-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, C7q6t+oChtu3GBpYLIRXD1V7hk6EwUrCe7VLrnp+yIu9NgO0VVjkMvuICih2pNAO 6oXCcHweHTwM8llDx70eNA== 0000950131-97-001923.txt : 19970320 0000950131-97-001923.hdr.sgml : 19970320 ACCESSION NUMBER: 0000950131-97-001923 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970319 SROS: CSX SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BAXTER INTERNATIONAL INC CENTRAL INDEX KEY: 0000010456 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 360781620 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-04448 FILM NUMBER: 97559356 BUSINESS ADDRESS: STREET 1: ONE BAXTER PKWY CITY: DEERFIELD STATE: IL ZIP: 60015 BUSINESS PHONE: 7089482000 MAIL ADDRESS: STREET 1: ONE BAXTER PARKWAY CITY: DEERFIELD STATE: IL ZIP: 60015 FORMER COMPANY: FORMER CONFORMED NAME: BAXTER TRAVENOL LABORATORIES INC DATE OF NAME CHANGE: 19880522 FORMER COMPANY: FORMER CONFORMED NAME: BAXTER LABORATORIES INC DATE OF NAME CHANGE: 19760608 10-K 1 FORM 10-K - ------------------------------------------------------------------------------- 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 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 OR [_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________ COMMISSION FILE NUMBER 1-4448 - ------------------------------------------------------------------------------- LOGO Baxter International Inc. - ------------------------------------------------------------------------------- DELAWARE 36-0781620 ---------------- ------------------------- State of I.R.S. Employer Incorporation Identification No. ONE BAXTER PARKWAY, DEERFIELD, ILLINOIS 60015 (847) 948-2000 ------------------------------------------ Address, including zip code, and telephone number, including area code, of principal executive offices Securities registered pursuant to Section 12(b) of the Act: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED -------------------- Common stock, $1 par value New York Stock Exchange Chicago Stock Exchange Preferred Stock Purchase Rights Pacific Stock Exchange (currently traded with common stock) New York Stock Exchange Chicago Stock Exchange Pacific Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None ---------------- 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. X Yes 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 the definitive proxy statement incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_] The aggregate market value of the voting stock held by non-affiliates of the registrant (based on the per share closing sale price of $47.63 on March 7, 1997, and for the purpose of this computation only, the assumption that all registrant's directors and executive officers are affiliates) was approximately $12.8 billion. The number of shares of the registrant's common stock, $1 par value, outstanding as of March 7, 1997, was 273,023,212. DOCUMENTS INCORPORATED BY REFERENCE Those sections or portions of the registrant's 1996 annual report to stockholders and of the registrant's proxy statement for use in connection with its annual meeting of stockholders to be held on May 5, 1997, described in the cross reference sheet and table of contents attached hereto are incorporated by reference in this report. - ------------------------------------------------------------------------------- CROSS REFERENCE SHEET AND TABLE OF CONTENTS - --------------------------------------------------------------------------------
Page Number or (Reference) (1) -------------- Item 1. Business (a)General Development of Business................... 1(2) (b)Financial Information about Industry Segments..... 1(3) (c)Narrative Description of Business................. 1(4) (d)Financial Information about Foreign and Domestic Operations and Export Sales......................................... 5(5) Item 2. Properties........................................... 5 Item 3. Legal Proceedings.................................... 5(6) Item 4. Submission of Matters to a Vote of Security Holders.. 5 Market for the Registrant's Common Equity and Related Item 5. Stockholder Matters.................................. 6(7) Item 6. Selected Financial Data.............................. 6(8) Management's Discussion and Analysis of Financial Item 7. Condition and Results of Operations.................. 6(9) Item 8. Financial Statements and Supplementary Data.......... 6(10) Changes in and Disagreements with Accountants on Item 9. Accounting and Financial Disclosure.................. 6 Item 10. Directors and Executive Officers of the Registrant (a)Identification of Directors....................... 7(11) (b)Identification of Executive Officers.............. 7 (c)Compliance with Section 16(a) of the Securities Exchange Act of 1934................................. 8(12) Item 11. Executive Compensation............................... 8(13) Security Ownership of Certain Beneficial Owners and Item 12. Management........................................... 9(14) Item 13. Certain Relationships and Related Transactions....... 9 Exhibits, Financial Statement Schedules and Reports Item 14. on Form 8-K.......................................... 9 (a)Financial Statements.............................. 9 (a)Reports on Form 8-K............................... 9 (c)Exhibits.......................................... 9
- ------------------- (1) Information incorporated by reference to the Company's Annual Report to Stockholders for the year ended December 31, 1996 ("Annual Report") and the board of directors' proxy statement for use in connection with the Registrant's annual meeting of stockholders to be held May 5, 1997 ("Proxy Statement"). (2) Annual Report, pages 31-46, section entitled "Notes to Consolidated Financial Statements" and pages 17-24, section entitled "Management's Discussion and Analysis." (3) Annual Report, pages 44-45, section entitled "Notes to Consolidated Financial Statements--Industry and Geographical Information." (4) Annual Report, pages 17-24, section entitled "Management's Discussion and Analysis" and pages 44-45, section entitled "Notes to Consolidated Financial Statements--Industry and Geographical Information." (5) Annual Report, pages 44-45, section entitled "Notes to Consolidated Financial Statements--Industry and Geographical Information." (6) Annual Report, pages 40-44, section entitled "Notes to Consolidated Financial Statements--Legal Proceedings." (7) Annual Report, page 46, section entitled "Notes to Consolidated Financial Statements--Quarterly Financial Results and Market for the Company's Stock." (8) Annual Report, inside back cover, section entitled "Six-Year Summary of Selected Financial Data." (9) Annual Report, pages 17-24, section entitled "Management's Discussion and Analysis." (10) Annual Report, pages 26-46, sections entitled "Report of Independent Accountants," "Consolidated Balance Sheets," "Consolidated Statements of Income," "Consolidated Statements of Cash Flows," "Consolidated Statements of Stockholders' Equity" and "Notes to Consolidated Financial Statements." (11) Proxy Statement, pages 2-5, sections entitled "Board of Directors" and "Election of Directors." (12) Proxy Statement, page 19, section entitled "Section 16(a) Beneficial Ownership Reporting Compliance." (13) Proxy Statement, pages 6-17, sections entitled "Compensation of Directors" and "Compensation of Named Executive Officers," and pages 18-19, section entitled "Pension Plan, Excess Plans and Supplemental Plans." (14) Proxy Statement, pages 20-21, section entitled "Ownership of Company Securities." - -------------------------------------------------------------------------------- LOGO Baxter International Inc., One Baxter Parkway, Deerfield. Illinois 60015. - -------------------------------------------------------------------------------- PART I - -------------------------------------------------------------------------------- ITEM 1. BUSINESS. (a) General Development of Business. Baxter International Inc. was incorporated under Delaware law in 1931. As used in this report, except as otherwise indicated in information incorporated by reference, "Baxter" means Baxter International Inc. and the "Company" means Baxter and its subsidiaries. The Company is engaged in the worldwide development, distribution and manufacture of a diversified line of products, systems and services used primarily in the health-care field. Products are manufactured by the Company in 25 countries and sold in approximately 100 countries. Health-care is concerned with the preservation of health and with the diagnosis, cure, mitigation and treatment of disease and body defects and deficiencies. The Company's products are used by hospitals, clinical and medical research laboratories, blood and dialysis centers, rehabilitation centers, nursing homes, doctors' offices and at home under physician supervision. See "Recent Developments." For information regarding acquisitions, investments in affiliates and divestitures, see the Company's Annual Report to Stockholders for the year ended December 31, 1996 (the "Annual Report"), page 32, section entitled "Notes to Consolidated Financial Statements--Acquisitions and Investments in Affiliates" which is incorporated by reference. (b) Financial Information About Industry Segments. Incorporated by reference from the Annual Report, pages 44-45, section entitled "Notes to Consolidated Financial Statements--Industry and Geographical Information." (c) Narrative Description of Business. Recent Developments Spin-off of Allegiance Corporation On September 30, 1996, Baxter stockholders of record on September 26, 1996, received all of the outstanding stock of Allegiance Corporation ("Allegiance"), its health-care cost management and distribution business, in a tax-free spin- off. Additional information is incorporated by reference from the Annual Report, page 32, section entitled "Notes to Consolidated Financial Statements-- Discontinued Operations." Acquisition of Immuno International AG In December 1996, Baxter commenced the acquisition of Immuno International AG ("Immuno"), a European manufacturer of biopharmaceutical products and services for transfusion medicine. The Company will acquire Immuno in a three-part transaction. The purchase price is valued at approximately $600 million. A substantial portion of the Immuno purchase price will be allocated to Immuno's in-process research and development which, under generally accepted accounting principles, will be immediately expensed by the Company during the first quarter of 1997 (the "Immuno Charge"). Excluding this charge, the transaction is expected to be nondilutive to earnings in 1997 and accretive in 1998, as both revenue and cost synergies are realized. The acquisition will be financed with debt, temporarily raising the Company's net-debt-to-net-capital ratio into the mid-40% range by year-end 1997. This ratio is expected to return to the targeted 35% to 40% range over time as a result of ongoing operations. Acquisition of Research Medical, Inc. In December 1996, the Company and Research Medical, Inc. ("RMI"), a provider of specialized products used in open-heart surgery, entered into a definitive agreement for the Company to acquire RMI for 1 approximately $236 million of Company common stock. The acquisition was completed on March 14, 1997. A substantial portion of the RMI purchase price will be allocated to RMI's in-process research and development and immediately expensed by the Company during the first quarter of 1997. This non-cash charge, together with the Immuno Charge, will be approximately $360 million (or $1.32 per share). The RMI charge represents approximately 35% of the total, while the Immuno Charge comprises the remainder. Company Overview The Company operates in a single industry segment as a global medical- products and services company that is a leader in technologies related to the blood and circulatory system. It has market-leading positions in four businesses: biotechnology, which develops therapies and products in transfusion medicine; cardiovascular medicine, which develops products and expands services to treat late-stage cardiovascular disease; renal therapy, which develops products and services to improve therapies to fight kidney disease; and intravenous systems/medical products, which develops technologies and systems to improve intravenous medication delivery, and distributes disposable medical products. Information about operating results is incorporated by reference from the Annual Report, pages 17-24, section entitled "Management's Discussion and Analysis" and pages 44-45, section entitled "Notes to Consolidated Financial Statements--Industry and Geographical Information." United States Markets The United States health-care marketplace continues to be competitive. There has been consolidation in the Company's customer base and by its competitors which has resulted in pricing and market share pressures. These industry trends are expected to continue. The Company intends to manage these trends by capitalizing on its market-leading positions and by leveraging its cost structure. International Markets The Company generates more than 50% of its revenues outside the United States and international sales are expected to grow at approximately twice the rate of domestic sales for the foreseeable future. Worldwide demand for health-care products and services continues to be strong, particularly in developing markets such as Asia and Latin America. In the developed world-- especially in Western Europe and Japan--there continues to be strong demand for more technologically advanced and cost-effective therapies, products and services. The Company's strategy emphasizes international expansion and technological innovation to capitalize on its strong global positions and the needs of rapidly growing markets. Joint Ventures The Company conducts an immaterial portion of its business through joint ventures. These joint venture are accounted for under the equity method of accounting. Methods of Distribution The Company conducts its selling efforts through its subsidiaries and divisions. Many subsidiaries and divisions have their own sales forces and direct their own sales efforts. In addition, sales are made to independent distributors, dealers and sales agents. The Company's distribution centers are stocked with adequate inventories to facilitate prompt customer service. Sales and distribution methods include frequent contact by sales representatives, automated communications via various electronic purchasing systems, circulation of catalogs and merchandising bulletins, direct mail campaigns, trade publications and advertising. International sales and distribution are made in approximately 100 countries either on a direct basis or through independent local distributors. International subsidiaries employ their own field sales forces in Argentina, Australia, Austria, Belgium, Brazil, Brunei, Canada, Chile, China, Colombia, Ecuador, Denmark, Finland, France, Germany, Hong Kong, India, Indonesia, Italy, Japan, Malaysia, Mexico, the Netherlands, New Zealand, Norway, Pakistan, Peru, the Philippines, Portugal, Singapore, Spain, Switzerland, Taiwan, Thailand, the United Kingdom and Venezuela. In other countries, sales are made through independent distributors or sales agents. Raw Materials Raw materials essential to the Company's business are purchased worldwide in the ordinary course of business from numerous suppliers. The vast majority of these materials are generally available, and no serious 2 shortages or delays have been encountered. Certain raw materials used in producing some of the Company's products are available only from a small number of suppliers. In addition, certain biomaterials for medical implant applications (primarily polymers) are becoming more difficult to obtain due to market withdrawals by biomaterial suppliers, primarily as a result of perceived exposures to liability in the United States. In some of these situations, the Company has long-term supply contracts with its suppliers, although it does not consider its obligations under such contracts to be material. The Company does not always recover cost increases through customer pricing due to contractual limits and market pressure on such price increases. See "Contractual Arrangements." Patents and Trademarks The Company owns a number of patents and trademarks throughout the world and is licensed under patents owned by others. While it seeks patents on new developments whenever feasible, the Company does not consider any one or more of its patents, or the licenses granted to or by it, to be essential to its business. Products manufactured by the Company are sold primarily under its own trademarks and trade names. Some products purchased and resold by the Company are sold under the Company's trade names while others are sold under trade names owned by its suppliers. Competition Historically, competition in the health-care industry has been characterized by the search for technological and therapeutic innovations in the prevention, diagnosis and treatment of disease. The Company believes that it has benefited from the technological advantages of certain of its products. While others will continue to introduce new products which compete with those sold by the Company, the Company believes that its research and development effort will permit it to remain competitive in all presently material product areas. Although no single company competes with the Company in all of its businesses, the Company is faced with substantial competition in all of its markets. The changing health-care environment in recent years has led to increasingly intense competition among United States health-care suppliers. Competition is focused on price, service and product performance. Pressure in these areas is expected to continue. In part through its restructuring programs, the Company continues to increase its efforts to minimize costs and better meet United States price competition. The Company believes that its cost position will continue to benefit from improvements in manufacturing technology and increased economies of scale. The Company continues to emphasize its investments in innovative and cost-effective technologies and the quality of its product and services. Credit and Working Capital Practices As of December 31, 1996, the Company's debt ratings were A3 on senior debt by Moody's, A by Standard & Poor's and BBB+ by Duff & Phelps. The Company's credit practices and related working capital needs are comparable to those of other market participants. Collection periods tend to be longer for sales outside the United States. Quality Control The Company places great emphasis on providing quality products and services to its customers. An integrated network of quality systems, including control procedures that are developed and implemented by technically trained professionals, result in rigid specifications for raw materials, packaging materials, labels, sterilization procedures and overall manufacturing process control. The quality systems integrate the efforts of raw material and finished goods suppliers to provide the highest value to customers. On a statistical sampling basis, a quality assurance organization tests components and finished goods at different stages in the manufacturing process to assure that exacting standards are met. Customers may return defective merchandise for credit or replacement. In recent years, such returns have been insignificant. 3 Research and Development The Company is actively engaged in research and development programs to develop and improve products, systems and manufacturing methods. These activities are performed at 21 research and development centers located around the world and include facilities in Australia, Belgium, Germany, Italy, Japan, Malta, the Netherlands, Sweden, the United Kingdom and the United States. Expenditures for Company-sponsored research and development activities were $340 in 1996, $345 million in 1995 and $303 million in 1994. The Company's research efforts emphasize self-manufactured product development, and portions of that research relate to multiple product lines. For example, many product categories benefit from the Company's research effort as applied to the human body's circulatory systems. In addition, research relating to the performance and purity of plastic materials has resulted in advances that are applicable to a large number of the Company's products. Principal areas of strategic focus for research are biotechnology, renal therapy and transplantation, blood disorders and cardiovascular disease. Government Regulation Most products manufactured or sold by the Company in the United States are subject to regulation by the Food and Drug Administration ("FDA"), as well as by other federal and state agencies. The FDA regulates the introduction and advertising of new drugs and devices as well as manufacturing procedures, labeling and record keeping with respect to drugs and devices. The FDA has the power to seize adulterated or misbranded drugs and devices or to require the manufacturer to remove them from the market and the power to publicize relevant facts. From time to time, the Company has removed products from the market that were found not to meet acceptable standards. This may occur in the future. Product regulatory laws exist in most other countries where the Company does business. Environmental policies of the Company mandate compliance with all applicable regulatory requirements concerning environmental quality and contemplate, among other things, appropriate capital expenditures for environmental protection. Various non-material capital expenditures for environmental protection were made by the Company during 1996 and similar expenditures are planned for 1997. See Item 3.--"Legal Proceedings." Employees As of December 31, 1996, the Company employed approximately 37,000 people. Contractual Arrangements A substantial portion of the Company's products are sold through contracts with purchasers, both international and domestic. Some of these contracts are for terms of more than one year and include limits on price increases. In the case of hospitals, clinical laboratories and other facilities, these contracts may specify minimum quantities of a particular product or categories of products to be purchased by the customer. Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995 Statements throughout this report that are not historical facts, including but not limited to statements in the "Company Overview," "International Markets" and "Recent Developments" sections of this report (including material incorporated therein by reference) include forward looking statements. These statements are based on the Company's current expectations and involve numerous risks and uncertainties. Some of these risks and uncertainties are factors that affect all international businesses, while some are specific to the Company and the health-care arenas in which it operates. The factors below in some cases have affected and could affect the Company's actual results, causing results to differ, and possibly differ materially, from those expressed in any such forward looking statements. These factors include technological advances in the medical field, economic conditions, demand and market acceptance risks for new and existing products, technologies and health-care services, the impact of competitive products and pricing, manufacturing capacity, new plant start-ups, the United States and global regulatory and trade environment, continued price competition related to the Company's United States operations, product development risks, including technological difficulties, and unforeseen foreign commercialization and regulatory factors. 4 Currency fluctuations are also a significant variable for global companies, especially fluctuations in local currencies where hedging opportunities are unreasonably expensive, or altogether unavailable. If the United States dollar continues to strengthen against most foreign currencies, the Company's ability to realize projected growth rates in its sales outside the United States (expressed in United States dollars) could be negatively impacted. However, a continued weakening in such non-United States currencies may correspondingly by reduce costs (which are initially denominated in local currencies) associated with Company product manufactured in those countries. The Company believes that its expectations with respect to forward-looking statements are based upon reasonable assumptions within the bounds of its knowledge of its business and operations, but there can be no assurance that the actual results or performance of the Company will conform to any future results or performance expressed or implied by such forward-looking statements. (d) Financial Information About Foreign and Domestic Operations and Export Sales. International operations are subject to certain additional risks inherent in conducting business outside the United States, such as changes in currency exchange rates, price and currency exchange controls, import restrictions, nationalization, expropriation and other governmental action. Financial information is incorporated by reference from the Annual Report, pages 44-45, section entitled "Notes to Consolidated Financial Statements-- Industry and Geographical Information." - -------------------------------------------------------------------------------- ITEM 2. PROPERTIES. The Company owns or has long-term leases on substantially all of its major manufacturing facilities. The Company maintains 18 manufacturing facilities in the United States, including seven in Puerto Rico, and also manufactures in Australia, Belgium, Brazil, Canada, the Czech Republic, Chile, China, Colombia, Costa Rica, the Dominican Republic, France, Indonesia, Ireland, Italy, Japan, Malta, Mexico, the Netherlands, Russia, Singapore, Spain, Switzerland, Taiwan, Turkey and the United Kingdom. The Company owns or operates distribution facilities throughout the world, including 67 located in 24 foreign countries. The Company maintains a continuing program for improving its properties, including the retirement or improvement of older facilities and the construction of new facilities. This program includes improvement of manufacturing facilities to enable production and quality control programs to conform with the current state of technology and government regulations. Capital expenditures were $318 million in 1996, $309 million in 1995 and $308 million in 1994. In addition, the Company added to the pool of equipment leased or rented to customers, spending $80 million in 1996, $90 million in 1995 and $72 million in 1994. - -------------------------------------------------------------------------------- ITEM 3. LEGAL PROCEEDINGS. Incorporated by reference from the Annual Report, pages 40-44, section entitled "Notes to Consolidated Financial Statements--Legal Proceedings." - -------------------------------------------------------------------------------- ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. 5 PART II - ------------------------------------------------------------------------------- ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. Incorporated by reference from the Annual Report, page 46, section entitled "Notes to Consolidated Financial Statements--Quarterly Financial Results and Market for the Company's Stock." - ------------------------------------------------------------------------------- ITEM 6. SELECTED FINANCIAL DATA. Incorporated by reference from the Annual Report, inside back cover, section entitled "Six Year Summary of Selected Financial Data." - ------------------------------------------------------------------------------- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Incorporated by reference from the Annual Report, pages 17-24, section entitled "Management's Discussion and Analysis." - ------------------------------------------------------------------------------- ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Incorporated by reference from the Annual Report, pages 26-46, sections entitled "Report of Independent Accountants," "Consolidated Balance Sheets," "Consolidated Statements of Income," "Consolidated Statements of Cash Flows," "Consolidated Statements of Stockholders' Equity," and "Notes to Consolidated Financial Statements." - ------------------------------------------------------------------------------- ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. 6 PART III - -------------------------------------------------------------------------------- ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. (a) Identification of Directors Incorporated by reference from the board of directors' proxy statement for use in connection with Baxter's annual meeting of stockholders to be held on May 5, 1997 (the "Proxy Statement"), pages 2-5, sections entitled "Board of Directors" and "Election of Directors." (b) Identification of Executive Officers Following are the names and ages, as of March 1, 1997, of the executive officers of Baxter International Inc. ("Baxter"), and one or both of its two principal direct subsidiaries, Baxter Healthcare Corporation ("Healthcare") and Baxter World Trade Corporation ("World Trade"), their positions and summaries of their backgrounds and business experience. All executive officers of Baxter are elected or appointed by the board of directors and hold office until the next annual meeting of directors and until their respective successors are elected and qualified. The annual meeting of directors is held after the annual meeting of stockholders. All executive officers of Healthcare and World Trade are elected or appointed by the boards of directors of the applicable subsidiary and hold office until their respective successors are elected and qualified. As permitted by applicable law, actions by these boards (and their sole stockholder, Baxter) may be taken by written consent in lieu of a meeting. (1) Baxter International Inc. Executive Officers Vernon R. Loucks Jr., age 62, has been chairman of the board of directors since 1987 and chief executive officer of Baxter since 1980. Mr. Loucks was first elected an officer of Baxter in 1971. Harry M. Jansen Kraemer, Jr., age 42, has been a senior vice president and chief financial officer of Baxter since 1993. Mr. Kraemer previously was the vice president of finance and operations for a subsidiary of Baxter. Prior to that he was employed as controller, group controller, and president of various divisions of subsidiaries of Baxter. Arthur F. Staubitz, age 57, has been senior vice president and general counsel of Baxter since 1993. From 1993 to 1994, he was also secretary of Baxter. Mr. Staubitz previously was vice president/general manager of the ventures group of a subsidiary of Baxter. Prior to that he was senior vice president, secretary and general counsel of Amgen, Inc. Prior to that he was a vice president of a Baxter subsidiary, and prior to that he was a vice president and deputy general counsel of Baxter. Michael J. Tucker, age 44, has been senior vice president of Baxter since 1995. From 1994 to 1995, he was a corporate vice president of World Trade. Mr. Tucker previously was a vice president of a division of World Trade, and prior to that, was a vice president of another division of a subsidiary of Baxter. Fabrizio Bonanni, age 50, has been a vice president of Baxter since 1995. From 1994 to 1995, he was a corporate vice president of World Trade. Mr. Bonanni previously was a vice president of a division of World Trade. John F. Gaither, Jr., age 47, has been a vice president of Baxter since 1994. Between 1991 and 1994, Mr. Gaither was vice president of law and strategic planning for a subsidiary of Baxter, and prior to that, was secretary and deputy general counsel of Baxter. David C. McKee, age 49, has been a vice president of Baxter since 1996, and secretary since February 1997. Since 1994, Mr. McKee has been deputy general counsel of Baxter. Prior to that, he was associate general counsel of a subsidiary of Baxter. Kshitij Mohan, age 52, has been a vice president of Baxter since 1995. In 1995, Mr. Mohan also was a corporate vice president of World Trade. Mr. Mohan previously was a vice president of a division of Healthcare. 7 John L. Quick, age 52, has been a vice president of Baxter since 1995. From 1994 to 1995, he was a corporate vice president of Healthcare. Mr. Quick previously was a vice president of a division of Healthcare, and prior to that, was a vice president of another division of that subsidiary. Brian P. Anderson, age 46, has been controller of Baxter since 1993. Mr. Anderson previously was the vice president of corporate audit of a subsidiary of Baxter, and prior to that was a partner in the international accounting firm of Deloitte & Touche. Steven J. Meyer, age 40, has been treasurer of Baxter since February 1997. From 1993 to 1997, Mr. Meyer was a vice president of international finance of a business group of World Trade. Mr. Meyer previously was the international controller of a business group of World Trade. (2) Healthcare and World Trade Executive Officers Timothy B. Anderson, age 50, has been a group vice president of Healthcare and World Trade since 1994. Between 1992 and 1994, Mr. Anderson was a vice president of Baxter. Mr. Anderson previously was president of several divisions of a subsidiary of Baxter. Donald W. Joseph, age 59, has been a group vice president of Healthcare and World Trade since 1994. Between 1990 and 1994, Mr. Joseph was a vice president of Baxter. Jack L. McGinley, age 50, has been a group vice president of Healthcare since 1994. Between 1992 and 1994, Mr. McGinley was a vice president of Baxter. Mr. McGinley previously was president of a division of Healthcare, and prior to that was president of the Japanese subsidiary of World Trade. Michael A. Mussallem, age 44, has been a group vice president of Healthcare since 1994. From 1993 to 1994, Mr. Mussallem was president of a division of Healthcare, and prior to that, was president of another division of that subsidiary. Carlos Del Salto, age 54, has been a senior vice president of World Trade since 1996. From 1994 to 1996, Mr. del Salto was a corporate vice president of World Trade. Between 1992 and 1994, Mr. del Salto was a vice president of Baxter. Mr. del Salto previously was president--Latin America/Switzerland/Austria of a subsidiary of Baxter, and prior to that, he was vice president--Latin America of that subsidiary. David F. Drohan, age 58, has been a corporate vice president of Healthcare since 1996. Between 1991 and 1996, Mr. Drohan was president of a division of Healthcare. James M. Gatling, age 47, has been a corporate vice president of Healthcare since 1996. Between 1991 and 1996, Mr. Gatling was a vice president of a division of Healthcare. J. Robert Hurley, age 47, has been a corporate vice president of World Trade since 1993. Mr. Hurley previously was vice president of a division of World Trade. Roberto E. Perez, age 47, has been a corporate vice president of Healthcare and World Trade since 1995. Between 1992 and 1995, Mr. Perez was president of a division of a subsidiary of Baxter, and prior to that, was a vice president of that division. (c) Compliance with Section 16(a) of the Securities Exchange Act of 1934. Incorporated by reference from Proxy Statement, page 19, section entitled "Section 16(a) Beneficial Ownership Reporting Compliance." - ------------------------------------------------------------------------------- ITEM 11. EXECUTIVE COMPENSATION. Incorporated by reference from the Proxy Statement, pages 6-17, sections entitled "Compensation of Directors" and "Compensation of Named Executive Officers," and pages 18-19, section entitled "Pension Plan, Excess Plans and Supplemental Plans." - ------------------------------------------------------------------------------- 8 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Incorporated by reference from the Proxy Statement, pages 20-21, section entitled "Ownership of Company Securities." - -------------------------------------------------------------------------------- ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. None. - -------------------------------------------------------------------------------- PART IV - -------------------------------------------------------------------------------- ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a)The following documents are filed as a part of this report: Financial Statements Location Financial Statements Required by Item 8 of this Form Consolidated Balance Sheets Annual Report, page 27 Consolidated Statements of Income Annual Report, page 28 Consolidated Statements of Cash Flows Annual Report, page 29 Consolidated Statements of Stockholders' Equity Annual Report, page 30 Notes to Consolidated Financial Statements Annual Report, pages 31- Report of Independent Accountants 46 Annual Report, page 26 Schedules Required by Article 12 of Regulation S-X Report of Independent Accountants on Financial Statement Schedule page 10 II Valuation and Qualifying Accounts page 11 All other schedules have been omitted because they are not applicable or not required. (b)Reports on Form 8-K A report on Form 8-K, dated December 6, 1996, was filed with the SEC under Item 5, Other Events, to file a press release which announced Baxter's agreement to acquire Research Medical, Inc. A report on Form 8-K, dated January 29, 1997, was filed with the SEC under Item 5, Other Events, to file amended exhibits and undertakings related to a debt securities shelf registration statement on Form S-3. A report on Form 8-K, dated March 18, 1997, was filed with the SEC under Item 5, Other Events to file a press release disclosing charges related to two transactions and a revision to first quarter 1997 sales projections. (c) Exhibits required by Item 601 of Regulation S-K are listed in the Exhibit Index, and incorporated herein by reference. Exhibits in the Exhibit Index marked with a "C" in the left margin constitute management contracts or compensatory plans or arrangements contemplated by Item 14(a)(3) of Form 10-K. The list of exhibits so designated is incorporated by reference in this Part IV, Item 14. 9 REPORT OF INDEPENDENT ACCOUNTS ON THE FINANCIAL STATEMENT SCHEDULE To the Board of Directors of Baxter International Inc. Our audits of the consolidated financial statements referred to in our report dated February 10, 1997 appearing on page 26 of the 1996 Annual Report to Stockholders of Baxter International Inc. (which report and consolidated financial statements are incorporated by reference in the Annual Report on Form 10-K) also included an audit of the Financial Statement Schedule listed in Item 14(a) of this Form 10-K. In our opinion, this Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. PRICE WATERHOUSE LLP Chicago, Illinois February 10, 1997 10 SCHEDULE II - -------------------------------------------------------------------------------- VALUATION AND QUALIFYING ACCOUNTS (In millions of dollars) - --------------------------------------------------------------------------------
Additions - -------------------------------------------------------------------------------- Balance at Charged to Charged to Deductions Balance beginning costs and other from at end of Description of period expenses accounts (A) reserves period - -------------------------------------------------------------------------------- Year ended December 31, 1996: Accounts receivable $22 $ 5 $(2) $(1) $24 - -------------------------------------------------------------------------------- Year ended December 31, 1995: Accounts receivable $21 $ 9 $ 1 $(9) $22 - -------------------------------------------------------------------------------- Year ended December 31, 1994: Accounts receivable $19 $ 7 $ 1 $(6) $21 - --------------------------------------------------------------------------------
(A) Valuation accounts of acquired or divested companies and foreign currency translation adjustments. Reserves are deducted from assets to which they apply. 11 SIGNATURES Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Baxter International Inc. /s/ Vernon R. Loucks Jr. By:____________________________________ Vernon R. Loucks Jr. Chairman of the Board and Chief Executive Officer Date: March 18, 1997 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. (i) Principal Executive Officer: (iv)A Majority of the Board of Directors /s/ Vernon R. Loucks Jr. Walter E. Boomer Vernon R. Loucks Jr. Pei-yuan Chia Director, Chairman of the Board John W. Colloton and Chief Executive Officer Susan Crown (ii) Principal Financial Officer: Mary Johnston Evans /s/ Harry M. Jansen Kraemer, Jr. Frank R. Frame Harry M. Jansen Kraemer, Jr. Martha R. Ingram Senior Vice President and Harry M. Jansen Kraemer, Jr. Chief Financial Officer Arnold J. Levine (iii) Controller: Georges C. St. Laurent, Jr. /s/ Brian P. Anderson Monroe E. Trout, M.D. Brian P. Anderson Reed V. Tuckson, M.D. Fred L. Turner Controller /s/ Vernon R. Loucks Jr. By: ____________________________________ Vernon R. Loucks Jr. Director and Attorney-in-Fact 12 - -------------------------------------------------------------------------------- APPENDICES
DESCRIPTION PAGE - ----------- ---- Computation of Primary Earnings per Common Share (Exhibit 11.1) 16 Computation of Fully Diluted Earnings per Common Share (Exhibit 11.2) 17 Computation of Ratio of Earnings to Fixed Charges (Exhibit 12) 18 Subsidiaries of the Company (Exhibit 21) 19
- -------------------------------------------------------------------------------- EXHIBITS FILED WITH SECURITIES AND EXCHANGE COMMISSION
NUMBER AND DESCRIPTION OF EXHIBIT --------------------------------- 3. Certificate of Incorporation and Bylaws 3.1* Restated Certificate of Incorporation, filed as exhibit 3.1 to the Company's annual report on Form 10-K for the year ended December 31, 1992, file number 1-4448 (the "1992 Form 10-K"). 3.2* Certificate of Designation of Series A Junior Participating Preferred Stock, filed under the Securities Act of 1933 as exhibit 4.3 to the Company's registration statement on Form S-8 (No. 33-28428). 3.3* Amended and Restated Bylaws, filed as exhibit 3.3 to the Form 10-Q for the quarter ended September 30, 1994, file number 1- 4448. Instruments defining the rights of security holders, including 4. indentures 4.1* Indenture dated November 15, 1985 between the Company and Bankers Trust Company, filed as exhibit 4.8 to the Company's current report on Form 8-K dated December 16, 1985, file no. 1- 4448. 4.2* Amended and Restated Indenture dated November 15, 1985 (the "Indenture"), between the Company and Continental Illinois National Bank and Trust Company of Chicago ("Continental"), filed under the Securities Act of 1933 as exhibit 4.1 to the Company's registration statement on Form S-3 (No. 33-1665). 4.3* First Supplemental Indenture to the Indenture between the Company and Continental, filed under the Securities Act of 1933 as exhibit 4.1(A) to the Company's registration statement on Form S-3 (No. 33-6746). 4.4* Supplemental Indenture dated as of January 29, 1997, between the Company and First Trust National Association (as successor to Continental), filed under the Securities Act of 1933 as exhibit 4.1B to the Company's debt securities shelf registration statement on Form S-3 (No. 333-19025) (the "1997 Shelf"). 4.5* Fiscal and Paying Agency Agreement dated as of April 26, 1984, among American Hospital Supply International Finance N.V., the Company and The Toronto-Dominion Bank, as amended, filed as exhibit 4.9 to the Company's annual report on Form 10-K for the year ended December 31, 1985 (the "1985 Form 10-K"). 4.6* Fiscal and Paying Agency Agreement dated as of November 15, 1984, between the Company and Citibank, N.A., as amended, filed as exhibit 4.16 to the Company's annual report on Form 10-K for the year ended December 31, 1987, file no. 1-4448 (the "1987 Form 10-K"). 4.7* Specimen 9 1/2% Note, filed as exhibit 4.3(a) to the Company's current report on Form 8-K dated June 23, 1988, file no. 1-4448. 4.8* Specimen 9 1/4% Note, filed as exhibit 4.3(a) to the Company's current report on Form 8-K dated September 13, 1989, file number 1-4448. 4.9* Specimen 9 1/4% Note, filed as exhibit 4.3(a) to the Company's current report on Form 8-K dated December 7, 1989, file number 1-4448. 4.10 Specimen 7.125% Note. 4.11 Specimen 7.65% Debenture.
13 10. Material Contracts C 10.1* Form of Indemnification Agreement entered into with directors and officers, filed as exhibit 19.4 to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 1986, file no. 1-4448. C 10.2* 1988 Long-Term Incentive Plan, filed as exhibit 10.12 to the 1987 Form 10-K. C 10.3* 1987-1989 Long-Term Performance Incentive Plan, filed as exhibit 10.15 to the Company's annual report on Form 10-K for the year ended December 31, 1986 (the "1986 Form 10-K"). C 10.4* 1989 Long-Term Incentive Plan, filed as exhibit 10.12 to the Company's annual report on Form 10-K for the year ended December 31, 1988, file no. 1-4448 (the "1988 Form 10-K"). C 10.5* Stock Option Plan Adopted July 25, 1988, filed as exhibit 10.13 to the 1988 Form 10-K. C 10.6* 1991 Officer Incentive Compensation Plan, filed as exhibit 10.11 to the Company's annual report on Form 10-K for the year ended December 31, 1990, file number 1-4448 (the "1990 Form 10- K"). C 10.7* Baxter International Inc. and Subsidiaries Incentive Investment Excess Plan, filed as exhibit 10.17 to the 1988 Form 10-K. C 10.8* Baxter International Inc. and Subsidiaries Supplemental Pension Plan, filed as exhibit 10.18 to the 1988 Form 10-K. C 10.9* Limited Rights Plan, filed as exhibit 19.6 to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 1989, file no. 1-4448 (the "September, 1989 Form 10-Q"). C 10.10* Amendments to various plans regarding disability, filed as exhibit 19.9 to the September, 1989 Form 10-Q. C 10.11* Amendments to 1987-1989 Long-Term Performance Incentive Plan and 1988 Long-Term Incentive Plan, filed as exhibit 19.10 to the September, 1989 Form 10-Q. C 10.12* 1987 Incentive Compensation Program, filed as exhibit C to the Company's proxy statement for use in connection with its May 13, 1987, annual meeting of stockholders, file no. 1-4448. 10.13* Rights Agreement between the Company and The First National Bank of Chicago, filed as exhibit 1 to a registration statement on Form 8-A dated March 21, 1989, file no. 1-4448. C 10.14* Amendment to 1987 Incentive Compensation Program, filed as exhibit 19.1 to September, 1989 Form 10-Q. C 10.15* Restricted Stock Grant Terms and Conditions, filed as exhibit 10.25 to the Company's annual report on Form 10-K for the year ended December 31, 1991, file number 1-4448 (the "1991 Form 10- K"). C 10.16* Vernon R. Loucks Restricted Stock Grant Terms and Conditions, filed as exhibit 10.26 to the 1991 Form 10-K. C 10.17* Deferred Compensation Plan (1990), as amended in 1992, filed as exhibit 10.27 to the 1992 Form 10-K. C 10.18* Restricted Stock Plan for Non-Employee Directors (as amended and restated in 1992), filed as exhibit 10.28 to the 1992 Form 10-K. C 10.19* Restricted Stock Grant Terms and Conditions (as amended), filed as exhibit 10.31 to the 1992 Form 10-K.
14 C 10.20* 1992 Officer Incentive Compensation Plan, filed as exhibit 10.29 to the 1992 Form 10-K. C 10.21* 1993 Officer Incentive Compensation Plan, filed as exhibit 10.30 to the 1992 Form 10-K. C 10.22* 1994 Officer Incentive Compensation Plan, filed as exhibit 10.31 to the Company's annual report on Form 10-K for the year ended December 31, 1993, file number 1-4448 (the "1993 Form 10-K"). C 10.23* Corporate Aviation Policy, filed as exhibit 10.33 to the 1992 Form 10-K. C 10.24* Plan and Agreement of Reorganization between Baxter and Caremark International Inc., filed as exhibit 10.34 to the 1992 Form 10-K C 10.25* 1994 Incentive Compensation Program, filed as exhibit A to the Company's proxy statement for use in connection with its April 29, 1994 annual meeting of stockholders, file no. 1-4448. C 10.26* 1994 Shared Investment Plan and Terms and Conditions, filed as exhibit 10.1 to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 1994. C 10.27* 1995 Officer Incentive Compensation Plan, filed as exhibit 10.31 to the Company's annual report on Form 10-K for the year ended December 31, 1994 (the "1994 Form 10-K"). C 10.28* Baxter International Inc. Restricted Stock Plan for Non- Employee Directors, as amended and restated effective May 8, 1995, filed as exhibit 10.32 to the 1994 Form 10-K. C 10.29* 1996 Officer Incentive Compensation Plan, filed as exhibit 10.33 to the Company's annual report on Form 10-K for the year ended December 31, 1995 (the "1995 Form 10-K"). C 10.30* 1995 Stock Option Grant Terms and Conditions, filed as exhibit 10.34 to the 1995 Form 10-K. 10.31* Reorganization Agreement between Baxter and Allegiance Corporation, filed as exhibit 2 to the Form 10 registration statement, file no. 1-11885, dated September 20, 1996. C 10.32 Supplemental Pension Agreement: Jack L. McGinley. C 10.33 November 1996 Stock Option Grant Terms and Conditions. C 10.34 November 1996 Premium Price Stock Option Grant Terms and Conditions. C 10.35 Officer Incentive Compensation Plan. 11. Statement re: computation of per share earnings. 11.1 Computation of primary earnings per common share. 11.2 Computation of fully diluted earnings per common share. 12. Statements re: computation of ratios. 13. 1996 Annual Report to Stockholders (such report, except to the extent incorporated herein by reference, is being furnished for the information of the Securities and Exchange Commission only and is not deemed to be filed as part of this annual report on Form 10-K). 21. Subsidiaries of the Company. 23. Consent of Price Waterhouse LLP. 24. Powers of Attorney. 27. Financial Statement Schedule.
- ------- *Incorporated herein by reference. CExhibit contemplated by Item 14(a)(3) of Form 10-K. (All other exhibits are inapplicable.) 15 APPENDIX OF GRAPHS The following is a listing of the graphs contained within the Annual Report, pages 17-24, section entitled "Management's Discussion and Analysis" which is incorporated by reference. DOMESTIC AND INTERNATIONAL SALES
U.S. INTERNATIONAL ----- ------------- 1994.................................................. 2,292 2,187 1995.................................................. 2,492 2,556 1996.................................................. 2,665 2,773
NET INCOME 1994.................................................................. 596 1995.................................................................. 649 1996.................................................................. 669
EX-4.10 2 SPECIMAN 7.125% NOTE EXHIBIT 4.10 R-1 $200,000,000 CUSIP NUMBER: 071813 AN 9 ---------------------------------------------------- 7.125% NOTE DUE FEBRUARY 1, 2007 GLOBAL CERTIFICATE, DATED FEBRUARY 3, 1997 ---------------------------------------------------- 1. Principal and Interest. Baxter International Inc., a Delaware corporation ("Company"), promises to pay to Cede & Co., or its registered assigns, the principal sum of Two Hundred Million Dollars ($200,000,000) on February 1, 2007, and to pay interest on the principal amount of this Security at the rate per annum shown above. The Company will pay interest semiannually on February 1 and August 1 of each year, commencing August 1, 1997. Interest on the Securities (as hereinafter defined) will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from February 1, 1997. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. Method of Payment. The Company will pay interest on the Securities (except defaulted interest) to the persons who are registered holder of Securities at the close of business on the January 15 and July 15 next preceding the interest payment date. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may pay principal and interest by check payable in such money. It may mail an interest check to a holder's registered address. 3. Paying Agent, Registrar, Place of Payment. The Company maintains an office or agency in Chicago, Illinois, where the Securities may be presented or surrendered for payment, registration of transfer or exchange and where notices and demands with respect to the Securities may be made. Initially, First Trust National Association will act as Paying Agent and Registrar and the Place of Payment is Chicago, Illinois. The Company may appoint Co-Paying Agents or Co-Registrars and change any Paying Agent, Registrar, Place of Payment or Co-Paying Agent or Co-Registrar without notice. The Company may act as Paying Agent, Registrar or Co-Registrar. 4. Indenture. This Security is one of a duly authorized issue of debentures, notes, bonds or other evidences of indebtedness of the Company (hereinafter called the "Debt Securities") of the series hereinafter specified, all issued or to be issued under and pursuant to an amended and restated indenture (including those provisions of the Trust Indenture Act of 1939 (15 U.S. Code /Sections/ 77aaa-77bbbb) made a part thereof) dated as of November 15, 1985, between the Company and the Trustee to which Indenture, as amended and supplemented from time to time (herein referred to, as so amended and supplemented, as the "Indenture"), reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the holders of the Debt Securities. The Debt Securities may be issued in one or more series, which different series may be issued in various principal amounts, may mature at different times, may bear interest (if any) at different rates, may be subject to different redemption provisions (if any), may be subject to different sinking, purchase or analogous funds (if any), may be subject to different covenants and Events of Default and may otherwise vary as in the indenture provided. This Security is one of a series designated as the 7.125% Notes due February 1, 2007 of the Company (herein called the "Securities"), limited in aggregate principal amount to $250,000,000 (except for Securities issued in substitution for destroyed, lost or stolen Securities). The Securities are unsecured general obligations of the Company. 5. Optional Redemption. The Securities are redeemable, in whole or in part, at the option of the Company at any time at a redemption price equal to the greater of (i) 100% of the principal amount of such Securities, or (ii) as determined by an Independent Investment Banker (as defined), the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus, in each case, accrued interest thereon to the date of redemption. "Adjusted Treasury Rate" means, with respect to any redemption date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date, plus 0.05%. "Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the Securities to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such Securities. "Independent Investment Banker" means one of the Reference Treasury Dealers appointed by the Trustee after consultation with the Company. "Comparable Treasury Price" means, with respect to any redemption date, (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third Business Day preceding such redemption date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S. Government Securities" or (ii) if such release (or any successor release) is not published or does not contain such prices on such Business Day, (A) the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (B) if the Trustee obtains fewer than three such Reference Treasury Dealer Quotations, the average of all such Quotations. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Treasury Reference Dealer at 5:00 p.m. on the third Business Day preceding such redemption date. "Business Day" means any day which is not a "Legal Holiday" as defined in the Indenture. "Reference Treasury Dealer" means each of Goldman, Sachs & Co., Credit Suisse First Boston Corporation, J.P. Morgan Securities Inc., BancAmerica Securities, Inc. and First Chicago Capital Markets, Inc. and their respective successors; provided, however, that if any of the foregoing shall cease to be a primary U.S. Government securities dealer in New York City (a "Primary Treasury Dealer"), the Company shall substitute therefor another Primary Treasury Dealer. Notice of any redemption shall be mailed at least 30 days but not more than 60 days before the redemption date to each holder of the Securities to be redeemed. Unless the Company defaults in payment of the redemption price, on and after the redemption date, interest shall cease to accrue on the Securities or portions thereof called for redemption. Page 2 6. Denominations, Transfers, Exchange. The Securities are in registered form without coupons in denominations of $1,000 and multiples of $1,000. The transfer of Securities may be registered and Securities may be exchanged as provided in the Indenture. The Registrar may require a holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and charges required by law or permitted by the Indenture. 7. Persons Deemed Owners. The registered holder of a Security may be treated as its owner for all purposes. 8. Amendments and Waivers. Subject to certain exceptions, the Indenture may be amended with the consent of the holders of a majority in principal amount of the Securities together with the consent of the holders of a majority in principal amount of each other series of Debt Securities which are affected by the amendment. Subject to certain exceptions, the Securities may be amended with the consent of the holders of a majority in principal amount of the Securities and any default or compliance by the Company with any provision of the Indenture with respect to the Securities may be waived with the consent of the holders of a majority in principal amount of the Securities. Without the consent of any Securityholder, the Indenture or the Securities may be amended to cure any ambiguity, defect or inconsistency, to provide for assumption of Company obligations to Securityholders, to provide for a successor Trustee, to provide for certain other forms of securities, or to make any change that does not adversely affect the rights of any Securityholder. The Company is authorized to fix a record date for the purpose of determining Securityholders whose consents may be sought, and the Trustee is authorized to accept such consents if received within 60 days of such record date. 9. Defaults and Remedies. An Event of Default is: default for 30 days in payment of interest on the Securities; default for five days in payment of principal on them; failure by the Company for 60 days after notice to it to comply with any of its other agreements in the Indenture or the Securities; certain defaults on certain other indebtedness of the Company; and certain events of bankruptcy or insolvency. If an Event of Default occurs and is continuing, the Trustee or the holders of at least 25% in principal amount of the Securities may declare all the Securities to be due and payable immediately. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Securities. Subject to certain limitations, holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing default (except a default in payment of principal or interest) if it determines that withholding notice is in their interests. The Company must furnish an annual compliance certificate to the Trustee. Overdue interest (to the extent permitted by law) and overdue principal shall bear interest at the rates stated on the face of the Security. 10. Trustee Dealings with Company. First Trust National Association, the Trustee under the Indenture for the Securities, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not Trustee. Page 3 11. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Securityholder by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 12. Termination of Obligations of Company. The Company may terminate all of its obligations under certain restrictive covenants contained in the Indenture, as described in the Indenture, by irrevocably depositing in trust with the Trustee money or U.S. Government Obligations, or any combination of the two, sufficient to pay principal of and interest on the Securities to maturity. 13. Unclaimed Funds. If money or U.S. Government Obligations for the payment of principal or interest remains unclaimed for two years, the Trustee and the Paying Agent shall pay to the Company on request such money or obligations. After payment to the Company, Securityholders entitled to the money must look to the Company for payment as general creditors unless an applicable abandoned property law designates another person. 14. Successor Corporation. When a successor corporation assumes all of the obligations of its predecessor under the Securities and the Indenture, the predecessor corporation will be released from those obligations. 15. Authentication. This Security shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 16. Abbreviations. Customary abbreviations may be used in the name of a Securityholder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). The Company will furnish to any Securityholder upon written request and without charge a copy of the Indenture. Requests may be made to: Treasurer, Baxter International Inc., One Baxter Parkway, Deerfield, Illinois 60015. Page 4 UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO. HAS AN INTEREST HEREIN. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR INDIVIDUAL NOTES REGISTERED IN THE NAMES OF PARTICIPANTS IN DTC, THIS CERTIFICATE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY DTC OR BY A NOMINEE OF DTC TO DTC OR BY DTC OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. BAXTER INTERNATIONAL INC. By: ---------------------------- Harry M. Jansen Kraemer, Jr. Senior Vice President and Chief Financial Officer ATTEST: - ------------------------------ A. Gerard Sieck, Secretary AUTHENTICATED: FIRST TRUST NATIONAL ASSOCIATION By: --------------------------- Authorized Person Page 5 EX-4.11 3 SPECIMAN 7.65% DEBENTURE EXHIBIT 4.11 R-1 $200,000,000 CUSIP NUMBER: 071813 AP 4 ------------------------------------------ 7.65% DEBENTURES DUE FEBRUARY 1, 2027 GLOBAL CERTIFICATE, DATED FEBRUARY 3, 1997 ------------------------------------------ 1. Principal and Interest. Baxter International Inc., a Delaware corporation ("Company"), promises to pay to Cede & Co., or its registered assigns, the principal sum of Two Hundred Million Dollars ($200,000,000) on February 1, 2027, and to pay interest on the principal amount of this Security at the rate per annum shown above. The Company will pay interest semiannually on February 1 and August 1 of each year, commencing August 1, 1997. Interest on the Securities (as hereinafter defined) will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from February 1, 1997. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. Method of Payment. The Company will pay interest on the Securities (except defaulted interest) to the persons who are registered holders of Securities at the close of business on the January 15 and July 15 next preceding the interest payment date. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may pay principal and interest by check payable in such money. It may mail an interest check to a holder's registered address. 3. Paying Agent, Registrar, Place of Payment. The Company maintains an office or agency in Chicago, Illinois, where the Securities may be presented or surrendered for payment, registration of transfer or exchange and where notices and demands with respect to the Securities may be made. Initially, First Trust National Association will act as Paying Agent and Registrar and the Place of Payment is Chicago, Illinois. The Company may appoint Co-Paying Agents or Co-Registrars and change any Paying Agent, Registrar, Place of Payment or Co-Paying Agent or Co-Registrar without notice. The Company may act as Paying Agent, Registrar or Co-Registrar. 4. Indenture. This Security is one of a duly authorized issue of debentures, notes, bonds or other evidences of indebtedness of the Company (hereinafter called the "Debt Securities") of the series hereinafter specified, all issued or to be issued under and pursuant to an amended and restated indenture (including those provisions of the Trust Indenture Act of 1939 (15 U.S. Code (S)(S) 77aaa-77bbbb) made a part thereof) dated as of November 15, 1985, between the Company and the Trustee to which Indenture, as amended and supplemented from time to time (herein referred to, as so amended and supplemented, as the "Indenture"), reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the holders of the Debt Securities. The Debt Securities may be issued in one or more series, which different series may be issued in various principal amounts, may mature at different times, may bear interest (if any) at different rates, may be subject to different redemption provisions (if any), may be subject to different sinking, purchase or analogous funds (if any), may be subject to different covenants and Events of Default and may otherwise vary as in the indenture provided. This Security is one of a series designated as the 7.65% Debentures due February 1, 2027 of the Company (herein called the "Securities"), limited in aggregate principal amount to $200,000,000 (except for Securities issued in substitution for destroyed, lost or stolen Securities). The Securities are unsecured general obligations of the Company. 5. Optional Redemption. The Securities are redeemable, in whole or in part, at the option of the Company at any time at a redemption price equal to the greater of (i) 100% of the principal amount of such Securities, or (ii) as determined by an Independent Investment Banker (as defined), the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus, in each case, accrued interest thereon to the date of redemption. "Adjusted Treasury Rate" means, with respect to any redemption date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date, plus 0.05%. "Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the Securities to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such Securities. "Independent Investment Banker" means one of the Reference Treasury Dealers appointed by the Trustee after consultation with the Company. "Comparable Treasury Price" means, with respect to any redemption date, (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third Business Day preceding such redemption date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S. Government Securities" or (ii) if such release (or any successor release) is not published or does not contain such prices on such Business Day, (A) the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (B) if the Trustee obtains fewer than three such Reference Treasury Dealer Quotations, the average of all such Quotations. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Treasury Reference Dealer at 5:00 p.m. on the third Business Day preceding such redemption date. "Business Day" means any day which is not a "Legal Holiday" as defined in the Indenture. "Reference Treasury Dealer" means each of Goldman, Sachs & Co., Credit Suisse First Boston Corporation, J.P. Morgan Securities Inc., BancAmerica Securities, Inc. and First Chicago Capital Markets, Inc. and their respective successors; provided, however, that if any of the foregoing shall cease to be a primary U.S. Government securities dealer in New York City (a "Primary Treasury Dealer"), the Company shall substitute therefor another Primary Treasury Dealer. Notice of any redemption shall be mailed at least 30 days but not more than 60 days before the redemption date to each holder of the Securities to be redeemed. Unless the Company defaults in payment of the redemption price, on and after the redemption date, interest shall cease to accrue on the Securities or portions thereof called for redemption. 6. Denominations, Transfers, Exchange. The Securities are in registered form without coupons in denominations of $1,000 and multiples of $1,000. The transfer of Securities may be registered and Securities may be exchanged as provided in the Indenture. Page 2 The Registrar may require a holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and charges required by law or permitted by the Indenture. 7. Persons Deemed Owners. The registered holder of a Security may be treated as its owner for all purposes. 8. Amendments and Waivers. Subject to certain exceptions, the Indenture may be amended with the consent of the holders of a majority in principal amount of the Securities together with the consent of the holders of a majority in principal amount of each other series of Debt Securities which are affected by the amendment. Subject to certain exceptions, the Securities may be amended with the consent of the holders of a majority in principal amount of the Securities and any default or compliance by the Company with any provision of the Indenture with respect to the Securities may be waived with the consent of the holders of a majority in principal amount of the Securities. Without the consent of any Securityholder, the Indenture or the Securities may be amended to cure any ambiguity, defect or inconsistency, to provide for assumption of Company obligations to Securityholders, to provide for a successor Trustee, to provide for certain other forms of securities, or to make any change that does not adversely affect the rights of any Securityholder. The Company is authorized to fix a record date for the purpose of determining Securityholders whose consents may be sought, and the Trustee is authorized to accept such consents if received within 60 days of such record date. 9. Defaults and Remedies. An Event of Default is: default for 30 days in payment of interest on the Securities; default for five days in payment of principal on them; failure by the Company for 60 days after notice to it to comply with any of its other agreements in the Indenture or the Securities; certain defaults on certain other indebtedness of the Company; and certain events of bankruptcy or insolvency. If an Event of Default occurs and is continuing, the Trustee or the holders of at least 25% in principal amount of the Securities may declare all the Securities to be due and payable immediately. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Securities. Subject to certain limitations, holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing default (except a default in payment of principal or interest) if it determines that withholding notice is in their interests. The Company must furnish an annual compliance certificate to the Trustee. Overdue interest (to the extend permitted by law) and overdue principal shall bear interest at the rates stated on the face of the Security. 10. Trustee Dealings with Company. First Trust National Association, the Trustee under the Indenture for the Securities, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not Trustee. 11. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Securityholder by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. Page 3 12. Termination of Obligations of Company. The Company may terminate all of its obligations under certain restrictive covenants contained in the Indenture, as described in the Indenture, by irrevocably depositing in trust with the Trustee money or U.S. Government Obligations, or any combination of the two, sufficient to pay principal of and interest on the Securities to maturity. 13. Unclaimed Funds. If money or U.S. Government Obligations for the payment of principal or interest remains unclaimed for two years, the Trustee and the Paying Agent shall pay to the Company on request such money or obligations. After payment to the Company, Securityholders entitled to the money must look to the Company for payment as general creditors unless an applicable abandoned property law designates another person. 14. Successor Corporation. When a successor corporation assumes all of the obligations of its predecessor under the Securities and the Indenture, the predecessor corporation will be released from those obligations. 15. Authentication. This Security shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 16. Abbreviations. Customary abbreviations may be used in the name of a Securityholder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). The Company will furnish to any Securityholder upon written request and without charge a copy of the Indenture. Requests may be made to: Treasurer, Baxter International Inc., One Baxter Parkway, Deerfield, Illinois 60015. Page 4 UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO. HAS AN INTEREST HEREIN. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR INDIVIDUAL DEBENTURES REGISTERED IN THE NAMES OF PARTICIPANTS IN DTC, THIS CERTIFICATE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY DTC OR BY A NOMINEE OF DTC TO DTC OR BY DTC OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. BAXTER INTERNATIONAL INC. By: __________________________ Harry M. Jansen Kraemer, Jr. Senior Vice President and Chief Financial Officer ATTEST: ____________________________________ A. Gerard Sieck Secretary AUTHENTICATED: FIRST TRUST NATIONAL ASSOCIATION By: _________________________________ Authorized Person Page 5 EX-10.32 4 SUPPLEMENTAL PENSION AGREEMENT [LETTERHEAD OF BAXTER INTERNATIONAL INC.] Exhibit 10.32 Baxter November 16, 1995 Jack L. McGinley 855 East Rosemary Road Lake Forest, Illinois 60045 Dear Jack: This letter is to confirm our agreement concerning your early retirement from Baxter Healthcare Corporation and its affiliates ("Company"), as follows: 1) You will continue your employment with the Company until either you or the Company decides to terminate your employment. If the Company terminates your employment, you will receive thirty (30) days advance notice. The effective date of your employment termination is your Early Retirement Date. Until your Early Retirement Date, you will continue working on matters assigned by me or my designee from time to time. If you resign prior to December 31, 1997, you will forfeit all of your rights created by this agreement. 2) Between now and your Early Retirement Date, the Company will continue to pay you at regular payroll intervals a base salary at least equal to your current base salary. Until your Early Retirement Date, you are eligible to receive a bonus under the Company's Officer Incentive Compensation Plan(s) (cash bonus plan), if the Company continues to make the plan available to other officers, in the ordinary course. In addition, if the cash bonus plan is in effect in the year of your early retirement, you will be eligible to receive a pro-rated bonus, the pro-ration being based on the number of months between January 1 of that year and your Early Retirement Date. The determination of the amount and payment of the bonus(es) will be made in accordance with the provision of the plan(s). You are not eligible to participate in any Company bonus plans effective after your Early Retirement Date. 3) Following your Early Retirement Date, the Company will pay you, in a lump sum, the cash value of your accrued, but unused vacation time. You will not accrue vacation time after your Early Retirement Date. 4) Your active participation in the Baxter International Inc. and Subsidiaries Pension Plan ("Pension Plan") will continue until your 1 Early Retirement Date. Your vested accrued benefits in the Pension Plan will be distributed to you in accordance with its provisions. In addition, the Company will provide you with a non-qualified and unfunded supplemental pension benefit ("Pension Supplement"). The Pension Supplement will be calculated as follows: a) Initially, your accrued benefit will be determined, as of your Early Retirement Date, under the provisions of the Pension Plan as if: 1) all of your service with the Company was performed in the United States (specifically including your service with the Company in Canada and Japan) and 2) on your Early Retirement Date you were five years older and had five additional years of benefit service under the Pension Plan ("Adjusted and Enhanced U.S. Benefit"). b) The Company will then determine, as of your Early Retirement Date, your actual accrued benefit under the provisions of the Pension Plan and your actual accrued benefit under the provisions of the Company's Canadian Pension Plan ("Combined U.S. and Canada Benefit") c) Your Pension Supplement equals the amount, if any, by which the Adjusted and Enhanced U.S. Benefit exceeds the Combined U.S. and Canada Benefit. Your Pension Supplement will be paid to you at the same time and in the same manner as your benefit under the Pension Plan. In the event of your death prior to your Early Retirement Date, the payment of your accrued benefit under the Pension Plan will be determined as if your Early Retirement Date were the day before your death and you selected a pension payment option of 100% Joint and Survivor. 5) Your active participation in the Company's Incentive Investment Plan, if any, including your contributions, will continue until your Early Retirement Date, unless you elect to discontinue your contributions earlier. Your vested accrued benefits, if any, in the Incentive Investment Plan will be distributed to you in accordance with its provisions. 6) Until your Early Retirement Date, you are eligible to participate in the Company's Flexible Benefits Program to the same extent eligibility is 2 extended in the ordinary course to other Company employees. On your Early Retirement Date, you are eligible to participate in the Company's retiree medical plan to the same extent eligibility is then extended in the ordinary course to other Company retirees. You may postpone retiree medical coverage and elect up to 18 months of medical and dental coverage under COBRA, if you are eligible. You may not obtain medical coverage through the retiree medical plan and COBRA simultaneously. If you elect COBRA coverage, you and the Company will share the cost for the first six months. For the remaining 12 months, you must pay the full COBRA cost. 7) Until your Early Retirement Date, you are eligible to participate in the Company's Employee Stock Purchase Plan on the same basis as other Company employees. Your participation, if any, in the plan will cease on your Early Retirement Date. After your Early Retirement Date, you will receive a cash refund of the balance, if any, in your subscription account. 8) Your stock options will vest or be forfeited according to their terms based on your Early Retirement Date. Your restricted shares earned, if any, before your Early Retirement Date will be allowed to vest and be paid according to their terms. Your restricted shares earned, if any, during the year of your Early Retirement will be pro-rated based on the number of months between January 1 and your Early Retirement Date. The pro-rated shares will be allowed to vest and be paid according to their terms. 9) To preserve your rights to make various elections under the Company's Flexible Benefits Program, Pension Plan and Incentive Investment Plan, you must contact the Human Resources Department prior to your Early Retirement Date. To exercise your stock options, contact the Stockholder Services Department. 10) In exchange for the money and benefits under this agreement, you waive your right to file, or participate as a class member in, any claims or lawsuits (whether or not you now know of the basis for the claims or lawsuits) with federal or state agencies or courts against the Company and its employee benefit plans, including their present and former directors, officers, employees, agents and fiduciaries. This waiver and release includes, but is not limited to, all claims of unlawful discrimination in regard to age, race, sex, color, religion, national origin and handicap under Title VII of the Civil Rights Act, the Age 3 Discrimination in Employment Act or any other federal or state statutes, all claims for wrongful employment termination or breach of contract and any other claims relating to your employment or termination of employment with the Company. This waiver and release also apply to your heirs, assigns, executors and administrators. This waiver and release do not waive rights or claims that may arise after the date this agreement is signed, except as provided in the next sentence. Your acceptance, or acceptance on your behalf, of the Pension Supplement under paragraph 4 of this agreement will constitute confirmation of this waiver and general release as if you signed it again on the date such benefits are accepted. 11) You also agree: (a) not to intentionally disparage the Company, its employees or products; (b) not to intentionally engage in actions contrary to the interest of the Company; (c) to honor the terms of your confidentiality and employment agreements with the Company; (d) to conduct the transition described here in a constructive and positive manner; and (e) to keep the terms of this agreement confidential. 12) In addition to the obligations under your employment agreement with the Company, you agree that, until one year from your Early Retirement Date, you will not directly or indirectly, as a consultant, employee or owner, engage in any activity which is competitive with the businesses of the Company, on your Early Retirement Date, without the Company's prior approval. I assure you it is the Company's intention to be fair and reasonable in considering this issue and to grant such approval whenever your competition will not adversely affect one of the Company's major businesses. The Company may terminate its payment to you under this agreement if you fail to comply with your obligations under this agreement. 13) All amounts payable to you or on your behalf under this agreement will be reported to appropriate governmental agencies as taxable income to the extent required, and appropriate withholding will be made where necessary. In addition, all amounts payable to you under this agreement are expressed as gross amounts, and the Company will not gross up the amounts or otherwise reimburse you for the taxes you pay relating to such amounts. 14) You are not entitled to any money, Company stock or other severance benefits as a result of your termination of employment, except as specified in this agreement. 4 15) You acknowledge that no promises have been made which are not included in this agreement, and that this agreement contains the entire understanding between you and the Company relating to your early retirement. You acknowledge that the terms of this agreement are contractually binding. If any portion of this agreement is declared invalid or unenforceable, the remaining portions of this agreement will continue in force. 16) You acknowledge that you carefully read the terms of this agreement, you know and understand its content and meaning, you had at least 21 days to review it, you were encouraged to consult with an attorney before accepting it and you accept it voluntarily. You have 7 days after you sign this agreement to revoke it, and this agreement will not become effective or enforceable until the 7-day period ends. If this letter accurately reflects our agreement, please sign two copies, and return one of them to me by December 11, 1995 or I will assume that you rejected this agreement. This agreement is subject to the approval of the Board of Directors of Baxter Healthcare Corporation. Sincerely, /s/ Lester B. Knight - --------------------- Lester B. Knight ACCEPTED AND AGREED: /s/ Jack Mcguiley - --------------------- (Signature) Nov. 20/95 - --------------------- (Date) cc: Steve Kane Mike Tucker Herb Walker 5 EX-10.33 5 STOCK OPTION TERMS AND AGREEMENT Exhibit 10.33 BAXTER INTERNATIONAL INC. Stock Option Plan Adopted November 18, 1996 Grant to Shared Investment Plan Participants Terms and Conditions 1. Purpose This Stock Option Plan ("Plan") is adopted pursuant to the Baxter International Inc. 1987 Incentive Compensation Program ("Program") for the purposes stated in the Program. 2. Participants Participants in this Plan ("Optionee") shall be valued employees of Baxter International Inc. or its subsidiaries ("Company") who (i) purchased Baxter common stock through the Baxter International Inc. Shared Investment Plan; (ii) have been selected by the Committee, as defined in the Program ("Committee"), to receive an option ("Option") under this Plan; and (iii) have satisfied the conditions specified in the resolutions pursuant to which the Option was granted. 3. Awards Each Option shall consist of a Stock Option as defined in the Program and is granted under the terms and conditions contained in the Program and this Plan. To the extent that any of the terms and conditions contained in this Plan are inconsistent with the Program, the terms of the Program shall control. Terms defined in the Program shall have the same meaning in these terms and conditions. The Option is not intended to qualify as an Incentive Stock Option within the meaning of section 422 of the United States Internal Revenue Code. Residents of the United Kingdom may also be subject to additional terms and conditions in the form contained in the Baxter International Inc. Rules of the Baxter International United Kingdom Stock Option, to the extent deemed necessary by the Committee. 4. Vesting, Exercise and Expiration 4.1 The Option becomes vested on October 1, 1999, except as specified in this Section 4.1 or in Section 4.3. If the Optionee's employment by the Company is terminated involuntarily, before October 1, 1999, and for reasons other than death, disability, or misconduct, the Option will be allowed to vest on October 1, 1999. If the Optionee's employment by the Company is terminated voluntarily before October 1, 1999, and on or after the Optionee's fifty-fifth birthday, the Option will continue to vest for up to one year after the date on which the Optionee's employment terminates. For purposes of this Section 4.1 and Section 4.4, misconduct means fraud, embezzlement, or other criminal conduct or an intentional, knowing and material violation of the Company's Standards for Business Ethics as amended. EX-10.34 6 PREMIUM PRICE STOCK OPTION Exhibit 10.34 BAXTER INTERNATIONAL INC. Stock Option Plan Adopted November 18, 1996 Premium-Priced Stock Option Grant Terms and Conditions 1. Purpose This Stock Option Plan ("Plan") is adopted pursuant to the Baxter International Inc. 1994 Incentive Compensation Program ("Program") for the purposes stated in the Program. 2. Participants Participants in this Plan ("Optionee") shall be valued employees of Baxter International Inc. or its subsidiaries ("Company") who have been selected by the Committee, as defined in the Program ("Committee"), and to whom the Committee makes an award of an option ("Option") under this Plan. 3. Awards Each Option shall consist of a Stock Option as defined in the Program and is granted under the terms and conditions contained in the Program and this Plan. To the extent that any of the terms and conditions contained in this Plan are inconsistent with the Program, the terms of the Program shall control. Terms defined in the Program shall have the same meaning in these terms and conditions. The Option is not intended to qualify as an Incentive Stock Option within the meaning of section 422 of the United States Internal Revenue Code. Residents of the United Kingdom may also be subject to additional terms and conditions in the form contained in the Baxter International Inc. Rules of the Baxter International United Kingdom Stock Option, to the extent deemed necessary by the Committee. 4. Vesting, Exercise and Expiration 4.1 The Option becomes vested five years from the date of grant, subject to acceleration in accordance with the following. One hundred percent of the Option shall become vested on the first Business Day (as defined in section 4.4) after the ninetieth consecutive calendar day during which the average Fair Market Value (as defined in the Program) of the Common Stock (as defined in the Program) equals or exceeds $65.00 per share. The Option shall not vest more than three years after the Optionee's employment is terminated by retirement at or after age 55 but shall otherwise continue to vest until the Option expires pursuant to section 4.4. 4.2 When vested and until it expires, the Option may be exercised in whole or in part in the manner specified by the Stockholder Services Department of Baxter International Inc. If exercised in part, the Option must be exercised in installments consisting of at least 100 shares or, if options for less than 100 shares are then exercisable, for the number of shares then exercisable. Shares of Common Stock may not be used to pay the exercise price of the Option unless certificates representing such shares have been issued and are delivered by the Optionee in accordance with the requirements specified by the Stockholder Services Department. Residents of the United Kingdom may not use shares of Common Stock to pay the exercise price of the Option in any circumstances. 4.3 If the Optionee's employment by the Company is terminated by death or disability more than 12 months after the date on which the Option is granted, the Optionee or the Optionee's legal representative or the person or persons to whom the Optionee's rights under the Option are transferred by will or the laws of descent and distribution shall have the right to exercise the Option until it expires in accordance with its terms with respect to all or any part of the shares remaining subject to the Option (whether or not such shares were purchasable by the Optionee under section 4.1 at the time of death). 4.4 The Option shall expire at the close of business on the earlier of a date determined as follows or, if such date is not a Business Day, then the last Business Day preceding such date: (i) one year after the date on which employment of the Optionee by the Company shall have been terminated by his death or disability; (ii) five years after the date on which employment of the Optionee by the Company shall have been terminated by retirement at or after age 55; (iii) three months after the date on which employment of the Optionee by the Company shall have terminated except as provided in subsection 4.4(i) and (ii), unless the Optionee dies or becomes disabled during said three-month period, in which case the relevant date shall be one year after the termination; or (iv) ten years from the date on which the Option was granted. "Business Day" shall mean any day, other than Saturday or Sunday, when the corporate headquarters of the Company is open for the transaction of business and when the Common Stock is traded on the New York Stock Exchange. A transfer of an Optionee from employment by one corporation to another among Baxter International Inc. and its subsidiaries, or a transfer of an Optionee to employment by another corporation which assumes the Option or issues a substitute option in a transaction to which section 424 of the Internal Revenue Code applies, shall not be considered a termination of employment for purposes of the Option. EX-10.35 7 1997 OFFICER INCENTIVE PLAN Exhibit 10.35 OFFICER INCENTIVE COMPENSATION PLAN This Officer Incentive Compensation Plan ("Plan") of Baxter International Inc. ("Baxter") and its subsidiaries (collectively, the "Company") is adopted pursuant to the Baxter International Inc. 1994 Incentive Compensation Program (the "Program") for the purposes stated in the Program. The Plan is intended to comply with the requirements of Section 162(m)(4)(C) of the Internal Revenue Code of 1986 ("IRC"), as amended, and the related income tax regulations issued thereunder. 1. Eligibility Officers of the Company are eligible to participate in the Plan if the officer's participation for a calendar year (or portion of such calendar year)("Plan Year") is approved by the Compensation Committee of the Board of Directors of Baxter ("Committee"). Officers so approved by the Committee shall be referred to herein as "Participants". 2. Bonus Award 2.1 For each Plan Year, each Participant shall be eligible to receive a cash payment ("Bonus Award") in accordance with the terms provided herein and any other terms established by the Committee. To determine a Participant's Bonus Award, the Committee shall establish a) Company performance goals for the Plan Year which will include one or more of the following performance measures: net income growth, operational cash flow, sales growth, the Common Stock price of Baxter, earnings per share, total shareholder return, and inventory turns ("Company Performance Criteria"), b) a "Bonus Range" for each Participant for the Plan Year, and c) the amount within a Participant's Bonus Range that will be payable to a Participant based upon the achievement of the Company Performance Criteria for the Plan Year. The terms described in the preceding sentence must be established by April 1 of the Plan Year, and such terms shall not thereafter be changed, except as permitted by paragraph 2.2. 2.2 By March 31 of each year, the Committee shall assess the extent to which the Company has achieved the Company Performance Criteria for the preceding Plan Year, based on the Company's publicly reported results. The Committee shall exclude the effect of acquisitions, divestitures, changes in accounting principles, and other extraordinary or non-recurring events which occurred during the Plan Year when assessing the extent to which the Company has achieved the Company Performance Criteria for such Plan Year, but only if such exclusion would enhance the Company's performance relative to the Company Performance Criteria. The exclusion authorized by the preceding sentence shall only apply to the extent it is consistent with IRC Section 162(m)(4)(C) and the related regulations described above. The Committee shall then determine each Participant's Bonus Award based upon the terms described in paragraph 2.1 above. The Committee, however, has the discretion to reduce the amount of a Participant's Bonus Award determined under the preceding sentence. The Committee's determination shall be consistent with IRC Section 162(m)(4)(C) and the related regulations described above. No Participant shall receive a Bonus Award in excess of $2.0 million for any Plan Year for which the Participant is subject to IRC Section 162(m). The committee may exercise discretion in the determination of the Bonus Awards earned under the Plan with respect to participants who are not subject to IRC Section 162(m). 2.3 If an officer's participation in the Plan becomes effective after January 1 of a Plan Year, the Committee shall establish a prorated Bonus Range for such Participant based on the number of full months remaining in the Plan Year after he or she becomes a Participant. To the extent applicable, the determination of a prorated Bonus Range shall be consistent with IRC Section 162(m)(4)(C) and the related regulations described above. 3. Payment 3.1 Except as otherwise determined by the Committee and except with respect to Participants who have filed in deferral elections pursuant to paragraph 4, all Bonus Awards will be paid in cash as soon as possible following determination of Bonus Awards by the Committee. 3.2 No Participant will be eligible to receive a Bonus Award for a Plan Year unless he or she continues to be employed by the Company through February 1 of the following year except as otherwise determined by the Committee. The Committee's Bonus Award determination with respect to such participant may be determined in the same manner as provided in paragraphs 2.1 and 2.2 above. 4. Deferral of Payment Participants may elect to defer payment in accordance with the Baxter International Inc. and Subsidiaries Deferred Compensation Plan. EX-11.1 8 PRIMARY EARNINGS PER SHARE EXHIBIT 11.1 - -------------------------------------------------------------------------------- COMPUTATION OF PRIMARY EARNINGS PER COMMON SHARE (In millions, except per share data)
Year ended December 31, - -------------------------------------------------------- 1996 1995 1994 - -------------------------------------------------------- EARNINGS Income from continuing operations $ 575 $ 371 $ 406 Total discontinued operations 94 278 190 - -------------------------------------------------------- Net income available for common stock $ 669 $ 649 $ 596 - -------------------------------------------------------- SHARES Average common shares outstanding 272 277 280 - -------------------------------------------------------- PRIMARY EARNINGS PER COMMON SHARE INCOME FROM CONTINUING OPERATIONS $2.11 $1.34 $1.45 TOTAL DISCONTINUED OPERATIONS 0.35 1.01 0.68 - -------------------------------------------------------- NET INCOME $2.46 $2.35 $2.13 - --------------------------------------------------------
16 EX-11.2 9 FULLY DILUTED EARNINGS PER SHARE EXHIBIT 11.2 - -------------------------------------------------------------------------------- COMPUTATION OF FULLY DILUTED EARNINGS PER COMMON SHARE (In millions, except per share data)
Years ended December 31 - ----------------------------------------------------------------------------- 1996 1995 1994 - ----------------------------------------------------------------------------- EARNINGS Income from continuing operations $ 575 $ 371 $ 406 Total discontinued operations 94 278 190 - ----------------------------------------------------------------------------- Net income available for common stock $ 669 $ 649 $ 596 - ----------------------------------------------------------------------------- SHARES Weighted average number of common shares outstanding 272 277 280 Additional shares assuming exercise or conversion of stock options, performance share awards and stock purchase plan subscriptions 5 5 2 - ----------------------------------------------------------------------------- Average common shares outstanding 277 282 282 - ----------------------------------------------------------------------------- FULLY DILUTED EARNINGS PER COMMON SHARE INCOME FROM CONTINUING OPERATIONS $2.07 $1.32 $1.44 TOTAL DISCONTINUED OPERATIONS 0.34 0.99 0.67 - ----------------------------------------------------------------------------- NET INCOME $2.41 $2.31 $2.11 - -----------------------------------------------------------------------------
17 EX-12 10 RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12 - -------------------------------------------------------------------------------- COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (In millions, except ratios)
Year ended December 31, - ---------------------------------------------------------------------------- 1996 1995 1994 1993 1992 - ---------------------------------------------------------------------------- Income (loss) from continuing operations before income tax expense (benefit) $793 $524 $559 $ (74) $510 Add: Interest Costs 133 117 120 109 100 Estimated interest in rentals (1) 27 29 31 31 29 - ---------------------------------------------------------------------------- Fixed charges as defined: 160 146 151 140 129 Interest costs capitalized (3) (3) (2) (5) (5) Losses of less than majority owned affiliates, net of dividends 8 10 18 27 34 - ---------------------------------------------------------------------------- Income as adjusted $958 $677 $726 $ 88 $668 - ---------------------------------------------------------------------------- Ratio of earnings to fixed charges 5.99 4.64 4.80 0.63 5.18 - ----------------------------------------------------------------------------
(1) Represents the estimated interest portion of rents. 18 EX-21 11 SUBSIDIARIES EXHIBIT 21 - -------------------------------------------------------------------------------- SUBSIDIARIES OF THE COMPANY, AS OF MARCH 14, 1997
Organized % owned by under immediate Subsidiary laws of parent (1) (2) - ------------------------------------------------------------------------------- Baxter International Inc......................... Delaware Perfusion Services of Baxter Healthcare Corporation.................................... Delaware 100 Seta Tax Parent.............................. Delaware 100 Baxter CVG Sub Inc.............................. Delaware 100 Edwards Intramed............................. Delaware 100 Baxter Healthcare Corporation................... Delaware 100 Nextran Parent............................... Delaware 100 Medication Delivery Devices.................. California 100 Baxter World Trade Corporation.................. Delaware 100 Baxter Foreign Sales Corporation............. Barbados 100 Baxter Export Corporation.................... Nevada 100 Baxter Argentina SA.......................... Argentina 100 Industrial y Comercial Baxter de Chile Ltda.. Chile 99(4) Baxter Representacoes Ltda................... Brazil 100 Baxter Hospitalar Ltda..................... Brazil 85.21(4) Baxter SA.................................... Belgium 98.44(4) Baxter SA.................................. France 64.57(4) Baxter Deutschland GmbH...................... Germany 100 Baxter SpA................................... Italy 98.74(4) Baxter B.V. (Uden)........................... Netherlands 50.83(4) Baxter SA.................................... Spain 99.99(4) Baxter A/S................................... Denmark 100 Baxter Pharmacy Services Corporation......... Delaware 100(5) Baxter Sales and Distribution Corporation.. Delaware 100 Baxter Healthcare Corporation of Puerto Rico...................................... Alaska 100 Baxter Healthcare Holdings Ltd............... United Kingdom 99.99(4) Baxter Healthcare Limited.................. United Kingdom 99.99(4) Baxter Limited............................... Malta 50(3) Baxter Healthcare S.A........................ Panama 100 Baxter Healthcare Pte Ltd.................... Singapore 100 Baxter World Trade......................... Belgium 51.74(4) Zweigen Parent............................. Switzerland 100 Baxter Limited............................... Japan 100 Baxter Healthcare Pty. Ltd................... Australia 99.99(4) Baxter Healthcare Ltd........................ New Zealand 100 Baxter Edwards A.G........................... Switzerland 99.6(4) Baxter A.G................................... Switzerland 99.9(4) Baxter A/O................................... Russia 100 Xenomedica A.G............................... Switzerland 99.94(4) Baxter S.A. de C.V........................... Mexico 99.9(4) Laboratorios Baxter SA (Colombia)............ Delaware 100 Baxter Corporation (Canada).................. Canada 100 Baxter Biotech Worldwide Ltd.................... Delaware 100 Baxter Biotech Holding AG.................... Switzerland 100 Immuno International AG.................... Switzerland 100 Immuno--US, Inc.......................... Michigan 100 Immuno AG................................ Austria 99.99(4)
- -------------------------------------------------------------------------------- Subsidiaries omitted from this list, considered in aggregate as a single subsidiary, would not constitute a significant subsidiary. * * * * * (1) Including director's qualifying and other nominee shares. (2) All subsidiaries set forth herein are reported in the Company's financial statements through consolidations or under the equity method of accounting. (3) 50% owned by Baxter World Trade Corporation and 50% owned by Baxter SA (France). (4) Remaining shares owned by the Company, its subsidiaries or employees. (5) Of common stock. 19 EX-23 12 CONSENT OF PRICE WATERHOUSE EXHIBIT 23 - -------------------------------------------------------------------------------- CONSENT OF PRICE WATERHOUSE LLP - -------------------------------------------------------------------------------- We hereby consent to the incorporation by reference in the Prospectuses constituting part of the Registration Statements on Form S-8 (Nos. 2-82667, 2-86993, 2-97607, 33-8812, 33-15523, 33-15787, 33-28428, 33-33750 and 33-54069), on Form S-3 (Nos. 33-5044, 33-23450, 33-27505, 33-31388, 33-49820) (333-19025) and on Form S-4 (Nos. 33-808, 33-15357, 33-53937 and 333-21327) of Baxter International Inc. of our report dated February 10, 1997 appearing on page 26 of the Annual Report to Stockholders incorporated by reference herein. We also consent to the incorporation by reference of our report on the Financial Statement Schedule, which appears on page 10 of this Form 10-K. PRICE WATERHOUSE LLP Chicago, Illinois March 18, 1997 EX-24 13 POWERS OF ATTORNEY EXHIBIT 24 POWER OF ATTORNEY ANNUAL REPORT ON FORM 10-K -------------------------- The undersigned director of Baxter International Inc., a Delaware corporation (the "Company"), which proposes to file with the Securities and Exchange Commission its annual report on Form 10-K for year ended December 31, 1996, pursuant to the Securities Exchange Act of 1934, as approved by the Company's principal executive and financial officers and controller, hereby appoints Vernon R. Loucks Jr. for him [her] and in his [her] name as a director to be his [her] lawful attorney-in-fact, with full power (i) to sign and file with the Securities and Exchange Commission the proposed report and (ii) to perform every other act which said attorney-in-fact may deem necessary or proper in connection with such report. Dated as of: March 17, 1997 /s/ Walter E. Boomer /s/ Pei-yuan Chia /s/ John W. Colloton /s/ Susan Crown /s/ Mary Johnston Evans /s/ Frank R. Frame /s/ Martha R. Ingram /s/ Harry M. Jansen Kraemer, Jr. /s/ Arnold J. Levine /s/ Georges C. St. Laurent, Jr. /s/ Monroe E. Trout, M.D. /s/ Reed V. Tuckson, M.D. /s/ Fred L. Turner EX-27 14 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from Consolidated Balance Sheet As Of 12/31/96, Consolidated Statement of Income For The Year Ended 12/31/96 and is qualified in its entirety by reference to such financial statements. 1,000,000 YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 761 0 1,509 24 883 3,480 3,795 1,952 7,596 2,445 1,695 288 0 0 2,216 7,596 5,438 5,438 3,009 3,009 376 5 133 793 218 575 94 0 0 669 2.46 2.41 For "Other Costs and Expenses", Ref #5-03(b)3 - Included R & D expense and goodwill amortization.
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