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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 10-K

(MARK ONE)

/x/		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
/ /		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2001

Commission file number 1-2189

Abbott Laboratories

An Illinois Corporation		36-0698440
		(I.R.S. employer identification number)
100 Abbott Park Road		(847) 937-6100
Abbott Park, Illinois 60064-6400		(telephone number)

Securities Registered Pursuant to Section 12(b) of the Act:

Title of Each Class		Name of Each Exchange on Which Registered


Common Shares, Without Par Value (including Preferred Stock Purchase Rights)		New York Stock Exchange Chicago Stock Exchange Pacific Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YesX No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

The aggregate market value of the 1,458,610,835 shares of voting stock held by nonaffiliates of the registrant, computed by using the closing price as reported on the consolidated transaction reporting system for Abbott Laboratories common shares without par value on January 31, 2002, was approximately $84,161,845,180. Abbott has no non-voting common equity.

Number of common shares outstanding as of January 31, 2002: 1,556,593,143.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the 2002 Abbott Laboratories Proxy Statement are incorporated by reference into Part III. The Proxy Statement will be filed on or about March 12, 2002.

PART I

ITEM 1. BUSINESS

GENERAL DEVELOPMENT OF BUSINESS

Abbott Laboratories is an Illinois corporation, incorporated in 1900. Abbott's* principal business is the discovery, development, manufacture, and sale of a broad and diversified line of health care products and services.

FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS,
GEOGRAPHIC AREAS, AND CLASSES OF SIMILAR PRODUCTS

Incorporated herein by reference is Note 14 entitled "Segment and Geographic Area Information" of the Notes to Consolidated Financial Statements included under Item 8, "Financial Statements and Supplementary Data."

NARRATIVE DESCRIPTION OF BUSINESS

Abbott has five reporting revenue segments: Pharmaceutical Products, Diagnostic Products, Hospital Products, Ross Products, and International. Abbott also has a 50 percent owned joint venture, TAP Pharmaceutical Products Inc. During the first quarter of 2001, Abbott acquired the pharmaceutical business of BASF, which includes the global pharmaceutical operations of Knoll Pharmaceuticals.

Pharmaceutical Products

This segment's products include a broad line of adult and pediatric pharmaceuticals which are sold primarily on the prescription or recommendation of physicians.

The principal products included in this segment are Depakote® an agent for the treatment of epilepsy, migraine, and bipolar disorder; the anti-infectives clarithromycin, sold in the United States under the trademark Biaxin®, Omnicef®, an oral cephalosporin antibiotic, and various forms of erythromycin, sold primarily as PCE® or polymer-coated erythromycin, Erythrocin®, and E.E.S.®; Synthroid® for the treatment of hypothyroidism; TriCor® for the treatment of elevated triglycerides; the anti-virals Kaletra® and Norvir®, protease inhibitors for the treatment of HIV infection; Meridia® for the treatment of obesity; Mavik® and Tarka® for the treatment of hypertension; Vicodin® and Vicoprofen® for the treatment of pain. In addition, this segment co-promotes the proton pump inhibitor Prevacid® (lansoprazole) for short-term treatment of duodenal ulcers, gastric ulcers and erosive esophagitis under an agreement with TAP Pharmaceuticals Inc. and Flomax® for the treatment of benign prostatic hyperplasia, Micardis® for the treatment of hypertension, and Mobic® for the treatment of arthritis through an agreement with Boehringer Ingelheim.

This segment markets its products in the United States. These products are generally sold directly to wholesalers, government agencies, health care facilities, and independent retailers from Abbott-owned distribution centers and public warehouses. Primary marketing efforts for pharmaceutical products are directed toward securing the prescription of Abbott's brand of products by physicians. Managed care purchasers (for example, health maintenance organizations and pharmacy benefit managers) are increasingly important customers.

*: As used throughout the text of this report on Form 10-K, the term "Abbott" refers to Abbott Laboratories, an Illinois corporation, or Abbott Laboratories and its consolidated subsidiaries, as the context requires.

Competition is generally from other healthcare and pharmaceutical companies. A significant aspect of competition is the search for technological innovations. The introduction of new products by competitors and changes in medical practices and procedures can result in product obsolescence. Price can also be a factor. In addition, the substitution of generic drugs for the brand prescribed has increased competitive pressures on pharmaceutical products which are off-patent.

Diagnostic Products

This segment's products include diagnostic systems and tests for blood banks, hospitals, commercial laboratories, alternate-care testing sites, and consumers. In the fourth quarter of 2001, Abbott acquired all of the outstanding shares of Vysis, Inc., a genomic disease management company.

The principal products included in this segment are systems and reagents used to perform immunoassay tests including Architect®, AxSYM®, IMx®, Abbott Quantum™; Commander®, and Abbott PRISM®; screening and diagnostic tests for hepatitis B, HTLV-I/II, hepatitis B core, and hepatitis C; tests for detection of HIV antibodies and antigens, and other infectious disease detection systems; tests for determining levels of abused drugs; physiological diagnostic tests; cancer monitoring tests including tests for prostate specific antigen (PSA); therapeutic drug monitoring tests; fertility and pregnancy tests and systems such as TDx® and TDxFlx®; the Murex® line of microtiter-based immunoassay test kits; the Vysis® product line of genomic-based tests including the PathVysion™ HER-2 DNA probe kit and the UroVysion™ bladder cancer recurrence kit; the LCx® amplified probe system and reagents; the Abbott TestPack® and Determine™ systems for rapid diagnostic testing; clinical chemistry systems such as Abbott Spectrum®, Aeroset®, and Alcyon®; a full line of hematology systems and reagents known as the Cell-Dyn® series; the MediSense® product line of blood glucose monitoring meters, test strips, data management software and accessories for people with diabetes including Precision Xtra™, MediSense Optium®, Sof-Tact™ (marketed in Europe as Soft-Sense™), Precision Q.I.D.®, MediSense II™, ExacTech® and ExacTech RSG®, TrueMeasure™ strip technology, Precision Link™ Direct, and Precision™ Sure-Dose insulin syringes. In addition, the MediSense Precision PCx® and Precision G® are used in hospital settings along with the i-STAT® point-of-care testing systems, which this segment distributes through a worldwide sales and marketing alliance with i-STAT Corporation. This segment also distributes diagnostic tests used to detect bovine spongiform encephalopathy (BSE) in cattle through a sales and marketing agreement with Enfer Scientific Ltd.

This segment markets its products worldwide. These products are generally marketed and sold directly to hospitals, laboratories, clinics, and physicians' offices from Abbott-owned distribution centers and public warehouses. Outside the United States, sales are made either directly to customers or through distributors, depending on the market served. Blood glucose monitoring meters and test strips for people with diabetes are also sold over the counter to consumers.

This segment's products are subject to competition in technological innovation, price, convenience of use, service, instrument warranty provisions, product performance, long-term supply contracts, and product potential for overall cost-effectiveness and productivity gains. Some products in this segment can be subject to rapid product obsolescence. Abbott has benefitted from technological advantages of certain of its current products; however, these advantages may be reduced or eliminated as competitors introduce new products. Certain of this segment's products are subject to restrictions on their sale in the United States. These restrictions are discussed in the section captioned "Regulation" on page 7.

Hospital Products

This segment's products include drugs and drug delivery systems, perioperative and intensive care products, cardiovascular products, renal products, oncology products, intravenous and irrigation solutions, related manual and electronic administration equipment, and diagnostic imaging products for hospitals and alternate-care sites.

The principal products included in this segment are hospital injectables including Carpuject® and FirstChoice® generics; premixed intravenous drugs in various containers; ADD-Vantage® and Nutrimix® drug and nutritional delivery systems; anesthetics, including Pentotha1®, Amidate®, Ultane®, isoflurane, and enflurane; products for anxiety, nausea and pain associated with surgery; Precedex® for sedation; cardiovascular products including Corlopam®; Techstar®, Prostar®, and The Closer™ vessel closure products; Opticath® and OptiQ™ advanced sensor catheters; Transpac® for hemodynamic monitoring; peripheral wires, catheters, and other specialty cardiac products; Calcijex® and Zemplar™, injectable agents for treatment of bone disease in hemodialysis patients; intravenous solutions and related administration equipment sold as the LifeCare® line of products, LifeShield® needleless products, and Venoset® products; irrigating fluids; parenteral nutritionals such as Aminosyn® and Liposyn®; Plum®, Omni-Flow®, GemStar® and Abbott AIM® electronic drug delivery systems; Abbott Pain Manager®; patient-controlled analgesia systems; venipuncture products; and Faultless® rubber sundry products.

This segment markets its products primarily in the United States. They are generally distributed to wholesalers and directly to hospitals from Abbott-owned distribution centers and public warehouses. This segment also develops and manufactures products for other companies.

This segment's products are subject to competition in technological innovation, price, convenience of use, instrument warranty provisions, service, product performance, long-term supply contracts, and product potential for overall cost effectiveness and productivity gains. Some products in this segment can be subject to rapid product obsolescence. Abbott has benefitted from technological advantages of certain of its current products; however, these advantages may be reduced or eliminated as competitors introduce new products.

Ross Products

This segment's products include a broad line of adult and pediatric nutritionals. These products are sold primarily on the recommendation of physicians or other health care professionals. The segment also includes specialty pharmaceuticals and consumer products.

Principal nutritional products include various forms of prepared infant formula, including Similac®, Similac® 2, Isomi1®, Isomi1® 2, Alimentum®, and Similac NeoSure®; and adult and pediatric products, including Ensure®, Ensure Plus®, Ensure® High Protein, Ensure® Light, Jevity®, Glucerna®, PediaSure®, Pedialyte® and Pulmocare®. Principal consumer products include the Fact Plus® Select™ and Fact Plus® Pro™ pregnancy tests; the dandruff shampoo Selsun Blue®; Murine® eye care and ear care products; and Tronolane® hemorrhoid medication. The principal pharmaceutical product is Survanta®. In addition, this segment co-promotes Synagis® under an agreement with MedImmune Inc. and Xopenex® under and agreement with Sepracor Inc., for the treatment of respiratory disorders and Oxandrin® for the promotion of anabolic activity (weight gain) under an agreement with Bio-Technology General Corp.

This segment markets its products in the United States. Nutritional products are generally sold directly to retailers, wholesalers, health care facilities, and government agencies. In most cases, they are distributed from Abbott-owned distribution centers or public warehouses. Primary marketing efforts for nutritional products are directed toward securing the recommendation of Abbott's brand of products by physicians or other health care professionals. Competition is generally from other health care manufacturers. Nutritional products are subject to competition in price, formulation, scientific innovation, and promotional initiatives.

This segment's pharmaceutical products are generally marketed and sold directly to physicians, retailers, wholesalers, health care facilities, and government agencies. In most cases, they are distributed from Abbott-owned distribution centers or public warehouses. Primary marketing efforts for this segment's pharmaceutical products are directed at securing the prescription of these products by physicians. Competition is generally from other healthcare and pharmaceutical companies. A significant aspect of competition is the search for technological innovations. The introduction of new products by competitors

and changes in medical practices and procedures can result in product obsolescence. Price can also be a factor. In addition, the substitution of generic drugs for the brand prescribed has increased competitive pressures on pharmaceutical products which are off-patent.

Consumer over-the-counter products and PediaSure®, Pedialyte®, and Ensure® retail products are promoted directly to the public by consumer advertising. These products are generally sold directly to retailers and wholesalers. Competitive products are sold by other diversified consumer and health care companies. Competitive factors include consumer advertising, formulation, scientific innovation, price, and availability of generic product forms.

International

This segment's products include a broad line of hospital, pharmaceutical, and adult and pediatric nutritional products marketed and primarily manufactured outside the United States. These products are sold primarily on the prescription or recommendation of physicians and other health care professionals. This segment also includes consumer products.

This segment's principal products include the anti-infectives clarithromycin, sold under the trademarks Biaxin®, Klacid® and Klaricid®, tosufloxacin, sold in Japan under the trademark Tosuxacin®, and various forms of the antibiotic erythromycin, sold primarily as PCE® or polymer-coated erythromycin, Erythrocin®, and E.E.S.®; the anti-virals Norvir® and Kaletra®, protease inhibitors for the treatment of HIV infection; Lupron®, also marketed as Lucrin®, and Lupron Depot® used for the palliative treatment of advanced prostate cancer, treatment of endometriosis and central precocious puberty and for the preoperative treatment of patients with anemia caused by uterine fibroids; Synthroid® for the treatment of hypothyroidism; Prevacid® (lansoprazole), a proton pump inhibitor for the short-term treatment of duodenal ulcers, gastric ulcers, and erosive esophagitis; various cardiovascular products, including Loftyl®, a vasoactive agent, Mavik® (also marketed as Goptin®), Isoptin® and Tarka® for the treatment of hypertension, Hytrin® (also marketed as Hitrin® and Flotrin®) used for the treatment of hypertension and benign prostatic hyperplasia, candesartan (sold under the trademarks Blopress® and Tiadyl™), an angiotension 2 antagonist; Reductil® (also marketed as Reductyl® and Reductal®) for the treatment of obesity; Uprima® for the treatment of erectile dysfunction; various forms of infant formulas and follow-on formulas, including Similac Advance®, Gain®, and Abbott Grow™; various adult medical nutritionals, including Ensure®, Glucerna®, and Jevity®; and a broad line of hospital products, including the anesthesia products sevoflurane (sold outside of the United States primarily under the trademark Sevorane® and in a few other markets as Ultane®), isoflurane, and enflurane; specialty injectables such as Calcijex® and Survanta®; and electronic drug delivery systems sold in select international markets.

This segment's pharmaceutical and nutritional products are generally sold directly to government agencies, retailers, wholesalers, and health care facilities. In most cases, they are distributed from Abbott-owned distribution centers. Certain products are co-marketed or co-promoted with other companies. Some of these products are marketed and distributed through distributors. Primary marketing efforts for pharmaceutical products are directed toward securing the prescription of Abbott's brand of products by physicians. Competition is generally from other healthcare and pharmaceutical companies. A significant aspect of competition is the search for technological innovations. The introduction of new products by competitors and changes in medical practices and procedures can result in product obsolescence. Price can also be a factor. In addition, the substitution of generic drugs for the brand prescribed has increased competitive pressures on pharmaceutical products. Primary marketing efforts for nutritional products are directed toward securing the recommendation of Abbott's brand of products by physicians or other health care professionals. Competition is generally from other health care manufacturers and food companies. Nutritional products are subject to competition in price, scientific innovation, formulation, and promotional initiatives.

This segment's hospital products are generally distributed to wholesalers and directly to hospitals from distribution centers maintained by Abbott. This segment is subject to competition in technological innovation, price, convenience of use, instrument warranty provisions, service, product performance, long-term supply contracts, and product potential for overall cost effectiveness and productivity gains. Products in this segment can be subject to rapid product obsolescence. Abbott has benefitted from technological advantages of certain of its current products; however, these advantages may be reduced or eliminated as competitors introduce new products.

TAP Pharmaceutical Products Inc.

Under an agreement between Abbott and Takeda Chemical Industries, Ltd. of Japan (Takeda), TAP Pharmaceutical Products Inc. (owned 50 percent by Abbott and 50 percent by an affiliate of Takeda), together with its subsidiary, TAP Pharmaceuticals Inc. (TAP), develops and markets pharmaceutical products for the United States and Canada. TAP markets Lupron®, an LH-RH analog, and Lupron Depot®, a sustained release form of Lupron®, in the United States. Lupron® and Lupron Depot® are used principally for the palliative treatment of advanced prostate cancer and for the treatment of endometriosis and central precocious puberty and for the preoperative treatment of patients with anemia caused by uterine fibroids. TAP also markets Prevacid® (lansoprazole), a proton pump inhibitor, and has a co-promotion arrangement with Abbott for Prevacid®. Its principal indications are for short-term treatment of duodenal ulcers, gastric ulcers, and erosive esophagitis. The patents related to lansoprazole are material to the operation of TAP's business. The original United States compound patent covering lansoprazole is licensed by TAP from Takeda and will expire in 2009.

TAP's products are generally sold directly to physicians, retailers, wholesalers, health care facilities, and government agencies. In most cases, they are distributed from Abbott-owned distribution centers. Primary marketing efforts for pharmaceutical products are directed toward securing the prescription of TAP's brand of products by physicians. Managed care purchasers (for example, health maintenance organizations and pharmacy benefit managers) are increasingly important customers. Competition is generally from other pharmaceutical companies. A significant aspect of competition is the search for technological innovations. The introduction of new products by competitors and changes in medical practices and procedures can result in product obsolescence. Price can also be a factor. In addition, the substitution of generic drugs for the brand prescribed has increased competitive pressures on pharmaceutical products that are off-patent.

INFORMATION WITH RESPECT TO ABBOTT'S BUSINESS IN GENERAL

Sources and Availability of Raw Materials

Abbott purchases, in the ordinary course of business, necessary raw materials and supplies essential to Abbott's operations from numerous suppliers in the United States and abroad. There have been no recent significant availability problems or supply shortages.

Patents, Trademarks, and Licenses

Abbott is aware of the desirability for patent and trademark protection for its products. Accordingly, where possible, patents and trademarks are sought and obtained for Abbott's products in the United States and all countries of major marketing interest to Abbott. Abbott owns and is licensed under a substantial number of patents and patent applications. Principal trademarks and the products they cover are discussed in the Narrative Description of Business on pages 1 through 5. These, and various patents which expire during the period 2002 to 2022, in the aggregate are believed to be of material importance in the operation of Abbott's business. Abbott believes that no single patent, license, trademark (or related group of patents, licenses, or trademarks), except for those related to clarithromycin (which is sold under the trademarks Biaxin®, Klacid® and Klaricid®) and those related to divalproex sodium (which is sold under the trademark

Depakote®), are material in relation to Abbott's business as a whole. The original United States compound patent covering clarithromycin is licensed from Taisho Pharmaceutical Co., Ltd. of Tokyo, Japan, and will expire in 2005. The original United States compound patents covering divalproex sodium will expire in 2008. Litigation involving Abbott's patents covering divalproex sodium is discussed in Legal Proceedings on page 11. See also the discussion on page 5 regarding the patents related to lansoprazole, which is sold by TAP as Prevacid® under a license from Takeda.

Seasonal Aspects, Customers, Backlog, and Renegotiation

There are no significant seasonal aspects to Abbott's business. The incidence of certain infectious diseases which occur at various times in different areas of the world does, however, affect the demand for Abbott's anti-infective products. Orders for Abbott's products are generally filled on a current basis, and order backlog is not material to Abbott's business. No single customer accounted for sales equaling 10 percent or more of Abbott's consolidated net sales. No material portion of Abbott's business is subject to renegotiation of profits or termination of contracts at the election of the government.

Research and Development

Abbott spent $1,577,552,000 in 2001, $1,351,024,000 in 2000, and $1,193,963,000 in 1999 on research to discover and develop new products and processes and to improve existing products and processes. Abbott continues to concentrate research expenditures on pharmaceutical and diagnostic products.

Environmental Matters

Abbott believes that its operations comply in all material respects with applicable laws and regulations concerning environmental protection. Regulations under federal and state environmental laws impose stringent limitations on emissions and discharges to the environment from various manufacturing operations. Abbott's capital and operating expenditures for pollution control in 2001 were approximately $36 million and $66 million, respectively. Capital and operating expenditures for pollution control are estimated to approximate $38 million and $73 million, respectively, in 2002.

Abbott has been identified as one of many potentially responsible parties in investigations and/or remediations at 27 locations in the United States including Puerto Rico under the Comprehensive Environmental Response, Compensation, and Liability Act, commonly known as Superfund. The aggregate costs of remediation at these sites by all identified parties are uncertain but have been subject to widely ranging estimates totaling as much as several hundred million dollars. In many cases, Abbott believes that the actual costs will be lower than these estimates, and the fraction for which Abbott may be responsible is anticipated to be considerably less and will be paid out over a number of years. Abbott may participate in the investigation or cleanup at these sites. Abbott is also voluntarily investigating potential contamination at seven Abbott-owned sites, and is engaged in remediation at these sites, in cooperation with the Environmental Protection Agency (EPA) or similar agencies.

While it is not feasible to predict with certainty the costs related to the previously described investigations and cleanup activities, Abbott believes that such costs, together with other expenditures to maintain compliance with applicable laws and regulations concerning environmental protection, should not have a material adverse effect on Abbott's financial position, cash flows, or results of operations.

Employees

Abbott employed 71,426 persons as of December 31, 2001.

Regulation

On November 4, 1999, a consent decree was entered in the United States District Court for the Northern District of Illinois which settled issues with the United States government involving alleged noncompliance with the FDA's Quality System Regulations at Abbott's diagnostic manufacturing operations in Lake County, Illinois. The decree, which was amended in December 2000, requires Abbott to ensure its diagnostic manufacturing processes in Lake County, Illinois conform with the FDA's Quality System Regulation. The consent decree does not represent an admission by Abbott of any violation of the Federal Food, Drug and Cosmetic Act or its regulations. The decree allows for the continued manufacture and distribution of medically necessary diagnostic products made in Lake County, Illinois, such as certain assays for hepatitis, retrovirus, cardiovascular disease, cancer, thyroid disorders, fertility, drug monitoring, and congenital and respiratory conditions. However, Abbott is prohibited from manufacturing or distributing certain other diagnostic products until Abbott ensures the processes in its Lake County, Illinois diagnostics manufacturing operations conform with the Quality System Regulation. Under the terms of the amended consent decree Abbott must ensure its diagnostics manufacturing operations are in conformance with the FDA's Quality System Regulation by various dates through January 15, 2001. The FDA performed an inspection of Abbott's Lake County, Illinois diagnostics manufacturing operations during the fourth quarter of 2001 and first quarter of 2002 to determine whether those operations are in conformity with the FDA's Quality System Regulation. If the FDA concludes that those operations were not in conformity, Abbott may be required to make additional payments to the FDA. The consent decree does not affect Abbott's MediSense, i-STAT, hematology, Murex or Vysis products; the clinical chemistry products Abbott Spectrum®, Aeroset®, and Alcyon®; or any other Abbott divisions or their products. The consent decree allows Abbott to export diagnostic products and components for sale and distribution outside the United States if they meet the export requirements of the Federal Food, Drug and Cosmetic Act.

The development, manufacture, sale, and distribution of Abbott's products are subject to comprehensive government regulation. Government regulation by various federal, state, and local agencies, which includes detailed inspection of, and controls over, research and laboratory procedures, clinical investigations, and manufacturing, marketing, sampling, distribution, record keeping, storage, and disposal practices, substantially increases the time, difficulty, and costs incurred in obtaining and maintaining the approval to market newly developed and existing products. Government regulatory actions can result in delay in the release of products, seizure or recall of products, suspension or revocation of the authority necessary for their production and sale, and other civil or criminal sanctions.

Continuing studies of the utilization, safety, and efficacy of health care products and their components are being conducted by industry, government agencies, and others. Such studies, which employ increasingly sophisticated methods and techniques, can call into question the utilization, safety, and efficacy of previously marketed products and in some cases have resulted, and may in the future result, in the discontinuance of marketing of such products and may give rise to claims for damages from persons who believe they have been injured as a result of their use.

The cost of human health care products continues to be a subject of investigation and action by governmental agencies, legislative bodies, and private organizations in the United States and other countries. In the United States, most states have enacted generic substitution legislation requiring or permitting a dispensing pharmacist to substitute a different manufacturer's version of a pharmaceutical product for the one prescribed. Federal and state governments continue to press efforts to reduce costs of Medicare and Medicaid programs, including restrictions on amounts agencies will reimburse for the use of products. In addition, the federal government follows a diagnosis-related group (DRG) payment system for certain institutional services provided under Medicare or Medicaid and has implemented a prospective payment system (PPS) for services delivered in hospital outpatient, nursing home, and home health settings. DRG and PPS entitle a health care facility to a fixed reimbursement based on diagnosis rather than actual costs incurred in patient treatment, thereby increasing the incentive for the facility to limit or

control expenditures for many health care products. Manufacturers must pay certain statutorily-prescribed rebates on Medicaid purchases for reimbursement on prescription drugs under state Medicaid plans. The Veterans Health Care Act of 1992 requires manufacturers to extend additional discounts on pharmaceutical products to various federal agencies, including the Department of Veterans Affairs, Department of Defense, and Public Health Service entities and institutions.

In the United States, governmental cost-containment efforts have extended to the federally funded Special Supplemental Nutrition Program for Women, Infants, and Children (WIC). All states participate in WIC and have sought and obtained rebates from manufacturers of infant formula whose products are used in the program. Over the last five years, all of the states have conducted competitive bidding for infant formula contracts which require the use of specific infant formula products by the state WIC program. States participating in WIC are required to engage in competitive bidding or to use any other cost containment measure that yields savings equal to or greater than the savings generated by a competitive bidding system.

Governmental regulatory agencies require prescription drug manufacturers to pay fees. The FDA imposes substantial fees on various aspects of the approval, manufacture, and sale of proprietary prescription drugs.

Abbott expects debate to continue during 2002 at both the federal and the state level over the availability, method of delivery, and payment for health care products and services. Abbott believes that if legislation is enacted, it could have the effect of reducing prices, or reducing the rate of price increases, for medical products and services.

International operations are also subject to a significant degree of government regulation. Many countries, directly or indirectly through reimbursement limitations, control the selling price of most health care products. Furthermore, many developing countries limit the importation of raw materials and finished products. International regulations also are having an impact on United States regulations. The International Organization for Standardization (ISO) provides the criteria for meeting the regulations for medical devices within the European Union. Abbott has made significant strides in gaining ISO 9000 and European Norm 46000 certification for facilities that manufacture devices for European markets. FDA regulations governing the manufacture of medical devices appear to encompass and exceed the ISO's approach to regulating medical devices. The FDA's adoption of the ISO's approach to regulation and other changes to the manner in which the FDA regulates medical devices will increase the cost of compliance with those regulations.

Efforts to reduce health care costs are also being made in the private sector. Health care providers have responded by instituting various cost reduction and containment measures.

It is not possible to predict the extent to which Abbott or the health care industry in general might be affected by the matters discussed above.

INTERNATIONAL OPERATIONS

Abbott markets products in approximately 130 countries through affiliates and distributors. Most of the products discussed in the preceding sections of this report are also sold outside the United States. In addition, certain products of a local nature and variations of product lines to meet local regulatory requirements and marketing preferences are manufactured and marketed to customers outside the United States. International operations are subject to certain additional risks inherent in conducting business outside the United States, including price and currency exchange controls, changes in currency exchange rates, limitations on foreign participation in local enterprises, expropriation, nationalization, and other governmental action.

ITEM 2. PROPERTIES

Abbott's corporate offices are located at 100 Abbott Park Road, Abbott Park, Illinois 60064-6400. The locations of Abbott's principal plants are listed below.

Location		Reportable Segments of Products Produced
Abbott Park, Illinois		Pharmaceutical Products, Diagnostic Products, and Hospital Products
Abingdon, England		Diagnostic Products
Altavista, Virginia		Ross Products
Ashland, Ohio		Hospital Products
Austin, Texas		Hospital Products
Barceloneta, Puerto Rico		Pharmaceutical Products and Diagnostic Products
Bedford, Massachusetts		Diagnostic Products
Brockville, Canada		International
Campoverde, Italy		International
Casa Grande, Arizona		Ross Products
Columbus, Ohio		Ross Products
Dartford, England		Diagnostic Products
Delkenheim, Germany		Diagnostic Products
Haina, San Cristoba, Dominican Republic		Hospital Products
Irving, Texas		Diagnostic Products
Katsuyama, Japan		International
Laurinburg, North Carolina		Hospital Products
Liscate, Italy		International
Ludwigshafen, Germany		International
Matsudo, Japan		International
McPherson, Kansas		Hospital Products
Mexico City, Mexico		International
Montreal, Canada		International
Morgan Hill, California		Hospital Products
North Chicago, Illinois		Pharmaceutical Products and Hospital Products
Queenborough, England		International
Redwood City, California		Hospital Products
Rocky Mount, North Carolina		Hospital Products
Salt Lake City, Utah		Hospital Products
San Jose, Costa Rica		Hospital Products
Santa Clara, California		Diagnostic Products
Sligo/Donegal/Cootehill/Finisklin, Ireland		Diagnostic Products and International
Sturgis, Michigan		Ross Products
St. Remy, France		International
Tokyo, Japan		Diagnostic Products
Whippany, New Jersey		Pharmaceutical Products
Zwolle, The Netherlands		International

In addition to the above, Abbott has manufacturing facilities in six other locations in the United States, including Puerto Rico. Outside the United States manufacturing facilities are located in 16 other countries. Abbott's facilities are deemed suitable, provide adequate productive capacity, and generally are utilized at normal and acceptable levels.

In the United States, including Puerto Rico, Abbott owns 10 distribution centers. Abbott also has 16 United States research and development facilities located at: Abbott Park, Illinois; Ashland, Ohio; Bedford, Massachusetts; Columbus, Ohio (two locations); Downers Grove, Illinois; Irving, Texas; Long Grove, Illinois; McPherson, Kansas; Morgan Hill, California; North Chicago, Illinois; Parsippany, New Jersey; Redwood City, California; Santa Clara, California; San Diego, California; and Worchester, Massachusetts. Outside the United States, Abbott has research and development facilities in Argentina, Australia, Canada, Germany, Ireland, Japan, The Netherlands, South Africa, Spain, and the United Kingdom.

The corporate offices, and those principal plants in the United States that are listed above, are owned by Abbott or subsidiaries of Abbott. The remaining manufacturing plants and all other facilities are owned or leased by Abbott or subsidiaries of Abbott. There are no material encumbrances on the properties.

ITEM 3. LEGAL PROCEEDINGS

Abbott is involved in various claims, legal proceedings and investigations, including (as of January 31, 2002), those described below. While it is not feasible to predict the outcome of such pending claims, proceedings, and investigations with certainty, management is of the opinion that their ultimate dispositions should not have a material adverse effect on Abbott's financial position, cash flows, or results of operations.

On January 26, 2001, the United States District Court for the Northern District of Illinois dismissed, with prejudice, all of complaints that had been filed in 1999 on behalf of a purported class of purchasers of Abbott stock and consolidated in "In re Abbott Laboratories Securities Litigation". The United States Court of Appeals for the Seventh Circuit affirmed the dismissal on October 17, 2001. A similar complaint, filed by Lena Gallagher purportedly on behalf of a class of purchasers of ALZA stock, was also dismissed. The plaintiffs had alleged federal securities laws violations by Abbott in connection with Abbott's consent decree with the FDA regarding the manufacturing operations of Abbott's Diagnostic Products division in Lake County, Illinois. Plaintiffs have not sought further review and the litigation is now over.

On March 28, 2001, the United States District Court for the Northern District of Illinois dismissed a number of shareholder derivative suits filed in 1999 against Abbott's directors in connection with Abbott's consent decree with the FDA. These suits had been consolidated as "In re Abbott Laboratories Derivative Shareholder Litigation". The plaintiffs alleged that the directors breached their duty of care by failing to prevent Abbott's alleged regulatory non-compliance and sought unspecified damages from the directors. Plaintiffs have appealed to the United States Court of Appeals for the Seventh Circuit. A virtually identical derivative action filed by Craig Heneghan and Marjory Motiaytis in the Circuit Court of Lake County, Illinois was also dismissed. The plaintiffs did not appeal that dismissal and that litigation is now over.

In the mid-1990s a number of prescription pharmaceutical pricing antitrust suits were brought on behalf of retail pharmacies in federal and state courts as purported class actions alleging that Abbott, other pharmaceutical manufacturers and pharmaceutical wholesalers conspired to fix prices for prescription pharmaceuticals and/or to discriminate in pricing to retail pharmacies in violation of state and federal antitrust laws. The cases seek treble damages, civil penalties, and injunctive and other relief. The federal cases are pending in the United States District Court for the Northern District of Illinois under the Multidistrict Litigation Rules as In re: Brand Name Prescription Drug Antitrust Litigation, MDL 997. In October, 2001, an order was issued remanding the federal cases to their courts of original jurisdiction. Various motions to consolidate these cases are pending. The state cases are pending in Clarke County, Alabama and Santa Clara County, California. The cases that previously were pending in Monterey County, California; San Francisco County, California (5 cases); San Joaquin County, California; Prentiss County,

Mississippi; Burleigh County, North Dakota; San Miguel County, New Mexico; Hughes County, South Dakota; Cocke County, Tennessee; and Marshall County, West Virginia have either been dismissed or settled. An investigation is also being conducted into the same allegations by the Illinois Attorney General.

Three cases were pending in which Abbott seeks to protect its patents for divalproex sodium (a drug that Abbott sells under the trademark Depakote®). The United States District Court for the Northern District of Illinois has granted Abbott's motion for summary judgment against Alra Laboratories, Inc. ("Alra") and has found that Alra's product infringes Abbott's patents. Alra has appealed to the Federal Circuit Court of Appeals. Abbott originally sued Alra on August 28, 1992. The United States District Court for the Northern District of Illinois has also granted Abbott's motion for summary judgment against TorPharm, a division of Apotex, Inc. ("TorPharm") holding that TorPharm's proposed product infringed Abbott's patents. TorPharm has appealed to the Federal Circuit Court of Appeals. Abbott originally sued TorPharm on October 24, 1997. On April 13, 2000, Abbott sued Andrx Corporation, Andrx Pharmaceutical, and Andrx Pharmaceutical, LLC in the United States District Court for the Southern District of Florida alleging patent infringement. The court has stayed the litigation at the request of the parties.

A number of antitrust cases were pending in federal court (including a case filed by the Attorneys General of the States of Colorado, Florida and Kentucky and a case filed by the Attorney General of West Virginia) and various state courts in connection with the settlement of litigation by Abbott involving terazosin hydrochloride, a drug sold by Abbott under the trademark Hytrin®. These cases (which were brought against Abbott, Geneva Pharmaceuticals, Inc. and Zenith Goldline Pharmaceuticals, Inc.) seek actual damages, treble damages, and other relief and allege Abbott violated state or federal antitrust laws and, in some cases, unfair competition laws. The federal court cases are pending in the United States District Court for the Southern District of Florida under the Multidistrict Litigation Rules as In Re: Terazosin Hydrochloride, MDL No. 1317. The state cases include three cases filed in 1999 that have been consolidated and are pending in the Supreme Court of the State of New York, County of New York: Asher and New Utrecht Pharmacy; Drug Mart Pharmacy Company Corp.; and Lisanti. The other state cases are: State of West Virginia, filed in October 2001 in the Circuit Court in Wyoming County, West Virginia; Daniels, filed in May 2001 in Superior Court in Orange County, California; Hopper, filed in October 2001 in state court in the Superior Court in Pitt County, North Carolina; and, Schroeder, filed in January 2002 in the First Judicial District Court in Santa Fe County, New Mexico. Abbott has filed or intends to file a response to each complaint denying all substantive allegations. The State of New York, Office of the Attorney General, is conducting an investigation into the matter.

A number of cases, brought as purported class actions on behalf of individuals or entities, were pending that allege generally that Abbott and other pharmaceutical companies reported false information in connection with certain drugs that are reimbursable under Medicare and Medicaid and generally seek damages, treble damages, disgorgement of profits, restitution and attorneys' fees: State of West Virginia ex rel Darrell V. McGraw, Jr. Attorney General v. Warrick Pharmaceuticals Corp., Dey, Inc. Abbott Laboratories and Abbott Laboratories, Inc., filed in October, 2001 in state court in Kanawha County, West Virginia; Jonathan Peralta, a minor by and through his Guardian ad Litem, Filamena Iberia v. Abbott Laboratories, filed in October, 2001 in state court in Superior Court for the County of Los Angeles, California; Shirley Geller v. Abbott Laboratories, Inc. Baxter International, Glaxo Wellcome, Inc., Smithkline Beecham, Bristol-Myers Squibb Company, and Does 1 through 100, filed in October, 2001 in state court in Superior Court for the County of Los Angeles, California; Citizens for Consumer Justice, et. al. v. Abbott Laboratories, TAP Pharmaceutical Products, Inc. et. al., filed in December 2001 in the United States District Court for Massachusetts; Board of Trustees of Carpenters and Millwrights of Houston and Vicinity Welfare Trust Fund v. Abbott Laboratories, Inc., Baxter International, Baxter Healthcare Corporation, Baxter Pharmaceutical Products, Inc., Bristol-Myers Squibb Company, GlaxoSmithKline Corporation, Glaxo Wellcome, Inc., Pharmacia Corporation, Pharmacia & Upjohn Company, SmithKline Beecham Corporation, and TAP Holdings, Inc., filed in December 2001 in the United States District Court for the Eastern District of Texas; and, State of Nevada v. Abbott Laboratories, Inc., Baxter Pharmaceutical Products, Inc., Bayer Corporation,

Bristol-Myers Squibb Company, Dey, Inc., Glaxosmithkline Corporation, Glaxo Wellcome, Inc., Pharmacia Corporation, Pharmacia & Upjohn Company, Smith Kline Beecham Corporation, TAP Holdings, Inc., Warrick Pharmaceuticals Corporation and Does 1 through 100, filed in January 2002, in the Second Judicial District Court for the State of Nevada for Washoe County, Nevada. In addition, various state and federal agencies, including the United States Department of Justice and the California, Florida, Illinois, Nevada and Texas Attorneys General, are investigating Abbott's marketing and pricing practices with respect to certain Medicare and Medicaid reimbursable products. These civil investigations seek to determine whether these practices violated any laws, including the Federal False Claims Act or constituted fraud in connection with the Medicare and/or Medicaid reimbursement paid to third parties.

The U.S. Attorney's office in the Southern District of Illinois is conducting an investigation of the enteral nutrition industry, including Abbott. On July 24, 2001, Abbott received a subpoena for documents from the U.S. Attorney's office and is cooperating with the investigation.

In its Form 10-Q for the fiscal quarter ending September 30, 2001, Abbott disclosed that TAP reached a settlement with the United States Department of Justice regarding TAP's marketing and pricing practices for leuprolide acetate depot suspension (a drug TAP markets as Lupron Depot®) and that the settlement was subject to court approval. On December 6, 2001, the United States District Court for the District of Massachusetts accepted TAP's plea, imposed the agreed-upon criminal fine and placed TAP on probation for 5 years.

A number of cases have been brought against TAP, Abbott and Takeda Chemical Industries, Ltd. in various courts that generally allege that TAP reported false pricing information in connection with Lupron, a product reimbursable under Medicare. Three are pending in the United States District Court for the Northern District of Illinois: Russano (filed September 7, 2001); Mechanical Contractors—UA Local 119 Welfare Plan (filed September 25, 2001); and Townsend (filed June 12, 2001). Four are pending in the United States District Court for the District of Massachusetts: Beacon Health Plans, Inc. (filed May 24, 2001); Porter (filed May 18, 2001); Maczak (filed on June 19, 2001); and Empire Healthcare, Inc. d/b/a Empire Blue Cross (filed January 2, 2002). The other cases pending in federal court are: Brickly (filed in the United States District Court for the Northern District of Alabama on October 31, 2001); Goetting (filed in the United States District Court for the Southern District of Illinois on October 24, 2001), and Twin City Bakery Workers Health and Welfare Fund (filed in the United States District Court for Minnesota on November 5, 2001). Cases are also pending in various state courts: Campbell-Hubbard (filed on June 27, 2001 in San Francisco, California); Clark (filed on July 20, 2001 in Williamson County, Illinois); Walker (filed October 18, 2001 in Cape May County, New Jersey); and Southerland (filed October 29, 2001 Lenoir County, North Carolina). Each case is brought as a purported class action on behalf of individuals and/or insurance plans that paid any portion of the twenty percent co-payment cost under Medicare for Lupron based on its average wholesale price and seek treble damages, and other relief. Abbott and TAP have filed or intend to file a response in each case denying all substantive allegations.

Three shareholder derivative suits were pending in state court in the Circuit Court of Cook County, Illinois relating to the TAP settlement: Zimmerman v. Leiden (filed October 4, 2001); Thierman v. Leiden (filed October 4, 2001); and Raftery v. Leiden (filed October 17, 2001). The cases name Abbott's current directors (other than R. A. Gonzalez, who was not a director at the time of the settlement) as defendants and allege the defendants breached their fiduciary duties by failing to take action to prevent improper marketing and pricing practices at TAP. The plaintiffs request damages, a return of salaries, reimbursement of their legal fees and costs, and various forms of other relief from those directors on behalf of Abbott. The federal case, Corwin v. Austin, was filed in the United States District Court for the Northern District of Illinois on October 5, 2001. The plaintiffs have filed a motion requesting the court to dismiss the federal case.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

EXECUTIVE OFFICERS OF THE REGISTRANT

Executive officers of Abbott are elected annually by the board of directors. All other officers may be elected by the board or appointed by the chairman of the board. All officers are either elected at the first meeting of the board of directors held after the annual shareholder meeting or appointed by the chairman after that board meeting. Each officer holds office until a successor has been duly elected or appointed and qualified or until the officer's death, resignation, or removal. Vacancies may be filled at any time by the board. Any officer may be removed by the board of directors when, in its judgment, removal would serve the best interests of Abbott. Any officer appointed by the chairman of the board may be removed by the chairman whenever, in the chairman's judgment, removal would serve the best interests of Abbott. A vacancy in any office appointed by the chairman of the board may be filled by the chairman.

Current corporate officers, and their ages as of March 1, 2002, are listed below. The officers' principal occupations and employment from January 1997 to March 1, 2002 and the dates of their first election as officers of Abbott are also shown. Unless otherwise stated, employment was by Abbott for the period indicated. There are no family relationships between any corporate officers or directors.

Miles D. White**, 46

1999 to present — Chairman of the Board and Chief Executive Officer, and Director.

1998 to 1999 — Executive Vice President and Director.

1997 to 1998 — Senior Vice President, Diagnostic Operations.

Elected Corporate Officer — 1993.

Richard A. Gonzalez**, 48

2001 to present — President and Chief Operating Officer, Medical Products Group, and Director.

2000 to 2001 — Executive Vice President, Medical Products.

1998 to 2000 — Senior Vice President, Hospital Products.

1997 to 1998 — Vice President, Abbott HealthSystems.

Elected Corporate Officer — 1995.

Jeffrey M. Leiden**, 46

2001 to present — President and Chief Operating Officer, Pharmaceutical Products Group, and Director.

2000 to 2001 — Executive Vice President, Pharmaceuticals and Chief Scientific Officer, and Director.

2000 — Senior Vice President, Chief Scientific Officer and Director.

1999 to 2000 — Elkan R. Blout Professor of Biological Sciences, Harvard School of Public Health and Professor of Medicine, Harvard Medical School.

1997 to 1999 — Frederick H. Rawson Professor of Medicine and Pathology and Chief of the Section of Cardiology, University of Chicago.

Elected Corporate Officer — 2000.

Christopher B. Begley**, 49

2000 to present — Senior Vice President, Hospital Products.

1999 to 2000 — Senior Vice President, Chemical and Agricultural Products.

1998 to 1999 — Vice President, Abbott HealthSystems.

1997 to 1998 — Vice President, MediSense Operations.

Elected Corporate Officer — 1993.

Thomas D. Brown**, 53

1998 to present — Senior Vice President, Diagnostic Operations.

1997 to 1998 — Vice President, Diagnostic Commercial Operations.

Elected Corporate Officer — 1993.

Jose M. de Lasa**, 60

1997 to present — Senior Vice President, Secretary and General Counsel.

Elected Corporate Officer — 1994.

William G. Dempsey**, 50

1999 to present — Senior Vice President, International Operations.

1998 to 1999 — Senior Vice President, Chemical and Agricultural Products.

1997 to 1998 — Vice President, Hospital Products Business Sector.

Elected Corporate Officer — 1996.

Gary L. Flynn**, 52

2001 to present — Senior Vice President, Ross Products.

1999 to 2001 — Vice President and Controller.

1997 to 1999 — Divisional Vice President and Controller, Ross Products.

Elected Corporate Officer — 1999.

Thomas C. Freyman**, 47

2001 to present — Senior Vice President, Finance and Chief Financial Officer.

1999 to 2001 — Vice President, Hospital Products Controller.

1997 to 1999 — Vice President and Treasurer.

Elected Corporate Officer — 1991.

David B. Goffredo**, 47

2001 to present — Senior Vice President, Pharmaceutical Operations.

1998 to 2001 — Vice President, European Operations.

1997 to 1998 — Vice President, Pharmaceutical Products, Marketing and Sales.

Elected Corporate Officer — 1995.

Thomas M. Wascoe**, 55

1999 to present — Senior Vice President, Human Resources.

1997 to 1999 — Divisional Vice President, Human Resources, Diagnostic Products.

Elected Corporate Officer — 1999.

Lance B. Wyatt**, 57

2000 to present — Senior Vice President, Specialty Products.

1997 to 2000 — Vice President, Corporate Engineering.

Elected Corporate Officer — 1995.

Catherine V. Babington, 49

1997 to present — Vice President, Investor Relations and Public Affairs.

Elected Corporate Officer — 1995.

Mark E. Barmak, 60

2000 to present — Vice President, Government Affairs.

1997 to 2000 — Vice President, Litigation and Government Affairs.

Elected Corporate Officer — 1995.

Michael G. Beatrice, 54

1999 to present — Vice President, Corporate Regulatory and Quality Science.

1997 to 1999 — Executive Vice President and General Manager, Quintiles Strategic Product Development Consulting Services (global regulatory and quality systems consultation service organization).

Elected Corporate Officer — 1999.

Douglas C. Bryant, 44

2002 to present — Vice President, Diagnostic Operations, Europe, Africa and Middle East.

1998 to 2002 — Vice President, Diagnostic Operations, Asia and Pacific.

1997 to 1998 — Commercial Director, Asia and Pacific, Diagnostic Products.

1997 — General Manager, United Kingdom and Ireland, Diagnostic Products.

Elected Corporate Officer — 1998.

Gary R. Byers, 60

1997 to present — Vice President, Internal Audit.

Elected Corporate Officer — 1993.

Thomas F. Chen, 52

1998 to present — Vice President, Pacific, Asia, and Africa Operations.

1997 to 1998 — Regional Director, Taiwan and People's Republic of China.

Elected Corporate Officer — 1998.

Michael J. Collins, 45

2001 to present — Vice President, Diagnostic Operations, U.S.

1998 to 2001 — Divisional Vice President and General Manager, MediSense Operations.

1997 to 1998 — Divisional Vice President, Sales, Diagnostic Products.

Elected Corporate Officer — 2001.

Edward J. Fiorentino, 43

2001 to present — Vice President, MediSense.

1998 to 2001 — Vice President, Pharmaceutical Products, Marketing and Sales.

1997 to 1998 — Divisional Vice President, Marketing, Pharmaceutical Products.

Elected Corporate Officer — 1998.

Stephen R. Fussell, 44

1999 to present — Vice President, Compensation and Development.

1997 to 1999 — Divisional Vice President, Compensation and Benefits.

Elected Corporate Officer — 1999.

Mark F. Gorman, 44

2002 to present — Vice President, Ross Products, Medical Nutritionals.

2001 to 2002 — Divisional Vice President, Europe, Abbott International Division.

2000 to 2001 — Divisional Vice President, Japan, Abbott International Division.

1999 to 2000 — Affiliate General Manager, Puerto Rico, Abbott International Division.

1996 to 1999 — Affiliate General Manager, Denmark, Iceland, and Norway, Abbott International Division.

Elected Corporate Officer — 2002.

Robert B. Hance, 42

2002 to present — Vice President, Vascular Devices.

1999 to 2002 — Vice President, Diagnostic Operations, Europe, Africa and Middle East.

1997 to 1999 — Divisional Vice President, European Region, Diagnostic Products.

1997 — Area Business Development Director, Europe, Middle East and Africa, Diagnostic Products.

Elected Corporate Officer — 1999.

Guillermo A. Herrera, 48

2001 to present — Vice President, European Operations.

1998 to 2001 — Vice President, Latin America and Canada Operations.

1997 to 1998 — Vice President, Latin America Operations.

Elected Corporate Officer — 1996.

Terrence C. Kearney, 48

2001 to present — Vice President and Treasurer.

1997 to 2001 — Divisional Vice President and Controller, International Division.

Elected Corporate Officer — 2001.

James J. Koziarz, 53

1997 to present — Vice President, Diagnostic Products Research and Development.

Elected Corporate Officer — 1993.

John C. Landgraf, 49

2000 to present — Vice President, Corporate Engineering.

1997 to 2000 — Divisional Vice President, Manufacturing, Abbott International Division.

1997 — Divisional Vice President, Commercial Operations, Chemical and Agricultural Products.

Elected Corporate Officer — 2000.

Elaine R. Leavenworth, 43

2001 to present — Vice President, Washington Government Affairs.

1999 to 2001 — Vice President, Abbott HealthSystems.

1997 to 1999 — Divisional Vice President, Licensing and New Business Development, Abbott International Division.

1997 — Director, Licensing and Acquisitions, Abbott International Division.

Elected Corporate Officer — 1999.

Gerald Lema, 41

2002 to present — Vice President, Diagnostic Operations, Asia and Pacific.

1999 to 2002 — Divisional Vice President, Europe, Africa and Middle East, Diagnostic Products.

1996 to 1999 — Affiliate General Manager, Turkey, Abbott International Division.

Elected Corporate Officer — 2002.

John M. Leonard, 44

2001 to present — Vice President, Global Pharmaceutical Drug Development.

1999 to 2001 — Vice President, Pharmaceutical Development.

1997 to 1999 — Divisional Vice President, Pharmaceutical Development, Pharmaceutical Products Research and Development.

1997 — Therapeutic Area Venture Head, Pharmaceutical Products Research and Development.

Elected Corporate Officer — 1999.

Holger Liepmann, 50

2001 to present — Vice President, Japan Operations, Abbott International Division.

1999 to 2001 — Divisional Vice President and Regional Director, Europe.

1997 to 1999 — General Manager.

Elected Corporate Officer — 2001.

Greg W. Linder**, 45

2001 to present — Vice President and Controller.

1999 to 2001 — Vice President and Treasurer.

1997 to 1999 — Divisional Vice President and Controller, Hospital Products.

Elected Corporate Officer — 1999.

John F. Lussen, 60

1997 to present — Vice President, Taxes.

Elected Corporate Officer — 1985.

Richard J. Marasco, 46

2001 to present — Vice President, Ross Products, Pediatrics.

1999 to 2001 — Divisional Vice President and General Manager, Neuroscience, Pharmaceutical Products Division.

1999 — Divisional Vice President, Marketing.

1997 to 1999 — Regional Manager, Middle East, Africa, Turkey.

Elected Corporate Officer — 2001.

Heather L. Mason, 42

2001 to present — Vice President, Pharmaceutical Products, Specialty Operations.

2001 — Divisional Vice President and General Manager Diabetes/Metabolics, Pharmaceutical Products Division.

2000 to 2001 — Divisional Vice President, Oncology and Managed Healthcare.

1998 to 2000 — Divisional Vice President, Managed Healthcare.

1997 to 1998 — Business Unit Director, Managed Healthcare.

1997 — National Accounts Director, Managed Healthcare.

Elected Corporate Officer — 2001.

P. Loreen Mershimer, 47

2001 to present — Vice President, Hospital Products Business Sector.

1998 to 2001 — Divisional Vice President, Hospital Business Systems.

1997 to 1998 — General Manager, Renal Care.

Elected Corporate Officer — 2001.

Edward L. Michael, 45

1999 to present — Vice President, Diagnostic Assays and Systems.

1997 to 1999 — Vice President, Diagnostic Operations, Europe, Africa, and Middle East.

1997 — Director, Area Operations and Scientific Development.

Elected Corporate Officer — 1997.

Karen L. Miller, 48

2000 to present — Vice President, Information Technology.

1997 to 2000 — Divisional Vice President, Information Systems, Diagnostic Products.

1997 — Director, Business Systems, Diagnostic Products.

Elected Corporate Officer — 2000.

Joseph M. Nemmers Jr., 48

2001 to present — Vice President, Hospital Products Business Sector.

2001 — Divisional Vice President, Acquisition Integration Management, International Division.

1999 to 2001 — Vice President and Executive Director, Clara Abbott Foundation.

1999 — Director, Marketing & Sales Service.

1998 to 1999 — Director, Field Operations.

1997 to 1998 — Director, Materials Management, Pharmaceutical Products Division.

Elected Corporate Officer — 2001.

Daniel W. Norbeck, 43

2001 to present — Vice President, Global Pharmaceutical Discovery.

1999 to 2001 — Vice President, Pharmaceutical Discovery.

1998 to 1999 — Divisional Vice President, Discovery, Pharmaceutical Products Research and Development.

1997 to 1998 — Divisional Vice President, Area Head, Pharmaceutical Products Research and Development.

Elected Corporate Officer — 1999.

Edward A. Ogunro, 49

1999 to present — Vice President, Hospital Products Research and Development, Medical and Regulatory Affairs.

1997 to 1999 — Divisional Vice President, Immunodiagnostics and Chemistry, Diagnostic Products.

Elected Corporate Officer — 1999.

Roberto Reyes, 48

2001 to present — Vice President, Latin America and Canada.

1998 to 2001 — Divisional Vice President and General Manager, Latin America and Canada, Diagnostic Products.

1997 to 1998 — General Manager, Diagnostic Products.

Elected Corporate Officer — 2001.

Mary T. Szela, 38

2001 to present — Vice President, Pharmaceutical Products, Primary Care Operations.

2001 — Vice President, Hospital Products Business Sector.

1998 to 2001 — Divisional Vice President, Hospital Products Business Sector.

1997 to 1998 — General Manager, Anesthesia, Hospital Products.

Elected Corporate Officer — 2001.

Marcia A. Thomas, 54

1999 to present — Vice President, Diagnostic Quality Assurance, Regulatory Affairs and Compliance.

1997 to 1999 — Vice President, Quality Assurance and Regulatory Affairs.

Elected Corporate Officer — 1996.

James L. Tyree, 48

2001 to present — Vice President, Global Licensing / New Business Development.

2000 to 2001 — Divisional Vice President, Licensing / New Business Development.

1997 to 2000 — Divisional Vice President and General Manager, Abbott International Division.

1997 — Deputy General Manager, Japan.

1997 — President of Sugen, Inc. (A bio-pharmaceutical corporation).

Elected Corporate Officer — 2001.

Steven J. Weger Jr., 57

1997 to present — Vice President, Corporate Planning and Development.

Elected Corporate Officer — 1996.

Susan M. Widner, 45

2001 to present — Vice President, Abbott HealthSystems.

1998 to 2001 — Vice President, Diagnostic Operations, U.S. and Canada.

1997 to 1998 — Divisional Vice President, Worldwide Marketing, Diagnostic Products.

Elected Corporate Officer — 1998.

**: Pursuant to Item 401(b) of Regulation S-K, Abbott has identified these persons as "executive officers" within the meaning of Item 401(b).

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Principal Market

The principal market for Abbott's common shares is the New York Stock Exchange. Shares are also listed on the Chicago Stock Exchange and the Pacific Exchange and are traded on the Boston, Cincinnati, and Philadelphia Exchanges. Outside the United States, Abbott's shares are listed on the London Stock Exchange and the Swiss Stock Exchange.

	Market Price Per Share
	2001		2000
	high	low	high	low
First Quarter	50.55	42.00	36¹/2	29³/8
Second Quarter	54.00	43.43	44¹¹/16	35³/8
Third Quarter	53.82	46.35	49	39⁵/16
Fourth Quarter	57.17	50.40	56¹/4	45⁷/16

Market prices are as reported by the New York Stock Exchange composite transaction reporting system.

Shareholders

There were 97,760 shareholders of record of Abbott common shares as of December 31, 2001.

Dividends

Quarterly dividends of $.21 per share and $.19 per share were declared on common shares in 2001 and 2000, respectively. Abbott Laboratories is an Illinois High Impact Business (HIB) and is located in a federal Foreign Trade Sub-Zone (Sub-Zone 22F). Effective June 15, 2001, dividends may be eligible for a subtraction from base income for Illinois income tax purposes. If you have questions, please contact your tax advisor.

ITEM 6. SELECTED FINANCIAL DATA

	Year ended December 31
	2001		2000		1999		1998		1997
	(dollars in millions, except per share data)
Net sales	$	16,285.2	$	13,745.9	$	13,177.6	$	12,512.7	$	11,889.3
Net earnings		1,550.4		2,786.0		2,445.8		2,334.4		2,079.1
Basic earnings per common share		1.00		1.80		1.59		1.52		1.34
Diluted earnings per common share		0.99		1.78		1.57		1.50		1.32
Total assets		23,296.4		15,283.3		14,471.0		13,259.9		12,101.8
Long-term debt		4,335.5		1,076.4		1,336.8		1,339.7		938.0
Cash dividends declared per common share		.84		.76		.68		.60		.54

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Financial Review

Results of Operations

Sales

The following table details the components of sales growth by segment for the last three years:

			Components of Change %
	Total % Change		Components of Change %
	Total % Change		Price		Volume	Exchange
Total Net Sales
2001 vs. 2000	18.5		0.7		20.1	(2.3	)
2000 vs. 1999	4.3		(0.3	)	6.6	(2.0	)
1999 vs. 1998	5.3		(0.1	)	6.1	(0.7	)
Total U.S.
2001 vs. 2000	17.2		0.7		16.5	—
2000 vs. 1999	6.1		(0.7	)	6.8	—
1999 vs. 1998	4.8		(0.5	)	5.3	—
Total International
2001 vs. 2000	20.7		0.6		26.1	(6.0	)
2000 vs. 1999	1.5		0.4		6.3	(5.2	)
1999 vs. 1998	6.1		0.6		7.4	(1.9	)
Pharmaceutical Products Segment (a)
2001 vs. 2000	45.7		2.8		42.9	—
2000 vs. 1999	7.6		(2.5	)	10.1	—
1999 vs. 1998	2.7		—		2.7	—
Diagnostic Products Segment
2001 vs. 2000	0.2		(0.2	)	4.2	(3.8	)
2000 vs. 1999	(2.9	)	—		0.7	(3.6	)
1999 vs. 1998	8.9		(1.2	)	10.7	(0.6	)
Hospital Products Segment
2001 vs. 2000	10.8		(1.2	)	12.0	—
2000 vs. 1999	11.5		(1.7	)	13.2	—
1999 vs. 1998	2.7		(1.5	)	4.2	—
Ross Products Segment
2001 vs. 2000	2.6		2.1		0.5	—
2000 vs. 1999	4.0		1.6		2.4	—
1999 vs. 1998	6.0		0.9		5.1	—
International Segment (a)
2001 vs. 2000	33.6		0.4		39.2	(6.0	)
2000 vs. 1999	3.2		0.9		7.1	(4.8	)
1999 vs. 1998	6.8		1.8		7.4	(2.4	)

(a): In 2001, Pharmaceutical and International segment sales were favorably impacted by the acquisition of the pharmaceutical business of BASF.

Sales of new products in 2001 are estimated to be $939 million, excluding the effect of the acquisition of the pharmaceutical business of BASF. Increases, as disclosed in Note 14, in adult nutritionals in all three years and in anti-infectives in 1999 were primarily due to unit increases. The decreases in anti-infectives for 2001 and 2000 were due primarily to unit decreases.

Operating Earnings

Gross profit margins (sales less cost of products sold, including distribution expenses) were 52.4 percent of net sales in 2001 and 54.6 percent in 2000 and 1999. The decrease in the gross profit margin in 2001 was due primarily to increased goodwill and intangibles amortization as a result of the acquisition of the pharmaceutical business of BASF and one-time integration charges, partially offset by favorable product mix. Gross profit margins in all years were also affected by productivity improvements, partially offset by the negative effect of the relatively stronger U.S. dollar, higher project expenses for new products, higher manufacturing capacity costs for anticipated unit growth, and the effects of inflation and competitive pricing pressures. In the U.S., states receive price rebates from manufacturers of infant formula under the federally subsidized Special Supplemental Food Program for Women, Infants, and Children. There are also rebate programs for pharmaceutical products. These rebate programs continue to have a negative effect on the gross profit margins of the Ross and Pharmaceutical segments.

As a result of the consent decree entered into with the U.S. government in 1999, as discussed in Note 17, Abbott is prohibited from manufacturing or distributing certain diagnostic products until Abbott ensures the processes in its Lake County, Ill., diagnostics manufacturing operations conform with the U.S. Food and Drug Administration's (FDA) Quality System Regulation (QSR). Under the terms of the amended consent decree, Abbott must ensure its diagnostics manufacturing operations are in conformance with the QSR by various dates through January 15, 2001. The FDA will determine Abbott's conformance with the QSR after an inspection of Abbott's facilities in the fourth quarter of 2001 and the first quarter of 2002. If the FDA concludes that the operations are not in conformance with the QSR, Abbott may be subject to additional costs.

The FDA announced in 1997 that all manufacturers of levothyroxine drug products (Synthroid), most of which had been on the market for many years, would be required as part of the agency's regulatory process to file either a New Drug Application (NDA), or a citizen petition showing that their products are not new drugs and therefore do not require an NDA. Synthroid's manufacturer at the time, Knoll Pharmaceutical Company, which Abbott acquired in March 2001, exercised the citizen petition option because of Synthroid's long history and excellent track record. On April 26, 2001, the FDA denied Knoll's petition. Abbott promptly responded to the FDA that Abbott would submit an NDA for Synthroid, which Abbott submitted on August 1, 2001. Abbott expects that the NDA review process will take approximately 10 to 12 months from the date the FDA filed the NDA. On July 11, 2001, the FDA published guidance on the distribution of levothyroxine sodium products during the NDA review process. The guidance allows Synthroid to remain on the market while the agency reviews the NDA Abbott has submitted for Synthroid. However, the guidance also requires that levothyroxine sodium products without approved NDAs are subject to gradually reducing quarterly limits on distribution as measured against the average monthly distribution during the six months ended August 1, 2001. By August 14, 2003, all levothyroxine sodium products without approved NDAs would be required to cease distribution. Upon NDA approval, the limits on distribution will be removed. In 2001, Abbott recorded U.S. net sales of Synthroid of $445 million.

Research and development expense was $1.6 billion in 2001 and represented 9.7 percent of net sales, compared to 9.8 percent of net sales in 2000, and 9.1 percent of net sales in 1999. The increase in research and development expenses in 2001 was concentrated primarily on pharmaceutical products. Research and development expenditures continue to be concentrated on pharmaceutical and diagnostic products.

Selling, general and administrative expenses increased 29.0 percent in 2001, net of the favorable effect of the relatively stronger U.S. dollar of 2.4 percent, compared to increases of 1.3 percent in 2000, and

3.5 percent in 1999. The increase in selling, general and administration in 2001 was due primarily to the acquisition of the pharmaceutical business of BASF. The increases, net of exchange, in all three years also reflect inflation and additional selling and marketing support primarily in the International, Pharmaceutical and Hospital segments.

Abbott's income from TAP Pharmaceutical Products Inc. (TAP) Joint Venture was adversely affected in 2001 and 2000 as a result of the settlement of the U.S. Department of Justice investigation of TAP's marketing of Lupron, as discussed in Note 16.

Interest (Income) Expense, Net

Net interest expense increased in 2001 primarily due to a higher level of borrowings as a result of the acquisition of the pharmaceutical business of BASF. Net interest expense decreased in 2000 and 1999 due to a lower level of borrowings and a higher level of investment securities.

Taxes on Earnings

The effective income tax rates were 17.7 percent in 2001, 27.0 percent in 2000, and 28.0 percent in 1999. The 2001 tax rate is lower than the 2000 tax rate due primarily to the effect of the benefit of tax exemptions in several taxing jurisdictions in relation to Abbott's decreased pretax income in 2001 compared to 2000. Excluding the effects of the acquisitions of the pharmaceutical business of BASF and Vysis, Inc., the effective tax rate for 2001 would have been approximately 26 percent. The 2000 tax rate was lower than the 1999 tax rate due, in part, to the domestic dividend exclusion applicable to the increased earnings of TAP Pharmaceutical Products Inc.

Earnings

Abbott recorded certain nonrecurring charges to earnings in 2001 primarily related to the acquisitions of the pharmaceutical business of BASF and of Vysis, Inc. and other items. Management's analysis of these nonrecurring items compared to reported net income and diluted earnings per share in accordance with generally accepted accounting principles (GAAP) is as follows:

Description	Amount
	(in millions, except per share amounts)
Acquired in-process research and development	$	1,330
TAP Pharmaceutical Products Inc. joint venture income adjustment relating to Lupron marketing settlements		289
Acquisition related charges other than acquired in-process research and development		262
Equity impairments and other charges		102

Total pretax nonrecurring charges		1,983
Taxes on nonrecurring charges		590

Net income effect of nonrecurring charges		1,393
Net income as reported (GAAP)		1,550

Net income excluding nonrecurring charges	$	2,943

Diluted earnings per share effect of nonrecurring charges	$	0.89
Diluted earnings per share as reported (GAAP)		0.99

Diluted earnings per share excluding nonrecurring charges	$	1.88

Financial Condition

Cash Flow

Abbott expects annual cash flow from operating activities to continue to approximate or exceed Abbott's capital expenditures and cash dividends.

Abbott does not have material exposures to off-balance sheet arrangements, including special purpose entities, or activities that include non-exchange-traded contracts accounted for at fair value.

Debt and Capital

At December 31, 2001, Abbott's bond ratings were AA by Standard & Poor's Corporation and Aa3 by Moody's Investors Service. Abbott has readily available financial resources, including unused domestic lines of credit of $3.0 billion, which support domestic commercial paper borrowing arrangements. As a result of the acquisition of the pharmaceutical business of BASF, Abbott's credit ratings were adjusted to reflect the increased borrowings that financed the acquisition.

Under a registration statement filed with the Securities and Exchange Commission in 2001, Abbott issued $3.250 billion of long-term debt securities. Proceeds from this issuance were used to reduce short-term commercial paper borrowings, which were primarily used to finance the acquisition of the pharmaceutical business of BASF. Under the registration statement, Abbott may issue $250 million in the future in the form of debt securities or common shares without par value.

Working Capital

At December 31, 2001, 2000, and 1999, working capital was $492 million, $3.1 billion, and $1.9 billion, respectively.

Capital Expenditures

Capital expenditures of $1.2 billion in 2001, $1.0 billion in 2000, and $987 million in 1999 were principally for upgrading and expanding manufacturing, research and development, and administrative support facilities in all segments, and for laboratory instruments and hospital equipment placed with customers. This level of capital expenditures is expected to continue, with an increased proportion dedicated to the Hospital, International and Diagnostic segments.

Legislative Issues

Abbott's primary markets are highly competitive and subject to substantial government regulation. Abbott expects debate to continue at both the federal and state levels over the availability, method of delivery, and payment for health care products and services. If legislation is enacted, it could have the effect of reducing prices, or reducing the rate of price increases, for medical products and services. International operations are also subject to a significant degree of government regulation. It is not possible to predict the extent to which Abbott or the health care industry in general might be adversely affected by these factors in the future.

Business Combinations and Divestiture

On March 2, 2001, Abbott acquired, for cash, the pharmaceutical business of BASF, which includes the global operations of Knoll Pharmaceuticals, for approximately $7.2 billion. This acquisition was

financed primarily with short- and long-term borrowings. The acquisition is accounted for under the purchase method of accounting. The allocation of the acquisition cost is as follows (in billions of dollars):

Acquired intangible assets, primarily product rights for currently marketed products	$	3.5
Goodwill		2.4
Acquired in-process research and development		1.2
Deferred income taxes resulting primarily from nondeductible intangibles		(0.4	)
Acquired net tangible assets		0.5

Total allocation of acquisition cost	$	7.2

The acquisition cost has been allocated to intangible assets, goodwill, acquired in-process research and development, and net tangible assets based on an independent appraisal of fair values as of the date of acquisition. Product rights for currently marketed products will be amortized on a straight-line basis over 10 to 16 years (average 13 years), and goodwill was amortized in 2001 on a straight-line basis over 20 years. Acquired in-process research and development was charged to expense in 2001. The net tangible assets acquired consist primarily of property and equipment of approximately $630 million, trade accounts receivable of approximately $402 million, and inventories of approximately $275 million, net of assumed liabilities, primarily trade accounts payable and other liabilities.

Prior to the date of acquisition, Abbott began to plan for the integration and restructuring of the business. In 2001, Abbott formally approved several restructuring plans and is continuing to assess and formulate further restructuring plans for specific business activities. Certain costs of implementing formally approved plans have been included in the reported amount of goodwill above. Abbott expects that additional restructuring plans will be finalized and formally approved, which will increase the amount of reported goodwill above. In addition, integration of the acquired operations will result in charges that will be recorded against earnings in the periods in which the integration plans are finalized.

The following unaudited pro forma financial information reflects the consolidated results of operations of Abbott as if the acquisition of the pharmaceutical business of BASF had taken place on January 1, 2000. The pro forma information includes primarily adjustments for acquired in-process research and development, amortization of product rights for currently marketed products, interest expense for estimated acquisition debt, and amortization of goodwill. The pro forma financial information is not necessarily indicative of the results of operations as it would have been had the transaction been effected on the assumed date.

	2001 Pro Forma		2000 Pro Forma
	(*in billions, except per share amounts)*
Net sales	$	16.7	$	16.1
Net income		2.3		2.5
Diluted earnings per common share		1.46		1.62

In November 2001, Abbott acquired, for cash, all of the outstanding common stock of Vysis, Inc., a leading genomic disease management company. Of the cash acquisition cost of approximately $362 million, $162 million was allocated to developed technology, which will be amortized over 15 years, and $143 million was charged against earnings in 2001 for acquired in-process research and development. The remaining acquisition cost was allocated to net tangible assets and goodwill. Had this acquisition taken place on January 1 of the previous year, consolidated sales and income would not have been significantly different from reported amounts.

In 2000, Abbott sold its agricultural products business to Sumitomo Chemical Co., Ltd., resulting in a $138 million gain.

Restructuring Plans
(in millions of dollars)

In 2001, Abbott began implementing restructuring plans related to the operations of the acquired pharmaceutical business of BASF. In addition, Abbott announced in 2001 that it was closing one of its manufacturing operations and relocating production to other Abbott facilities. The following summarizes the restructuring activity:

	Employee-Related and Other			Asset Impairments			Total
Restructuring charges	$	195.5		$	11.5		$	207.0
Payments and other activity		(106.7	)		(11.5	)		(118.2	)

Accrued balance at December 31, 2001	$	88.8		$	—		$	88.8

Of the $207.0 total restructuring charges, $155.5 has been recorded as goodwill associated with the acquisition of the pharmaceutical business of BASF. Of the amount expensed, approximately $35.8 is classified as cost of products sold, $13.3 as selling, general and administrative, and $2.4 as research and development. Employee-related costs are primarily severance pay, relocation of former BASF employees and outplacement services. Approved restructuring plans cover 2,393 employees, of which approximately 1,200 were severed by year end. Employee groups covered under the restructuring plans include manufacturing, research and development, and sales and administrative-related functions.

Recently Issued Accounting Standards

In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires that all business combinations initiated after June 30, 2001, be accounted for using the purchase method of accounting. With the adoption of SFAS No. 142 on January 1, 2002, goodwill will no longer be subject to amortization over its estimated useful life. Goodwill will be subject to at least an annual assessment of impairment by applying a fair-value-based test, beginning on the date of adoption of the new standard. Abbott is assessing the potential impact, if any, that may be caused by the assessment of impairment requirements of SFAS No. 142. Abbott estimates that annual goodwill amortization in 2001 subject to the new rule would have been approximately $80 million to $100 million on an after-tax basis.

In addition, in 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations," and No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." Adoption of the provisions of these statements will not have a material effect on the financial statements of Abbott.

Private Securities Litigation Reform Act of 1995 — A Caution Concerning Forward-Looking Statements

Under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, Abbott cautions investors that any forward-looking statements or projections made by Abbott, including those made in this document, are subject to risks and uncertainties that may cause actual results to differ materially from those projected. Economic, competitive, governmental, technological and other factors that may affect Abbott's operations are discussed in Exhibit 99.1 to the Annual Report on Form 10-K.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Financial Instruments and Risk Management
(Unaudited)

Interest Rate Sensitive Financial Instruments

In 2001, Abbott entered into interest rate hedge contracts totaling $2.450 billion to manage its exposure to changes in the fair value of $2.450 billion of long-term debt due in July 2004 and 2006. Abbott does not use derivative financial instruments, such as interest rate swaps, to manage its exposure to changes in interest rates for its investment securities. As of December 31, 2001, and 2000, Abbott had $2.9 billion and $185 million, respectively, of domestic commercial paper outstanding with an average interest rate of 1.8% and 6.5%, respectively, and with an average remaining life of 14 days and three days, respectively. The fair market value of long-term debt at December 31, 2001, and 2000, amounted to $4.5 billion and $1.3 billion, respectively, and consisted primarily of fixed-rate (average of 5.5% and 6.1%, respectively) debt with maturities through 2023. As of December 31, 2001, and 2000, the fair market value of current and long-term investment securities maturing through 2023 amounted to $345 million and $571 million, respectively. Approximately 13 percent and 10 percent of these investments as of December 31, 2001, and 2000, respectively, have fixed interest rates (average of 7.4% and 6.9%, respectively), while the remaining investments have variable rates. A hypothetical 100-basis point change in the interest rates would not have a material effect on cash flows, income or market values. (A 100-basis point change is a reasonably possible near-term change in rates.)

Market Price Sensitive Financial Instruments

Abbott maintains a portfolio of available-for-sale equity securities from strategic technology acquisitions. The market value of these investments was approximately $262 million and $215 million, respectively, as of December 31, 2001, and 2000. A hypothetical 20 percent decrease in the share prices of these investments would decrease the fair value by approximately $52 million. (A 20 percent decrease is a reasonably possible near-term change in share prices.)

Non-Exchange-Traded Equity Secruities

Abbott maintains a portfolio of equity securities from strategic technology acquisitions that are not traded on public stock exchanges. The carrying value of these investments was approximately $81 million and $75 million, respectively, as of December 31, 2001, and 2000. Abbott monitors these investments for other than temporary declines in estimated value, and charges impairment losses to income when an other than temporary decline in estimated value occurs.

Foreign Currency Sensitive Financial Instruments

Abbott enters into foreign currency forward exchange contracts to manage its exposure to foreign currency denominated intercompany loans and trade payables and third-party trade payables and receivables. The contracts are marked-to-market, and resulting gains or losses are reflected in income and are generally offset by losses or gains on the foreign currency exposure being managed. At December 31, 2001, and 2000, Abbott held $3.1 billion and $1.3 billion, respectively, of such contracts, which all mature in the next calendar year.

In addition, certain Abbott foreign subsidiaries enter into foreign currency forward exchange contracts to manage exposures to changes in foreign exchange rates for anticipated intercompany purchases by those subsidiaries whose functional currencies are not the U.S. dollar. These contracts are designated as cash flow hedges of the variability of the cash flows due to changes in the foreign exchange rates and are marked-to-market with the resulting gains or losses reflected in accumulated other comprehensive (income) loss. Gains or losses will be included in cost of sales at the time the products are

sold, generally through the end of 2002. At December 31, 2001, Abbott held $571 million of such contracts, which all mature in the next calendar year.

The following table reflects the total foreign currency forward contracts outstanding at December 31, 2001, and 2000:

	2001						2000
	Contract Amount		Average Exchange Rate	Fair and Carrying Value			Contract Amount		Average Exchange Rate	Fair and Carrying Value
	*(dollars in millions)*
Receive primarily U.S. Dollars in exchange for the following currencies:
Euro	$	2,381	0.91	$	(21.9	)	$	318	0.87	$	1.6
British Pound		752	0.71		(4.5	)		269	0.67		13.0
Japanese Yen		208	120.4		2.8			212	106.5		5.3
All other currencies		352	N/A		0.9			472	N/A		1.4

Total	$	3,693		$	(22.7	)	$	1,271		$	21.3

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

		Page
Financial Statements:
	Consolidated Statement of Earnings and Comprehensive Income	32
	Consolidated Statement of Cash Flows	33
	Consolidated Balance Sheet	34
	Consolidated Statement of Shareholders' Investment	36
	Notes to Consolidated Financial Statements	37
Report of Independent Public Accountants		53
Management Report on Financial Statements		53

Abbott Laboratories and Subsidiaries

Consolidated Statement of Earnings and Comprehensive Income
(dollars and shares in thousands except per share data)

	Year Ended December 31
	2001			2000			1999
Net Sales	$	16,285,246			13,745,916		$	13,177,625

Cost of products sold		7,748,382			6,238,646			5,977,183
Research and development		1,577,552			1,351,024			1,193,963
Acquired in-process research and development		1,330,400			—			—
Selling, general and administrative		3,734,880			2,894,178			2,857,104
Gain on sale of agricultural business		—			(138,507	)		—

Total Operating Cost and Expenses		14,391,214			10,345,341			10,028,250

Operating Earnings		1,894,032			3,400,575			3,149,375
Net interest expense		234,759			23,221			81,765
Income from TAP Pharmaceutical Products Inc. joint venture		(333,767	)		(481,340	)		(390,152	)
Net foreign exchange (gain) loss		31,351			7,287			26,238
Other (income) expense, net		78,541			35,000			34,636

Earnings Before Taxes		1,883,148			3,816,407			3,396,888
Taxes on earnings		332,758			1,030,430			951,129

Net Earnings	$	1,550,390		$	2,785,977		$	2,445,759

Basic Earnings Per Common Share	$	1.00		$	1.80		$	1.59

Diluted Earnings Per Common Share	$	0.99		$	1.78		$	1.57

Average Number of Common Shares Outstanding Used for Basic Earnings Per Common Share		1,550,408			1,548,015			1,536,762
Dilutive Common Stock Options		15,555			17,564			20,893

Average Number of Common Shares Outstanding Plus Dilutive Common Stock Options		1,565,963			1,565,579			1,557,655

Outstanding Common Stock Options Having No Dilutive Effect		768			1,038			1,807

Comprehensive Income, net of tax:
Foreign currency translation adjustments	$	(5,029	)	$	(198,951	)	$	(171,231	)
Unrealized gains (losses) on marketable equity securities		21,107			18,752			(6,377	)
Net gains (losses) on derivative instruments designated as cash flow hedges		11,408			—			—
Reclassification adjustments for realized gains		(18,984	)		(17,712	)		—

Other comprehensive income (loss)		8,502			(197,911	)		(177,608	)
Net Earnings		1,550,390			2,785,977			2,445,759

Comprehensive Income	$	1,558,892		$	2,588,066		$	2,268,151

Supplemental Comprehensive Income Information, net of tax:
Cumulative foreign currency translation loss adjustments	$	635,922		$	630,893		$	431,942
Cumulative unrealized (gains) on marketable equity securities		(29,804	)		(27,681	)		(26,641	)
Cumulative (gains) losses on derivative instruments designated as cash flow hedges		(11,408	)		—			—

The accompanying notes to consolidated financial statements are an integral part of this statement.

Abbott Laboratories and Subsidiaries

Consolidated Statement of Cash Flows
(dollars in thousands)

	Year Ended December 31
	2001			2000			1999
Cash Flow From (Used in) Operating Activities:
Net earnings	$	1,550,390		$	2,785,977		$	2,445,759
Adjustments to reconcile net earnings to net cash from operating activities—
Depreciation and amortization		1,168,018			827,431			828,006
Acquired in-process research and development		1,330,400			—			—
Investing and financing (gains) losses, net		159,936			69,914			93,723
Trade receivables		(279,167	)		(260,790	)		(176,347	)
Inventories		(184,953	)		(361,377	)		(147,778	)
Prepaid expenses and other assets		(962,005	)		(397,714	)		(521,265	)
Trade accounts payable and other liabilities		732,482			621,078			299,048
Income taxes payable		51,747			(46,394	)		213,936
Gain on sale of agricultural business		—			(138,507	)		—

Net Cash From Operating Activities		3,566,848			3,099,618			3,035,082

Cash Flow From (Used in) Investing Activities:
Acquisitions of the pharmaceutical business of BASF and of Vysis, Inc. in 2001, and of certain assets of Glaxo Wellcome Inc.'s U.S. anesthesia business in 1999, net of cash acquired		(7,424,356	)		—			(217,000	)
Proceeds from sale of agricultural business		—			205,000			—
Acquisitions of property, equipment and other businesses		(1,163,707	)		(1,035,873	)		(987,098	)
Purchases of investment securities		(179,618	)		(68,085	)		(210,797	)
Proceeds from sales of investment securities		309,161			235,839			169,356
Other		73,646			45,455			12,187

Net Cash Used in Investing Activities		(8,384,874	)		(617,664	)		(1,233,352	)

Cash Flow From (Used in) Financing Activities:
Proceeds from (repayments of) commercial paper, net		2,741,000			(670,000	)		(864,000	)
Proceeds from issuance (retirement) of long-term debt, net		3,000,000			—			—
Other borrowing transactions, net		1,540			(2,769	)		6,286
Issuance (purchases) of common shares		(17,364	)		(464,856	)		329,490
Proceeds from stock options exercised		169,422			135,570			42,235
Dividends paid		(1,270,782	)		(1,145,894	)		(1,003,295	)

Net Cash From (Used in) Financing Activities		4,623,816			(2,147,949	)		(1,489,284	)

Effect of exchange rate changes on cash and cash equivalents		(62,630	)		(27,884	)		(19,587	)

Net (Decrease) Increase in Cash and Cash Equivalents		(256,840	)		306,121			292,859
Cash and Cash Equivalents, Beginning of Year		914,218			608,097			315,238

Cash and Cash Equivalents, End of Year	$	657,378		$	914,218		$	608,097

Supplemental Cash Flow Information:
Income taxes paid	$	984,079		$	1,085,083		$	882,957
Interest paid		232,431			113,922			145,055

The accompanying notes to consolidated financial statements are an integral part of this statement.

Abbott Laboratories and Subsidiaries

Consolidated Balance Sheet
(dollars in thousands)

			December 31
			2001		2000		1999
Assets
Current Assets:
Cash and cash equivalents			$	657,378	$	914,218	$	608,097
Investment securities				56,162		242,500		115,199
Trade receivables, less allowances of — 2001: $195,585; 2000: $190,167; 1999: $238,956				2,812,727		2,179,451		2,055,839
Inventories —
	Finished products			1,154,329		903,973		772,478
	Work in process			487,310		370,407		338,818
	Materials			570,396		466,951		384,148

		Total inventories		2,212,035		1,741,331		1,495,444
Prepaid income taxes				1,112,247		896,083		918,617
Other prepaid expenses and receivables				1,568,640		1,402,658		1,226,558

		Total Current Assets		8,419,189		7,376,241		6,419,754

Investment Securities				647,214		637,979		954,778

Property and Equipment, at Cost:
Land				332,268		245,850		202,858
Buildings				2,248,959		1,953,665		1,882,439
Equipment				8,097,044		7,597,553		7,339,578
Construction in progress				547,134		330,830		372,692

				11,225,405		10,127,898		9,797,567
Less: accumulated depreciation and amortization				5,673,858		5,310,987		5,027,508

Net Property and Equipment				5,551,547		4,816,911		4,770,059

Net Intangible Assets and Goodwill				7,294,320		1,555,260		1,574,851

Deferred Charges and Income Taxes, Investments in Joint Ventures and Other Assets				1,384,153		896,863		751,602

			$	23,296,423	$	15,283,254	$	14,471,044

The accompanying notes to consolidated financial statements are an integral part of this statement.

Abbott Laboratories and Subsidiaries

Consolidated Balance Sheet
(dollars in thousands)

	December 31
	2001			2000			1999
Liabilities and Shareholders' Investment
Current Liabilities:
Short-term borrowings and current portion of long-term debt	$	2,953,335		$	479,454		$	896,271
Trade accounts payable		1,525,215			1,355,985			1,226,854
Salaries, wages and commissions		557,672			401,366			383,552
Other accrued liabilities		2,285,644			1,549,245			1,433,424
Dividends payable		326,552			293,800			263,000
Income taxes payable		278,399			217,690			313,610

Total Current Liabilities		7,926,817			4,297,540			4,516,711

Long-Term Debt		4,335,493			1,076,368			1,336,789

Other Liabilities and Deferrals		1,974,681			1,338,440			1,189,949

Shareholders' Investment:
Preferred shares, one dollar par value Authorized — 1,000,000 shares, none issued		—			—			—
Common shares, without par value Authorized — 2,400,000,000 shares
Issued at stated capital amount — Shares: 2001: 1,571,816,976; 2000: 1,563,436,372; 1999: 1,564,670,440		2,643,443			2,218,234			1,939,673
Common shares held in treasury, at cost — Shares: 2001: 17,286,684; 2000: 17,502,239; 1999: 17,650,834		(252,438	)		(255,586	)		(257,756	)
Unearned compensation — restricted stock awards		(18,258	)		(18,116	)		(23,028	)
Earnings employed in the business		7,281,395			7,229,586			6,174,007
Accumulated other comprehensive loss		(594,710	)		(603,212	)		(405,301	)

Total Shareholders' Investment		9,059,432			8,570,906			7,427,595

	$	23,296,423		$	15,283,254		$	14,471,044

Abbott Laboratories and Subsidiaries

Consolidated Statement of Shareholders' Investment
(dollars in thousands except per share data)

		Year Ended December 31
		2001			2000			1999
Common Shares:
Beginning of Year
Shares: 2001: 1,563,436,372; 2000: 1,564,670,440; 1999: 1,548,382,682		$	2,218,234		$	1,939,673		$	1,310,500
Issued shares: 1999: 9,000,000			—			—			329,490
Issued under incentive stock programs Shares: 2001: 12,571,697; 2000: 11,424,234; 1999: 11,476,536			363,492			245,668			240,897
Tax benefit from option shares and vesting of restricted stock awards (no share effect)			70,223			50,219			62,458
Retired — Shares: 2001: 4,191,093; 2000: 12,658,302; 1999: 4,188,778			(8,506	)		(17,326	)		(3,672	)

End of Year
Shares: 2001: 1,571,816,976; 2000: 1,563,436,372; 1999: 1,564,670,440		$	2,643,443		$	2,218,234		$	1,939,673

Common Shares Held in Treasury:
Beginning of Year
Shares: 2001: 17,502,239; 2000: 17,650,834; 1999: 17,710,838		$	(255,586	)	$	(257,756	)	$	(46,735	)
Private transaction in 1999
	Shares purchased: 5,099,720;
	Shares issued: 4,985,475		—			—			(211,822	)
Issued under incentive stock programs
	Shares: 2001: 215,555; 2000: 148,595; 1999: 174,249		3,148			2,170			801

End of Year
Shares: 2001: 17,286,684; 2000: 17,502,239; 1999: 17,650,834		$	(252,438	)	$	(255,586	)	$	(257,756	)

Unearned Compensation — Restricted Stock Awards:
Beginning of Year		$	(18,116	)	$	(23,028	)	$	(25,796	)
Issued at market value —
	Shares: 2001: 198,000; 2000: 133,000; 1999: 162,500		(10,222	)		(5,479	)		(7,186	)
Lapses — Shares: 2001: 52,000; 2000: 8,500			2,126			320			—
Amortization			7,954			10,071			9,954

End of Year		$	(18,258	)	$	(18,116	)	$	(23,028	)

Earnings Employed in the Business:
Beginning of Year		$	7,229,586		$	6,174,007		$	4,743,315
Net earnings			1,550,390			2,785,977			2,445,759
Cash dividends declared on common shares (per share — 2001: $.84; 2000: $.76; 1999: $.68)			(1,303,534	)		(1,176,694	)		(1,038,895	)
Cost of common shares retired in excess of stated capital amount			(202,926	)		(557,628	)		(194,990	)
Cost of treasury shares issued below market value			7,879			3,924			218,818

End of Year		$	7,281,395		$	7,229,586		$	6,174,007

Accumulated Other Comprehensive Loss:
Beginning of Year		$	(603,212	)	$	(405,301	)	$	(227,693	)
Other comprehensive income (loss)			8,502			(197,911	)		(177,608	)

End of Year		$	(594,710	)	$	(603,212	)	$	(405,301	)

The accompanying notes to consolidated financial statements are an integral part of this statement.

Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements

Note 1 — Summary of Significant Accounting Policies

NATURE OF BUSINESS AND CONCENTRATION OF RISK — Abbott's principal business is the discovery, development, manufacture and sale of a broad line of health care products and services. Due to the nature of its operations, Abbott is not subject to significant concentration risks relating to customers, products or geographic locations.

Abbott does not have material exposures to off-balance sheet arrangements, including special purpose entities, or activities that include non-exchange-traded contracts accounted for at fair value.

BASIS OF CONSOLIDATION — The consolidated financial statements include the accounts of the parent company and subsidiaries, after elimination of intercompany transactions. The accounts of foreign subsidiaries are consolidated as of November 30, due to the time needed to consolidate these subsidiaries. No events occurred related to these foreign subsidiaries in December 2001, 2000 and 1999 that materially affected the financial position or results of operations.

USE OF ESTIMATES — The financial statements have been prepared in accordance with generally accepted accounting principles and necessarily include amounts based on estimates and assumptions by management. Actual results could differ from those amounts. Significant estimates include amounts for litigation, income taxes, sales rebates, and inventory and accounts receivable exposures.

CASH, CASH EQUIVALENTS AND INVESTMENT SECURITIES — Cash equivalents consist of time deposits and certificates of deposit with original maturities of three months or less. Investments in marketable equity securities are classified as available-for-sale and are recorded at fair value with any unrealized holding gains or losses, net of tax, included in accumulated other comprehensive income (loss). Impairment losses are charged to income for other than temporary declines in fair value of equity securities. Investments in debt securities are classified as held-to-maturity, as management has both the intent and ability to hold these securities to maturity, and are reported at cost, net of any unamortized premium or discount. Income relating to these securities is reported as a component of interest income.

INVENTORIES — Inventories are stated at the lower of cost (first-in, first-out basis) or market. Cost includes material and conversion costs.

LONG-LIVED ASSETS — Depreciation and amortization are provided on a straight-line basis over the estimated useful lives of the assets. The following table shows estimated useful lives of property and equipment:

Classification		Estimated Useful Lives
Buildings		10 to 50 years (average 29 years	)
Equipment		3 to 20 years (average 11 years	)

Intangible assets, primarily purchased intangible assets and goodwill resulting from business acquisitions, are amortized on a straight-line basis over 10 to 40 years (average 24 years). Accumulated amortization as of December 31, 2001, 2000, and 1999, was $728 million, $334 million, and $228 million, respectively.

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable based on projected undiscounted cash flows associated with the affected assets. If the fair value is less than the carrying amount of the asset, a loss is recognized for the difference. Fair value is determined based on market quotes, if available, or is based on valuation techniques.

PRODUCT LIABILITY — Provisions are made for the portions of probable losses that are not covered by product liability insurance.

TRANSLATION ADJUSTMENTS — For foreign operations in highly inflationary economies, translation gains and losses are included in net foreign exchange (gain) loss. For remaining foreign operations, translation adjustments are included as a component of accumulated other comprehensive income (loss).

REVENUE RECOGNITION — Revenue from product sales is recognized upon passage of title to customers. Provisions for discounts and rebates to customers, and returns and other adjustments are provided for in the period the related sales are recorded. Sales of product rights are recorded as revenue upon disposition of the rights. Revenue from license of product rights, or for performance of research or selling activities, is recorded over the periods earned.

RESEARCH AND DEVELOPMENT — Internal research and development costs are expensed as incurred. Third-party research and development costs are expensed when the contracted work has been performed or as milestone results have been achieved.

Note 2 — Supplemental Financial Information (dollars in thousands)

		2001			2000			1999
Other prepaid expenses and receivables
Receivables purchased from TAP Pharmaceutical Products Inc. under a service agreement		$	540,914		$	514,200		$	431,801
All other			1,027,726			888,458			794,757

	Total	$	1,568,640		$	1,402,658		$	1,226,558

Other liabilities and deferrals
Accrued post-employment costs		$	692,003		$	597,910		$	537,309
All other			1,282,678			740,530			652,640

	Total	$	1,974,681		$	1,338,440		$	1,189,949

Net interest expense
Interest expense		$	307,336		$	113,938		$	144,689
Interest income			(72,577	)		(90,717	)		(62,924	)

	Total	$	234,759		$	23,221		$	81,765

Note 3 — Taxes on Earnings (dollars in thousands)

Deferred income taxes reflect the tax consequences on future years of temporary differences between the tax bases of assets and liabilities and their financial reporting amounts. U.S. income taxes are provided on those earnings of foreign subsidiaries and subsidiaries operating in Puerto Rico under tax incentive grants, which are intended to be remitted to the parent company. Undistributed earnings reinvested indefinitely in foreign subsidiaries as working capital and plant and equipment aggregated $4,681,735 at December 31, 2001. Deferred income taxes not provided on these earnings would be approximately $1,019,447.

Earnings before taxes, and the related provisions for taxes on earnings, were as follows:

		2001			2000			1999
Earnings Before Taxes
Domestic		$	442,150		$	2,773,244		$	2,505,060
Foreign			1,440,998			1,043,163			891,828

	Total	$	1,883,148		$	3,816,407		$	3,396,888

		2001			2000			1999
Taxes on Earnings
Current:
U.S. Federal and Possessions		$	633,684		$	825,608		$	785,709
State			74,087			67,898			70,376
Foreign			388,950			194,944			235,459

	Total current		1,096,721			1,088,450			1,091,544

Deferred:
Domestic			(741,213	)		(70,383	)		(112,398	)
Foreign			(21,563	)		11,812			(30,215	)
Enacted tax rate changes			(1,187	)		551			2,198

	Total deferred		(763,963	)		(58,020	)		(140,415	)

	Total	$	332,758		$	1,030,430		$	951,129

Differences between the effective income tax rate and the U.S. statutory tax rate were as follows:

	2001		2000		1999
Statutory tax rate	35.0	%	35.0	%	35.0	%
Benefit of tax exemptions in Puerto Rico, the Dominican Republic, Ireland, the Netherlands, and Costa Rica	(14.6	)	(5.0	)	(5.2	)
State taxes, net of federal benefit	0.8		1.2		1.4
Domestic dividend exclusion	(5.0	)	(3.5	)	(3.2	)
All other, net	1.5		(0.7	)	—

Effective tax rate	17.7	%	27.0	%	28.0	%

As of December 31, 2001, 2000, and 1999, total deferred tax assets were $2,412,064, $1,458,707, and $1,364,867, respectively, and total deferred tax liabilities were $913,614, $463,406, and $441,404,

respectively. Valuation allowances for deferred tax assets were not significant. The temporary differences that give rise to deferred tax assets and liabilities were as follows:

		2001			2000			1999
Compensation and employee benefits		$	434,549		$	344,641		$	293,893
Trade receivable reserves			219,387			155,178			178,157
Inventory reserves			140,762			124,759			150,100
Deferred intercompany profit			254,276			204,052			184,687
State income taxes			100,265			53,610			46,964
Depreciation			(168,499	)		(204,595	)		(174,396	)
Other, primarily acquired in-process research and development and other accruals and reserves not currently deductible, and the excess of book basis over tax basis of intangible assets			504,649			277,033			215,433

	Total	$	1,485,389		$	954,678		$	894,838

Note 4 — Investment Securities (dollars in thousands)

The following is a summary of investment securities at December 31:

		2001		2000		1999
Current Investment Securities
Time deposits and certificates of deposit		$	20,000	$	232,500	$	95,000
Other, primarily debt obligations issued or guaranteed by various governments or government agencies			36,162		10,000		20,199

	Total	$	56,162	$	242,500	$	115,199

		2001		2000		1999
Long-Term Investment Securities
Time deposits and certificates of deposit, maturing through 2003		$	100,000	$	120,000	$	391,500
Corporate debt obligations, maturing through 2003			70,000		70,000		73,037
Debt obligations issued or guaranteed by various governments or government agencies, maturing through 2023			134,099		158,301		183,184
Equity securities			343,115		289,678		307,057

	Total	$	647,214	$	637,979	$	954,778

Of the investment securities listed above, $323,974, $590,678, and $742,610 were held at December 31, 2001, 2000, and 1999, respectively, by subsidiaries operating in Puerto Rico under tax incentive grants expiring in 2015 and 2020. In addition, these subsidiaries held cash equivalents of $0, $85,925, and $11,900 at December 31, 2001, 2000, and 1999, respectively.

Note 5 — Post-Employment Benefits (dollars in thousands)

Retirement plans consist of defined benefit, defined contribution, and medical and dental plans.

Information for Abbott's major defined benefit plans and post-employment medical and dental benefit plans is as follows:

	Defined Benefit Plans									Medical and Dental Plans
	2001			2000			1999			2001			2000			1999
Projected benefit obligations, January 1	$	2,572,226		$	2,259,741		$	2,348,620		$	741,372		$	635,700		$	714,946
Service cost — benefits earned during the year		144,982			118,863			131,670			33,133			30,034			31,933
Interest cost on projected benefit obligations		199,067			171,790			157,004			59,954			50,216			44,297
Losses (gains), primarily changes in discount and medical trend rates, plan design changes, and differences between actual and estimated health care costs		127,509			162,753			(283,135	)		165,251			65,375			(124,269	)
Benefits paid		(132,137	)		(109,589	)		(97,399	)		(43,599	)		(39,953	)		(31,207	)
Acquisition of the pharmaceutical business of BASF		331,003			—			—			7,300			—			—
Other, primarily translation		(2,127	)		(31,332	)		2,981			—			—			—

Projected benefit obligations, December 31	$	3,240,523		$	2,572,226		$	2,259,741		$	963,411		$	741,372		$	635,700

Plans' assets at fair value, January 1, principally listed securities	$	2,828,801		$	3,100,222		$	2,550,971		$	35,335		$	77,749		$	82,528
Actual return on plans' assets		(198,581	)		(154,748	)		608,805			4,646			(6,097	)		23,407
Company contributions		44,770			23,639			24,623			3,911			3,636			3,021
Benefits paid		(132,137	)		(109,589	)		(97,399	)		(43,599	)		(39,953	)		(31,207	)
Acquisition of the pharmaceutical business of BASF		123,755			—			—			—			—			—
Other, primarily translation		(22,904	)		(30,723	)		13,222			—			—			—

Plans' assets at fair value, December 31	$	2,643,704		$	2,828,801		$	3,100,222		$	293		$	35,335		$	77,749

Projected benefit obligations less than (greater than) plans' assets, December 31	$	(596,819	)	$	256,575		$	840,481		$	(963,118	)	$	(706,037	)	$	(557,951	)
Unrecognized actuarial (gains) losses, net		289,405			(287,242	)		(837,234	)		287,176			136,188			63,324
Unrecognized prior service cost		21,518			834			3,210			(58,079	)		(64,390	)		(68,682	)
Unrecognized transition obligation		(1,062	)		(1,808	)		(10,486	)		—			—			—

Accrued benefit cost	$	(286,958	)	$	(31,641	)	$	(4,029	)	$	(734,021	)	$	(634,239	)	$	(563,309	)

Service cost — benefits earned during the year	$	144,982		$	118,863		$	131,670		$	33,133		$	30,034		$	31,933
Interest cost on projected benefit obligations		199,067			171,790			157,004			59,954			50,216			44,297
Expected return on plans' assets		(261,753	)		(233,056	)		(200,260	)		(1,940	)		(6,176	)		(6,813	)
Net amortization		(213	)		(3,994	)		(3,082	)		2,589			(1,573	)		1,396

Net cost	$	82,083		$	53,603		$	85,332		$	93,736		$	72,501		$	70,813

The projected benefit obligations for certain foreign defined benefit plans that do not have plan assets were $276,000, $65,000, and $64,000 at December 31, 2001, 2000, and 1999, respectively.

Assumptions used for major benefit plans as of December 31 include:

	2001		2000		1999
Discount rate for determining obligations and interest cost	7¹/4	%	7¹/2	%	7³/4	%
Expected aggregate average long-term change in compensation	5	%	5	%	5	%
Expected long-term rate of return on assets	9¹/2	%	9¹/2	%	9¹/2	%

A seven percent annual rate of increase in the per capita cost of covered health care benefits was assumed for 2002. This rate is assumed to decrease gradually to five percent in 2006.

A one-percentage point increase/(decrease) in the assumed health care cost trend rate would increase/(decrease) the accumulated post-employment benefit obligations as of December 31, 2001, by $170,941/$(103,550), and the total of the service and interest cost components of net post-employment health care cost for the year then ended by approximately $19,334/$(12,046).

The Abbott Stock Retirement Plan is the principal defined contribution plan. Abbott's contributions to this plan were $97,000 in 2001, $86,000 in 2000, and $76,000 in 1999.

Abbott provides certain other post-employment benefits, primarily salary continuation plans, to qualifying domestic employees, and accrues for the related cost over the service lives of the employees.

Note 6 — Financial Instruments and Derivatives

On January 1, 2001, Abbott adopted the provisions of Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." On January 1, 2001, all derivative instruments were recognized as either assets or liabilities at fair value, resulting in a transition credit to income of approximately $2.0 million, which is included in net foreign exchange (gain) loss in the Condensed Consolidated Statement of Earnings.

In 2001, certain Abbott foreign subsidiaries entered into foreign currency forward exchange contracts to manage exposures to changes in foreign exchange rates for anticipated intercompany purchases by those subsidiaries whose functional currencies are not the U.S. dollar. These contracts, totaling $571 million at December 31, 2001, are designated as cash flow hedges of the variability of the cash flows due to changes in the foreign exchange rates. In 2001, Abbott recorded the contracts at fair value, resulting in an $11.4 million credit to accumulated other comprehensive (income) loss. No hedge ineffectiveness was recorded in income in 2001. Accumulated gains and losses will be included in cost of products sold at the time the products are sold, generally through the end of 2002.

In 2001, Abbott entered into interest rate hedge contracts totaling $2.450 billion to manage its exposure to changes in the fair value of $2.450 billion of fixed-rate debt due in July 2004 and 2006. These contracts are designated as fair value hedges of the variability of the fair value of fixed-rate debt due to changes in the long-term benchmark interest rates. At December 31, 2001, Abbott recorded the contracts at fair value and adjusted the carrying amount of the fixed-rate debt by an offsetting amount. No hedge ineffectiveness was recorded in income in 2001.

Abbott has designated a Japanese yen denominated liability as a hedge of the foreign currency exposure of Abbott's net investment in certain Japanese operations whose functional currency is the Japanese yen. Accordingly, changes in this liability due to fluctuations in foreign exchange rates are charged or credited to accumulated other comprehensive (income) loss. During 2001, approximately $669,000 was credited to accumulated other comprehensive (income) loss.

Abbott enters into foreign currency forward exchange contracts to manage currency exposures for intercompany loans and trade accounts payable where the receivable or payable is denominated in a

currency other than the functional currency of the entity. Such contracts are also used for foreign currency denominated third-party trade payables and receivables. For intercompany loans, the contracts require Abbott to sell foreign currencies, primarily European currencies and Japanese yen, in exchange for primarily U.S. dollars and other European currencies. For intercompany and trade payables and receivables, the currency exposures are primarily the U.S. dollar, European currencies and Japanese yen. These contracts are recorded at fair value, with the resulting gains or losses reflected in income as net foreign exchange (gain) loss. At December 31, 2001, 2000, and 1999, Abbott held $3.1 billion, $1.3 billion, and $1.4 billion, respectively, of such foreign currency exchange contracts.

The gross unrealized holding gains (losses) on current and long-term held-to-maturity investment securities totaled $2.0 million and $(17.2) million, respectively, at December 31, 2001; $1.3 million and $(21.4) million, respectively, at December 31, 2000; and $1.1 million and $(29.9) million, respectively, at December 31, 1999. The gross unrealized holding gains (losses) on available-for-sale equity securities totaled $57.0 million and $(1.8) million, respectively, at December 31, 2001; $80.3 million and $(34.0) million, respectively, at December 31, 2000; and $49.3 million and $(4.7) million, respectively, at December 31, 1999.

The carrying values and fair values of certain financial instruments as of December 31 are shown in the table below. The carrying values of all other financial instruments approximate their estimated fair values. Fair value is the quoted market price of the instrument held or the quoted market price of a similar instrument. The counterparties to financial instruments consist of select major international financial institutions. Abbott does not expect any losses from nonperformance by these counterparties.

	2001						2000						1999
	Carrying Value			Fair Value			Carrying Value			Fair Value			Carrying Value			Fair Value
	*(dollars in millions)*
Investment Securities:
Current	$	56.2		$	56.2		$	242.5		$	238.0		$	115.2		$	114.4
Long-Term:
Held-to-Maturity Debt Securities		304.1			288.9			348.3			332.7			647.7			619.7
Available-for-Sale Equity Securities		343.1			343.1			289.7			289.7			307.1			307.1
Total Long-Term Debt		(4,337.9	)		(4,453.2	)		(1,326.5	)		(1,328.6	)		(1,337.0	)		(1,280.2	)
Foreign Currency Forward Exchange Contracts:
(Payable) position		(38.7	)		(38.7	)		(8.1	)		(8.1	)		(23.9	)		(23.9	)
Receivable position		16.0			16.0			29.4			29.4			35.8			35.8
Interest Rate Hedge Contracts		21.8			21.8			—			—			—			—

Note 7 — Incentive Stock Program

The 1996 Incentive Stock Program authorizes the granting of stock options, replacement stock options, stock appreciation rights, limited stock appreciation rights, restricted stock awards, performance units and foreign qualified benefits. Stock options, replacement stock options, limited stock appreciation rights, restricted stock awards and foreign qualified benefits have been granted and are currently outstanding under this program and prior programs. The purchase price of shares under option must be at least equal to the fair market value of the common stock on the date of grant, and the maximum term of an option is 10 years. Options granted in 2001, 2000 and 1999 vest equally over three years except for replacement options, which generally vest in six months. Upon a change in control of Abbott, all outstanding stock options become fully exercisable, and all terms and conditions of all restricted stock awards are deemed satisfied.

At January 1, 2002, 40.9 million shares were reserved for future grants under the 1996 Program. Subsequent to year end, the Board of Directors granted approximately 21.7 million stock options from this reserve.

	Options Outstanding				Exercisable Options
	Shares		Weighted Average Exercise Price		Shares	Weighted Average Exercise Price
January 1, 1999	64,605,029		$	25.20
Granted	18,682,834			44.68
Exercised	(11,428,496	)		20.74
Lapsed	(837,026	)		32.16

December 31, 1999	71,022,341			30.96	42,410,885	$	25.42

Granted	18,922,849			36.03
Exercised	(11,390,803	)		21.21
Lapsed	(1,460,206	)		33.99

December 31, 2000	77,094,181			33.59	45,315,980		30.12

Granted	23,118,789			48.64
Exercised	(12,571,690	)		28.30
Lapsed	(1,369,321	)		42.58

December 31, 2001	86,271,959		$	38.25	50,383,606	$	34.13

	Options Outstanding at December 31, 2001				Exercisable Options at December 31, 2001
Range of Exercise Prices	Shares	Weighted Average Remaining Life (Years)	Weighted Average Exercise Price		Shares	Weighted Average Exercise Price
$12 to $35	34,465,386	5.6	$	27.64	23,963,033	$	24.63
36 to 47	26,969,453	6.9		41.92	21,743,161		41.18
48 to 57	24,837,120	9.0		48.99	4,677,412		50.01

$12 to $57	86,271,959	7.0	$	38.25	50,383,606	$	34.13

Abbott measures compensation cost using the intrinsic value-based method of accounting. Had compensation cost been determined using the fair market value-based accounting method, pro forma net income and earnings per share (EPS) amounts would have been as follows:

	2001		2000		1999
Pro Forma Net Income (in billions)	$	1.4	$	2.6	$	2.3
Pro Forma Basic EPS		0.89		1.71		1.51
Pro Forma Diluted EPS		0.88		1.69		1.49

The weighted average fair value of an option granted in 2001, 2000 and 1999 was $13.31, $10.60 and $12.26, respectively. For purposes of fair market value disclosures, the fair market value of an option grant was estimated using the Black-Scholes option pricing model with the following assumptions:

	2001		2000		1999
Risk-Free Interest Rate	4.9	%	6.8	%	5.1	%
Average Life of Options (years)	5.4		5.4		5.3
Volatility	27.0	%	26.0	%	24.0	%
Dividend Yield	2.0	%	2.0	%	1.4	%

Note 8 — Debt and Lines of Credit (dollars in thousands)

The following is a summary of long-term debt at December 31:

	2001		2000		1999
6.5% debentures, due 2001	$	—	$	—	$	250,000
5.6% debentures, due 2003		200,000		200,000		200,000
5.125% debentures, due 2004		1,650,000		—		—
6.8% debentures, due 2005		150,000		150,000		150,000
5.625% debentures, due 2006		1,600,000		—		—
6.4% debentures, due 2006		250,000		250,000		250,000
6.0% debentures, due 2008		200,000		200,000		200,000
5.4% debentures, due 2008		200,000		200,000		200,000
Other		85,493		76,368		86,789

Total, net of current maturities	$	4,335,493	$	1,076,368	$	1,336,789

Principal payments required on long-term debt outstanding at December 31, 2001, are $2,379 in 2002, $202,157 in 2003, $1,672,200 in 2004, $151,243 in 2005, and $1,852,737 in 2006.

At December 31, 2001, Abbott had $3,000,000 of unused domestic lines of credit, which support domestic commercial paper borrowing arrangements. Related compensating balances, which are subject to withdrawal by Abbott at its option, and commitment fees are not material. Abbott's weighted average interest rate on short-term borrowings was 1.9%, 5.9%, and 5.7% at December 31, 2001, 2000, and 1999, respectively.

Note 9 — Equity Method Investments (dollars in millions)

Abbott's 50 percent owned joint venture, TAP Pharmaceutical Products Inc. (TAP), is accounted for under the equity method of accounting. Abbott's share of TAP's income was $334, $481, and $390 in 2001, 2000, and 1999, respectively. The investment in TAP was $392, $491, and $521 at December 31, 2001, 2000, and 1999, respectively. Dividends received from TAP were $433, $511, and $237 in 2001, 2000, and 1999, respectively. In addition, Abbott performs certain administrative, selling and manufacturing services for

TAP at negotiated rates that approximate fair market value for the services performed. Summarized financial information for TAP is as follows:

	Year Ended December 31
	2001		2000		1999
Net sales	$	3,787.2	$	3,538.9	$	2,927.5
Cost of products sold		938.6		881.5		686.4
Income before income taxes		1,204.1		1,503.7		1,240.4
Net income		667.5		962.7		780.3

	December 31
	2001		2000		1999
Current assets	$	1,223.1	$	1,675.8	$	1,595.4
Total assets		1,588.1		2,019.4		1,850.2
Current liabilities		813.9		1,022.6		759.1

Undistributed earnings of investments accounted for under the equity method amounted to $368 as of December 31, 2001.

Note 10 — Quarterly Results (Unaudited) (dollars in millions except per share data)

	2001			2000		1999
First Quarter
Net Sales	$	3,559.9		$	3,353.2	$	3,313.3
Gross Profit		1,916.6			1,856.7		1,860.3
Net Earnings (Loss) (a)		(223.6	)		693.0		668.7
Basic Earnings (Loss) Per Common Share		(.14	)		.45		.44
Diluted Earnings (Loss) Per Common Share		(.14	)		.44		.43
Market Price Per Share-High		50.55			36.50		51.44
Market Price Per Share-Low		42.00			29.38		43.00
Second Quarter
Net Sales	$	4,099.1		$	3,370.2	$	3,259.2
Gross Profit		2,116.1			1,839.9		1,844.0
Net Earnings		529.0			685.2		645.0
Basic Earnings Per Common Share		.34			.44		.42
Diluted Earnings Per Common Share		.34			.44		.41
Market Price Per Share-High		54.00			44.69		53.31
Market Price Per Share-Low		43.43			35.38		41.94
Third Quarter
Net Sales	$	4,181.2		$	3,317.9	$	3,137.2
Gross Profit		2,140.3			1,802.4		1,547.0
Net Earnings		631.4			654.4		468.1
Basic Earnings Per Common Share		.41			.42		.30
Diluted Earnings Per Common Share		.40			.42		.30
Market Price Per Share-High		53.82			49.00		45.88
Market Price Per Share-Low		46.35			39.31		36.31
Fourth Quarter
Net Sales	$	4,445.1		$	3,704.6	$	3,467.9
Gross Profit		2,364.0			2,008.3		1,949.1
Net Earnings		613.6			753.4		664.0
Basic Earnings Per Common Share		.39			.49		.43
Diluted Earnings Per Common Share		.39			.48		.43
Market Price Per Share-High		57.17			56.25		42.88
Market Price Per Share-Low		50.40			45.44		33.00

(a): First-quarter 2001 included a pretax charge for acquired in-process research and development of $1,015 related to the acquisition of the pharmaceutical business of BASF.

Note 11 — Stock Purchase Rights

Common shares outstanding are subject to stock purchase rights. The rights, which are exercisable only under certain conditions, entitle the holder to purchase common shares at prices specified in the Rights Agreement. The rights were not exercisable at December 31, 2001.

Note 12 — Business Combinations and Divestiture

On March 2, 2001, Abbott acquired, for cash, the pharmaceutical business of BASF, which includes the global operations of Knoll Pharmaceuticals, for approximately $7.2 billion. This acquisition was


Acquired intangible assets, primarily product rights for currently marketed products	$	3.5
Goodwill		2.4
Acquired in-process research and development		1.2
Deferred income taxes resulting primarily from nondeductible intangibles		(0.4	)
Acquired net tangible assets		0.5

Total allocation of acquisition cost	$	7.2

	2001 Pro Forma		2000 Pro Forma
	(*in billions, except per share amounts*)
Net Sales	$	16.7	$	16.1
Net income		2.3		2.5
Diluted earnings per common share		1.46		1.62

place on January 1 of the previous year, consolidated sales and income would not have been significantly different from reported amounts.

In 2000, Abbott sold its agricultural products business to Sumitomo Chemical Co., Ltd., resulting in a $138 million gain.

Note 13 — Restructuring Plans (in millions of dollars)

	Employee-Related And Other			Asset Impairments			Total
Restructuring charges	$	195.5		$	11.5		$	207.0
Payments and other activity		(106.7	)		(11.5	)		(118.2	)

Accrued balance at December 31, 2001	$	88.8		$	—		$	88.8

Note 14 — Segment and Geographic Area Information (dollars in millions)

REVENUE SEGMENTS — Abbott's principal business is the discovery, development, manufacture and sale of a broad line of health care products and services. Abbott's products are generally sold directly to retailers, wholesalers, hospitals, health care facilities, laboratories, physicians' offices and government agencies throughout the world. Abbott's reportable segments are as follows:

PHARMACEUTICAL PRODUCTS — U.S. sales of a broad line of pharmaceuticals.

DIAGNOSTIC PRODUCTS — Worldwide sales of diagnostic systems for blood banks, hospitals, consumers, commercial laboratories and alternate-care testing sites.

HOSPITAL PRODUCTS — U.S. sales of intravenous and irrigation fluids and related administration equipment, drugs and drug-delivery systems, anesthetics, critical care products, and other medical specialty products for hospitals and alternate-care sites.

ROSS PRODUCTS — U.S. sales of a broad line of adult and pediatric nutritional products, pediatric pharmaceuticals and consumer products.

INTERNATIONAL — Non-U.S. sales of Abbott's pharmaceutical, hospital and nutritional products. Products sold by International are manufactured by domestic segments and by international manufacturing locations.

Abbott's underlying accounting records are maintained on a legal entity basis for government and public reporting requirements. Segment disclosures are on a performance basis consistent with internal management reporting. Intersegment transfers of inventory are recorded at standard cost and are not a

measure of segment operating earnings. The cost of some corporate functions and the cost of certain employee benefits are sold to segments at predetermined rates which approximate cost. Remaining costs, if any, are not allocated to revenue segments. The following segment information has been prepared in accordance with the internal accounting policies of Abbott, as described above, and are not presented in accordance with generally accepted accounting principles applied to the consolidated financial statements.

	Net Sales to External Customers						Operating Earnings						Depreciation and Amortization						Additions to Long-Term Assets						Total Assets
	2001		2000		1999		2001		2000		1999		2001		2000		1999		2001		2000		1999		2001		2000		1999
Pharmaceutical (a)	$	3,759	$	2,580	$	2,398	$	1,409	$	1,013	$	1,238	$	34	$	43	$	46	$	23	$	145	$	177	$	2,014	$	1,719	$	1,528
Diagnostics (b)		2,929		2,924		3,010		357		331		561		182		200		215		249		292		305		2,736		2,626		2,593
Hospital		2,778		2,507		2,249		738		660		523		107		111		115		164		183		161		1,934		1,702		1,567
Ross		2,088		2,035		1,957		752		720		634		67		65		71		70		47		42		889		899		870
International (a)(b)		4,418		3,307		3,204		949		782		675		111		86		104		255		150		180		3,632		2,576		2,485

Total Reportable Segments		15,972		13,353		12,818	$	4,205	$	3,506	$	3,631	$	501	$	505	$	551	$	761	$	817	$	865	$	11,205	$	9,522	$	9,043

Other		313		393		360

Net Sales	$	16,285	$	13,746	$	13,178

(a): Net sales and operating earnings were favorably impacted by the acquisition of the pharmaceutical business of BASF in 2001.
(b): Net sales and operating earnings were unfavorably affected by the relatively stronger U.S. dollar in each year presented.

	2001			2000			1999
Total Segment Operating Earnings	$	4,205		$	3,506		$	3,631
Corporate functions (c)		261			147			118
Benefit plans costs		101			46			109
Non-reportable segments		9			(12	)		(32	)
Gain on sale of business		—			(139	)		—
Net interest expense		235			23			82
Acquired in-process research and development		1,330			—			—
Income from TAP Pharmaceutical Products Inc.		(334	)		(481	)		(390	)
Net foreign exchange (gain) loss		31			7			26
Other expenses, net(d)		689			99			321

Consolidated Earnings Before Taxes	$	1,883		$	3,816		$	3,397

Total Segment Assets	$	11,205		$	9,522		$	9,043
Cash and investments		1,361			1,795			1,678
Investment in TAP Pharmaceutical Products Inc.		392			491			521
Prepaid income taxes		1,112			896			919
Non-reportable segments		645			440			391
All other, net(e)		8,581			2,139			1,919

Total Assets	$	23,296		$	15,283		$	14,471

(c): 2001 includes certain one-time charges related to the acquisition of the pharmaceutical business of BASF.
(d): 2001 includes amortization and restructuring charges relating to the acquisition of the pharmaceutical business of BASF.
(e): 2001 includes intangible assets related to the acquisitions of the pharmaceutical business of BASF and of Vysis, Inc.

	Net Sales to External Customers (f)						Long-Term Assets
	2001		2000		1999		2001		2000		1999
United States	$	10,249	$	8,762	$	8,291	$	8,308	$	6,689	$	6,820
Japan		748		708		664		128		143		164
Germany (g)		644		411		452		4,185		160		164
Canada		468		408		374		50		49		49
The Netherlands		349		340		309		97		71		62
Italy		496		308		335		152		95		97
All Other Countries		3,331		2,809		2,753		1,957		700		695

Consolidated	$	16,285	$	13,746	$	13,178	$	14,877	$	7,907	$	8,051

(f): Sales by country are based on the country that sold the product or service.
(g): 2001 includes certain intangible assets related to the acquisition of the pharmaceutical business of BASF.

The classes of products that contributed at least 10 percent to consolidated net sales in at least one of the last three years were:

		2001			2000			1999
Anti-Infectives		$	1,258		$	1,370		$	1,431
Adult Nutritionals			1,489			1,426			1,357

Note 15 — Litigation and Environmental Matters

Abbott is involved in various claims and legal proceedings including a number of antitrust suits and investigations in connection with the pricing of prescription pharmaceuticals. These suits and investigations allege that various pharmaceutical manufacturers have conspired to fix prices for prescription pharmaceuticals and/or to discriminate in pricing to retail pharmacies by providing discounts to mail-order pharmacies, institutional pharmacies and HMOs in violation of state and federal antitrust laws. The suits have been brought on behalf of individuals and retail pharmacies and name both Abbott and certain other pharmaceutical manufacturers and pharmaceutical wholesalers and at least one mail-order pharmacy company as defendants. The cases seek treble damages, civil penalties, and injunctive and other relief. Abbott has filed a response to each of the complaints denying all substantive allegations.

There are several lawsuits pending in connection with the sales of Hytrin. These suits allege that Abbott violated state or federal antitrust laws and, in some cases, unfair competition laws by signing patent settlement agreements with Geneva Pharmaceuticals, Inc. and Zenith Laboratories, Inc. Those agreements related to pending patent infringement lawsuits between Abbott and the two companies. Some of the suits also allege that Abbott violated various state or federal laws by filing frivolous patent infringement lawsuits to protect Hytrin from generic competition. The cases seek treble damages, civil penalties and other relief. Abbott has filed or intends to file a response to each of the complaints denying all substantive allegations.

Abbott has been identified as a potentially responsible party for investigation and cleanup costs at a number of locations in the United States and Puerto Rico under federal and state remediation laws and is investigating potential contamination at a number of company-owned locations.

Within the next year, legal proceedings may occur that may result in a change in the estimated reserves recorded by Abbott. While it is not feasible to predict the outcome of such pending claims, proceedings, investigations and remediation activities with certainty, management is of the opinion that their ultimate disposition should not have a material adverse effect on Abbott's financial position, cash flows, or results of operations.

Note 16 — TAP Pharmaceutical Products Inc.

In 2001, TAP Pharmaceutical Products Inc. (TAP) entered into an agreement with the United States Department of Justice to settle matters relating to its investigation involving TAP's marketing of its prostate cancer drug, Lupron, primarily in the early to mid- 1990s. In 2001, Abbott's income from the TAP joint venture was reduced by a charge of $274 million relating to TAP's settlement of this investigation.

TAP and Abbott have been named as defendants in several lawsuits alleging violations of various state or federal laws in connection with TAP's marketing and pricing of Lupron. Abbott intends to file a response to each of the lawsuits denying all substantive allegations.

Within the next year, legal proceedings may occur that may result in a change in the estimated reserves recorded by TAP and Abbott. While it is not feasible to predict the outcome of such pending claims, proceedings, investigations and remediation activities with certainty, management is of the opinion that their ultimate disposition should not have a material adverse effect on Abbott's financial position, cash flows, or results of operations.

Note 17 — U.S. Food and Drug Administration Consent Decree

In November 1999, Abbott reached agreement with the U.S. government to have a consent decree entered to settle issues involving Abbott's diagnostics manufacturing operations in Lake County, Ill. The decree, which was amended in December 2000, requires Abbott to ensure its diagnostics manufacturing processes in Lake County conform with the U.S. Food and Drug Administration's (FDA) Quality System Regulation (QSR). The decree allows for the continued manufacture and distribution of medically necessary diagnostic products made in Lake County. However, Abbott is prohibited from manufacturing or distributing certain diagnostic products until Abbott ensures the processes in its Lake County diagnostics manufacturing operations conform with the QSR. The decree allows Abbott to export diagnostic products and components for sale and distribution outside the United States if they meet the export requirements of the Federal Food, Drug and Cosmetic Act. Under the terms of the amended consent decree, Abbott must ensure its diagnostics manufacturing operations are in conformance with the QSR by various dates through January 15, 2001. The FDA will determine Abbott's conformance with the QSR after an inspection of Abbott's facilities in the fourth quarter of 2001 and the first quarter of 2002. If the FDA concludes that the operations are not in conformance with the QSR, Abbott may be subject to additional costs.

Abbott Laboratories and Subsidiaries

Report of Independent Public Accountants

To the Shareholders of Abbott Laboratories:

We have audited the accompanying consolidated balance sheet of Abbott Laboratories (an Illinois corporation) and Subsidiaries as of December 31, 2001, 2000, and 1999, and the related consolidated statement of earnings and comprehensive income, shareholders' investment, and cash flows for the years then ended. These financial statements are the responsibility of Abbott's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Abbott Laboratories and Subsidiaries as of December 31, 2001, 2000, and 1999, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States.

Chicago, Illinois
January 15, 2002

Arthur Andersen LLP

Management Report on Financial Statements

Management has prepared, and is responsible for, Abbott's consolidated financial statements and related notes. They have been prepared in accordance with generally accepted accounting principles and necessarily include amounts based on judgments and estimates by management. All financial information in this annual report is consistent with the consolidated financial statements.

Abbott maintains internal accounting control systems and related policies and procedures designed to provide reasonable assurance that assets are safeguarded, that transactions are executed in accordance with management's authorization and properly recorded, and that accounting records may be relied upon for the preparation of consolidated financial statements and other financial information. The design, monitoring and revision of internal accounting control systems involve, among other things, management's judgment with respect to the relative cost and expected benefits of specific control measures. Abbott also maintains an internal auditing function that evaluates and formally reports on the adequacy and effectiveness of internal accounting controls, policies and procedures.

Abbott's consolidated financial statements have been audited by independent public accountants who have expressed their opinion with respect to the fairness of these statements.

Miles D. White
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER

Thomas C. Freyman
SENIOR VICE PRESIDENT, FINANCE AND CHIEF FINANCIAL OFFICER

Greg W. Linder
VICE PRESIDENT AND CONTROLLER

ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Incorporated herein by reference are "Committees of the Board of Directors" and "Information Concerning Nominees for Directors" to be included in the 2002 Abbott Laboratories Proxy Statement. The 2002 Proxy Statement will be filed on or about March 12, 2002. Also incorporated herein by reference is the text found under the caption, "Executive Officers of The Registrant" on pages 13 through 21 hereof.

ITEM 11. EXECUTIVE COMPENSATION

The material to be included in the 2002 Proxy Statement under the heading "Executive Compensation," other than the Report of the Compensation Committee and the Performance Graph, is incorporated herein by reference. The 2002 Proxy Statement will be filed on or about March 12, 2002.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Incorporated herein by reference is the text to be included under the caption "Information Concerning Security Ownership" and the material under the heading "Security Ownership of Executive Officers and Directors" in the 2002 Proxy Statement. The 2002 Proxy Statement will be filed on or about March 12, 2002.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) Documents filed as part of this Form 10-K.

1. Financial Statements: See Item 8, "Financial Statements and Supplementary Data," on page 32 hereof, for a list of financial statements.

2. Financial Statement Schedules: The required financial statement schedules are found on the pages indicated below. These schedules should be read in conjunction with the Consolidated Financial Statements:

Schedules		Page No.
Valuation and Qualifying Accounts (Schedule II)		58
Schedules I, III, IV, and V are not submitted because they are not applicable or not required.
Supplemental Report of Independent Public Accountants		59
Individual Financial Statements of the registrant have been omitted pursuant to Rule 3.05, paragraph (1) of Regulation S-X.

3. Exhibits Required by Item 601 of Regulation S-K: The information called for by this paragraph is incorporated herein by reference to the Exhibit Index on pages 61, 62 and 63 of this Form 10-K.

(b) Reports on Form 8-K during the quarter ended December 31, 2001:

No reports on Form 8-K were filed during the quarter ended December 31, 2001.

(d) Financial Statement Schedules filed (page 58).

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Abbott Laboratories has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ABBOTT LABORATORIES
	By		/s/ MILES D. WHITE Miles D. White Chairman of the Board and Chief Executive Officer
			Date: February 15, 2002

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Abbott Laboratories on February 15, 2002 in the capacities indicated below.

/s/ MILES D. WHITE Miles D. White Chairman of the Board, Chief Executive Officer and Director of Abbott Laboratories (principal executive officer)		/s/ DAVID A. JONES David A. Jones Director of Abbott Laboratories
/s/ RICHARD A. GONZALEZ Richard A. Gonzalez President and Chief Operating Officer, Medical Products Group and Director of Abbott Laboratories		/s/ DAVID A. L. OWEN David A. L. Owen Director of Abbott Laboratories
/s/ JEFFREY M. LEIDEN Jeffrey M. Leiden President and Chief Operating Officer, Pharmaceutical Products Group and Director of Abbott Laboratories		/s/ BOONE POWELL JR. Boone Powell Jr. Director of Abbott Laboratories
/s/ THOMAS C. FREYMAN Thomas C. Freyman Senior Vice President, Finance and Chief Financial Officer (principal financial officer)		/s/ A. BARRY RAND A. Barry Rand Director of Abbott Laboratories
/s/ GREG W. LINDER Greg W. Linder Vice President and Controller (principal accounting officer)		/s/ W. ANN REYNOLDS W. Ann Reynolds Director of Abbott Laboratories


/s/ ROXANNE S. AUSTIN Roxanne S. Austin Director of Abbott Laboratories		/s/ ROY S. ROBERTS Roy S. Roberts Director of Abbott Laboratories
/s/ H. LAURENCE FULLER H. Laurence Fuller Director of Abbott Laboratories		/s/ WILLIAM D. SMITHBURG William D. Smithburg Director of Abbott Laboratories
/s/ JACK M. GREENBERG Jack M. Greenberg Director of Abbott Laboratories		/s/ JOHN R. WALTER John R. Walter Director of Abbott Laboratories

ABBOTT LABORATORIES AND SUBSIDIARIES

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS

FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999

Allowances for Doubtful Accounts and Sales Deductions	Balance at Beginning of Year	Provisions Charges to Income (a)		Amounts Charged Off Net of Recoveries		Balance at End of Year
2001	190,167	88,248		(82,830	)	195,585
2000	238,956	(8,169	)	(40,620	)	190,167
1999	191,352	67,645		(20,041	)	238,956

(a): Represents provisions related to allowances for doubtful accounts and net change in the allowances for sales deductions

SUPPLEMENTAL REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Abbott Laboratories:

We have audited in accordance with auditing standards generally accepted in the United States, the financial statements of Abbott Laboratories included in this Annual Report on Form 10-K, and have issued our report thereon dated January 15, 2002. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. Schedule II is the responsibility of Abbott's management, is presented for purposes of complying with the Securities and Exchange Commission's rules, and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.

ARTHUR ANDERSEN LLP

Chicago, Illinois
January 15, 2002

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation by reference of our reports included in this Form 10-K into Abbott's previously filed Form S-8 Registration Statements 33-39798 for the Abbott Laboratories 1991 Incentive Stock Program, 333-09071, 333-43381, 333-69547, 333-93253, 333-52768 and 333-74228 for the Abbott Laboratories 1996 Incentive Stock Program, 333-13091 and 333-74222 for the Abbott Laboratories Ashland Union 401(k) Plan and Trust, 333-68268 for the Abbott Laboratories 401(k) Plan and Trust, 333-74220 for the Abbott Laboratories Deferred Compensation Plan, 333-76516 for the Abbott Laboratories Employee Share Ownership Plan, 333-75442 for the Abbott Laboratories Affiliate Employee Stock Purchase Plan, and 33-26685, 33-51585, 33-56897, 33-65127, 333-19511, 333-43383, 333-69579, 333-93257 and 333-74224 for the Abbott Laboratories Stock Retirement Plan and Trust; Abbott's previously filed post-effective Amendment No. 1 to Registration Statement on Form S-8 333-85867 for the Perclose, Inc. 1992 Stock Plan, Perclose, Inc. 1995 Director Option Plan, Perclose, Inc. 1997 Stock Plan and Perclose, Inc. 1995 Employee Stock Purchase Plan; and into Abbott's previously filed S-3 Registration Statements 33-50253, 333-06155, 333-63481, 333-65601, 333-83647, and 333-55446.

ARTHUR ANDERSEN LLP

Chicago, Illinois
February 20, 2002

EXHIBIT INDEX
ABBOTT LABORATORIES
ANNUAL REPORT
FORM 10-K
2001

10-K Exhibit Table Item No.
2.1		Purchase Agreement between BASF Aktiengesellschaft and Abbott Laboratories recorded on December 14, 2000 filed as Exhibit 2.1 to the 2000 Abbott Laboratories Annual Report on Form 10-K.**
2.2		Amendment to Purchase Agreement between BASF Aktiengesellschaft and Abbott Laboratories dated as of March 2, 2001.
2.3		Second Amendment to Purchase Agreement between BASF Aktiengesellschaft and Abbott Laboratories recorded on May 18, 2001.
2.4		Agreement and Third Amendment to Purchase Agreement between BASF Aktiengesellschaft and Abbott Laboratories recorded on July 24, 2001.
3.1		* Articles of Incorporation, Abbott Laboratories, filed as Exhibit 3.1 to the Abbott Laboratories Quarterly Report for the quarter ended March 31, 1998 on Form 10-Q. (see also Exhibit 4.30, below.)
3.2		Corporate By-Laws, Abbott Laboratories.
4.1		*Abbott Laboratories Deferred Compensation Plan filed as Exhibit 4 to Registration Statement 333-74220.
4.2		*Abbott Laboratories Employee Share Ownership Plan filed as Exhibit 4 to Registration Statement 333-76516.
4.3		* Indenture dated as of October 1, 1993, between Abbott Laboratories and Harris Trust and Savings Bank, filed as Exhibit 4.1 to the Abbott Laboratories Quarterly Report for the quarter ended September 30, 1993, on Form 10-Q.
4.4		* Form of 5.6% Note issued pursuant to the Indenture filed as Exhibit 4.2 to the Abbott Laboratories Quarterly Report for the quarter ended September 30, 1993, on Form 10-Q.
4.5		* Form of Medium-Term Note, Series A (Fixed Rate) to be issued pursuant to the Indenture filed as Exhibit 4.3 to the Abbott Laboratories Quarterly Report for the quarter ended September 30, 1993, on Form 10-Q.
4.6		* Form of Medium-Term Note, Series A (Floating Rate) to be issued pursuant to the Indenture filed as Exhibit 4.4 to the Abbott Laboratories Quarterly Report for the quarter ended September 30, 1993, on Form 10-Q.
4.7		* Resolution of Abbott's Board of Directors filed as Exhibit 4.5 to the Abbott Laboratories Quarterly Report for the quarter ended September 30, 1993, on Form 10-Q.
4.8		* Actions of the Authorized Officers with respect to Abbott's $200,000,000 5.6% Notes filed as Exhibit 4.6 to the Abbott Laboratories Quarterly Report for the quarter ended September 30, 1993, on Form 10-Q.
4.9		* Actions of the Authorized Officers with respect to Abbott's Medium-Term Notes, Series A filed as Exhibit 4.7 to the Abbott Laboratories Quarterly Report for the quarter ended September 30, 1993, on Form 10-Q.
4.10		* Officers' Certificate and Company Order with respect to Abbott's $200,000,000 5.6% Notes filed as Exhibit 4.8 to the Abbott Laboratories Quarterly Report for the quarter ended September 30, 1993, on Form 10-Q.

4.11		* Form of 6.8% Note issued pursuant to Indenture filed as Exhibit 4.9 to the 1995 Abbott Laboratories Annual Report on Form 10-K.
4.12		* Actions of Authorized Officers with respect to Abbott's $150,000,000 6.8% Notes filed as Exhibit 4.10 to the 1995 Abbott Laboratories Annual Report on Form 10-K.
4.13		* Officers' Certificate and Company Order with respect to Abbott's $150,000,000 6.8% Notes filed as Exhibit 4.11 to the 1995 Abbott Laboratories Annual Report on Form 10-K.
4.14		* Resolution of Abbott's Board of Directors relating to the 6.4% Notes filed as Exhibit 4.12 to the 1996 Abbott Laboratories Annual Report on Form 10-K.
4.15		* Form of $50,000,000 6.4% Note issued pursuant to Indenture filed as Exhibit 4.13 to the 1996 Abbott Laboratories Annual Report on Form 10-K.
4.16		* Form of $200,000,000 6.4% Note issued pursuant to Indenture filed as Exhibit 4.14 to the 1996 Abbott Laboratories Annual Report on Form 10-K.
4.17		* Actions of Authorized Officers with respect to Abbott's 6.4% Notes filed as Exhibit 4.15 to the 1996 Abbott Laboratories Annual Report on Form 10-K.
4.18		* Officers' Certificate and Company Order with respect to Abbott's 6.4% Notes filed as Exhibit 4.16 to the 1996 Abbott Laboratories Annual Report on Form 10-K.
4.19		* Form of $200,000,000 6.0% Note issued pursuant to Indenture filed as Exhibit 4.2 to the Abbott Laboratories Quarterly Report for the quarter ended June 30, 1998, on Form 10-Q.
4.20		* Actions of Authorized Officers with respect to Abbott's 6.0% Note filed as Exhibit 4.3 to the Abbott Laboratories Quarterly Report for the quarter ended June 30, 1998, on Form 10-Q.
4.21		* Officers' Certificate and Company Order with respect to Abbott's 6.0% Note filed as Exhibit 4.4 to the Abbott Laboratories Quarterly Report for the quarter ended June 30, 1998, on Form 10-Q.
4.22		* Form of $200,000,000 5.40% Note issued pursuant to Indenture filed as Exhibit 4.2 to the Abbott Laboratories Quarterly Report for the quarter ended September 30, 1998, on Form 10-Q.
4.23		* Actions of Authorized Officers with respect to Abbott's 5.40% Note filed as Exhibit 4.3 to the Abbott Laboratories Quarterly Report for the quarter ended September 30, 1998, on Form 10-Q.
4.24		* Officers' Certificate and Company Order with respect to Abbott's 5.40% Note filed as Exhibit 4.4 to the Abbott Laboratories Quarterly Report for the quarter ended September 30, 1998, on Form 10-Q.
4.25		* Indenture dated as of February 9, 2001, between Abbott Laboratories and Bank One Trust Company, N.A., filed as Exhibit 4.1 to Registration Statement 333-55446.
4.26		* Form of 5.125% Note issued pursuant to Indenture filed as Exhibit 4.1 to the Abbott Laboratories Quarterly Report for the quarter ended June 30, 2001, on Form 10-Q.
4.27		* Form of 5.625% Note issued pursuant to Indenture filed as Exhibit 4.2 to the Abbott Laboratories Quarterly Report for the quarter ended June 30, 2001, on Form 10-Q.
4.28		* Actions of Authorized Officers with Respect to Abbott's 5.125% Notes and its 5.625% Notes filed as Exhibit 4.3 to the Abbott Laboratories Quarterly Report for the quarter ended June 30, 2001, on Form 10-Q.
4.29		* Officers' Certificate and Company Order with respect to Abbott's 5.125% Notes and its 5.625% Notes filed as Exhibit 4.4 to the Abbott Laboratories Quarterly Report for the quarter ended June 30, 2001, on Form 10-Q.

4.30		* Certificate of Designations, Preferences and Rights of the Series A Junior Participating Preferred Stock, filed as Exhibit 4.1 to the Abbott Laboratories Current Report on Form 8-K filed on November 15, 1999.
4.31		* Rights Agreement, dated as of November 11, 1999, between Abbott Laboratories and BankBoston, N.A., as Rights Agent, filed as Exhibit 99.1 to the Abbott Laboratories Current Report on Form 8-K filed on November 15, 1999.
4.32		* Amendment No. 1 to Rights Agreement, dated as of December 7, 1999, between Abbott Laboratories and BankBoston, N.A., as Rights Agent, filed as Exhibit 99.1 to the Abbott Laboratories Current Report on Form 8-K filed on December 20, 1999.
4.33		* Amendment No. 2 to Rights Agreement dated as of May 19, 2000 filed as Exhibit 99.1 to the Abbott Laboratories Current Report on Form 8-K filed on May 19, 2000. Other debt instruments are omitted in accordance with Item 601(b)(4)(iii)(A) of Regulation S-K. Copies of such agreements will be furnished to the Securities and Exchange Commission upon request.
10.1		* Supplemental Plan Abbott Laboratories Extended Disability Plan, filed as an exhibit (pages 50-51) to the 1992 Abbott Laboratories Annual Report on Form 10-K.**
10.2		* The Abbott Laboratories 1991 Incentive Stock Program filed as Exhibit 10.2 to the Abbott Laboratories Quarterly Report for the quarter ended September 30, 2001 on Form 10-Q.**
10.3		Abbott Laboratories 401(k) Supplemental Plan.**
10.4		Abbott Laboratories Supplemental Pension Plan.**
10.5		The 1986 Abbott Laboratories Management Incentive Plan.**
10.6		Abbott Laboratories Non-Employee Directors' Fee Plan.**
10.7		* The Abbott Laboratories 1996 Incentive Stock Program filed as Exhibit 10.1 to the Abbott Laboratories Quarterly Report for the quarter ended September 30, 2001 on Form 10-Q.**
10.8		* 1998 Abbott Laboratories Performance Incentive Plan filed as Exhibit 10.1 to the Abbott Laboratories Quarterly Report for the quarter ended March 31, 1998 on Form 10-Q.**
10.9		* Form of Agreement Between Abbott Laboratories and each of M. D. White, R. A. Gonzalez, J. M. Leiden, C. B. Begley and W. G. Dempsey, regarding Change in Control filed as Exhibit 10.9 to the 2001 Abbott Laboratories Annual Report on Form 10-K.**
12		Computation of Ratio of Earnings to Fixed Charges.
21		Subsidiaries of Abbott Laboratories.
23		Consent of Independent Public Accountants.
99.1		Cautionary Statement Regarding Forward-Looking Statements.

The 2002 Abbott Laboratories Proxy Statement will be filed with the Securities and Exchange Commission under separate cover on or about March 12, 2002.

*: Incorporated herein by reference. Commission file number 1-2189.
**: Denotes management contract or compensatory plan or arrangement required to be filed as an exhibit hereto.
***: Certain portions of this exhibit have been omitted pursuant to a request for confidential treatment separately filed with the Securities and Exchange Commission.

Abbott will furnish copies of any of the above exhibits to a shareholder upon written request to the Corporate Secretary, Abbott Laboratories, 100 Abbott Park Road, Abbott Park, Illinois 60064-6400.

QuickLinks

PART I
GENERAL DEVELOPMENT OF BUSINESS
FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS, GEOGRAPHIC AREAS, AND CLASSES OF SIMILAR PRODUCTS
NARRATIVE DESCRIPTION OF BUSINESS
INFORMATION WITH RESPECT TO ABBOTT'S BUSINESS IN GENERAL
INTERNATIONAL OPERATIONS
EXECUTIVE OFFICERS OF THE REGISTRANT
PART II
Consolidated Statement of Earnings and Comprehensive Income
Consolidated Statement of Cash Flows
Consolidated Balance Sheet
Consolidated Statement of Shareholders' Investment
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
Management Report on Financial Statements
PART III
PART IV
SIGNATURES
ABBOTT LABORATORIES AND SUBSIDIARIES SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999
SUPPLEMENTAL REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
EXHIBIT INDEX ABBOTT LABORATORIES ANNUAL REPORT FORM 10-K 2001



                         AMENDMENT TO PURCHASE AGREEMENT

         This AMENDMENT TO PURCHASE AGREEMENT dated as of March 2, 2001 (this
"Amendment") is between BASF Aktiengesellschaft ("Seller") and Abbott
Laboratories ("Purchaser").

                                   WITNESSETH:

         WHEREAS, Seller and Purchaser are parties to the Purchase Agreement
dated as of December 14, 2000 (Number 194 of the Roll of Deeds for 2000 of Dr.
Norbert Meister, notar at Frankfurt a.M.) (the "Purchase Agreement") pursuant to
which Purchaser has agreed to acquire the Shares and Transferred Patents (as
such terms are defined in the Purchase Agreement); and

         WHEREAS, Seller and Purchaser have agreed to certain matters incidental
to the consummation of the transactions contemplated by the Purchase Agreement.

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, the parties to the Purchase Agreement hereby
agree as follows:

                                    SECTION 1
                                   DEFINITIONS

         All initial capitalized terms used and not otherwise defined herein
have the meanings assigned to such terms in the Purchase Agreement.

                                    SECTION 2
                        AMENDMENTS TO PURCHASE AGREEMENT

         The Purchase Agreement is hereby amended as follows:

         2.1. The section of the Purchase Agreement entitled "Definitions" is
hereby amended by adding the following defined terms:

                  "BASF Knoll India Shares" means the Knoll India Shares owned
                  by Lupharma and representing 51% of the total issued and
                  outstanding equity shares of Knoll India.

                  "Hokuriku" means Hokuriku Seiyaku and Co. Ltd., a Japanese
                  stock corporation.

                  "Knoll India Base Amount" means the aggregate value derived by
                  multiplying the Knoll India Per Share Base Amount with the
                  number of BASF Knoll India Shares.

                  "Knoll India Net Assets Amount" has the meaning set forth in
                  Exhibit 7.4.



                  "Knoll India Per Share Base Amount" means (i) the Knoll India
                  Per Share Tender Price, less (ii) the Knoll India Per Share
                  Net Assets Amount.

                  "Knoll India Per Share Net Assets Amount" means (i) the Knoll
                  India Net Assets Amount, divided by (ii) the number of
                  outstanding Knoll India Shares as of the Closing.

                  "Knoll India Per Share Tender Price" means the price per share
                  offered by Purchaser in the Knoll India Tender Offer.

                  "Knoll India Shares" means the fully paid, issued and
                  outstanding voting equity shares in the capital of Knoll
                  India, each such share having a par value of Rs. 10.

                  "Knoll India Tender Offer" means the public offer that
                  Purchaser is required to make to the public shareholders of
                  Knoll India pursuant to the laws of India as a result of
                  Purchaser deciding to acquire, or acquiring, the BASF Knoll
                  India Shares in accordance with the provisions of this
                  Agreement, as amended.

                  "Knoll India" means Knoll Pharmaceuticals Limited, a listed
                  public company formed under the laws of India.

                  "Lupharma" means Lupharma GmbH, a limited liability company
                  under the laws of the Federal Republic of Germany registered
                  in the Commercial Register of the local court Ludwigshafen
                  under docket number HRB 3617.

                  "Provisional Knoll India Base Amount" means the amount set
                  forth on Exhibit 8.1 for Knoll India.

                  "Transpharm" means Transpharm GmbH, a limited liability
                  company under the laws of the Federal Republic of Germany
                  registered in the Commercial Register of the local court
                  Ludwigshafen under docket number HRB 1135.

         2.2 Section 5.3 of the Purchase Agreement is hereby amended and
restated in its entirety as follows:

                  5.3      "Shared Substances" shall mean the substances
                           (Substanzen) contained in the physical compound
                           library of the Seller or its Affiliates (other than
                           the Companies), on the one hand, and/or Knoll AG, on
                           the other hand, in each case at facilities located in
                           Ludwigshafen, Germany, including, without limitation,
                           any such substances obtained from third parties.

         2.3. The section of the Purchase Agreement entitled "Section 7, Sale"
is hereby amended by amending and restating such section in its entirety as
follows:

                  7.1      Seller hereby sells the Shares and the Transferred
                           Patents to Purchaser or to entities designated by
                           Purchaser, subject to the occurrence and fulfillment
                           or waiver of all of the Closing Conditions and with
                           commercial


                                                                               2



                           effect as amongst the parties as of the Closing, and
                           Seller hereby agrees to transfer, or to cause its
                           Affiliates to transfer, the Shares and the
                           Transferred Patents by separate transfer contracts
                           (hereinafter referred to as "Separate Transfer
                           Contracts") to Purchaser or to entities designated by
                           Purchaser at and effective as of the Closing.
                           Notwithstanding anything to the contrary set forth in
                           this Agreement, "Shares" shall not include shares or
                           other interests in any of the companies or entities
                           set forth on Exhibit 12.2(d).

                  7.2      The Separate Transfer Contracts shall be entered into
                           and completed at the Closing in accordance with
                           Section 12.1.

                  7.3      Seller shall cause the businesses described in
                           clauses (a) through (d) in the definition of
                           "Discontinued/Excluded Businesses" to be transferred
                           to Seller or any of its Affiliates (other than the
                           Companies) prior to the Closing. To the extent not so
                           transferred, Purchaser shall (a) upon Seller's
                           request and at Seller's expense cause each such
                           transfer to be made or completed after the Closing as
                           far as not made or completed prior thereto, (b) hold
                           (without any obligation to manage or operate) such
                           Discontinued/Excluded Businesses until completion of
                           their transfer for the account of Seller and (c) pay
                           any consideration in respect of such transfer to
                           Seller.

                  7.4      Subject to the second sentence of Section 8.3(b), as
                           far as the Knoll India Shares are concerned, the
                           Knoll India Per Share Tender Price multiplied by the
                           number of BASF Knoll India Shares acquired by
                           Purchaser pursuant hereto (such amount, converted
                           from RS to USD using the Conversion Exchange Rates,
                           being the "Knoll India Purchase Price") shall
                           determine the total purchase price paid by Purchaser
                           to Seller in respect of, and allocated to, the BASF
                           Knoll India Shares; PROVIDED, HOWEVER, that if such
                           amount as so determined is (a) greater than the
                           amount set forth for Knoll India on Exhibit 8.1,
                           then the Knoll India Purchase Price shall be the
                           amount set forth on such Exhibit, or (b) less than
                           the amount set forth for Knoll India on Exhibit 8.1
                           (the "Knoll India Excess"), such Knoll India Excess
                           shall be allocated to such Companies (other than
                           Knoll India) as Seller and Purchaser may mutually
                           agree. Exhibit 7.4 shall govern the calculation of
                           the Knoll India Net Asset Value described therein.

                  7.5      The parties acknowledge that at the Closing,
                           Purchaser shall not acquire the shares of Lupharma UK
                           Holding II, Ltd. (or indirectly shares of Knoll
                           International Private Ltd. ("Knoll India Private")).
                           Seller hereby grants to Purchaser an option to
                           acquire either the shares of Lupharma UK Holding II,
                           Ltd. (the "Share Option") or all or substantially all
                           of the assets of Knoll India Private (the "Assets
                           Option") through such entities as Purchaser may
                           elect, including through a less than wholly owned
                           affiliate of Purchaser. Purchaser shall exercise
                           either the Share Option or the Assets Option no later
                           than December 31, 2001. Upon the exercise of


                                                                               3



                           such Option by Purchaser, each of Purchaser and
                           Seller shall take, or cause to be taken, all actions
                           (including the execution and delivery of documents,
                           instruments and agreements), and to do, or cause to
                           be done, and to assist and cooperate with the other
                           parties in doing, all things necessary, proper or
                           advisable to consummate and make effective, in the
                           most expeditious manner practicable, the transactions
                           contemplated by the sale of such assets, including
                           (i) obtaining all necessary actions or nonactions,
                           waivers, consents and approvals from third parties
                           and governmental entities and making all necessary
                           registrations and filings (including filings with
                           governmental entities) and taking all reasonable
                           steps as may be necessary to obtain any approvals or
                           waivers from, or avoiding any action or proceeding
                           by, any such third parties or governmental entities,
                           (ii) executing and delivering any additional
                           instruments necessary to consummate the transactions
                           contemplated by this Section 7.5, and to fully carry
                           out the purposes of this Section, and (iii) the
                           engagement of such Indian advisors (including Counsel
                           and accountants) as may be necessary to fully carry
                           out the purposes of this Section. From and after the
                           Closing through the date of the acquisition
                           contemplated by this Section 7.5, Seller shall
                           operate Knoll India Private in accordance with the
                           terms of this Agreement as if Knoll India Private
                           were a Company referred to in Section 12.5. Upon the
                           closing of the transactions contemplated by the Share
                           Option or the Assets Option, as the case may be,
                           Purchaser shall pay Seller or Seller's Affiliate
                           (including Knoll India Private in the case of the
                           exercise of the Assets Option) the purchase price for
                           Knoll India Private in the amount set forth on
                           Exhibit 8.1 for such entity.

         2.4. The section of the Purchase Agreement entitled "Section 8,
Purchase Price" is hereby amended by amending and restating such section in its
entirety as follows:

                  8.1      Subject to Section 8.2(b) below, the aggregate
                           purchase price for the Shares and Transferred Patents
                           and the license granted in Section 25.1 below shall
                           be USD 6,930,000,000.00 (six billion nine hundred
                           thirty million United States Dollars) (hereinafter
                           referred to as the "Aggregate Purchase Price"), and
                           shall be allocated, except as otherwise provided in
                           Section 7.4, as set forth in Exhibit 8.1. To the
                           extent permitted by law such allocation of the
                           Aggregate Purchase Price shall be binding for Seller
                           and Purchaser for all aspects including but not
                           limited to tax filings. The Aggregate Purchase Price
                           less any sums held back pursuant to Sections 8.2(b)
                           or 12.5 shall be paid to Seller by transfer of
                           immediately available funds and free of wire transfer
                           charges and transfer taxes to:

                           Account       BASF AG
                           Bank          Citibank, New York
                           SWIFT Code    CITIUS33
                           ABA No.       021000089
                           Account No.   40795258


                                                                               4


                  8.2      (a) The Aggregate Purchase Price shall be adjusted as
                           provided for in Sections 9 and 10 below or as a
                           result of a claim for indemnification pursuant to
                           Sections 15, 18 and 21 below.

                           (b) Purchaser shall withhold $ 15,000,000 (the
                           "Uetersen Amount") from the Aggregate Purchase Price
                           paid at the Closing and shall hold the Uetersen
                           Amount in escrow until such time as Seller shall have
                           delivered to Purchaser satisfactory evidence of the
                           full and unconditional termination of (i) the License
                           Agreement (LIZENZVERTRAG) (the "Uetersen License"),
                           regarding the marketing and sale of Pancreatin, to be
                           executed by Knoll AG and Nordmark Arzneimittel GmbH &
                           CO. KG pursuant to the Master Agreement regarding the
                           acquisition of the Uetersen factory of Knoll AG
                           (RAHMENVERTRAG UEBER DEN ERWERB DER BETRIEBSSTAETTE
                           WERK UETERSEN DER KNOLL AG) between Knoll AG and Dr.
                           Peter Tonne, and (ii) Knoll AG's obligation to
                           execute and deliver such Uetersen License; provided,
                           that if the Uetersen License and such obligation are
                           not so terminated within 60 days after Closing,
                           Purchaser shall retain the Uetersen Amount and such
                           Uetersen Amount will constitute a reduction of the
                           Aggregate Purchase Price.

                  8.3      (a) The parties acknowledge that the Aggregate
                           Purchase Price does not reflect any amounts to be
                           paid in respect of the computations to be made
                           pursuant to Sections 9 and 10, and Exhibit 7.4
                           hereof.

                           (b) If the Provisional Knoll India Base Amount
                           exceeds the Knoll India Base Amount (the "Knoll India
                           Base Amount Overallocation"), an amount equal to the
                           Knoll India Base Amount Overallocation shall be
                           allocated to such other Shares (other than the BASF
                           Knoll India Shares) or assets of the Companies (other
                           than Knoll India) in such manner as Purchaser and
                           Seller shall mutually agree. If the Knoll India Base
                           Amount exceeds the Provisional Knoll India Base
                           Amount (the "Knoll India Base Amount
                           Underallocation"), an amount equal to the Knoll India
                           Base Amount Underallocation shall reduce the amount
                           allocated to the BASF Knoll India Shares.

                           The "Non-Indian Purchase Price" shall be equal to (a)
                           the Aggregate Purchase Price, less (b) the Knoll
                           India Base Amount.

         2.5. The section of the Purchase Agreement entitled "Section 9,
Non-Hokuriku Purchase Price Adjustment" is hereby retitled "Section 9,
Non-Indian Purchase Price Adjustment" and amended by amending and restating such
section in its entirety as follows:

                  9.1      The Non-Indian Purchase Price shall be adjusted as
                           follows:

                           (a)      As of September 30, 2000, the net asset
                                    value of the BASF Pharmaceutical Business
                                    amounts to EUR 750,400,000 (seven hundred
                                    fifty million four hundred thousand Euro)
                                    (such amount,


                                                                               5



                                    net of the Knoll India Reference Net Asset
                                    Value, being hereinafter referred to as
                                    "Reference Net Asset Value"). The Reference
                                    Net Asset Value has been determined on the
                                    basis of the unaudited proforma balance
                                    sheet contained in the attached Exhibit
                                    9.1(a) in item 3.2 thereof taking into
                                    account adjustments, as shown in Exhibit
                                    9.1(b) by the elimination of (i) Cash,
                                    Financial Debt, deferred Taxes and Accrued
                                    Taxes as shown in Exhibit 9.1(a), (ii)
                                    deferrals shown in Exhibit 9.1(a) as
                                    miscellaneous liabilities related to
                                    expenses of Seller allocated to the BASF
                                    Pharmaceutical Business; and (iii) other
                                    current assets as shown in Exhibit 9.1(a)
                                    related to one-time payments of American
                                    Home Products to Seller with regard to a
                                    certain patent ("Enbrel"). Notwithstanding
                                    anything to the contrary set forth in this
                                    Section 9.1, Exhibit 9.1(a) or Exhibit
                                    9.1(b), Section 21.4 shall govern to the
                                    exclusion of this Section 9.1 with respect
                                    to the calculations described therein.

                           (b)      If the net asset value of the BASF
                                    Pharmaceutical Business as of the Closing
                                    (net of the Knoll India Closing Net Asset
                                    Values) as determined in accordance with the
                                    principles set forth in Section 10 below and
                                    as shown on the Final Closing Net Asset
                                    Value Statement (hereinafter referred to as
                                    the ("Closing Net Asset Value") is less than
                                    the Reference Net Asset Value, Seller shall
                                    pay to Purchaser the amount by which the
                                    Closing Net Asset Value is less than the
                                    Reference Net Asset Value.

                           (c)      If the Closing Net Asset Value exceeds the
                                    Reference Net Asset Value, Purchaser shall
                                    pay to Seller in addition to the amounts
                                    required to be paid pursuant to Section 8.1
                                    the amount by which the Closing Net Asset
                                    Value exceeds the Reference Net Asset Value.

                  9.2      The amount determined in accordance with Section 9.1
                           above shall be paid by Seller or Purchaser, as the
                           case may be in USD, together with any accrued
                           interest at a rate of six percent per annum as of the
                           Closing within 5 working days after the Closing Net
                           Asset Value Statement has become final in accordance
                           with Section 10.5 hereof in immediately available
                           funds free of wire transfer charges and transfer
                           taxes to the bank account set forth in Section 8.1
                           above, if payment is to be made to Seller, and to
                           Citibank, N.A., New York, New York (ABA #021000089)
                           for credit to Abbott Laboratories (Acct. #00001329)
                           if payment is to be made to Purchaser. Any credit to
                           Purchaser shall be made in USD at the spot exchange
                           rate in effect at two business days prior to the date
                           of payment.

         2.6. Sections 10.1 and 10.2 of the Purchase Agreement are hereby
amended by amending and restating such sections in their entirety as follows:


                                                                               6



                  10.1     For the purpose of determining the amount of the
                           purchase price adjustment, if any, pursuant to
                           Section 9 above, Seller shall deliver to Purchaser as
                           promptly as practicable (but in any event no more
                           than 45 days) after the Closing an audited
                           consolidated balance sheet and statement of changes
                           in shareholder's equity of the Companies as of the
                           Closing (the "Closing Balance Sheet") and the Closing
                           Net Asset Value Statement, each prepared by Seller
                           and audited by Deloitte & Touche GmbH ("Seller's
                           Auditors") (hereinafter referred to as "Closing Net
                           Asset Value Statement") reflecting the Closing Net
                           Asset Value, together with the report of Seller's
                           Auditors thereon ("Auditor's Report"). The Closing
                           Balance Sheet and the statement of changes in
                           shareholder's equity included in the Auditor's Report
                           shall be prepared in accordance with the Report
                           Principles (as defined in Section 13.20) as of the
                           Closing Date, and prepared and consolidated in a
                           manner consistent with Exhibit 9.1(a). The Closing
                           Net Asset Value Statement included in the Auditor's
                           Report shall be prepared on the basis of, and derived
                           from, the balance sheet contained in the Closing
                           Balance Sheet, and adjusted in a manner consistent
                           with Exhibit 9.1(b), and further adjusted in
                           accordance with the principles set forth in Exhibit
                           10.1 hereto; provided however, that (a) the value of
                           any Cash of Hokuriku (or intercompany item or
                           receivable in respect of Cash of Hokuriku) to be set
                           forth on the Final Hokuriku Net Asset Value Statement
                           shall not exceed U.S. $170,000,000, (b) the Closing
                           Balance Sheet shall not reflect any cash of the
                           Companies to be paid after Closing by way of dividend
                           or distribution to which Purchaser shall not be
                           entitled, (c) no value shall be included on the
                           Closing Balance Sheet for the Excluded Inventories
                           (as hereinafter defined), and (d) the Closing Balance
                           Sheet shall include as an asset an adjustment of U.S.
                           $ 321,000 to the extent such adjustment has been paid
                           prior to Closing. The audit of the Closing Balance
                           Sheet shall include a physical count and valuation of
                           the Companies' inventory. The Auditor's Report shall
                           provide at least as much detail by financial
                           statement line item as is included in Exhibit 9.1(a).
                           Intercompany Obligations shall be dealt with as
                           provided in Section 19; PROVIDED, HOWEVER, that the
                           Closing Net Asset Value Statement shall reflect the
                           amounts payable by the Companies and the amounts
                           payable by Seller pursuant to the Agreement set forth
                           on Exhibit 19.3. Notwithstanding anything to the
                           contrary set forth in this Section 10.1, Exhibit 7.4
                           shall govern the calculation of the Knoll India Net
                           Asset Value described therein.

                  10.2     To the extent that the Closing Net Asset Value
                           Statement arrives at a Closing Net Asset Value
                           resulting in an adjustment of the Non-Indian Purchase
                           Price pursuant to Section 9, the Closing Net Asset
                           Value Statement must also state how the amount by
                           which the Non-Indian Purchase Price, as so adjusted,
                           should be allocated. The parties acknowledge and
                           agree that (a) the Knoll India Purchase Price
                           reflects the value of any additional net assets that
                           may be attributable to Knoll India and that no
                           additional allocation to Knoll India shall be made in
                           excess of


                                                                               7



                           the Knoll India Purchase Price as calculated pursuant
                           to Section 7.4, (b) no additional allocation to Knoll
                           Pharmaceuticals Ltd., a Pakistan corporation, shall
                           be made in excess of the amount set forth on Exhibit
                           8.1 for such entity, and (c) no additional amount
                           shall be allocated to BASF Pharmaceutical Corp. on
                           account of its holdings in Hokuriku.

         2.7. Section 11.1.1 of the Purchase Agreement is hereby amended by
adding the following subsections (d) and (e):

                  d)       Seller shall have completed the Hokuriku Share
                           transfer procedures described in Exhibit 11.1.1(d).

                  e)       Seller shall have completed the transfer procedures
                           relating to Knoll Pharmaceuticals Ltd. and Knoll
                           International Ltd. described in paragraphs 1(a) and
                           2 of Exhibit 11.1.1(e).

         2.8. Section 12.2 of the Purchase Agreement is hereby amended by adding
the following subsection (d):

                  d.       a duly executed sales and transfer contract
                           transferring from the Companies to Seller or its
                           Affiliates the entities set forth on Exhibit 12.2(d).

         2.9 Section 12.5 is hereby amended by adding the following to the end
of such Section:

                  The parties acknowledge that the shares in the Companies
                  described on Exhibit 12.5 shall be Shares subject to this
                  Section 12.5.

         2.10. The section of the Purchase Agreement entitled "Section 13,
Representations of Seller" is hereby amended by adding the following Section
13.29:

                  13.29(I) The entities described below have been held, directly
                  or indirectly, 100% (66.67% as to Hokuriku) by Seller in an
                  uninterrupted chain of title as described below:

                  (a)      KNOLL AG

                           (i)      Since prior to January 1, 2000 to November
                                    27, 2000, Seller owned directly 100% of the
                                    issued and outstanding shares of capital
                                    stock of Knoll AG;

                           (ii)     On November 27, 2000, Seller transferred a
                                    94% interest in Knoll AG to BASF Pharma
                                    Holding GmbH, a wholly owned direct
                                    subsidiary of Seller;


                                                                               8


                           (iii)    Seller and BASF Pharma Holding GmbH will
                                    until Closing continue to own directly 6 and
                                    94 percent, respectively, of the issued and
                                    outstanding shares of Knoll AG;

                           (iv)     Seller has, since prior to January 1, 2000
                                    owned, and Seller will continue until the
                                    Closing to own, directly 100% of the equity
                                    interests (Geschaftsanteile) of BASF Pharma
                                    Holding GmbH;

                  (b)      LUPHARMA AND TRANSPHARM

                           (i)      Since prior to January 1, 2000 to July 1,
                                    2000, Knoll AG owned directly 100% of the
                                    equity interests (Geschaftsanteile) of each
                                    of Lupharma and Transpharm;

                           (ii)     On July 1, 2000, Knoll AG transferred to
                                    Seller all of Knoll AG's right, title and
                                    interest in and to the equity interests
                                    (Geschaftsanteile) of each of Lupharma and
                                    Transpharm, being in each case 100% of the
                                    equity interests (Geschaftsanteile) thereof;

                           (iii)    On July 1, 2000, immediately upon having
                                    acquired all of Knoll AG's right, title and
                                    interest in and to the equity interests
                                    (Geschaftsanteile) of each of Lupharma and
                                    Transpharm, Seller transferred to BASF
                                    Pharma Holding GmbH all of Seller's right,
                                    title and interest in and to the equity
                                    interests (Geschaftsanteile) of each of
                                    Lupharma and Transpharm, being in each case
                                    100% of the equity interests
                                    (Geschaftsanteile) thereof;

                           (iv)     BASF Pharma Holding GmbH has since July 1,
                                    2000 owned, and BASF Pharma Holding GmbH
                                    will continue until the Closing to own,
                                    directly 100% of the equity interests
                                    (Geschaftsanteile) of each of Lupharma and
                                    Transpharm;

                  (c)      HOKURIKU

                           (i)      Since January 1, 2000, Seller's interest in
                                    the issued and outstanding shares in
                                    Hokuriku has been owned as set forth in
                                    Exhibit 13.29;

                           (ii)     Lupharma has acquired by an agreement dated
                                    July 1, 2000, and Lupharma will continue
                                    until the completion of the transfers
                                    contemplated by Exhibit 11.1.1(d) to own,
                                    directly 14,616,000 shares in Hokuriku;

                           (iii)    Transpharm has acquired by an agreement
                                    dated July 1, 2000, and Transpharm will
                                    continue until the completion of the
                                    transfers


                                                                               9



                                    contemplated by Exhibit 11.1.1(d) to own,
                                    directly 14,616,000 shares in Hokuriku;

                           (iv)     Immediately prior to Closing, the transfers
                                    contemplated by Exhibit 11.1.1(d) shall
                                    have been completed;

                  (d)      KNOLL PHARMACEUTICAL COMPANY

                           (i)      Since prior to January 1, 2000, BASFin has
                                    owned, and BASFin will continue until the
                                    Closing to own, directly 100% of the issued
                                    and outstanding shares of capital stock of
                                    BASF Corporation;

                           (ii)     Since prior to January 1, 2000 to July 31,
                                    2000, BASF Corporation owned directly 100%
                                    of the issued and outstanding shares of
                                    capital stock of BASF Capital Corporation;

                           (iii)    Since prior to January 1, 2000 to July 31,
                                    2000, BASF Capital Corporation owned
                                    directly 100% of the issued and outstanding
                                    shares of capital stock of Knoll
                                    Pharmaceutical Company;

                           (iv)     On July 31, 2000, BASF Capital Corporation
                                    was merged into BASF Corporation, as a
                                    result of which Knoll Pharmaceutical Company
                                    became a wholly owned direct subsidiary of
                                    BASF Corporation;

                           (v)      On July 31, 2000, BASF Corporation
                                    transferred to BASF Pharmaceutical
                                    Corporation all of the issued and
                                    outstanding shares of capital stock of Knoll
                                    Pharmaceutical Company, as a result of which
                                    Knoll Pharmaceutical Company became a wholly
                                    owned direct subsidiary of BASF
                                    Pharmaceutical Corporation;

                           (vi)     BASF Pharmaceutical Corporation has since
                                    July 31, 2000 owned, and BASF Pharmaceutical
                                    Corporation will continue until the Closing
                                    to own, directly 100% of the issued and
                                    outstanding shares of capital stock of Knoll
                                    Pharmaceutical Company;

                           (vii)    On July 31, 2000, BASF Corporation
                                    transferred to BASFin Corporation all of the
                                    issued and outstanding shares of capital
                                    stock of BASF Pharmaceutical Corporation, as
                                    a result of which BASF Pharmaceutical
                                    Corporation became a wholly owned direct
                                    subsidiary of BASFin Corporation;

                           (viii)   Since prior to January 1, 2000, Seller
                                    owned, and will continue until the Closing
                                    to own, directly 100% of the issued and
                                    outstanding shares of capital stock of
                                    BASFin Corporation;


                                                                              10



                           (ix)     On July 31, 2000, BASFin Corporation
                                    transferred to Seller all of the issued and
                                    outstanding shares of capital stock of BASF
                                    Pharmaceutical Corporation, as a result of
                                    which BASF Pharmaceutical Corporation became
                                    a wholly owned direct subsidiary of Seller;

                           (x)      On November 27, 2000, Seller transferred to
                                    BASF Pharma Holding GmbH all of the issued
                                    and outstanding shares of capital stock of
                                    BASF Pharmaceutical Corporation, as a
                                    result of which BASF Pharmaceutical
                                    Corporation became a wholly owned direct
                                    subsidiary of BASF Pharma Holding GmbH;

                           (xi)     On November 27, 2000, BASF Pharma Holding
                                    GmbH transferred to Lupharma all of the
                                    issued and outstanding shares of capital
                                    stock of BASF Pharmaceutical Corporation, as
                                    a result of which BASF Pharmaceutical
                                    Corporation became a wholly owned direct
                                    subsidiary of Lupharma;

                           (xii)    During the period from November, 2000 to the
                                    date hereof, Lupharma GmbH will continue
                                    until the Closing to own directly 100% of
                                    the issued and outstanding shares of capital
                                    stock of BASF Pharmaceutical Corporation;

                  (II) On February 27, 2001, Knoll AG transferred 18,062,659
                  quotas of Knoll Produtos Quimicos e Farmaceuticos Ltda., which
                  represent 99.999% of its share capital, to Lupharma. On that
                  same date, Knoll Produtos Quimicos e Farmaceuticos Ltda.
                  amended its Articles of Association to reflect this transfer.
                  Further on that same date, the amendment of the Articles of
                  Association was filed with the Commercial Registry of Rio de
                  Janeiro and the transfer of the quotas was recorded in the
                  books and records of Knoll AG and Lupharma.

         2.11. Section 15.1(I) of the Purchase Agreement is hereby amended by
adding the following subsections (d), (e), (f), and (g):

                  d)       The termination of the Development and Distribution
                           Agreement between Knoll, Ltd. and Byk Gulden ("Byk"),
                           dated May 1, 1996 (the "Byk Agreement"), by Byk
                           Gulden due to the exercise of its right of
                           termination pursuant to Section 16.4 thereof,
                           provided that, with respect to this subsection (d),
                           Damages owing by Seller pursuant to this Section
                           15.1(I)(d) shall (i) be calculated taking into
                           account the methodology and factors set forth on
                           Exhibit 15.1(I)(d), and (ii) not exceed U.S.
                           $51,400,000 in the aggregate;

                  e)       (i) The failure of the representations and warranties
                           set forth in Section 13.1 to be true and correct with
                           respect to Knoll Philippines, Inc. (KPH) ("Knoll
                           Philippines"), the failure by Knoll Philippines to
                           have prepared


                                                                              11



                           financial statements as required by law and any
                           action by the Purchaser Group or Knoll Philippines
                           after Closing necessary to render such
                           representations and warranties true and correct, and
                           (ii) the sale by Knoll Philippines of its assets to a
                           party designated by Purchaser or the liquidation of
                           Knoll Philippines, including any and all costs,
                           Taxes, filing, registration and other fees, and
                           expenses (including reasonable attorneys' and
                           accountants' fees, liabilities to creditors, and any
                           fines or penalties) arising out of or relating
                           thereto or reasonably incurred to bring Knoll
                           Philippines into compliance with Philippine laws and
                           regulations, to the extent such compliance is a
                           condition to the liquidation of Knoll Philippines;

                  f)       Any Taxes, including stamp taxes, transfer taxes and
                           VAT, arising from or related to (i) the shares of
                           Knoll Pharma Ltd. and Knoll Ltd. and/or (ii) the
                           sale, transfer or other disposition of any
                           Discontinued Businesses or any of the entities or
                           businesses described on Exhibit 12.2(d), whenever
                           effected; and

                  g)       Knoll Sante Active S.A. ("Knoll Sante" that the
                           Purchaser Group would not have incurred had Knoll
                           Sante not been acquired, directly or indirectly, by
                           Purchaser, including any liabilities, Taxes, costs,
                           filing, registration and other fees, and expenses
                           (including reasonable attorneys' and accountants'
                           fees) arising out of or related to Knoll Sante, its
                           business or operations prior to Closing, or its
                           liquidation, winding up or dissolution.

         2.12. Section 15.4 of the Purchase Agreement is hereby amended by
amending and restating such section in its entirety as follows:

                  15.4     The limitation of the liability of Seller set forth
                           in Sections 15.2 and 15.3 above shall not apply in
                           case of a violation of any Representation made in
                           Sections 13.1 through 13.4, Section 13.9, Section
                           13.15.3(a), and Section 13.29. In this case, the
                           liability of Seller shall be limited to the amount of
                           the Aggregate Purchase Price as adjusted pursuant to
                           Section 9.

         2.13. Section 15.8(a) of the Purchase Agreement is hereby amended by
amending and restating such section in its entirety as follows:

                  a)       claims pursuant to Sections 13.1 through 13.4, 13.9,
                           13.15.3(a), and 13.29, and claims pursuant to
                           Sections 13.13 and 13.14 which are based on a defect
                           of title, shall be subject to a survival period of 10
                           years;

         2.14. Section 19.3 of the Purchase Agreement is hereby amended by
inserting the following phrase at the beginning of such section:

                  Except as the parties may otherwise agree as set forth on
                  Exhibit 19.3,


                                                                              12


         2.15. Section 21.1 of the Purchase Agreement is hereby amended by
adding the following sentence at the end of such section:

                  To the extent not otherwise indemnifiable under any other
                  indemnity provision of this Agreement, Seller shall indemnify
                  and hold harmless Purchaser and each of its Affiliates
                  (including the Companies) from and against any and all Damages
                  (including, without limitation, costs and expenses of
                  litigation and reasonable attorneys' fees and expenses for
                  physical delivery of shares) arising out of or related to
                  claims asserted under Seller's stock option programs or any
                  stock purchase plan of Seller or its Affiliates against
                  Purchaser or any of its Affiliates (including the Companies).

         2.16. The section of the Purchase Agreement entitled "Section 24,
Conduct of Business prior to Closing" is hereby amended by adding the following
Sections 24.14, 24.15, 24.16, 24.17 and 24.18:

                  24.14    Prior to the Closing, Seller shall cause (a) the
                           Hokuriku Shares owned by it to be transferred to KPC
                           as described on Exhibit 11.1.1(d), and (b) the
                           Shares of the Indian entities described on Exhibit
                           11.1.1(e) to be transferred to Seller's new
                           companies as described therein.

                  24.15    If there are any Shares not transferred at Closing
                           pursuant to Section 12.5, including the Shares of
                           Lupharma UK Holding II, Ltd., the rights of Purchaser
                           as described in Section 24.5(a) shall continue
                           post-Closing for purposes of determining Seller's
                           compliance with the terms of this Purchase Agreement,
                           including, without limitation, compliance with the
                           terms in Sections 12.5 and 24.8. Such rights shall
                           terminate when all such Shares are transferred in
                           accordance with Section 12.5.

                  24.16    Seller shall, without further consideration and at no
                           additional cost to Purchaser in excess of those costs
                           that the Companies would have incurred had they
                           remained Affiliates of Seller (such costs to be
                           calculated on a basis consistent with the pro forma
                           financial statements provided to Purchaser in the
                           London data room in November 2000, or to Purchaser
                           during the November 2000 Seller management
                           presentation), take such acts, or cause such acts to
                           be taken, as necessary to ensure uninterrupted and
                           lawful use by the Companies worldwide from and after
                           the Closing Date of all information technology
                           ("IT"), software, data and IT related equipment and
                           hardware, including routers and telecommunications
                           and data equipment (collectively, "IT Rights")
                           utilized by the Companies in the conduct of their
                           respective businesses. Such acts shall include, if
                           necessary to insure such uninterrupted and lawful
                           use, the valid transfer of Seller's or its
                           Affiliates' existing IT Rights, including, without
                           limitation, any rights pertaining to any IT or
                           software customized by Seller and/or its Affiliates,
                           the separate procurement of such IT Rights in the
                           name of and for the benefit of the Companies or the
                           valid transfer of copies of any


                                                                              13



                           Seller-owned software (including source codes and
                           documentation) (the "IT/Software Licenses"). Such
                           IT/Software Licenses include, without limitation, the
                           following:



                           ------------------------------  ----------------  ----------
                           Software Package                Software Vendor    Number of
                                                                              Licenses
                           ------------------------------  ----------------  ----------
                                                                            
                           MS Office 2000                    Microsoft            6022
                           ------------------------------  ----------------  ----------
                           MS Operating System               Microsoft            6022
                           ------------------------------  ----------------  ----------
                           PC Anywhere                       Symantec             6022
                           ------------------------------  ----------------  ----------
                           F Prot                            F Secure             6022
                           ------------------------------  ----------------  ----------
                           Win Zip                           Win Zip              6022
                           ------------------------------  ----------------  ----------
                           Lotus Notes                       IBM                  5339
                           ------------------------------  ----------------  ----------
                           SAP development                   SAP                    53
                           ------------------------------  ----------------  ----------
                           SAP operational user              SAP                  2166
                           ------------------------------  ----------------  ----------
                           SAP information user              SAP                   371
                           ------------------------------  ----------------  ----------
                           SAP AR user                       SAP                    19
                           ------------------------------  ----------------  ----------
                           SAP BC user                       SAP                    68
                           ------------------------------  ----------------  ----------
                           SAP CAT                                 -              -
                           ------------------------------  ----------------  ----------
                           Oracle concurrent users           Oracle                226
                           ------------------------------  ----------------  ----------
                           Netware                           Novell               6022
                           ------------------------------  ----------------  ----------
                           Documentum                        Documentum            126
                           ------------------------------  ----------------  ----------
                           Brazil outstanding SAP invoice    to BASF Corp         -
                           ------------------------------  ----------------  ----------
                           R&D MDL                                 -               500
                           ------------------------------  ----------------  ----------
                           Win BLITZ                               -              -
                           ------------------------------  ----------------  ----------
                           BLITZ                                   -              -
                           ------------------------------  ----------------  ----------
                           SPRINT                                  -              -
                           ------------------------------  ----------------  ----------
                           BASF HR                                 -              -
                           ------------------------------  ----------------  ----------
                           TPS                                     -              -
                           ------------------------------  ----------------  ----------
                           ELJ                               BASF                 -
                           ------------------------------  ----------------  ----------
                           Oracle Clinical                   Oracle               -
                           ------------------------------  ----------------  ----------
                           ClinTrace                         Domain Pharma        -
                           ------------------------------  ----------------  ----------
                           MSI Suite                         MSI                  -
                           ------------------------------  ----------------  ----------


                  24.17    Seller (a) shall procure that, effective no later
                           than December 31, 2001, any license relating to
                           Pharmaceutical Products and granted by it or any of
                           its Affiliates to BASF LYNX Bioscience AG
                           ("BASF/LYNX"), shall be terminated or shall expire,
                           including any license to use the "TET" technology
                           and, (b) hereby undertakes not to exercise or obtain
                           any benefit of any right of first refusal, first
                           offer or similar rights on developments, research or
                           products arising from BASF/LYNX, the research,
                           development, importation, use, registration,
                           manufacture, distribution or sale of which would
                           violate or be inconsistent with Section 27.1.

                  24.18    The parties acknowledge that Purchaser shall not
                           acquire certain inventories of the Companies with a
                           book value of up to $30 million (the "Excluded
                           Inventories"). No later than twenty (20) business
                           days after the Closing, Purchaser shall deliver to
                           Seller a statement describing the Excluded
                           Inventories ("Excluded Inventories Notification").
                           Seller shall, at its sole cost and expense (a) remove
                           from the Companies' premises all of the Excluded
                           Inventories, and (b) destroy of the Excluded
                           Inventories in


                                                                              14



                           compliance with applicable law ("Inventory
                           Destruction"), no later than ten (10) business days
                           after Seller's receipt of the Excluded Inventories
                           Notification or such later date as may be necessary
                           to comply with applicable laws governing such
                           Destruction (the "Destruction Date"). Seller shall
                           certify to Purchaser in writing that the Inventories
                           Destruction shall have been completed in accordance
                           with this Section 24.18 no later than ten (10)
                           business days after the Destruction Date. If the book
                           value of the Excluded Inventories is less than $30
                           million, Seller shall pay to Purchaser, no later than
                           10 business days after Seller's receipt of the
                           Excluded Inventories Notification, an amount in cash
                           by immediately available same day funds equal to the
                           difference between $ 30 million and such book value.

                  24.19    After the Closing, Seller shall continue to
                           prosecute, at its own expense and with its own
                           counsel, the EBEWE Insurance Claims. Each of
                           Purchaser and Seller shall pay to the other party
                           50% of any proceeds or recovery from the EBEWE
                           Insurance Claims (net of expenses and any Taxes
                           arising in connection therewith) that it may receive
                           no later than 5 business days after receipt by
                           Purchaser or Seller (as the case may be) of such
                           proceeds or recovery. "EBEWE Insurance Claims" shall
                           mean claim No. C 00006292 asserted by Seller on
                           behalf of EBEWE Arzneimittel GmbH ("EBEWE") against
                           American International Group, Inc. (AIG) under Policy
                           No. Y10FID2100 in the approximate amount of
                           28,400,000 Euro, relating to losses incurred by EBEWE
                           on account of unauthorized forward currency exchange
                           transactions undertaken by former employees of EBEWE
                           with funds of EBEWE.

         2.17 Section 24.8 of the Purchase Agreement is hereby amended by adding
the following sentence to the end of such Section:

                  With respect to the Shares that are not transferred at Closing
                  (the "Excluded Companies"), Seller covenants that it will, and
                  will cause the Excluded Companies to: (a) provide Purchaser
                  with a contact person of each of such Companies who shall
                  coordinate any procedures with respect to such Companies for
                  financial reporting or the transfer of such Companies
                  following the Closing, (b) permit Purchaser and its
                  representatives to have reasonable access to the assets,
                  employees, books and records of such Companies, and shall
                  furnish or cause to be furnished to Purchaser such financial,
                  tax, regulatory, R&D and operating data and other available
                  information with respect to such Companies as Purchaser may
                  from time to time request or that may otherwise be legally
                  required by Purchaser, and (c) upon the transfer of the Shares
                  of each such Excluded Company to Purchaser, remit all earnings
                  of such Company through the date of such transfer as soon as
                  practicable (but no later than five (5) business days) after
                  the date of such transfer, together with interest thereon at a
                  rate of six percent per annum from the Closing through the
                  date on which such earnings are paid to the Company.


                                                                              15



         2.18. Section 25 of the Purchase Agreement is hereby amended by
amending and restating Sections 25.2, 25.3 and 25.4 in their entirety and by
adding a new Section 25.5, as follows:

                  25.2     Seller hereby grants to Purchaser and Purchaser's
                           Affiliates including the Companies, with respect to
                           Seller Shared Substance Related Patents an
                           irrevocable, exclusive fully paid-up license for the
                           life of the respective patent, with the right to
                           grant sublicenses, in the Pharmaceutical Field and
                           the Pharmachemical Field.

                  25.3     Purchaser hereby grants to Seller with respect to the
                           Shared Substance Related Patents an irrevocable,
                           exclusive fully paid-up license for the life of the
                           respective patent, with the right to grant
                           sublicenses, outside of the Pharmaceutical Field and
                           the Pharmachemical Field.

                  25.4     Except as otherwise agreed by the parties, the
                           following procedures will govern Shared Substances
                           that are located on the premises of one party but
                           that are not physically present already in the
                           compound collection of the other party. Either
                           Purchaser or Seller may request samples of Shared
                           Substances from the other party, subject to the
                           following:

                           (a) The number of samples of different compounds
                           requested by a party shall not exceed 20,000 in the
                           aggregate;

                           (b) Each solid sample request must be for a physical
                           quantity of 20 milligrams or less;

                           (c) No party shall be required to provide any solid
                           sample of Shared Substances if such party has less
                           than 70 milligrams of such Shared Substances
                           remaining in such party's compound library; and

                           (d) No party shall be required to provide any sample
                           requested after September 3, 2002.

                  25.5     The parties acknowledge that Seller owns certain
                           patents relating to certain inactive ingredients that
                           are being supplied by Seller or one of its Affiliates
                           to the Companies, commonly known as "excipients"
                           ("Excipients"). Seller agrees that, with respect to
                           Excipients that are the basis of, or included in, any
                           product registrations of any of the Companies
                           ("Covered Excipients"), (a) Seller shall, and shall
                           cause its Affiliates to, continue to supply the
                           Companies with their requirements of Covered
                           Excipients on terms and conditions generally offered
                           to Seller's comparable customers, and (b) if Seller
                           and its Affiliates cease to manufacture and sell any
                           Covered Excipients, Seller shall (i) provide
                           Purchaser with not less than 12 months prior written
                           notice of such


                                                                              16


                           cessation, and (ii) grant the Companies an
                           irrevocable, non-exclusive, paid-up license for the
                           life of the respective patent, with the right to
                           grant sublicenses, to make, have made and use the
                           Covered Excipients to produce any of the Companies'
                           products in the Pharmaceutical Field.

         2.19. The section of the Purchase Agreement entitled "Section 26,
Conduct and Litigation" is hereby amended as follows:

                  (a) Section 26.1 (i) of the Purchase Agreement is hereby
         amended by inserting the phrase "to the extent" immediately preceding
         the existing phrase "based upon, arising out of, or related to."

                  (b) Section 26.1 (iv) of the Purchase Agreement is hereby
         amended by replacing the existing term "26(a)(i)" with the term
         "26.1(i)."

                  (c) Section 26.1 of the Purchase Agreement is hereby amended
         by adding the following sentence at the end of such section:

                           Loss, liability, damage and expenses covered by this
                           Section 26 shall include, without limitation, any
                           expenses arising from the provision of free product
                           by KPC, net of any reserve on the Closing Date
                           Balance Sheet for any such product.

                  (d) Section 26.2 of the Purchase Agreement is hereby amended
         by inserting the term "hereafter" immediately preceding the existing
         phrase "commenced against it" in the first sentence of such section.

                  (e) Section 26.3 of the Purchase Agreement is hereby amended
         by inserting the phrase "Section 26.2 above and" immediately preceding
         the existing phrase "Section 26.4" in the first sentence of such
         section.

                  (f) Section 26.6 of the Purchase Agreement is hereby amended
         and restated in its entirety as follows:

                           Insurance Proceeds and Settlement Amounts. Seller
                           shall be entitled to all IN RE SYNTHROID(R) MARKETING
                           LITIGATION Settlement Amounts. In addition, if and to
                           the extent that Seller prosecutes, at its own expense
                           and with its own counsel, the Insurance Litigation,
                           Seller shall be entitled to any proceeds or recovery
                           arising from or out of the Insurance Litigation.
                           Purchaser hereby assigns any and all rights, claims
                           and/or interests in the Insurance Litigation to
                           Seller, including authorizing Seller to sue, continue
                           suit, prosecute, receive and retain any and all
                           recoveries or proceeds in or from the Insurance
                           Litigation without limitation in the name of Knoll
                           Pharmaceutical Company, all and with the same force
                           and effect as if Knoll Pharmaceutical Company and/or
                           any and all predecessors and/or successors to Knoll
                           Pharmaceutical Company had done so.


                                                                              17



                  (g) Section 26.7(i) of the Purchase Agreement is hereby
         amended by deleting the existing term "and" immediately preceding the
         existing term "(3)" and by adding the following phrase at the end of
         such section:

                           ; (4) the dismissal of RXD PHARMACIES, INC. V. BASF,
                           ET AL., No. 98CV-5560, United States District Court
                           for the Eastern District of Pennsylvania; (5) IN THE
                           MATTER OF COORDINATED PROCEEDINGS SPECIAL TITLE,
                           PHARMACEUTICAL CASES I, II AND III J.C.C.P. Nos.
                           2969, 2971 and 2972 in the Superior Court of
                           California; and (6) any settlement or similar
                           agreements entered into in connection therewith,
                           including the Master Agreement of Settlement and
                           Release entered into by Knoll on February 1, 1999.

                  (h) Section 26.7(ii) of the Purchase Agreement is hereby
         amended by amending and restating such section in its entirety as
         follows:

                           (ii) "Section 26 Conduct" shall mean the conduct
                           alleged, or conduct substantially similar to that
                           alleged, in the Section 26 Litigation, and which in
                           each case occurs prior to Closing;

                  (i) Section 26.7 (iii) of the Purchase Agreement is hereby
         amended by adding the following phrase at the end of such Section and
         immediately before the existing term "and":

                           and any policies in excess thereof that were issued
                           to Knoll Pharmaceutical Company or its predecessors
                           prior to the Closing.

         2.20. Section 27.2 of the Purchase Agreement is hereby amended by
adding the following sentence at the end of such section:

                  Further, subject to the following proviso, the preceding
                  paragraph shall not prevent Seller from maintaining its equity
                  ownership interest in the joint venture company BASF/LYNX;
                  PROVIDED, that (x) any such equity ownership interest
                  percentage shall be not more than 45%, (y) such equity
                  ownership interest shall be for financial investment purposes
                  only and shall not extend, directly or indirectly, to (1) any
                  other arrangements, contracts, revenue sharing, licensing or
                  right of first refusal, first offer or similar rights on
                  developments, research or products arising from BASF/LYNX, the
                  research, development, importation, use registration,
                  manufacture, distribution or sale of which would violate or be
                  inconsistent with Section 27.1, or (2) other opportunities of
                  any kind with such joint venture company in any manner that
                  would otherwise violate or be inconsistent with Section 27.1,
                  and (z) no assets, properties, rights or interest, including
                  Patents or Intellectual Property, of any of the Companies or
                  the BASF Pharmaceutical Business shall be made available,
                  provided or licensed to or used


                                                                              18



                  by such joint venture company, including, without limitation,
                  through any license of "TET" technology.

         2.21. The section of the Purchase Agreement entitled "Section 27,
Non-Compete Covenant" is hereby amended by adding the following Section 27.3:

                  27.3     Notwithstanding anything in Sections 27.1 or 27.2 to
                           the contrary, the operation of the restrictions in
                           such sections in Turkey shall be for a period of five
                           years following the Closing.

         2.22. Exhibit 4.2(b) to the Purchase Agreement is hereby deleted.

         2.23.Exhibits 5.1 and 5.2 to the Purchase Agreement are hereby amended
as follows:

                  (a)      Exhibit 5.1 is hereby amended to add the following
                           patent cases:

                           00480/1059
                           00480/1075
                           00480/1164
                           00480/1200
                           00480/1201
                           2475/8170
                           00480/1218
                           00650/1003
                           2063/8460

                  (b)      Exhibit 5.2 is hereby amended to add the following
                           patent cases:

                           00050/48377
                           00050/49589
                           00050/49033
                           00050/49619
                           00050/49931

                  (c) In addition, each of Exhibits 5.1 and 5.2 are hereby
         amended to incorporate any and all patents and/or patent applications,
         including but not limited to all divisionals, continuations,
         continuations in part, reissues, renewals, extensions and supplementary
         protection certificates thereof and therefor, existing anywhere in the
         world, not specifically listed but which otherwise are owned by Seller
         and:

                           (i) in the case of Exhibit 5.1, relate exclusively
                  to the Pharmaceutical Field and/or the BASF Pharmaceutical
                  Business; and

                           (ii) in the case of Exhibit 5.2, relate but not
                  exclusively relate to the Pharmaceutical Field and/or the BASF
                  Pharmaceutical Business.


                                                                              19



         2.24. Exhibit 7.4 to the Purchase Agreement is hereby amended by
amending and restating such exhibit in its entirety as follows:

                     KNOLL INDIA NET ASSET VALUE STATEMENT

                                                                     EXHIBIT 7.4

                                    SECTION 1
                     KNOLL INDIA NET ASSET VALUE CALCULATION

                  1.1      (a) Prior to the Closing, Seller shall ascertain the
                           aggregate value of the net assets of Knoll India (the
                           "Knoll India Reference Net Asset Value") as of
                           September 30, 2000 on the basis of the unaudited
                           proforma balance sheet contained in the attached
                           Exhibit 9.1 (a), and adjusted to eliminate Cash,
                           Financial Debt, deferred Taxes and Accrued Taxes.

                           (b) (i) If the value of the net assets of Knoll India
                           as of the Closing as determined in accordance with
                           the principles set forth in Section 2 below and as
                           shown on the Knoll India Closing Net Asset Value
                           Statement (hereinafter referred to as the "Knoll
                           India Closing Net Asset Value") is less than the
                           Knoll India Reference Net Asset Value, Seller shall
                           pay to Purchaser Seller's pro rata share, in
                           accordance with its percentage interest in Knoll
                           India as of the Closing, of the amount by which the
                           Knoll India Closing Net Asset Value is less than the
                           Knoll India Reference Net Asset Value.

                                    (ii) If the Knoll India Closing Net Asset
                           Value exceeds the Knoll India Reference Net Asset
                           Value, such excess (the "Knoll India Net Assets
                           Amount") shall be paid pro rata to Seller in
                           accordance with its percentage interest in Knoll
                           India as of the Closing.

                  1.2      Each of the amounts determined in accordance with
                           Section 1.1 (b)(i) above shall be paid by Seller
                           within 5 working days after the applicable Closing
                           Net Asset Value Statement has become final in
                           accordance with Section 2.4 hereof in immediately
                           available funds to Citibank, N.A., New York, New York
                           (ABA #021000089) for credit to Abbott Laboratories
                           (Acct. #00001329). Any credit to Purchaser shall be
                           made in U.S. dollars at the spot exchange rate in
                           effect at two business days prior to the date of
                           payment.

                                    SECTION 2
              FINAL CLOSING KNOLL INDIA NET ASSET VALUE STATEMENT

                  2.1      For the purpose of determining the amount of the
                           payments, if any, pursuant to Section 1 above, Seller
                           shall deliver to Purchaser as promptly as practicable
                           (but in any event no later than 15 working days)
                           after the Closing a condensed balance sheet of Knoll
                           India, certified by Knoll


                                                                              20


                           India's chief financial officer (hereinafter referred
                           to as "Knoll India Closing Net Asset Value
                           Statement") reflecting the Knoll India Closing Net
                           Asset Value. The Knoll India Closing Net Asset Value
                           Statement shall be prepared in accordance with the
                           Report Principles (as defined in Section 13.20(a) of
                           the Agreement) as of the Closing Date, shall be
                           prepared and consolidated in a manner consistent with
                           Exhibit 9.1(a), shall fairly present the net assets
                           of Knoll India as of the Closing Date, and shall be
                           adjusted in a manner consistent with Exhibit 9.1(b)
                           (to the extent applicable) and further adjusted in
                           accordance with the principles set forth in Exhibit
                           10.1 hereto (to the extent applicable).

                  2.2      Purchaser shall have 10 working days after receipt of
                           the Knoll India Closing Net Asset Value Statement
                           during which it may review such Closing Net Asset
                           Value Statement, and raise in writing and in
                           reasonable detail any objections against specified
                           items such Closing Net Asset Value Statement,
                           indicating precisely the higher or lower value which
                           in Purchaser's opinion should be allocated to each
                           item in dispute. During this period of time,
                           Purchaser and its auditors shall be granted access to
                           all relevant information produced by Seller or
                           Seller's Auditors. Any item in the Knoll India
                           Closing Net Asset Value Statement objected to by
                           Purchaser shall hereinafter be referred to as an
                           "Knoll India Disputed Item".

                  2.3      If and insofar as Purchaser does not raise objections
                           to the Knoll India Closing Net Asset Value Statement
                           in accordance with Section 2.2 above, the Closing Net
                           Asset Value arrived at in the Knoll India Closing Net
                           Asset Value Statement shall be final and binding upon
                           the parties. To the extent that the Net Asset Value
                           arrived at in the Knoll India Closing Net Asset Value
                           Statement is final and binding upon the parties, the
                           adjustment payment to be made by Purchaser or Seller
                           according to Section 1 above shall be made in
                           accordance with such Section.

                  2.4      The parties shall use their best efforts to resolve
                           the Knoll India Disputed Items within 15 working days
                           following the receipt by Seller of Purchaser's
                           objections pursuant to Section 2.3 above.

                  2.5      Any Knoll India Disputed Items not resolved pursuant
                           to Section 2.4 above shall be submitted by the
                           parties to Ernst & Young for review. Should Ernst &
                           Young become unavailable, the parties shall mutually
                           agree on another accounting firm of international
                           standing.

                  2.6      In rendering its decision, the accounting firm shall
                           consider only the Knoll India Disputed Items and,
                           with respect to each such Knoll India Disputed Item,
                           shall stay within the range of the values allocated
                           to it by the parties. The accounting firm shall
                           deliver in writing to Seller and Purchaser as
                           promptly as practicable its determination of the
                           Knoll India Disputed Items stating the reasons of its
                           decision. The reasons shall specifically


                                                                              21



                           address the arguments brought forward by the parties
                           with respect to each Knoll India Disputed Item. Such
                           determination shall be final and binding upon the
                           parties absent manifest mathematical errors. The
                           accounting firm shall allocate its fees to the
                           parties in accordance with Sections 91 et seq. of
                           the German Civil Procedure.

         2.25. A new Exhibit 11.1.1(d) to the Purchase Agreement is hereby
created and is as follows:

                                EXHIBIT 11.1.1(d)

                  The Hokuriku Shares owned by Lupharma and Transpharm shall be
                  duly and validly transferred by Lupharma and Transpharm
                  directly to the Seller, and the Seller shall duly and validly
                  transfer such shares directly to KPC pursuant to the Share
                  Sale and Transfer Agreement ("KPC Hokuriku Shares Agreement").
                  For the avoidance of doubt, such shares, as transferred to
                  KPC, shall, for purposes of the Purchase Agreement, be deemed
                  "Shares."

                  At Closing, the Promissory Note issued by KPC pursuant to the
                  KPC Hokuriku Shares Agreement is hereby assigned to Purchaser
                  by its holder upon payment of the Aggregate Purchase Price.

                  Any stamp or transfer taxes or VAT incurred in connection with
                  the transfers contemplated by this Exhibit 11.1.1(d) shall
                  be borne by Purchaser.

                  Purchaser shall not make any Section 338(h)(10) election with
                  respect to the acquisition by it of the Hokuriku Shares.

         2.26. A new Exhibit 11.1.1(e) to the Purchase Agreement is hereby
created and is as follows:

                               EXHIBIT 11.1.1(e)

                  1.       (a) Seller shall cause the Shares of Knoll
                           Pharmaceuticals Ltd. (India) ("Knoll India") owned by
                           Lupharma to be duly and validly transferred by
                           Lupharma to a newly-formed corporation organized
                           under the laws of the United Kingdom and wholly owned
                           by the Seller or any Affiliate of Seller other than
                           the Companies ("BASF UK Public Holding Company").

                           (b) Seller shall then cause, on the Closing Date, all
                           of the issued and outstanding shares of BASF UK
                           Public Holding Company to be duly and validly
                           transferred to the Purchaser entity, Abbott Equities
                           Holdings Limited, a U.K. company.

                  2.       Seller shall cause the Shares of Knoll International
                           Ltd. (India) ("Knoll Private") owned by Knoll AG to
                           be duly and validly transferred by Knoll


                                                                              22



                           AG to a newly-formed corporation (other than BASF UK
                           Public Holding Company) that is organized under the
                           laws of the United Kingdom and wholly owned by the
                           Seller or any Affiliate of Seller other than the
                           Companies ("BASF UK Private Holding Company").

                  3.       Any stamp or transfer taxes or VAT incurred in
                           connection with the transfers contemplated by
                           paragraphs 1(a) and 2 of this Exhibit 11.1.1(e)
                           (the "India Transfers") shall be borne by Purchaser.

                  4.       For the avoidance of doubt, in addition to Knoll
                           India, the BASF UK Public Holding Company shall, for
                           purposes of the Purchase Agreement, be deemed an
                           "Other Foreign Subsidiary."

         2.27. A new Exhibit 12.2(d) to the Purchase Agreement is hereby created
and is as follows:

                                                                EXHIBIT 12.2(d)
                               EXCLUDED COMPANIES

                  1.       Boots Galenika d.o.o. (Yugoslavia)
                  2.       Knoll Polska Sp zoo (Poland)
                  3.       Knoll Pharmaceutical PTE Ltd. (Singapore)
                  4.       Knoll AG & Co OHG
                  5.       Minden Farmaceutical Lda.
                  6.       Knoll International Private Ltd. (India) and BASF UK
                           Private Holding Company
                  7.       Latinoamericana de Farmacos Lda. (Colombia)
                  8.       BASF Management Services S.A. (Spain)
                  9.       Knoll Centroamericana (Guatemala)
                  10.      Transpharm, Inc.

         2.28. Exhibit 8.1 is amended and restated in its entirety as attached
hereto as Exhibit 8.1.

         2.29. Exhibit 13.21 to the Purchase Agreement is hereby amended by
deleting therefrom "Development and Distribution Agreement between Knoll, Ltd.
and Byk Gulden, dated May 1, 1996."

         2.30. A new Exhibit 13.29 to the Purchase Agreement is hereby created
and is attached hereto as Exhibit 13.29.

         2.31. A new Exhibit 15.1(I)(d) to the Purchase Agreement is hereby
created and is attached hereto as Exhibit 15.1(I)(d).

         2.32. The Purchase Agreement is hereby amended by replacing, in every
provision in which it occurs, the existing term "Separate Sale and Transfer
Contracts" with the term "Separate Transfer Contracts."


                                                                              23



                                    SECTION 3
                                 MISCELLANEOUS

         3.1. Notices. All notices, statements and other communications to be
given with respect to this Amendment shall be in the English language and sent
by registered mail, by facsimile transmission or by messenger to the parties at
the following addresses or at such other addresses as shall be specified by the
parties:

If to Seller:               BASF Aktiengesellschaft
                            Central Legal Department
                            67056 Ludwigshafen, Germany
                            Telefax: 49.621.60.20410

If to Purchaser:            Abbott Laboratories
                            One Abbott Park Road
                            Abbott Park, Illinois 60053-3500
                            Telephone: 847-937-6100
                            Attn: General Counsel

         3.2. Entire Agreement; Written Form.

         (a) The Purchase Agreement as amended by this Amendment constitutes the
entire agreement and supersedes all other prior agreements and undertakings both
written and oral among the parties with respect to the subject matter thereof
and hereof. In the event of any translation of this Amendment, the English
version shall govern.

         (b) Any changes in this Amendment including, but not limited to, this
clause shall only be valid if made in writing and executed by both Seller and
Purchaser or, if necessary, in a stricter form.

         3.3. Assignment; Set-off.

         (a) Neither Seller nor Purchaser may assign any rights or obligations
under this Amendment to any third party without the consent of the respective
other party.

         (b) Purchaser shall not be entitled to offset any claim it may have
against Seller (whether under this Amendment or otherwise) against the claim of
Seller for payment of the Aggregate Purchase Price pursuant to Section 8 of the
Purchase Agreement as amended by this Amendment unless Purchaser's claim has
become final (rechtskraftig) or is undisputed.

         3.4. Governing Law, Jurisdiction.

         (a) This Amendment shall be governed by and construed in accordance
with the laws of the Federal Republic of Germany, without regard to its choice
of law rules.


                                                                              24


         (b) Except as otherwise expressly stated elsewhere in this Amendment,
all disputes arising out of or in connection with this Amendment, including any
question regarding its existence, validity or termination, shall be referred to
and finally resolved by arbitration in accordance with the Rules of the German
Institute of Arbitration e.V. (DIS) without recourse to the ordinary courts of
law, provided that the Chairman of the Arbitral Tribunal shall not be of the
same nationality as that of any of the parties to a given dispute. The place of
arbitration shall be Frankfurt; the language of the arbitration shall be
English.

         3.5. Expenses.

         (a) Except as specifically provided otherwise in this Amendment, each
party shall bear its own expenses and fees (including attorneys', accountants',
consultants' and advisors' fees) in connection with this Amendment or any of the
transactions contemplated herein, including any merger control filing and
filings with other governmental authorities made by such party.

         (b) Fees and costs triggered by the implementation of this
Amendment, including but not limited to any notarial fees, any transfer or
sales Tax (including value added Tax and stamp duties and property transfer
Tax according to Section 5 para 3 Grunderwerbssteuergesetz), any registration
or publication fees shall be borne by Purchaser.

         3.6. Severability. Should any of the provisions of this Amendment be or
become fully or partly invalid or unenforceable, the remainder of the Amendment
shall be valid or enforceable. The invalid or unenforceable provision shall be
replaced by a provision which shall come as close as possible to the economic
purpose of the invalid provision. Any gaps in this Amendment shall be filled by
a provision which the parties as prudent businessmen would in good faith have
agreed to, had they considered the matter not covered by this Amendment.


                                                                              25



                                                                   EXHIBIT 13.29

               CHAIN OF TITLE OF 66.67 % SHAREHOLDING IN HOKURIKU
                              SINCE JANUARY 1, 2000

January 1, 2000:           Knoll AG (direct 100% subsidiary of BASF AG since
                           before 2000) owns 66.67% of the shares in Hokuriku

June 2000:                 Lupharma GmbH and Transpharm GmbH each acquired
                           33.335% of the shares in Hokuriku from Knoll AG.
                           Lupharma and Transpharm are, at the time of such
                           acquisition, each 100% owned by Knoll AG and
                           therewith indirectly by BASF AG since before January
                           1, 2000

June 2000:                 Subsequent to the acquisition of the said shares in
                           Hokuriku, Lupharma GmbH and Transpharm GmbH were sold
                           to BASF AG and then contributed to BASF Pharma
                           Holding GmbH, which is and has been a 100% BASF AG,
                           wholly owned subsidiary since before 2000.


                                                                              26



                                                              EXHIBIT 15.1(I)(d)

                               ABBOTT LABORATORIES
                     BASF Pharma - Protium - Total Worldwide
                                      ($MM)
ABBOTT FORECAST



                                          2001       2002       2003       2004       2005       2006
                                       -----------------------------------------------------------------
                                                                               
Total Abbott Net Sales                    24.0       35.0       37.0       39.0       41.0       43.0
Earnings Before Interest & Taxes           7.9       11.6       14.1       14.8       17.6       18.5
Working Capital Cash Flow                 (5.7)      (2.7)      (0.7)      (0.5)      (0.6)      (0.5)
                                       -----------------------------------------------------------------
Total Cash Flow                            2.2        8.9       13.4       14.3       17.0       18.0



                  2001-2006            NPV @ 12.5%         51.4


                                                                              27



                                                                    EXHIBIT 12.5

                               DEFERRED CLOSINGS



- ----------------------------------------  ----------------------------------------  ------------------------------
        COMPANY/COUNTRY                                    REASON                      ALLOCATED PURCHASE PRICE
- ----------------------------------------  ----------------------------------------  ------------------------------
                                                                                    
Knoll Columbiana S.A. Laboratorio          Competition law                                $  18,000,000
Farmaceutico/Columbia
- ----------------------------------------  ----------------------------------------  ------------------------------
Knoll spol. sro./Slovak Republic           Competition law/embassy approval of                2,100,000
                                           transfer documents
- ----------------------------------------  ----------------------------------------  ------------------------------
Knoll Pharmaceuticals South Africa Pty.    Competition law                                    8,300,000
Ltd./South Africa
- ----------------------------------------  ----------------------------------------  ------------------------------
Knoll Produtos Quimicos e Farmaceuticos    Funds flow/central bank                          100,000,000
Ltda./Brazil
- ----------------------------------------  ----------------------------------------  ------------------------------
Knoll spol. s. r. o./Czech Republic        Documentation translation requirements             3,600,000
- ----------------------------------------  ----------------------------------------  ------------------------------
Knoll International Private Ltd./India                                                        6,800,000
Private Holding Company
- ----------------------------------------  ----------------------------------------  ------------------------------
             Total                                                                        $ 138,800,000
- ----------------------------------------  ----------------------------------------  ------------------------------

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



                                                                              29



                                                                     EXHIBIT 8.1



                                                                          Amount in USD 000
                                                                           
Knoll Argentina SA                                                               10,400
Knoll Australia Pty. Ltd.                                                        21,000
EBEWE Arzneimittel GmbH                                                          72,000
Knoll Produtos Quimicos e Farmaceuticos Ltda.                                   100,000
Knoll Belgium S.A. N.V.                                                          14,300
Knoll Colombiana S.A.                                                            18,000
Knoll spol. s.r.o. (Czech Republic)                                               3,600
Laboratoires Knoll France S.A.                                                  125,000
Knoll AG                                                                      3,281,000
Lupharma UK Holding I, Ltd.                                                      57,570
(Knoll Pharmaceuticals Ltd.)
Lupharma UK Holding II, Ltd.                                                      6,800
Knoll Farmaceutici S.p.A.                                                       152,000
Ravizza Farmaceutici S.p.A.                                                     133,780
Knoll Japan KK                                                                    3,450
Quimica Knoll de Mexico S.A. de C.V.                                             50,000
Immobiliaria Candelaria S.A.                                                      2,800
Knoll B.V.                                                                      956,300
Knoll Pharmaceuticals Ltd.  (Pakistan)                                           15,550
Knoll spol. s.r.o. (Slovak Republic)                                              2,100
Knoll Pharmaceuticals South Africa Pty., Ltd.                                     8,300
Laboratorios Knoll, S.A.                                                        106,000
Lufarma  Espanola S.L.                                                           11,400
Knoll Lakemedel AB                                                                1,200
Knoll Bio-Research S.A.                                                          59,400
Knoll AG (Liesthal)                                                              63,600
Knoll Alman Ilac ve Ecza tic. Ltd. Sti                                           37,400
BASF Pharma Ltd.                                                                      0
Knoll Ltd.                                                                       93,000
BASF Pharmaceutical Corp.                                                     1,356,050
Assets from BASF AG
         Transferred Patents                                                    160,000
         Licensed Patents                                                         8,000

                                                                              6,930,000


                                                                               3



                                   [GRAPHIC]



                                    URKUNDE

                                   des Notars

                              DR. NORBERT MEISTER

                              in Frankfurt am Main






                                            Nummer 56 der Urkundenrolle fur 2001


                                    [GRAPHIC]

                                    RECORDED

                      at Frankfurt am Main on May 18, 2001

                      Before the undersigned notary public

                              DR. NORBERT MEISTER

                       with offices at Frankfurt am Main

appeared today:


1.       Ms. Monika Wickel, having her business address at Taunusanlage 11,
         60329 Frankfurt am Main, personally known, acting not in her own name
         but, excluding any personal liability whatsoever, in the name and on
         behalf of BASF Aktiengesellschaft, Ludwigshafen, Central Legal
         Department, 67056 Ludwigshafen, Germany, by way of a power of attorney
         a fax copy of which was presented to the notary public. Ms. Wickel
         stated that the original power of attorney will be submitted to the
         notary public in due course and that a certified copy of the power of
         attorney shall be attached to this deed.




                                        2


                                          - hereinafter referred to as "Seller"-

2.       Mr. Thomas Gilles, who identified himself by his German identity card,
         Bethmannstrasse 50-54, 60311 Frankfurt am Main, acting not in his own
         name but in the name and on behalf of Abbott Laboratories, One Abbott
         Park Road, Abbott Park, Illinois 60053-3500, USA, by way of a power of
         attorney a fax copy of which was presented to the notary public. Mr.
         Gilles stated that the original power of attorney will be submitted to
         the notary public in due course and that a certified copy of the power
         of attorney shall be attached to this deed.


                                        -hereinafter referred to as "Purchaser"-

The Notary asked about a prior involvement in the meaning of Section 3 para 1
no. 7 Notarization Act (BEURKUNDUNGSGESETZ) and received an affirmative reply
with the proviso, that such prior involvement occurred upon request of all
parties involved. The notary public advised the persons appeared of their right
to demand a written translation into German or the assistance of an interpreter.
The persons appeared expressly waived such right and demanded the immediate
recording of the present deed.

The Parties appeared stated that this notarial deed should be notarized in
English. The notary public who is in command of the English language ascertained
that the Parties appeared are also in command of the English language. The
Parties appeared waived their right to have this deed translated to them by a
sworn interpreter.

The parties now therefore enter into the following:



                     SECOND AMENDMENT TO PURCHASE AGREEMENT
                               "SECOND AMENDMENT"


         WHEREAS, Seller and Purchaser are parties to the Purchase Agreement
dated as of December 14, 2000 (Number 194 of the Roll of Deeds for 2000 of Dr.
Norbert Meister, notar, at Frankfurt am Main), as amended by the Amendment dated
as of March 2, 2001 (Number 226 of the Roll of Deeds for 2001 of Dr. Gerhard
Pilger, notar, at Frankfurt am Main) (the "Purchase Agreement" or the "Reference
Deeds"), pursuant to which the Purchaser acquired the Shares and Transferred
Patents (as such terms are defined in the Purchase Agreement); and

         WHEREAS, any and all defined terms used in this present deed shall have
the same meaning as attached to them in the Purchase Agreement unless expressly
stated otherwise herein;



                                        3


         WHEREAS, for the purpose of making reference to the Notarial Deeds,
certified copies of the Reference Deeds were made available to the parties
throughout the course of the present notarization. The content of the Reference
Deeds is known to the Signatories and they waive their right to have the
Reference Deeds read aloud and to have the Reference Deeds attached to this
Deed.

         WHEREAS, Seller and Purchaser have agreed to certain matters incidental
to the actions to be taken by the parties subsequent to the Closing (as such
term is defined in the Purchase Agreement) regarding the adjustment of the
Non-Indian Purchase Price (as such term is defined in the Purchase Agreement as
amended);

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, the parties to the Purchase Agreement hereby
agree as follows:

                                    SECTION 1
                                   DEFINTIONS

         All initial capitalized terms used and not otherwise defined herein
have the meanings assigned to such terms in the Purchase Agreement.



                                    SECTION 2
                      AMENDMENTS TO THE PURCHASE AGREEMENT

         The Purchase Agreement is hereby amended as follows:

2.1      The first sentence of section 9.2 of the section of the Purchase
         Agreement entitled "Section 9, Non-Indian Purchase Price Adjustment" is
         hereby amended by replacing the phrase "The amount determined in
         accordance with Section 9.1 above" with the phrase "The amount
         determined in accordance with Section 10.5 below."

2.2      The section of the Purchase Agreement entitled "Section 10, Final
         Closing Net Asset Value Statement" is hereby amended by amending and
         restating Sections 10.4, 10.5 and 10.6 in their entirety as follows:

         "10.4    Purchaser shall have until and including June 4, 2001 to
                  review the Closing Net Asset Value Statement, and to raise in
                  writing and in reasonable detail any objections against
                  specified items of the Closing Net Asset Value Statement,
                  indicating precisely the higher or lower value which in
                  Purchaser's opinion should be allocated to each item in
                  dispute. Purchaser and its auditors shall be granted access to
                  all relevant information produced by Seller or Seller's
                  Auditors; provided, however, that the work papers of Seller's
                  Auditors shall be made available only to Pur-



                                        4


                  chaser's Auditors. The objections raised by Purchaser pursuant
                  to this section must also specify how the amounts in dispute
                  should be allocated in Purchaser's opinion. Any item in the
                  Closing Net Asset Value Statement objected to by Purchaser
                  shall hereinafter be referred to as a "Disputed Item."

         10.5     (a)   If and insofar as Purchaser does not raise objections to
                        the Closing Net Asset Value Statement in accordance with
                        Section 10.4 above, the Closing Net Asset Value arrived
                        at in the Closing Net Asset Value Statement shall be
                        final and binding upon the parties, subject to Section
                        10.5(b) below. To the extent to which the Closing Net
                        Asset Value arrived at in the Closing Net Asset Value
                        Statement is final and binding upon the parties the
                        adjustment payment to be made by Purchaser or Seller
                        according to Section 9.1 shall be made forthwith, in
                        accordance with Section 10.5(c) below.

                  (b)   On May 23, 2001, Purchaser shall pay to Seller Euro
                        1,078,853,000 (in words: one billion seventy eight
                        million eight hundred fifty-three thousand Euros). This
                        payment represents Euro 1,064,307,000 (in words: one
                        billion sixty-four million three hundred and seven
                        thousand Euros) (the "Partial Adjustment Payment"), plus
                        accrued interest in the amount of Euro 14,546,000 which
                        has been calculated at a rate of six percent (6%) per
                        annum from the Closing to the date of payment.

                  (c)   When the Closing Net Asset Value arrived at in the
                        Closing Net Asset Value Statement is final and binding
                        upon the parties, then any adjustment payment owed by
                        one party to the other party pursuant to Section 9.1(b)
                        or Section 9.1(c) above, shall first be reconciled
                        against the amount of the Partial Adjustment Payment,
                        and such reconciled amount shall be paid to the party to
                        whom it is due, pursuant to Section 9.2 above.

         10.6     The parties shall use their best efforts to resolve the
                  Disputed Items within 15 working days following receipt by
                  Seller of Purchaser's objections pursuant to Section 10.4
                  above, and as part of such efforts the parties shall meet to
                  discuss such Disputed Items during the week of June 17, 2001."

                                    SECTION 3
                                  MISCELLANEOUS

3.1      Notices. All notices, statements and other communications to be given
         with respect to this Second Amendment shall be in the English language
         and sent by registered mail, by facsimile transmission or by messenger
         to the parties at the





                                        5

following addresses or at such other addresses as shall be specified by the
parties:

If to Seller:            BASF Aktiengesellschaft
                         Central Legal Department
                         67056 Ludwigshafen, Germany
                         Telefax: 49.621.60.20410

If to Purchaser:         Abbott Laboratories
                         One Abbott Park Road
                         Abbott Park, Illinois 60053-3500
                         Telefax: 847-938-6277
                         Attn: General Counsel

3.2    Entire Agreement; Written Form.

       (a) As amended by this Second Amendment, the Purchase Agreement shall
           remain in full force and effect and shall constitute the entire
           agreement and supersede all other prior agreements and
           undertakings both written and oral among the parties with respect
           to the subject matter thereof and hereof. In the event of any
           translation of this Second Amendment, the English version shall
           govern.

       (b) Any changes in this Second Amendment including, but not limited
           to, this clause shall only be valid if made in writing and
           executed by both Seller and Purchaser or, if necessary, in a
           stricter form.

       (c) Neither party hereto waives any rights it may have under the
           Purchase Agreement, including any and all rights under Sections 10
           (as amended hereby), 15 and 18 of the Purchase Agreement, or
           otherwise under applicable law in connection with this Second
           Amendment, the subject matter hereof, or by virtue of any payment
           made pursuant to Section 10.5 above, all of which rights are
           hereby expressly reserved.

3.3    Assignment. Neither Seller nor Purchaser may assign any rights or
       obligations under this Second Amendment to any third party without the
       consent of the respective other party.

3.4    Governing Law; Jurisdiction.

       (a) This Second Amendment shall be governed by and construed in
           accordance with the laws of the Federal Republic of Germany,
           without regard to its choice of law rules.






                                        6

       (b) Except as otherwise expressly stated elsewhere in this Second
           Amendment, and except for the continuing applicability of the
           provisions of Sections 10.7 and 10.8 of the Purchase Agreement for
           the resolution of remaining Disputed Items described in Section
           10.6 of the Purchase Agreement as amended by this Second
           Amendment, all disputes arising out of or in connection with this
           Second Amendment, including any question regarding its existence,
           validity or termination, shall be referred to and finally resolved
           by arbitration in accordance with the Rules of the German
           Institute of Arbitration e.V. (DIS) without recourse to the
           ordinary courts of law, provided that the Chairman of the Arbitral
           Tribunal shall not be of the same nationality as that of any of
           the parties to a given dispute. The place of arbitration shall be
           Frankfurt, Germany; the language of the arbitration shall be
           English.

3.5    Expenses.

       (a) Except as specifically provided otherwise in this Second
           Amendment, each party shall bear its own expenses and fees
           (including attorneys', accountants', consultants' and advisors'
           fees) in connection with this Second Amendment or any of the
           actions contemplated herein.

       (b) Fees and costs triggered by the implementation of this Second
           Amendment, including but not limited to any notarial fees, any
           transfer or sales Tax (including any value added Tax and stamp
           duties and property transfer Tax according to Section 5 para 3
           Grunderwerbssteuergesetz), any registration or publication fees
           shall be borne by Purchaser.

3.6    Severability. Should any of the provisions of this Second Amendment be
       or become fully or partly invalid or unenforceable, the remainder of
       the Second Amendment shall be valid or enforceable. The invalid or
       unenforceable provision shall be replaced by a provision which shall
       come as close as possible to the economic purpose of the invalid
       provision. Any gaps in this Second Amendment shall be filled by a
       provision which the parties as prudent businessmen would in good faith
       have agreed to, had they considered the matter not covered by this
       Second Amendment.

The above was read out aloud by the notary public, approved by the parties
appearing, and then signed by them and the notary public in their own hand as
follows:

       gez. Monika Wickel
       gez. Thomas Gilles
       gez. Meister, Notar





                   [BASF Aktiengesellschaft LETTERHEAD]




BASF Aktiengesellschaft - 67056 Ludwigshafen


                                   VOLLMACHT

Hiermit erteilen wir

                               HERRN WALTER KNAUS,

                               FRAU SABINE GERTH,

                              FRAU DAGMAR ROTH und

                               FRAU MONIKA WICKEL

- - jedem fur sich alleine -


Vollmacht, BASF Aktiengesellschaft bei der notariellen Beurkundung des
beigefugten "Second Amendment to Purchase Agreement" zwischen BASF
Aktiengesellschaft und Abbott Laboratories am 18.05.2001 zu vertreten.

Ludwigshafen, 18.05.2001

BASF Aktiengesellschaft

/s/ Dr. Heinz-Gerd Goldmann             /s/ Joachim Scholz
- ---------------------------            --------------------------
Dr. Heinz-Gerd Goldmann                Joachim Scholz

Prokurist                              Prokurist







                     SECOND AMENDMENT TO PURCHASE AGREEMENT

This SECOND AMENDMENT TO PURCHASE AGREEMENT, dated as of May 18, 2001, ("Second
Amendment") is between BASF Aktiengeselleschaft ("Seller") and Abbott
Laboratories ("Purchaser").

                                   WITNESSETH

     WHEREAS, Seller and Purchaser are parties to the Purchase Agreement
dated as of December 14, 2000 (Number 194 of the Roll of Deeds for 2000 of
Dr. Norbert Meister, notar, at Frankfurt am Main), as amended by the
Amendment dated as of March 2, 2001 (Number 226 of the Roll of Deeds for 2001
of Dr. Gerhard Pilger, notar, at Frankfurt am Main) (the "Purchase
Agreement"), pursuant to which the Purchaser acquired the Shares and
Transferred Patents (as such terms are defined in the Purchase Agreement); and

     WHEREAS, Seller and Purchaser have agreed to certain matters incidental
to the actions to be taken by the parties subsequent to the Closing (as such
term is defined in the Purchase Agreement) regarding the adjustment of the
Non-Indian Purchase Price (as such term is defined in the Purchase Agreement);

     NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, the parties to the Purchase Agreement hereby
agree as follows:

                                    SECTION 1
                                   DEFINITIONS

     All initial capitalized terms used and not otherwise defined herein have
the meanings assigned to such terms in the Purchase Agreement.

                                    SECTION 2
                      AMENDMENTS TO THE PURCHASE AGREEMENT

     The Purchase Agreement is hereby amended as follows:

2.1    The first sentence of section 9.2 of the section of the Purchase
       Agreement entitled "Section 9, Non-Indian Purchase Price Adjustment" is
       hereby amended by replacing the phrase, "The amount determined in
       accordance with Section 9.1 above" with the phrase, "The amount
       determined in accordance with Section 10.5 below."

2.2    The section of the Purchase Agreement entitled "Section 10, Final Closing
       Net Asset Value Statement" is hereby amended by amending and restating
       Sections 10.4, 10.5 and 10.6 in their entirety as follows:


                                                                             1





10.4   Purchaser shall have until and including June 4, 2001 to review the
       Closing Net Asset Value Statement, and to raise in writing and in
       reasonable detail any objections against specified items of the
       Closing Net Asset Value Statement, indicating precisely the higher or
       lower value which in Purchaser's opinion should be allocated to each
       item in dispute. Purchaser and its auditors shall be granted access to
       all relevant information produced by Seller or Seller's Auditors;
       provided, however, that the work papers of Seller's Auditors shall be
       made available only to Purchaser's Auditors. The objections raised by
       Purchaser pursuant to this section must also specify how the amounts
       in dispute should be allocated in Purchaser's opinion. Any item in the
       Closing Net Asset Value Statement objected to by Purchaser shall
       hereinafter be referred to as a "Disputed Item."

10.5  (a) If and insofar as Purchaser does not raise objections to the
       Closing Net Asset Value Statement in accordance with Section 10.4
       above, the Closing Net Asset Value arrived at in the Closing Net Asset
       Value Statement shall be final and binding upon the parties, subject
       to Section 10.5(b) below. To the extent to which the Closing Net Asset
       Value arrived at in the Closing Net Asset Value Statement is final and
       binding upon the parties the adjustment payment to be made by
       Purchaser or Seller according to Section 9.1 shall be made forthwith,
       in accordance with Section 10.5(c) below.

       (b) On May 23, 2001, Purchaser shall pay to Seller Euro
           1,078,853,000. This payment represents Euro 1,064,307,000 (the
           "Partial Adjustment Payment"), plus accrued interest in the amount
           of Euro 14,546,000 which has been calculated at a rate of six
           percent (6%) per annum from the Closing to the date of payment.

       (c) When the Closing Net Asset Value arrived at in the Closing Net
           Asset Value Statement is final and binding upon the parties, then
           any adjustment payment owed by one party to the other party
           pursuant to Section 9.1(b) or Section 9.1(c) above, shall
           first be reconciled against the amount of the Partial Adjustment
           Payment, and such reconciled amount shall be paid to the party to
           whom it is due, pursuant to Section 9.2 above.

10.6   The parties shall use their best efforts to resolve the Disputed Items
       within 15 working days following receipt by Seller of Purchaser's
       objections pursuant to Section 10.4 above, and as part of such efforts
       the parties shall meet to discuss such Disputed Items during the week
       of June 17, 2001.

                                    SECTION 3
                                 MISCELLANEOUS


                                                                              2




3.1      Notices. All notices, statements and other communications to be given
         with respect to this Second Amendment shall be in the English language
         and sent by registered mail, by facsimile transmission or by messenger
         to the parties at the following addresses or at such other addresses as
         shall be specified by the parties:

         If to Seller:     BASF Atiengeselleschaft
                           Central Legal Department
                           67056 Ludwigshafen, Germany
                           Telefax: 49.621.60.20410

         If to Purchaser:  Abbott Laboratories
                           One Abbott Park Road
                           Abbott Park, Illinois 60053-3500
                           Telefax: 847-938-6277
                           Attn: General Counsel

3.2      Entire Agreement; Written Form.

         (a)      As amended by this Second Amendment, the Purchase Agreement
                  shall remain in full force and effect and shall constitute the
                  entire agreement and supercede all other prior agreements and
                  undertakings both written and oral among the parties with
                  respect to the subject matter thereof and hereof. In the event
                  of any translation of this Second Amendment, the English
                  version shall govern.

         (b)      Any changes in this Second Amendment including, but not
                  limited to, this clause shall only be valid if made in writing
                  and executed by both Seller and Purchaser or, if necessary, in
                  a stricter form.

         (c)      Neither party hereto waives any rights it may have under the
                  Purchase Agreement, including any and all rights under
                  Sections 10 (as amended hereby), 15 and 18 of the Purchase
                  Agreement, or otherwise under applicable law in connection
                  with this Second Amendment, the subject matter hereof, or by
                  virtue of any payment made pursuant to Section 10.5 above, all
                  of which rights are hereby expressly reserved.

3.3      Assignment. Neither Seller nor Purchaser may assign any rights or
         obligations under this Second Amendment to any third party without the
         consent of the respective other party.

3.4      Governing Law; Jurisdiction

         (a)      This Second Amendment shall be governed by and construed in
                  accordance with the laws of the Federal Republic of Germany,
                  without regard to its choice of law rules.



                                                                               3




         (b)      Except as otherwise expressly stated elsewhere in this Second
                  Amendment, and except for the continuing applicability of the
                  provisions of Sections 10.7 and 10.8 of the Purchase Agreement
                  for the resolution of remaining Disputed Items described in
                  Section 10.6 of the Purchase Agreement as amended by this
                  Second Amendment, all disputes arising out of or in connection
                  with this Second Amendment, including any question regarding
                  its existence, validity or termination, shall be referred to
                  and finally resolved by arbitration in accordance with the
                  Rules of the German Institute of Arbitration e.V. (DIS)
                  without recourse to the ordinary courts of law, provided that
                  the Chairman of the Arbitral Tribunal shall not be of the same
                  nationality as that of any of the parties to a given dispute.
                  The place of arbitration shall be Frankfurt, Germany; the
                  language of the arbitration shall be English.

3.5      Expenses

         (a)      Except as specifically provided otherwise in this Second
                  Amendment, each party shall bear its own expenses and fees
                  (including attorneys', accountants', consultants' and
                  advisors' fees) in connection with this Second Amendment or
                  any of the actions contemplated herein.

         (b)      Fees and costs triggered by the implementation of this Second
                  Amendment, including but not limited to any notarial fees, any
                  transfer or sales Tax (including any value added Tax and stamp
                  duties and property transfer Tax according to Section 5 para 3
                  Grunderwerbssteuergesetz), any registration or publication
                  fees shall be borne by Purchaser.

3.6      Severability. Should any of the provisions of this Second Amendment be
         or become fully or partly invalid or unenforceable, the remainder of
         the Second Amendment shall be valid or enforceable. The invalid or
         unenforceable provision shall be replaced by a provision which shall
         come as close as possible to the economic purpose of the invalid
         provision. Any gaps in this Second Amendment shall be filled by a
         provision which the parties as prudent businessmen would in good faith
         have agreed to, had they considered the matter not covered by this
         Second Amendment.

[to be added at end: powers of attorney, certificates, apostile etc. for each
party]



                                                                               4



Vorstehende Ablichtung Stimmt mit der Urschrift wortlich uberein.

Frankfurt am Main, den

25. MAI 2001   /s/ Dr. Norbert Meister
- -----------------------------------------
              Notar





                     [STATE OF ILLINOIS SECRETARY OF STATE SEAL]

                                    APOSTILLE

                    (Convention de La Haye du 5 Octobre 1961)

1.       Country:  United States of America

           This public document

2.       has been signed by  MARY TAMARRI

3.       acting in the capacity of NOTARY PUBLIC, LAKE COUNTY

4.       bears the seal/stamp of STATE OF ILLINOIS

                                    Certified

5.       Springfield, Illinois

6.                                           MAY 15, 2001

7.       by the Secretary of State, State of Illinois

8.       No.  5285

9.       Seal/Stamp:                            10.  Signature

                                                /s/  Jesse White
                                                --------------------------------
                                                JESSE WHITE
                                                SECRETARY OF STATE
                                                STATE OF ILLINOIS





                               POWER OF ATTORNEY

We, the undersigned company

                              ABBOTT LABORATORIES
                           ABBOTT PARK, ILLINOIS, USA
                    hereinafter referred to as the "Company"

hereby grant powers of attorney to

                                Matthias Jaletzke
                            with business address at
                                Baker & McKenzie
                               Frankfurt, Germany

                                  Thomas Gilles
                            with business address at
                                Baker & McKenzie
                               Frankfurt, Germany

                                 Henrik Bauwens
                            with business address at
                                Baker & McKenzie
                               Frankfurt, Germany

                                   Peter Gullo
                            with business address at
                                Baker & McKenzie
                               Frankfurt, Germany

                                       and

                                Katharina Spenner
                            with business address at
                                Baker & McKenzie
                               Frankfurt, Germany

each singly to represent the Company in connection with the transactions
contemplated by the purchase agreement dated as of December 14, 2000 (the
"Purchase Agreement") between BASF Aktiengesellschaft, a stock corporation
organized under the laws of the Federal Republic of Germany ("BASF") and the
Company and any matters related thereto, including, but not limited to, (i) any
amendments to the Purchase Agreement; (ii) the sale of all of the issued and
outstanding shares of capital stock of (a) Knoll GmbH, formerly Knoll AG, a
stock corporation organized under the laws of the Federal Republic of Germany,
and (b) BASF Pharmaceutical Corporation, a Delaware corporation; (iii) the sale
to the Company and/or any of its subsidiaries of all of shares of capital stock
or other equity interests directly or indirectly owned by BASF;


                                      -2-


(iv) the sale and transfer of certain patents, trademarks, tradenames and other
intellectual property, and to enter into any kinds of agreements and
commitments, including the right to grant substitute and additional powers of
attorney, as any of them deem necessary and appropriate in connection therewith.

Our representatives shall be authorized to make all statements they deem
necessary or appropriate in this context. Furthermore, our representatives shall
be released from the restrictions set forth in Section 181 of the German Civil
Code, and they shall be authorized to pass on this release to any recipient of a
substitute or additional Power of Attorney.

ABBOTT LABORATORIES

Illinois, 14 day of May 2001

by:

/s/ Thomas C. Freyman
- ------------------------------------
Thomas C. Freyman, Senior Vice President,
Finance and Chief Financial Officer

STATE OF ILLINOIS     )
                      )   ss.
COUNTY OF LAKE        )

The undersigned, a Notary Public in and for the County and State aforesaid, does
hereby certify that Thomas C. Freyman, personally known to me to be a duly
appointed officer of Abbott Laboratories, an Illinois corporation, appeared
before me this day in person and acknowledged under oath that in such capacity
he signed and delivered this certificate pursuant to authority duly given to him
by said corporation.

GIVEN under my hand and seal this 14 day of May, 2001.

                                     [OFFICIAL SEAL]
/s/ Mary Tamarri
- ------------------------

Notary Public

My Commission expires: 8/14/04



Vorstehende Ablichtung stimmt mit der Urschrift wortlich uberein.

Frankfurt am Main, den


 22. MAI 2001     /s/ Dr. Norbert Meister
- --------------   -------------------------
                 Notar



                              Beglaubigte Abschrift

                             [STATE OF ILLINOIS SEAL]

                                    APOSTILLE

                    (Convention de La Haye du 5 Octobre 1961)

1.       Country:  United States of America

           This public document

2.       has been signed by MARY TAMARRI

3.       acting in the capacity of NOTARY PUBLIC, LAKE COUNTY

4.       bears the seal/stamp of STATE OF ILLINOIS

                                    Certified

5.       Springfield, Illinois

6.                                           MAY 15, 2001

7.       by the Secretary of State, State of Illinois

8.       No. 5284

9.       Seal/Stamp:                            10. Signature:

                                                /s/ Jesse White
                                                ---------------------------
                                                JESSE WHITE
                                                SECRETARY OF STATE
                                                STATE OF ILLINOIS



                                  CERTIFICATION

     This is to certify that I, Brian J. Smith, am Assistant Secretary of
Abbott Laboratories and duly qualified and acting as such; that Abbott
Laboratories is a corporation duly organized and existing under the laws of
the State of Illinois with its principal office in Abbott Park, Lake County,
Illinois; that as such Assistant Secretary I am keeper of its books and
records and its corporate seal; that the attached Resolution is a true,
complete and correct copy of the Resolution passed by the Board of Directors
of Abbott Laboratories at a meeting held on December 8, 2000.

     Given under my hand as Assistant Secretary and the seal of the Corporation
this 14 day of May, 2001.


                                      /s/ Brian J. Smith
                                   -----------------------------
                                   Assistant Secretary


SUBSCRIBED and SWORN to before me

This 14 day of May, 2001.

                                      [OFFICIAL SEAL]
/s/ Mary Tamarri
- ---------------------------------

NOTARY PUBLIC

My Commission Expires   8/14/04
                     -----------------



     WHEREAS, BASF AG and certain of its affiliates, including Knoll AG
("BASF"), is divesting its global pharmaceutical products business, including
the capital stock of BASF subsidiaries engaged in such business (the "BASF
Pharma Group"), and has requested various companies, including the
Corporation, to submit a binding offer for the BASF Pharma Group; and

     WHEREAS, the Board of Directors of the Corporation has determined that
it is desirable for the Corporation to submit a binding offer for the BASF
Pharma Group (the "Offer") and, if such Offer is accepted, to negotiate for
the purchase of the BASF Pharma Group by the Corporation (the "Acquisition");
and

     WHEREAS, this Board of Directors has reviewed and considered the
Acquisition.

     NOW, THEREFORE, BE IT RESOLVED, that the Chairman of the Board and Chief
Executive Officer, the Executive Vice President, Pharmaceuticals and Chief
Scientific Officer, the Senior Vice President, Pharmaceutical Operations, the
Senior Vice President, International Operations, and the Senior Vice
President Finance and Chief Financial Officer (the "Authorized Officers") are,
and each of them is, hereby authorized and directed on behalf of the
Corporation to submit the Offer, including price terms and conditions
presented at this meeting and, in the event that the Corporation's Offer is
accepted, to proceed with negotiations for the purchase of the BASF Pharma
Group at a total cash purchase price not to exceed $_*_________.

     FURTHER RESOLVED, that the Authorized Officers are, and each of them
hereby is, authorized to do or perform, or cause to be done or performed, all
such acts, deeds and things (including the payment of all necessary expenses
and the retention of the services of attorneys, investment bankers and others)
and to negotiate, execute and deliver in the name of and on behalf of the
Corporation, any and all agreements (including without limitation a definitive
purchase agreement), undertakings, documents, government filings,
instruments, or certificates or amendments thereto as each such Authorized
Officer deems necessary or desirable to effectuate and carry out fully the
purpose and intent of the foregoing resolution; and

     FURTHER RESOLVED, that the corporate seal of the Corporation may be
affixed to any instrument or document executed pursuant to any of the
foregoing resolutions  by impressing or affixing such seal thereon or by
imprinting or otherwise reproducing thereon a facsimile thereof.



Intentionally left blank



[RESTRICTED INFORMATION - THIS DOCUMENT CONTAINS CONFIDENTIAL
INFORMATION WHICH IS THE PROPERTY OF ABBOTT LABORATORIES. DO NOT DUPLICATE
OR CIRCULATE TO UNAUTHORIZED PERSONNEL. PLEASE DESTROY OR RETURN TO
THE CORPORATE SECRETARY AFTER YOU HAVE COMPLETED YOUR REVIEW.






Vorstehende Ablichtung stimmt mit der Urschrift wortlich uberein.

Frankfurt am Main, den


22 MAI      2001   /s/ Dr. Norbert Meister
- ---------   --------------------------------
            Notar



                        [STATE OF ILLINOIS LETTERHEAD]

                                   APOSTILLE

                   (Convention de La Haye du 5 Octobre 1961)

1. Country: United States of America

   This public document

2. has been signed by MARY TAMARRI

3. acting in the capacity of NOTARY PUBLIC, LAKE COUNTY

4. bears the seal/stamp of STATE OF ILLINOIS

                                    Certified

5. Springfield, Illinois

6.                                MAY 15, 2001

7. by the Secretary of State, State of Illinois

8. No. 5286

9. Seal/Stamp:                            10. Signature:


                                           /s/ Jesse White
                                          -------------------------
                                          JESSE WHITE
                                          SECRETARY OF STATE
                                          STATE OF ILLINOIS






                           CERTIFICATE OF INCUMBENCY

      I, Brian J. Smith, do hereby certify that I am the duly elected and
qualified Assistant Secretary and keeper of the records and corporate seal of
Abbott Laboratories, a corporation organized and existing under the laws of
the State of Illinois, and that the following person has been duly elected to
the office set forther after his name by the Board of Directors of Abbott
Laboratories, and that this person is the present incumbent of the said
office.

         NAME                                TITLE
         ----                                -----
         Thomas C. Freyman                   Senior Vice President, Finance and
                                                 Chief Financial Officer

     Given under my hand as Assistant Secretary and the seal of the
Corporation this 14 day of May, 2001.

                                             /s/ Brian J. Smith
                                             -----------------------------
                                             Assistant Secretary


SUBSCRIBED and SWORN to before me
this 14 day of May, 2001.


/s/ Mary Tamarri                       [NOTARY PUBLIC SEAL]
- -----------------------------

NOTARY PUBLIC
My Commission Expires        8/14/04
                             -------------






                                  Vorstehende Ablichtung, stimmt
                                  mit der Urschrift wortlich uberein.

                                  Frankfurt am Main, den


                                  22. MAI 2001      /s/ Dr. Norbert Meister
                                  ---------------  -----------------------
                                                       Notar





                            NOTARIELLE BESCHEINIGUNG
                                 (Section 21 BNot0)

Hiermit bescheinige ich auf der Grundlage der von mir veranlassten heutigen
Einsichtnahme in das Handelsregister beim Amtsgericht Ludwigshafen (HRB
3000), dass die Herren

                           DR. GERD HEINZ GOLDMANN UND
                                 JOACHIM SCHOLZ

als Prokuristen der BASF Aktiengesellschaft mit Sitz in Ludwigshafen dort
eingetragen sind und jeweils berechtigt sind, die genannte Gesellschaft mit
einem Vorstandsmitglied oder einem anderen Gesamtprokuristen zu vertreten.


Frankfurt am Main, den 22. Mai 2001


                                       /s/ Dr. Norbert Meister
                                       (Dr. Norbert Meister)
                                               Notar

                                            [NOTAR SEAL]





Vorstehende Ablichtung stimmt
mit der Urschrift wortlich uberein.

Frankfurt am Main, den


25.  MAI 2001       /s/ Dr. Norbert Meister
- -----------------   --------------------
                        Notar



                       AGREEMENT AND THIRD AMENDMENT TO
                              PURCHASE AGREEMENT

     This Agreement and Third Amendment to Purchase Agreement, dated July 23,
2001 (this "AGREEMENT") is by and between BASF Aktiengesellschaft ("SELLER")
and Abbott Laboratories ("PURCHASER").

                             W I T N E S S E T H:

     WHEREAS, Purchaser and Seller are parties to that certain Purchase
Agreement dated as of December 14, 2000 (Number 194 of the Roll of Deeds for
2000 of Dr. Norbert Meister, notar, at Frankfurt am Main), as amended by the
Amendment dated as of March 2, 2001 (Number 226 of the Roll of Deeds for 2001
of Dr. Gerhard Pilger, notar, at Frankfurt am Main) and the Second Amendment
dated as of May 18, 2001 (Number 56 of the Roll of Deeds for 2001 of Dr.
Norbert Meister, notar, at Frankfurt am Main), pursuant to which Purchaser
acquired the Shares and Transferred Patents (collectively, the "PURCHASE
AGREEMENT").

     WHEREAS, Sections 9 and 10 of the Purchase Agreement provide for an
adjustment of the Non-Indian Purchase Price according to the procedures
described therein (the "ADJUSTMENT PROCEDURES");

     WHEREAS, Exhibit 7.4 of the Purchase Agreement provides for the
determination of the Knoll India Net Asset Value;

     WHEREAS, in furtherance of the Adjustment Procedures, Deloitte & Touche
GmbH ("D&T") issued an Auditor's Report, together with an opinion thereon,
dated April 20, 2001 (collectively, the "D&T REPORT");

     WHEREAS, Seller and Purchaser (the "PARTIES") have agreed to certain
adjustments, described more particularly in EXHIBIT A-1 hereto, to the
Closing Net Asset Value reflected in the D&T Report, and that such Closing
Net Asset Value as so adjusted, as described more particularly in EXHIBIT A-2
hereto, shall be the "CLOSING NET ASSET VALUE" for purposes of this Agreement
and Sections 9.1(b) and 9.1(c) of the Purchase Agreement;

     WHEREAS, the Parties have agreed to defer their mutual obligation under
Section 10.2 of the Purchase Agreement to allocate the amount by which the
Closing Net Asset Value exceeds the Reference Net Asset Value (the
"ADDITIONAL PURCHASE PRICE") until completion of the procedures described in
Section 21.4 of the Purchase Agreement and as more particularly described
herein;

     WHEREAS, in connection with the Adjustment Procedures, Seller has agreed
to reimburse Purchaser, and indemnify Purchaser against, certain matters and
Damages, as described more particularly herein; and

     WHEREAS, the Parties desire to amend (a) Section 18 of the Purchase
Agreement to clarify its application to Closing Tax Assets (as defined in
Section 4 of this Agreement), and (b)



Section 27.3 of the Purchase Agreement with respect to the application of
such Section to Mexico.

     NOW, THEREFORE, in consideration of the premises and the mutual
agreements, covenants and representations below, the Parties agree as follows:

     1.  CERTAIN DEFINITIONS.

         Terms used in this Agreement with initial capital letters that are
not otherwise defined in this Agreement will have the meanings given to them
in the Purchase Agreement.

     2.  ADJUSTMENTS, PAYMENT AND ALLOCATION.

         (a)  The Closing Net Asset Value contained in the D&T Report set
forth as Item A to Exhibit A-2 shall be adjusted in accordance with Exhibit A-1
hereto, and such Closing Net Asset Value as so adjusted, shall be
EUR 2,082,600,000 and as such the "FINAL CLOSING NET ASSET VALUE."

         (b)  The Parties hereby acknowledge and agree that the amount of the
Additional Purchase Price shall be EUR 1,332,200,000, of which EUR
1,064,300,000 was paid to Seller on May 23, 2001 leaving EUR 267,900,000
owing by Purchaser to Seller to be satisfied and to be paid as follows:
(i) EUR 87,600,000 of net debt owing by BASF shall be forgiven as described
in Items H and I on Exhibit A-2, and (ii) EUR 180,300,000, together with
interest thereon at the rate of six percent (6%) per annum from March 2, 2001
to the date of payment, will be paid by Purchaser to Seller, within two (2)
business days from the date of this Agreement, by transfer of immediately
available funds to BASF AG, Konto: 0201000700, Commerzbank Ludwigshafen,
BLZ 54540033, SWIFT COBADEFF545.

         (c)  The Parties further acknowledge and agree that upon the final
determination and payment of the Seller or Purchaser Pension Indemnification
Amount, if any, in accordance with the provisions in Section 21.4 of the
Purchase Agreement (the "PENSION AMOUNT"), such Pension Amount will be netted
against or added to, as the case may be, the Additional Purchase Price (as so
adjusted, the "ADJUSTED ADDITIONAL PURCHASE PRICE"), and the Parties will
agree upon allocations of the Adjusted Additional Purchase Price as provided
in Section 5 of this Agreement.

     3.  INDEMNIFICATION AND REIMBURSEMENT.

         (a)  INDEMNIFICATION.

              (i)  Seller shall indemnify and hold harmless each member of
the Purchaser Group from and against all Damages (including without
limitation, costs and expenses of litigation, amounts paid in settlement and
reasonable attorneys' fees) arising out of or related to any of the items or
matters described on the disclosure letter (the "DISCLOSURE LETTER") to this
Agreement (each, an "INDEMNIFIED ITEM"). With respect to each Indemnified
Item, Purchaser shall have, or retain, as the case may be, full control of
the defense and the proceedings, including the right to settle. If requested
by Purchaser, Seller shall cooperate in good faith with Purchaser in order to
contest effectively such claim.


                                       2




                           (ii) If and to the extent a specific provision is
set forth in the Disclosure Letter with respect to a Indemnified Item,
Seller's liability for indemnification pursuant to Section 3(a)(i) of this
Agreement shall be reduced by the amount of such provision.

                           (iii) Seller's liability for indemnification
pursuant to Section 3(a)(i) of this Agreement above shall not exceed, for
each Indemnified Item, the respective amounts set forth in the Disclosure
Letter.

                           (iv) If the liabilities of the Purchaser Group as
set forth in and established by the final order or judgment (without right of
appeal) of the case described in Item 13 in the Disclosure Letter together
with all Damages incurred by Purchaser Group in connection with such case
(collectively, "ITEM 13 LIABILITIES") are less than 1,534,000 Euro, Purchaser
shall pay to Seller an amount equal to (i) 1,534,000 Euro, minus (ii) the
Item 13 Liabilities. If the Item 13 Liabilities are greater than 1,534,000
Euro, Seller shall pay to Purchaser an amount equal to (i) the Item 13
Liabilities, minus (ii) 1,534,000 Euro, but in no event greater than
1,634,000 Euro.

                  (b) NO LIMITATIONS. Seller's obligations set forth in this
Section 3 shall be in addition to, independent of, and not be limited by, any
provision included in the Purchase Agreement, including Section 15 thereof.

         4. Section 18.1 is amended by deleting the first sentence thereof
and substituting the following:


         Seller shall indemnify Purchaser on an After-Tax Basis against (i)
         any liability for Taxes relating to the Companies for any taxable
         period ending on or before the Closing Date and any Pre-Closing
         Straddle Period if and to the extent such liability exceeds the
         liabilities or accruals taken into account by the Closing Net Asset
         Value Statement for Taxes relating to said periods, PROVIDED,
         HOWEVER, that such obligation to indemnify shall be limited to the
         percentage of such liability that corresponds to the percentage of
         the direct or indirect ownership interest of Seller in the Companies
         sold hereunder and (ii) any permanent reduction in the nominal value
         (determined as of the Closing Date) of any Tax Asset included on the
         Closing Net Asset Value Statement resulting from an adjustment by
         any governmental tax authority of any item (including, without
         limitation, any loss carryforward, credit carryforward, deduction,
         or income inclusion) taken into account in determining such Tax
         Asset; PROVIDED that the indemnity under this clause (ii) shall
         include any penalty imposed by the relevant governmental tax
         authority related to such adjustment. Excluded are reductions to the
         extent due to changes in tax law after the Closing Date, expiration
         of items due to inability to utilize after the Closing Date,
         elections made by Purchaser after the Closing Date and business
         restructuring done by Purchaser after the Closing Date.

         5. ALLOCATIONS. After the final determination and payment of the
Pension Amount in accordance with Section 2(c) of this Agreement, the Parties
will agree upon allocations of the Adjusted Additional Purchase Price in
accordance with Section 10.2 of the Purchase Agreement.

                                       3




The Parties acknowledge and agree that any payment made by Seller to
Purchaser or any other member or Purchaser Group, or by Purchaser to Seller,
pursuant to Section 3 of this Agreement shall be considered part of the
Additional Purchase Price, and the Parties shall agree upon allocation(s) at
such time(s) as appropriate. The Parties further acknowledge and agree that
there will be no change to the purchase price allocation with respect to
Knoll India, Hokuriku or Knoll Pakistan for any reason.

         6. NON-COMPETE AMENDMENT. The section in the Purchase Agreement
entitled "Section 27, Non-Compete Covenant" is hereby amended by adding the
following to Section 27.3 after the word "Turkey" and before the word
"shall": "and Mexico".

         7. RESERVATION OF RIGHTS. Nothing in this Agreement shall be deemed
to be a waiver by either Party of any right that such Party may have under
and in accordance with the terms of the Purchase Agreement, as amended by
Sections 4 and 6 hereof, or an agreement to forbear from exercising any right
or remedy with respect to any provision in the Purchase Agreement including
Sections 15 and 18 (as so amended). Purchaser specifically reserves its
rights and remedies under the Purchase Agreement, the documents delivered in
connection therewith and applicable law.

         8. NOTICES. All notices, statements and other communications to be
given with respect to this Agreement shall be in the English language and
sent by registered mail, by facsimile transmission or by messenger to the
parties at the following addresses or at such other addresses as shall be
specified by the parties:

If to Seller:         BASF Atiengeselleschaft
                      Central Legal Department
                      67056 Ludwigshafen, Germany
                      Telefax: 49.621.60.20410

If to Purchaser:      Abbott Laboratories
                      One Abbott Park Road
                      Abbott Park, Illinois 60053-3500
                      Telefax: 847-938-6277
                      Attn: General Counsel

         9. ENTIRE AGREEMENT; WRITTEN FORM.

                  (a) The Purchase Agreement shall remain in full force and
effect and, together with this Agreement and the Disclosure Letter, shall
constitute the entire agreement of the parties with respect to the subject
thereof and hereof and supercede all other prior agreements and undertakings
both written and oral among the Parties with respect to the subject matter
thereof and hereof. In the event of any translation of this Agreement, the
English version shall govern.

                  (b) Any changes in this Agreement, including, but not
limited to, this clause shall only be valid if made in writing and executed
by both Seller and Purchaser or, if necessary, in a stricter form.

         10. ASSIGNMENT. Neither Seller nor Purchaser may assign any rights
or obligations under this Agreement to any third party without the consent of
the respective other Party.

                                       4






     11.  GOVERNING LAW; JURISDICTION.

          (a)  This Agreement shall be governed by and construed in
accordance with the laws of the Federal Republic of Germany, without regard
to its choice of law rules.

          (b)  Except as otherwise expressly stated elsewhere in this
Agreement, all disputes arising out of or in connection with this Agreement,
including any question regarding its existence, validity or termination,
shall be referred to and finally resolved by arbitration in accordance with
the Rules of the German Institute of Arbitration e.V. (DIS) without recourse
to the ordinary courts of law, provided that the Chairman of the Arbitral
Tribunal shall not be of the same nationality as that of any of the parties
to a given dispute. The place of arbitration shall be Frankfurt, Germany; the
language of the arbitration shall be English.


     12.  EXPENSES.

          (a)  Except as specifically provided otherwise in this Agreement,
each party shall bear its own expenses and fees (including attorneys',
accountants', consultants' and advisors' fees) in connection with this
Agreement or any of the actions contemplated herein.

          (b)  Fees and costs triggered by the implementation of this
Agreement, including but not limited to any notarial fees, any transfer or
sales Tax (including any value added Tax and stamp duties and property
transfer Tax according to section 5 paragraph 3 Grunderwerbssteuergesetz, any
registration or publication fees shall be borne by Purchaser.

     13.  SEVERABILITY.  Should any of the provisions of this Agreement be or
become fully or partly invalid or unenforceable, the remainder of the Agreement
shall be valid or enforceable. The invalid or unenforceable provision shall
be replaced by a provision which shall come as close as possible to the
economic purpose of the invalid provision. Any gaps in this Agreement shall
be filled by a provision which the parties as prudent businessmen would be in
good faith have agreed to, had they considered the matter not covered by this
Agreement.


                                       5



                                                                     EXHIBIT A-1


                    Adjustments to Closing Net asset Value





                                                                                             KNOLL PHARMACEUTICAL
                                                                                            DISPUTED ITEMS LISTING

                                                                                         RESOLUTION AS OF JUNE 21, 2001
                                                                                         ---------------------------------
                                                                                                     RESOLVED    RESOLVED
ISSUE #    COUNTRY                                                                       RESOLVED      BASF      ABBOTT
- -------    ------------------          ----------------------------------------------    --------    --------    -------
                                                                                                  
      1    Consolidation               Deferred Tax Balances as reported in the            250.674                4.401 a
                                       closing balance sheet
      2    Consolidation               Adjustment to exchange rates in effect as            48.200               46.500 x
                                       of 9/30/2000
      3    Consolidation               Equity Rollforward - Discontinued Operations         53.800
      4    Consolidation               Equity Rollforward - Unreconciled Balance            55.700
      5    Consolidation               Unreconciled Intercompany - Puerto Rico &            29.000
                                       Knoll BV
      6    Consolidation               Unreconciled Intercompany                            24.978
      7    Consolidation               Tax effect of BASF PharmaChemikalien GmbH &           5.162
                                       Co. KG and Chemikalien GmbH sale
      8    Consolidation               NonTrade Intercompany Balances                          603
      9    Consolidation               Knoll India - should be excluded from 9/30 &                               2.259 a
                                       3/2 balances
     10    Consolidation               Prepaid Insurance                                                          5.693 a
     11    Consolidation               Prepaid Insurance                                         0
     12    Consolidation               Inventory Valuation Reserves                              0
     13    Consolidation               Intercompany Receivables                             18.584
     14    Consolidation               Accounts Payable/Accrued Liabilities                      0
     15    Argentina                   March sales recorded in February                                    48       120 a
     16    Argentina                   Reserve for specific receivable risk                                43
     17    Argentina                   Vacation Accrual                                                              84 a
     18    Argentina                   Asset Disposition                                                   85
     19    Australia                   Unaccrued Diabetes Studies                                                    18 a
     20    Austria                     Loss from product failing testing in normal                         70        71 a
                                       course of production
     21    Brazil                      Labor Relationship - 34 Sales Agencies                                    10.770 b
     22    Brazil                      Foreign sales rep. in Uruguay                                                317 b
     23    Brazil                      Labor-Required Compensation for Employees                                  1.647 b
                                       Without a Collective Bargaining Agreement
     24    Brazil                      Labor Relationship - 27 Outsourced IT Personnel                            1.571 b
     25    Brazil                      Underaccrued Inventory reserves                                    662
     26    Brazil                      Labor Relationship - 23 claims by outsourced workers;                        923 b
                                       16 claims by former employees
     27    Brazil                      Ministry of Justice against several companies for
                                       abusive prices and falsification of materials                    2.391     1.594 a
     28    Brazil                      Receivable reserves                                                          343 a
     29    Brazil                      Labor - Failure to Account for Incentives for                                285 b
                                       Dangerous and Hazardous Jobs
     30    Brazil                      Civil lawsuit hazardous pay                                                  186 b
     31    Brazil                      Pre-closing work accident                                 0
     32    Canada                      Liquidated damages for default (failed to make
                                       payments and market licensed product) by
                                       Knoll Canada under contract with BML Pharma                                  649 b
     33    Canada                      Inventory - Returns accepted by Knoll on Synthroid in              232       300 a
                                       1Q01 not in ordinary course
     34    Canada                      Unaccrued Long-term Disability Obligations                                   200 a
     35    Colombia                    Librapharma claims damages and lost profits from                             471 b
                                       recall of products toll manufactured by Knoll;
                                       fine for recall by Colombia's FDA agency
     36    Colombia                    Potential fines for violation of advertising                       365        46 a
                                       statutes - 9 cases
     37    Colombia                    Liquid Funds - Colombia Minority Interest                                    176 x
     38    Colombia                    Unverified inventory in transit                                     81        87 a
     39    Colombia                    Unsupported reconciliatory items on bank statement                  86
     40    France                      Tax Litigation with Innothera from which Boots                             4.366 b
                                       Pharma S.A. was purchased
     41    France                      Tax losses due to a tax consolidation agreement                    833
                                       between LKF and GNR Pharma
     42    France                      Retirement Indemnity Provision                                       0         0 c
     43    France                      Possible criminal offense related to personnel                       0
                                       lending service agreement
     44    Germany                     Novartis Agreement                                                         6.391 b
     45    Germany                     International Arbitration - Greek distributor                              1.643 b
                                       claim it was agent under German law and
                                       entitled to termination and redundancy fees
     46    Germany                     Patent claim for infringing Alfatec's                                        920 b
                                       Nanosol German and EU patents
     47    Germany-Egypt               Unrecorded liability for free product                              301       255 a
                                       exported to Egypt
     48    Germany                     Interco. Profit for Sibutramin                            0
     49    Germany                     Interco. Profit related to sale of intangible             0
                                       assets (BASFIN and Boots)
     50    Germany-Other Rep. Offices  Cash Basis Reporting in Representative Offices            0
     51    Hokuriku                    Underaccrued Inventory Reserves                                    208       225 a
     52    Hokuriku                    Reconciliation of Hokuriku dividend                       0
     53    Italy                       Ravizza Goodwill                                                          14.397 a
     54    Italy                       Excess/Slow Moving Reserve for Quomen                              510     1.500 a
     55    Italy                       Understatement of receivable reserve                               972
     56    Italy                       Underaccrued inventory reserves                                    142
     57    Italy                       Understatement of credit memo reserve                                        251 a
     58    Italy                       Capitalization of Y2K and Euro Software                                      153 a
     59    Italy                       Capitalization of Litio Carbonato                                             24 a
     60    Mexico                      Adjustment to Labor Accruals                                        26        26 a
     61    New Zealand                 Unaccrued Reductil post launch Monitoring Study                               14 a
     62    Pakistan                    Understatement of inventory reserve                                 16        29 a
     63    Philippines                 Allowance for expired inventory                                     25
     64    Poland                      Vacation, Bonuses, Mandatory Payments, and Travel                   69        20 a
                                       Costs - Underaccruals
     65    Poland                      Unaccrued Drug Monitoring Trials                                   214       215 a
     66    Spain                       Termination benefit was not accrued                                465
     67    Taiwan                      Unaccrued Free Goods                                                41
     68    United Kingdom              Unamortized leasehold improvements on                                      1.481 a
                                       property where lease has expired
     69    United Kingdom              Restoration of leased property to same                             630
                                       conditon as start of lease term
     70    United States               Returns Reserve                                                            3.294 a
     71    United States               Rejected Inventory                                               2.663     2.653 a
     72    United States               Underaccrual of rebate reserve related                                     7.808 b
                                       to Medco
     73    United States               SAMe Distribution Rights                                                   5.407 a
     74    United States               Vacation Accrual                                                 1.917     1.917 a
     75    United States               Investment in GPC                                                          3.921 a
     76    United States               Sales Force/Mktg - payments for sales                            1.879     1.879 a
                                       force and marketing expenses incurred prior to
                                       March 2 but not accrued
     77    United States               Meridia Voucher Program Underaccrual - Distributed                         3.244 a
                                       vouchers for price discounts on purchases
     78    United States               Reduction in Payroll for Accrued Fringe               3.087
     79    United States               Promotion - payments for promotional activities                  1.397     1.397 a
                                       incurred prior to March 2, but not accrued
     80    United States               Underaccrual of Medicaid reserve                                 1.239     1.239 a
     81    United States               Inventory Variance Capitalization                                1.568
     82    United States               A/R uncorrectable                                                          1.544 a
     83    United States               Excess inventories/commodities                                             1.478 a
     84    United States               Unrecorded A/P - Invoices not accrued at the plants                525       525 a
     85    United States               Boots General Integration Reserve                                  912
     86    United States               Reduction in Environmental Reserves                                663
     87    United States               BHA Boots Product Liability Reserve                                953
     88    United States               Manoplax Boots Product Liability Reserve                           735
     89    United States               Accrued Expenses - Project Andrew                                  316
                                                                                           -------   --------   ---------
                                       Sub total                                           489.788     23.282   146.927
                                                                                           -------   --------   ---------
                                                                                                                659.997






                                                          Knoll Pharmaceutical
                                                         Disputed Items Listing


                                                                                           Resolution as of June 21, 2001
                                                                                           --------------------------------------
                                                                                                         Resolved      Resolved
 Issue #         Country                                                                    Resolved       BASF         Abbott
- --------   --------------------       --------------------------------------------------   ----------   ----------   ------------
                                                                                                      
NEW ITEMS

       1   Hokuriku                   Unaccrued Vacation                                                       649            649 a
       2   Italy                      Intangibles                                                            1.360
           Italy                      Fixed Assets                                                           1.002          1.002 a
       3   Brazil                     Failure to Treat Performance Bonuses as Salary                                          779 b
       4   Australia                  Omitted Receivables Reserve                                               46
           Germany                    Aventis payment                                                        1.075          1.075 a
                                                                                           ----------   ----------   ------------
                                      Sub-total                                                              4.132          3.505
                                                                                           ----------   ----------   ------------
                                                                                              489.788       27.414        150.432
                                                                                           ==========   ==========   ============
           GRAND TOTAL
                                                                                                                          667.634
                                                                                                                     ============
         a Adjustment to NAV
         b Indemnification/Reimbursement
         c Include in pension true-up process. Abbott to notify Hewitt.
         x Include in liquid fund settlement




           GRAND TOTAL                                                                                                    150.432
           INDEMNIFICATION/REIMBURSEMENT ITEMS
           21,22,23,24,26,29,30,93    Brazil legal/labor matters                                                           16.478
                                   32 Canada/BML                                                                              649
                                   35 Colombia/Librapharma                                                                    471
                                   40 France/Boots                                                                          4.366
                                   44 Germany/Novartis                                                                      6.391
                                   45 Germany/Greek Distributor                                                             1.643
                                   46 Germany/Alfatec                                                                         920
                                   72 United States/Medco                                                                   7.808
                                                                                                                     ------------
                                      SUBTOTAL - INDEMNIFICATION/REIMBURSEMENT ITEMS                                       38.726
                                                                                                                     ------------

           EXCHANGE ADJUSTMENT                                                                                             46.500
           COLOMBIA FUNDS                                                                                                     176
                                                                                                                     ------------
                                      Subtotal - NAV Adjustments, pretax                                                   65.030

                                    1 Deferred Taxes                                                                        4.401
                                    9 India                                                                                 2.259
                                                                                                                     ------------
                                                                                                                           58.370
                                      Average tax rate, as agreed                                                              35%
                                      Tax effect                                                                           20.430
                                                                                                                     ------------

                                      NAV Adjustments, net of tax                                                          44.601
                                                                                                                     ============


                                      -------------------------------------------------------------------------------------------
                                                          SUMMARY
                                                      (THOUSAND EUROS)
                                       Resolved Abbott                                                150.432
                                       Indemnification/Reimbursement Items                             38.726
                                       Addition to Deferred taxes (NAV adjustment)                     20.430
                                       Colombia funds                                                     176
                                                                                                    ---------
                                       Net Asset Adjustment agreed by BASF
                                       (Exhibit A-2/(D))                                               91.101

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




                                                                 EXHIBIT A-2

     NON-INDIAN PURCHASE PRICE ADJUSTMENT FOR THE BASF PHARMA BUSINESS(1)



                                                                                       (Euros;
                                                                                      Amounts in
                                                                                       millions)
                                                                                     ------------
                                                                                
(A) Closing Net Asset Value as of March 2, 2001 (per Deloitte & Touche Report)            2.173,7
(B) Reference Net Asset Value as of September 30, 2000                                     (750,4)
                                                                                     -------------
(C) PURCHASE PRICE ADJUSTMENT PAYABLE BY ABBOTT TO BASF                                   1.423,3
(D) Net Asset Adjustments agreed by BASF AG per Exhibit A-1                                 (91,1)
(E) Additional Purchase Price                                                             1.332,2
(F) Partial Adjustment Payment by Abbott to BASF AG (May 23, 2001)                       (1.064,3)
                                                                                     -------------
(G) Adjusted payment amount                                                                 267,9

(H) Settlement of amounts owing between Knoll GmbH and BASF AG

    (1) Payment from Lupharma to Knoll GmbH                             258,4
    (2) Payment from Knoll GmbH to BASF AG (Profit Transfer)           (170,8)
                                                                       -------
    (3) Due to Knoll GmbH                                                87,6

(I) Forgiveness of net debt owed by Seller to Purchaser                                     (87,6)
                                                                                     -------------
(J) PURCHASE PRICE ADJUSTMENT TO BE PAID BY ABBOTT TO BASF AG                               180,3
(K) Interest (6%) from March 2, 2001 to Payment Date
(L) Total amount to be paid by Abbott to BASF AG




- ------------------------
(1) Does not reflect the Pension Amount that Seller may owe to Purchaser in
accordance with the Section 21.4 of the Purchase Agreement.





Die wortliche Ubereinstimmung vorstehender Ablichtung mit der mir
vorliegenden Urschrift beglaubige ich hiermit.

Frankfurt am Main, den 26. Juli 2001

[DR. GERHARD PILGER SEAL]              /s/ Dr. Pilger
                                       Dr. Pilger
                                       N o t a r



                                                           Beglaubigte Abschrift

                               POWER OF ATTORNEY

I, the undersigned

                             Michael G. Strohmeier
                           with business address at
                          Jones, Day, Reavis & Pogue
                            Chicago, Illinois, USA

hereby grant a substitute power of attorney on behalf of

                            Abbott Laboratories
                        Abbott Park, Illinois, USA
                -hereinafter referred to as the "Company".


                               Ansgar C. Rempp
                                Jens U. Boeck
                                      and
                                Ercan Acikel
                        each with business address at
                         Jones, Day, Reavis & Pogue
                             Frankfurt, Germany

according to the power of attorney dated February 23, 2001 granted to me by
the Company (the "Original Power of Attorney"), a copy of which is attached
hereto, to individually represent the Company within the scope and
limitations provided for by the Original Power of Attorney.


Illinois, July 19, 2001

/s/ Michael G. Strohmeier
- -------------------------------------
Michael G. Strohmeier


SUBSCRIBED AND SWORN TO
before me this 19th day of July, 2001
                                            --------------------------------
                                                     "OFFICIAL SEAL"
                                                      SONIA ARCHER
/s/ Sonia Archer                            Notary Public, State of Illinois
- -------------------------------------        My Commission Expires 08/26/03
Notary Public                               --------------------------------



                               POWER OF ATTORNEY

We, the undersigned company

                              Abbott Laboratories
                          Abbott Park, Illinois, USA
                   hereinafter referred to as the "Company"

hereby grant powers of attorney to

                                James L. Tyree
                           with business address at
                              Abbott Laboratories
                          Abbott Park, Illinois, USA

                                Brian J. Smith
                           with business address at
                              Abbott Laboratories
                          Abbott Park, Illinois, USA

                           Charles N. Bensinger III
                           with business address at
                          Jones, Day, Reavis & Pogue
                            Chicago, Illinois, USA

                                      and

                             Michael G. Strohmeier
                           with business address at
                          Jones, Day, Reavis & Pogue
                            Chicago, Illinois, USA

to individually represent the Company in connection with the transactions
contemplated by the purchase agreement dated as of December 14, 2000 (the
"Purchase Agreement") between BASF Aktiengesellschaft, a stock corporation
organized under the laws of the Federal Republic of Germany ("BASF") and the
Company, including, but not limited to, (i) any amendments to the Purchase
Agreement, (ii) the sale of all of the issued and outstanding shares of
capital stock of (a) Knoll AG, a stock corporation organized under the laws
of the Federal Republic of Germany, and (b) BASF Pharmaceutical Corporation,
a Delaware corporation; (iii) the sale to the Company and/or any of its
subsidiaries of all of shares of capital stock or other equity interests
directly or indirectly owned by BASF; (iv) the sale and transfer of certain
patents, trademarks, tradenames and other intellectual property, and to enter
into any kinds of agreements and commitments, including the right to grant
substitute and additional powers of attorney, as any of them deem necessary
and appropriate in connection therewith.



Our representatives shall be authorized to make all statements they deem
necessary or appropriate in this context. Furthermore, our representatives
shall be released from the restrictions set forth in Section 181 of the
German Civil Code.



ABBOTT LABORATORIES

Illinois, 23 day of February, 2001


by:

/s/ Gary P. Coughlan
- ------------------------------------
Gary P. Coughlan, Senior Vice President,
Finance and Chief Financial Officer



STATE OF ILLINOIS           )
                            ) ss.
COUNTY OF LAKE              )

    The undersigned, a Notary Public in and for the County and State
aforesaid, does hereby certify that Gary P. Coughlan, personally known to me
to be a duly appointed officer of Abbott Laboratories, an Illinois
corporation, appeared before me this day in person and acknowledged under
oath that in such capacity he or she signed and delivered this certificate
pursuant to authority duly given to him by said corporation.


    GIVEN under my hand and seal this 23 day of February, 2001.




                                       /s/ Judith Pacheco
                                       -----------------------------------
                                       Notary Public

                                         --------------------------------
                                                   OFFICIAL SEAL
                                                   JUDITH PACHECO
                                         Notary Public, State of Illinois
                                           My Commission expires 10/4/03
                                         --------------------------------

My Commission expires: 10/4/03
                      ---------



Die wortliche Ubereinstimmung vorstehender Ablichtung mit der mir
vorliegenden Urschrift beglaubige ich hiermit.

Frankfurt am Main, den 26. Juli 2001


[DR. GERHARD PILGER SEAL]              /s/ Dr. Pilger
                                       Dr. Pilger
                                       N o t a r



Die wortliche Ubereinstimmung vorstehender Ablichtung mit der mir
vorliegenden Urschrift beglaubige ich hiermit.

Frankfurt am Main, den 26. Juli 2001


                                       /s/ Dr. Pilger
                                       Dr. Pilger
                                       N o t a r



                                     BY-LAWS

                                       OF

                               ABBOTT LABORATORIES


                        Adopted by the Board of Directors
                          of Abbott Laboratories at the
                         Annual Meeting, April 11, 1963
              as amended and restated, effective February 15, 2002



                         BY-LAWS OF ABBOTT LABORATORIES

                                    ARTICLE I

                                     OFFICES

     The principal office of the Corporation in the State of Illinois shall be
located at the intersection of State Routes 43 and 137 in the County of Lake.
The Corporation may have such other offices either within or without the State
of Illinois as the business of the Corporation may require from time to time.

     The registered office of the Corporation may be, but need not be, identical
with the principal office in the State of Illinois. The address of the
registered office may be changed from time to time by the Board of Directors.

                                   ARTICLE II

                                  SHAREHOLDERS

     SECTION 1. ANNUAL MEETING; TRANSACTION OF BUSINESS, NOMINATION OF
DIRECTORS. The annual meeting of the shareholders shall be held in the month of
April in each year on such date and at such time as the Board of Directors shall
provide. The meeting shall be held for the purpose of electing Directors and for
the transaction of such other business as is properly brought before the meeting
in accordance with these By-Laws. If the election of Directors shall not be held
on the day designated for any annual meeting, or at any adjournment thereof, the
Board of Directors shall cause the election to be held at a meeting of the
shareholders as soon thereafter as conveniently may be.

     To be properly brought before the meeting, business must be either (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors, (b) otherwise properly brought before
the meeting by or at the direction of the Board of Directors or (c) otherwise
properly brought before the meeting by a shareholder. In addition to any other
applicable requirements, for business to be properly brought before an annual
meeting by a shareholder, the shareholder must have given timely notice thereof
in writing to the Secretary. To be timely, a shareholder's notice must be
delivered to or mailed and received at the principal office of the Corporation,
not earlier than October 1 nor later than the first business day of January
immediately prior to the date of the meeting; PROVIDED, HOWEVER, that in the
event that the date of such meeting is not in the month of April and less than
sixty-five days' notice or prior public disclosure of the date of the meeting is
given or made to shareholders, notice by the shareholder to be timely must be so
received not later than the close of business on the fifteenth day following the
day on which such notice of the date of the annual meeting was mailed or such
public disclosure was made, whichever first occurs. A shareholder's notice to
the Secretary shall set forth as to each matter the shareholder proposes to
bring before the annual meeting (i) a brief description of the business desired
to be brought before the annual meeting and the reasons for


BY-LAWS
                                                                          Page 2


conducting such business at the annual meeting, (ii) the name and record address
of the shareholder proposing such business, (iii) the class and number of shares
of the Corporation which are beneficially owned by the shareholder and (iv) any
material interest of the shareholder in such business.

     Notwithstanding anything in these By-Laws to the contrary, no business
shall be conducted at the annual meeting except in accordance with the
procedures set forth in this Section 1, PROVIDED, HOWEVER, that nothing in this
Section 1 shall be deemed to preclude discussion by any shareholder of any
business properly brought before the annual meeting.

     The Chairman of an annual meeting shall, if the facts warrant, determine
and declare to the meeting that business was not properly brought before the
meeting in accordance with the provisions of this Section 1, and if he should so
determine, he shall so declare to the meeting and such business not properly
brought before the meeting shall not be transacted.

     Only persons who are nominated in accordance with the following procedures
shall be eligible for election as directors. Nominations of persons for election
to the Board of Directors of the Corporation at the annual meeting may be made
at such annual meeting of shareholders by or at the direction of the Board of
Directors, by any nominating committee or person appointed by the Board of
Directors, or by any shareholder of the Corporation entitled to vote for the
election of directors at such meeting who complies with the notice procedures
set forth in this Section 1. Such nominations, other than those made by or at
the direction of the Board of Directors or by a committee or person appointed by
the Board of Directors, shall be made pursuant to timely notice in writing to
the Secretary. To be timely, a shareholder's notice shall be delivered to or
mailed and received at the principal office of the Corporation not earlier than
October 1 nor later than the first business day of January immediately prior to
the date of the meeting; PROVIDED, HOWEVER, that in the event that the date of
such meeting is not in the month of April and less than sixty-five days' notice
or prior public disclosure of the date of the meeting is given or made to
shareholders, notice by the shareholder to be timely must be so received not
later than the close of business on the fifteenth day following the day on which
such notice of the date of the meeting was mailed or such public disclosure was
made, whichever first occurs. Such shareholder's notice to the Secretary shall
set forth: (a) as to each person whom the shareholder proposes to nominate for
election or re-election as a director, (i) the name, age, business address and
residence address of the person, (ii) the principal occupation or employment of
the person, (iii) the class and number of shares of capital stock of the
Corporation which are beneficially owned by the person and (iv) any other
information relating to the person that is required to be disclosed in
solicitations for proxies for election of directors pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended; and (b) as to the
shareholder giving the notice, (i) the name and record address of such
shareholder and (ii) the class and number of shares of the Corporation which are
beneficially owned by such shareholder. The Corporation may require any proposed
nominee to furnish such other information as may reasonably be required by the
Corporation to determine the eligibility of such proposed nominee to serve as
director of the Corporation. No person shall be eligible for election as a
director of the Corporation unless nominated in accordance with the procedures
set forth herein.


BY-LAWS
                                                                          Page 3


     The Chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.

     SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders may be
called by the Chairman of the Board, the Chief Executive Officer, the President,
the Board of Directors or by the holders of not less than one-fifth of all the
outstanding shares entitled to vote on the matter for which the meeting is
called.

     SECTION 3. PLACE OF MEETING. The Board of Directors may designate any
place, either within or without the State of Illinois, as the place of meeting
for any annual meeting or for any special meeting called by the Board of
Directors. If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal office of the Corporation in
the State of Illinois.

     SECTION 4. NOTICE OF MEETINGS. Written notice stating the place, day and
hour of the meeting and, in the case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than ten
nor more than sixty days before the date of the meeting, or in the cases of a
merger, consolidation, share exchange, dissolution or sale, lease or exchange of
assets not less than twenty nor more than sixty days before the meeting, either
personally or by mail, by or at the direction of the Chairman of the Board, the
Chief Executive Officer, the President, or the Secretary or the persons calling
the meeting, to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail, addressed to the shareholder at his or her address as it appears on
the records of the Corporation, with postage thereon prepaid.

     SECTION 5. FIXING RECORD DATE. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders, or shareholders
entitled to receive payment of any dividend, or in order to make a determination
of shareholders for any other proper purpose, the Board of Directors of the
Corporation may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than sixty
days and, for a meeting of shareholders, not less than ten days, or in the case
of a merger, consolidation, share exchange, dissolution or sale, lease or
exchange of assets not less than twenty days, immediately preceding such
meeting.

     SECTION 6. VOTING LISTS. The Secretary shall make, or cause to have made,
within twenty days after the record date for a meeting of shareholders or ten
days before such meeting, whichever is earlier, a complete list of the
shareholders entitled to vote at such meeting, arranged in alphabetical order,
with the address of and the number of shares held by each, which list, for a
period of ten days prior to such meeting, shall be kept on file at the
registered office of the Corporation and shall be subject to inspection by any
shareholder and to copying at the shareholder's expense, at any time during
usual business hours. Such list shall also be produced and kept open at the time
and place of the meeting and shall be subject to the inspection of any
shareholder during the whole time of the meeting. The original share ledger or
transfer book, or


BY-LAWS
                                                                          Page 4


a duplicate thereof kept in this State, shall be prima facie evidence as to who
are the shareholders entitled to examine such list or share ledger or transfer
book or to vote at any meeting of shareholders.

     SECTION 7. QUORUM. A majority of the outstanding shares of the Corporation
entitled to vote on a matter, represented in person or by proxy, shall
constitute a quorum for consideration of such matter at a meeting of
shareholders. If a quorum is present, the affirmative vote of the majority of
the shares represented at the meeting and entitled to vote on a matter shall be
the act of the shareholders, unless the vote of a greater number or voting by
classes is required by The Business Corporation Act of 1983 or the Articles of
Incorporation, as in effect on the date of such determination. If a quorum is
not present, a majority of the shares of the Corporation entitled to vote on a
matter and represented in person or by proxy at such meeting may adjourn the
meeting from time to time without further notice.

     SECTION 8. PROXIES. A shareholder may appoint a proxy to vote or
otherwise act for the shareholder by delivering a valid appointment to the
person so appointed or such person's agent; PROVIDED, HOWEVER, no shareholder
may name more than two persons as proxies to attend and to vote the
shareholder's shares at any meeting of shareholders. Without limiting the
manner in which a shareholder may appoint such a proxy pursuant to these
By-Laws, the following shall constitute valid means by which a shareholder
may make such an appointment:

     (a)  A shareholder may sign a proxy appointment form. The shareholder's
          signature may be affixed by any reasonable means, including, but not
          limited to, by facsimile signature.

     (b)  A shareholder may transmit or authorize the transmission of a
          telegram, cablegram, or other means of electronic transmission;
          provided that any such transmission must either set forth or be
          submitted with information from which it can be determined that the
          telegram, cablegram, or other electronic transmission was authorized
          by the shareholder. If it is determined that the telegram, cablegram,
          or other electronic transmission is valid, the inspectors or, if there
          are no inspectors, such other persons making that determination shall
          specify the information upon which they relied.

No proxy shall be valid after the expiration of eleven months from the date
thereof unless otherwise provided in the proxy. Each proxy continues in full
force and effect until revoked by the person appointing the proxy prior to the
vote pursuant thereto, except as otherwise provided by law. Such revocation may
be effected by a writing delivered to the secretary of the Corporation stating
that the proxy is revoked or by a subsequent delivery of a valid proxy by, or by
the attendance at the meeting and voting in person by the person appointing the
proxy. The dates of the proxy shall presumptively determine the order of
appointment.

     SECTION 9. VOTING OF SHARES. Each outstanding share, regardless of class,
shall be entitled to one vote in each matter submitted to a vote at a meeting of
shareholders and, in all elections for Directors, every shareholder shall have
the right to vote the number of shares owned


BY-LAWS
                                                                          Page 5


by such shareholder for as many persons as there are Directors to be elected, or
to cumulate such votes and give one candidate as many votes as shall equal the
number of Directors multiplied by the number of such shares or to distribute
such cumulative votes in any proportion among any number of candidates; provided
that, vacancies on the Board of Directors may be filled as provided in Section
9, Article III of these By-Laws. A shareholder may vote either in person or by
proxy.

     SECTION 10. VOTING OF SHARES BY CERTAIN HOLDERS. Shares of this Corporation
held by the Corporation in a fiduciary capacity may be voted and shall be
counted in determining the total number of outstanding shares entitled to vote
at any given time.

     Shares registered in the name of another corporation, domestic or foreign,
may be voted by any officer, agent, proxy or other legal representative
authorized to vote such shares under the law of incorporation of such
corporation.

     Shares registered in the name of a deceased person, a minor ward or a
person under legal disability may be voted by his or her administrator,
executor, or court appointed guardian, either in person or by proxy without a
transfer of such shares into the name of such administrator, executor, or court
appointed guardian. Shares registered in the name of a trustee may be voted by
him or her, either in person or by proxy.

     Shares registered in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his or her name if authority so to do
is contained in an appropriate order of the court by which such receiver was
appointed.

     A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.

     SECTION 11. VOTING BY BALLOT. Voting on any question or in any election may
be viva voce unless the presiding officer shall order that voting be by ballot.

     SECTION 12. INSPECTORS OF ELECTION. The Board of Directors in advance of
any meeting of shareholders may appoint inspectors to act at such meeting or any
adjournment thereof. If inspectors of election are not so appointed, the officer
or person acting as chairman at any such meeting may, and on the request of any
shareholder or his proxy, shall make such appointment. In case any person
appointed as inspector shall fail to appear or to act, the vacancy may be filled
by appointment made by the Board of Directors in advance of the meeting or at
the meeting by the officer or person acting as chairman.

     Such inspectors shall ascertain and report the number of shares represented
at the meeting, based upon their determination of the validity and effect of
proxies; count all votes and report the results; and do such other acts as are
proper to conduct the election and voting with impartiality and fairness to all
the shareholders.


BY-LAWS
                                                                          Page 6


     Each report of an inspector shall be in writing and signed by him or her or
by a majority of them if there be more than one inspector acting at such
meeting. If there is more than one inspector, the report of a majority shall be
the report of the inspectors. The report of the inspector or inspectors on the
number of shares represented at the meeting and the results of the voting shall
be prima facie evidence thereof.

                                   ARTICLE III

                                    DIRECTORS

     SECTION 1. GENERAL POWERS. The business and affairs of the Corporation
shall be managed under the direction of the Board of Directors.

     SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of Directors of
the Corporation shall be fourteen. The terms of all Directors shall expire at
the next annual meeting of shareholders following their election. Despite the
expiration of a Director's term, he or she shall continue to serve until the
next meeting of shareholders at which Directors are elected. Directors need not
be residents of Illinois or shareholders of the Corporation.

     SECTION 3. REGULAR MEETINGS. A regular annual meeting of the Board of
Directors shall be held without other notice than this By-Law, immediately
after, and at the same place as, the annual meeting of shareholders. Other
regular meetings of the Board of Directors shall be held at the principal office
of the Corporation on the second Friday of every month at 9:00 a.m. without
other notice than this By-Law. The Board of Directors may provide, by
resolution, for the holding of the regular monthly meetings at a different time
and place, either within or without the State of Illinois, or for the omission
of the regular monthly meeting altogether. Where the Board of Directors has, by
resolution, changed or omitted regular meetings, no other notice than such
resolution shall be given.

     SECTION 4. SPECIAL MEETINGS. Special meetings of the Board of Directors may
be called by or at the request of the Chairman of the Board, the Chairman of the
Executive Committee, the Chief Executive Officer, the President, or of any four
Directors. The persons authorized to call special meetings of the Board of
Directors may fix any place, either within or without the State of Illinois, as
the place for holding any special meeting of the Board of Directors.

     SECTION 5. NOTICE. Notice of any special meeting shall be given: (i) at
least one day prior thereto if the notice is given personally or by an
electronic transmission, (ii) at least two business days prior thereto if the
notice is given by having it delivered by a third party entity that provides
delivery services in the ordinary course of business and guarantees delivery of
the notice to the Director no later than the following business day, and (iii)
at least seven days prior thereto if the notice is given by mail. For this
purpose, the term "electronic transmission" may include, but shall not be
limited to, a telex, facsimile, or other electronic means. Notice shall be
delivered to the Director's business address and/or telephone number and shall
be deemed given upon electronic transmission, upon delivery to the third party
delivery service, or upon being deposited


BY-LAWS
                                                                          Page 7


in the United States mail with postage thereon prepaid. Any Director may waive
notice of any meeting by signing a written waiver of notice either before or
after the meeting. Attendance of a Director at any meeting shall constitute a
waiver of notice of such meeting, except where a Director attends a meeting for
the express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors need to be specified in the notice or waiver of notice of such
meeting.

     SECTION 6. QUORUM. A majority of the number of Directors fixed by these
By-Laws shall constitute a quorum for transaction of business at any meeting of
the Board of Directors; provided, that if less than a majority of such number of
Directors are present at said meeting, a majority of the Directors present may
adjourn the meeting from time to time without further notice.

     SECTION 7. MANNER OF VOTING. The act of the majority of the Directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.

     SECTION 8. INFORMAL ACTION BY DIRECTORS. Any action required to be taken at
a meeting of the Board of Directors, or any other action which may be taken at a
meeting of the Board of Directors or a committee thereof, may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the Directors entitled to vote with respect to the subject
matter thereof, or by all the members of such committee, as the case may be.

     The consent shall be evidenced by one or more written approvals, each of
which sets forth the action taken and bears the signature of one or more
Directors. All the approvals evidencing the consent shall be delivered to the
Secretary of the Corporation to be filed in the corporate records. The action
taken shall be effective when all the Directors have approved the consent unless
the consent specifies a different effective date.

     Any such consent signed by all the Directors or all the members of a
committee shall have the same effect as a unanimous vote.

     SECTION 9. VACANCIES. Any vacancy occurring in the Board of Directors and
any directorship to be filled by reason of an increase in the number of
Directors, may be filled by election at an annual meeting or at a special
meeting of shareholders called for that purpose. A Director elected to fill a
vacancy shall serve until the next annual meeting of shareholders. A majority of
Directors then in office may also fill one or more vacancies arising between
meetings of shareholders by reason of an increase in the number of Directors or
otherwise, and any Director so selected shall serve until the next annual
meeting of shareholders, provided that at no time may the number of Directors
selected to fill vacancies in this manner during any interim period between
meetings of shareholders exceed 33-1/3 per cent of the total membership of the
Board of Directors.


BY-LAWS
                                                                          Page 8


     SECTION 10. PRESUMPTION OF ASSENT. A Director of the Corporation who is
present at a meeting of the Board of Directors or any committee thereof at which
action on any corporate matter is taken is conclusively presumed to have
assented to the action taken unless his or her dissent is entered in the minutes
of the meeting or unless he or she files his or her written dissent to such
action with the person acting as the secretary of the meeting before the
adjournment thereof or forwards such dissent by registered or certified mail to
the Secretary of the Corporation immediately after the adjournment of the
meeting. Such right to dissent shall not apply to a Director who voted in favor
of such action.

     SECTION 11. APPOINTMENT OF AUDITORS. Upon the recommendation of the Audit
Committee, the Board of Directors shall appoint annually a firm of independent
public accountants as auditors of the Corporation. Such appointment shall be
submitted to the shareholders for ratification at the Annual Meeting next
following such appointment. Should the holders of a majority of the shares
represented at the meeting fail to ratify the appointment of any firm as
auditors of the Corporation, or should the Board of Directors for any reason
determine that such appointment be terminated, the Board of Directors shall
appoint another firm of independent public accountants to act as auditors of the
Corporation and such appointment shall be submitted to the shareholders for
ratification at the Annual or Special Shareholders Meeting next following such
appointment.

                                   ARTICLE IV

                                   COMMITTEES

     SECTION 1. APPOINTMENT. A majority of the Board of Directors may create one
or more committees and appoint members of the Board to serve on the committee or
committees. Each committee shall have three or more members, who serve at the
pleasure of the Board. The Board shall designate one member of each committee to
be chairman of the committee. The Board shall designate a secretary of each
committee who may be, but need not be, a member of the committee or the Board.

     SECTION 2. COMMITTEE MEETINGS. A majority of any committee shall constitute
a quorum and a majority of the committee is necessary for committee action. A
committee may act by unanimous consent in writing without a meeting. Committee
meetings may be called by the Chairman of the Board, the chairman of the
committee, or any two of the committee's members. The time and place of
committee meetings shall be designated in the notice of such meeting. Notice of
each committee meeting shall be given to each committee member. Each Committee
shall keep minutes of its proceedings and such minutes shall be distributed to
the Board of Directors.

     SECTION 3. EXECUTIVE COMMITTEE. The Board shall appoint an Executive
Committee. A majority of the members of the Committee shall be selected from
those Directors who are not then serving as full-time employees of the
Corporation or any of its subsidiaries.


BY-LAWS
                                                                          Page 9


     SECTION 4. DUTIES OF THE EXECUTIVE COMMITTEE. The Executive Committee may,
when the Board of Directors is not in session, exercise the authority of the
Board in the management of the business and affairs of the Corporation;
provided, however, the Committee may not:

          (1)  authorize distributions;

          (2)  approve or recommend to shareholders any act the Business
               Corporation Act of 1983 requires to be approved by shareholders;

          (3)  fill vacancies on the Board or on any of its committees;

          (4)  elect or remove Officers or fix the compensation of any member of
               the Committee;

          (5)  adopt, amend or repeal the By-Laws;

          (6)  approve a plan of merger not requiring shareholder approval;

          (7)  authorize or approve reacquisition of shares, except according to
               a general formula or method prescribed by the Board;

          (8)  authorize or approve the issuance or sale, or contract for sale,
               of shares or determine the designation and relative rights,
               preferences, and limitations of a series of shares, except that
               the Board may direct the Committee to fix the specific terms of
               the issuance or sale or contract for sale or the number of shares
               to be allocated to particular employees under an employee benefit
               plan; or

          (9)  amend, alter, repeal, or take action inconsistent with any
               resolution or action of the Board of Directors when the
               resolution or action of the Board of Directors provides by its
               terms that it shall not be amended, altered or repealed by action
               of the Committee.

     SECTION 5. AUDIT COMMITTEE. The Board of Directors shall appoint an Audit
Committee. All of the members of the Committee shall be selected from those
Directors who are not then serving as full-time employees of the Corporation or
any of its subsidiaries.

     SECTION 6. DUTIES OF THE AUDIT COMMITTEE. The Audit Committee shall:

          (1)  recommend to the Board of Directors annually a firm of
               independent public accountants to act as auditors of the
               Corporation;

          (2)  review with the auditors in advance the scope of and fees for
               their annual audit;


BY-LAWS
                                                                         Page 10


          (3)  review with the auditors and the management, from time to time,
               the Corporation's accounting principles, policies, and practices
               and its reporting policies and practices;

          (4)  review with the auditors annually the results of their audit; and

          (5)  review from time to time with the auditors and the Corporation's
               financial personnel the adequacy of the Corporation's accounting,
               financial and operating controls.

     SECTION 7. COMPENSATION COMMITTEE. The Board of Directors shall appoint a
Compensation Committee. The members of the Committee shall be selected from
those Directors who are not then serving as full-time employees of the
Corporation or any of its subsidiaries and who are "non-employee directors"
under Rule 16b-3 promulgated under the Securities Exchange Act of 1934, or any
similar successor rule.

     SECTION 8. DUTIES OF THE COMPENSATION COMMITTEE. The Compensation Committee
shall:

          (1)  administer the stock option plans of the Corporation;

          (2)  review, at least annually, the compensation of Directors who are
               not then serving as full-time employees of the Corporation or any
               of its subsidiaries and recommend for approval by the Board any
               change in the compensation of such Directors;

          (3)  review, at least annually, the compensation of all Officers of
               the Corporation. The committee shall have the authority to
               approve changes in the base compensation, and any proposed
               special separation arrangements of Officers, except the Chairman
               of the Board of Directors, the Chief Executive Officer, and the
               President, whose base compensation, and any special separation
               arrangements, shall be subject to approval by the Board of
               Directors.

     SECTION 9. NOMINATIONS AND BOARD AFFAIRS COMMITTEE. The Board of Directors
shall appoint a Nominations and Board Affairs Committee. A majority of the
members of the Committee shall be selected from those Directors who are not then
serving as full-time employees of the Corporation or any of its subsidiaries.

     SECTION 10. DUTIES OF THE NOMINATIONS AND BOARD AFFAIRS COMMITTEE. The
Nominations and Board Affairs Committee shall:

          (1)  develop general criteria for selection of and qualifications
               desirable in members of the Board of Directors and Officers of
               the Corporation and aid


BY-LAWS
                                                                         Page 11


               the Board in identifying and attracting qualified candidates to
               stand for election to such positions;

          (2)  recommend to the Board annually a slate of nominees to be
               proposed by the Board to the shareholders as nominees for
               election as Directors, and, from time to time, recommend persons
               to fill any vacancy on the Board;

          (3)  review annually, or more often if appropriate, the performance of
               individual members of the management of the Corporation and the
               membership and performance of committees of the Board and make
               recommendations deemed necessary or appropriate to the Board;

          (4)  recommend to the Board persons to be elected as Officers of the
               Corporation; and

          (5)  serve in an advisory capacity to the Board of Directors and
               Chairman of the Board on matters of organization, management
               succession plans, major changes in the organizational structure
               of the Corporation, and the conduct of Board activities,
               including assisting in the evaluation of the Board's own
               performance.

     SECTION 11. PUBLIC POLICY COMMITTEE. The Board of Directors shall appoint a
Public Policy Committee. A majority of the members of the Committee shall be
selected from those Directors who are not then serving as full time employees of
the Corporation or any of its subsidiaries.

     SECTION 12. DUTIES OF THE PUBLIC POLICY COMMITTEE. The Public Policy
Committee shall have an advisory role with respect to public policy, regulatory
and government affairs issues that affect the Corporation.

                                    ARTICLE V

                                    OFFICERS

     SECTION 1. NUMBER. The Officers of the Corporation shall be the Chairman of
the Board, the Chief Executive Officer, one or more Presidents, one or more
Executive, Group or Senior Vice Presidents, one or more Vice Presidents, a
Treasurer, a Secretary, a Controller, a General Counsel and such Assistant
Treasurers and Assistant Secretaries as the Board of Directors may elect or the
Chairman of the Board may appoint. Any two offices may be held by the same
person.

     SECTION 2. ELECTION AND TERM OF OFFICE. The Board of Directors may elect
any Officer. The Chairman of the Board may appoint any Vice President, a
Controller, a Treasurer, a Secretary and any Assistant Treasurers and Assistant
Secretaries.


BY-LAWS
                                                                         Page 12


     The Officers of the Corporation shall be elected or appointed annually.
Each year, the Board of Directors shall elect Officers at the first meeting of
the Board of Directors held after the annual meeting of shareholders. If the
Board of Directors does not elect Officers at such meeting, such election shall
be held as soon thereafter as conveniently may be. Each year, immediately
following the election of Officers by the Board of Directors or as soon
thereafter as conveniently may be, the Chairman of the Board shall appoint such
additional Officers within the scope of the Chairman's authority as the Chairman
deems necessary or appropriate.

     Vacancies or new offices may be filled at any time as set forth in Section
4 of this Article V.

     Each Officer shall hold office until his or her successor shall have been
duly elected or appointed and shall have qualified or until his or her death or
until he or she shall resign or shall have been removed in the manner
hereinafter provided.

     SECTION 3. REMOVAL OF OFFICERS. Any Officer may be removed by the Board of
Directors whenever in its judgment the best interests of the Corporation will be
served thereby. Any Officer appointed by the Chairman of the Board may be
removed by the Chairman whenever, in the Chairman's judgment, the best interests
of the Corporation will be served thereby.

     SECTION 4. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term. A vacancy in any office
appointed by the Chairman of the Board may be filled by the Chairman of the
Board for the unexpired portion of the term.

     SECTION 5. CHAIRMAN OF THE BOARD OF DIRECTORS AND CHIEF EXECUTIVE OFFICER.
The Chairman shall preside at all meetings of the Board of Directors and the
shareholders. The Chief Executive Officer shall be responsible for the overall
management of the Corporation subject to the direction of the Board of
Directors.

     SECTION 6. PRESIDENT. Each President shall be the Chief Operating Officer
of a major area of the Corporation's activities and shall perform such duties as
may be prescribed by the Board of Directors or the Chief Executive Officer.

     SECTION 7. EXECUTIVE, GROUP AND SENIOR VICE PRESIDENTS. Each Executive,
Group, or Senior Vice President shall be responsible for supervising and
coordinating a major area of the Corporation's activities subject to the
direction of the Chief Executive Officer or a President.

     SECTION 8. VICE PRESIDENTS. Each of the Vice Presidents shall be
responsible for those activities designated by an Executive, Group, or Senior
Vice President, a President, the Chief Executive Officer, or the Board of
Directors.


BY-LAWS
                                                                         Page 13


     SECTION 9. TREASURER. The Treasurer shall administer the investment,
financing, insurance and credit activities of the Corporation.

     SECTION 10. SECRETARY. The Secretary will be the custodian of the corporate
records and of the seal of the Corporation, will countersign certificates for
shares of the Corporation, and in general will perform all duties incident to
the office of the Secretary. The Secretary shall have the authority to certify
the By-Laws, resolutions of the shareholders and the Board of Directors and
committees thereof, and other documents of the Corporation as true and correct
copies hereof.

     SECTION 11. CONTROLLER. The Controller will conduct the accounting
activities of the Corporation, including the maintenance of the Corporation's
general and supporting ledgers and books of account, operating budgets, and the
preparation and consolidation of financial statements.

     SECTION 12. GENERAL COUNSEL. The General Counsel will be the chief
consultant of the Corporation on legal matters. He or she will supervise all
matters of legal import concerning the interests of the Corporation.

     SECTION 13. ASSISTANT TREASURER. The Assistant Treasurer shall, in the
absence or incapacity of the Treasurer, perform the duties and exercise the
powers of the Treasurer, and shall perform such other duties as shall from time
to time be given to him or her by the Treasurer.

     SECTION 14. ASSISTANT SECRETARY. The Assistant Secretary shall, in the
absence or incapacity of the Secretary, perform the duties and exercise the
powers of the Secretary, and shall perform such other duties as shall from time
to time be given to him or her by the Secretary. The Assistant Secretary shall
be, with the Secretary, keeper of the books, records, and the seal of the
Corporation, and shall have the authority to certify the By-Laws, resolutions
and other documents of the Corporation.

     SECTION 15. GENERAL POWERS OF OFFICERS. The Chairman of the Board, the
Chief Executive Officer, any President, and any Executive, Group or Senior Vice
President, may sign without countersignature any deeds, mortgages, bonds,
contracts, reports to public agencies, or other instruments whether or not the
Board of Directors has expressly authorized execution of such instruments,
except in cases where the signing and execution thereof shall be expressly
delegated by the Board of Directors or by these By-Laws solely to some other
Officer or agent of the Corporation, or shall be required by law to be otherwise
signed or executed. Any other Officer of this Corporation may sign contracts,
reports to public agencies, or other instruments which are in the regular course
of business and within the scope of his or her authority, except where signing
and execution thereof shall be expressly delegated by the Board of Directors or
by these By-Laws to some other Officer or agent of the Corporation, or shall be
required by law to be otherwise signed or executed.


BY-LAWS
                                                                         Page 14


                                   ARTICLE VI

                   CERTIFICATES FOR SHARES AND THEIR TRANSFER

     SECTION 1. CERTIFICATES FOR SHARES. Certificates representing shares of the
Corporation shall be in such form as may be determined by the Board of
Directors. Such certificates shall be signed by any one of the Chairman of the
Board, the Chief Executive Officer, the President or an Executive Vice
President, and shall be countersigned by the Secretary or an Assistant Secretary
and shall be sealed with the seal, or a facsimile of the seal, of the
Corporation. If a certificate is countersigned by a Transfer Agent or Registrar,
other than the Corporation itself or its employee, any other signatures or
countersignature on the certificate may be facsimiles. In case any Officer of
the Corporation, or any officer or employee of the Transfer Agent or Registrar
who has signed or whose facsimile signature has been placed upon such
certificate ceases to be an Officer of the Corporation, or an officer or
employee of the Transfer Agent or Registrar before such certificate is issued,
the certificate may be issued by the Corporation with the same effect as if the
Officer of the Corporation, or the officer or employee of the Transfer Agent or
Registrar had not ceased to be such at the date of its issue. Each certificate
representing shares shall state: that the Corporation is organized under the
laws of the State of Illinois; the name of the person to whom issued; the number
and class of shares; and the designation of the series, if any, which such
certificate represents. Each certificate shall be consecutively numbered or
otherwise identified. The name of the person to whom the shares represented
thereby are issued, with the number of shares and date of issue, shall be
entered on the books of the Corporation. All certificates surrendered to the
Corporation for transfer shall be canceled, and no new certificate shall be
issued in replacement until the former certificate for a like number of shares
shall have been surrendered and canceled, except in the case of lost, destroyed
or mutilated certificates.

     SECTION 2. TRANSFER AGENT AND REGISTRAR. The Board of Directors may from
time to time appoint such Transfer Agents and Registrars in such locations as it
shall determine, and may, in its discretion, appoint a single entity to act in
the capacity of both Transfer Agent and Registrar in any one location.

     SECTION 3. TRANSFER OF SHARES. Transfers of shares of the Corporation shall
be made only on the books of the Corporation at the request of the holder of
record thereof or of his attorney, lawfully constituted in writing, and on
surrender for cancellation of the certificate for such shares. The person in
whose name shares stand on the books of the Corporation shall be deemed the
owner thereof for all purposes as regards the Corporation.

     SECTION 4. LOST, DESTROYED OR MUTILATED CERTIFICATES. In case of lost,
destroyed or mutilated certificates, duplicate certificates shall be issued to
the person claiming the loss, destruction or mutilation, provided:

     (a)  That the claimant furnishes an affidavit stating the facts of such
          loss, destruction or mutilation so far as known to him or her and
          further stating that the affidavit is


BY-LAWS
                                                                         Page 15


          made to induce the Corporation to issue a duplicate certificate or
          certificates; and that issuance of the duplicate certificate or
          certificates is approved:

          (i)  in a case involving a certificate or certificates for more than
               1,000 shares, by the Chairman of the Board, the Chief Executive
               Officer, the President, an Executive Vice President, or the
               Secretary; or

          (ii) in a case involving a certificate or certificates for 1,000
               shares or less, by the Transfer Agent appointed by the Board of
               Directors for the transfer of the shares represented by such
               certificate or certificates;

          upon receipt of a bond, with one or more sureties, in the amount to be
          determined by the party giving such approval; or

     (b)  that issuance of the said duplicate certificate or certificates is
          approved by the Board of Directors upon such terms and conditions as
          it shall determine.

                                   ARTICLE VII

                                   FISCAL YEAR

     The fiscal year of the Corporation shall begin on the first day of January
in each year and end on the last day of December in each year.

                                  ARTICLE VIII

                VOTING SHARES OR INTERESTS IN OTHER CORPORATIONS

     The Chairman of the Board, the Chief Executive Officer, the President, an
Executive, Group, or Senior Vice President and each of them, shall have the
authority to act for the Corporation by voting any shares or exercising any
other interest owned by the Corporation in any other corporation or other
business association, including wholly or partially owned subsidiaries of the
Corporation, such authority to include, but not be limited to, power to attend
any meeting of any such corporation or other business association, to vote
shares in the election of directors and upon any other matter coming before any
such meeting, to waive notice of any such meeting and to consent to the holding
thereof without notice, and to appoint a proxy or proxies to represent the
Corporation at any such meeting with all the powers that the said Officer would
have under this section if personally present.


BY-LAWS
                                                                         Page 16


                                   ARTICLE IX

                          DISTRIBUTIONS TO SHAREHOLDERS

     The Board of Directors may authorize, and the Corporation may make,
distributions to its shareholders, subject to any restriction in the Articles of
Incorporation and subject also to the limitations prescribed by law.

                                    ARTICLE X

                                      SEAL

     The Corporate Seal of the Corporation shall be in the form of a circle in
the center of which is the insignia "[CORPORATE SEAL]" and shall have inscribed
thereon the name of the Corporation and the words "an Illinois Corporation."

                                   ARTICLE XI

                                WAIVER OF NOTICE

     Whenever any notice whatever is required to be given under the provisions
of these By-Laws or under the provisions of the Articles of Incorporation or
under the provisions of The Business Corporation Act of 1983, a waiver thereof
in writing, signed by the person or persons entitled to such notice, whether
before or after the time stated therein, shall be deemed equivalent to the
giving of such notice. Attendance at any meeting shall constitute waiver of
notice thereof unless the person at the meeting objects to the holding of the
meeting because proper notice was not given.

                                   ARTICLE XII

                                   AMENDMENTS

     These By-Laws may be made, altered, amended or repealed by the shareholders
or the Board of Directors.



                                                            Amended effective
                                                            December 14, 2001


                  ABBOTT LABORATORIES 401(K) SUPPLEMENTAL PLAN


                                    SECTION 1
                                  INTRODUCTION

         1.1 PURPOSE. This Abbott Laboratories 401(k) Supplemental Plan (the
"Plan") is being established by Abbott Laboratories ("Abbott") to provide
eligible management employees of Abbott an opportunity to accumulate capital for
their retirement or other termination of employment in excess of the
contributions allowed under the Abbott Laboratories Stock Retirement Plan
("Stock Plan").

         1.2 EFFECTIVE DATE. The Plan shall be effective as of October 1, 1993.

         1.3 ADMINISTRATION. The Plan shall be administered by the Compensation
Committee (the "Committee") appointed by the Board of Directors of Abbott.

                                    SECTION 2
                          ELIGIBILITY AND PARTICIPATION

         2.1 PERSONS ELIGIBLE TO PARTICIPATE. Participation in the Plan shall be
limited to employees who are serving as corporate officers of Abbott as of
October 1, 1993 or who become corporate officers thereafter. The term "corporate
officer" for purposes of the Plan shall mean an individual elected an officer of
Abbott by its Board of Directors (or designated as such for purposes of the Plan
by the Committee), but shall not include assistant officers. In the event an
employee should cease to be a corporate officer of Abbott due to demotion,
termination of employment or otherwise, such employee shall cease to be eligible
to participate in the Plan and any contributions then being made on behalf of
such employee shall immediately cease.

         2.2 PARTICIPANT. An eligible employee may elect to participate in the
Plan by electing to have contributions made on the employee's behalf as provided
in Section 5.


                                    SECTION 3
                             EMPLOYEE CONTRIBUTIONS

         3.1 ALLOWABLE CONTRIBUTIONS. An eligible employee may elect to have his
employer make "pre-tax contributions" on his behalf in an amount not greater
than 18% in total of his compensation in any calendar year for services rendered
to his employer. A pre-tax contribution made by an employer on behalf of a
participant shall reduce the participant's compensation at the time of payment
of such compensation. Each election hereunder shall be in writing, and shall be
in multiples of 1% of compensation.


                                       1



         3.2 COMPENSATION. A participant's "compensation" shall have the same
meaning as that term is used in Subsection 7-2 of the Stock Plan.

         3.3 MAXIMUM EMPLOYEE CONTRIBUTIONS. Notwithstanding Subsection 3.1, in
no event shall the sum of:

         (a)  the participant's total contributions, pre-tax contributions,
              supplemental deposits and supplemental pre-tax contributions made
              under the Stock Plan; plus

         (b)  the participant's total pre-tax contributions made under the Plan;

for any calendar year, exceed 18% of the employee's compensation for such year.
In the event the limitation described in this subsection 3.3 would be exceeded
for any participant, the participant's pre-tax contributions made under this
Plan shall be reduced until the limit is not exceeded.

                                    SECTION 4
                             EMPLOYER CONTRIBUTIONS

         For the calendar year ending December 31, 1993, and for each subsequent
calendar year, Abbott shall make a contribution on behalf of each participant in
the Plan who makes pre-tax contributions ("basic contributions") under the Plan
during such year at the rate of two percent (2%) of compensation in excess of,
for calendar year 1993, Two Hundred Thousand Dollars ($200,000), and for
calendar years subsequent to 1993, the limit in effect for such year under
Section 40l(a)(17), Internal Revenue Code of 1986, as amended. Such employer
contribution shall be in an amount equal to the contribution the participant
would have received under subsection 8-3 of the Stock Plan with respect to such
basic contributions had such basic contributions been made under subsection 7-1
of the Stock Plan. A participant who suspends his basic contributions to the
Plan during any calendar year shall receive an employer contribution under this
Section 4 based on the basic contributions made by the participant during such
year.

         A contribution made by a participant under subsection 5.4 shall be
considered a basic contribution for purposes of this Section 4 to the extent it
includes contributions at the rate of two percent (2%) of compensation for 1993
in excess of Two Hundred Thousand Dollars ($200,000).

                                    SECTION 5
                                    ELECTIONS

         5.1 ANNUAL ELECTIONS REQUIRED. Except as provided in subsections 5.2
and 5.3, a participant shall elect to make pre-tax contributions with respect to
compensation earned in any calendar year, prior to the first day of such
calendar year. Each such election shall be in writing, shall be filed with the
Committee, shall be effective only for the calendar year for which made and,
except as provided in subsection 5.2, shall be irrevocable. Notwithstanding
subsection 5.2, an employee who fails to make an election under this subsection
5.1 for a calendar year may not contribute to the Plan during such year.


                                       2



         5.2 LIMITED CHANGES. A participant who has elected under subsection 5.1
to make pre-tax contributions for any calendar year, may increase or decrease
such pre-tax contributions during such calendar year by filing a written
election with the Committee. A participant may make no more than two such
elections under this subsection 5.2 during such calendar year. Any election
filed under this subsection 5.2 shall become effective for compensation earned
no earlier then the first payroll period commencing after receipt of the
election by the Committee. Any election filed under this subsection 5.2 shall
remain in effect for compensation earned during the remainder of such calendar
year unless changed by a subsequent election under this subsection 5.2.

         5.3 NEWLY ELIGIBLE EMPLOYEES. A newly eligible employee (including
employees who become eligible due to the adoption of the Plan) shall make the
election described in subsection 5.1 within thirty (30) days of the date he is
notified of his eligibility to participate in the Plan. Any such election shall
become effective for compensation earned no earlier then the first payroll
period commencing after receipt of the election by the Committee and shall
remain in effect for the remainder of the then current calendar year unless
changed as provided in subsection 5.2.

         5.4 SPECIAL CONTRIBUTION FOR 1993. Employees who are serving as
corporate officers of Abbott and who have established "Grantor Trusts" under the
1986 Abbott Laboratories Management Incentive Plan ("MIP") as of October 1,
1993, may elect to make a lump-sum contribution based on compensation earned
during the period of January 1, 1993 through September 30, 1993 (the "Make-up
Period") by filing an election with the Administrator and tendering payment in
cash to such Grantor Trust of the amount of the contribution, not later than
October 31, 1993. Any such contribution shall not exceed the maximum
contribution allowed under subsection 3.3 based on the employee's Stock Plan
contributions made, and compensation earned, during the Make-Up Period.

         5.5 GRANTOR TRUST ELECTION. As part of the annual elections described
in subsection 5.1, each participant may also elect to have his pre-tax and
employer contributions for such year deposited in a "Grantor Trust" established
by the participant under the circumstances and on the terms described in
subsection 6.1. Any such election shall be irrevocable and shall apply to all
pre-tax contributions made during, and employer contributions made for, such
calendar year on behalf of such participant. If the participant fails to make an
election under this subsection 5.5, the participant's pre-tax contributions made
during, and employer contribution made for, such calendar year shall be retained
by Abbott and shall not be deposited in a grantor trust in the future.

                                    SECTION 6
                   FUNDING EMPLOYER AND EMPLOYEE CONTRIBUTIONS

         6.1 CONTRIBUTIONS TO BE DEPOSITED IN GRANTOR TRUSTS. Each participant's
pre-tax contributions and employer contributions which the participant has filed
an election under subsection 5.5 shall be retained by Abbott and credited to a
Grantor Trust Account established under subsection 7.1. As soon as practicable
after the date the value of the participant's Grantor Trust Account exceeds
Fifty Thousand Dollars ($50,000), the entire value of such account, less the
approximate aggregate federal, state and local individual income taxes
(determined under subsection 8.5) attributable to the Grantor Trust Account,
shall be deposited in a "Grantor Trust" established by the participant, provided
such trust is in a form which the Committee determines is substantially similar
to the trust attached to this Plan as Exhibit A. The appropriate aggregate
federal, state and local individual income taxes attributable to the Grantor
Trust Account shall be paid directly to the participant.


                                       3



         6.2 CONTRIBUTIONS TO BE RETAINED BY ABBOTT. Each participant's pre-tax
contributions and employer contributions for which the participant has not filed
an election under subsection 5.5 shall be retained by Abbott and credited to a
Deferred Account established under subsection 7.1.

         6.3 AFTER ESTABLISHMENT OF GRANTOR TRUST. After a Grantor Trust has
been established by a participant under subsection 6.1, all pre-tax
contributions and employer contributions made thereafter for which the
participant has filed an election under Subsection 5.5, shall be deposited in
such Grantor Trust (less the approximate aggregate federal, state and local
individual income taxes (determined under subsection 8.5) attributable to such
contributions). Such deposits shall be made as soon as practicable after the
last complete payroll period of the calendar quarter in which the contributions
are made.

         6.4 FUNDING SPECIAL CONTRIBUTION FOR 1993. The full amount of any
contribution made by a participant under subsection 5.4 shall be deposited in
the participant's Grantor Trust established under subsection 5.1 of the MIP.
Such participant's Trust Account established under subsection 5.2 of the MIP
shall be credited with the sum of (a) the amount of such contribution, plus (b)
the amount of the approximate aggregate federal, state and local individual
income taxes (determined under subsection 6.7 of the MIP) attributable to the
sum of paragraph (a) and (b) of this subsection 6.4. Thereafter, such
contribution shall be treated for all purposes of the MIP as if it were an
allocation paid under subsection 5.1 (b) of the MIP.

                                    SECTION 7
                                   ACCOUNTING

         7.1 SEPARATE ACCOUNTS. The Committee shall maintain two separate
Accounts, a "Deferred Account" and a "Trust Account" in the name of each
participant. The Deferred Account shall be comprised of any pre-tax
contributions made on behalf of the participant under subsection 3.1 and any
employer contributions made on behalf of the participant under Section 4, for
which the participant has not made an election under subsection 5.5, and any
adjustments made pursuant to subsection 7.2. The "Trust Account" shall be
comprised of any pre-tax contributions made on behalf of the participant under
subsection 3.1 and any employer contributions made on behalf of the participant
under Section 4, for which the participant has made an election under subsection
5.5, and any adjustments made pursuant to subsection 7.3.

         7.2 ADJUSTMENT OF DEFERRED ACCOUNTS. As of the end of each calendar
year, the Administrator shall adjust each participant's Deferred Account as
follows:

         (a)  FIRST, charge an amount equal to any payments made to the
              participant during that year pursuant to subsections 7.9 or 7.10;

         (b)  NEXT, credit an amount equal to any pre-tax contributions and
              employer contributions made on behalf of such participant for that
              year for which the participant has not made an election under
              subsection 5.5; and

         (c)  FINALLY, credit an amount equal to the Interest Accrual earned for
              that year pursuant to subsection 7.4.


                                       4



           7.3 ADJUSTMENT OF TRUST ACCOUNTS. As of the end of each calendar
year, the Administrator shall adjust each participant's Trust Account as
follows:

         (a)  FIRST, charge an amount equal to the product of: (i) any payments
              made to the participant during that year from the participant's
              Grantor Trust (other than distributions of trust earnings in
              excess of the Net Interest Accrual authorized by the administrator
              of the trust to provide for the Tax Gross Up under subsection
              8.4); multiplied by (ii) a fraction, the numerator of which is the
              balance in the participant's Trust Account as of the end of the
              prior calendar year and the denominator of which is the balance of
              the participant's Grantor Trust (as determined by the
              administrator of the trust) as of that same date;

         (b)  NEXT, credit an amount equal to any pre-tax contributions and
              employer contributions made on behalf of the participant for that
              year for which the participant has made an election under
              subsection 5.5;

         (c)  FINALLY, credit an amount equal to the Interest Accrual earned for
              that year pursuant to subsection 7.4.

         7.4 INTEREST ACCRUALS ON ACCOUNTS. As of the end of each calendar year,
a participant's Deferred Account and Trust Account shall be credited with
interest equal to: (a) the average of the prime rates of interest charged by the
two largest banks located in the City of Chicago on loans made by them as of
January 1 and the end of each month of the calendar year plus (b) two hundred
twenty-five (225) basis points. Such interest shall be credited on the
conditions established by the Committee.

         7.5 GUARANTEED RATE PAYMENTS. In addition to any employer contribution
made on behalf of a participant for any calendar year pursuant to section 4,
Abbott shall also make a payment to a participant's Grantor Trust (a "Guaranteed
Rate Payment") for any year in which the net earnings of such trust do not equal
or exceed the participant's Net Interest Accrual for that year. A participant's
"Net Interest Accrual" for a year is an amount equal to: (a) the Interest
Accrual credited to the participant's Trust Account for that year; less (b) the
product of (i) the amount of such Interest Accrual, multiplied by (ii) the
aggregate of the federal, state and local individual income tax rates
(determined in accordance with subsection 8.5). The Guaranteed Rate Payment
shall equal the difference between the participant's Net Interest Accrual and
the net earnings of the participant's Grantor Trust for the year, and shall be
paid within 90 days of the end of the calendar year.

         7.6 DESIGNATION OF BENEFICIARIES. Subject to the conditions and
limitations set forth below, each participant, and after a participant's death,
each primary beneficiary designated by a participant in accordance with the
provisions of this subsection 7.6, shall have the right from time to time to
designate a primary beneficiary or beneficiaries and, successive or contingent
beneficiary or beneficiaries to receive unpaid amounts from the participant's
Deferred Account under the Plan. Beneficiaries may be a natural person or
persons or a fiduciary, such as a trustee of a trust or the legal representative
of an estate. Any such designation shall take effect upon the death of the
participant or such beneficiary, as the case may be, or in the case of any
fiduciary beneficiary, upon the termination of all of its duties (other than the
duty to dispose of the right to receive amounts remaining to be paid under the
Plan). The conditions and limitations relating to the designation of
beneficiaries are as follows:


                                       5



         (a)  A nonfiduciary beneficiary shall have the right to designate a
              further beneficiary or beneficiaries only if the original
              participant or the next preceding primary beneficiary, as the case
              may be, shall have expressly so provided in writing; and

         (b)  A fiduciary beneficiary shall designate as a further beneficiary
              or beneficiaries only those persons or other fiduciaries who are
              entitled to receive the amounts payable from the participant's
              account under the trust or estate of which it is a fiduciary.

Any beneficiary designation or grant of any power to any beneficiary under this
subsection may be exercised only by an instrument in writing, executed by the
person making the designation or granting such power and filed with the
Secretary of Abbott during such person's lifetime or prior to the termination of
a fiduciary's duties. If a deceased participant or a deceased nonfiduciary
beneficiary who had the right to designate a beneficiary as provided above dies
without having designated a further beneficiary, or if no beneficiary designated
as provided above is living or qualified and acting, the Committee, in its
discretion, may direct distribution of the amount remaining from time to time to
either:

         (i)  any one or more or all of the next of kin (including the surviving
              spouse) of the participant or the deceased beneficiary, as the
              case may be, and in such proportions as the Committee determines;
              or

         (ii) the legal representative of the estate of the deceased participant
              or deceased beneficiary as the case may be.

         7.7 NON-ASSIGNABILITY AND FACILITY OF PAYMENT. Amounts payable to
participants and their beneficiaries under the Plan are not in any way subject
to their debts and other obligations, and may not be voluntarily or
involuntarily sold, transferred or assigned; provided that the preceding
provisions of this section shall not be construed as restricting in any way a
designation right granted to a beneficiary pursuant to the terms of subsection
7.6. When a participant or the beneficiary of a participant is under legal
disability, or in the Committee's opinion is in any way incapacitated so as to
be unable to manage his or her financial affairs, the Committee may direct that
payments shall be made to the participant's or beneficiary's legal
representative, or to a relative or friend of the participant or beneficiary for
the benefit of the participant or beneficiary, or the Committee may direct the
payment or distribution for the benefit of the participant or beneficiary in any
manner that the Committee determines.

         7.8 PAYER OF AMOUNTS ALLOCATED TO PARTICIPANTS. Any employer
contribution made on behalf of a participant in the Plan and any interest
credited thereto (and to other contributions) will be paid by the employer (or
such employer's successor) by whom the participant was employed during the
calendar year for which any amount was allocated, and for that purpose, if a
participant shall have been employed by two or more employers during any
calendar year the amount allocated under this Plan for that year shall be an
obligation of each of the respective employers in proportion to the respective
amounts of compensation paid by each of them in that calendar year.


                                       6



         7.9 MANNER OF PAYMENT. Subject to subsection 7.10, a participant shall
elect the timing and manner of payment of each portion of his Deferred Account
attributable to contributions made for any calendar year, at the time of his
election for such calendar year under subsection 5.1. Notwithstanding subsection
5.2, any election made under this subsection 7.10 shall be irrevocable as to
that portion of the Deferred Account to which the election relates. The
participant may select a payment method from any of the following alternatives:

         (a)  Payment in a lump-sum as soon as practicable following the
              participant's retirement or other termination of employment; or

         (b)  Payment under any method allowed by the Committee for deferred
              accounts under the MIP.

         7.10 PAYMENT UPON TERMINATION FOLLOWING CHANGE IN CONTROL.
Notwithstanding any other provisions of the Plan, if employment of any
participant with Abbott and its subsidiaries should terminate for any reason
within five (5) years after the date of a Change in Control, the aggregate
unpaid balance of the participant's Deferred Account and Trust Account, shall be
paid to the participant in a lump sum within thirty (30) days following the date
of such termination.

         7.11 CHANGE IN CONTROL. A "Change in Control" shall be deemed to have
occurred on the earliest of the following dates:

         (i)   The date any entity or person (including a "group" as defined in
               Section 13(d)(3) of the Securities Exchange Act of 1934 (the
               "Exchange Act")) shall have become the beneficial owner of, or
               shall have obtained voting control over thirty percent (30%) or
               more of the outstanding common shares of Abbott;

         (ii)  The date the shareholders of Abbott approve a definitive
               agreement (A) to merge or consolidate Abbott with or into another
               corporation, in which Abbott is not the continuing or surviving
               corporation or pursuant to which any common shares of Abbott
               would be converted into cash, securities or other property of
               another corporation, other than a merger of Abbott in which
               holders of common shares immediately prior to the merger have the
               same proportionate ownership of common stock of the surviving
               corporation immediately after the merger as immediately before,
               or (B) to sell or otherwise dispose of substantially all the
               assets of Abbott; or

         (iii) The date there shall have been a change in a majority of the
               Board of Directors of Abbott within a twelve (12) month period
               unless the nomination for election by Abbott's shareholders of
               each new director was approved by the vote of two-thirds of the
               directors then still in office who were in office at the
               beginning of the twelve (12) month period.

         7.12 PROHIBITION AGAINST AMENDMENT. The provisions of subsections 7.10,
7.11 and this subsection 7.12 may not be amended or deleted, nor superseded by
any other provision of this Plan, during the period beginning on the date of a
Change in Control and ending on the date five (5) years following such Change in
Control.


                                       7



                                    SECTION 8
                                  MISCELLANEOUS

         8.1 RULES. The Committee may establish such rules and regulations as it
may consider necessary or desirable for the effective and efficient
administration of the Plan.

         8.2 TAXES. Any employer shall be entitled, if necessary or desirable,
to pay, or withhold the amount of any federal, state or local tax, attributable
to any amounts payable by it under the Plan after giving the person entitled to
receive such amount notice as far in advance as practicable, and may defer
making payment of any amount with respect to which any such tax question may be
pending unless and until indemnified to its satisfaction.

         8.3 RIGHTS OF PARTICIPANTS. Employment rights of participants with
Abbott and its subsidiaries shall not be enlarged or affected by reason of
establishment of or inclusion as a participant in the Plan. Nothing contained in
the Plan shall require Abbott or any subsidiary to segregate or earmark any
assets, funds or property for the purpose of payment of any amounts which may
have been deferred. The Deferred and Trust Accounts established pursuant to
subsection 7.1 are for the convenience of the administration of the Plan and no
trust relationship with respect to such Accounts is intended or should be
implied. Participant's rights shall be limited to payment to them at the time or
times and in such amounts as are contemplated by the Plan. Any decision made by
the Committee which is within his sole and uncontrolled discretion, shall be
conclusive and binding upon all persons whomsoever.

         8.4 TAX GROSS UP. In addition to the employer contribution provided
under Section 4, each participant (or, if the participant is deceased, the
beneficiary designated under the participant's Grantor Trust) shall be entitled
to a Tax Gross Up payment for each year there is a balance in his Trust Account.
The "Tax Gross Up" shall approximate: (a) the amount necessary to compensate the
participant (or beneficiary) for the net increase in the participant's (or
beneficiary's) federal, state and local income taxes as a result of the
inclusion in his taxable income of the income of the participant's Grantor Trust
and any Guaranteed Rate Payment for that year; less (b) any distribution to the
participant (or beneficiary) of his Grantor Trust's net earnings for that year;
plus (c) an amount necessary to compensate the participant (or beneficiary) for
the net increase in the taxes described in (a) above as a result of the
inclusion in his taxable income of any payment made pursuant to this subsection
8.4. Payment of the Tax Gross Up shall be made by the employers (in such
proportions as Abbott shall designate) directly from their general corporate
assets.

         8.5 INCOME TAX ASSUMPTIONS. For purposes of Sections 7 and 8, a
participant's federal income tax rate shall be deemed to be the highest marginal
rate of federal individual income tax in effect in the calendar year in which a
calculation under those Sections is to be made, and state and local tax rates
shall be deemed to be the highest marginal rates of individual income tax in
effect in the state and locality of the participant's residence on the date such
a calculation is made, net of any federal tax benefits.

         8.6 GENDER. For purposes of the Plan, words in the masculine gender
shall include the feminine and neuter genders, the singular shall include the
plural and the plural shall include the singular.


                                       8



         8.7 MANNER OF ACTION BY COMMITTEE. A majority of the members of the
Committee qualified to act on any particular question may act by meeting or by
writing signed without meeting, and may execute any instrument or document
required or delegate to one of its members authority to sign. The Committee from
time to time may delegate the performance of certain ministerial functions in
connection with the Plan, such as the keeping of records, to such person or
persons as the Committee may select. Except as otherwise expressly provided in
the Plan, the costs of administration of the Plan will be paid by Abbott. Any
notice required to be given to, or any document required to be filed with the
Committee, will be properly given or filed if mailed or delivered in writing to
the Secretary of Abbott.

         8.8 RELIANCE UPON ADVICE. The Board of Directors and the Committee may
rely upon any information or advice furnished to it by any Officer of Abbott or
by Abbott's independent auditors, or other consultants, and shall be fully
protected in relying upon such information or advice. No member of the Board of
Directors or the Committee shall be liable for any act or failure to act on
their part, excepting only any acts done or omitted to be done in bad faith, nor
shall they be liable for any act or failure to act of any other member.

                                    SECTION 9

                      AMENDMENT, TERMINATION AND CHANGE OF
                         CONDITIONS RELATING TO PAYMENTS

         The Plan will be effective from its effective date until terminated by
the Board of Directors. The Board of Directors reserves the right to amend the
Plan from time to time and to terminate the Plan at any time. No such amendment
or any termination of the Plan shall reduce any fixed or contingent obligations
which shall have arisen under the Plan prior to the date of such amendment or
termination.


                                       9



                                    EXHIBIT A

                       IRREVOCABLE GRANTOR TRUST AGREEMENT


         THIS AGREEMENT, made this _____ day of ____________, __, by and between
____________ of ____________, Illinois (the "grantor"), and The Northern Trust
Company located at Chicago, Illinois, as trustee (the "trustee"),


                                WITNESSETH THAT:

         WHEREAS, the grantor desires to establish and maintain a trust to hold
certain benefits received by the grantor under the Abbott Laboratories 40l(k)
Supplemental Plan, as it may be amended from time to time;

         NOW, THEREFORE, IT IS AGREED as follows:


                                    ARTICLE I
                                  INTRODUCTION

         I-1. NAME. This agreement and the trust hereby evidenced (the "trust")
may be referred to as the "__________ 19__ Grantor Trust".

         I-2. THE TRUST FUND The "trust fund" as at any date means all property
then held by the trustee under this agreement.

         I-3. STATUS OF THE TRUST. The trust shall be irrevocable. The trust is
intended to constitute a grantor trust under Sections 671-678 of the Internal
Revenue Code, as amended, and shall be construed accordingly.

         I-4. THE ADMINISTRATOR. Abbott Laboratories ("Abbott") shall act as the
"administrator" of the trust, and as such shall have certain powers, rights and
duties under this agreement as described below. Abbott will certify to the
trustee from time to time the person or persons authorized to act on behalf of
Abbott as the administrator. The trustee may rely on the latest certificate
received without further inquiry or verification.

         I-5. ACCEPTANCE. The trustee accepts the duties and obligations of the
"trustee" hereunder, agrees to accept funds delivered to it by the grantor or
the administrator, and agrees to hold such funds (and any proceeds from the
investment of such funds) in trust in accordance with this agreement.

                                   ARTICLE II
                         DISTRIBUTION OF THE TRUST FUND

         II-1. DEFERRED ACCOUNT. The administrator shall maintain a "deferred
account" under the trust. As of the end of each calendar year, the administrator
shall charge the deferred account with all distributions made from such account
during that year; and credit such account with income and realized gains and
charge such account with expenses and realized losses for the year.


                                       10



         II-2. DISTRIBUTIONS FROM THE DEFERRED ACCOUNT PRIOR TO THE GRANTOR'S
DEATH. Principal and accumulated income credited to the deferred account shall
not be distributed from the trust prior to the grantor's retirement or other
termination of employment with Abbott or a subsidiary of Abbott (the grantor's
"settlement date"); provided that, each year the administrator may direct the
trustee to distribute to the grantor a portion of the income of the deferred
account for that year, with the balance of such income to be accumulated in that
account. The administrator shall inform the trustee of the grantor's settlement
date. Thereafter, the trustee shall distribute the amounts from time to time
credited to the deferred account to the grantor, if then living, either in a
lump-sum payable as soon as practicable following the settlement date, or in a
series of annual installments, with the amount of each installment computed by
one of the following methods:

         (a)  The amount of each installment shall be equal to the sum of: (i)
              the amount credited to the deferred account as of the end of the
              year in which the grantor's settlement date occurs, divided by the
              number of years over which installments are to be distributed;
              plus (ii) the net earnings credited to the deferred account for
              the preceding year (excluding the year in which the grantor's
              settlement date occurs).

         (b)  The amount of each installment shall be determined by dividing the
              amount credited to the deferred account as of the end of the
              preceding year by the difference between (i) the total number of
              years over which installments are to be distributed, and (ii) the
              number of annual installment distributions previously made from
              the deferred account.

         (c)  Each installment (after the first installment) shall be
              approximately equal, with the amount comprised of the sum of: (i)
              the amount of the first installment, plus interest thereon at the
              rate determined under the Abbott Laboratories 401(k) Supplemental
              Plan, compounded annually; and (ii) the net earnings credited to
              the deferred account for the preceding year.

Notwithstanding the foregoing, the final installment distribution made to the
grantor under this paragraph II-3 shall equal the total principal and
accumulated income then held in the trust fund. The grantor, by writing filed
with the trustee and the administrator on or before the end of the calendar year
in which the grantor's settlement date occurs, may select either the lump-sum or
an installment payment method and, if an installment method is selected, may
select both the period (which may not be less than ten years from the end of the
calendar year in which the grantor's settlement date occurred) over which the
installment distributions are to be made and the method of computing the amount
of each installment. In the absence of such a written direction by the grantor,
installment distributions shall be made over a period of ten years, and the
amount of each installment shall be computed by using the method described in
subparagraph (a) next above. Installment distributions under this Paragraph II-2
shall be made as of January 1 of each year, beginning with the calendar year
following the year in which the grantor's settlement date occurs. The
administrator shall inform the trustee of the amount of each installment
distribution under this paragraph II-2, and the trustee shall be fully protected
in relying on such information received from the administrator.


                                       11



         II-3. DISTRIBUTIONS AFTER THE GRANTOR'S DEATH. The grantor, from time
to time may name any person or persons (who may be named contingently or
successively and who may be natural persons or fiduciaries) to whom the
principal of the trust fund and all accrued or undistributed income thereof
shall be distributed in a lump sum or, if the beneficiary is the grantor's
spouse (or a trust for which the grantor's spouse is the sole income
beneficiary), in installments, as directed by the grantor, upon the grantor's
death. If the grantor directs an installment method of distribution to the
spouse as beneficiary, any amounts remaining at the death of the spouse
beneficiary shall be distributed in a lump sum to the executor or administrator
of the spouse beneficiary's estate. If the grantor directs an installment method
of distribution to a trust for which the grantor's spouse is the sole income
beneficiary, any amounts remaining at the death of the spouse shall be
distributed in a lump sum to such trust. Despite the foregoing, if (i) the
beneficiary is a trust for which the grantor's spouse is the sole income
beneficiary, (ii) payments are being made pursuant to this paragraph II-3 other
than in a lump sum and (iii) income earned by the trust fund for the year
exceeds the amount of the annual installment payment, then such trust may elect
to withdraw such excess income by written notice to the trustee. Each
designation shall revoke all prior designations, shall be in writing and shall
be effective only when filed by the grantor with the administrator during the
grantor's lifetime. If the grantor fails to direct a method of distribution, the
distribution shall be made in a lump sum. If the grantor fails to designate a
beneficiary as provided above, then on the grantor's death, the trustee shall
distribute the balance of the trust fund in a lump sum to the executor or
administrator of the grantor's estate.

         II-4. FACILITY OF PAYMENT. When a person entitled to a distribution
hereunder is under legal disability, or, in the trustee's opinion, is in any way
incapacitated so as to be unable to manage his or her financial affairs, the
trustee may make such distribution to such person's legal representative, or to
a relative or friend of such person for such person's benefit. Any distribution
made in accordance with the preceding sentence shall be a full and complete
discharge of any liability for such distribution hereunder.

         II-5. PERPETUITIES. Notwithstanding any other provisions of this
agreement, on the day next preceding the end of 21 years after the death of the
last to die of the grantor and the grantor's descendants living on the date of
this instrument, the trustee shall immediately distribute any remaining balance
in the trust to the beneficiaries then entitled to distributions hereunder.

                                   ARTICLE III
                          MANAGEMENT OF THE TRUST FUND

         III-1. GENERAL POWERS. The trustee shall, with respect to the trust
fund, have the following powers, rights and duties in addition to those provided
elsewhere in this agreement or by law:

         (a)  Subject to the limitations of subparagraph (b) next below, to
              sell, contract to sell, purchase, grant or exercise options to
              purchase, and otherwise deal with all assets of the trust fund, in
              such way, for such considerations, and on such terms and
              conditions as the trustee decides.

         (b)  To retain in cash such amounts as the trustee considers advisable;
              and to invest and reinvest the balance of the trust fund, without
              distinction between principal and income, in obligations of the
              United States Government and its agencies or which are backed by
              the full faith and credit of the United States Government or in
              any mutual fund, common trust fund or collective investment fund
              which invests solely in such obligations; and any such investment
              made or retained by the trustee in good faith shall be proper
              despite any resulting risk or lack of diversification or
              marketability.


                                       12



         (c)  To deposit cash in any depositary (including the banking
              department of the bank acting as trustee) without liability for
              interest, and to invest cash in savings accounts or time
              certificates of deposit bearing a reasonable rate of interest in
              any such depositary.

         (d)  To invest, subject to the limitations of subparagraph (b) above,
              in any common or commingled trust fund or funds maintained or
              administered by the trustee solely for the investment of trust
              funds.

         (e)  To borrow from anyone, with the administrator's approval, such sum
              or sums from time to time as the trustee considers desirable to
              carry out this trust, and to mortgage or pledge all or part of the
              trust fund as security.

         (f)  To retain any funds or property subject to any dispute without
              liability for interest and to decline to make payment or delivery
              thereof until final adjudication by a court of competent
              jurisdiction or until an appropriate release is obtained.

         (g)  To begin, maintain or defend any litigation necessary in
              connection with the administration of this trust, except that the
              trustee shall not be obliged or required to do so unless
              indemnified to the trustee's satisfaction.

         (h)  To compromise, contest, settle or abandon claims or demands.

         (i)  To give proxies to vote stocks and other voting securities, to
              join in or oppose (alone or jointly with others) voting trusts,
              mergers, consolidations, foreclosures, reorganizations,
              liquidations, or other changes in the financial structure of any
              corporation, and to exercise or sell stock subscription or
              conversion rights.

         (j)  To hold securities or other property in the name of a nominee, in
              a depositary, or in any other way, with or without disclosing the
              trust relationship.

         (k)  To divide or distribute the trust fund in undivided interests or
              wholly or partly in kind.

         (l)  To pay any tax imposed on or with respect to the trust; to defer
              making payment of any such tax if it is indemnified to its
              satisfaction in the premises; and to require before making any
              payment such release or other document from any lawful taxing
              authority and such indemnity from the intended payee as the
              trustee considers necessary for its protection.

         (m)  To deal without restriction with the legal representative of the
              grantor's estate or the trustee or other legal representative of
              any trust created by the grantor or a trust or estate in which a
              beneficiary has an interest, even though the trustee,
              individually, shall be acting in such other capacity, without
              liability for any loss that may result.


                                       13



         (n)  To appoint or remove by written instrument any bank or corporation
              qualified to act as successor trustee, wherever located, as
              special trustee as to part or all of the trust fund, including
              property as to which the trustee does not act, and such special
              trustee, except as specifically limited or provided by this or the
              appointing instrument, shall have all of the rights, titles,
              powers, duties, discretions and immunities of the trustee, without
              liability for any action taken or omitted to be taken under this
              or the appointing instrument.

         (o)  To appoint or remove by written instrument any bank, wherever
              located, as custodian of part or all of the trust fund, and each
              such custodian shall have such rights, powers, duties and
              discretions as are delegated to it by the trustee.

         (p)  To employ agents, attorneys, accountants or other persons, and to
              delegate to them such powers as the trustee considers desirable,
              and the trustee shall be protected in acting or refraining from
              acting on the advice of persons so employed without court action.

         (q)  To perform any and all other acts which in the trustee's judgment
              are appropriate for the proper management, investment and
              distribution of the trust fund.

         III-2. PRINCIPAL AND INCOME. Any income earned on the trust fund which
is not distributed as provided in Article II shall be accumulated and from time
to time added to the principal of the trust. The grantor's interest in the trust
shall include all assets or other property held by the trustee hereunder,
including principal and accumulated income.

         III-3. STATEMENTS. The trustee shall prepare and deliver monthly to the
administrator and annually to the grantor, if then living, otherwise to each
beneficiary then entitled to distributions under this agreement, a statement (or
series of statements) setting forth (or which taken together set forth) all
investments, receipts, disbursements and other transactions effected by the
trustee during the reporting period; and showing the trust fund and the value
thereof at the end of such period.

         III-4. COMPENSATION AND EXPENSES. All reasonable costs, charges and
expenses incurred in the administration of this trust, including compensation to
the trustee, any compensation to agents, attorneys, accountants and other
persons employed by the trustee, and expenses incurred in connection with the
sale, investment and reinvestment of the trust fund shall be paid from the trust
fund.

                                   ARTICLE IV
                               GENERAL PROVISIONS

         IV-1. INTERESTS NOT TRANSFERABLE. The interests of the grantor or other
persons entitled to distributions hereunder are not subject to their debts or
other obligations and may not be voluntarily or involuntarily sold, transferred,
alienated, assigned or encumbered.

         IV-2. DISAGREEMENT AS TO ACTS. If there is a disagreement between the
trustee and anyone as to any act or transaction reported in any accounting, the
trustee shall have the right to a settlement of its account by any proper court.


                                       14



         IV-3. TRUSTEE'S OBLIGATIONS. No power, duty or responsibility is
imposed on the trustee except as set forth in this agreement. The trustee is not
obliged to determine whether funds delivered to or distributions from the trust
are proper under the trust, or whether any tax is due or payable as a result of
any such delivery or distribution. The trustee shall be protected in making any
distribution from the trust as directed pursuant to Article II without inquiring
as to whether the distributee is entitled thereto; and the trustee shall not be
liable for any distribution made in good faith without written notice or
knowledge that the distribution is not proper under the terms of this agreement.

         IV-4. GOOD FAITH ACTIONS. The trustee's exercise or non-exercise of its
powers and discretions in good faith shall be conclusive on all persons. No one
shall be obliged to see to the application of any money paid or property
delivered to the trustee. The certificate of the trustee that it is acting
according to this agreement will fully protect all persons dealing with the
trustee.

         IV-5. WAIVER OF NOTICE. Any notice required under this agreement may be
waived by the person entitled to such notice.

         IV-6. CONTROLLING LAW. The laws of the State of Illinois shall govern
the interpretation and validity of the provisions of this agreement and all
questions relating to the management, administration, investment and
distribution of the trust hereby created.

         IV-7. SUCCESSORS. This agreement: shall be binding on all persons
entitled to distributions hereunder and their respective heirs and legal
representatives, and on the trustee and its successors.

                                    ARTICLE V
                               CHANGES IN TRUSTEE

         V-1. RESIGNATION OR REMOVAL OF TRUSTEE. The trustee may resign at any
time by giving thirty days' advance written notice to the administrator and the
grantor. The administrator may remove a trustee by written notice to the trustee
and the grantor.

         V-2. APPOINTMENT OF SUCCESSOR TRUSTEE. The administrator shall fill any
vacancy in the office of trustee as soon as practicable by written notice to the
successor trustee; and shall give prompt written notice thereof to the grantor,
if then living, otherwise to each beneficiary then entitled to payments or
distributions under this agreement. A successor trustee shall be a bank (as
defined in Section 581 of the Internal Revenue Code, as amended).

         V-3. DUTIES OF RESIGNING OR REMOVED TRUSTEE AND OF SUCCESSOR TRUSTEE. A
trustee that resigns or is removed shall furnish promptly to the administrator
and the successor trustee an account of its administration of the trust from the
date of its last account. Each successor trustee shall succeed to the title to
the trust fund vested in its predecessor without the signing or filing of any
instrument, but each predecessor trustee shall execute all documents and do all
acts necessary to vest such title of record in the successor trustee. Each
successor trustee shall have all the powers conferred by this agreement as if
originally named trustee. No successor trustee shall be personally liable for
any act or failure to act of a predecessor trustee. With the approval of the
administrator, a successor trustee may accept the account furnished and the
property delivered by a predecessor trustee without incurring any liability for
so doing, and such acceptance will be complete discharge to the predecessor
trustee.


                                       15



                                   ARTICLE VI
                            AMENDMENT AND TERMINATION

         VI-1. AMENDMENT. With the consent of the administrator, this trust may
be amended from time to time by the grantor, if then living, otherwise by a
majority of the beneficiaries then entitled to payments or distributions
hereunder, except as follows:

         (a)  The duties and liabilities of the trustee cannot be changed
              substantially without its consent.

         (b)  This trust may not be amended so as to make the trust revocable.

         VI-2. TERMINATION THIS TRUST SHALL NOT TERMINATE, and all rights,
titles, powers, duties, discretions and immunities imposed on or reserved to the
trustee, the administrator, the grantor and the beneficiaries shall continue in
effect, until all assets of the trust have been distributed by the trustee as
provided in Article II.

                   *           *  *

         IN WITNESS WHEREOF, the grantor and the trustee have executed this
agreement as of the day and year first above written.



                              -------------------------------------
                              Grantor


                              The Northern Trust Company as Trustee

                              By
                                -----------------------------------

                              Its
                                 ----------------------------------










                                       16




                  ABBOTT LABORATORIES SUPPLEMENTAL PENSION PLAN

                                    SECTION 1
                                  INTRODUCTION

     1-1. On September 9, 1977, December 14, 1979 and February 10, 1984 the
Board of Directors of Abbott Laboratories ("Abbott") adopted certain resolutions
providing for payment of (i) pension benefits calculated under the Abbott
Laboratories Annuity Retirement Plan ("Annuity Plan") in excess of those which
may be paid under that plan under the limits imposed by Section 415 of the U.S.
Internal Revenue Code, as amended, and the Employee Retirement Income Security
Act ("ERISA") and (ii) the additional pension benefits that would be payable
under the Annuity Plan if deferred awards under the Abbott Laboratories
Management Incentive Plan were included in "final earnings" as defined in the
Annuity Plan.

     The purpose of this ABBOTT LABORATORIES SUPPLEMENTAL PENSION PLAN (the
"Supplemental Plan") is to clarify, restate and supersede the prior resolutions.

     1-2. The Supplemental Plan shall apply to employees of Abbott and its
subsidiaries and affiliates existing as of the date of adoption of the
Supplemental Plan or thereafter created or acquired. (Abbott and each of such
subsidiaries and affiliates are hereinafter referred to as an "employer" and
collectively as the "employers").

     1-3. All benefits provided under the Supplemental Plan shall be provided
from the general assets of the employers and not from any trust fund or other
designated asset. All participants in the Supplemental Plan shall be general
creditors of the employers with no priority over other creditors.

                                   1




     1-4. The Supplemental Plan shall be administered by the Abbott Laboratories
Employee Benefit Board of Review appointed and acting under the Annuity Plan
("Board of Review"). Except as stated below, the Board of Review shall perform
all powers and duties with respect to the Supplemental Plan, including the power
to direct payment of benefits, allocate costs among employers, adopt amendments
and determine questions of interpretation. The Board of Directors of Abbott
shall have the sole authority to terminate the Supplemental Plan.

                                    SECTION 2
                     ERISA ANNUITY PLAN SUPPLEMENTAL BENEFIT

     2-1. The benefits described in this Section 2 shall apply to all
participants in the Annuity Plan who retire, or terminate with a vested pension
under that plan, on or after September 9, 1977.

     2-2. Each Annuity Plan participant whose retirement or vested pension under
that plan would otherwise be limited by Section 415, Internal Revenue Code,
shall receive a supplemental pension under this Supplemental Plan in an amount,
which, when added to his or her Annuity Plan pension, will equal the amount the
participant would be entitled to under the Annuity Plan as in effect from time
to time, based on the particular option selected by the participant, without
regard to the limitations imposed by Section 415, Internal Revenue Code.

                                    SECTION 3
                    1986 TAX REFORM ACT SUPPLEMENTAL BENEFIT

     3-1. The benefits described in this Section 3 shall apply to all
participants in the Annuity Plan who retire, or terminate with a vested pension
under that plan, after December 31, 1988.

     3-2. Each Annuity Plan participant shall receive a supplemental pension
under this Supplemental Plan in an amount determined as follows:

     (a) The supplemental pension shall be the difference, if any, between:

         (i)   The monthly benefit payable under the Annuity Plan plus any
               supplement provided by Section 2; and

         (ii)  The monthly benefit which would have been payable under the
               Annuity Plan (without regard to the limits imposed by Section
               415, Internal Revenue Code) if the participant's "final
               earnings", as defined in the Annuity Plan had included
               compensation in excess of the limits imposed by Section
               401(a)(17), Internal Revenue Code, and any "pre-tax
               contributions" made by the participant under the Abbott
               Laboratories Supplemental 401(k) Plan.


                                   2




                                    SECTION 4
                 DEFERRED MIP ANNUITY PLAN SUPPLEMENTAL BENEFIT

     4-1. The benefits described in this Section 4 shall apply to all
participants in the Annuity Plan who retire, or terminate with a vested pension,
under that plan, on or after December 14, 1979 and who were awarded Management
Incentive Plan awards for any calendar year during the ten consecutive calendar
years ending with the year of retirement or termination of employment.

     4-2. Each Annuity Plan participant shall receive a supplemental pension
under this Supplemental Plan in an amount determined as follows:

     (a)  The supplemental pension shall be the difference, if any, between:

         (i)    The monthly benefit payable under the Annuity Plan plus any
                supplement provided by Section 2 and Section 3; and

         (ii)   the monthly benefit which would have been payable under the
                Annuity Plan (without regard to the limits imposed by Section
                415, Internal Revenue Code) if the participant's "final
                earnings", as defined in the Annuity Plan, were one-sixtieth of
                the sum of:

                (A) the participant's total "basic earnings" (excluding any
                    payments under the Management Incentive Plan or any Division
                    Incentive Plan) received in the sixty consecutive calendar
                    months for which his basic earnings (excluding any payments
                    under the Management Incentive Plan or any Division
                    Incentive Plan) were highest within the last one hundred
                    twenty consecutive calendar months immediately preceding his
                    retirement or termination of employment; and

                (B) the amount of the participant's total awards under the
                    Management Incentive Plan and any Division Incentive Plan
                    (whether paid immediately or deferred) made for the five
                    consecutive calendar years during the ten consecutive
                    calendar years ending with the year of retirement or
                    termination for which such amount is the greatest and (for
                    participants granted Management Incentive Plan awards for
                    less than five consecutive calendar years during such ten
                    year period) which include all Management Incentive Plan
                    awards granted for consecutive calendar years within such
                    ten year period.

                                   3




         (b)    That portion of any Management Incentive Plan award which the
                Compensation Committee has determined shall be excluded from the
                participant's "basic earnings" shall be excluded from the
                calculation of "final earnings" for purposes of this subsection
                4-2. "Final earnings" for purposes of this subsection 4-2 shall
                include any compensation in excess of the limits imposed by
                Section 401(a)(17), Internal Revenue Code.

         (c)    In the event the period described in subsection 4-2(a)(ii)(B) is
                the final five calendar years of employment and a Management
                Incentive Plan award is made to the participant subsequent to
                retirement for the participant's final calendar year of
                employment, the supplemental pension shall be adjusted by adding
                such new award and subtracting a portion of the earliest
                Management Incentive Plan award included in the calculation,
                from the amount determined under subsection 4-2(a)(ii)(B). The
                portion subtracted shall be equal to that portion of the
                participant's final calendar year of employment during which the
                participant was employed by Abbott. If such adjustment results
                in a greater supplemental pension, the greater pension shall be
                paid beginning the first month following the date of such new
                award.


                                    SECTION 5
                   RESTRICTED STOCK AWARD SUPPLEMENTAL BENEFIT

     5-1. The benefits described in this Section 5 shall apply to all
participants in the Annuity Plan who retire or terminate with a vested pension,
under that plan, after September 1, 1995.

     5-2. For purposes of this Supplemental Plan, the phrase "Eligible
Restricted Stock Award" shall mean a restricted stock award granted under the
Abbott Laboratories 1991 Incentive Stock Program, or any successor plan or
program, (the "Incentive Stock Program"), which is designated by the
Compensation Committee of the Board of Directors of Abbott, at any time prior to
retirement or termination of the participant, as includable in "final earnings"
for purposes of this Supplemental Plan.

     5-3. Each Annuity Plan participant shall receive a supplemental pension
under this Supplemental Plan in an amount determined as follows:

         (a)    The supplemental pension shall be the difference, if any,
                between:

                (i)    The monthly benefit payable under the Annuity Plan plus
                       any supplement provided by Sections 2, 3 and 4; and

                (ii)   The monthly benefit which would have been payable under
                       the Annuity Plan (without regard to the limits imposed by
                       Section 415, Internal Revenue Code) if the participant's
                       "final earnings", as defined in the Annuity Plan, were
                       one-sixtieth of the sum of:

                       (A)   the participant's earnings described in subsection
                             4-2(a)(ii)(A);


                                   4




                       (B)   the participant's awards described in subsection
                             4-2(a)(ii)(B) (adjusted as provided in subsections
                             4-2(b) and (c)); and

                       (C)   the total value of those installments of Eligible
                             Restricted Stock Awards granted the participant
                             which become non-forfeitable during the sixty
                             consecutive calendar months for which his basic
                             earnings (as defined in subsection 4-2(a)(ii)(A))
                             are highest within the last one hundred twenty
                             consecutive calendar months immediately preceding
                             his retirement or termination of employment.

         (b)    For purposes of this subsection 5-3:

         (i)    The value of an Eligible Restricted Stock Award shall be the
                fair market value of such award (as determined under the
                Incentive Stock Program) on the date the award is granted;

         (ii)   No more than five installments of Eligible Restricted Stock
                Awards shall be included in the amount calculated under
                subsection 5-3(a)(ii)(C); and

         (iii)  "Final earnings" shall include compensation in excess of the
                limits imposed by Section 401(a)(17), Internal Revenue Code."

     In the event the limitation described in subsection 5-3(b)(ii) would be
     exceeded for a participant, those installments in excess of five with the
     lowest fair market value (as defined in subsection 5-3(b)(i)) shall be
     disregarded in calculating the benefit due under this Section 5.

                                   SECTION 6
               CORPORATE OFFICER ANNUITY PLAN SUPPLEMENTAL BENEFIT

     6-1. The benefits described in this Section 6 shall apply to all
participants in the Annuity Plan who are corporate officers of Abbott as of
September 30, 1993 or who become corporate officers thereafter, and who retire,
or terminate with a vested pension under that plan on or after September 30,
1993. The term "corporate officer" for purposes of this Supplemental Plan shall
mean an individual elected an officer of Abbott by its Board of Directors (or
designated as such for purposes of this Section 6 by the Compensation Committee
of the Board of Directors of Abbott), but shall not include assistant officers.


                                   5




     6-2. Subject to the limitations and adjustments described below, each
participant described in subsection 6-1 shall receive a monthly supplemental
pension under this Supplemental Plan commencing on the participant's normal
retirement date under the Annuity Plan and payable as a life annuity, equal to
6/10 of 1 percent (.006) of the participant's final earnings (as that phrase is
used in subsection 5-3(a)(ii), adjusted as provided in subsections 5-3(b)(ii)
and (iii)) for each of the first twenty years of the participant's benefit
service (as defined in the Annuity Plan) occurring after the participant's
attainment of age 35.

     6-3. In no event shall the sum of (a) the participant's aggregate
percentage of final earnings calculated under subsection 6-2 and (b) the
participant's aggregate percentage of final earnings calculated under subsection
5-1(b)(i) of the Annuity Plan, exceed the maximum aggregate percentage of final
earnings allowed under subsection 5-1(b)(i) of the Annuity Plan (without regard
to any limits imposed by the Internal Revenue Code), as in effect on the date of
the participant's retirement or termination. In the event the limitation
described in this subsection 6-3 would be exceeded for any participant, the
participant's aggregate percentage calculated under subsection 6-2 shall be
reduced until the limit is not exceeded.

     6-4. Benefit service occurring between the date a participant ceases to be
a corporate officer of Abbott and the date the participant again becomes a
corporate officer of Abbott shall be disregarded in calculating the
participant's aggregate percentage under subsection 6-2.

     6-5. Any supplemental pension otherwise due a participant under this
Section 6 shall be reduced by the amount (if any) by which:

     (a)  the sum of (i) the benefits due such participant under the Annuity
          Plan and this Supplemental Plan, plus (ii) the actuarially equivalent
          value of the employer-paid portion of all benefits due such
          participant under the primary retirement plans of all non-Abbott
          employers of such participant; exceeds

     (b)  the maximum benefit that would be due under the Annuity Plan (without
          regard to the limits imposed by Section 415, Internal Revenue Code)
          based on the participant's final earnings (as that phrase is used in
          subsection 5-3(a)(ii), adjusted as provided in subsections 5-3(b)(ii)
          and (iii), if the participant had accrued the maximum benefit service
          recognized by the Annuity Plan.


                                   6




The term "primary retirement plan" shall mean any pension benefit plan as
defined in ERISA, whether or not qualified under the Internal Revenue Code,
which is determined by the Board of Review to be the primary pension plan of its
sponsoring employer. The term "non-Abbott employer" shall mean any employer
other than Abbott or a subsidiary or affiliate of Abbott. A retirement plan
maintained by an employer prior to such employer's acquisition by Abbott shall
be deemed a retirement plan maintained by a non-Abbott employer for purposes of
this subsection 6-5.

     6-6. Any supplemental pension due a participant under this Section 6 shall
be actuarially adjusted as provided in the Annuity Plan to reflect the pension
form selected by the participant and the participant's age at commencement of
the pension, and shall be paid as provided in subsection 7-2.

                                    SECTION 7
                         CORPORATE OFFICER ANNUITY PLAN
                      SUPPLEMENTAL EARLY RETIREMENT BENEFIT

     7-1. The benefits described in this Section 7 shall apply to all persons
described in subsection 6-1.

     7-2. The supplemental pension due under Sections 2, 3, 4, 5 and 6 to each
participant described in subsection 7-1 shall be reduced as provided in
subsections 5-3 and 5-6 of the Annuity Plan for each month by which its
commencement date precedes the last day of the month in which the participant
will attain age 60. No reduction will be made for the period between the last
day of the months the participant will attain age 60 and age 62.

     7-3. Each participant described in subsection 7-1 shall receive a monthly
supplemental pension under this Supplemental Plan equal to any reduction made in
such participant's Annuity Plan pension under subsections 5-3 or 5-6 of the
Annuity Plan for the period between the last day of the months the participant
will attain age 60 and age 62.


                                   7



                                    SECTION 8
                                  MISCELLANEOUS

     8-1. For purposes of this Supplemental Plan, the term "Management Incentive
Plan" shall mean the Abbott Laboratories 1971 Management Incentive Plan, the
Abbott Laboratories 1981 Management Incentive Plan and all successor plans to
those plans.

     8-2. The supplemental pension described in Sections 2, 3, 4, 5, 6 and 7
shall be paid to the participant or his or her beneficiary based on the
particular pension option elected by the participant, in the same manner, at the
same time, for the same period and on the same terms and conditions as the
pension payable to the participant or his beneficiary under the Annuity Plan. In
the event a participant is paid his or her pension under the Annuity Plan in a
lump sum, any supplemental pension due under Sections 2, 3, 4, 5, 6 or 7 shall
likewise be paid in a lump sum. Notwithstanding the foregoing provision of this
subsection 8-2: (a) if the present value of the vested supplemental pensions
described in Sections 2, 3, 4, 5, 6 and 7 of a participant who is actively
employed by Abbott as a corporate officer exceeds $100,000, then payment of such
pensions shall be made to the participant under Section 9 below; and (b) if the
monthly vested supplemental pensions, expressed as a straight life annuity, due
a participant or his or her beneficiary under Sections 2, 3, 4, 5, 6 and 7 do
not exceed an aggregate of One Hundred Fifty Dollars ($150.00) as of the
commencement date of the pension payable such participant or his or her
beneficiary under the Annuity Plan, and payment of such supplemental pension has
not previously been made under Section 9, the present value of such supplemental
pensions shall be paid such participant or beneficiary in a lump-sum.

     8-3. Notwithstanding any other provisions of this Supplemental Plan, if
employment of any participant with Abbott and its subsidiaries and affiliates
should terminate for any reason within five (5) years after the date of a Change
in Control:

          (a)  The present value of any supplemental pension due the participant
               under Section 2 (whether or not then payable) shall be paid to
               the participant in a lump sum within thirty (30) days following
               such termination; and

          (b)  The present value of any supplemental pension due the participant
               under Sections 3 or 4 (whether or not then payable) shall be paid
               to the participant in a lump sum within thirty (30) days
               following such termination.


                                   8




The supplemental pension described in paragraph (a) shall be computed using as
the applicable limit under Section 415, Internal Revenue Code, such limit as is
in effect on the termination date and based on the assumption that the
participant will receive his or her Annuity Plan pension in the form of a
straight life annuity with no ancillary benefits. The present values of the
supplemental pensions described in paragraphs (a) and (b) shall be computed as
of the date of payment by using an interest rate equal to the Pension Benefit
Guaranty Corporation interest rate applicable to an immediate annuity, as in
effect on the date of payment.

     8-4. For purposes of subsection 8-3, a "Change in Control" shall be deemed
to have occurred on the earliest of the following dates:

          (a)  The date any entity or person (including a "group" as defined in
               Section 13(d)(3) of the Securities Exchange Act of 1934 (the
               "Exchange Act")) shall have become the beneficial owner of, or
               shall have obtained voting control over thirty percent (30%) or
               more of the outstanding common shares of the Company;

          (b)  The date the shareholders of the Company approve a definitive
               agreement (A) to merge or consolidate the Company with or into
               another corporation, in which the Company is not the continuing
               or surviving corporation or pursuant to which any common shares
               of the Company would be converted into cash, securities or other
               property of another corporation, other than a merger of the
               Company in which holders of common shares immediately prior to
               the merger have the same proportionate ownership of common stock
               of the surviving corporation immediately after the merger as
               immediately before, or (B) to sell or otherwise dispose of
               substantially all the assets of the Company; or

          (c)  The date there shall have been a change in a majority of the
               Board of Directors of the Company within a twelve (12) month
               period unless the nomination for election by the Company's
               shareholders of each new director was approved by the vote of
               two-thirds of the directors then still in office who were in
               office at the beginning of the twelve (12) month period.


                                   9




     8-5. The provisions of subsections 8-3, 8-4 and this subsection 8-5 may not
be amended or deleted, nor superseded by any other provision of this
Supplemental Plan, during the period beginning on the date of a Change in
Control and ending on the date five years following such Change in Control.

     8-6. All benefits due under this Supplemental Plan shall be paid by Abbott
and Abbott shall be reimbursed for such payments by the employee's employer. In
the event the employee is employed by more than one employer, each employer
shall reimburse Abbott in proportion to the period of time the employee was
employed by such employer, as determined by the Board of Review in its sole
discretion.

     8-7. The benefits under the Supplemental Plan are not in any way subject to
the debts or other obligations of the persons entitled to benefits and may not
be voluntarily or involuntarily sold, transferred or assigned.

     8-8. Nothing contained in this Supplemental Plan shall confer on any
employee the right to be retained in the employ of Abbott or any of its
subsidiaries or affiliates.

     8-9. Upon adoption of this Supplemental Plan, the prior resolutions shall
be deemed rescinded.

                                    SECTION 9
                   ALTERNATE PAYMENT OF SUPPLEMENTAL PENSIONS

     9-1. If, as of December 31, 1995 or any subsequent December 31, the present
value of the supplemental pension described in Sections 2, 3, 4, 5, 6 and 7 of a
participant, who is actively employed by Abbott as a corporate officer, exceeds
$100,000, then payment of such present value shall be made, at the direction of
the participant, by either of the following methods: (a) current payment in cash
directly to the participant, or (b) current payment of a portion of such present
value (determined as of that December 31) in cash for the participant directly
to a Grantor Trust established by the participant, and current payment of the
balance of such present value in cash directly to the participant, provided that
the payment made directly to the participant shall approximate the aggregate
federal, state and local individual income taxes attributable to the amount paid
pursuant to this subparagraph 9-1(b) (as determined pursuant to the tax rates
set forth in subsection 9-14).


                                   10




     9-2. If the present value of a participant's supplemental pension has been
paid to the participant (including amounts paid to the participant's Grantor
Trust) pursuant to subsection 9-1 (either as in effect prior to June 1, 1996
that applied to any participant with a supplemental pension with a present value
in excess of $100,000 or as currently in effect that requires the participant to
have a supplemental pension with a present value in excess of $100,000 and to be
a corporate officer), then as of each subsequent December 31, such participant
shall be entitled to a payment in an amount equal to: (i) the present value (as
of that December 31) of the participant's supplemental pension described in
Sections 2, 3, 4, 5, 6 and 7, less (ii) the current value (as of that December
31) of the payments previously made to the participant under subsections 9-1 and
9-2. Payments under this subsection 9-2 shall be made, at the direction of the
participant, by either of the following methods: (a) current payment in cash
directly to the participant, or (b) current payment of a portion of such amount
in cash for the participant directly to the Grantor Trust established by the
participant; and current payment of the balance of such amount in cash directly
to the participant, provided that the payment made directly to the participant
shall approximate the aggregate federal, state and local individual income taxes
attributable to the amount paid pursuant to this subparagraph 9-2(b) (as
determined pursuant to the tax rates set forth in subsection 9-14). No payments
shall be made under this subsection 9-2 as of any December 31 after the calendar
year in which the participant retires or otherwise terminates employment with
Abbott.

                                   11



     9-3. Present values for the purposes of subsections 9-1, 9-2, 9-4 and 9-5
shall be determined using reasonable actuarial assumptions specified for this
purpose by Abbott and consistently applied. The "current value" of the payments
previously made to a participant under subsections 9-1 and 9-2 means the
aggregate amount of such payments, with interest thereon (at the rate specified
for this purpose by Abbott). For purposes of subsections 9-4 and 9-5, "Projected
Taxes" with respect to any payment of supplemental pension benefits under
subsections 9-1 or 9-2, shall mean the taxes which Abbott projects will be
incurred by the participant on the income earned (i) on the payment (net of
taxes) that is made pursuant to subsections 9-1 or 9-2, (ii) on the
corresponding payment(s) for Projected Taxes that are made pursuant to
subsection 9-4 and, if applicable, 9-5 and (iii) on the accumulated income
earned on any of the payments covered by parts (i) and (ii) hereof, during the
life of such participant's Grantor Trust (or during the period that such Grantor
Trust would have been in existence if the participant had elected to receive all
of the payments under subsections 9-1 and 9-2 in cash). In calculating such
Projected Taxes, Abbott shall use the aggregate of the current federal, state
and local tax rates specified by subsection 9-14.


                                   12



     9-4. Effective as of December 31, 1995, or any subsequent December 31, as a
result of any payment made to a Qualified Participant for any calendar year
pursuant to subsection 9-1 or 9-2, Abbott shall also make a corresponding
payment to such Qualified Participant in the amount of the present value of the
Projected Taxes. A "Qualified Participant" is either (i) a participant who as of
December 31, 1995 was actively employed by Abbott and who had previously
received, or as of such date was qualified to receive, a payment under
subsection 9-1; or (ii) a participant who as of any subsequent December 31
qualifies to receive a payment pursuant to subsection 9-1. The payment for
Projected Taxes under this subsection 9-4 shall be made to the Qualified
Participant in the identical manner that the payment under subsection 9-1 or 9-2
was made. For example, (a) if the Qualified Participant elected to receive the
payment under subsection 9-1 directly in cash, then Abbott shall also pay the
present value of the Projected Taxes on such payment in cash directly to the
Qualified Participant, and (b) if the Qualified Participant elected to receive
the payment under subsection 9-1 into a Grantor Trust established by the
Qualified Participant, then Abbott shall pay the present value of the Projected
Taxes on such payment as follows: current payment of a portion of such present
value (determined as of that December 31) in cash for such Qualified Participant
directly to a Grantor Trust established by such participant, and current payment
of the balance of such present value in cash directly to such Qualified
Participant, provided that the payment made directly to such participant shall
approximate the aggregate federal, state and local individual income taxes
attributable to the amount paid pursuant to this subparagraph 9-4(b) (as
determined pursuant to the tax rates set forth in subsection 9-14). No payments
shall be made under this subsection 9-4 as of any December 31 after the calendar
year in which the participant retires or otherwise terminates employment with
Abbott.


                                   13



     9-5. In the event that Abbott has made any payment for Projected Taxes
under subsection 9-4 in cash directly to the Qualified Participant and there is
a subsequent increase in the tax rates for such Qualified Participant, Abbott
shall make a further cash payment to such Qualified Participant in the amount of
(a) the present value of the Projected Taxes on the payments that were made
under subsections 9-1 and 9-2 in cash directly to such Qualified Participant
using the actual tax rates for previous years and the new tax rates (determined
in accordance with subsection 9-14) for the current and subsequent years, less
(b) the amount that would have been in the Qualified Participant's Tax Payment
Account with respect to the payments made under subsections 9-1 and 9-2 in cash
directly to the Participant, if such payments had instead been made to the
Qualified Participant's Grantor Trust. Such amount shall be paid by Abbott
directly to the Qualified Participant in cash. In the event that Abbott has made
any payment for Projected Taxes under subsection 9-4 to the Qualified
Participant's Grantor Trust, then Abbott shall as of December 31 of each year,
make a further payment to the Qualified Participant in the amount of (a) the
present value (as of that December 31) of the Projected Taxes on the payments
that were made under subsections 9-1 and 9-2 into the Qualified Participant's
Grantor Trust less (b) the balance of such Qualified Participant's Tax Payment
Account (as described in subsection 9-8). Such payment shall be paid by Abbott
as follows: the current payment of a portion of such amount in cash directly to
the Qualified Participant's Grantor Trust and the current payment of the balance
of such amount in cash directly to such Qualified Participant; provided, that
the payments made directly to such Qualified Participant shall approximate the
aggregate federal, state and local individual income taxes attributable to the
amount paid pursuant to this subsection 9-5. No payments shall be made under
this subsection 9-5 for any year following the participant's death. In the event
that the calculation required by this subsection 9-5 for a Grantor Trust
demonstrates that there has been an overpayment of projected taxes, such
overpayment shall be held within the Grantor Trust in an Excess Tax Account and
may be used by Abbott as a credit against any payments due hereunder or as
specified in subsection 9-12.

     9-6. For each Qualified Participant whose Grantor Trust has received a
payment pursuant to subsection 9-4, Abbott, as the administrator of such Grantor
Trust, shall direct the trustee to distribute to the participant from the income
of such Grantor Trust, a sum of money sufficient to pay the taxes on trust
earnings for such year. The taxes shall be calculated by multiplying the income
of the Grantor Trust by the aggregate of the federal, state, and local tax rates
(determined in accordance with subsection 9-14).

                                   14



     9-7. A participant shall be deemed to have irrevocably waived and shall be
foreclosed from any right to receive any supplemental pension benefits on that
portion of the supplemental pension that the participant elects to be paid in
cash under subsection 9-1 or 9-2. A participant, who has elected to receive a
payment under subsection 9-1 or 9-2 to a Grantor Trust, must establish such
trust in a form which Abbott determines to be substantially similar to the trust
attached to this Supplemental Plan as Exhibit A. If a participant fails to make
an election under subsection 9-1 or 9-2, or if a participant makes an election
under subsection 9-1 or 9-2 to receive payment in a Grantor Trust but fails to
establish a Grantor Trust, then payment shall be made in cash directly to the
participant. Each payment required under subsections 9-1, 9-2, 9-4 and 9-5 shall
be made as soon as practicable after the amount thereof can be ascertained by
Abbott, but in no event later than the last day of the calendar year following
the December 31 as of which such payment becomes due.

     9-8. Abbott will establish and maintain a separate Supplemental Pension
Account in the name of each participant, a separate After-Tax Supplemental
Pension Account in the name of each participant, and a separate Tax Payment
Account in the name of each participant. The Supplemental Pension Account shall
reflect any amounts: (i) paid to a participant (including amounts paid to a
participant's Grantor Trust) pursuant to subsections 9-1, and 9-2; (ii) credited
to such Account pursuant to subsection 9-9; and (iii) disbursed to a participant
for supplemental pension benefits (or which would have been disbursed to a
participant if the participant had not elected to receive a cash disbursement
pursuant to subsections 9-1 and 9-2). The After-Tax Supplemental Pension Account
shall also reflect such amounts but shall be maintained on an after-tax basis.
The Tax Payment Account shall reflect any amounts (i) paid to a Qualified
Participant (net of taxes) pursuant to subsections 9-4 and 9-5 and (ii)disbursed
to a participant for the payment of taxes pursuant to subsection 9-6. The
accounts established pursuant to this subsection 9-8 are for the convenience of
the administration of the Plan and no trust relationship with respect to such
accounts is intended or should be implied.

                                   15



     9-9. As of the end of each calendar year, a participant's Supplemental
Pension Account shall be credited with interest calculated at a reasonable rate
of interest specified for this purpose by Abbott and consistently applied. Any
amount so credited shall be referred to as a participant's "Interest Accrual".
The calculation of the Interest Accrual shall be based on the balance of the
payments made pursuant to subsections 9-1 and 9-2 and any Interest Accrual
thereon from previous years. As of the end of each calendar year a participant's
After-Tax Supplemental Pension Account shall be credited with interest which
shall be referred to as the After-Tax Interest Accrual. The "After-Tax Interest
Accrual" shall be an amount equal to (a) the Interest Accrual credit to the
participant's Supplemental Pension Account for such year less (b)the product of
(i) the amount of such Interest Accrual multiplied by (ii) the aggregate of the
federal, state and local income tax rates (determined in accordance with
subsection 9-14). The Excess Interest Account shall be the cumulative amount, if
any, by which the net income earned by the Grantor Trust on the payments made
pursuant to Sections 9-1, 9-2, 9-4, 9-5 and 9-10 (and interest earned thereon)
for all years that the Grantor Trust has been in existence exceeds the After-Tax
Interest Accrual for such years.

     9-10. In addition to any payment made to a participant for any calendar
year pursuant to subsections 9-1, 9-2, 9-4 and 9-5, Abbott shall also make a
payment to a participant's Grantor Trust (a "Guaranteed Rate Payment"), for any
year in which the net income of such trust does not equal or exceed the
participant's After-Tax Interest Accrual for that year. The Guaranteed Rate
Payment shall equal the difference between the participant's After-Tax Interest
Accrual and such net income of the participant's Grantor Trust for the year, and
shall be paid within 180 days of the end of that year. Any funds in a
participant's Excess Interest Account may be used by Abbott as a credit against
any Guaranteed Rate Payment due to the participant under this subsection 9-10 or
as specified in subsection 9-12. No payments shall be made under this subsection
9-10 for any year following the year of the participant's death.


                                   16



     9-11. If at any time after a participant's retirement or other termination
of employment with Abbott, there is no longer a balance in his or her Grantor
Trust, then such participant (or his or her surviving spouse if such spouse is
entitled to periodic payments from the Grantor Trust) shall be entitled to a
"Continuation Payment" under this subsection 9-11. The amount of the
Continuation Payment shall be equal to the amount of the supplemental pension
that would have been payable to the participant (or surviving spouse) had no
payments been made to or for the participant's Grantor Trust under subsections
9-1 and 9-2. Continuation Payments shall be made monthly, beginning with the
month in which there is no longer a sufficient balance in the participant's
Grantor Trust and ending with the month of the participant's (or surviving
spouse's) death. Payments under this subsection 9-11 shall be made by the
employers (in such proportions as Abbott shall designate) directly from their
general corporate assets. Appropriate adjustments to the Continuation Payments
shall be made in the event distributions have been made from a participant's
Grantor Trust for reasons other than benefit payments to the participant or
surviving spouse.

     9-12. To the extent that Abbott is obligated to make a payment to a
participant under subsections 9-1, 9-2, 9-4, 9-5 or 9-10, Abbott shall have the
right to offset such payment with any funds in the participant's Excess Interest
Account or Excess Tax Account. In addition, any funds in a participant's Excess
Tax Account may be used by Abbott as a credit against any future Guaranteed Rate
Payment due to the participant under subsection 9-10.


                               17





     9-13. For participants who are not Qualified Participants that received any
payment pursuant to subsection 9-4, in addition to the payments provided under
subsections 9-1 and 9-2, each participant shall also be entitled to a Tax Gross
Up payment for each year there is a balance in his or her Supplemental Pension
Account. The "Tax Gross Up" shall approximate: (a) the product of (i) the
participant's After-Tax Interest Accrual for the year (calculated using the
greater of the rate of return of the Grantor Trusts or the rate specified in
subsection 9-9), multiplied by (ii) the aggregate of the federal, state and
local tax rates (determined in accordance with subsection 9-14) plus (b) an
amount equal to the product of (i) any payment made pursuant to this subsection
9-13, multiplied by (ii) the aggregate tax rate determined under subparagraph
9-13(a)(ii) above, such that the participant is fully compensated for taxes on
payments made hereunder. Payment of the Tax Gross Up shall be made by the
employers (in such proportions as Abbott shall designate) directly from their
general corporate assets. The Tax Gross Up for a year shall be paid to the
participant as soon as practicable after the amount of the Tax Gross Up can be
ascertained by Abbott, but in no event later than the last day of the calendar
year following the calendar year to which the Tax Gross Up relates. No payments
shall be made under this subsection 9-13 for any year following the year of the
participant's death.

     9-14. For purposes of this Supplemental Plan, a participant's federal
income tax rate shall be deemed to be the highest marginal rate of federal
individual income tax in effect in the calendar year in which a calculation
under this Supplemental Plan is to be made, and state and local tax rates shall
be deemed to be the highest marginal rates of individual income tax in effect in
the state and locality of the participant's residence in the calendar year for
which such a calculation is to be made, net of any federal tax benefits.


                                   18




                              SUPPLEMENTAL BENEFIT
                                  GRANTOR TRUST


     THIS AGREEMENT, made this ___ day of _______________ , 19__ , by and
between _________________________, (the "grantor"), and The Northern Trust
Company, located at Chicago, Illinois, as trustee (the "trustee"),

                                WITNESSETH THAT:

     WHEREAS, the grantor desires to establish and maintain a trust to hold
certain benefits received by the grantor under the Abbott Laboratories
Supplemental Pension Plan, as it may be amended from time to time;

     NOW, THEREFORE, IT IS AGREED as follows:

                                    ARTICLE I
                                  INTRODUCTION

     I-1. NAME. This agreement and the trust hereby evidenced (the "trust") may
be referred to as the "______________________ Supplemental Benefit Grantor
Trust."


     I-2. THE TRUST FUND. The "trust fund" as at any date means all property
then held by the trustee under this agreement.

     I-3. STATUS OF THE TRUST. The trust shall be irrevocable. The trust is
intended to constitute a grantor trust under Sections 671-678 of the Internal
Revenue Code, as amended, and shall be construed accordingly.

     I-4. THE ADMINISTRATOR. Abbott Laboratories ("Abbott") shall act as the
"administrator" of the trust, and as such shall have certain powers, rights and
duties under this agreement as described below. Abbott will certify to the
trustee from time to time the person or persons authorized to act on behalf of
Abbott as the administrator. The trustee may rely on the latest certificate
received without further inquiry or verification.

     I-5. ACCEPTANCE. The trustee accepts the duties and obligations of the
"trustee" hereunder, agrees to accept funds delivered to it by the grantor or
the administrator, and agrees to hold such funds (and any proceeds from the
investment of such funds) in trust in accordance with this agreement.

                                   ARTICLE II
                         DISTRIBUTION OF THE TRUST FUND

     II-1. SUPPLEMENTAL PENSION ACCOUNT. The administrator shall maintain a
"supplemental pension account" under the trust. As of the end of each calendar
year, the administrator shall charge the account with all distributions made
from the account during that year; and credit the account with its share of
trust income and realized gains and charge the account with its share of trust
expenses and realized losses for the year.


                                   19




     II-2. DISTRIBUTIONS PRIOR TO THE GRANTOR'S DEATH. Principal and accumulated
income shall not be distributed from the trust prior to the grantor's retirement
or other termination of employment with Abbott or a subsidiary of Abbott (the
grantor's "settlement date"); provided that, each year the administrator may
direct the trustee to distribute to the grantor a portion of the income of the
trust fund for that year, with the balance of such income to be accumulated in
the trust. The administrator shall inform the trustee of the grantor's
settlement date. Thereafter, the trustee shall distribute the amounts from time
to time credited to the supplemental pension account to the grantor, if then
living, in the same manner, at the same time and over the same period as the
pension payable to the grantor under Abbott Laboratories Annuity Retirement
Plan.

     II-3. DISTRIBUTIONS AFTER THE GRANTOR'S DEATH. The grantor, from time to
time may name any person or persons (who may be named contingently or
successively and who may be natural persons or fiduciaries) to whom the
principal of the trust fund and all accrued or undistributed income thereof
shall be distributed upon the grantor's death. The grantor may direct that such
amounts be distributed in a lump-sum or, if the beneficiary is the grantor's
spouse (or a trust for which the grantor's spouse is the sole income
beneficiary), in the same manner, at the same time and over the same period as
the pension payable to the grantor's surviving spouse under the Abbott
Laboratories Annuity Retirement Plan. If the grantor directs the same method of
distribution as the pension payable to the surviving spouse under the Abbott
Laboratories Annuity Retirement Plan to the spouse as beneficiary, any amounts
remaining at the death of the spouse beneficiary shall be distributed in a lump
sum to the executor or administrator of the spouse beneficiary's estate. If the
grantor directs the same method of distribution as the pension payable to the
surviving spouse under the Abbott Laboratories Annuity Retirement Plan to a
trust for which the grantor's spouse is the sole income beneficiary, any amounts
remaining at the death of the spouse shall be distributed in a lump sum to such
trust. Despite the foregoing, if (i) the beneficiary is a trust for which the
grantor's spouse is the sole income beneficiary, (ii) payments are being made
pursuant to this paragraph II-3 other than in a lump sum and (iii) income earned
by the trust fund for the year exceeds the amount of the annual installment
payment, then such trust may elect to withdraw such excess income by written
notice to the trustee. Each designation shall revoke all prior designations,
shall be in writing and shall be effective only when filed by the grantor with
the administrator during the grantor's lifetime. If the grantor fails to direct
a method of distribution, the distribution shall be made in a lump sum. If the
grantor fails to designate a beneficiary as provided above, then on the
grantor's death, the trustee shall distribute the balance of the trust fund in a
lump sum to the executor or administrator of the grantor's estate.

     II-4. FACILITY OF PAYMENT. When a person entitled to a distribution
hereunder is under legal disability, or, in the trustee's opinion, is in any way
incapacitated so as to be unable to manage his or her financial affairs, the
trustee may make such distribution to such person's legal representative, or to
a relative or friend of such person for such person's benefit. Any distribution
made in accordance with the preceding sentence shall be a full and complete
discharge of any liability for such distribution hereunder.

     II-5. PERPETUITIES. Notwithstanding any other provisions of this agreement,
on the day next preceding the end of 21 years after the death of the last to die
of the grantor and the grantor's descendants living on the date of this
instrument, the trustee shall immediately distribute any remaining balance in
the trust to the beneficiaries then entitled to distributions hereunder.



                                   20




                                   ARTICLE III
                          MANAGEMENT OF THE TRUST FUND

     III-1. GENERAL POWERS. The trustee shall, with respect to the trust fund,
have the following powers, rights and duties in addition to those provided
elsewhere in this agreement or by law:

            (a)  Subject to the limitations of subparagraph (b) next below, to
                 sell, contract to sell, purchase, grant or exercise options to
                 purchase, and otherwise deal with all assets of the trust fund,
                 in such way, for such considerations, and on such terms and
                 conditions as the trustee decides.

            (b)  To invest and reinvest the trust fund, without distinction
                 between principal and income, in obligations of the United
                 States Government and its agencies or which are backed by the
                 full faith and credit of the United States Government and in
                 any mutual funds, common trust funds or collective investment
                 funds which invest solely in such obligations, provided that to
                 the extent practicable no more than Ten Thousand Dollars
                 ($10,000) shall be invested in such mutual funds, common trust
                 funds or collective investment funds at any time; and any such
                 investment made or retained by the trustee in good faith shall
                 be proper despite any resulting risk or lack of diversification
                 or marketability.

            (c)  To deposit cash in any depositary (including the banking
                 department of the bank acting as trustee) without liability for
                 interest, in amounts not in excess of those reasonably
                 necessary to make distributions from the trust.

            (d)  To borrow from anyone, with the administrator's approval, such
                 sum or sums from time to time as the trustee considers
                 desirable to carry out this trust, and to mortgage or pledge
                 all or part of the trust fund as security.

            (e)  To retain any funds or property subject to any dispute without
                 liability for interest and to decline to make payment or
                 delivery thereof until final adjudication by a court of
                 competent jurisdiction or until an appropriate release is
                 obtained.

            (f)  To begin, maintain or defend any litigation necessary in
                 connection with the administration of this trust, except that
                 the trustee shall not be obliged or required to do so unless
                 indemnified to the trustee's satisfaction.

            (g)  To compromise, contest, settle or abandon claims or demands.

            (h)  To give proxies to vote stocks and other voting securities, to
                 join in or oppose (alone or jointly with others) voting trusts,
                 mergers, consolidations, foreclosures, reorganizations,
                 liquidations, or other changes in the financial structure of
                 any corporation, and to exercise or sell stock subscription or
                 conversion rights.

            (i)  To hold securities or other property in the name of a nominee,
                 in a depositary, or in any other way, with or without
                 disclosing the trust relationship.

            (j)  To divide or distribute the trust fund in undivided interests
                 or wholly or partly in kind.


                                   21




            (k)  To pay any tax imposed on or with respect to the trust; to
                 defer making payment of any such tax if it is indemnified to
                 its satisfaction in the premises; and to require before making
                 any payment such release or other document from any lawful
                 taxing authority and such indemnity from the intended payee as
                 the trustee considers necessary for its protection.

            (l)  To deal without restriction with the legal representative of
                 the grantor's estate or the trustee or other legal
                 representative of any trust created by the grantor or a trust
                 or estate in which a beneficiary has an interest, even though
                 the trustee, individually, shall be acting in such other
                 capacity, without liability for any loss that may result.

            (m)  Upon the prior written consent of the administrator, to appoint
                 or remove by written instrument any bank or corporation
                 qualified to act as successor trustee, wherever located, as
                 special trustee as to part or all of the trust fund, including
                 property as to which the trustee does not act, and such special
                 trustee, except as specifically limited or provided by this or
                 the appointing instrument, shall have all of the rights,
                 titles, powers, duties, discretions and immunities of the
                 trustee, without liability for any action taken or omitted to
                 be taken under this or the appointing instrument.

            (n)  To appoint or remove by written instrument any bank, wherever
                 located, as custodian of part or all of the trust fund, and
                 each such custodian shall have such rights, powers, duties and
                 discretions as are delegated to it by the trustee.

            (o)  To employ agents, attorneys, accountants or other persons, and
                 to delegate to them such powers as the trustee considers
                 desirable, and the trustee shall be protected in acting or
                 refraining from acting on the advice of persons so employed
                 without court action.

            (p)  To perform any and all other acts which in the trustee's
                 judgment are appropriate for the proper management, investment
                 and distribution of the trust fund.

     III-2. PRINCIPAL AND INCOME. Any income earned on the trust fund which is
not distributed as provided in Article II shall be accumulated and from time to
time added to the principal of the trust. The grantor's interest in the trust
shall include all assets or other property held by the trustee hereunder,
including principal and accumulated income.

     III-3. STATEMENTS. The trustee shall prepare and deliver monthly to the
administrator and annually to the grantor, if then living, otherwise to each
beneficiary then entitled to distributions under this agreement, a statement (or
series of statements) setting forth (or which taken together set forth) all
investments, receipts, disbursements and other transactions effected by the
trustee during the reporting period; and showing the trust fund and the value
thereof at the end of such period.

     III-4. COMPENSATION AND EXPENSES. All reasonable costs, charges and
expenses incurred in the administration of this trust, including compensation to
the trustee, any compensation to agents, attorneys, accountants and other
persons employed by the trustee, and expenses incurred in connection with the
sale, investment and reinvestment of the trust fund shall be paid from the trust
fund.

                                   22



                                   ARTICLE IV
                               GENERAL PROVISIONS

     IV-1. INTERESTS NOT TRANSFERABLE. The interests of the grantor or other
persons entitled to distributions hereunder are not subject to their debts or
other obligations and may not be voluntarily or involuntarily sold, transferred,
alienated, assigned or encumbered.

     IV-2. DISAGREEMENT AS TO ACTS. If there is a disagreement between the
trustee and anyone as to any act or transaction reported in any accounting, the
trustee shall have the right to a settlement of its account by any proper court.

     IV-3. TRUSTEE'S OBLIGATIONS. No power, duty or responsibility is imposed on
the trustee except as set forth in this agreement. The trustee is not obliged to
determine whether funds delivered to or distributions from the trust are proper
under the trust, or whether any tax is due or payable as a result of any such
delivery or distribution. The trustee shall be protected in making any
distribution from the trust as directed pursuant to Article II without inquiring
as to whether the distributee is entitled thereto; the trustee shall not be
liable for any distribution made in good faith without written notice or
knowledge that the distribution is not proper under the terms of this agreement;
and the trustee shall not be liable for any action taken because of the specific
direction of the administrator.

     IV-4. GOOD FAITH ACTIONS. The trustee's exercise or non-exercise of its
powers and discretions in good faith shall be conclusive on all persons. No one
shall be obliged to see to the application of any money paid or property
delivered to the trustee. The certificate of the trustee that it is acting
according to this agreement will fully protect all persons dealing with the
trustee.

     IV-5. WAIVER OF NOTICE. Any notice required under this agreement may be
waived by the person entitled to such notice.

     IV-6. CONTROLLING LAW. The laws of the State of Illinois shall govern the
interpretation and validity of the provisions of this agreement and all
questions relating to the management, administration, investment and
distribution of the trust hereby created.

     IV-7. SUCCESSORS. This agreement shall be binding on all persons entitled
to distributions hereunder and their respective heirs and legal representatives,
and on the trustee and its successors.

                                    ARTICLE V
                               CHANGES IN TRUSTEE

     V-1. RESIGNATION OR REMOVAL OF TRUSTEE. The trustee may resign at any time
by giving thirty days' advance written notice to the administrator and the
grantor. The administrator may remove a trustee by written notice to the trustee
and the grantor.

     V-2. APPOINTMENT OF SUCCESSOR TRUSTEE. The administrator shall fill any
vacancy in the office of trustee as soon as practicable by written notice to the
successor trustee; and shall give prompt written notice thereof to the grantor,
if then living, otherwise to each beneficiary then entitled to payments or
distributions under this agreement. A successor trustee shall be a bank (as
defined in Section 581 of the Internal Revenue Code, as amended).


                                   23



     V-3. DUTIES OF RESIGNING OR REMOVED TRUSTEE AND OF SUCCESSOR TRUSTEE. A
trustee that resigns or is removed shall furnish promptly to the administrator
and the successor trustee an account of its administration of the trust from the
date of its last account. Each successor trustee shall succeed to the title to
the trust fund vested in its predecessor without the signing or filing of any
instrument, but each predecessor trustee shall execute all documents and do all
acts necessary to vest such title of record in the successor trustee. Each
successor trustee shall have all the powers conferred by this agreement as if
originally named trustee. No successor trustee shall be personally liable for
any act or failure to act of a predecessor trustee. With the approval of the
administrator, a successor trustee may accept the account furnished and the
property delivered by a predecessor trustee without incurring any liability for
so doing, and such acceptance will be complete discharge to the predecessor
trustee.

                                   ARTICLE VI
                            AMENDMENT AND TERMINATION

     VI-1. AMENDMENT. With the consent of the administrator, this trust may be
amended from time to time by the grantor, if then living, otherwise by a
majority of the beneficiaries then entitled to payments or distributions
hereunder, except as follows:

          (a)  The duties and liabilities of the trustee cannot be changed
               substantially without its consent.

          (b)  This trust may not be amended so as to make the trust revocable.


     VI-2. TERMINATION. This trust shall not terminate, and all rights, titles,
powers, duties, discretions and immunities imposed on or reserved to the
trustee, the administrator, the grantor and the beneficiaries shall continue in
effect, until all assets of the trust have been distributed by the trustee as
provided in Article II.

                                      * * *


     IN WITNESS WHEREOF, the grantor and the trustee have executed this
agreement as of the day and year first above written.


                                       _______________________________________
                                                     Grantor

                                       The Northern Trust Company, as Trustee


                                       By_____________________________________


                                       Its____________________________________


                                   24



                                             Amended effective December 14, 2001

                                      1986
                               ABBOTT LABORATORIES
                            MANAGEMENT INCENTIVE PLAN


                                    SECTION 1
                                  INTRODUCTION

     1.1 BACKGROUND AND PURPOSES. This 1986 ABBOTT LABORATORIES MANAGEMENT
INCENTIVE PLAN (the "Plan") is a successor Plan to the 1961, 1971 and 1981
Management Incentive Plans (the "Predecessor Plans"). This Plan is being
established by ABBOTT LABORATORIES ("Abbott") for the following purposes:

     (a)  To provide greater incentive for participants in the Plan to attain
          and maintain the highest standards of managerial performance by
          rewarding them for services rendered with compensation, in addition
          to their base salaries, in proportion to the success of Abbott and to
          the participants' respective contribution to such success; and

     (b)  To attract and retain in the employ of Abbott and its subsidiaries
          persons of outstanding competence.

     1.2  EFFECTIVE DATE AND FISCAL YEAR. The Plan shall be effective as of
January 1, 1986. The term "fiscal year," as used in this Plan, means the fiscal
period from time to time employed by Abbott for the purpose of reporting
earnings to shareholders.

     1.3  ADMINISTRATION. The Plan will be administered by the Compensation
Committee (the "Committee") appointed by the Board of Directors of Abbott.

                                    SECTION 2
                         ELIGIBILITY AND PARTICIPATION

     2.1  PERSONS ELIGIBLE FOR PARTICIPATION. Participation in the Plan will be
limited to those Officers and managerial employees of Abbott and its
subsidiaries who, from time to time, shall be selected as participants by the
Committee.





                                       -2-

     2.2  PARTICIPANTS. The term "participant," as used in the Plan, shall
include both active participants and inactive participants.

     2.3  ACTIVE PARTICIPANTS. For each fiscal year, there shall be a group of
active participants which, except as provided below, shall not exceed forty-five
persons and shall consist of those persons eligible for participation who shall
have been designated as active participants and notified of that fact by the
Committee at any time before or during the fiscal year. If, as a result of the
growth of Abbott and its subsidiaries or changes in Abbott's organization, the
Board of Directors deems it appropriate, the Board of Directors may, in its
discretion, from time to time, increase the number of persons who may be
designated as active participants for any fiscal year beyond the limit of
forty-five persons provided for above. Selection as an active participant for
any fiscal year shall not confer upon any person a right to be an active
participant in any subsequent fiscal year, nor shall it confer upon him the
right to receive any allocation under the Plan, other than amounts allocated to
him by the Committee pursuant to the Plan, and all such allocations shall be
subject to all of the terms and conditions of the Plan.

     2.4  INACTIVE PARTICIPANTS. Inactive participants shall consist of those
persons, including beneficiaries of deceased participants, if any, for whom an
allocation shall have been made for a prior fiscal year under this Plan or a
Predecessor Plan, the payment of which was deferred and remains unpaid. Status
as an inactive participant shall not preclude a person from also being an active
participant during any fiscal year.





                                       -3-

                                    SECTION 3
                         MANAGEMENT INCENTIVE PLAN FUND

     3.1  BASE FOR MANAGEMENT INCENTIVE PLAN FUND. The "base earnings" for
determining whether any portion of consolidated net income for any fiscal year
may be allocated to the Management Incentive Plan Fund for such year shall be
that amount of consolidated net income (as defined in subsection 3.2) which is
equal to 15 percent of the Abbott Common Shareholder's Equity for such fiscal
year. For this purpose, "Abbott Common Shareholders' Equity" for any fiscal year
shall mean the Shareholders' Investment, as reflected in the consolidated
balance sheet of Abbott as of the close of the next preceding fiscal year, plus
or minus such adjustments thereof as may be determined by the Committee in order
to reflect:

     (a)  The existence, issuance, sale, exchange, conversion or retirement of
          any securities, other than common shares, of Abbott (whether involving
          preferred stock, debt, convertible preferred stock or convertible debt
          securities); and

     (b)  The issuance or retirement of any common shares or any changes in
          accounting methods or period adopted by Abbott since the close of such
          next preceding fiscal year.

Any adjustments to be made in accordance with (a) and (b) above in determining
Abbott Common Shareholders' Equity for any fiscal year shall be determined by
the Committee after consultation with Abbott's independent auditors, and any
determination made by the Committee after such consultation shall be conclusive
upon all persons.

     3.2  CONSOLIDATED NET INCOME. For the purposes of this Plan, for any fiscal
year or period, the "consolidated net income" shall be the consolidated net
income of Abbott and its subsidiaries, prepared in accordance with generally
accepted accounting principles, consistently applied, after provision for any
interest accrued with respect to such period on account of deferred payments
under this Plan or a Predecessor Plan, but before allowances for any amount to
be allocated to the Management Incentive Plan Fund, both net of applicable
income taxes, and




                                       -4-

after such adjustments for the following, as may be determined by the Committee
after consultation with Abbott's independent auditors (all net of applicable
income taxes):

     (a)  The exclusion of any charges for amortization or goodwill arising out
          of acquisitions made for securities which, as a result of adjustments
          made in determining Abbott Common Shareholders' Equity pursuant to
          subsection 3.1, are treated as common share equivalents; and

     (b)  The exclusion of any interest on debt securities which are
          convertible into common shares of Abbott and which shall have been
          considered as common share equivalents in determining Abbott Common
          Shareholders' Equity pursuant to subsection 3.1 hereof; and

     (c)  The deduction of any dividend requirement for preferred shares which
          has not been considered as common share equivalents in determining
          Common Shareholders' Equity pursuant to subsection 3.1 hereof.

In the sole discretion of the Committee there shall also be excluded in the
calculation of "consolidated net income" unusual gains and losses and the tax
effects thereof, changes in generally accepted accounting principles and the tax
effects thereof and extraordinary gains and losses.

     3.3  DETERMINATION OF MANAGEMENT INCENTIVE PLAN AMOUNT FOR ANY YEAR. For
each fiscal year that consolidated net income exceeds base earnings, and as soon
as practicable after ascertainment of that fact, the Committee shall determine a
tentative amount as the Management Incentive Plan Amount for that year, which
tentative amount shall not exceed the lesser of:

     (a)  an amount which, when treated as an expense currently deductible for
          income tax purposes in such year, would cause a 5 percent reduction in
          such year's excess of consolidated net income over the base earnings
          for such year; and

     (b)  an amount which, when treated as an expense currently deductible for
          income tax purposes in such year, would cause a 1-1/2 percent
          reduction in such year's consolidated net income; and

     (c)  an amount which equals 200 percent of the aggregate base salaries of
          all active participants for such year.





                                       -5-

For purposes of the Plan "base salary" means the amount of salary paid to each
active participant by Abbott and its subsidiaries for such year plus the
includible portion (as described below) of any "Eligible Restricted Stock
Award," as defined in Section 5-2 of the Abbott Laboratories Supplemental
Pension Plan and does not include bonuses, other awards or any other
compensation of any kind. The includible portion of a participant's Eligible
Restricted Stock Award shall be the portion of the participant's Eligible
Restricted Stock Award that is included in the participant's final earnings
under the Abbott Laboratories Supplemental Pension Plan for such year. Following
determination of such tentative Management Incentive Plan Amount, the Committee
shall report in writing the amount of such tentative amount to the Board of
Directors. At the meeting of the Board of Directors coincident with or next
following receipt by it of the Committee's determination, the Board of Directors
shall have the power to approve or reduce, but not to increase, the tentative
amount reported to it by the Committee. The amount approved by the Board of
Directors shall be the Management Incentive Plan Amount for such year.

     3.4  THE MANAGEMENT INCENTIVE PLAN FUND. The Management Incentive Plan Fund
at any time shall consist of an amount equal to the aggregate of the Management
Incentive Plan Amounts established pursuant to subsection 3.3 of this Plan for
all fiscal years during which this Plan shall have been operative, plus the
amounts established as Management Incentive Plan Amounts for any prior fiscal
year pursuant to a Predecessor Plan, reduced by an amount equal to the aggregate
of the amounts of awards which shall have been allocated to participants in
accordance with this Plan or a Predecessor Plan, and awards, or any other
compensation of any kind. Following determination of such tentative Management
Incentive Plan Amount, the Committee shall report in writing the amount of such
tentative amount to the Board of Directors. At the meeting of the Board of
Directors coincident with or next following receipt by it of the




                                       -6-

Committee's determination, the Board of Directors shall have the power to
approve or reduce, but not to increase, the tentative amount reported to it by
the Committee. The amount approved by the Board of Directors shall be the
Management Incentive Plan Amount for such year.

                                    SECTION 4
                     ALLOCATION OF MANAGEMENT INCENTIVE FUND

     4.1  ANNUAL ALLOCATION OF MANAGEMENT INCENTIVE FUND. As soon as practicable
after the close of each fiscal year, part or all of the amount then in the
Management Incentive Plan Fund (including the Management Incentive Plan Amount
for such fiscal year) will be allocated by the Committee among active
participants in the Plan for such fiscal year, having due regard for the
purposes for which the Plan was established, in the following manner and order:

     (a)  First, if the Chairman of the Board of Abbott shall be an active
          participant for such year, the members of the Committee, other than
          the Chairman of the Board, shall determine the amount, if any, to be
          allocated to the Chairman of the Board from such Fund for such year;
          and

     (b)  Next, all or a part of the balance of such Fund may be allocated among
          the active participants (other than the Chairman of the Board) for
          such year, in such amounts and proportions as the Committee shall
          determine

provided, however, that the amount allocated to any active participant for any
year shall not exceed 200 percent of such participant's base salary for that
year.

     4.2  COMMITTEE'S DISCRETION IN ALLOCATIONS. In making any allocations in
accordance with subsection 4.1 for any year, the discretion of the Committee
shall be absolute, and no active participants for any year, by reason of their
designation as such, shall be entitled to any particular amounts or any amount
whatsoever.





                                       -7-

                                    SECTION 5
                  PAYMENT OF AMOUNTS ALLOCATED TO PARTICIPANTS

     5.1  TIME OF PAYMENT. For fiscal years beginning after December 31, 1988, a
participant shall direct the payment or deferral of an allocation made to him
pursuant to subsection 4.1 (subject to such conditions relating to the right of
the participant to receive Payment of such amount as established by the
Committee) by one or more of the following methods:

     (a)  current payment in cash to the participant;

     (b)  current payment of a portion of the allocation in cash for the
          participant directly to a "Grantor Trust" established by the
          participant, provided such trust is in a form which the Committee
          determines is substantially similar to the trust attached to this Plan
          as Exhibit A; and current payment of the balance of the allocation in
          cash directly to the participant, provided that the payment made
          directly to the participant shall approximate the aggregate federal,
          state and local individual income taxes (determined in accordance with
          subsection 6.7) attributable to the allocation paid pursuant to this
          paragraph (b); or

     (c)  deferral of payment until such time and in such manner as determined
          in accordance with subsection 5.11.

A participant shall make the preceding direction within 30 days of the date he
is notified of his eligibility to participate in the Plan. A participant may
change such direction with respect to any future allocation, provided that the
change is made prior to the beginning of the fiscal year to which such
allocation relates. Payment of a participant's allocation for the 1988 fiscal
year and of any allocations deferred under the Plan prior to such year shall be
made in accordance with the provisions of either or both of paragraphs (a) and
(b) above. The Committee shall establish and maintain a Trust Account in
accordance with subsection 5.2 and for purposes of subsection 5.4, shall treat
such payment as if it were an allocation made for that fiscal year.





                                       -8-

     5.2  SEPARATE ACCOUNTS. The Committee will maintain two separate Accounts,
a "Deferred Account" and a "Trust Account," in the name of each participant. The
Deferred Account shall be comprised of any allocations the payment of which is
deferred pursuant to subsection 5.1(c) and any adjustments made pursuant to
subsection 5.3. The Trust Account shall be comprised of any allocations paid in
cash to a participant (including amounts paid to a participant's Grantor Trust)
pursuant to subsection 5.1(b) and any adjustments made pursuant to subsection
5.4.

     5.3  ADJUSTMENT OF DEFERRED ACCOUNTS. As of the end of each fiscal year,
the Committee shall adjust each participant's Deferred Account as follows:

     (a)  FIRST, charge an amount equal to any payments made to the participant
          during that year pursuant to subsections 5.11 or 5.12;

     (b)  NEXT, credit an amount equal to the allocation for that year that is
          deferred pursuant to subsection 5.1(c); and

     (c)  FINALLY, credit an amount equal to the Interest Accrual earned for
          that year pursuant to subsection 5.5.

     5.4  ADJUSTMENT OF TRUST ACCOUNTS. As of the end of each fiscal year, the
Committee shall adjust each participant's Trust Account as follows:

     (a)  FIRST, charge an amount equal to the product of (i) any payments made
          to the participant during that year from the participant's Grantor
          Trust (other than distributions of trust earnings in excess of the Net
          Interest Accrual authorized by the administrator of the trust to
          provide for the Tax Gross Up under subsection 6.6); multiplied by (ii)
          a fraction, the numerator of which is the balance in the participant's
          Trust Account as of the end of the prior fiscal year and the
          denominator of which is the balance of the participant's Grantor Trust
          (as determined by the administrator of the trust) as of that same
          date;

     (b)  NEXT, credit an amount equal to the allocation for that year that is
          paid to the Participant (including the amount paid to the
          participant's Grantor Trust) pursuant to subsection 5.l(b); and

     (c)  FINALLY, credit an amount equal to the Interest Accrual earned for
          that Year pursuant to subsection 5.5.




                                       -9-


     5.5  INTEREST ACCRUALS ON ACCOUNTS. As of the end of each fiscal year, a
participant's Deferred Account and Trust Account shall be credited with interest
equal to: (a) the average of the prime rates of interest charged by the two
largest banks located in the City of Chicago on loans made by them as of January
1 and the end of each month of the fiscal year; plus (b) two hundred twenty-five
(225) basis points. Such interest shall be credited on the conditions
established by the Committee, provided that any allocation of an award from the
Management Incentive Plan Fund shall be considered to have been made and
credited to a participant's Deferred Account and Trust Account as of the first
day of the fiscal year in which such award is made regardless of the date upon
which the Committee actually makes the determination to award such allocation.

     5.6  GUARANTEED RATE PAYMENTS. In addition to any allocation made to a
participant for any fiscal year pursuant to subsection 4.1 which is paid or
deferred pursuant to subsection 5.1, Abbott shall also make a payment to a
participant's Grantor Trust (a "Guaranteed Rate Payment") for any year in which
the net earnings of such trust do not equal or exceed the participant's Net
Interest Accrual for that year. A participant's "Net Interest Accrual" for a
year is an amount equal to: (a) the Interest Accrual credited to the
participant's Trust Account for that year; less (b) the product of (i) the
amount of such Interest Accrual, multiplied by (ii) the aggregate of the
federal, state and local individual income tax rates (determined in accordance
with subsection 6.7). The Guaranteed Rate Payment shall equal the difference
between the participant's Net Interest Accrual and the net earnings of the
participant's Grantor Trust for the year, and shall be paid within 90 days of
the end of the fiscal year.





                                      -10-

     5.7  DESIGNATION OF BENEFICIARIES. Subject to the conditions and
limitations set forth below, each participant, and after a participant's death,
each primary beneficiary designated by a participant in accordance with the
provisions of this subsection 5.7, shall have the right from time to time to
designate a primary beneficiary or beneficiaries and, successive or contingent
beneficiary or beneficiaries to receive unpaid amounts from the participant's
Deferred Account under the Plan and the Predecessor Plans. Beneficiaries may be
a natural person or persons or a fiduciary, such as a trustee of a trust or the
legal representative of an estate. Any such designation shall take effect upon
the death of the participant or such beneficiary, as the case may be, or in the
case of any fiduciary beneficiary, upon the termination of all of its duties
(other than the duty to dispose of the right to receive amounts remaining to be
paid under the Plan or a Predecessor Plan). The conditions and limitations
relating to the designation of beneficiaries are as follows:

     (a)  A nonfiduciary beneficiary shall have the right to designate a further
          beneficiary or beneficiaries only if the original participant or the
          next preceding primary beneficiary, as the case may be, shall have
          expressly so provided in writing; and

     (b)  A fiduciary beneficiary shall designate as a further beneficiary or
          beneficiaries only those persons or other fiduciaries who are entitled
          to receive the amounts payable from the participant's account under
          the trust or estate of which it is a fiduciary.

Any beneficiary designation or grant of any power to any beneficiary under this
subsection may be exercised only by an instrument in writing, executed by the
person making the designation or granting such power and filed with the
Secretary of Abbott during such person's lifetime or prior to the termination of
a fiduciary's duties. If a deceased participant or a deceased nonfiduciary
beneficiary who had the right to designate a beneficiary as provided above dies
without having




                                      -11-

designated a further beneficiary, or if no beneficiary designated as provided
above is living or qualified and acting, the Committee, in its discretion, may
direct distribution of the amount remaining from time to time to either:

     (i)  any one or more or all of the next of kin (including the surviving
          spouse) of the participant or the deceased beneficiary, as the case
          may be, and in such proportions as the Committee determines; or

     (ii) the legal representative of the estate of the deceased participant or
          deceased beneficiary as the case may be.

     5.8  STATUS OF BENEFICIARIES. Following a participant's death, the
participant's beneficiary or beneficiaries will be considered and treated as an
inactive participant for all purposes of this Plan.

     5.9  NON-ASSIGNABILITY AND FACILITY OF PAYMENT. Amounts payable to
participants and their beneficiaries under the Plan are not in any way subject
to their debts and other obligations, and may not be voluntarily or
involuntarily sold, transferred or assigned; provided that the preceding
provisions of this section shall not be construed as restricting in any way a
designation right granted to a beneficiary pursuant to the terms of subsection
5.7. When a participant or the beneficiary of a participant is under legal
disability, or in the Committee's opinion is in any way incapacitated so as to
be unable to manage his or her financial affairs, the Committee may direct that
payments shall be made to the participant's or beneficiary's legal
representative, or to a relative or friend of the participant or beneficiary for
the benefit of the participant or beneficiary, or the Committee may direct the
payment or distribution for the benefit of the participant or beneficiary in any
manner that the Committee determines.





                                      -12-

     5.10 PAYER OF AMOUNTS ALLOCATED TO PARTICIPANTS. Any amount allocated to a
participant in the Plan and any interest credited thereto will be paid by the
employer (or such employer's successor) by whom the participant was employed
during the fiscal year for which any amount was allocated, and for that purpose,
if a participant shall have been employed by two or more employers during any
fiscal year the amount allocated under this Plan for that year shall be an
obligation of each of the respective employers in proportion to the respective
amounts of base salary paid by each of them in that fiscal year.

     5.11 MANNER OF PAYMENT. Subject to subsections 5.12, a participant shall
elect the timing and manner of payment of his Deferred Account at the time of
his deferral election under subsection 5.l. The participant may select a payment
method from among alternative payment methods established by the Committee.

     5.12 PAYMENT UPON TERMINATION FOLLOWING CHANGE IN CONTROL. Notwithstanding
any other provisions of this Plan or the Predecessor Plans, or the provisions of
any award made under this Plan or the Predecessor Plans, if employment of any
participant with Abbott and its subsidiaries should terminate for any reason
within five (5) years after the date of a Change in Control, the aggregate
unpaid balance of all awards previously made to such participant under this Plan
and all Predecessor Plans, plus any unpaid interest credited thereon, shall be
paid to the participant in a lump sum within thirty (30) days following the date
of such termination.

     5.13 CHANGE IN CONTROL. A "Change in Control" shall be deemed to have
occurred on the earliest of the following dates:

     (i)  The date any entity or person (including a "group" as defined in
          Section 13(d)(3) of the Securities Exchange Act of 1934 (the "Exchange
          Act")) shall have become the beneficial owner of, or shall have
          obtained voting control over thirty percent (30%) or more of the
          outstanding common shares of Abbott;





                                      -13-

     (ii)  The date the shareholders of Abbott approve a definitive agreement
           (A) to merge or consolidate Abbott with or into another corporation,
           in which Abbott is not the continuing or surviving corporation or
           pursuant to which any common shares of Abbott would be converted into
           cash, securities or other property of another corporation, other than
           a merger of Abbott in which holders of common shares immediately
           prior to the merger have the same proportionate ownership of common
           stock of the surviving corporation immediately after the merger as
           immediately before, or (B) to sell or otherwise dispose of
           substantially all the assets of Abbott; or

     (iii) The date there shall have been a change in a majority of the Board of
           Directors of Abbott within a twelve (12) month period unless the
           nomination for election by Abbott's shareholders of each new director
           was approved by the vote of two-thirds of the directors then still in
           office who were in office at the beginning of the twelve (12) month
           period.

     5.14 PROHIBITION AGAINST AMENDMENT. The provisions of subsections 5.12,
5.13 and this subsection 5.14 may not be amended or deleted, nor superseded by
any other provision of this Plan, during the period beginning on the date of a
Change in Control and ending on the date five (5) years following such Change in
Control.

                                    SECTION 6
                                  MISCELLANEOUS

     6.1 RULES. The Committee may establish such rules and regulations as it may
consider necessary or desirable for the effective and efficient administration
of the Plan.

     6.2 MANNER OF ACTION BY COMMITTEE. A majority of the members of the
Committee qualified to act on any particular question may act by meeting or by
writing signed without meeting, and may execute any instrument or document
required or delegate to one of its members authority to sign. The Committee from
time to time may delegate the performance of certain ministerial functions in
connection with the Plan, such as the keeping of records, to such person or
persons as the Committee may select. Except as otherwise expressly provided in
the Plan, the




                                      -14-

costs of administration of the Plan will be paid by Abbott. Any notice
required to be given to, or any document required to be filed with the
Committee, will be properly given or filed if mailed or delivered in writing to
the Secretary of Abbott.

     6.3 RELIANCE UPON ADVICE. The Board of Directors and the Committee may
rely upon any information or advice furnished to it by any Officer of Abbott
or by Abbott's independent auditors, or other consultants, and shall be fully
protected in relying upon such information or advice. No member of the Board
of Directors or the Committee shall be liable for any act or failure to act
on their part, excepting only any acts done or omitted to be done in bad
faith, nor shall they be liable for any act or failure to act of any other
member.

     6.4 TAXES. Any employer shall be entitled, if necessary or desirable, to
pay, or withhold the amount of any federal, state or local tax, attributable to
any amounts payable by it under the Plan after giving the person entitled to
receive such amount notice as far in advance as practicable, and may defer
making payment of any amount with respect to which any such tax question may be
pending unless and until indemnified to its satisfaction.

     6.5 RIGHTS OF PARTICIPANTS. Employment rights of participants with Abbott
and its subsidiaries shall not be enlarged or affected by reason of
establishment of or inclusion as a participant in the Plan. Nothing contained in
the Plan shall require Abbott or any subsidiary to segregate or earmark any
assets, funds or property for the purpose of payment of any amounts which may
have been deferred. The Deferred and Trust Accounts established pursuant to
subsection 5.2 are for the convenience of the administration of the Plan and no
trust relationship with respect to such Accounts is intended or should be
implied. Participant's rights shall be limited to payment to them at the time or
times and in such amounts as are contemplated by the




                                      -15-

Plan. Any decision made by the Board of Directors or the Committee, which is
within the sole and uncontrolled discretion of either, shall be conclusive and
binding upon the other and upon all other persons whomsoever.

     6.6 TAX GROSS UP. In addition to the allocations provided under subsection
4.1, each participant (or, if the participant is deceased, the beneficiary
designated under the participant's Grantor Trust) shall be entitled to a Tax
Gross Up payment for each year there is a balance in his or her Trust Account.
The "Tax Gross Up" shall approximate: (a) the amount necessary to compensate the
participant (or beneficiary) for the net increase in the participant's (or
beneficiary's) federal, state and local income taxes as a result of the
inclusion in his or her taxable income of the income of the participant's
Grantor Trust and any Guaranteed Rate Payment for that year; less (b) any
distribution to the participant (or beneficiary) of his or her Grantor Trust's
net earnings for that year; plus (c) an amount necessary to compensate the
participant (or beneficiary) for the net increase in the taxes described in (a)
above as a result of the inclusion in his or her taxable income of any payment
made pursuant to this subsection 6.6. Payment of the Tax Gross Up shall be made
by the employers (in such proportions as Abbott shall designate) directly from
their general corporate assets.

     6.7 INCOME TAX ASSUMPTIONS. For purposes of Sections 5 and 6, a
participant's federal income tax rate shall be deemed to be the highest marginal
rate of federal income individual tax in effect in the calendar year in which a
calculation under those Sections is to be made, and state and local tax rates
shall be deemed to be the highest marginal rates of individual income tax in
effect in the state and locality of the participant's residence on the date such
a calculation is made, net of any federal tax benefits.





                                      -16-

     6.8 PAYMENT OF PRIOR DEFERRALS. Notwithstanding any other provision of this
Plan, the Committee, in its absolute discretion, may direct that all or a
portion of the balance in a participant's Deferred Account be paid in accordance
with the provisions of subsection 5.1(b). In such event, the Committee shall
establish and maintain a Trust Account in accordance with subsection 5.2 and,
for purposes of subsection 5.4, shall treat such payment as if it were an
allocation made for that fiscal year.

                                    SECTION 7
                      AMENDMENT, TERMINATION AND CHANGE OF
                         CONDITIONS RELATING TO PAYMENTS

     7.1 AMENDMENT AND TERMINATION. The Plan will be effective from its
effective date until terminated by the Board of Directors. During the fifth year
after the Plan's effective date and during every fifth year thereafter, the
Committee may recommend to the Board of Directors whether the Plan should be
amended or terminated. The Board of Directors reserves the right to amend the
Plan from time to time and to terminate the Plan at any time, except that no
such amendment or any termination of the Plan shall reduce any fixed or
contingent obligations which shall have arisen under the Plan prior to the date
of such amendment or termination, or change the terms and conditions of payment
of any allocation theretofore made without the consent of the participant
concerned.

     7.2 CHANGE OF CONDITIONS RELATING TO PAYMENTS. Following the establishment
by the Committee of any conditions relating to the payment of any amount
allocated to a participant for any fiscal year and any interest credited thereon
(including the time of payment or the time of commencement of payment and any
period over which payment shall be made), neither the Committee nor the
participant concerned, acting unilaterally, shall have the power to change the
conditions originally established by the Committee. However, in order to
effectuate the purposes




                                      -17-

of the Plan, any conditions initially established by the Committee may be
changed thereafter by mutual agreement of the Committee and the participant
concerned.



                                    Exhibit A

                       IRREVOCABLE GRANTOR TRUST AGREEMENT


     THIS AGREEMENT, made this _____ day of ____________, 1991, by and between
_______________________ of ___________, Illinois (the "grantor"), and The
Northern Trust Company located at Chicago, Illinois, as trustee (the "trustee"),

                                WITNESSETH THAT:

     WHEREAS, the grantor desires to establish and maintain a trust to hold
certain benefits received by the grantor under the 1986 Abbott Laboratories
Management Incentive Plan, as it may be amended from time to time;

     NOW, THEREFORE, IT IS AGREED as follows:

                                    ARTICLE I
                                  INTRODUCTION

     I-1. NAME. This agreement and the trust hereby evidenced (the "trust") may
be referred to as the "______________ 1991 Grantor Trust".

     I-2. THE TRUST FUND. The "trust fund" as at any date means all property
then held by the trustee under this agreement.

     I-3. STATUS OF THE TRUST. The trust shall be irrevocable. The trust is
intended to constitute a grantor trust under Sections 671-678 of the Internal
Revenue Code, as amended, and shall be construed accordingly.

     I-4. THE ADMINISTRATOR. Abbott Laboratories ("Abbott") shall act as the
"administrator" of the trust, and as such shall have certain powers, rights and
duties under this agreement as described below. Abbott will certify to the
trustee from time to time the person or persons authorized to act on behalf of
Abbott as the administrator. The trustee may rely on the latest certificate
received without further inquiry or verification.

     I-5. ACCEPTANCE. The trustee accepts the duties and obligations of the
"trustee" hereunder, agrees to accept funds delivered to it by the grantor or
the administrator, and agrees to hold such funds (and any proceeds from the
investment of such funds) in trust in accordance with this agreement.





                                       -2-

                                   ARTICLE II
                         DISTRIBUTION OF THE TRUST FUND

     II-1. SEPARATE ACCOUNTS. The administrator shall maintain two separate
accounts under the trust, a "rollout account" and a "deferred account." Funds
delivered to the trustee shall be allocated between the accounts by the trustee
as directed by the administrator. As of the end of each calendar year, the
administrator shall charge each account with all distributions made from such
account during that year; and credit each account with its share of income and
realized gains and charge each account with its share of expenses and realized
losses for the year. The trustee shall not be required to make any separate
investment of the trust fund for the accounts, and may administer and invest all
funds delivered to it under the trust as one trust fund.

     II-2. DISTRIBUTIONS FROM THE ROLLOUT ACCOUNT PRIOR TO THE GRANTOR'S DEATH.
The trustee shall distribute principal and accumulated income credited to the
rollout account to the grantor, if then living, at such times and in such
amounts as the administrator shall direct.

     II-3. DISTRIBUTIONS FROM THE DEFERRED ACCOUNT PRIOR TO THE GRANTOR'S DEATH.
Principal and accumulated income credited to the deferred account shall not be
distributed from the trust prior to the grantor's retirement or other
termination of employment with Abbott or a subsidiary of Abbott (the grantor's
"settlement date"); provided that, each year the administrator may direct the
trustee to distribute to the grantor a portion of the income of the deferred
account for that year, with the balance of such income to be accumulated in that
account. The administrator shall inform the trustee of the grantor's settlement
date. Thereafter, the trustee shall distribute the amounts from time to time
credited to the deferred account to the grantor, if then living, in a series of
annual installments, with the amount of each installment computed by one of the
following methods:

     (a)  The amount of each installment shall be equal to the sum of: (i) the
          amount credited to the deferred account as of the end of the year in
          which the grantor's settlement date occurs, divided by the number of
          years over which installments are to be distributed; plus (ii) the net
          earnings credited to the deferred account for the preceding year
          (excluding the year in which the grantor's settlement date occurs).

     (b)  The amount of each installment shall be determined by dividing the
          amount credited to the deferred account as of the end of the preceding
          year by the difference between (i) the total number of years over
          which installments are to be distributed, and (ii) the number of
          annual installment distributions previously made from the deferred
          account.

     (c)  Each installment (after the first installment) shall be approximately
          equal, with the amount comprised of the sum of: (i) the amount of the
          first installment, plus interest thereon at the rate determined under
          the 1986 Abbott Laboratories Management Incentive Plan, compounded
          annually; and (ii) the net earnings credited to the deferred account
          for the preceding year.





                                       -3-

Notwithstanding the foregoing, the final installment distribution made to the
grantor under this paragraph II-3 shall equal the total principal and
accumulated income then held in the trust fund. The grantor, by writing filed
with the trustee and the administrator on or before the end of the calendar year
in which the grantor's settlement date occurs (or the end of the calendar year
in which this trust is established, if the grantor's settlement date has already
occurred), may select both the period (which may not be less than ten years from
the end of the calendar year in which the grantor's settlement date occurred)
over which the installment distributions are to be made and the method of
computing the amount of each installment. In the absence of such a written
direction by the grantor, installment distributions shall be made over a period
of ten years, and the amount of each installment shall be computed by using the
method described in subparagraph (a) next above. Installment distributions under
this Paragraph II-3 shall be made as of January 1 of each year, beginning with
the calendar year following the year in which the grantor's settlement date
occurs. The administrator shall inform the trustee of the amount of each
installment distribution under this paragraph II-3, and the trustee shall be
fully protected in relying on such information received from the administrator.

     II-4. DISTRIBUTIONS FROM THE TRUST FUND AFTER THE GRANTOR'S DEATH. The
grantor, from time to time may name any person or persons (who may be named
contingently or successively and who may be natural persons or fiduciaries) to
whom the principal of the trust fund and all accrued or undistributed income
therefrom shall be distributed in a lump sum or, if the beneficiary is the
grantor's spouse (or a trust for which the grantor's spouse is the sole income
beneficiary), in installments, as directed by the grantor, upon the grantor's
death. If the grantor directs an installment method of distribution to the
spouse as beneficiary, any amounts remaining at the death of the spouse
beneficiary shall be distributed in a lump sum to the executor or administrator
of the spouse beneficiary's estate. If the grantor directs an installment method
of distribution to a trust for which the grantor's spouse is the sole income
beneficiary, any amounts remaining at the death of the spouse shall be
distributed in a lump sum to such trust. Despite the foregoing, if (i) the
beneficiary is a trust for which the grantor's spouse is the sole income
beneficiary, (ii) payments are being made pursuant to this paragraph II-4 other
than in a lump sum and (iii) income earned by the trust fund for the year
exceeds the amount of the annual installment payment, then such trust may elect
to withdraw such excess income by written notice to the trustee. Each
designation shall revoke all prior designations, shall be in writing and shall
be effective only when filed by the grantor with the administrator during the
grantor's lifetime. If the grantor fails to direct a method of distribution, the
distribution shall be made in a lump sum. If the grantor fails to designate a
beneficiary as provided above, then on the grantor's death, the trustee shall
distribute the balance of the trust fund in a lump sum to the executor or
administrator of the grantor's estate.

     II-5. FACILITY OF PAYMENT. When a person entitled to a distribution
hereunder is under legal disability, or, in the trustee's opinion, is in any way
incapacitated so as to be unable to manage his or her financial affairs, the
trustee may make such distribution to such person's legal representative, or to
a relative or friend of such person for such person's benefit. Any distribution
made in accordance with the preceding sentence shall be a full and complete
discharge of any liability for such distribution hereunder.





                                       -4-

     II-6. PERPETUITIES. Notwithstanding any other provisions of this agreement,
on the day next preceding the end of 21 years after the death of the last to die
of the grantor and the grantor's descendants living on the date of this
instrument, the trustee shall immediately distribute any remaining balance in
the trust to the beneficiaries then entitled to distributions hereunder.

                                   ARTICLE III
                          MANAGEMENT OF THE TRUST FUND

     III-1. GENERAL POWERS. The trustee shall, with respect to the trust fund,
have the following powers, rights and duties in addition to those provided
elsewhere in this agreement or by law:

     (a)  Subject to the limitations of subparagraph (b) next below, to sell,
          contract to sell, purchase, grant or exercise options to purchase, and
          otherwise deal with all assets of the trust fund, in such way, for
          such considerations, and on such terms and conditions as the trustee
          decides.

     (b)  To retain in cash such amounts as the trustee considers advisable; and
          to invest and reinvest the balance of the trust fund, without
          distinction between principal and income, in obligations of the United
          States Government and its agencies or which are backed by the full
          faith and credit of the United States Government or in any mutual
          fund, common trust fund or collective investment fund which invests
          solely in such obligations; and any such investment made or retained
          by the trustee in good faith shall be proper despite any resulting
          risk or lack of diversification or marketability.

     (c)  To deposit cash in any depositary (including the banking department of
          the bank acting as trustee) without liability for interest, and to
          invest cash in savings accounts or time certificates of deposit
          bearing a reasonable rate of interest in any such depositary.

     (d)  To invest, subject to the limitations of subparagraph (b) above, in
          any common or commingled trust fund or funds maintained or
          administered by the trustee solely for the investment of trust funds.

     (e)  To borrow from anyone, with the administrator's approval, such sum or
          sums from time to time as the trustee considers desirable to carry out
          this trust, and to mortgage or pledge all or part of the trust fund as
          security.

     (f)  To retain any funds or property subject to any dispute without