) MFA ---------, Tranche A : B: Tranche C: Fiscal Unity Tranche I I I (C)P EC/PE~s (contemplated) Abbott Overseas Luxembourg Sar! (Luxembourg) Abbott Investments Luxembourg Sari (Luxembourg) Receivables (contemplated) Abbott Overseas Sub Holding (Cyprus) Ltd (Cyprus) CFCs Abbott Hospitals Limited (Bahamas) Abbott Diagnostics lntemational Ltd (13) Enclosure 3 Articles of association of Abbott Investments Luxembourg S.a r.I, Abbott International Luxembourg S.a r.I and Abbott Overseas Luxembourg S.a r.I (14) Enclosure 4 Analysis of the tax treatment of Lux S.C.S and of its partners Pursuant to Article 175 of the LJTL and to article 11 bis Loi d' Adaptation, a Societe en Commandite Simple (hereafter "S.C.S") is not deemed to have a separate tax personality from that of its partner and is hence considered as transparent for tax purposes in Luxembourg. An S.C.S is therefore not itself subject to CIT and NWT in Luxembourg, but its partners arc personally subject to tax in respect of their part in the profits/unitary value of the S.C.S, regardless of whether such profits are effectively distributed or not. Given that an SCS is not subject to tax in Luxembourg, it will not be considered as a tax resident for the purposes of Article 159 of the LJTL. In the case at hand, the partners of Lux S.C.S, i.e. GibCo I and GibCo2 will be nonresident, thus their taxation in respect of their part in Lux S.C.S profits is to be determined by fol lowing the rules provided in Article 156 of the LITL regarding the taxation of nonresidents. Absence ofa permanent establishment in Luxembourg - Lux S. CS· activities The partners of Lux S.C.S, i.e., GibCol and GibCo2 will not be Luxembourg corporations. Therefore, Lux S.C.S will not fall within the scope of article 14-4 of the LITL nor of article 2 of the Municipal Business tax law. Pursuant to Article 156 (1) (a) of the LITL, the commercial income realised by a nonresident through a permanent establishment located in Luxembourg is treated as Luxembourg-sourced income, subject to CIT. According to paragraph 16 of the Luxembourg Adaptation Tax Law, a permanent establishment is defined as a fixed place of business used with a certain degree of permanence for the exercise of a commercial or industrial activity in Luxembourg. In the framework of the Abbott's group restructwing, GibCo 1 and GibCo2 will contribute the participations in Abbott Overseas Luxembourg S.a r.l and Abbott investments Luxembourg S.a r.l to Lux S.C.S, which in its turn will sell these participations (in a short time frame) to Abbott International Luxembourg S.a r.l in exchange for shares and a note payable issued under a MF A. ( 15) Accordingly, Lux S.C.S will hold, for a limited period of time, a participation in Abbott Overseas Luxembourg S.a r.l and Abbott Investments Luxembourg S.a r.l. This will not impact the analysis regarding the Luxembourg tax treatment (both for CIT, MBT and NWT) of the operations of the Lux S.C.S. Further to the restructuring, Lux S.C.S will have an activity restricted to the mere holding of Abbott International Luxembourg S.a r.l as well as the management of the MF A. Lux S.C.S could also hold a current account with a Dutch entity from the group exclusively for the payment of the operational expenses of Lux S.C.S. Lux S.C.S will not have any office space, equipment or any other tangible presence in Luxembourg. It will have no employees. GibCo l and GibCo2 will not be considered to have a pennancnt establishment in Luxembourg for the activities carried out by Lux S.C.S and therefore will not be subject to CIT, MBT and NWT in Luxembourg. Under the same circumstances, Lux S.C.S. will not be deemed to exploit an enterprise in Luxembourg, and will therefore not be subject to MBT. (16) Enclosure 5 Articles of association of Abbott Holding Subsidiary (Gibraltar) Limited Luxembourg S.C.S (17) Enclosure 6 Article 147 LITL Article 147 LITL provides for a withJ1olding tax exemption m Luxembourg if the following conditions are met: • The distributing company is: - A Luxembourg resident collective entity, which is fully taxable and takes one of the fonn s listed in the Enclosure to the paragraph 10 of article I 66 LITL; • The entity receiving the dividends is: - A collective entity falling under article 2 of the amended version of the Counci I directive of 23 July 1990 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States (90/435/EEC, hereafter the "Parent I Subsidiary Directive"); or - A Luxembourg resident joint-stock company, which is fully taxable and does not take one of the fonns listed in the above-mentioned Enclosure; or A collective entity that is resident in a State with which Luxembourg has concluded a double tax treaty and which is fully liable to a tax con-esponding to the Luxembourg corporate income tax, or a domestic pcnnanent establishment of such an entity ; or - A Swiss resident joint-stock company that is subject to Swiss corporate income tax without benefiting from any exemption; or • And At the date on which the income is made available, the beneficiary has been holding or undertakes to hold, directly, for an uninterrupted period of at least 12 months, a participation of at least l 0%, or with an acquisition price of at least EUR 1.2 million in the share capital of the income debtor. If the participation is held through a tax-transparent entity falling under § 1 of atticle 175 LITL, this will be regarded as a direct participation, proportionally to the interest held in the tax-transparent entity. (18) Enclosure 7 Status of the Gibraltar Companies In the case at hand, it needs to be determined if from a Luxembourg perspective, a company incorporated under the law of Gibraltar is to be considered as faJling under Article 2 of the Parent/Subsidiary Directive and therefore if it can benefit from the participation exemption provided for by Articles 147 and 166 LTTL. Article 227(4) of the treaty establishing the European Economic Comm unity (the "Treaty") expressly provides that the provisions of the Treaty shall apply to the European territories for whose external relations a Member State is responsible. The Government of the United Kingdom is responsible for Gibraltar's external relations. Thus, the treaty should apply to Gibraltar, as established at the time of the accession of the United Kingdom to the European Economic Community on January 1si, 1973. Gibraltar was however expressly excluded from the scope of application of European Union regulations relating to agricultural matters, value added tax harmonization and custom union pursuant to article 28 of the accession treaty. No other exclusion was mentioned. Therefore, all other regulations from the European Union should apply to Gibraltar. In a letter dated January 22, 1999 (a copy of which is also enclosed in this Enclosure 7), the European Commission confirmed that E-U directives apply to Gibraltar: "/confirm that Gibraltar, according to the provisions of article 227 paragraph 4 of the EC treaty, is a European State whose foreign relations are assumed by the United Kingdom. Accordingly, tax directives 901434, 901435, 691335 and 851303 are applicable to it". One could argue that in addition to such confirmation it would be necessary to check whether Gibraltar companies are referred to under article 2 of the Council Directive 90/435/ EEC dated July 23, 1990. Gibraltar companies arc not expressly mentioned in article 2 of the Council Directive 90/435/EEC dated July 23, 1990. However, we understand that they are covered by the provisions of the Directive, given the confirmation issued by the European Commission and the following: • Article 2 of the Cow1cil Directive 90/435/EEC refers to "companies incorporated under the laws of United Kingdom"; (19) • The United Kingdom Foreign and Commonwealth Office issued on November 17, 1988 a letter regarding the status of the Gibraltar companies vis-a-vis United Kingdom legislation (a copy has been included in this Enclosure 7). [n such letter, it is expressly stated that "nationals", "nationals of member states" or "national of member states and overseas countries and territories" whenever used in the EEC Treaty arc to be understood to refer to, inter alia, British Dependent Territories Citizens who acquire citizenship from connection with Gibraltar; • The United Kingdom considers companies incorporated under the laws of Gibraltar as incorporated under the laws of the United Kingdom for the purpose of article 2(a) of the Council Directive 90/435/EEC; and • The United Kingdom also recognizes that Gibraltar income tax is analogous to its corporation tax for the purpose of article 2(c) of the Council Directive 90/435/EEC 1• Therefore, GibCo 1 and GibCo2 wil I be considered as covered by article 2 of the Council Directive 90/435/EEC dated July 23, 1990. Please note that pursuant to Article 2(b) of the Council Directive 90/435/EEC, "company" of a Member State is in particular defined as a company, which "according to the tax laws of a Member State is considered to be resident in that State for tax purposes and, under the terms of a double taxation agreement concluded with a third State, is not considered lo be a resident for tax purposes outside the Community". GibCo 1 and GibCo2 will meet the requirements established in the Directive, since they will be residents in Gibraltar for tax purposes. Under the Gibraltar income tax ordonance, a resident company is: a. a company the management and control of whose business is exercised from Gibraltar; or b. a company which carries on business in Gibraltar and the management and control of which is exercised outside Gibraltar by persons ordinarily resident within the meaning of the Ordonance. The Commissioner of CIT will presume that a company incorporated in Gibraltar will be liable to taxation in Gibraltar unless it is either a tax exempt company or it is shown that management and control lies outside of Gibraltar (exercised by non Gibraltar residents), neither of which would be the case in the case at hand. Management and control is judged in accordance with UK precedent as decided in De Beers Consolidated v Howe ( 1906) (i.e. control lies with the head and mind of a company). "EC corporate tax law. Commentary on the EC Direct Tax Measures and Member States lmple1m:ntation, 4, Territorial scope", International Bureau of Fiscal Documentation, August 2006, page 4.16. (20) Therefore, based on the above and to the extent that GibCo 1 and GibCo2 will be tax residents in Gibraltar, the Council Directive 90/435/ EEC will be applicable to these Gibraltar companies for the purpose of Articles 147 and article 166 of the LITL. (21) Enclosure 8 Master Facility Agreement Enclosure 9 Tax treatment of the Master Facility Agreement A Description of the MFA A MF A is a multi-purpose facility agreement under which funds are made available in different tranches depending on the purpose for which the funds will be used. As far as the MF A between Luxembourg SCS and Abbott international Luxembourg S.a.r.l is concerned: • "Tranche A" will finance in priority the assets of Abbott International Luxembourg S.ar.l (borrower in the MF A) other than (i) the shareholdings eligible for the Luxembourg participation exemption (ii) the assets (loan receivables ) denominated in a currency other than USD and which arc financed by Tranche B, cotTesponding mainly to the USD intra group receivables; and • "Tranche B" will finance the assets (loan receivables ) denominated in a currency other than USD, • "Tranche C" will finance the shareholdings qualifying for the Luxembourg participation exemption held by Abbott International Luxembourg S.a.r.I as defined in article 166 LITL and the Grand-Ducal Decree of21 December 2001 in execution to Article I 66 of the LITL. Since Abbott lntemational Luxembourg S.ar.l will be deemed to be in a financial onlcnding activity with respect to Tranche A assets and Tranche B assets, it should derive a net remuneration from these transactions. This net remuneration will reduce the interest paid to Lux S.C.S under the MFA. The Tranche C of the MFA will bear an arm's length fixed interest rate of 7, 6573% calculated on the principal average amount allocated to this tranche. 8 Financial on-lending activity As mentioned above, further to the restructuring, Abbott International Luxembourg S.ar.l will be deemed to be in a financial on-lending activity. Depending on the amounts of Tranche A and B of the MFA and taking into account the features and conditions of the Tranche A and B of the MF A, we will revert to you in order to detennine the appropriate and acceptable profit with respect to Articles 56 of the LITL and 164 (3) of the LITL (after deduction of all the charges incurred by Abbott International Luxembourg S.kl) to be earned by Abbott International Luxembourg S.ar.l.. (23) [JRicEWAIERHousE[roPERS I Should the total amount of Tranche A and B for the first year exceed EUR 1,250 Mio, an acceptable level of taxable spread will be 0,03125% of the sum of the Average Gross Financial Asset Amount and the Average Foreign Asset Amount. The acceptable level of the spread may be reviewed if the principal amounts of the loans and receivables involved in the financial on-lending activity transactions vary significantly (i.e., if the principal amount of the Joans and receivables increase significantly, the spread could decrease, conversely if the principal amounts of the loans and receivable in the financial on-lending activity decrease significantly, the spread could increase). (24) Enclosure 10 Tax treatment of the potential reimbursement of share capital of Abbott Investments Luxembourg S.a r.l A. At the level of Abbott Investments Luxembourg S.a r.l At a later stage, Abbott Investments Luxembourg S.a r.1 may redeem part of the outstanding shares held by Abbott International Luxembourg S.a r.I in exchange for (C) PECs or PECs. Article 97 (I) of the Luxembourg Income Tax Law ("LITL") states that all dividends, profit sharings and other allocations granted under whatever form, in respect of shares, profit shares or other participations of whatever nature in collective entities as mentioned in articles l 59 and 160 LITL, are considered income from capital. Article 146 (I), I 0 LITL refers (among others) to article 97 (1), 1° LITL in order to determine the income that is subject to withholding tax in Luxembourg. Article 97, (3) b) LlTL provides for an exception to article 97 (1) LITL in stating that the proceeds allocated at the occasion of the reduction of the share capital (the reimbursement of share premium being assimilated to a reduction of share capital) and corresponding to contributions of the shareholders are not deemed to constitute income from movable property. Such reimbursement of share capital would however be taxable up to the amount of retained earnings incorporated into the share capital, as such retained earnings would be deemed distributed first. Furthermore, the reduction of share capital wi ll also be taxable if it is not motivated by serious economical reasons. According to the Administrative Practice Note, if a company disposes of retained earnings that it docs not want to distribute to the shareholders, the reimbursement of share capital is not motivated by serious economical reasons. Legitimate economic reasons may also not be available in case the reimbursement of the share capital would remain outstanding. Accordingly, if undertaken, this reduction of share capital will not be subject to withholding tax in Luxembourg provided that Abbott lnvestments Luxembourg S.a r.l will not have any retained earnings at the beginning of the current financial year in which the reduction of share capital will be held. In the contrary case, such reimbursement of share capital will be re-qualified as a dividend distribution (up to the amount of retained earnings incorporated into the share capital of Abbott Investments Luxembourg S.a r.l) and should in principle be subject to a 15% withholding tax pursuant to article 146 LITL. However, such a dividend distribution will not be subject to any Luxembourg withholding tax provided that Abbott International Luxembourg S.a r.l will comply with the minimum threshold and holding period requirement provided by article 147 LlTL (please refer to Enclosure 6). (25) B. At the level of Abbott International Luxembourg S.a r.1 According to article lO LITL, "Are only being considered for the detennination of the total net income[ ... ]: 1. Commercial profits, 2. Agricultural and forestry profits, 3. Profits from the exercise of a liberal profession, ( ... ) 6. Net income deriving from movable property, ( ...) 8. Other net income specified under article 99 LITL" The listing of article I 0 LITL is restrictive. The profits and income not affected by n° I to 8 [of the above list] benefit from a so-called "material" exemption. In the event the movable property would be part of the net assets invested in an enterprise or an exploitation as assets invested by destination (notwendiges Betriebsvennogung) or by option (gewillki.irtes Betriebsvennogung), the related income would be taxable as commercial profit, agricultural and forestry profit or profit from a liberal profession. The subsidiary character of article 97 LITL in comparison with the three first categories of revenue listed in article I0 LITL finds its legal foundation in article 97 (4) LITL. According to the preparatory works to the Luxembourg Income Tax Law (commentaries to the proposed article I 14 (now article 97 LITL)), the income derived from one of the three first categories of revenue as listed under article I0 LITL is subject to its respective own rules for the detennination of profit. This principle is also laid down in article 97 (4) LITL which states that insofar an income referred to in this article is included in the commercial profit, in the agricultural and forestry profit or in the profit from a liberal profession, according to the provisions governing the detennination of the said profit, it shall be taxable in the related net income category. In the case at hand, taking into consideration the nature of the activities to be performed by Abbott International Luxembourg S.a r.l and the fact that "the movable property" will be part of the net assets invested of Abbott International Luxembourg S.a r. I, movable income to be received by Abbott International Luxembourg S.a r.l will be considered as commercial profits as envisaged by article 14 LITL and will be taxed as such. Consequently, the general principle of article 40 LITL ("theorie de l 'accrochement du biLan fiscal au bilan comptable ") will apply. Therefore, the tax treatment of an operation/item involving income covered by article 97 LITL will follow the applicable accounting treatment of this operation/item. (26) Abbott International Luxembourg S.a r.I will record in its statutory accounts, further to the reimbursement of share capital (the reimbursement of share premium being assimilated to a reduction of share capital) from Abbott Investments Luxembourg S.a r.I, a decrease of the acquisition costs of its shareholding in Abbott investments Luxembourg S.a r.I and a corresponding increase of assets (e.i., receivable). This transaction will not have any impact on the profit/loss account and will not result in the reali zation of any profit. Consequently, this reimbursement of share capital will not trigger any impact from a Luxembourg tax perspective. In the case retained earnings would have been incorporated into the share capital of Abbott Investments Luxembourg S.a r.l, such reimbursement of share capital will be re-qualified as a dividend distribution (up to the amount ofretaincd earnings incorporated into the share capital of Abbott Investments Luxembourg S.a r.l). Accordingly, Abbott International Luxembourg S.a r.I will benefit from the Luxembourg participation exemption regime in Luxembourg for its qualifying participations in Abbott Investments Luxembourg S.a r.1 with respect to dividends derived in relation to its qualifying participation, provided that the conditions of Article 166 of the LITL arc fulfilled. Please refer to Enclosure 11 for further details in this respect. (27) Enclosure 11 Luxembourg participation exemption regime A. Dividend income • Article 166 of the LITL provides for the exemption of tlze dividends conditions arefuljilled:The distributing company is: - if the following A collective entity falling under article 2 of the amended version of the Council directive of 23 July 1990 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States (90/435/EEC); or - A Luxembourg resident capital company, which is fully taxable and does not take one of the fonns listed in the Enclosure to the paragraph 10 of article 166 of the LITL; or - A non-resident capital company that is folly liable in its state of residence to a tax corresponding to the Luxembourg corporate income tax. Regarding this condition, the Luxembourg tax authorities have set the rule that the foreign tax must be assessed at a minimum rate of I 0,5% on a taxable basis determined similarly to the Luxembourg one; and • The beneficiary company is: - A Luxembourg resident collective entity, which is fully taxable and takes one of the forms listed in the Enclosure to the paragraph 10 of article I 66 of the LITL; or - A Luxembourg resident capital company, which is fully taxable and docs not take one of the fonns listed in the above-mentioned Enclosure; or - A domestic permanent establishment of a collective entity falling under a11icle 2 of the amended version of the Council directive of 23 July 1990 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States (90/435/EEC); or - A domestic permanent establishment of a capital company that is resident in a State with which Luxembourg has concluded a double tax treaty; - A domestic permanent establishment of a capital company or of a cooperative company which is resident in a European Economic Arca (EEA) Member State other than a EU Member State. (28) • And - At the date on which the income is made available, the beneficiary held or undertakes to hold, directly, for an uninterrupted period of at least 12 months a participation in the share capital of the subsidiary of at least 10% or with an acquisition price of at least EUR 1.2 million. If the participation is held through a Luxembourg tax-transparent entity, this will be regarded as direct participation proportionally to the interest held by the Luxembourg holding company in the tax-transparent entity. A fmther benefit of the system by comparison with the one applicable in other countries is the ability to deduct related expenses (e.g., interest charges incmTed in financing the shares). Nevertheless, expenses incurred during the year in which a dividend is received and which are connected to the exempt participation may only be deducted insofar as they exceed the exempt dividend for the year in question. Additionally, if a write-down in the value of the participation has been booked as a consequence of the distribution of dividends, this write-down will not be deductible up to the amount of the exempt dividend. B. Capital gains The Grand-Ducal decree of21 December 2001 for the application of Article 166 of the LITL provides that capital gains realized from the disposal of shareholdings are tax exempt if: The subsidiary is: - A collective entity falling under article 2 of the amended version of the Council directive of23 July 1990 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States (90/435/EEC); or - A Luxembourg resident capital company, which is fully taxable and does not take one of the forms listed in the Enclosure to the paragraph 10 of article 166 of the LlTL; or - A non-resident capital company that is fully liable in its state of residence to a tax co1Tesponding to the Luxembourg corporate income tax. Regarding this condition, the Luxembourg tax authorities have set the rule that the foreign tax must be assessed at a minimum rate of I 0,5% on a taxable basis detenni ned similarly to the Luxembourg one; The beneficiary company is: - A Luxembourg resident collective entity, which is fully taxable and takes one of the fo1ms listed in the Enclosure to the paragraph 10 of article 166 of the LlTL; or (29) - A Luxembourg resident capital company, which is fully taxable and does not take one of the forms listed in the above-mentioned Enclosure; or - A domestic permanent establishment of a collective entity falling under article 2 of the amended version of the Council directive of 23 July 1990 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States (90/435/EEC); or - A domestic permanent establishment of a capital company that is resident in a State with which Luxembourg has concluded a double tax treaty; - A domestic permanent establishment of a capital company or of a cooperative company which is resident in a European Economic Area (EEA) Member State other than a EU Member State. And - At the date on which the alienation takes place, the beneficiary has held or undertakes to hold the respective participation for an uninterrupted period of at least 12 months, and during this period the participation held does not fall below I0% or an acquisition price of less than EUR 6 million. If the shares are held through a Luxembourg tax-transparent entity, this requirement must be fulfilled not by the tax transparent entity itself, but by the beneficiary, proportional to the interest held by the latter in the tax-transparent entity. A recapture system exists, under which the exempt amount of the gain is reduced by the algebraic sum of income (mainly derived from the participation and potential writedowns in the value of the participation), to the extent that they have reduced the taxable base of that year or previous years. Basically, an effect of this rule is that the capital gain realized will become taxable up to the amount of the aggregate expenses and write-downs deducted during the respective and previous years in relation to the participation. The purpose of the system is to avoid the taxation vacuum, which could result if the deductibility of expenses and write-downs connected to the participation was allowed whereas the income arising from the participation was tax exempt. (30) Enclosure 2 Simplified proposed structure of the group Abbott Laboratories (US) Abbott Health Products Inc. (Delaware) Abbott Universal Ltd. (Delaware) Abbott Holding Gibraltar Ltd. (Gibraltar) 99% Abbott Holding Subsidiary Gibraltar Ltd (Gibraltar) MFA ---------, Tranche A : Fiscal Unity Tranche B :I Tranche C: CPECs Abbott Overseas Luxembourg Sari (Luxembourg) Abbott Investments Luxembourg Sari (Luxembourg) Abbott Overseas Sub Holding (Cyprus) Ltd (Cyprus) CFCs (5) PRICEVWTERHOUSEGDPERS Enclosure 3 Draft version of the CPEC agreement Abbott Investments Luxembourg S.a r.l. Societe are.sponsabilite limitee Share capital: USO 44,989,000 Registered office: 26 boulevard Royal, L-2449 Luxembourg R.C.S. Luxembourg: B 144.635 AUTHOIUZATION FOR CONVERTIBLE PREFERRED EQUITY CERTIFICATES Series A The Board of Managers and the sole shareholder of Abbott Investments Luxembourg S.a r.J., a societe a responsabilite limitee (Luxembourg private limited liability company) (the Company), with registered office at 26 boulevard Royal, L-2449 Luxembourg, duly registered with the Registre de Commerce et des Societes (Luxembourg Trade and Companies Register) under the number B 144.635, have authorized the issue and sale of up to 3,698,638 Series A Convertible Preferred Equity Certificates (each a Series A CP EC and together the Series A CPECs) governed by the following terms and conditions of the Series A CPECs (the Terms and Conditions). TERMS AND CONDITIONS DEFINITIONS Adjustment Event means any of the following: (i) the Company distributes a dividend with respect to its Share Capital in an amount in excess of the Permitted Dividends and such excess is composed of an in kind distribution of Shares; (ii) the Company subdivides or combines into a larger or smaller number its outstanding Shares; (iii) the Company is recapitalized, consolidated with or merged into any other entity; or (iv) the Company issues Shares in exchange for cash or property with an issue price per Share that is less than the Fair Market Value per Share immediately prior to such issuance. Affiliate means, as to any Person, any other Person having control of, controlled by, or under common control with, such first person, and for this purpose, "control" of a Person means the direct, indirect or beneficial ownership of (i) 100% of the outstanding stock or comparable equity interest in the person as measured by the ability to elect the board of directors, managers, trustees or other controlling Persons of such person and (ii) 100% of the outstanding stock or comparable equity interest in the Person as measured by value. Applicable Rate means the Fixed Rate Yield. Board of Managers means the board of managers of the Company or, as long as there is only one appointed manager, the sole manager of the Company. Business Days means all of the days in a calendar year in which banks in the City of Luxembourg are open for ordinary business. Company means Abbott Investments Luxembourg S.a r.l. Conversion Date means the date speci lied by the Company for conversion of the Series A CPECs into Shares. Conversion Shares means 0.009972339 Shares, which represents the quotient of (x) the Par Value and (y) the Fair Market Value of one Share, determined as of the Issue Date per Series A CPEC; provided that in the case of any Adjustment Event the number of Conversion Shares shall be adjusted in such manner as is necessary in order that, after such adjustment: the number of Conversion Shares per Series A CPEC will carry (i) as nearly as possible (and in any event not less than) the same proportion (expressed as a percentage of the total number of votes exercisable in respect of all the Shares) of the votes as immediately before the Adjustment Event; and (ii) the same entitlement to participate (expressed as a percentage of the total entitlement conferred by all the Shares) in the profits and assets of the Company as immediately before the Adjustment Event; the total Repurchase Price will be the same as it was immediately before the Adjustment Event; and each Share received as a result of a conversion of Series A CPECs shall carry a share premium equal to the Par Value of the Series A CPEC(s) converted minus the par value of the Share(s) received in exchange. In calculating the aggregate entitlement to Conversion Shares, entitlements lo a fraction of a Conversion Share will be rounded down to the nearest whole Conversion Share. CPEC Register means the register and transfer book maintained by the Company in respect of the Series A CPECs. Extraordinary Event means a disposal at fair market value of a substantial amount or all of the assets directly held by the Company, including such disposals to an Affiliate or other related person. Fair Market Value means the value of a Share, calculated on a Fully Diluted Basis, as dctcnnincd by an independent appraiser agreed to by the Issuer and the Holder(s) by utilizing any reasonable valuation methodolo&'Y based on arm's length principles. In the event of no agreement on the nomination of this independent appraiser, this expert shall be nominated al the request of the most diligent party by the President of the Luxembourg court ("Tribunal d 'arrondissement de Luxembourg '')as soon as possible. Financial Year means the accounting year of the Company as provided for in the Company's articles of association. Fixed Rate Yield means 1% of the Par Value of lhe Series A CPEC per annum. Fully Diluted Basis in the expression "on a Fully Diluted Basis" means taking into account an aggregate number of shares in the Company computed on the basis of the assumption that all the shares of the Company to which any existing CPEC and/or any other convertible instrument may give access shall have been issued. Holder means a holder of an outstanding Series A CPEC, as recorded in the CPEC Register. 2 Insolvent means (i) that the aggregate amount or the Company's obligations exceeds the fair market value of the Company's assets or (ii) if the Company is no longer in a position to pay for its debts as they become due and the Company is no longer creditworthy. Issue Date means December I, 2009, being the date of issuance of Series A CPECs to the I lolder(s). Par Value means, in relation to one Series A CPEC, USO 1,000. Payment Date means, in relation to any Payment Period, the date 60 days after the end of such Payment Period. Payment Period means, for as long as the Series A. CPECs remain outstanding, the Financial Year of the Company, except as follows: 1. the Payment Period for the year of issuance shall mean the period beginning on the Issue Date and ending on the last day of the Financial Year including the Issue Date; and 11. the Payment Period for the year of conversion, redemption, or repurchase shall mean the period beginning on the first day of the Financial Year that includes the Retirement Date and ending on the Retirement Date. Permitted Dividend means a dividend on the Shares that satisfies the restrictions set forth in Article 6 hereof'. Person means any individual, corporation, company, association, partnership, joint venture, trust, unincorporated organisation or government (or any agency, instrumentality or political subdivision thereof). Record Date means, in relation to any Payment Period, the last Business Day in that Payment Period. Repurchase Date means the date specified by the Company for the repurchase of the Series A CPECs. Repurchase Price means, at any time, in respect of one Series A. CPEC, the amount obtained by multiplying the Fair Market Value per Share as at the relevant Retirement Date, by 0.009972339 (i.e. the number of Conversion Shares per Series A CPECs}, as adjusted as provided herein for any Adjustment Event. Retained Earnings means the retained earnings of the Company detem1ined on an unconsolidated basis in accordance with generally accepted accounting principles as in effect from time to time in Luxembourg consistent with the policies and practices of the Company. Retirement Date means the date of the repayment of the Series A. CPECs whether by way of conversion, redemption or repurchase. Senior Obligations means all present and future obligations of the Company, whether secured or unsecured, other than the Subordinated Securities and the Series A CPECs. Share means a voling ordinary share having a nominal value of USO 1,000 in the Share Capital. 3 Share Capital means the ordinary share capital of the Company. Subordinated Securities means all the outstanding shares of the Share Capital from time lo time; provided that the Series A CPECs (including any other series of Series A CPECs) shall not constitute Subordinated Securities. In the construction of these Terms and Conditions words defined in the plural shall also imply the singular and vice-versa. ISSUE I. I Pursuant to the resolutions of the Board of Managers and according to these Terms and Conditions, the Company issues the Series A CPECs in an aggregate amount of USO 3,698,638,000 to Abbott International Luxembourg S.a.r.1 on the Issue Date in consideration for the cancellation of lhc Shares held by Abbott International Luxembourg S.a r.I. in the Company, having the same value. 1.2 The Series A CPECs shall be comprised of 3,698,638 Series A CPECs with a Par Value of USO 1,000 each. 1.3 The Series A CPECs shall be issued by the Company to the Holder as of the Issue Date, and shall remain outstanding for a term of 30 years, unless earlier redeemed, repurchased or converted pursuant lo these Terms and Conditions. YIELD 2.1. Each Series A CPEC shall carry the right to receive a yield payable by the Company in respect of any Payment Period of an amount equal to the product of the Applicable Rate and the Par Value of such Series A CPEC multiplied by a fraction of which the numerator shall be the number of days in such Payment Period and the denominator shall be 365 (the Yield). 2.2. The Yield shall be payable on each Payment Date to the Holder only to the extent declared by the Board of Managers and only to the extent of the existence of Retained Earnings of the Company (determined before accrual of the Yield on this or other similar instruments that the Company may issue) as of the close of the last Payment Period preceding such Payment Date and provided that the Company would not become Insolvent as a result of the payment of such Yield. 2.3. Any Yield in arrears for any Payment Period may be declared by the Board of Managers to the extent of the existence of Retained Earnings of the Company (as computed prior to the accrual of any accrued yield on this or other similar instruments that the Company may issue and paid on any date specified by the Board of Managers), whether or not a Payment Date, to those Holders whose names appear in the CPEC Register on the relevant Record Date; provided that the Company would not become Insolvent as a result of such payment. Any such payment shall first be applied against any arrears of Yield (taking earlier a1Tears before later ones). 4 2.4 So long as no Event of Default (as defined herein) has occurred and is continuing, lhe Company may elect in its absolute discretion, from time to time, to satisfy its obligation to pay Yield for any Payment Period, in whole or in part, by issuing and delivering Shares having an aggregate Fair Markel Value equal to the portion of the Yield to which the election relates. The sbareholder(s) by signing these Tenns and Conditions undertake to vote in favour of the issuance of new Shares to the IIolder(s) and of the increase of the share capital of the Company in any extraordinary general meeting of the sbarebolder(s) of the Company that could be held in the future in order to reflect the payment of the Yield as from time to time determined by the Board of Managers in accordance with this section 2.4, and shall cause any transferee or successor to do so, among others, by not transfcn"ing any Shares without the transferee having signed and agreed to these Terms and Conditions, as well as having delegated to the Board of Managers the powers necessary hereunder. REDEMPTION 3.1 Series A CPECs may not be redeemed in part and the Company may not repurchase, redeem or otherwise acquire for value the Series A CPECs except in accordance with these Tenns and Conditions. Prior to the redemption of the Series A CPECs, no Person shall have any right, power, privilege or abi lity to demand, sue for or otherwise make claims in respect of, the acceleration, redemplion or calling of all or any part of the Series A CPECs. 3.2 Mandatory Redemption. On the 30th anniversary of the Issue Date, the Company shall redeem all outstanding Series A CPECs for either (x) an amount of cash per Series A CPEC equal lo the Repurchase Price (provided that the Company would have sufficient funds available to settle its liabilities under all Senior Obligations then outstanding and the Company would not become Insolvent as a result of such cash payment) or (y) for the number of Conversion Shares, adjusted as provided herein for any Adjustment Event, at the sole discretion of the Company. The notice procedures applicable to a repurchase of Series A CPECs by the Company shall apply to redemption of Series A CPECs at maturity. 3.3 Liquidation Rights. In the event of any voluntary or involuntary liquidation, bankruptcy, dissolution or winding up of the affairs of the Company (a Liquidation), each Series A CPEC shall be redeemed for either (x) an amount of cash per CPEC equal to the Repurchase Price or (y) for the number of Conversion Shares, adjusted as provided herein for any Adjustment Event, at the sole d iscretion of the Company. Such payment shall be made before any payment by the Company in respect of the SubordinalCd Securities but after payment of all other obligations of the Company and only to the extent the Company would not become Insolvent as a result of the Series A CPEC redemption. 3.4 The Company shall not commence a voluntary Liquidation without the consent of Holders holding in aggregate more than 50% of the issued and outstanding Series A CPECs unless the amount due on each Series A CPEC in respect of that voluntary Liquidation can be fully provided for. 5 3.5 In accordance with the articles of association of the Company, the consent of a majority of the shareholders representing 75% of the Company's share capital is necessary to decide a voluntary Liquidation. 3.6 Any Liquidation payment due in respect of any Series A CPEC shall be made to the Holders of Series A CPECs whose names appear on the C PEC Register on the date of the Liquidation (for the avoidance of doubt such tenn shall not include bankruptcy or assimilated insolvency events and procedures). CONVERSION 4.1 Conversion Right. At any time beginning on the 3'd anniversary of the Issue Date (including the date of maturity or the date of Liquidation) or, if earlier, upon the occurrence of an Extraordinary Event, (i) the Company shall be entitled to elect to convert Series A CPECs, in whole or part, into Shares by requiring any Holder to exchange each such Series A CPEC for the number of Conversion Shares, as adjusted as a result of an Adjustment Event, and (ii) any Holder shall be entitled to elect to convert Series A CPECs, in whole or part, into Shares by requiring the Company to exchange each such Series A CPEC for the number of Conversion Shares, as adjusted as a result of an Adjustment Event. If an election by the Company is made to convert fewer than all of the Series A CPECs, the conversion shall be pro rata as to all Holders of the Series /\ CPECs. 4.2 Conversion by the Comoanv. Not less than 10 Business Days prior to the Conversion Date, the Company shall provide written notice of its intention to convert the Series A CPECs to each Holder of record of the Series A CPECs at such Holder's address as recorded in the CPEC Register, but no failure of or defect in such notice shall affect the validity of the conversion. Each such notice shall state: 1. ii. 111. 1v. the Conversion Date; the adjustment, if any, in the number of Conversion Shares resulting from an Adjustment Event; the place or places where Series A CPECs are to be sunendered against the issuance of the Conversion Shares; and that the Series A CPECs to be converted will cease to accrue Yield as of the Conversion Date provided that the Conversion Shares arc issued to the Holder by the Company on that date. 4.3 Conversion by Holders. Any Holder may give wr1tten notice to the Company of its intention to convert Series A CPECs into Shares. A Conversion Date shall then be established by the Company which shall not be less than I 0 Business Days nor more than 30 Business Days after the receipt of such notice by the Company. The conversion will in this case apply to those Series A CPECs in respect of which an election to convert has been expressed. 4.4 On the Conversion Date, the Conversion Shares shall be issued by the Company on surrender of the Series A CPECs to be converted (properly endorsed or assigned for transfer in accordance with the notice of the conversion). From and after the Conversion Date (unless the Company shall default in issuance of the Conversion Shares), the Series 6 A CPECs surrendered for conversion shall no longer be outstanding and the llolders of such Series A CPECs shall have no rights or obligations in respect thereof. 4.5 The shareholder(s) by signing these Terms and Conditions undertake to, and shall cause any transferees or successors to, vote their shares in a manner and to take whatever other steps are necessary, and the Board of Managers hereby undertakes to execute whatever steps may be required, under applicable corporate law for the issuance of the Conversion Shares pursuant to this Agreement; it being understood that if a Holder is not also then a shareholder of the Company, such Holder cannot be issued such Conversion Shares without the prior approval of the shareholder(s) representing ~ of the share capital. REPURCHASE 5.1. At any time beginning on the 3rd anniversary of the Issue Date or, if earlier, upon the occurrence of an Extraordinary Event (but then only to the extent of the proceeds of such event), the Company may elect to repurchase the Series A CPECs, in whole or part, in cash at a price per Series A CPEC equal to the Repurchase Price. Any such election shall be in lieu of the Company's right to convert the Series A CPECs into Shares; provided, however, that any such repurchase may be carried out only to the extent the Company will have sufficient funds available to settle its liabilities under all Senior Obligations then outstanding and the Company will not become Insolvent as a result of such cash payment. A repurchase shall be pro rata as to all I Iolders of Series A CPECs. 5.2. The Company shall give notice of any repurchase of Series A CPECs not less than 10 Business Days before the Repurchase Date to each Holder of record of the Series A CPECs at such Holder's address as recorded in the CPEC Register, but no failure or defect in such notice shall affect the validity of the repurchase. Each such notice shall state: 1. the Repurchase Date; 11. the Repurchase Price; and 111. the place or places where Series A CPECs are to be surrendered for delivery of the Repurchase Price. The Series A CPECs to be repurchased will cease to accrue Yield as of the Repurchase Date provided that the Repurchase Price is paid on that date. 5.3 Notwithstanding anything to the contrary in these Terms and Conditions, the Company's right to repurchase any Series A CPEC shall be subject to each Holder's conversion right, provided that such Holder notifies the Company of its election to convert no later than 5 days after receiving notice of repurchase from the Company. PERMITTED DIVIDENDS 6.1 Except as provided in this section 6.1, dividend payments from the Company to its shareholder(s) shall be permitted (Permitted Dividends). So long as any of the Series A CPECs arc outstanding: 6.1.1 no dividends may be paid by the Company on the Shares if there has been an Event of Default (as defined herein) and whilst it is continuing; 7 6.1.2 The aggregate amount of dividends declared on each Share during any Payment Period shall not exceed an amount equal to the excess (if any) of: (a) the quotient of (i) the aggregate Yield paid with respect to each Series A CPEC since tr '"sue Date to the end of such Payment Period divided by (ii) the number ' • •rc;ion Shares per Series A CPEC during the relevant period, over 6.1.3 (b) the aggre Date to com po issua' '"red on each Share since the Issue Jing Payment Period (with this Payment Period for the year of no dividends 01..., the Series A CPECs. there is accrued but unpaid Yield on CORPORATE CHANGES 7.1 So long as any of the Series A CPECs arc outstanding, the Company shall not, without the consent of all Holders of the issued and outstanding Series A CPECs: 7.1. J purchase, redeem or retire in any manner any of its Shares or otherwise reduce its issued or stated capital in respect of its Shares or make any other distribution of its assets, or set aside any of its assets to make any dist.Jibution, to its shareholders other than to make a Permitted Dividend; 7.1 .2 convert, exchange, reclassify, redesignatc, subdivide, consolidate or otherwise make any change of or to any of its Shares or any other shares in its capital or amend any right, privilege, restriction or condition attached thereto; 7.1.3 issue any Shares (other than the Conversion Shares) or any other shares in the capital of the Company including making any allotment of, or the issuance or granting of any option, right or warrant to subscribe for, purchase or otherwise acquire, any Share or any other share in the Share Capital of the Company or any security convertible into or exchangeable for any Share or any other share in the capital of the Company other than as expressly provided for in these Tenns and Conditions; 7.1.4 permit, acknowledge or give effect to, the transfer of its Shares to any person other than an Affiliate; 7.1.5 change its corporate form; 7.1.6 make an election under Treas. Reg. § 301.7701-3 to change its entity classification for U.S. Federal income tax purposes. 8 REGISTRATION AND TRANSFER 8.1 Series A CPECs shall be issued only in registered fonn and the name and address of the Holder of each Series A CPEC shall be entered into the CPEC Register by the Company. The Company shall have the right to issue certificates witnessing the registration of the Holder of a Series A CPEC in the CPEC Register without such certificate however constituting a transferable instrnment. Except as expressly required by law, the Person in whose name any Series A CPEC is registered in the CPEC Register shall be regarded for all purposes as tl1e owner of that Series A CPEC. 8.2 A Series A CPEC may not be transferred to any Person other than an Affiliate of the transferring I Iolder without the prior wrilten consent of the Company and of all nontransferring I lot ders. EVENTS OF DEFAULT 9.1 9.2. Each of the following events shall constitute an Event of Default: 9. 1. l the Company shall fail to pay the full amount of any declared Yield on the applicable Payment Date or make any required Liquidation payments and such failure continues for three Business Days following such Payment Date; 9.1.2 the Company shall fail to comply with the provisions for Permitted Dividends or corporate changes; or 9. I .3 except as expressly permitted in these Tenns and Conditions, the Company shall (a) be dissolved or liquidated, (b) become Insolvent or unable to pay its debts as they become due or (c) institute or have instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under bankruptcy or insolvency law or other similar law affecting creditors' rights, and in the case any such proceeding or petition is instituted or presented against it, such proceeding or petition (x) results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation or (y) is not dismissed, discharged, stayed or restrained in each case within 90 days of the institution or presentation thereof. If an Event of Default has occurred and is continuing with respect to Series A CPECs, the Board of Managers shall convene a meeting at which the shareholder(s) of the Company shall be asked to approve the dismissals of the members of the Board of Managers and elect two new members to the Board of Managers from a list of managers proposed by the Holders, and those Managers shall serve until such Event of Default is cured and the former members of the Board of Managers may be reappointed thereafter. The shareholdcr(s) of the Company hereby agree(s) that if asked, upon occurrence of an Event of Default, it/they shall accept the resignations of the members of the Board of Managers and elect two new members to the Board of Managers from a list of managers proposed by the Holders. 9 SUBORDINATION 10.1 The Company, the Holder(s) and the shareholders of the Company agree that the Series A CPECs shall, with respect to payment rights, redemption and rights of liquidation, winding up and dissolution, rank prior to all Subordinated Securities (current and future), but the Series A C PECs shall be subordinated to all Senior Obligations (current and future). 10.2 Without limiting the foregoing, upon delivery of notice of any default with respect to any Senior Obligations in excess of $ 100,000, (a) to the Company, the Company shall not make any payments on the Series A CPECs until all such defaults arc cured or waived, and (b) to any holder of the Series A CPECs, such holder shall not accept any payment on, take any remedial action under, or take any action to enforce payment on the Series A CPECs until all such defaults are cured or waived. 10.3 Further, without limiting the foregoing, upon any distribution to creditors of the Company in a liquidation, winding up, or dissolution, or in a bankruptcy, reorganization, insolvency, receivership, or other similar proceeding with respect to the Company, the holders of Senior Obligations shall be entitled to receive payment in full in cash of all Senior Obligations (including interest accruing at tl1e rates specified in and otherwise in accordance with the tenns of the agreements creating ilie applicable Senior Obligations, or that would have accrued under such terms, whether or not such interest is allowed by the bankruptcy court, receiver, or other entity overseeing such proceeding after the commencement of any proceeding) before the holders of the Series A CPECs will be entitled to receive from ilie Company any payment on the Series A CPECs. Payments that would otherwise be made to the Holders of the Series A CPECs shall be applied to the Senior Obligations until the Senior Obligations (including the interest specified above) have been paid in full in cash, and if any such payment is nonetheless made to a holder of the Series A CPECs before the Senior Obligations (including the interest specified above) have been paid in full in cash, such Holder of Series A CPECs shall hold such payment in trust for the holders of the Senior Obligations and shall promptly deliver such payment to the Senior Creditors in the form received with all necessary endorsements. Subject to the prior payment in full in cash of all Senior Obligations (including the interest specified above), ilie holders of the Series A CPECs shall be subrogated to the rights of the holders of the Senior Obligations. SECURITY 11.1 No lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of the Company bas been or shall be created to secure payment of any amount under the Series A CPECs. VOTING 12. I Except as set out above in clause 9.2 following an Event of Default, the Series A CPECs shall carry no voting rights in res pect of the Company. 10 PAYMENTS 13.1 Any payment of cash with respect to a Series A CPEC shall be made by wire transfer to such account as the I loIder of the relevant Series /\. CPEC may specify by notice in writing given to the Company not later than three Business Days prior to the relevant Payment or Repurchase Date or, in default of such notice, by cheque sent by registered mail and al the risk of such Holder lo the address of the relevant Holder as registered in the CPEC Register. 13.2 /\.II sums payable by the Company in respect of the Series A CPECs shall be paid free and clear of all deductions or withholdings unless the deduction or withholding is required by law. TAX AND BOOK TREATMENT 14.1 The Series A CPECs shall consistently be treated as common equity for all US tax and US accounting purposes and the Company shall lend any reasonable assistance to the I Iolder as may be requested by the Holder in order for such characterization to apply. GOVERNING LAW 15.1 The Terms and Conditions of these Series A CPECs will be governed by, and shall be construed in accordance with, the laws of the Grand Duchy of Luxembourg. AMENDMENTS 16.1 Any amendments and modifications to the present Terms and Conditions are subject to the written approval of the parties. These Terms and Conditions may be executed in counterparts, each of which shall be an original and all of which, when taken together, shall be deemed to be one and the same instrument. ll IN WITNESS WIIEREOF the parties hereto through their duly authorized representatives have executed these Terms and Conditions in two originals on t11e day and year first above written, each party acknowledging having received one copy. Abbott Investments Luxembourg S.a r. I By:_ _ _ _ _ _ _ __ Title: Abbott International Luxembourg S.a r.1, as Holder By:_ _ _ __ _ _ __ Title: /\cknowledged and approved as Shareholder of /\bbott Investments Luxembourg S.a r.l for the purposes of Section 2.4, Section 4.5, Section 9.2 and Section 10. I hereof. Abbott International Luxembourg S.a r.l, as Shareholder of the Company By: --------~ Title: 12 Enclosure 4 Luxembourg tax treatment of the CPECs to be issued by Abbott Investments Luxembourg S.a r.I. A Main features of the CPECs Features CPECs to be issued by Abbott Investments Luxembourg S.a r.1. Term 30 years Return Fixed vicld - I% of the par value of the CPECs • At any time beginning on the 3rd anniversary of the Issue Date or, if earlier, upon the occurrence of an Extrnordinary Event (but then only to the extent of the proceeds of such event). the Company may elect to repurchase the Series A CPECs, in whole or part, in cash at a price per Series A CPEC equal to the Repurchase Price•. Any such election shall be in lieu of the Company's right to convert the Series A CPECs into Shares: provided, however, that any such repurchase may be carried out only to the extent the Company will have sufficient funds available 10 sclllc its liabilities under all Senior Obligations then outstanding and Ilic Company will not become Insolvent as a result of such cash payment. A repurchase shall be pro rata as to all Holders of Series A CPECs. • Repurchase/Re de mp lion On the 30th anniversary of the Issue Date, the Company shall redeem all outstanding Series A CPECs for either (x) an amount of cash per Series A CPEC equal to the Repurchase Price (provided that the Company would have sufficient funds available to settle its liabilities under all Senior Obligations then outstanding and the Company would not become Insolvent as a n:sult of such cash payment) or (y) for the number of Conversion Shares, adjusted as provided herein for any Adjustment Event, at the sole discretion of the Company. Tiie notice procedures applicable to a repurchase of Series A CPECs by Ilic Company shall apply to rcck:mption of Series A CPECs at maturity. • Repurchase Price: means, al any lime, in respect of one Scrfos A CPEC, the amount obtained by multiplying the Fair Market Value per Share as at the relevant Retirement Date, by 0.009972339 (i.e. the number ofC'onvcrsion Shares•• per Series A CPECs), as acljustcd as provided herein for any Acljustment Event ** Con,•crsion Shares: means 0.009972339 Shares, which represents the quolienl of (x) tl1e Par Value and (y) the Fair Marlee! Value of one Share, detennined as of the Issue Oate per Sencs A C'PEC. [ . ]. At any time beginning on the 3rd anniversary of the Issue Date (including the date of maturity or the date of Liquidation) or, if earlier, upon the occurrence of an Extraordinary Event, (i) the Company shall be entitled to elect to convert Series A CPECs, in whole or part, into Shares by requiring any Holder to exchange each such Series A CPEC for the number of' Conversion Shares•, as adjusted as a result of an Adjustment Event, and (ii) any Holder shall be entitled to elect to convert Series A C'PECs, Conversion in whole or part, into Shares by requiring the Company to exchange each such Series A CPEC for the number of Conversion Shares, as adjusted as a result of an Adjustment Event. If an election by the Company is made to convert fewer than all of the Series A CPECs, the conversion shall be pro rata as to all I loldcrs of the Series A CPECs. * Convusion Shares: means 0.009972339 Shares, which represents the quotient of (x) the Par Value and (y) the Fair Market Value of one Share, dctcnnincd as of the Issue Date l>CI' Series ACPEC'; I l. (7) CPECs shall, with respect to payment rights, redemption and rights of liquidation, winding up and dissolution, rank prior to all Subordinated Securities* of the Company (current and future), but the CPECS shall be subordinated to all Senior Obligations** (current and future). Ranking • Subordinated Securilies: means all the outstanding shares of the Share Capital from time to time; provided that the Series A CPECs (including any other series of Series A CPECs) shall not constitute Subordinated Securities.*" ••Senior Obligations: means all present and foturc obligations of the Company, whelher secured or unsecured, other than !he Subordinated Securities and the Series A CPECs. Transferability Restricted - with the prior consent of the Company and of all non transferring holders Stapling cla use No stapling c lause Liquidation proceeds B No entitlement to liquidation procCL"Cls. Characterization of the CPECs issued by Abbott Investments Luxembourg S.a r.l. as debt for Luxembourg tax purposes Based on the characteristics above mentioned, the CPECs to be issued by Abbott lnvestments Luxembourg S.a r.J. will be treated as debt for Luxembourg corporate income tax, municipal business tax and net wealth tax purposes. 2 In this respect, the explanatory note to the income tax reform law no. 571 of l 955 (Projet de Loi on Article 114 - currently Article 97 of the Luxembourg Income Tax Law - referred as "LITL") points out that the distinction between debt and equity must be done on the basis of the economic characteristics of the financial instrument. In particular, the main economic features that characterise a financial instrument as debt are: • The fact that the instrument bears a fixed yield (as opposed to an equity participation which gives right to a percentage of the company's profits); • A yield due even in loss-making years; and • A privileged ranking over the company's shares. 3 Considering that the CPECs rank prior to the company's shares, do not grant the holder any right in the distributable profits of the company or the liquidation proceeds as long as the CPECs are not converted into shares, bear a fixed interest rate even in loss-making years, have a fixed maturity date, and do not grant the holder any voting rights, the CPECs will be treated as debt from a Luxembourg corporate tax, municipal business tax and net wealth tax perspective at the level of both Abbott International Luxembourg S.a r.l and Abbott Investments Luxembourg S.a r.I. (8) C Tax treatment of the return (interest payments and redemption price) C.J. Deductibility 4 Interest is normally deductible from a Luxembourg tax perspective, except if: • The interest is due on an instrument re-qualified into equity from a Luxembourg tax perspective. In this respect, given the qualification of the CPECs as debt from a Luxembourg tax perspective, the payments to be made under the CPECs will not be treated as a non deductible dividend distribution. • The interest expense is related to exempt income under the provisions of Article 45 and Article 166(5) LITL. To the extent to which the return due on the CPECs will relate to exempt income, the provisions of Article 45 and 166(5) LITL will be applicable. • 111e debt exceeds the debt-to-equity ratio usually applicable in practice for the ji11a11ci11g of participations. Considering that Abbott investments Luxembourg S.a r.l. will comply with the 85/ 15 debt-to-equity ratio in relation to the financing of its participations (not more than 85% of the initial acquisition cost of the participations held by Abbott investments Luxembourg S.a r.1 will be financed by CPECs), the interest on the CPECs will remain deductible and will not be rcqualified into a deemed dividend distribution. • The interest is re-qualified into a deemed dividend distribution on the basis of Article 164(2) or 164(3) LJ7L. Considering the fact that the CPECs are not qualified as shares, founder shares, profit shares orjouissance shares, that they are not issued in the form of bonds or other similar securities, that their bear a fixed interest rate that will also accrue in years in which the issuer is in a loss position, and they do not give the holder any rights to the profits after tax or liquidation proceeds (as long as the CPECs arc not converted into shares) of Abbott Investments Luxembourg S.a r.l., the return will not be treated as a distribution under the provisions of Article 164(2) LITL. Since the interests due by Abbott Investments Luxembourg S.a r.l. on the CPECs can be considered as acceptable with respect to Articles 56 of the LITL and 164 (3), the deductibility of the interest on the CPECs will not be (partially) disallowed under the provisions of Article 164(3) LITL. 5 As a result, the interest paid on the CPECs will be booked as a yearly financial cost (even if not paid but only accrued for) and will not be re-qualified into a dividend distribution at the level of both Abbott Investments Luxembourg S.a r.I. and Abbott International Luxembourg S.a r.I. This accounting treatment will be followed for tax purposes as no specific tax rules depart there from (cf. Article 40 LITL). Consequently, the interest will constitute a yearly tax-deductible charge. (9) C.2. No Withholding tax 6 Interest due on the CPECs will not be subject to withholding tax in Luxcmbow-g. In this respect, according to Al1iclc 146 LITL, payments can be subject to withholding tax only if: • They represent dividends and other profit shares covered by Article 97(1)(1) LITL. Given the qualification of the CPECs as debt from a Luxembow-g tax perspective, the payments to be made by Abbott Investments Luxembourg S.a r.1. under the CPECs will not fall in the category of income covered by Article 97(1)(1). • 7 They are paid on the basis of bonds or other similar securities that give right cumulatively to a.fixed interest plus a variable interest depending on the pro.fits distributed by the issuer, except for the case where the variable interest is granted/allowing a temporary reduction of the fixed interest, without exceeding the initial level of the interest rate. As CPECs are not issued in the form of bonds or similar securities and bear a fixed interest only, they will not fall in the scope of this provision. Moreover, based on the characteristics of the redemption clauses (please refer to Enclosme 3), the redemption of the CPECs will neither be re-characterized into a hidden dividend distribution in the sense of Article 164(3) LITL. As a consequence, the redemption of the CPECs will not be subject to any Luxembourg withholding tax in accordance with A11icle 146(1) LITL. (10) LE GOUV ERNEMENT DU GRA ND-DUCHE DE LUX EM BOURG Administration des contributions directes Bureau d'imposition societes 6 For the attention of Valery Civilio PricewaterhouseCoopers 400, route d'Esch B.P. 1443 L - 1014 Luxembourg Companies involved : Abbott Investments Luxembourg S.a r.I. - 2009124/02208 Abbott International Luxembourg S. ar.I. - 2009124109547 25 November 2009 Dear Sir, Further to your letter dated 25 November 2009 and reference VCO/ROIM/LTTY/Q5709015MGYVN relating to the transactions that the group Abbott would like to conduct, I find the contents of said letter to be in compliance with current tax legislation and administrative practice. It is understood that my above confirmation may only be used within the framework of the transactions contemplated by the abovementioned letter and that the principles described in ·· your letter shall not apply ipso facto to other situations. • 18, rue du Fort Wedell Tel.: (352) 40.800-3118 1\dresse postale Luxembourg Fax: (352) 40.800-3100 L-2982 Luxembourg ite Internet \ .impotsdirects.public.lu