AbbVie 2012 Annual Report Download - page 177

Abbott is responsible for workers’ compensation and disability benefits for employees continuing
with Abbott following the distribution date and for former employees whose last employment was not
with the AbbVie business, and AbbVie is responsible for workers’ compensation and disability benefits
for employees transferring to AbbVie and for former employees whose last employment was with the
AbbVie business. AbbVie also is responsible for certain other benefits for former employees who were
on disability leave on the distribution date and whose last employment was with the AbbVie business.
Equity Compensation Awards
The employee matters agreement provides for the conversion of all outstanding awards granted
under Abbott’s equity compensation programs (whether held by Abbott or AbbVie employees or other
participants) into adjusted awards based on both Abbott common shares and AbbVie common stock.
For purposes of adjusted award vesting, continued employment or service with Abbott or AbbVie, as
applicable, is treated as continued employment or service for both Abbott and AbbVie awards.
Holders of Abbott restricted shares or restricted stock units generally retained those awards after
the distribution date and also received restricted stock or restricted stock units of AbbVie, in an
amount that reflected the distribution to Abbott shareholders, by applying the distribution ratio to the
Abbott restricted shares or restricted stock units as though they were unrestricted Abbott shares.
Together, the Abbott and AbbVie awards were intended to preserve the value of the original Abbott
restricted shares or restricted stock units as measured immediately before and immediately after the
distribution. The original Abbott restricted shares and restricted stock units and the AbbVie restricted
stock and restricted stock units are subject to substantially the same terms, vesting conditions and other
restrictions that applied to the original Abbott restricted shares and restricted stock units, respectively,
immediately before the distribution. Dividend equivalent payments on restricted stock units will be paid
by the restricted stock unit holder’s employer (Abbott or AbbVie, as applicable).
Each Abbott stock option generally was converted into an adjusted Abbott stock option and an
AbbVie stock option, which together were intended to preserve the aggregate value of the original
Abbott stock option as measured immediately before and immediately after the distribution. The
adjusted Abbott stock options cover the same number of shares as the original Abbott stock options,
but the exercise prices were adjusted to reflect the distribution. The adjusted Abbott stock options and
the AbbVie stock options are subject to substantially the same terms, vesting conditions,
post-termination exercise rules, and other restrictions that applied to the original Abbott stock option
immediately before the distribution.
To the extent that local regulations outside the United States or award agreement terms did not
permit use of the adjustment method described above or would cause an adverse effect for equity
award holders, a compliant alternative adjustment method was used. In such cases, affected employees
generally received adjusted awards in the equity of their post-distribution employer.
Miscellaneous
The employee matters agreement also addresses other employee-related issues and certain special
circumstances, including employees who will transfer to their eventual permanent employer on a
delayed basis, special rules for benefit arrangements in various non-U.S. jurisdictions, and treatment of
certain legacy plans originally adopted by companies that have been acquired by Abbott.
International Commercial Operations Agreements
The local separation of AbbVie’s business in certain countries outside the United States did not
occur at the distribution date due to regulatory requirements, the need to obtain consents from local
governmental authorities, and other business reasons. The international commercial operations
agreement and the Luxembourg international commercial operations agreement provides for the
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