AbbVie 2013 Annual Report Download - page 164

If the termination of employment had been due to disability, then the named executive officers
also would have received, in addition to AbbVie’s standard disability benefits, a monthly long-term
disability benefit in the amount of $137,500 for Mr. Gonzalez; $53,750 for Ms. Schumacher; $45,833 for
Mr. Chase; $42,917 for Mr. Alban; and $21,875 for Mr. Richmond. This long-term disability benefit
would continue for up to 18 months following termination of employment. It ends if the named
executive officer retires, recovers, dies or ceases to meet eligibility criteria.
In addition, if the named executive officer’s employment had terminated due to death or disability,
his or her unvested stock options and restricted stock or unit awards would have vested on
December 31, 2013 with values as set forth below in the subsection of this proxy statement captioned
‘‘Equity Awards.’’
Potential Payments upon Change in Control
In connection with the Separation from Abbott, AbbVie assumed the change in control agreements
between Abbott and the officers transferring to AbbVie. The agreements with Mr. Gonzalez,
Ms. Schumacher, and Messrs. Chase, Alban and Richmond are described below.
Each change in control agreement continues in effect until December 31, 2014, and can be
renewed for successive two-year terms upon notice prior to the expiration date. If notice of
non-renewal is given, the agreement will expire on the later of the scheduled expiration date and the
one-year anniversary of the date of such notice. If no notice is given, the agreement will expire on the
one-year anniversary of the scheduled expiration date. Each agreement also automatically extends for
two years following any change in control (see below) that occurs while the agreement is in effect.
The agreements provide that if the employee is terminated other than for cause or permanent
disability or if the employee elects to terminate employment for good reason (see below) within two
years following a change in control, he or she is entitled to receive a lump sum payment equal to three
times his or her annual salary and annual incentive (‘‘bonus’’) award (assuming for this purpose that all
target performance goals have been achieved or, if higher, based on the average bonus for the last
three years), plus any unpaid bonus owing for any completed performance period and the pro rata
bonus for any current bonus period (based on the highest of the bonus assuming achievement of target
performance, the average bonus for the past three years or, in the case of the unpaid bonus for any
completed performance period, the actual bonus earned). If the employee is terminated other than for
cause or permanent disability or if the employee elects to terminate employment for good reason
during a potential change in control (see below), he or she is entitled to receive a lump sum payment
of the annual salary and bonus payments described above, except that the amount of the bonus to
which the employee is entitled will be based on the actual achievement of the applicable performance
goals. If the potential change in control becomes a ‘‘change in control event’’ (within the meaning of
Internal Revenue Code Section 409A), the employee will be entitled to receive the difference between
the bonus amounts the officer received upon termination during the potential change in control and
the bonus amounts that would have been received had such amounts instead been based on the higher
of the employee’s target bonus or the average bonus paid to the employee in the preceding three years.
Bonus payments include payments made under the Performance Incentive Plan. The employee also
will receive up to three years of additional employee benefits (including welfare benefits, outplacement
services and tax and financial counseling, and the value of three more years of pension accruals). If
change in control-related payments and benefits become subject to the excise tax imposed under
Internal Revenue Code Section 4999, payments under the agreement will be reduced to prevent
application of the excise tax if such a reduction would leave the employee in a better after-tax position
than if the payments were not reduced and the tax applied. The agreements also limit the conduct for
which awards under AbbVie’s incentive stock programs can be terminated and generally permit options
to remain exercisable for the remainder of their term. The compensation committee’s independent
compensation consultant has confirmed that the level of payments provided under the agreements is
consistent with current market practice.
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