CLASSIFICATION SHEET

BUREAU D'IMPOSITION SOC. 6

ENTRE
This document relates to the following request:

2 5 NOV. 2009

Novembcr 25, 2009

References: VCO/ROIM/LTTY/Q57090 ISM-GYVN
Abbott lnvestments Luxembourg S. r.l. (2009/24/022081
Abbott International Luxembourg S. r.l. [2009/24/09547)

1. Key topics: Convertible Preferred Equity Certificatcs

2. Na me of t_!!e advisor : PwC

.::...__ _

3. Corporate group's name, or fund sponsor: Abbott

_____________________________________________~

4.Nameof ~
th~
c~
p~
ro~
je
~
c~
t:

_S. Amount intcnded to be invcsted: Approx. USD 3,698 Mio

1

6. Date of implementation: Last quarter 2009

2 5 NOV. 2009

Pric:rwaterhouscCoopcrs
responsabilitE lirniltt
Rtvistur d'entreprises
400, route d'Esch
llP. 1443
l 10 14 Luxembourg
1ck'Jlhonc +352 494848 1
Facsomile +352 494!1482900
www.pwc.com/lu
info@lu.pwc.com
Soti~tf

For the attention of Mr Marius Kohl

Administration des Contributions Directes

Bureau d' Imposition des socits YI
18, me du Fort Wedell
L- 2982 Luxembow-g

BUREAU D'IMPOSITION SOC. 6

E'NTRE

Novembcr 25, 2009

References: YCO/RO IM/LTIY/Q5709015M-GYVN

Abbott Jnvcstments Lu xembourg S. r.l. [2009/24/022081

Abbott International Luxembourg S. r.l. )2009/24/09547]
Tssuancc of CPECs by A b bott lnvcstmcnts Luxembourg S. r.l

Oear Mr Kohl,
1 our capacity of tax consultant of the above-mentioned client, we are pleased to submil
hercafter the Lax treatmcnt applicable to the transactions foresccn by our client. This lctter
aims at confirrning the conclusions reached during our meeting datcd June 24, 2009 during
which we discussed certain characteristics of Convertible Preferred Equity Certificatcs to
be issucd by Abbott Investments Luxembourg S. r.l.

A.

Facts

A.t

Background
1.

The Abbott group is a leading provider of innovative health carc products and
is devoted to discovering new medicincs, 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.

ln 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-effcctive financing of group activitics (please refcr to
the
Advance
Tax
Agreements
dated
May 13, 2009
(Ref: YCO/ROIM/LTTY/Q5709003M-GYVN) - attached in Enclosure 1 to
this letter).

R.C.S. Luxembourg U 6S 47'/ - TVA l.lJ 17$64447

A.2 Restrocturing
4.

Abbott lnvestments Luxembourg S. r.l envisages redeeming up to 85% of the

outstanding shares held by Abbott International Luxembourg S. r.l in
exchange for Convertible Preferred Equity Certificates (referred as "CPECs")
amounting to around USD 3,698 Mio.

5.

ln addition, Abbott Investments Luxembomg S. r.l, Abbott International

Luxembourg S. r.l and Abbott Overseas Luxembourg S. r.l contemplate
forming a Luxembomg fiscal unity as from the fmancial year starting 1st
December 2010. Abbott International Luxembow-g S. r.l would be the parent
company. Jn 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 infonnation, you will find attached in Enclosure 2 to this letter,
a simplified organization chart upon completion of these restmcturings.

B.

Tax analysis

B.l

Luxembourg tax treatment of the CPECs to be issued by Abbott lnvestmcnts

Luxembourg S. r.l
7.

Based on the charactetistics of the CPEC agreement (a draft version is attached

in Enclosure 3 to this letter) to be concluded by Abbott International
Luxembourg S. r.1 and Abbott lnvestments Luxembourg S. r.l., the CPECs
will be treated as debt for Luxembourg corporate income tax, municipal
business tax, and net wealth tax pml)oses. Thcrefore, the intcrest cxpenscs will
be fully tax deductible at the level of A bbott Jnvcstments Luxembourg S. r.l
and not be subject to withholding tax (see our technical analysis on the debt
charactcrization of the CPECs instrument provided in Enclosure 4).

8.

Howcvcr, interest expenses on the CPECs directly linked to Abbott

lnvestments Luxembourg S. r.l's participations exempt in application of
Atticlc 166 of the Luxcmbow-g Income Tax Law (rcfcn-ed as "LITL") and the
Grand Ducal Regulation of 21 December 2001 for the application of Article
166 of the LITL will be subject to the recapture mechanism.

9.

Interest incomc on the CPECs to be received by Abbott International

Luxembow-g S. r.l will be taxable, but will be offset using available cm-rent
year and can-y forward !osses.

(2)

We remain at your disposai should you need any further information and would like to
thank you for the attention that you will give to our rcqucst.
Yours sincerely,

1-/l

Va ry Civilio
Partncr

Razvan Bruno Ifrim

Senior Manager

Enclosures:
Enclosure 1:
Enclosure 1:
Enclosure 3:
Enclosure 4:

77rl.l

/l~r

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. r.l.

uguemell/ rs ba.sed 011

th~ fa4'1.1

as presmred to

PriCI!ll'aterl!ous~oopers

Srl as at the

dat~

the athlc.t was gi1e11 17w

agretmem ls depl'lldem 011 spcqfic facts a11d c:ircumsta11CI's and may 110tlx appropna to IIIIOtlrer pari) thm /he om for which il naJ
prepared. 'f7us tar agreement

w11.\

preparetl with on/y the lnteresrs of Abboll group in mind. a11d was not plmul!'d ur carried out ln

comemplarlrm of emy use by till)' orher party. PricewaterlwuseC'oopers Srl, Ils porlllers. employees ami or agems, neuher owe nor
aCCI!fJI till l' dury of core or any nsponsibilify to any other party. wlrether in contra('/ or in tort (including withoutllmt'totioll. neRiiRI'IICI!

or brl'tlclr uf Sl1111110ry dllly) houtvrr arrsmg, and shall not lx ilablf' ln respect ofany loss. tlamagt> or ~rpem~ Q{wluacl'l'r nawre whclt
u

causctlto an.y otlter party

(3)

Enclosure 1
Advance Tax Agreement dated May 13, 2009

(4)

CLASSIFICATION SHEET

This document relates to the following request:

May 13,2009
References: VCO/ROJM/LTTY/Q5709003M-GYVN
Abbott Jnvestmcnts Luxembourg S. r.l. - Tax number in process
Abbott International Luxembourg S. r.l. - Tax number in process
Abbott Overscas Luxembourg S. r.l. - Tax number in process
Abbott Holding Subsidiar-y (Gibraltar) Limitcd Luxembourg S.C.S - Tax number
in process

r 1. Key topics: Mastcr Facility Agreement, spread, permanent establishment, priority allocation, fiscal
uni
2.Nameofthead~~s~
o~
r~
:~
P~~v~
C----------------------------------------------~

_ 3. Corporate group 's namc, or fu nd sponsor: Abbott

4. Namc ofthc pro'ect: 1

S. Amount intended to be invcsted: 50 Bio

~~~~~~--------------------------------------~

6. Date of im lemcntation:

~~----------------------------------------------~

PriccwaterhouscCoopers
Socit responsabilit limite
Rviseur d'entreprises

For the attention of Mr Marius Kohl

Administration des Contributions Directes

Bureau d'Imposition des socits VI
18, rue du fort Wcdcll
L - 2982 Luxembourg

400, route <l'Esch

B.P. 1443
L-1014 Lu'cmbourg
Telephone +352 494848-1
Facsimilc +352 4941!48-2900
www pwc.comllu
info@;lu.pwc.com

May13, 2009

References: VCO/ROIM/LTIY/Q5709003M -GYVN

Abbott lnvcstmcnts L uxembourg S.r.l. - Tax number in proccss
Abbott International Luxembourg S.r.l. - Tax numbcr in proccss
Abbott Overseas Luxembourg S.r.l. - Tax number in process
Abbott Holding Subsidiary (Gibraltar) Limitcd 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,
wc would likc to confirm your approval and/or obtain your comments on the Luxembourg
tax trcatmcnt dcscribed in this lctter in relation to operations to be canied out in
Luxembourg in the future.

Facts

A.t Background

1.

The Abbott group is a leading provider of innovative health care products and
is devoted to discovering new mcdicines, new technologies and new ways to
manage health.

2.

The parent of the group, Abbott Laboratories (referrcd 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 currently being reshaped
in order to allow for tax efficient future business acquisitions by Abbott Labs
and a cost-cffcctivc financing of group activities.

R.( .S. Luxembourg B 65 477 - IVA LU17564447

A.2 Rcstructuring
3.

Prior to the reorganization, the Abbott group did not have any Luxembourg
entities.

4.

For your information, you will find attached in Enclosure 1 to this lettcr,
a simplified organization chart summarizing the structure prior to this
rcorganization.

5.

The relevant restructuring steps from a Luxembourg income tax perspective,

as weil as a simpli fied organizational chart upon completion of the
rcorgani:tation are attachcd in Enclosure 2 to this lctter.

Tax analysis

B.l

Luxembourg tax residency of Abbott Invcstmcnts Luxembourg S. r.l, Abbott

International Luxembourg S.r.l and Abbott Overscas Luxembourg S. r.J
6.

According to article 159 of the Luxembourg Income Tax Law ("LITL"),

capital comparues 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 providcs that a limited liability company
(socit responsabilit limite - referred as "S. r.l") qualifies as a capital
company.

7.

Abbott lnvestments Luxembourg S. r.l, Abbott International Luxembourg

S. r.l and Abbott Overseas Luxembourg S.r.l (referred as "Lux S. r.ls'') will
be S. r.ls, and will have their statutory scats locatcd in Luxembourg.

8.

Moreover, the Lux S. r.ls will have their place of central administration in
Luxembourg to the extcnt thal their sharcholders' meetings and their board
meetings will 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. r.ls will be considered as full y taxable

Luxembourg-resident capital companies. Tax residency ccrtificates will be
issued upon request.

1O.

Copies of the articles of association of the Lux S. r.ls arc attached m

Enclosure 3 to this Ietter.

(2)

8.2

8 .3

Tax treatmen t of Abbott Holding Subsidiary (Gibraltar) Limitcd Luxembourg

S.C.S and its partners
Il.

Given its tax transparent character, Abbott Holding Subsidiary (Gibraltar)

Limited Luxembourg S.C.S (refen ed as "Lux S.C.S") will not be subject to
corporatc income tax or net wealth tax in its own namc (article 175 L!TL and
article 1 1bis Loi d'Adaptation).

12.

The two partners of Lux S.C.S, i.e. Abbott Holding (Gibraltar) Limitcd and
Abbott Holding Subsidiary (Gibraltar) Limited (both incorporated under the
law of Gibraltar - refened respectively as "GibCo 1" and "GibCo2'') , will not
be tax resident in Luxembourg and will not hold their interest in Lux S.C.S
tl1rough a pennanent establishment in Luxembourg.

13.

As Lux S.C.S w ill not exploit a commercial enterprise in Luxembourg, ncither

Lux S.C.S nor its pariners wi ll be subj ect to corporate income tax (referred as
"CIT"), municipal business tax (refened as "MBT"), or net wealth tax (referred
as "NWT"), in Luxembourg.

14.

The analysis of the tax trcatment 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 lo

this letter.

Withholding tax on dividends payments made by Abbott International

Luxembourg S.r.l to Lux S.C.S
16.

Duc to the tax transparency of Lux S.C.S, dividend payments made by Abbott
International Luxembourg S.r.lto Lux S.C.S will be regarded for Luxembourg
tax purposes as payments made directly to its non-resident partners Gibco 1
and Gibco 2.

17.

Since the Gibraltar companies are falli ng under the application of the Council
Directive 90/435/EEC, the dividend distribution that will be canied out by
Abbott International Luxembourg S.r.l will not be subject to any Luxembourg
withholding tax provided that the Gibraltar companies comply with the
minimum tl1reshold and holding period rcquirement providcd by article 147
LJTL (dctailed in Enclosure 6).

18.

The analysis of the cligibility of Gibraltar companics to the benefit of the

Council Directive 90/435/EEC is detailed in Enclosw-e 7.

(3)

B.4 Master Facility Agreement (referred as "MFA")

19.

Further to Step 78 of the envisaged restructuring (please re fer to Enclosure 2),

a MF A will be put in place between Lux S.C.S and Abbott International
Luxembourg S. r.l.

20.

A copy of the executed MFA is attachee! in Enclosure 8 to this letter..

8.4.1 Tax treatmcnt of the MFA

21.

The MFA will be considercd debt for CIT, MBT and NWT purposes, and
interest thereon will be considered fully tax deductible (see Encloswe 9 for
a description of the MFA).

B.4.2 Financial on-lcnding activity

22.

Taking into account the features of the financial on-lending acti vity covered in
the Tranche A and Bof the MFA, Abbott International Luxembourg S. 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 rea1izes a margin (after
deduction of the charges incurred by Abbott International Luxembourg S. r.l)
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 f1nancing participations held by Abbott

International Luxembourg S. 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 arnount as of the last day of
the relevant accounting period).

B.4.3 Treatmcnt of lntcrest Payments undcr the MFA

24.

Neither the payments of interest (or the accruing of intercst), nor the
reimbursement of the principal amou nt of the MF A wi Il be treated as dividend
djstributions in the meaning of Articles 97 and 146 (1)-(3) of the LITL. Hcnce,
these payrnents (or accruals) will not be subject to withholding tax pursuant to
Luxembourg domestic law. Intcrest payments will be full y tax deductible at the
leve! of Abbott International Luxembourg S. r.l..

(4)

25.

Only intcrest paid in conncction with Tranche C of the MPA (l.c., financing of
sharcholdings qual ifying for the Luxembourg participation exemption regime)
may be subject to the rccapturc mcchanism providcd by Article 166(5) of the
LITL and article 1 (2) of the Grand-Ducal Decrcc of 21 Deccmber 2001 in
execution to Article 166 of the LITL.

26.

The Luxembourg thin capitalization rules will be respectcd at the lcvcl of

Abbott International Luxembourg S. r.l since its shares held in Abbott
lnvestments Luxembourg S. r. l and Abbott Ovcrscas Luxembourg S. r.l will
be finanecd up to 85% by tranche C of the MF A.

8.4.4 Net wcalth tax

8 .5

B.6

27.

For NWT purposes, the non-qualifying financial assets (i.e. ali 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 specifie debt, will be deemcd to
be financed in priority by Tranche A or Tranche B of the MFA. The equity of
Abbott International Luxembourg S. r.l will be dccmed to finance by priority
participations qualifying for the Luxembourg participation exemption regime.

28.

Finally, depending on the additional invcstments that may be made during the
existence of the structure, the MF A could be amended to include new tranches.
Should it be the case, we will update you on this.

T ax treatment of the potential reimbursement of share capital of Abbott

l nvcstments Luxembourg S. r.l

29.

If undertaken, this rcimbursement of share capital should not trigger any

impact from a Luxembourg tax perspective.

30.

The analysis of the tax treatmcnt of the reimburscmcnt of share capital of

Abbott lnvcstmcnts Luxembourg S. r.l should it arise is detailcd in
Enclosure 1O.

Financiog of Abbott Jnvestments Lux.c mbourg S. r.l

3 1.

For the sake of clarity and for simplification purposes at the level of Abbott
lnvestments Luxembourg S. r.l, for CIT, MBT and NWT purposcs, any
potcntial debts financing Abbott lnvestments Luxembourg S. r.l will be
dccmcd to finance in priority first other assets than participations qualifying for
the Luxembourg partici pation exemption regime, then participations qualifying
for the Luxembourg participation exemption regime.

(5)

8.7

Application of the Luxembourg participation exemption to Lux S. r.ls

B.7.1 At the leve) of Abbott International Luxembourg S. r.l

32.

Abbott International Luxembourg S. r.l will benefit from the Luxembourg

pmticipation exemption regime in Luxembourg for its qualifying participations
in Abbott lnvestments Luxembourg S. r.l and Abbott Overseas Luxembourg
S. r.l with respect to dividcnds and capital gains derived in relation to thcir
qualifying participations, providcd Abbott lntemational Luxembourg S. r.l has
held or cornmits to hold a participation of at !east 10% (or with an acquisition
priee of at lcast EUR 1.2 M fo r dividends and EUR 6 million for capital gain)
in cach above mentioned company for an unintetTupted period of at !east
12 months pursuant to Article 166 of the LITL a11d the Grand Ducal Regulation
of21 Deccmber 2001 for the appl ication of Article 166 of the LITL.

33.

Expenses directly linked to Abbott International Luxembourg S. r.l's exempt

participations in Abbott Lnvestments Luxembourg S. r.1 and Abbott Overseas
Luxembourg S. r.l (mainJy intcrest expenses on Tranche C of the MFA) couJd
be subject to the recapture mechm1ism. Please reter to Enclosure 11 for further
details in this respect.

8.7.2 At the levcl of Abbott Overseas Luxembourg S. r.l

34.

Further to Stcp 4, Step 60A, Step 60B, and Step 62FF of the envisaged
restructuring (please refer to Enclosure 2), Abbott Overseas Luxembourg
S. r.l will hold a 100% participation (total! y equity financcd) in
Abbott Ovcrscas Sub Holding (Cyprus) Limited.

35.

Abbott Overseas Sub Holding (Cyprus) Limited has one of the forms listcd
under Art. 2 of the Parent/Subsidiary Directive and will be subject to corporate
incarne tax in Cyprus.

36.

Accordingly, Abbott Overseas Luxembourg S.r.l will benefit from the

Luxembourg participation exemption regime in Luxembourg for its
participation in Abbott Ovcrseas Sub Holding (Cyprus) Limited with respect to
dividcnds and capital gains detived therefrom, providcd Abbott Overscas
Luxembourg S.r.l has held or commits to hold a participation of at !east 10%
(or with an acquisition priee of at )east EUR 1.2 M for dividends and
EUR 6 million for capital gain) in the relevant above mentioned company for
an uninterrupted period of at !east 12 months pursuant to Article 166 of the
LITL and the Grand Ducal Regulation of21 Decembcr 2001 for the application
of Article 166 ofthe LITL.

37.

The participation in Abbott Ovcrseas Sub Holding (Cyprus) Limited being

flly equity financed at the lcvcl of Abbott Overseas Luxembourg S. r.l, the
recapture mechanism wi ll not apply.

(6)

38.

Please refer to Enclosure 11 for further details in this respect.

8.7.3 At the level of Abbott Iovestments Luxembourg S. r.l

39.

Further to Step 16 to Step 57 and Step 63 to Step 73 of the envisaged

restructuring (please refcr to Enclosure 2), Abbott lnvestments Luxembourg
S. r.l will hold participation in CFCs.

40.

Provided that conditions of Article 166 of the LTTL and the Grand Ducal
Regulation of 21 December 2001 for the application of Article 166 of the LITL
are fulfilled, Abbott lnvestments Luxembourg S. r.l will benefit from the
Luxembourg participation exemption regime in Luxembourg for its qualifying
pruiicipations in CFCs with respect to dividcnds and capitaJ gains derivcd in
relation to its qualifying pru1icipations.

41.

Expenscs directly linked to Abbott lnvcstmcnts Luxembourg S. r.l's exempt

participations in CFCs would be subject to the recapture mechanism.

42.

Pleasc rcfer to Enclosure li for further details in this respect.

8 .8 Dcbt-to-eq uity ratio of L ux S. r.ls for the financing of theil- participations

43.

lt is the practice of the Luxembourg tax authorities to accept th at participations

held by Luxembourg companics arc financcd by intra-group debt up to 85%.
Other asscts may be full y finru1ced by intra-group debt.

44.

Please note that the Luxembourg thin capitalization rulcs will be respected at
the levcl of the Lux S. r.ls.

8.9 Functional currcncy

45.

The accounts and the share capital of the Lux S. r.ls will be denominated
in USD.

46.

furthennore, USD will be the functional currency of the Lux S. r.ls for tax
pwposcs as from the date of their incorporation for a period of at !cast
10 years. This implies that their tax returns will be established on the basis of
the ycarly net profits convet1ed into EU R by using the year-end market
EUR/USD rate.

(7)

Taking into account the importance of the above for our client, we would appreciate your
written confirmation ofthe above trcatment.
We remain at your entire disposai should you require any further information.

Wc thank you in advance for the attention you will pay to our rcqucst.
Y ours faithfully,

Razvan Bruno lfrim

Manager

Valry Civilio
Partner

For approval
Le prpos du bureau d'imposition Socits VI
Marius Kohl
Luxembourg,

2009

Enclosures:
Enclosure 1:
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 lnvcstments Luxembourg S.r.l,
Abbott International Luxembourg S.r.l and Abbott Ovcrscas
Luxembourg S.r.l
Analysis of the tax treatment of Lux S.C.S and ofits partners
Articles of association of Abbott Holding Subsidiary (Gibraltar) Limitcd
Luxembourg S.C.S
Article 147 LITL
Status of the Gibraltar compa:nies
Mastcr Facility Agreement
Tax treatment of the Master Facility Agreement
Tax treatment of the reimbursement of share capital of Abbott
Investments Luxembourg S.r.l
Luxembourg participation exemption regime

71ris 1ax agrel.'meru ls based on 1/re fac/s as presemed 10 PrlcewaU!rltouseCoopers Sr/ as at the dme 1/u:

ad~t/ce

was gi1e11 17w

agreemenl u depndenl on specifie focLJ and circumslonces a1rd may nol be appropria/e 10 mwther pany !han 1/w one for h'illdt
prepared This

/eiX

a11,reemenl

'IHIJ

prepared will! on/y tire interes/J of Abbo11 group in mind, and was

1101

ltw~t~

p/anned or carried ou1 m

toniCmplalion of wry use by emy otlrer pany. PricewalerltouseCoopers Srl. Ils par/ners, employees and or agents, neilher owe nor
accep1 any dmy of cure or any responslbillty

10

emy aliter parly, wlrelher in controc/ or in tort {lnclttding wlilrow 1/milalion, nexligen

or breaclr ofs/ahtlory duty) however arising. and sha/1 nol be liab/~ m ri!Spect ofMY loss. damage or expeJISI! of wlralel'er narem! wh/dt
is caused to any otlter party,

(8)

Enclosure 1

Simplified pre-reorganisation structure

Abbott Laboratories
(US)

CFCs
l
1

f-

Ab bou 1lealth
Products [ne.
(Delaware)

Abbotl Ilospitals
Limitcd (Bahamas)

Abbou Univcrsal Lld.

(Delaware)

v~

~'7
tbcria

CFCs
l
1

(9)

r-

Enclosure 2

Restructuring steps and simptificd final structure

A.

Restructuring steps

The relevant steps from a Luxembourg tax perspective arc the following:
Stcp 2: Abbott Labs will incorporate Abbott Jnvestmcnts Luxembourg S. r.l
Step 3: Abbott Health Products lnc. will incorporate Abbott Overseas Luxembourg S. r.l
Step 4: Abbott Overseas Luxembourg S.r.l will incorporate Abbott Ovcrseas Sub Holding
(Cyprus) Limited.
Step 6: Abbott Universal Ltd. will fonn Abbott Holding (Gibraltar) Limitcd.
Stcp 7: Abbott Holding (Gibraltar) Limited will form Abbott Holding Subsidiary
(Gibraltar) Limited
Step 9: Abbott llolding (Gibraltar) Limited and Abbott Holding Subsidiary (Gibraltar)
Lirnited will forrn Abbott Holding Subsidiary (Gibraltar) Limited Luxembourg S.C.S.
Step 11: Abbott Ho1<.1ing Subsidiary (Gibraltar) Limited Luxembourg S.C.S will form
Abbott International Luxembourg S. r.l
Step 14: Abbott Labs will contribute Abbott Universal Ltd. to Abbott HeaJth Products lnc.
Step 16 to Stcp 57: Abbott Labs will contribute E.U/non E.U entities (rcferrcd as "CFCs")
to Abbott lnvestments Luxembourg S. r.l in exchangc for shares.
Step 58: Abbott Labs will contribute Abbott Invcstmcnts Luxembourg S. r. l to Abbott
Health Products lnc.
Step 59A: Abbott Hcalth Products 1nc. will contribute Abbott Hospitals Limited to Abbott
Overscas Luxembourg S. r.l
Stcp 598: Abbott HeaJth Products lnc. wil 1 contribute Abbott Diagnostics International
Limited to Abbott Ovcrseas Luxembourg S. r.l

( 10)

Stcp 60A: Abbott Ovcrseas Luxembourg S . r.l will contribute Abbott Hospitals Limitcd
to Abbott Overseas Sub Holding (Cyprus) Limited.
Stcp 608: Abbott Overseas Luxembourg S. r.l will contribute Abbott Diagnostics
Intemational Lim ited to Abbott Overscas Sub Holding (Cyprus) Limited.
Stcp 61 : Abbott Health Produets lne. will contributc Abbott Overscas Luxembourg S. r.l
and Abbott lnvcstments Luxembourg S. r. l to Abbott Universal Ltd.
Stcp 62CC: Abbott Universal Ltd. will contribute Abbott C.V. to Abbott Ovcrscas
Luxembourg S. r.l
Stcp 62FF: Abbott Overseas Luxembourg S. r.l will contribute Abbott C.V. to Abbott
Ovcrseas Sub Holding (Cyprus) Limited.
Step 63 to Step 73: Abbott Universal Ltd. will contribute others CFCs to Abbott
lnvcstments Luxembourg S.r.l in exchange for shares.
Stcp 74: Abbott Univcrsal Ltd. will contribute Abbott Investments Luxembourg S. r.l and
Abbott Ovcrseas Luxembourg S. r.l to Abbott Holding (Gibraltar) Limited.
Stcp 75: Abbott Holding (Gibraltar) Limited will contribute 1% of Abbott Investments
Luxembourg S. r.l and Abbott Overseas Luxembourg S. r.l to Abbott 1Iolding Subsidiary
(Gibraltar) Limited.
Stcp 76: Abbott Holding Subsidiary (Gibraltar) Limitcd will contributc 1% of Abbott
lnvcstments Luxembourg S. r.l and Abbott Overseas Luxembourg S. r.l to
Abbott Holding Subsidiary (Gibraltar) Limitcd Luxembourg S.C.S.
Stcp 77: Abbott Holding (Gibraltar) Limitcd will contribute 99% of Abbott Tnvestments
Luxembourg S. r.l and Abbott Overseas Luxembourg S. r.l to Abbott l Iolding Subsidiary
(Gibraltar) Limited Luxembourg S.C.S.
Stcp 78: Abbott Holding Subsidiary (Gibraltar/US) Lirnitcd Luxembourg S.C.S. will
contribute 15% and sell 85% of Abbott lnvestments Luxembourg S.r.l and Abbott
Ovcrseas Luxembourg S. r.l to Abbott International Luxembourg S.r.l in exchange for
sharcs and a note payable issued w1der a Master Facility Agreement.
Stcp 79: Abbott Investmcnts Luxembourg S. r.l, Abbott International Luxembourg S. r.l
and Abbott Overseas Luxembourg S. r.l may fonn a Luxembourg fiscal unity. Abbott
International Luxembourg S. r.l will be the parent company.

(li)

At a Jater stage, Abbott Investments Luxembourg S. r.l may rcdeem part of the
outstanding shares hcld by Abbott International Luxembourg S. r.l in cxchange for
(Convertible) Preferred Equity Certificates (refeiTed as "(C)PECs") or Preferred Equity
Certificates (referred as "PECs"). Should it be the case, we will revert to you on the
applicable tax trcatment of such instruments.
Finally, at the same moment as the above mentioned share redemption note that Abbott
lnvestments Luxembourg S. r.l could also grant intra-group loans and therefore would
hold receivablcs towards its subsidiarics.

(12)

B.

Simplified proposed structure of the group

Abbott Laboratories
(US)

Abbott IIcalth
Products lnc.
(Delaware)
Abbott Universal Ltd.
(Delaware)

Abbott Holding
Gibraltar Ltd.
(Gibraltar)

99%

Abbott Holding
Subsidiary Gibraltar Ltd
(Gibraltar)

MFA

---------,
Tranche A :
Tranche B:

Fiscal Unity

Tranche

C:
1
1

(C)PEC/PE~s

Abbott Overseas
Luxembourg Sarl
(Luxembourg)

Abbott Overscas Sub

Holding (Cyprus) Lld
(Cyprus)

(contcmplated)

Abbott lnvestments
Luxembourg Sarl
(Luxembourg)
Receivablcs
(contemplated)

Abbott Hospitals
Limited (Bahamas)

Abbott Diagnostics
International Ltd

(1 3)

Enclosure 3

Articles of association of Abbott Invcstments Luxembourg S. r.l,

Abbott International Luxembourg S. r.l
and Abbott Overseas Luxembourg S. r.l

(14)

Enclosure 4

Analysis of the ta x treatment of Lux S.C.S and of its partners

Pursuant to Article 175 of the LITL and to article 11 bis Loi d'Adaptation, a Socit en
Commandite Simple (hercafter "S.C.S") is not deemed to have a separate tax personality
from that of its partner and is hence considered as transparent fo r tax purposes in
Luxembourg.
An S.C.S is therefore not itself subject to CIT and NWT in Luxembourg, but its partncrs
arc personally subject to tax in respect oftheir part in the profits/unitary value of the S.C.S,
regardless ofwhether such profits are effective! y 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 purposcs of Article 159 of the LITL.
ln the case at hand, the partners of Lux S.C.S, i.e. GibCol and GibCo2 will be nonresident, th us their taxation in respect of their part in Lux S.C.S profits is to be detcrmincd
by following the rules provided in Article 156 of the LITL regarding the taxation of nonresidents.

Absence ofa permanent establishment in f.LtX,embourg - LttX S. C.S 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 trcated as
Luxembourg-sourced incarne, subject to ClT.
According to paragraph 16 of the Luxembourg Adaptation Tax Law, a permanent
establishment is dcfined as a fixed place of business used with a certain degree of
permanence for the exercise of a commercial or industrial activity in Luxembourg.
ln the framework of the Abbott's group rcstructuring, GibCo 1 and GibCo2 will contributc
the participations in Abbott Overseas Luxembourg S. r.l and Abbott lnvestrnents
Luxembourg S. 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. 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 lirnited period of time, a participation in Abbott
Ovcrseas Luxembourg S. r.l and Abbott Investments Luxembourg S. r.l. This will not
impact the analysis regarding the Luxembourg tax treatment (both for C IT, 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. r. l as weil as the management of the MF A.
Lux S.C.S could also hold a currcnt account with a Dutch entlty from the group
exclusivcly for the payment of the operational expenscs of Lux S.C.S.
Lux S.C.S will not have any office spacc, equipment or any other tangible presence in
Luxembourg. lt will have no employees.
GibCo 1 and GibCo2 will not be eonsidered to have a pennancnt cstablislunent in
Luxembourg for the activities carried out by Lux S.C.S and tberefore will not be subject to
CIT, MBT and NWT in Luxembourg. Under the same cireumstances, 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 withholding tax exemption in Luxembourg if the
following conditions are met:

The distributing company is:

- A Luxembourg resident collective entlty, wlch is fully taxable and takes one of
the fom1s Jisted in the Enclosure to the paragraph 10 of article 166 LITL;

The entity receiving the dividends is:

- A collective entity falling und cr article 2 of the amendcd version of the Council
directive of 23 July 1990 on the common system of taxation applicable in the
case of parent compani es and subsidiaries of different Mcmber States
(90/435/EEC, hereafter the "Parent 1 Subsidiary Directive"); or
-

A Luxembourg resident joint-stock company, which is fully taxable and docs

not take one of 1e fonns listcd in the above-mentioncd Enclosure; or

A collective entity that is resident in a Statc with which Luxembourg has

concludcd a double tax treaty and which is fully lia.ble to a tax corresponding to
the Luxembourg corporate incomc tax, or a domestic permanent 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 avai lable, the bcneficiary has been holding or
undertakes to hold, dircctly, for an uninterrupted period of at !east 12 months,
a participation of at !east 10%, or with an acquisition priee of at !east EUR 1.2 million in
the share capital of the income debtor. If the participation is held through a tax-transparent
cntity falling und cr 1 of article 175 UTL, this will be regarded as a direct participation,
proportionally to the intcrest held in the tax-transparent entity.

( 18)

Enclosure 7

Status of the Gibraltar Companies

ln the case at hand, il needs to be determined if from a Luxembourg perspective,
a company incorporated under the law of Gibraltar is to be considered as falling under
Article 2 of the Parent/Subsidiary Directive and thercfore if it can benefit from the
participation exemption providcd for by Articles 147 and 166 LITL.
Article 227(4) of the treaty establishing the European Economie Communily (the "Treaty'')
cx pressly providcs that the provisions of the Treaty shall apply to the European territ01ies
for whosc externat relations a Member State is responsible.
The Govemment of the United Kingdom is responsiblc for Gibraltar's extemal relations.
Th us, the treaty should apply to Gibraltar, as established at the ti me of the accession of the
United :Kingdom to the European Economie Community on January 1s', 1973.
Gibraltar was howevcr expressly excluded from the scope of application of European
Union regulations rclating to agricultural matters, value added tax hannonization and
custom union pursuant to article 28 of the accession trealy. No othcr exclusion was
mentioned. Therefore, all other regulations from the European Union should apply to
Gibraltar.
ln a letter dated January 22, 1999 (a copy of which is also encloscd in this Enclosure 7),
the European Commission confinned that E-U directives apply to Gibraltar: "/ confirm that
Gibraltar, according to tite provisions of article 227 paragraph 4 of the EC treaty, is
a European State whose foreign. reLations are asswned by the United Kingdom.
Accordingly, lax directives 90/434, 90/435, 69/335 and 85/303 are applicable to it".

One could argue thal in addition to such confinnation it would be ncccssary to check
wbcther Gibraltar comparues are referrcd to under article 2 of the Council Directive
90/435/EEC dated July 23, 1990.
Gibraltar companies arc not expressly mcntioned in article 2 of the Council Directive
90/435/EEC dated July 23, 1990. However, we w1dcrstand that they are eovered by the
provisions of the Directive, given the confinnation issued by the European Commission
and the following:

Article 2 of the Council Directive 90/435/EEC refers to "companies incoll>Orated

under the laws of United Kingdom";

(19)

The United K1ngdom Foreign and Commonwealth Office issued on

November 17, 1988 a lettcr rcgarding the status of the Gibraltar companies
vis--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 cmmtries and
territories" whencvcr used in the BEC Treaty arc to be understood to refcr to, inter
alia, British Dependent Territories Citizcns who acquire citizenship fiom
connection with Gibraltar;

The United Kingdom considers comparues incorporatcd 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 ilS
corporation tax for the purpose of article 2(c) of the Council Directive
90/435/EEC 1

Thcrefore, GibCo 1 and GibCo2 will be considered as covered by article 2 of the

Council Directive 90/435/EEC dated July 23, 1990.
Plcasc 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, whicb "according
to the tax laws of a Member State is consideree/ to be resident in thar State for tax
purposes and, under the terms of a double taxation agreement conc/uded with a thire/
State, is not considereclto be a resident for tax purposes oulside the Community".
GibCo 1 and GibCo2 will meet the rcquirements established in the Directive, since they
will be residents in Gibraltar for tax purposes.
Under the Gibraltar incarne 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 pcrsons ordinarily
resident within the meaning of the Ordonance.
The Commissioner of CIT will presume that a company incorporatcd 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 accordancc with UK precedent as decidcd in De Bccrs
Consolidated v Howe (1 906) (i.e. control lies with the head and mind of a company).
''EC corporale tax law. Commcntary on the EC Direct Tax Mcasun.:s and Mcmbcr States Implementation, 4,
Territorial scopc", 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 pUI-pose of Articles 147 and article 166 of the LITL.

(21)

Enclosure 8
Master Facitity Agreement

(22)

Enclosure 9

Tax treatment of the Master Facility Agreement

Description of the MFA

A MF A is a multi-purposc facility agreement under which funds are made availablc in

different tranches dcpcnding on the purpose for whch the funds will be used. As far as the
MFA bctween Luxembourg SCS and Abbott lnternational Luxembourg S..r.l is
concerned:

"Tranche A" will finance in priority the asscts of Abbott International Luxembourg
S.r.l (borrower in the MF A) other than () the sharcholdings eligible for the
Luxembourg participation exemption (ii) the assets (Joan receivables) denominated
in a currency other than USD and which arc financed by Tranche B, corTesponding
mainly to the USD ntra group receivables; and

"Tranche B" will finance the assets (loan receivables ) denominated in a curreney
other than USD,

"Tranche C" will finance the sharcholdings qual ifying for the Luxembourg
participation exemption held by Abbott International Luxembourg S..r.l as dcfincd
in article 166 LITL and the Grand-Ducal Dccree of21 December 2001 in execution
to Article 166 of the LITL.

Since Abbott International Luxembourg S.r.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 thcse transactions. This net remuneration will rcduce the intercst
paid to Lux S.C.S under the MFA.
The Tranche C of the MFA will bear an ann's length fixed intcrest rate of 7. 6573%
caleulated on the principal average amount allocated to this tranche.

Financial on-lending activity

As mcntioned abovc, further to the rcstructuring, Abbott International Luxembourg S.r.l

will be deemcd to be in a financial on-lending aetivity.
Depending on the amounts of Tranche A and B of the MF A and taking into account the
fcaturcs and conditions of the Tranche A and B of the MFA, wc will revert to you in arder
to determine the appropriate and acceptable profit with respect to Articles 56 of the LfTL
and 164 (3) of the LITL (aftcr deduction of ail the charges incurred by Abbott lntemational
Luxembourg S.r.l) to be earned by Abbott International Luxembourg S.r.l..

(23)

Should the total amounl ofTranche A and B for the first year exceed EUR 1,250 Mio, an
acceptable level of taxable spread will be 0,03 125% of the sum of the Average Gross
Financial Assct Amount and the Average Foreign Asset Amount.
The acceptable leve! 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 loans and receivables incrcasc significantJy, the spread
could decrease, conversely if the principal amounts of the Joans and receivable in the
financial on-lending activity decrease significantly, the spread could increasc).

(24)

Enclosure 10
Tax treatment of the potential rcimbursement of sb are capital of Abbott
Investments Luxembourg S. r.l
A.

At the level of Abbott Investments Luxembourg S. r.l

At a latcr stage, Abbott Investments Luxembourg S. r.l may redeem part of the
outstanding sharcs held by Abbott International Luxembourg S. r.l in exchange for (C)
PECs or PECs.
Article 97 ( 1) of the Luxembourg Incomc Tax Law ("LITL") states that ail dividcnds,
profit sharings and ether allocations granted under whatever fo1m, in respect of sharcs,
profit sharcs or ether participations of whatcver nature in collective cntities as mentioncd
in articles 159 and 160 LITL, are considered income from capital. Article 146 ( 1), 1 LITL
re fers (among others) to article 97 (l ), 1 UTL in order to dctcrmi ne the income that is
subjcct to withbolding tax in Luxembourg.
Article 97, (3) b) L!TL provides for an exception to article 97 ( 1) LITL in stating that the
procccds allocatcd at the occasion of the reduction of the sharc capital (the rcimburscment
of share premium bcing assimilated to a reduction of share capital) and conesponding to
contributions of the shareholders are not deemcd to constitutc income from movable
property. Such reimbursemcnt of sharc capital would however be taxable up to the amount
of rctaincd eamings incorporated into the share capital, as such rctaincd eamings would be
dcemed distributed first. Furthennore, the reduction of share capital will also be taxable if
it is not motivated by serious economica[ reasons. According to the Administrative
Practice Note, if a company disposes of rctained earnings that it docs not want to distribute
to the sharcholders, the rcimbursemcnt of sharc capital is not motivatcd by scrious
economical rcasons. Legitimate economie reasons may also not be available in case the
reimburscment of the share capital wou id rem ain outstanding.
Accordingly, if undcttaken, this reduction of sharc capital will not be subject to
withholding tax in Luxembourg provided that Abbott Investments Luxembourg S. r.l will
not have any rctaincd eamings at the beginning of the cutTent financial year in which the
reduction of share capital will be held. In the contrary case, such reimbursement of share
capital will be rc-qualified as a dividcnd distribution (up to the amount of retained earnings
incorporatcd into the share capital of Abbott lnvestments Luxembourg S. 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. r.l will comply with the minimwn
threshold and holding pcriod requirement provided by article 147 LITL (please refer to
Enclosure 6).

(25)

B.

At the level of Abbott International Luxembourg S. r.l

According to article 10 LITL, "Are only being considered for the determination of the total
net income [ ... ]:
1. Conunercial profits,
2. Agticultural and forestry profits,
3. Profits from the cxercise of a liberal profession,
( ...)

6. Net incarne deriving from movable property,

( ...)

8. Other net income specified under article 99 LITL"

The listing of article 10 LlTL is restrictive. The profits and income not affcctcd by n 1 to 8
[of the above list] benefit fTom a so-called "material" exemption.
ln the event the movable property would be part of the net assets invested in an enterprise
or an exploitation as asscts invested by destination (notwendigcs Betriebsvermgung) or
by option (gewillk:rtes Betriebsvcnngung), the related income would be taxable as
commercial profit, agriculturaJ 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 10 LlTL finds its legal foundation in article 97 (4) LITL.
According to the preparatory works to the Luxembourg Incornc Tax Law (commentarics to
the proposed article 114 (now article 97 LITL)), the income dcrived from one of the thrcc
first categories of revenue as listed under article 10 LITL is subject to its respective own
ru les for the determination of profit. This pri111ciplc is also laid down in article 97 (4) LITL
which states that insofar an incorne rcfcrred 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 goveming the detennination of the said profit, it shall be
taxable in the rclated net income category.
ln the case at hand, taking into consideration the nature of the activities to be perfonned by
Abbott International Luxembourg S. r.l and the fact that "the movable property" will be
part of the net assets invested of Abbott International Luxembourg S. r.l, movablc incomc
to be received by Abbott Lnternational Luxembourg S. r.l will be considcred as
commercial profits as envisaged by article 14 LITL and will be taxed as such.
Consequcntly, the general principlc of article 40 LITL ("thorie de /'accrochement du
bilan fiscal au bilan comptable") will apply. Therefore, the tax trcatmcnt of an
operation/item involving income covercd by article 97 LJTL will follow the applicable
accounting trcatment of this operation/item.

(26)

Abbott International Luxembourg S. r.l will record in its statutory accounts, further to the
rcimbursement of share capital (the reimbursement of share premium bcing assimilated to
a reduction of sharc capital) fiom Abbott lnvcstmcnts Luxembourg S. r.l, a dccrcase of
the acquisition costs of its shareholding in Abbott lnvestments Luxembourg S. r.l and a
corrcsponding incrcase of assets (c.i., receivable). This transaction will not have any
impact on the profitlloss account and will not result in the realization of any profit.
Conscquently, this rcimbursement of share capital will not trigger any impact from
a Luxembourg tax perspective.
In the case retained carnings would have becn incorporatcd into the sharc capital of Abbott
Invcstments Luxembourg S. r.l, such reimbursement of share capital will be re-qualificd
as a dividcnd distribution (up to the amount of retaincd eamings incorporated into the share
capital of Abbot1 fnvcstments Luxembourg S. r.l).
Accordingly, Abbott International Luxembourg S. r.l will benefit from the Luxembourg
participation exemption regime in Luxembourg for its qualifying participations in Abbott
lnvcstments Luxembourg S. r.l with respect to dividends derivcd in relation to its
qualifying patticipation, provided that the conditions of Article 166 of the UTL are
fu) fi lied.

Pl case rcfcr to Enclosure 11 for furthcr details in this respect.

(27)

Enclosure 11
Luxembourg participation exemption regime
A.

Dividend income

Article 166 of the LITL provides for the exemption of the dividends
conditions are fu(filled: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 tl1e Enclosure to the paragraph 10 of article
166 of the LITL; or
-

A non-resident capital company tbat is full y liable in its state of residence to a

tax corresponding to the Luxembourg corporate income tax. Regarding this
condi tion, the Luxembourg tax authorities have set the rule that the foreign tax
must be assesscd at a minimum rate of l 0,5% on a taxable basis detem1ined
similarly to the Luxembourg one;

and

The bcneficiary company is:

- A Luxembourg resident collective entity, which is fully taxable and takes one

of the fmms listed in the Enclosure to the paragraph 10 of article 166 of the
LITL; or
- A Luxembourg resident capital company, wbich is fully taxable and does not
take one of the fonns listed in the above-mentioned Enclosure; or
- A domestic permanent establishment of a collective entity falli ng under article
2 of the arnended version of the Council directive of 23 July 1990 on the
common system of taxation applicable in the case of parent companics and
subsidiaries of different Member States (90/435/EEC); or
- A domestic permanent establishment of a capital company th at 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 Econom ie Arca (EEA) Mcmbcr State
other than a EU Member State.

(28)

And
- At the date on which the income is made available, the bcneficiary hcld or
unde1takes to hold, direct! y, for an uninterrupted period of at !east 12 months a
participation in the share capital of the subsidiary of at !east 10% or with an
acquisition priee of at !east EUR 1.2 million. ff the participation is held through
a Luxembourg tax-transparcnt cntity, this will be rcgarded as direct
participation proportionally to the interest held by the Luxembourg holding
company in the tax-transparent cntity.

A ftuthcr bene'fit of the system by comparison with the one applicable in other
countries is the ability to deduct related ex penses (e.g., interest charges incurred in
financing the shares). Neverthelcss, expenses incurred during the year in which a
dividend is rcceived and which are coru1ccted to the exempt participation may only be
deducted insofar as they exceed the exempt dividend for the year in question.
Additionally, if a writc-down in the value of the participation has been booked as a
consequence of the distribution of dividcnds, this write-down will not be deductible up
to the amou nt of the exempt dividend.

B.

Capital gains
The Grand-Ducal dccrcc of21 Deccmber 2001 fo r the application of Article 166 of the
LITL providcs that capital gains realized from the disposai of sharcholdings are tax
exempt if:
The subsidiary is:
- A collective entity falling under article 2 of the amendcd version of the Council
directive of23 July 1990 on the common system of taxation applicable in the case of
parent corn panics 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 Jisted in the Encloswe to the paragraph l 0 of article 166 of the
LITL; or
- A non-resident capital company that is full y liable in its statc of residence to a tax
corresponding to the Luxembourg corporate incorne tax. Regarding this condition,
the Luxembourg tax authori.ties have set the rule that the foreign tax must be assessed
at a minimum rate of 10,5% on a taxable basis determined similarly to the
Luxembourg one;
The beneficiary company is:
- A Luxembourg resident collective entity, which is full y taxable and takes one of the
fonns listcd in the Enclosure to 1c paragraph l 0 of article 166 of the LITL; 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 ofthe Council directive of23 July 1990 on the common system
of taxation applicable in the case of parent companies and subsidiarics 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 concludcd a double tax treaty;
A domestic permanent establishment of a capital company or of a cooperative
company which is resident in a European Economie Area (EEA) Member State other
than a EU Mcmber State.
And
- At the date on which the alienation takes place, the bcncficiary has hcld or
unertakes to hold the respective participation for an uninterrupted period of at !cast
12 months, and during this period the participation held does not fall below 10% or
an acquisition priee of Jess than EUR 6 million. If the sharcs are hcld through a
Luxembourg tax-transparent entity, this rcquirement must be fulfillcd 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, undcr which the exempt amount of the gain is reduccd by
the algebraic sum of income (mainly derived from the participation and potcntial writedowns in the value of the participation), to the extent that they have reduced the taxable
base of that ycar or prcvious ycars. Basically, an cffcct of this rule is that the capital
gain realized will become taxable up to the amount of the aggregate cxpenses 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
dcductibility of expenses and write-downs connected to the participation was allowed
whcrcas the income arising from the participation was tax exempt.

(30)

Enclosure 2
Simplitied proposed structure of the group
Abbott Laboratories
(US)

Abboll Uealth
Products Lnc.
(Delaware)

Abbott Unlversal Ltd.

(Delaware)

Abbott Holding
Gibraltar Ltd .
(Gibraltar)

MFA

--------.,
TrancheA :
Fiscal Unity

Tranche 8 :
Tranche C

CPECs
Abbott Overseas
Luxembourg Sarl
(Luxembourg)

Abbott lnwstments
Luxembourg Sarl
(Luxembourg)

Abbotl Overscas Sub

Holding (Cyprus) Ltd
(Cyprus)

CFCs

(5)

Enclosure 3
Draft version of the CPEC agreement

(6)

Abbott Investments Luxembourg S. r.l.

Socit responsabilit limite
Share capital: USD 44,989,000
Registercd office: 26 boulevard Royal, L-2449 Luxembourg
R.C.S. Luxembourg: B 144.635

AUTHORIZATION FOR
CONVERTIDLE PREFERRED .EQU lTY CERTIFICATES
Series A
The Board of Managers and the sole shareholder of Abbott Investments Luxembourg S. r.l., a
socit responsabilit limite (Luxembourg private limited liability company) (the Company),

with registered office at 26 boulevard Royal, L-2449 Luxembourg, duly registered wi1 the
Registre de Commerce e t des Socits (Luxembourg Trade and Companies Register) under the

number 8 144.635, have authorized the issue and sale of up to 3,698,638 Series A Convertible
Preferred Equity Certiticates (each a Series A CPEC and toge1er the Series A CPECs)
governed by the following tcrms 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 distri butes a dividend with respecr
to its Sharc Capital in an amount in excess of the Pcnnittcd Dividends and such excess is composed
of an in kind distribution of Shares; (i i) 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 Sbares in exchange for cash or propcrty
with an issue priee per Share that is Jess than the Fair Market Value per Share immediately prior to
such issuance.
Aftliate means, as to any Person, any othcr Person having control of, controlled by, or under
common control wiU1, such first person, and for this purposc, "control" of a Pcrson means U1e
direct, indirect or beneficiai ownership of (i) 100% of the outstanding stock or comparable cquity
interest in the person as measured by the ability to elect the board of directors, managers, trustees or
other controlliog Persons of such person and (ii) 100% of the outstanding stock or comparable
equity interest in the Person as measured by value.
Applicable Rate mcans the Fixed Rate Yield.
Board of Managers means the board of managers of the Company or, as long as therc is only one
appointed manager, the sole manager of the Company.
Business .Days means ali of the da ys in a calendar year in which banks in the City of Luxembourg
are open for ordinary business.
Company means Abbott lnvestments Luxembourg S. r.J.

Conversion Date means the date speci ficd by the Company for conversion of U1e Series A CPECs
into Sharcs.
Conversion Shares means 0.009972339 Shares, whieh 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 Adjustrnent Event the nurnber of Conversion Shares shall be
adjusted in such manner as is necessary in order that, after such adjusnnent:
the nurnber of Conversion Shares per Series A CPEC will carry (i) as nearly as possible (and
in any event not Jess tban) the same proportion (expressed as a perecnlage of tbe total
numbcr of votes exereisable in respect of ali the Shares) of the voles as immediate! y before
the Adjustment Event; and (ii) the samc cntitlcment to participate (expressed as a percentage
of the total entitlcmenl eonferred by ail the Sbares) in the profits and assets of the Company
as immediately before the Adjuslment Event;
the total Repurehase Priee will be the same as it was immediately bcfore the Adjustment
Event; and
cach Sharc rcceived as a rcsult of a conversion of Series A CPECs shall carry a share
premium cqual to the Par Value of the Series A CPEC(s) eonverted minus the par value of
the Share(s) reeeived in exchange.
ln calculating the aggregate entitlement to Conversion Shares, entitlemcnts to a fraction of a
Conversion Sharc will be rounded down to the nearest whole Conversion Sharc.
CPEC Registcr mcans the regis ter and trans fer book maintained by the Company in respect of the
Series A CPECs.
Extraordinary Event means a disposai at fair market value of a substantial amount or all of the
assets directly hcld by the Company, including such disposais to an Affiliate or other related
person.
Fair Market Value means the value of a Share, calculated on a Fully Dilutcd Basis, as determined
by an indcpcodent appraiser agreed to by the lssuer and the Holder(s) by utilizing any reasonable
valuation methodology based on arm's length principles. In the event of no agreement on the
nomination of 1is independent appraiser, this expert shall be nominated at 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 mcans the accounting ycar of the Company as provided for in 1e Company's
articles of association.
Fixed Rate Yicld mcans 1% of the Par Value of the Series A CPEC per annum.
Fully Diluted Basis in the expression "on a Fully Diluted Basis'' means taking into accounl an
aggregate nurnber of shares in the Company eomputed on the basis of 1e assumption thal ail the
shares of the Company to wbich any existing CPEC and/or any other convertible instrument may
give access shall have bcen issued.
Ho!der means a holdcr of an outstanding Series A CPEC, as recordee! in the CPEC Register.

lnsolvcnt means (i) that the aggregate a mount of the Company's obligations cxceecls the fair market
value of the Company's assets or (ii) if the Company is no longer in a position topa y for its debts as
they become due and the Company is no longer creditworthy.
Issue Date means Dcccmber 1, 2009, being the date of issuance of Series A CPECs to the
llolder(s).
Par Value means, in relation to one Series A CPEC, USD 1,000.
Paymcnt Date means, in relation to any Paymcnt Period, the date 60 da ys after the end of such
Paymcnt Period.
Payment Period mcans, for as long as the Series A CPECs remain outslanding, the Financial Year
of the Company, cxccpt as follows:
1.
the Paymcnt Period for the year of issuance shall mean the period begillllng on the Issue
Date and ending on the last day of the Financial Year including the Issue Date; and
11.
the Paymcnt Pcriod for the year of conversion, redemption, or rcpurchase shall mean the
period bcginning 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 1e Sharcs that satisfics lhe restrictions set forth m
Article 6 hereof.
Person means any individual, corporation, company, association, partnership, joint venture, trust,
unincorporatcd organisation or govemment (or any agency, instrumentality or political subdivision
thereof).
Record Date means, in relation to any Payment Pcriod, the last Business Day in thal Paymcnt
Period.
Rcpurchase Date means the date specified by the Company for the repurchase of the Series A
CPECs.
Repurchase Priee means, al any lime, in respect of one Series A CPEC, the amoum obtained by
rnulliplying the Fair Maikct Value per Share as at the relevant Retirement Date, by 0.009972339
(i.e. the oumber of Conversion Shares per Series A CPECs), as adjustcd as providcd hcrein for any
Adjustmeot Event.
Retained Earnings mcans the retained eamings of the Company determincd on an unconsolidated
basis in accordancc with generally acceptcd accounting principles as in effect from time to timc in
Luxembourg consistent wi1 the poli ci es and practices of the Company.
Retirement Date meaos the date of the repaymcnt of ilic Series A CPECs whcther by way of
conversion, redemption or repurchase.
Senior Obligations means ali present and future obligations of the Company, whethcr secured or
unsecured, other than the Subordinated Securities and the Series A CPECs.
Sharc means a voling ordinary sharc having a nominal value of USD 1,000 in the Share Capital.

Sharc Capital mcans the ordinary sharc capital of the Company.

Subordinated Securitics mcans ali the outstanding shares of Lb.c Share Capital from timc lo lime:
provided thal the Series A CPECs (including any other series of Series A CPECs) shall not
constitute Subordinatcd Securities.
ln the construction of 1csc Tcrms and Conditions words delined in the plural shaH aIso imply the
singular and vice-versa.

ISSUE

1.1

Pursuant to the resolutions of the Board of Managers and according to these Tenns and
Conditions, the Company issues the Series A CPECs in an aggregate amount of USD
3,698,638,000 to Abbott International Luxembourg S..r.l on the Issue Date in
consideration for the cancellatioo of U1c Shares bcld by Abbott International Luxembourg
S. r.l. in the Company, baving the same value.

1.2

The Series A CPECs shall be comprised of 3,698,638 Series A CPECs wilh a Par Value
of USD 1,000 each.

1.3

The Series A CPECs sball be issucd by the Company to the Holder as of the Issue Date,
and sball remain outstanding for a term of 30 years, unless earlicr redeemcd, repurchased
or converted pursuantto these Tcrms and Conditions.

YlELD

2. 1.

Each Series A CPEC shall carry the right to reccive a yield payable by the Company in
respect of any Paytnent Period of an amount cqual 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 numbcr of days in such Payment Pcriod and the denominator sball be 365
(the Yield).

2.2.

The Yield shall be payable on each Payment Date to the Holder only to the extent
dcclared by the Board of Managers and only to the extent of the existence of Retained
f3arnings of the Company (determined beforc accrual of the Yield on this or othcr similar
instruments thal the Company may issue) as of the close of the last Payment Pcriod
preccding such Payment Date and provided lhat Lb.c Company would not become
lnsolvent as a rcsult of the paytnent of such Yield.

2.3.

Any Yield in arrears for any Payment Period may be declared by the 13oard of Managers
lo 1e cxtcnt of the existence of Retained Earnings of the Company (as computed prior to
1c accrual of any acerued yield on this or otber similar instruments that U1e Company

may issue and paid on any date speeified by the Board of Managers), whether or not a
Payment Date, to those Holdcrs wbose names appear in the CPEC Rcgister on the
relevant Record Date; provided thal the Company would not become lnsolvent as a resull
of such paytncnt. Any such paYJnent shall first be applied against any arrears of Yicld
(ta king carl ier arrears before later ones).

2.4

So long as no Event of Default (as defincd herein) has occurrcd and is continuing, the
Company may clect 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
Sharcs having an aggregate Fair Market Value equal to the portion of the Yield to which
the election relates. The shareholder(s) by signing these Terms and Conditions undertakc
to vote in favour of the issuance of new Shares Lo the Ilolder(s) and of the increase of the
share capital of the Company in any extraordinary general meeting of the sharebolder(s)
of the Company that could be held in 1e future in order to reflect the payment of the
Yield as from time to ti me detennincd by the Board of Managers in accordance with this
section 2.4, and shall cause any transferee or successor to do so, among othcrs, by not
transferring any Shares without the transferee baving signed and agrccd to tbesc Tenus
and Conditions, as weil as having delegatcd to the Board of Managers the powers
necessary hereundcr.

REDEM PTION
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 accordancc wiili
these Terms and Conditions. Prior to the redemption of ilie Series A CPBCs, no Person
sball have any righi, power, privilege or ability to demand, sue for or otherwise make
clairns in respect of, 1e acceleration, redemption or calling of ali or any part of the Series
A CPECs.

3.2

Mandatory Redemption. On the 30th annjvcrsary of the Issue Date, the Company shall
redeem ali outstanding Series A CPECs for cither (x) an amount of cash pcr Series A
CPEC equalto the Repurchase Priee (provided thal the Company would have sufficient
funds available to settle its liabilities undcr ali Senior Obligations lhcn 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. ln the event of any volunlary 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 Priee or (y) for the number of Conversion Shares, adjusted as provided herein
for any Adjustment Event, at the sole discretion of the Company. Such payment shall be
made bcforc any paytuent by the Company in respect of the Subordinatcd Sccurities but
after paytncnt of ali otbcr obligations of U1e Company and only to the extent the
Company would not become Insolvent as a rosult 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 ilian 50% of the issued and outstanding Series A
CPECs unless the amount due on each Series A CPEC in respect of thal voluntary
Liquidation can be fully providcd for.

3.5

In accordance with the articles of association of the Company, the consent of a majotity
of the shareholders represcnting 75% of the Company's share capital is necessary to
decide a voluntary Liquidation.

3.6

Any Liquidation payment due in respect of any Seties A CPEC shall be made to the
Holders of Series A CPECs wh ose names appear on tbe CPEC Register on the date of the
Liquidation (for the avoidancc of doubt sucb tenn shall not include bankruptcy or
assimilatcd insolvency events and procedures).

CONVERSION
4.1

Conversion Right. At any time beginning on the 3'11 anniversary of the Issue Date
(including the date of maturity or the date of Liquidation) or, if earlier, upoo the
occutTence of an Extraordinary Event, (i) the Company shall be entitlcd to elect to
convcrt Series A CPECs, in whole or part, into Shares by requiring any Bolder Lo
exchange each such Series A CPEC for the number of Conversion Shares, as adjustcd as
a resull of an Adjustment Event, and (ii) any Holdcr shall be entitled to elecl to couvert
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 Sbarcs, as adjusted as a result of
an Adjustment Event. If an election by the Company is made to convert fewer than ali of
the Series A CPECs, the conversion shaH be pro rata as to ali Holders of the Series A
CPECs.

4.2

Conversion by the Company. Not Jess than 10 Business Days prior to the Conversion
Date, the Company shall provide written notice of its intention to couvert the Series A
CPECs to each Holder of record of the Series A CPECs at such Holder's address as
rccorded in the CPEC Register, but no failure of or defect in such notice shall affect the
validity of the conversion. Bach such notice shall state:
1.

u.
tH.

1v.

the Conversion Date;

the adjustmcnt, 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 Sbares; and
that the Series A CPECs to be converted will cease to accnte Yield as of the
Conversion Date provided that the Conversion Shares are issued to the Holdcr by
the Company on that date.

4.3

Conversion by Holders. Any Holder roay give written notice to the Company of its
intention to convert Series A CPECs into Shares. A Conversion Date sball then be
est.ablished by the Company which shall not be Jess than 10 Business Days nor more than
30 Business Days after the receipt of sucb notice by the Company. The conversion will
in this case apply to thosc Series A CPECs in respect of which an election to convert has
been cxprcssed.

4.4

On tbe 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). Proro and after the Conversion
Date (unless the Company shall default in issuance of the Conversion Shares), the Series

A CPECs surrendered for conversion shall no longer be outslanding and the llolders of
such Series A C'PBCs shall have no rights or obligations in respect lhereof.
4.5

The sharcholder(s) by signing these Terms and Conditions undertake to, and shall cause
any transferees or successors to, vote their sharcs in a manner and to take whatever other
steps arc occcssary, and the Board of Managers hercby undertakcs to execute whatcvcr
steps may be rcquircd, under applicable corporate law for the issuance of the Conversion
Shares pursuant to this Agreement; it bcing understood thal if a Holder is not also then a
sharcholder of the Company, such Holdcr cannot be issucd such Conversion Sbares
without the prior approval of the shareholdcr(s) represeoting -x of the share capital.

REPURCIJASE
5.1.

At any timc beginning on the 3'd anniversary of the Issue Date or, if earlier, upon the
occurrence of an Extraordinary Event (but then only to the extent of the procecds of such
event), me Company may elect to repurchase the Series A CPECs, in whole or part, in
cash at a priee per Series A CPEC equal to the Repurchase Priee. Any such election shall
be in lie1.1 of the Company's right to convert the Series A CPECs into Shares; provided,
howevcr, thal any such repurchasc may be carried out only to the extent the Company
will have suflicient funds available lo settlc its Jiabilities under ali Senior Obligations
then outstanding and the Company will not become lnsolvcnt as a result of such cash
payment. A repurchase shall be pro rata as to ali Holders of Series A CPECs.

5.2.

The Company shall give notice of any repurchase of Series A CPECs not Jess tban 10
Business Days before the Repurchase Date to each Holder of record of the Series A
CPECs al such lloldcr's address as rccordcd in the CPEC Register, but no failure or
defcct in such notice shall affect the validity of the repurchasc. Each such notice shall
statc:
1.
the Repurchase Date;
11.
the Repurchase Priee; and
111.
the place or places where Series A CPECs are to be surrendered for delivery of
the Repurchase Priee.
The Series A CPECs to be repurchased will cease to accrue Yield as of the Repurchase
Date provided thal the Repurchase Priee is paid on that date.

5.3

Notwithstanding anything to the contrary in thcse Terms and Conditions, the Company's
righi to repurchase any Series A CPEC shall be subject to each Holder' s conversion righl,
provided thal such Holder notifies the Company of its election to convert no laler than 5
days after receiving notice ofrepurchase from the Company.

PERMJTTED DIVIDENDS
6.1

Except as provided in this section 6.1, dividcnd paymeots from 1e Company to its
sharebolder(s) shall be permitted (Permitted Dividends). So long as any of the Series A
CPECs are outstanding:
6.1.1

no dividends may be paid by the Company on the Sharcs if thcrc bas been an
Event of Dcfault (as defined hcrcin) and wbilst it is continuing;

6.1.2

The aggregate amount of dividends declarcd on each Sbare during any Paytnent
Period shall not excecd an amount equalto U1e cxcess (if any) of:
(a) the quotient of (i) the aggregate Yield paid with respect to each Series A
CPEC since tf. lc;sue Date to the end of such Paytnenl Period divided by (ii)
the number r
~.:;ion Shares pcr Series A CPEC during the relevant
pcriod, ovcr
1

(b) the aggrr

Date to

<~rcd

cornpo

on each Sbare since the Issue

Jing Paytnenl Period (wilh this
.2ayment Period for the year of

issua
6.1.3

no dividends m..~
the Series A CPECs.

lhcrc is accrued bul unpaid Yield on

COlu>ORATE CHANGES
7.1

So long as any of the Series A CPECs are outstanding, the Company shall not, withoul
the consent of ali llolders of the issucd and outstanding Series A CPECs:
7.1.1

purchasc, redcern or retire in any manner any of ils Sbarcs or otherwise redu cc ils
issued or stated capital in respect of its Sharcs or make any othcr distribution of
its assets, or set aside any of ils assets lo make any distribution, to ils
shareholders other than to make a Permitted Dividend;

7. 1.2

convert, exchange, reclassify, redesignate, subdivide, consolidale or othcrwisc

makc any change of or to any of its Sbares or any other shares in its capital or
amend any right, privilege, restriction or condition attacbed thcreto;

7.1.3

issue any Shares (other than the Conversion Sbares) or any othcr shares in the
capital of the Company including making any allotmenl of, or the issuance or
granting of any option, right or warrant to subscribe for, putchase or otherwise
acquirc, any Share or any othcr share in the Sharc Capital of the Company or any
sccurity convertible into or cxchaugeablc for any Sharc or any other share in the
capital of UlC Company other than as cxpressly provided for in thcse Tenns and
Conditions;

7.1.4

permit, acknowledge or give effect to, the transfer of its Sbares to any person
other than an Affiliate;

7.1.5

change its corporate fonn;

7.1.6

make an election under Treas. Reg. 301.7701-3 Lo change its cntity

classification for U.S. Federal incarne tax purposes.

REGISTRATION AND TRANSFER

8.1

Series A CPECs shall be issued only in registered fonn and the name and address of the
Bolder of cach Series A CPEC sball be entered ioto the CPEC Register by Lbe Company.
The Company shaH have the right to issue certificates witoessing the registratioo of the
Bolder of a Series A CPEC in the CPEC Register witbout such certificatc however
constituting a transferable instrument. Exceptas expressly requircd by law, the Person in
whose name any Series A CPEC is registered in the CPEC Register shall be regarded for
ali purposes as the owner of tbat Series A CPEC.

8.2

A Series A CPEC may not be transfcrrcd to any Person other than an Affiliate of the
transferring 1loldcr without the prior written consent of the Company and of ali nontransferring llolders.

EVENTS OF DEFAULT
9.1

9.2.

Each of the following events shall conslitutc an Event of Dcfault:

9.1. 1

1e Company sball fail to pay the full amount of any declared Yield on the
applicable Payrncnt Date or make any required Liquidation payments and such
failurc continues for three Business Days following such Paytnent Date;

9.1.2

the Company shall fail to comply with the provisions for Pennitted Dividends or
corpora te changes; or

9.1.3

except as cxpressly pennitted in these Terms and Conditions, the Company shall
(a) be dissolved or liquidatcd, (b) become lnsolvent or unable to pay ils debts as
they become due or (c) institute or have instituted against it a proceeding seeking
a judgment of insolvency or bankruplcy or any other relief under bankruplcy or
insolvency law or o1er similar law affecting creditors' rights, and in the case any
such procceding or petition is instilutcd or presentcd against il, such proceeding
or petition (x) results in a judgment of inso1veocy or bank:ruptcy or the enlry of
an ordcr for relief or the ma king of an order for its winding-up or liquidation or
(y) is not dismissed, discharged, stayed or restraincd in each case within 90 days
of the institution or presentation thcreof.

If an Event ofDefault has occurred and is continuing with respect to Series A CPECs, the
Board of Managers shall convene a meeting al which the sharcholder(s) of the Company
sha11 be asked to approve the dismissals of the members of lhc Board of Managers and
elect two new mcmbers to the Board of Managers from a list of managers proposed by
the Holders, and those Managers sha11 serve until sucb Event of Default is cured and the
former members of the Board of Managers may be reappointcd thereafter. The
shareholdcr(s) of the Company hereby agree(s) that if asked, upon occurrence of an Evem
of Default, it/they sha11 accept the resignations of the members of the Board of Managers
and clect two new members to the Board of Managers from a list of managers proposed
by the Iloldcrs.

SUBORDINATION
1O. 1

The Company, the Holder(s) and the shareholders of the Company agree lhattbe Series A
CPECs shall, with respect to payment rights, redemption and rights of liquidation,
windi ng up and dissolution, rank prior to ali Subordinated Securities (current and future),
but the Series A CPECs shall be subordinated to ali Senior Obligations (current and
future).

10.2

Without limiling the foregoing, upon delivery of notice of any defauh with rcspeclto any
Senior Obligations in excess of $100,000, (a) to the Company, the Company shall not
make any paymcnls on the Series A CPECs until ali such defaults are cured or waivcd,
and (b) to any holder of the Series A CPECs, such bolder shall not accepl any payment
on, take any remediai action under, or lake any action lo enforce pa)'lnent on the Series A
CPECs until ali such defaults are cured or waived.

10.3

Further, without li mi ting 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 simi lar proceeding with respect to tbe Company, the
holders of Senior Obligations shall be entied to receive payment in full in cash of ali
Senior Obligations (including intercst accruing at the rates specified in and otherwise in
accordance with the terms of the agreements crcating the applicable Senior Obligations,
or 1at would have accrued under such tenns, whether or not such interest is allowed by
the bankruptcy court, receiver, or other entity overseeing such proceeding after the
commencement of any procccding) bcfore the holdcrs of the Series A CPECs will be
cntillcd to receive from 1e Company any payment on the Series A CPECs. Paymcnts
that would o1crwise be made to the llolders of 1c Series A CPECs sball be applied to
the Senior Obligations until the Senior Obligations (including the inlercst spccificd
above) have been pa id in full in cash, and if any such payment is nonethcless made to a
holder of the Series A CPECs before the Senior Obligations (including the interest
spccified above) have been paid in fu ll in cash, such llolder of Series A CPECs shall hold
sueh pa)'lnent in trust for the holders of the Senior Obligations and shall prompt! y dcliver
such paymcnl to the Senior Crcditors in the fonn receivcd wilh ali necessary
cndorsements. Subject to lbe prior payment in full in cash of ali Senior Obligations
(including 1c interest specified above), lbe holdcrs of the Series A CPECs shall be
subrogated to the rights of tbe holders of the Senior Obligations.

SECURJTY
11.1

No lien, charge or encumbrance of any nature whatsoever upon any of 1e properly or

assets of lbe Company bas bcen or shall be creatcd to secure payment of any amount
under the Series A CPECs.

VOTING
12.1

Exceptas set out above in clause 9.2 following an Event of Defaull, 1e Series A CPECs
shall carry no voting rigbts in respect 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 accm.mt as the 1lolder of the relevant Series A CPEC may specify by notice in
writing given to the Company not later than three Business Days prior to the relevant
Payment or Rcpurchasc Date or, in default of such notice, by chcque sent by rcgistercd
mail and at the risk of sucb Holder to the address of the relevant Holder as registered in
the CPEC Registcr.

13.2

Ail sums payable by the Company in respect of the Series A CPECs shall be paid frec
and clear of ali deductions or withholdings unless the deduction or withholding is
rcquired by law.

TAX AND BOOK TREATMENT

14.1

The Series A CPECs shall consistently be treated as common equity for ali US tax and
US accounting purposes and the Company shall !end any reasonable assistance to the
llolder as may be rcquested by the Helder in order for such characterization to app! y.

GOVERNING LAW
15.1

The Tenns and Conditions of these Series A CPECs will be govemed 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 Tcrms and Conditions are subjcct to
th~.: written approval of the parties.

Thcse Terms and Conditions may be executed in counterparts, eacb of which shall be an original
and ali of which, whcn ta ken togcther, shall be deemcd to be one and the sa me instrument.

Il

fN WITNESS WIIEREOP the parties hereto through thcir duly authorb:cd representatives have
cxecuted thesc Tenns and Condions in two originals on the day and ycar first abovc written,
eacb party acknowlcdging having received one copy.

Abbott lnvestmcnts Luxembourg S. r.l

By:_ _ __ _ _ __
Title:

Abbott Intemational Luxembourg S. rJ, as Holder

By:_ _ _ _ _ _ __
Ti tic:

Acknowlcdgcd and approved as Shareholder of Abbott lnvestmcnts Luxembourg S. r.l for tbc
purposcs of Section 2.4, Section 4.5, Section 9.2 and Section 10.1 hereof.

Abbott International Luxembourg S. r.l, as Shareholder of the Company

By:

----------------

Titlc:

12

Enclosure 4
Luxembourg tax treatment of the CPECs to be issued by Abbott
Investments Luxembourg S. r.l.

Main features of the CPECs

Features

CPECs to be issued by Abbott lnvestmcnts Luxembourg S. r.l.

Tcrm

30 years

Rcl'urn

Fixed yield - 1% of the par value of the CPECs

AL any lime beginning on the Jrd annivcrsary of the Issue Date or, if carlicr, upon the occurrence
of an Extmordinary Event (but thon only to the extcnt of tlle proce\lds of such event), the
Company may elect to rcpurchasc the Series A CPECs, in whole or part, in cash at a priee pcr
Series A CPEC equal to the Rcpurchase Prie~:. Any such election shall be in lieu of the

Company's right to convcrt the Series A CPECs into Sharcs; providcd, howcvcr, thal any such
rcpurchase may be carried out only to the extenl the Company will have sutlicicnt funds avwlable
to seule its liabilities under ali Senior Obligations thcn outstanding and the Company will not
bccomo lnsolvcnt as a result of such cash paYJncnl. A repurchase shall be pro rata as to ali

1loldcrs of Series A CPECs.

Rcpurchasc/Rc
dcmptlon

On tl1c 30th anniversary of tllc Issue Date, tlle Company shall redcem ali outstanding Sc;ries A

CPECs for citller (x) an amount of cash pcr Series A CPEC cqunl to the

Rcpurchas~:

Priee

(provadcd that the Company would have sutlicicnt funds available to scttle ats liabiliues undcr ali
Senior Obligations then outst<mding and the Company would not becomc lnsolvcnt as a r.:sult of
such cash payrncnt) or (y) lor the numbcr of Conversion Shares, adjustcd as provided hcrcin lor
uny Adjustment Event, at the soll.l discretion of the Company. The notice procedures applicable
to a repurchase of Series A CI'ECs by the Company shull apply to redemption of Senes A CPEC's
at maturity.
Rcpurchasc Priee: mcans, nt any lune, in respect of one Senes A CPEC, the nmount obtaincd by
muhaplying the Fnir Market Value pcr Sharc us at the relevant Retirement Date, by 0.009972339 (i.e. the
numoor of C'onvcrsaon Shares pcr Series A CI'ECs), as ndjustccl us providcd hcrcin for any /\djusuncnt

Eveni.

** Con,ersion Shares: means 0.009972339 Sharcs, which n:prcscnts the quotacnl of (x) ac l'ar Value
and (y) lhc F1.11r Market Value of one Shan::, detennined as ofilie Issue Date per Senes A ('Jl~C. [ J.
At any ti me bcginning on the Jrd anniversary of the Issue Date (including tlle date of maturity or the
date of Liquidation) or, if earlier, upon tho occurrence of an Extraordinury Event. (i) the Company
shall be entitlcd to elect to convert Series A CPECs, in wholc or part, into Shan.:s by requiring any
Holdcr to ex change each such Series A CPEC for Ole number of Conversion Slmrcs, as adjusted as a
resuh of an Adjustment Event, and (ii} any Holder shall be entitled to elcct to convcrt Series A C'PECs,
Conversion

in who le or part, into Sharcs by rcquiring tllc Company to exchange each such Series A CPEC for the
uumbcr of Conversion Sharcs, as adjustcd as a rosult of an Adjustment Event. If an election by the
Company is made to convert fcwer tl1an ali of the Series A CPECs, the conversion shall be pro rata as
to ali lloldcrs ()f the Series A CPF.Cs.

* Conversion Shan~s: means 0.009972339 Shares, which rcprescntS the quotient of (x) tl1c l'ar Value and (Y) ac
Fair Market Value of one Shan:, dctcmuned as of the Issue Date P<:r Series A CPFC'~j_ j.

(7)

CPECs shaH, with respect to paymenl rights, redemption and rights of liquidation, winding up and
dissolution, rank prior to ali Subordinated Sccurities* of the Company (current and future). but the
CPECS shall be subordinated to ali Senior Obligations** (currcnt and future).
Ranking

Subordinat'ed Sec.urities: means ail the outstanding shares of the Share Capitalfi-om me to time; provided thal
the Series A CPECs (including any othcr series of Series A CPECs) sball not constitute Subordinated Securities.**
Senior Obligations: mcans ali present and lhturc obligations of the Company, whether secured or unsecured,
other than the Subordinatcd Securities and the Series A CPECs.

Transferability

Rcstricted - with the prior consent of the Company and of ali non transfcrring holders

Stapliog clause

No stapling clause

Liquidation
procccds

No entitlement to liquidation procCL>ds.

Characterization of the CPECs issued by Abbott Investments

Luxembourg S. r.l. as debt for Luxembourg tax purposes
Based on the cbaracteristics above mentioned, the CPECs to be issued by Abbott
[nvcstmcnts Luxembourg S. r.l. will be treated as dcbt for Luxembourg corporate
income tax, municipal business tax and net wealth tax purposcs.

ln this respect, the explanatory note to the income tax reform law no. 571 of L955
(Projet de Loi on Article 114 - currently Atticle 97 of the Luxembourg Income Tax
Law - referred as "LITL") points out that the distinction betwcen debt and cquity
must be done on the basis of the economie characteristics of the fmancial instrument.
In particular, the main economie features that characterise a fmancial instrument as
debt are:
The fact that the instrument bears a fixed yield (as opposcd to an equity
participation which gives right to a percentage of the company's profits);
A yicld due even in loss-making years; and
A privileged ranking over the company's sbares.

Considering that the CPECs rank prior to the company's shares, do not grant the
holdcr any right in the distributable profits of the company or the liquidation
procecds as long as 1e 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 leve! of
both Abbott International Luxembourg S. r.l and Abbott Investments Luxembourg
S. r.I.

(8)

Tax treatment of the return (interest payments and redemption

priee)
C.J. Deductibility

lntcrest is norn1ally deductible from a Luxembourg tax perspective, except if:

Tite interest is due on an instrument re-qual(fied into equity from a Luxembourg
tax perspective. In this respect, given the qualification of the CPECs as debtfrom
a Luxembourg tax perspective, the payments ta be made under the CPHCs will not
be treated as a non deductible dividend distribution.
'l11e interest expense is related to exempt incarne under the provisions of Article
45 and Article 166(5) LITL. To the extent to which the retum 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
financing of participations. Considering that Abbott lnvestments Luxembourg
S. r.l. will comply with the 85/ 15 debt-to-equity ratio in relation to the fmancing
of its participations (not more than 85% of the initial acquisition cost of the
participations held by Abbott lnvestments Luxembourg S. r.l will be financed by
CPECs), the interest on the CPECs will remain deductible and will not be requalified into a dccmed dividcnd distribution.

The interest is re-qualifiee/ into a deemed dividend distribution on the basis of

Article 164(2) or 164(3) LITL. Considering the fact thal the CPECs are not
qualificd as shares, founder shares, profit sharcs orjouissance shares, that they are
not issued in the form of bonds or other similar sccurities, that their bear a fixcd
intcrest rate ihat will also accrue in years in whjch the issuer is in a Joss position,
and they do not give the bolder any rights to the profits after tax or liquidation
proceeds (as long as the CPECs are not converted into shares) of Abbort
lnvcstments Luxembourg S. r.l., the rctum will not be trcated as a distribution
undcr the provisions of Article 164(2) LJTL. Since the interests due by Abbott
lnvestments Luxembourg S. 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
intercst on the CPECs will not be (pru1ially) disallowed undcr the provisions of
A11icle 164(3) LITL.
5

As a rcsult, 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 rc-qualitied into a dividcnd
distribution at the level of both Abbott lnvestments Luxembourg S. r.l. and Abbott
International Luxembourg S. r.l. This accounting treatmenl will be followcd for tax
purposcs as no specifie tax rules depat1 there ii01n (cf. Article 40 LJTL).
Conscqucntly, the interest will constitute a yearly tax-deductiblc charge.

(9)

C.2. No Withholding tax

6

Intercst due on the CPECs will not be subject to withholding tax in Luxembourg. In
this respect, according to Article 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 Luxembourg tax
perspective, the payments to be made by Abbott Investments Luxembourg
S. r.l. under the CPECs will not fall in the category of income covered by
Article 97(1)(1).

They are paid on the basis of bonds or other similar securities that give right
cumulative/y to afixed interest plus a variable interest depending on the profits
distributed by the issuer, except for the case where the variable interest is
granted.following a temporary reduction of the fixed interest, without exceeding
the initial leve! of the interest rate. As CPECs are not issued in the fonn of
bonds or similar securities and bear a ftxed interest only, they will not fall in the
scope of this provision.

Moreover, based on the characteristics of the redemption clauses (please refer to

EnclosUJe 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 Article 146(1) LTTL.

(10)

LE GOUVERNEMENT
DU GRAND-DUCH DE LUXEMBOURG
Administration des contributions directes

Bureau d'imposition
Socits 6

For the attention of Valry Civilio

PricewaterhouseCoopers
400, route d'Esch
B.P. 1443
L -1 014 Luxembourg

Companies involved :

Abbott lnvestments Luxembourg S. r.f.- 2009/24/02208

Abbott International Luxembourg S. r.f. - 2009/24/09547

25 November 2009

Dar 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, 1 find the contents
of said letter to be in compliance wlth current tax legislation and administrative practice.

lt is understood that my above confirmation may only be used within the framework of the
transactiom> contemplated by the abovementioned letter and that the principles described in

your letter shall not apply ipso facto to other situa.tions.

18, rue du Fort Weell

Tl.: (352) 40.800-3118

!\dresse postale

Luxembourg

Fax: (352) 40.800-3100

L-2982 Luxembourg

ite Internet
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