8-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported) October 3, 2006

Baxter International Inc.

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation)

1-4448	36-0781620
(Commission File Number)	(IRS Employer Identification No.)
One Baxter Parkway, Deerfield, Illinois	60015-4633
(Address of principal executive offices)	(Zip Code)

(847) 948-2000

(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

     o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

     o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

     o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

     o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

Item 1.01. Entry into a Material Definitive Agreement.

     On October 3, 2006, the Board of Directors of Baxter International Inc. (the “Company”) approved amendments to the Company’s Non-Employee Director Compensation Plan and the Directors’ Deferred Compensation Plan (collectively, the “Plans”). As a result of these amendments, effective January 1, 2007, the annual retainer paid to the directors will be increased from $45,000 to $50,000, the fee paid for each Board and committee meeting attended will be increased from $1,000 to $1,500 and the additional fee for each committee meeting chaired by a director will be increased from $1,000 to $1,500. In addition, effective May 2007, directors will receive annual awards of restricted stock units instead of restricted stock and will have the option of deferring the receipt of the shares of stock underlying such restricted stock units until the earlier of three years from the grant date or termination from service as a director. Copies of the Plans, as amended, are filed as Exhibits 10.1 and 10.2 hereto and are incorporated herein by reference.

Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

     On October 3, 2006 and effective thereon, the Board of Directors of the Company approved amendments to the Company’s Bylaws, as amended, to implement majority voting in the election of directors in uncontested elections, beginning with the next election of directors. Previously, directors were elected under a plurality vote standard. These amendments include the addition of a new section 2(g) in Article 1 as well as the deletion of the plurality standard from the third sentence of Section 3 of Article 1.

     A copy of the Company’s Bylaws, as amended, is attached hereto as Exhibit 3.1 and is incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits.

     (d) Exhibits.

3.1	Bylaws of Baxter International Inc., as amended on September 24, 2004 and October 3, 2006.
10.1	Baxter International Inc. Non-Employee Director Compensation Plan, as amended.
10.2	Baxter International Inc. Directors’ Deferred Compensation Plan, as amended.

SIGNATURES

Pursuant to the requirements 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.
By:	/s/ David P. Scharf
	David P. Scharf
	Corporate Vice President, Associate General Counsel and Corporate Secretary

Date: October 4, 2006

Exhibit Index

Exhibit No.	Description
3.1	Bylaws of Baxter International Inc., as amended on September 24, 2004 and October 3, 2006.
10.1	Baxter International Inc. Non-Employee Director Compensation Plan, as amended.
10.2	Baxter International Inc. Directors’ Deferred Compensation Plan, as amended.

EX-3.1

Exhibit 3.1

As Amended October 3, 2006

BAXTER INTERNATIONAL INC.
BYLAWS

ARTICLE I
STOCKHOLDERS

SECTION 1. PLACE OF HOLDING MEETINGS. All meetings of the stockholders shall be held at the office of the Corporation in Deerfield, Illinois, or such other place as shall be determined by the Board of Directors.

SECTION 2. ELECTION OF DIRECTORS.

          (a) The annual meeting of stockholders for the election of directors and the transaction of other business shall be held at such time and date as shall be determined by the Board of Directors.

          (b) Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation, except as may be otherwise provided in the Certificate of Incorporation of the Corporation with respect to the right of holders of preferred stock of the Corporation to nominate and elect a specified number of directors in certain circumstances. Nominations of persons for election to the Board of Directors may be made at any annual meeting of stockholders, or at any special meeting of stockholders called for the purpose of electing directors, (i) by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (ii) by any stockholder of the Corporation (A) who is a stockholder of record on the date of the giving of the notice provided for in this Section 2 and on the record date for the determination of stockholders entitled to vote at such meeting and (B) who complies with the notice procedures set forth in this Section 2.

          (c) In addition to any other applicable requirements, for a nomination to be made by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Corporate Secretary of the Corporation.

          (d) To be timely, a stockholder’s notice to the Corporate Secretary must be delivered to or mailed and received at the principal executive offices of the Corporation (i) in the case of an annual meeting, not less than sixty (60) days nor more than ninety (90) days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within thirty (30) days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was

made, whichever occurs first, and (ii) in the case of a special meeting of stockholders called for the purpose of electing directors, not later than the close of business on the tenth (10th) day following the day on which notice of the date of the special meeting was mailed or public disclosure of the date of the special meeting was made, whichever occurs first.

          (e) To be in proper written form, a stockholder’s notice to the Corporate Secretary must set forth (i) as to each person whom the stockholder proposes to nominate for election as a director (A) the name, age, business address and residence address of the person, (B) the principal occupation or employment of the person, (C) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by the person and (D) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder; and (ii) as to the stockholder giving the notice (A) the name and record address of such stockholder, (B) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such stockholder, (C) a description of all arrangements or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such stockholder, (D) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice and (E) any other information relating to such stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected.

          (f) No person shall be eligible for election as a director of the Corporation, at any annual meeting of stockholders or at any special meeting of stockholders called for the purpose of electing directors, unless nominated in accordance with the procedures set forth in this Section 2. If the chairman of the meeting determines that a nomination was not made in accordance with the foregoing procedures, the chairman shall declare to the meeting that the nomination was defective and such defective nomination shall be disregarded.

          (g) Except as provided by the Certificate of Incorporation, each director shall be elected by the vote of the majority of the votes cast with respect to that director’s election at any meeting for the election of directors at which a quorum is present, provided that if the number of nominees at any such meeting exceeds the number of directors to be elected at the meeting, the directors shall be elected by the vote of a plurality of the shares represented in person or by proxy at any such meeting and entitled to vote on the election of directors. For purposes of this Section, a majority of the votes cast means that the number of shares voted “for” a director must exceed the number of

votes cast “against” that director. If a nominee for director is not elected and that nominee is an incumbent director, the director shall promptly tender his or her resignation to the Board, subject to the Board’s acceptance. The Corporate Governance Committee will make a recommendation to the Board on whether to accept or reject the resignation, or whether other action should be taken. The Board will act on the tendered resignation, taking into account the Corporate Governance Committee’s recommendation, and publicly disclose its decision and the rationale behind it within 90 days from the date of the certification of the election results. The director who tenders his or her resignation will not participate in the decision of the Board or the Corporate Governance Committee.

SECTION 3. VOTING. Each stockholder entitled to vote in accordance with the terms of the Certificate of Incorporation, these Bylaws or Delaware law shall, unless the Certificate of Incorporation or Delaware law otherwise provides, be entitled to one vote, in person or by proxy, for each share of stock entitled to vote held by such stockholder, but no proxy shall be voted after three years from its date unless such proxy provides for a longer period. The vote for directors, and upon the demand of any stockholder, the vote upon any question before the meeting, shall be by ballot. Except for the election of directors, all matters shall be decided by the affirmative vote of a majority of shares present in person or represented by proxy at any meeting duly called and entitled to vote thereat, except as otherwise provided by the Certificate of Incorporation or Delaware law.

The Corporate Secretary shall prepare and make, at least ten days before each meeting of stockholders, a complete list of the stockholders in either hard copy or electronic format, entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours at the office of the Corporation in Deerfield, Illinois, for a period of at least ten days prior to the meeting. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present.

SECTION 4. QUORUM. Except as provided in the next section hereof, any number of stockholders together holding a majority of the stock issued and outstanding and entitled to vote thereat, who shall be present in person or represented by proxy at any meeting duly called, shall constitute a quorum for the transaction of business.

SECTION 5. ADJOURNMENT OF MEETINGS. If less than a quorum shall be in attendance at any time for which the meeting shall have been called, the meeting may, after the lapse of at least half an hour, be adjourned from time to time by a majority of the stockholders present or represented and entitled to vote thereat. If notice of such adjourned meeting is sent to the stockholders entitled by statute to receive the same, and such notice contains a statement of the purpose of the meeting, that the previous meeting failed for lack of a quorum, and that under the provisions of this Section it is proposed to hold the adjourned meeting with a quorum of those present, then any number of stockholders, in person or by proxy, shall constitute a quorum at such meeting unless otherwise provided by statute.

SECTION 6. SPECIAL MEETINGS: HOW CALLED. Special meetings of the stockholders for any purpose or purposes may be called only (a) by the Chairman of the Board, the Chief Executive Officer or the Corporate Secretary, and shall be called by the Chairman of the Board, the Chief Executive Officer or the Corporate Secretary upon a request in writing therefor, stating the purpose or purposes thereof, delivered to the Chairman of the Board, the Chief Executive Officer or the Corporate Secretary, signed by a majority of the directors or (b) by resolution of the directors.

SECTION 7. NOTICE OF STOCKHOLDERS’ MEETINGS. Written or printed notice stating the time and place of regular or special meetings of the stockholders and the general nature of the business to be considered shall be mailed by the Corporate Secretary, or such other officer as the Board of Directors may designate, to each stockholder entitled to vote thereat at such stockholder’s address as it appears on the records of the Corporation, at least twenty (20) days but not more than sixty (60) days before the date of such meeting.

SECTION 8. CONDUCT OF THE MEETINGS.

          (a) The chairman of the meeting shall have absolute authority over matters of procedure and there shall be no appeal from the ruling of the chairman. If the chairman, in his or her absolute discretion, deems it advisable to dispense with the rules of parliamentary procedure as to any one meeting of stockholders or part thereof, the chairman shall so state and shall clearly state the rules under which the meeting or appropriate part thereof shall be conducted.

          (b) If disorder should arise which prevents continuation of the legitimate business of the meeting, the chairman may quit the chair and announce the adjournment of the meeting; and upon his or her doing so, the meeting is immediately adjourned.

          (c) The chairman may ask or require that anyone not a bona fide stockholder or proxy leave the meeting.

          (d) A resolution or motion shall be considered for vote only if (i) proposed by a stockholder or duly authorized proxy, and seconded by an individual, who is a stockholder or a duly authorized proxy, other than the individual who proposed the resolution and (ii) all other requirements under law, the Corporation’s Certificate of Incorporation, these Bylaws or otherwise, for consideration of such a resolution or motion have been duly satisfied as determined by the chairman in his or her absolute discretion, from which there shall be no appeal.

SECTION 9. ANNUAL MEETINGS.

          (a) No business may be transacted at an annual meeting of stockholders, other than business that is either (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof), (ii) otherwise properly brought before the annual meeting by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (iii)

otherwise properly brought before the annual meeting by any stockholder of the Corporation (A) who is a stockholder of record on the date of the giving of the notice provided for in this Section 9 and on the record date for the determination of stockholders entitled to vote at such annual meeting and (B) who complies with the notice procedures set forth in this Section 9.

          (b) In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Corporate Secretary of the Corporation, which notice is not withdrawn by such stockholder at or prior to such annual meeting.

          (c) To be timely, a stockholder’s notice to the Corporate Secretary must be delivered to or mailed and received at the principal executive offices of the Corporation not less than sixty (60) days nor more than ninety (90) days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within thirty (30) days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever occurs first.

          (d) To be in proper written form, a stockholder’s notice to the Corporate Secretary must set forth as to each matter such stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and record address of such stockholder, (iii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such stockholder, (iv) a description of all arrangements or understandings between such stockholder and any other person or persons (including their names) in connection with the proposal of such business by such stockholder and any material interest of such stockholder in such business and (v) a representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting.

          (e) No business shall be conducted at the annual meeting of stockholders except business brought before the annual meeting in accordance with the procedures set forth in this Section 9, provided, however, that, once business has been properly brought before the annual meeting in accordance with such procedures, nothing in this Section 9 shall be deemed to preclude discussion by any stockholder of any such business. If the chairman of the annual meeting determines that business was not properly brought before the annual meeting in accordance with the foregoing procedures, the chairman shall declare to the meeting that the business was not properly brought before the meeting and such business shall not be transacted.

ARTICLE II
DIRECTORS

SECTION 1. QUALIFICATION AND QUORUM. No person shall be eligible for election or appointment as a director who, at the time of his election or appointment is 72 years old, or older.

One-third of the total number of directors (rounded upwards, if necessary, to the next whole number) shall constitute a quorum for the transaction of business at any meeting of the Board of Directors. If at any meeting of the Board of Directors there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time until a quorum is obtained, and no further notice thereof need to be given other than by announcement at said meeting which shall be so adjourned. The Board of Directors may also transact business without a meeting if all members of the Board of Directors consent thereto in writing.

SECTION 2. FIRST MEETING. The newly elected directors may hold their first meeting for the purpose of organization and the transaction of business if a quorum be present, immediately after the annual meeting of the stockholders; or the time and place of such meeting may be fixed by consent in writing of all the directors.

SECTION 3. ELECTION OF OFFICERS. At the first meeting or at any subsequent meeting called for the purpose, the directors shall elect a Chairman of the Board from their number, and a Chief Executive Officer, a President, one or more Executive Vice Presidents, one or more Senior Vice Presidents, one or more Corporate Vice Presidents, one or more Vice Presidents, a Treasurer, a Corporate Secretary, and one or more Assistant Corporate Secretaries, who need not be directors. Such officers shall hold office until the next annual election of officers, and until their successors are elected and qualified.

SECTION 4. SPECIAL MEETINGS: HOW CALLED: NOTICE. Special meetings of the Board of Directors may be called by the Chairman of the Board, the Chief Executive Officer, the President or the Corporate Secretary on the written request of any two directors on twenty-four (24) hours notice to each director. Such notice, which need not specify the purpose of the meeting or the matters to be considered thereat, may be given as provided in Article VIII, personally (including by telephone) or by electronic transmission or other written communication delivered to the residence or office of the director. Such personal notice or written communication shall be effective when delivered.

SECTION 5. PLACE OF MEETING. The directors may hold their meetings and have one or more offices, and keep the books of the Corporation, outside the State of Delaware, at any office or offices of the Corporation, or at any place as they may from time to time by resolution determine.

SECTION 6. GENERAL POWERS OF DIRECTORS. The Board of Directors shall have the management of the business of the Corporation, and subject to the restrictions

imposed by law, by the Certificate of Incorporation, or by these Bylaws, may exercise all the powers of the Corporation, including any powers incidental thereto.

SECTION 7. COMPENSATION OF DIRECTORS. Directors shall not receive any stated salary for their services as directors, but by resolution of the Board of Directors a fixed fee may be paid together with expenses for attendance at meetings. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity as an officer, agent or otherwise, and receiving compensation therefor.

ARTICLE III
COMMITTEES

SECTION 1. The Board of Directors shall create an Audit Committee, a Compensation Committee, a Finance Committee, a Corporate Governance Committee, and a Public Policy Committee, and may create such other committees as the Board of Directors, from time to time, deems desirable. Each committee shall consist of three or more of the directors of the Corporation and, to the extent provided in the resolutions creating the committees or in these Bylaws, shall have the powers of the Board of Directors in the management of the business and affairs of the Corporation.

SECTION 2. The Audit Committee shall consist solely of three or more directors, each of whom is qualified to serve on the Audit Committee pursuant to the requirements of the New York Stock Exchange and each of whom shall satisfy the independence requirements of the Corporation’s Corporate Governance Guidelines. All members of the Committee will be financially literate, or will become financially literate within a reasonable period of time after appointment to the Committee. In addition, either (i) at least one member of the Committee must qualify as an “audit committee financial expert” under the rules of the Securities and Exchange Commission or (ii) the Audit Committee must advise the Corporation that none of its members so qualifies.

The primary purpose of the Audit Committee is to assist the Board of Directors in fulfilling its oversight responsibilities. The Committee will review the Corporation’s financial reporting process (including the integrity of its financial statements), system of internal control, internal and external audit process (including the qualifications, independence and performance of the independent auditor) and the process for monitoring compliance with laws and regulations. The Committee will also issue the report required to be included in the Corporation’s annual proxy statement pursuant to the rules of the Securities and Exchange Commission. The responsibilities and authority of the Audit Committee are set forth in detail in the Charter of the Audit Committee established by the Board of Directors.

SECTION 3. The Compensation Committee shall consist of three or more directors, all of whom shall satisfy the independence requirements of the New York Stock Exchange and the Corporation’s Corporate Governance Guidelines, and any other qualification requirements specified in the Charter of the Compensation Committee established by the Board of Directors (the “Compensation Committee Charter”).

The Compensation Committee shall discharge the responsibilities of the Board of Directors relating to employee benefit plans and the compensation of the Corporation’s executives and shall produce an annual report on executive compensation for inclusion in the Corporation’s proxy statement in accordance with applicable rules and regulations. The specific responsibilities and authority of the Compensation Committee are set forth in detail in the Compensation Committee Charter.

SECTION 4. The Finance Committee shall consist of three or more directors, a majority of whom shall satisfy the independence requirements of the New York Stock Exchange and the Corporation’s Corporate Governance Guidelines.

The Finance Committee shall exercise the power and authority of the Board of Directors, and assist the Board of Directors in fulfilling its responsibilities, in connection with the financial affairs of the Corporation, as follows:

The Finance Committee shall:

          (a) have the authority to approve, without further action by the Board of Directors: (i) financing proposals, including loans and securities offerings involving not more than $100 million, and matters relating thereto, and (ii) proposed capital expenditures, acquisitions, divestitures, partnerships, strategic alliances involving the purchase or sale of a security, and other similar transactions involving a commitment by the Corporation of more than $10 million, but not more than $50 million (including the issue of the Corporation’s common stock in connection with such transactions); and

          (b) review the following and, when appropriate, report or make recommendations to the Board of Directors: (i) annual, quarterly or extraordinary dividend proposals, (ii) financing proposals involving more than $100 million, (iii) results of the management of pension assets and the reasonableness of the major actuarial assumptions which impact the funding of the pension benefits, and (iv) proposed capital expenditures, acquisitions, divestitures, partnerships, strategic alliances involving the purchase or sale of a security, and other similar transactions involving a commitment by the Corporation of more than $50 million.

          (c) exercise such other authority and duties as shall be assigned or granted to it from time to time by the Board of Directors or as may be further set forth in the Charter of the Finance Committee established by the Board of Directors.

SECTION 5. The Corporate Governance Committee shall consist of three or more directors, all of whom shall satisfy the independence requirements of the New York Stock Exchange and the Corporation’s Corporate Governance Guidelines, and any other qualification requirements specified in the Charter of the Corporate Governance Committee established by the Board of Directors (the “Corporate Governance Committee Charter”).

The Corporate Governance Committee shall assist and advise the Board of Directors and make recommendations to the Board of Directors on corporate governance and general organization and planning matters. The Committee’s responsibilities will include

identifying qualified individuals to become members of the Board of Directors; selecting and recommending that the Board of Directors approve the Director nominees for the next Annual Meeting of Stockholders; determining Board committee structure and membership; and developing, renewing, revising and recommending to the Board of Directors as appropriate the Corporation’s Corporate Governance Guidelines. The specific responsibilities and authority of the Corporate Governance Committee are set forth in detail in the Corporate Governance Committee Charter.

SECTION 6. The Public Policy Committee shall consist of three or more directors of the Corporation, a majority of whom shall satisfy the independence requirements of the New York Stock Exchange and the Corporation’s Corporate Governance Guidelines.

The Public Policy Committee shall review the policies and practices of the Corporation to assure that they are consistent with the Corporation’s social responsibility to act as a global corporate citizen to employees, to customers, and to society. The specific responsibilities and authority of the Public Policy Committee are set forth in detail in the Charter of the Public Policy Committee established by the Board of Directors.

SECTION 7. The following provisions shall apply to all committees of the Board of Directors:

          (a) Any power or authority granted to a committee by these Bylaws may also be exercised by the Board of Directors, subject to the requirements of the New York Stock Exchange, these Bylaws, or Delaware law.

          (b) The Board of Directors shall appoint the members and chairperson of each committee. The members shall serve until their successors are appointed and qualified or until the committee is dissolved by a majority of the whole Board of Directors.

          (c) Meetings of a committee may be called by any member thereof, the Chairman of the Board, the Chief Executive Officer, the President, the Corporate Secretary, or any Assistant Corporate Secretary upon twenty-four (24) hours notice to each member stating the place, date, and hour of the meeting, which notice may be written or oral. If mailed, the notice shall be deemed to be delivered when deposited in the United States mail, addressed to the member of the committee at his or her business address, provided it is mailed four (4) days prior to the meeting. Any member of a committee may waive notice of any meeting and no notice of any meeting need be given to any member thereof who attends in person. The notice of a meeting of a committee need not state the business proposed to be transacted at the meeting.

          (d) The lesser of a majority of the members or two members of a committee shall constitute a quorum for the transaction of business at any meeting thereof and action of a committee must be authorized by the affirmative vote of a majority of the members present at a meeting at which a quorum is present.

          (e) Any action that may be taken by a committee at a meeting may be taken without a meeting if a consent in writing, setting forth the action so to be taken,

shall be signed by all of the members of a committee and filed with the minutes of the committee, which action shall be effective as of the date stated in such consent.

          (f) Each committee shall report its actions and recommendations to the Board at the next meeting of the Board following each Committee meeting.

          (g) The Board of Directors shall have the power at any time to change the membership of a committee and to fill any vacancies in it, subject to the membership requirements of the committee. Any vacancy on a committee may be filled by a resolution adopted by a majority of the Board of Directors.

          (h) Any member of a committee may be removed at any time with or without cause by resolution adopted by a majority of the Board of Directors.

          (i) The chairman of the committee shall, if present, preside at all meetings of a committee. A committee may fix its own rules of procedure which shall not be inconsistent with these Bylaws. Each committee shall keep regular minutes of its proceedings.

          (j) The Chairman of the Board, Chief Executive Officer and the President shall act in an advisory capacity to all committees.

ARTICLE IV
OFFICERS

SECTION 1. The officers of the Corporation shall include, when and if designated by the Board of Directors, a Senior Chairman, a Chairman of the Board, a Chief Executive Officer, a President, one or more Executive Vice Presidents, one or more Senior Vice Presidents, one or more Corporate Vice Presidents, one or more Vice Presidents, a Corporate Secretary, one or more Assistant Corporate Secretaries, a Treasurer, and such other officers as may from time to time be elected or appointed by the Board of Directors. Any one person may hold any number of offices of the Corporation unless specifically prohibited therefrom by law.

SECTION 2. SENIOR CHAIRMAN. The Senior Chairman shall, in the absence of the Chairman of the Board, the Chief Executive Officer and the President, preside at all meetings of the stockholders and the Board of Directors. In addition, the Senior Chairman shall advise the Chief Executive Officer and the President on matters of long and short term strategic planning, policy and other major matters affecting the Corporation and shall have such duties, authority and responsibilities as the Chief Executive Officer, the President or the Board of Directors shall designate from time to time.

SECTION 3. CHAIRMAN OF THE BOARD. The Chairman of the Board, if any, shall be an officer of the Corporation and, subject to the direction of the Board of Directors, shall perform such executive, supervisory and management functions and duties as may be assigned to him or her from time to time by the Board of Directors. The Chairman of the Board shall, when present, preside at all meetings of the stockholders and of the Board of

Directors. He or she shall act as spokesman for the Board of Directors and as a liaison between the Board of Directors and the Corporation. The Chairman of the Board shall perform all other duties commonly incident to this office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from time to time

SECTION 4. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall have responsibility for the management of the Corporation, including the general supervision and control of all the business and affairs of the Corporation, and shall have such other powers and duties as may be assigned to him or her from time to time by the Board of Directors. The Chief Executive Officer shall, in the absence of the Chairman of the Board, preside at all meetings of the stockholders and of the Board of Directors. The Chief Executive Officer shall participate in long range planning for the Corporation. He or she may sign shares of the Corporation, any deeds, mortgages, bonds, contracts or other instruments which the Board of Directors has authorized to be executed, or which are in the ordinary course of business of the Corporation. The Chief Executive Officer may vote, either in person or by proxy, all the shares of the capital stock of any company which the Corporation owns or is otherwise entitled to vote at any and all meetings of the stockholders of such company and shall have the power to accept or waive notice of such meetings. The Chief Executive Officer shall perform other duties commonly incident to this office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from time to time.

SECTION 5. PRESIDENT. The President shall have such duties and authority as the Chief Executive Officer may determine from time to time. In the absence or disability of the Chief Executive Officer, the President shall exercise all powers and discharge all of the duties of the Chief Executive Officer, including the general supervision and control of all the business and affairs of the Corporation. The President shall, in the absence of the Chairman of the Board and the Chief Executive Officer, preside at all meetings of stockholders and the Board of Directors. The President may sign any deeds, mortgages, bonds, contracts or other instruments which the Board of Directors has authorized to be executed or which are in the ordinary course of business of the Corporation. The President may vote, either in person or by proxy, all the shares of the capital stock of any company which the Corporation owns or is otherwise entitled to vote at any and all meetings of the stockholders of such company and shall have the power to accept or waive notice of such meetings. The President shall perform all other duties commonly incident to this office and shall also perform such other duties and have such powers as the Chief Executive Officer shall designate from time to time.

SECTION 6. VICE PRESIDENT. In the absence or disability of the Chief Executive Officer and the President, the functions of the Chief Executive Officer shall be performed by the Executive Vice President who was first elected to that office and who is not then absent or disabled, or, if none, the Senior Vice President who was first elected to that office and who is not then absent or disabled, or, if none, the Corporate Vice President who was first elected to that office and who is not then absent or disabled, or, if none, the Vice President who was first elected to that office and who is not then absent or disabled.

Each Executive Vice President, Senior Vice President, Corporate Vice President and Vice President shall have such powers and shall discharge such duties as may be assigned to him or her from time to time by the Chief Executive Officer or the President and may sign any deeds, mortgages, bonds, contracts or other instruments which the Board of Directors has authorized to be executed or which are in the ordinary course of business. Each Executive Vice President, Senior Vice President, Corporate Vice President and Vice President may vote, either in person or by proxy, all the shares of the capital stock of any company which the Corporation owns or is otherwise entitled to vote at any and all meetings of the stockholders of such company and shall have the power to accept or waive notice of such meetings. Each Vice President shall perform all other duties commonly incident to this office and shall also perform such other duties and have such powers as the Chief Executive Officer or President shall designate from time to time.

SECTION 7. CORPORATE SECRETARY. The Corporate Secretary shall give, or cause to be given, notice of all meetings of stockholders and directors, and all other notices required by law or by these Bylaws, and in the case of his or her absence or refusal or neglect so to do, any such notice may be given by any person thereunto directed by the Chief Executive Officer or the directors, upon whose requisition the meeting is called as provided in these Bylaws. The Corporate Secretary shall record all the proceedings of the meetings of the stockholders and of the directors in a book to be kept for that purpose, and shall perform such other duties as may be assigned to him or her by the Board of Directors, the Chief Executive Officer or the President. The Corporate Secretary shall have the custody of the seal of the Corporation and shall affix the same to all instruments requiring it, when authorized by the Board of Directors, the Chief Executive Officer or the President, and attest the same. The Corporate Secretary shall have charge of the original stock books, transfer books and stock ledgers, and act as transfer agent in respect of the stock and the securities of the Corporation in the absence of designation by the Board of Directors of a corporate transfer agent, and shall perform all of the other duties incident to the office of Corporate Secretary. The Corporate Secretary may vote, either in person or by proxy, all the shares of the capital stock of any company which the Corporation owns or is otherwise entitled to vote at any and all meetings of the stockholders of such company and shall have the power to accept or waive notice of such meetings.

SECTION 8. ASSISTANT CORPORATE SECRETARY. Each Assistant Corporate Secretary shall have such powers and perform such duties as shall be assigned to him or her by the directors or delegated to him by the Corporate Secretary, and in the absence or inability of the Corporate Secretary to act, shall have the same general powers as the Corporate Secretary.

SECTION 9. TREASURER. The Treasurer shall perform such duties as shall be delegated to him by the Board of Directors.

ARTICLE V
RESIGNATIONS; FILLING OF VACANCIES;
INCREASE OF NUMBER OF DIRECTORS

SECTION 1. RESIGNATIONS. Any director, member of a committee or other officer may resign at any time. Such resignations shall be made in writing and shall take effect at the time specified therein and, if no time be specified, at the time of the receipt of such resignation by the Chairman of the Board, the Chief Executive Officer, the President or the Corporate Secretary. The acceptance of the resignation shall not be necessary to make it effective.

SECTION 2. FILLING OF VACANCIES. If the office of any member of a committee or other officer becomes vacant, the vacancy may be filled only by the remaining directors in office, although less than a quorum, who, by a majority vote, may appoint any qualified person to fill such vacancy. Except as set forth below, any vacancy on the Board of Directors may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. A person appointed to fill a vacancy shall hold office for the unexpired term and until his or her successor shall have been elected and qualified.

SECTION 3. INCREASE IN NUMBER OF DIRECTORS. The number of directors may be increased or decreased at any time by the affirmative vote of a majority of the directors at a regular meeting or a special meeting called for that purpose. Any vacancy on the Board of Directors that results from an increase in the number of directors may be filled by a majority of the directors then in office. These additional directors may be chosen at such meeting to hold office until the next election of the class for which such directors have been chosen and until their successors have been elected and qualified.

ARTICLE VI
CAPITAL STOCK

SECTION 1. CERTIFICATES OF STOCK. Certificates of stock, numbered and with the seal of the Corporation affixed, signed by the Chief Executive Officer, the President or any Vice President, and the Corporate Secretary or an Assistant Corporate Secretary, shall be issued to each stockholder certifying the number of shares owned by such stockholder in the Corporation. Any of or all the signatures on these certificates may be facsimile. In case any officer or transfer agent who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer or transfer agent before such certificate is issued, it may be issued by the Corporation with the same effect as if he or she were such officer or transfer agent at the date of issue unless otherwise provided in accordance with Delaware law.

SECTION 2. LOST, STOLEN OR DESTROYED CERTIFICATES. A new certificate of stock may be issued in the place of any certificate theretofore issued by the Corporation, alleged to have been lost, stolen or destroyed, and the directors may, in their discretion, require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to give the Corporation a bond, in such sum as they may direct, sufficient to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.

SECTION 3. TRANSFER OF SHARES. The shares of stock of the Corporation shall be transferable only upon its books by the holders thereof in person or by their duly authorized attorneys or legal representatives, and upon such transfer the old certificates shall be surrendered to the Corporation by the delivery thereof to the person in charge of the stock and transfer books and ledgers, or to such other person as the directors may designate, by whom they shall be canceled, and new certificates shall thereupon be issued. A record shall be made of each transfer, and whenever a transfer shall be made for collateral security, and not absolutely, it shall be so expressed in the entry of the transfer.

SECTION 4. DETERMINATION OF RECORD DATE.

          (a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action.

          (b) If no record date is fixed:

               (1) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.

               (2) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

          (c) A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

SECTION 5. DIVIDENDS. Subject to the provisions of the Certificate of Incorporation, if any, and Delaware law, the directors may declare dividends upon the capital stock of the Corporation as and when they deem expedient. Before declaring any dividend there may be set apart out of any funds of the Corporation available for dividends, such sum or sums as the directors from time to time in their discretion think proper for working capital or as a reserve fund to meet contingencies or for equalizing dividends, or for such other purposes as the directors shall think conducive to the interests of the Corporation.

ARTICLE VII
AMENDMENTS

SECTION 1. AMENDMENTS OF BYLAWS. The stockholders by the affirmative vote of the holders of the majority of the stock issued and outstanding, or the directors by the affirmative vote of a majority of the directors present at any meeting, may amend or alter any of these Bylaws, provided the substance of the proposed amendment shall have been stated in the notice of the meeting.

ARTICLE VIII
MISCELLANEOUS PROVISIONS

SECTION 1. CORPORATE SEAL. The corporate seal of the Corporation shall be circular in form and shall contain the name of the Corporation, and the words “Corporate Seal, Delaware”. Said seal may be used by causing it or facsimile thereof to be impressed or affixed or reproduced or otherwise.

SECTION 2. FISCAL YEAR. The fiscal year of the Corporation shall be the calendar year.

SECTION 3. PRINCIPAL OFFICE. The registered office shall be established and maintained at the office of The Corporation Trust Company, in the City of Wilmington and County of New Castle, and such company shall be the registered agent of this Corporation.

SECTION 4. BANK ACCOUNTS, CHECKS, DRAFTS, NOTES. The Corporation shall maintain such bank accounts and checks upon such accounts shall be signed and/or countersigned by such officers as may be designated by resolution of the Board of Directors. Notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or officers, agent or agents of the Corporation, and in such manner as shall from time to time be determined by resolution of the Board of Directors.

SECTION 5. NOTICE AND WAIVER OF NOTICE. Whenever any notice is required by these Bylaws to be given, personal notice is not meant unless expressly so stated, and any notice so required shall be deemed to be sufficient if given by any of the following means:

          (a) given by depositing the same in a post office box in a sealed post paid wrapper, addressed to the person entitled thereto at his last known post office address, and such notice shall be deemed to have been given on the day of such mailing;

          (b) given by facsimile telecommunication, when directed to a number at which the recipient has consented to receive notice; or

          (c) given by electronic mail, when directed to an electronic mail address at which the recipient has consented to receive notice.

Without limiting the manner by which notice may be given effectively to stockholders, any notice to stockholders given by the Corporation shall be effective if given by a single written notice to stockholders who share an address if consented to by the stockholders at that address to whom such notice is given.

Any notice required to be given under these Bylaws may be waived by the person entitled thereto. Stockholders not entitled to vote shall not be entitled to receive notice of any meetings except as otherwise provided by statute.

SECTION 6. CERTAIN PURCHASES BY THE CORPORATION OF OUTSTANDING SHARES OF ITS COMMON STOCK.

          (a) Vote Required for Certain Purchases. Except as set forth in subsection (b) of this Section 6, in addition to any vote of the Corporation’s stockholders required by law, the Corporation’s Certificate of Incorporation or these Bylaws, the affirmative vote of the holders of not less than a majority of the Voting Stock (as defined below) of the Corporation shall be required before the Corporation may purchase any outstanding shares of Common Stock of the Corporation at a price known by the Corporation to be above Market Price (as defined below) from a person known by the Corporation to be a Selling Stockholder (as defined below). Such affirmative vote will be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law or any agreement with any national securities exchange.

          (b) When a Vote is Not Required. The provisions of subsection (a) of this Section 6 will not apply to:

               (i) any purchase or other acquisition of securities made as part of a tender or exchange offer by the Corporation to purchase securities of the same class made on the same terms to all holders of such securities and complying with the applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder;

               (ii) any purchase or acquisition made pursuant to an open market purchase program approved by the Board of Directors; or

               (iii) any purchase or acquisition which is approved by the vote of a majority of the directors then in office and which is made at no more than the Market Price, on the date that the understanding between the Corporation and the Selling Stockholder is reached with respect to such purchase (whether or not such purchase is made or a written agreement relating to such purchase is executed on such date), of shares of the Common Stock of the Corporation to be purchased.

          (c) Certain Definitions. For purposes of this Section 6, the following terms are defined as follows:

               (i) “Voting Stock” means the outstanding shares of capital stock of the Corporation entitled to vote in elections of directors of the Corporation considered as one class.

               (ii) “Market Price” means the highest closing sale price, during the

30-day period immediately preceding the date of the making of such purchase agreement, of a share of the Common Stock of the Corporation on the Composite Tape for the New York Stock Exchange. If such stock is not quoted on the Composite Tape or is not listed on the New York Stock Exchange, then such price during the 30-day period on the principal United States securities exchange registered under the Exchange Act on which such stock is listed. If such stock is not listed on any such exchange, then the highest closing bid quotation with respect to a share of such stock during the 30-day period on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use. If no such quotations are available, the fair market value on the date in question of a share of such stock.

               (iii) “Selling Stockholder” means and includes any person (other than the Corporation, any of its Subsidiaries, any benefit plan or trust of or for the benefit of the Corporation or any of its Subsidiaries, or any trustee, agent or other representative of any of the foregoing) who or which is the beneficial owner of in the aggregate five percent (5%) or more of the outstanding shares of Common Stock of the Corporation and who or which has purchased or agreed to purchase any of such shares within the most recent two-year period. For purposes of determining whether a person is a Selling Stockholder, the number of shares of Common Stock deemed to be outstanding and the number of shares beneficially owned by the person shall include shares respectively deemed owned through application of Article VIII, Section 6(c)(v), but shall not include any other shares of Common Stock which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise.

               (iv) A “person” means any individual, firm, partnership, corporation or other entity (including, without limitation, a “group” within the meaning of Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder).

               (v) A person shall be the “beneficial owner” of any shares of Common Stock of the Corporation:

                    (A) which such person or any of its Affiliates or Associates (as defined below) beneficially owns, directly or indirectly; or

                    (B) which such person or any of its Affiliates or Associates has (1) the right to acquire (whether such right is conditional or exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (2) the right to vote pursuant to any agreement, arrangement or understanding; or

                    (C) which are beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing thereof.

               (vi) The terms “Affiliate” and “Associate” have the respective meanings ascribed to such terms in Rule 12b-2 of the rules and regulations under the Exchange Act.

               (vii) “Subsidiary” means any corporation, at least a majority of the outstanding securities of which having ordinary voting power to elect a majority of the board of directors of such corporation (whether or not any other class of securities has or might have voting power by reason of the happening of a contingency) is at the time owned or controlled directly or indirectly by the Corporation and/or one or more Subsidiaries.

          (d) Fiduciary Duty of Selling Stockholder. Nothing contained in this Section 6 shall be construed to relieve any Selling Stockholder or any other person from any fiduciary obligation imposed by law.

          (e) Interpretations. The Board of Directors of the Corporation has the power to construe and interpret this Section 6, including, without limitation, (i) whether a person is a Selling Stockholder, (ii) whether a person is an Affiliate or Associate of another, (iii) whether this Section 6 is applicable to a proposed transaction, (iv) what is the Market Price and whether a price is above Market Price, and (v) when or whether a purchase or agreement to purchase any shares of Common Stock of the Corporation has occurred and when or whether a person has become a beneficial owner of any shares of Common Stock of the Corporation. Any decision or action reasonably taken by the Board of Directors of the Corporation in good faith in connection with the interpretation of this Section 6 shall not constitute a violation of and shall be deemed to be in accordance with the terms of this Section 6.

EX-10.1

EXHIBIT 10.1

[Amended]

BAXTER INTERNATIONAL INC.
Non-Employee Director Compensation Plan
adopted May 6, 2003
Terms and Conditions

1.	Purpose
	This Non-Employee Director Compensation Plan (the “Plan”) is adopted by the Board of Directors (the “Board”) of Baxter International Inc. (“Baxter”). This Plan is adopted pursuant to the Baxter International Inc. 2003 Incentive Compensation Program (the “Program”), for the purposes stated in the Program. Capitalized terms defined in the Program that are used without being defined in the Plan will have the same meaning as in the Program.
2.	Participants
	Each member of the Board who is not an employee of Baxter or any of its subsidiaries shall participate in the Plan (a “Participant”).
3.	Restricted Stock

3.1

On the date of Baxter’s annual meeting of stockholders (the “Annual Meeting”) in each year beginning with the Annual Meeting on May 6, 2003, and subject to availability of shares of Common Stock under the Program, each Participant upon completion of the Annual Meeting shall, automatically and without necessity of any action by the Board or any committee thereof, receive the number of shares of Restricted Stock equal to the quotient of (A) $60,000 divided by (B) the Fair Market Value of a share of Common Stock on the date of grant (rounded to the nearest whole number which is a multiple of ten) (the “Annual Restricted Stock Grant Amount”).

3.2

Each Participant elected or appointed on a date other than the date of an Annual Meeting shall, on the date of such election or appointment and automatically and without necessity of any action by the Board or any committee thereof, receive the number of shares of Restricted Stock equal to the product of (A) the Annual Restricted Stock Grant Amount (as defined in Section 3.1, subject to adjustment in accordance with the Program) for the Restricted Stock awarded on the date of the immediately preceding Annual Meeting, multiplied by (B) the quotient of (i) the number of full calendar months before the next Annual Meeting divided by (ii) 12 (rounded to the nearest whole number which is a multiple of ten). The number of shares of Restricted Stock granted under this Section 3.2 shall not exceed the number available under the Program on the date of grant.

3.3	Restricted Stock may not be sold, transferred, assigned, pledged, hypothecated or otherwise encumbered or disposed of, whether voluntarily, involuntarily or by operation of law, until vested pursuant to the terms hereof.
3.4	Subject to Section 11.10 of the Program and except as expressly provided in Sections 3.6 and 3.7, all shares of Restricted Stock shall vest on the date of and immediately prior to the next Annual Meeting following the date of grant.
3.5	Except as provided in Sections 3.6 and 3.7, if a Participant ceases service as a member of the Board before his or her Restricted Stock vests, the Participant will forfeit his or her unvested Restricted Stock immediately upon ceasing service as a member of the Board.
3.6	If a Participant dies while serving as a member of the Board, his or her unvested Restricted Stock will not be forfeited and will be fully vested immediately.
3.7	If a Participant becomes disabled and unable to continue service as a member of the Board, his or her Restricted Stock will not be forfeited and will, when the Participant ceases to serve as member of the Board, be fully vested.
3.8	Each Participant receiving Restricted Stock shall have all of the rights of a stockholder with respect to the shares of Restricted Stock during any period in which the shares of Restricted Stock are subject to forfeiture or restrictions on transfer, including the right to vote the shares of Restricted Stock and to receive dividends and other distributions thereon, unless and until such shares are forfeited pursuant to Section 3.5; provided, however, that a dividend or other distribution with respect to Restricted Stock (including, without limitation, a stock dividend or stock split), other than a cash dividend, shall be delivered to Baxter (and the Participant shall, if requested by Baxter, execute and return one or more irrevocable stock powers related thereto) and shall be subject to the same restrictions as the Restricted Stock with respect to which such dividend or other distribution was made. Cash dividends paid on the Restricted Stock will be reinvested in shares of Common Stock, unless the Participant elects otherwise. Common Stock purchased with reinvested cash dividends shall not be restricted.
3.9	If requested by Baxter, each Participant receiving Restricted Stock shall enter into an agreement with Baxter incorporating the terms and conditions of this Plan. A stock certificate for the shares of Restricted Stock awarded will be issued in the name of each Participant and deposited, together with a stock power endorsed in blank by Participant, with Baxter. Each such certificate shall bear a legend in substantially the following form:

The transferability of this certificate and the shares of Common Stock represented by it are subject to the terms and conditions (including conditions of forfeiture) contained in the Baxter International Inc. Non-Employee Director Compensation Plan

adopted May 6, 2003. A copy of this Plan is available from the Corporate Secretary of Baxter International Inc.

Subject to the terms of the Program, after the Restricted Stock vests, shares of Common Stock free and clear of all restrictions will be delivered to the Participant (or to the Participant’s legal representative, beneficiary or heir).

4. Stock Options

4.1	On the date of Baxter’s Annual Meeting in each year beginning with the Annual Meeting on May 6, 2003, and subject to availability of shares of Common Stock under the Program, upon completion of the Annual Meeting each Participant shall be granted Stock Options having a value equal to $60,000, to be determined by the Board or the Compensation Committee of the Board (the “Committee”) based on a Black-Scholes or other option valuation model in the discretion of the Board or the Committee (rounded to the nearest whole number which is a multiple of ten) (the “Annual Stock Option Grant Amount”).
4.2	Each Participant elected or appointed on a date other than the date of an Annual Meeting shall, on the date of such election or appointment and automatically and without necessity of any action by the Board or any committee thereof, be granted a Stock Option to purchase that number of shares of Common Stock equal to the product of (A) the Annual Stock Option Grant Amount (as defined in Section 4.1, subject to adjustment in accordance with the Program) for each Stock Option granted on the date of the immediately preceding Annual Meeting, multiplied by (B) the quotient of (i) the number of full calendar months before the next Annual Meeting divided by (ii) 12 (rounded to the nearest whole number which is a multiple of ten). The number of shares of Common Stock subject to any Stock Option granted under this Section 4.2 shall not exceed the number available under the Program on the date of grant.
4.3	The purchase price for each share of Common Stock subject to a Stock Option shall be the Fair Market Value of a share of Common Stock on the date of grant. The terms of each Stock Option will be as set forth in this Plan and the Program. To the extent that any provision of the Plan is inconsistent with the Program, the Program shall control. The Stock Options are not intended to qualify as Incentive Stock Options within the meaning of Section 422 of the United States Internal Revenue Code.
4.4	Subject to Section 11.10 of the Program and except as expressly provided in Sections 4.8, 4.9 and 4.10, Stock Options shall first become exercisable on the date of and immediately prior to the next Annual Meeting following the date of grant.
4.5	After a Stock Option becomes exercisable and until it expires, it may be exercised in whole or in part, in the manner specified by the Company. Under no circumstances may a Stock Option be exercised after it has expired. Shares of Common Stock may be used to pay the purchase price for shares of Common Stock to be acquired

	upon exercise of a Stock Option or fulfill any tax withholding obligation, subject to any requirements or restrictions specified by the Company.
4.6	Except as provided in Sections 4.8, 4.9 and 4.10, if a Participant ceases service as a member of the Board before his or her Stock Option becomes exercisable, the Stock Option will expire when the Participant ceases service as a member of the Board.
4.7	If a Participant ceases service as a member of the Board after his or her Stock Option becomes exercisable, the Stock Option will not expire but will remain exercisable. Subject to Sections 4.8, 4.9, 4.10 and 4.11, the Stock Option will expire three months after the Participant ceases service as a member of the Board, unless the Participant dies or becomes disabled during such three month period in which case the Stock Option will expire on the first anniversary of the date the Participant ceased serving as a member of the Board.
4.8	If a Participant dies while serving as a member of the Board, his or her Stock Option will not expire and will remain, or immediately become, fully exercisable, as the case may be. Subject to Sections 4.10 and 4.11, the Stock Option will expire on the first anniversary of the Participant’s death.
4.9	If a Participant becomes disabled and unable to continue service as a member of the Board, his or her Stock Option will not expire and will remain, or when the Participant ceases to serve as member of the Board become, fully exercisable, as the case may be. Subject to Sections 4.10 and 4.11, the Stock Option will expire on the first anniversary of the date the Participant ceases service as a member of the Board.
4.10	If a Participant who has served as a member of the Board for a continuous period of at least ten years or who is at least 72 years of age ceases to serve as a member of the Board (including without limitation by reason of death or disability), his or her Stock Option will not expire and will remain, or when the Participant ceases to serve as member of the Board become, fully exercisable, as the case may be. Subject to Section 4.11, the Stock Option will expire on the fifth anniversary of the date the Participant ceases service as a member of the Board.
4.11	Stock Options that have not previously expired will expire at the close of business on the tenth anniversary of the date of grant. If a Stock Option would expire on a date that is not a Business Day, it will expire at the close of business on the last Business Day preceding that date. A “Business Day” is any day on which the Common Stock is traded on the New York Stock Exchange.
4.12	An exercisable Stock Option may only be exercised by the Participant, his or her legal representative, or a person to whom the Participant’s rights in the Stock Option are transferred by will or the laws of descent and distribution or in accordance with rules and procedures established by the Committee.

5. Cash Compensation

5.1	Baxter shall pay each Participant a meeting fee of $1,000 for each meeting of the Board or any committee thereof attended, and a Participant acting as the chairperson of any meeting of a committee of the Board shall receive an additional $1,000 for each meeting chaired by him or her. Fees shall be paid quarterly in arrears and are payable if the Participant attends in person, by conference telephone, or by any other means permitted by the Delaware General Corporation Law and Baxter’s Bylaws.
5.2	Baxter shall pay each Participant a total annual cash retainer of $45,000 per calendar year (“Annual Cash Retainer”). The Annual Cash Retainer shall be paid quarterly in arrears. For purposes of determining the amount of such quarterly payment, a Participant must be a member of the Board on or prior to the 15th day of a month in order to be entitled to receive payment of the Annual Cash Retainer with respect to that month.
5.3	Participants shall be eligible to defer payment of cash compensation otherwise payable under this Section 5 pursuant to the terms and conditions of the Baxter Non-Employee Director Deferred Compensation Plan.

6.	Availability of Shares
	If on any grant date, the number of shares of Common Stock which would otherwise be granted in the form of Restricted Stock or subject to Stock Options granted under the Plan shall exceed the number of shares of Common Stock then remaining available under the Program, the available shares shall be allocated among the Stock Options and Restricted Stock to be granted Participants in proportion to the number of shares subject to Stock Options and shares of Restricted Stock that Participants would otherwise be entitled to receive, and allocated evenly between Restricted Stock and Stock Options.
7.	General Provisions

7.1	Subject to the limitations contained in Section 11.9 of the Program, the Board or the Committee may, at any time and in any manner, amend, suspend, or terminate the Plan or any Stock Option outstanding under the Plan.
7.2	Participation in the Plan does not give any Participant any right to continue as a member of the Board for any period of time or any right or claim to any benefit unless such right or claim has specifically accrued hereunder.

Amendment No. 1
to
Baxter International Inc.
Non-Employee Director Compensation Plan

     Effective as of May 4, 2004, the Baxter International Inc. Non-Employee Director Compensation Plan is amended to add the following subsection 4.13 to read in its entirety as follows:

4.13 The Board or the Committee may, in its sole discretion and without receiving permission from any Participant, substitute stock appreciation rights (“SARs”) for any or all outstanding Stock Options granted on or after May 4, 2004. Upon the grant of substitute SARs, the related Stock Options replaced by the substitute SARs shall be cancelled. The grant price of the substitute SAR shall be equal to the Option Price of the related Stock Option, the term of the substitute SAR shall not exceed the term of the related Stock Option, and the terms and conditions applicable to the substitute SAR shall otherwise be substantially the same as those applicable to the related Stock Option replaced by the substitute SAR.

Amendment No. 2
to
Baxter International Inc.
Non-Employee Director Compensation Plan

     Effective as of July 26, 2005, subsection 5.2 of the Baxter International Inc. Non-Employee Director Compensation Plan is amended to read in its entirety as follows:

5.2 Baxter shall pay each Participant a total annual cash retainer of $45,000 per calendar year (“Annual Cash Retainer”). Baxter shall pay an additional annual cash retainer of $25,000 per calendar year to the Lead Director (“Lead Director Retainer”). Both the Annual Cash Retainer and Lead Director Retainer shall be paid quarterly in arrears. For purposes of determining the amount of such quarterly payment(s), a Participant and/or the Lead Director must be a member of the Board on or prior to the 15^th day of a month in order to be entitled to receive such payment(s) with respect to that month.

Amendment No. 3
to
Baxter International Inc.
Non-Employee Director Compensation Plan

     Effective as of January 1, 2007, the Baxter International Inc. Non-Employee Director Compensation Plan (the “Plan”) is amended as follows:

1. Section 3 shall be amended to read in its entirety as follows:

3.	Restricted Stock Units
3.1	On the date of Baxter’s annual meeting of stockholders (the “Annual Meeting”) in each year beginning with the Annual Meeting held in May 2007, and subject to availability of shares of Common Stock under the Program, each Participant upon completion of the Annual Meeting shall, automatically and without necessity of any action by the Board or any committee thereof, receive the number of Restricted Stock Units equal to the quotient of (A) $60,000 divided by (B) the Fair Market Value of a share of Common Stock on the date of grant (rounded to the nearest whole number which is a multiple of ten) (the “Annual Restricted Stock Unit Grant Amount”).
3.2	Each Participant elected or appointed on a date other than the date of an Annual Meeting shall, on the date of such election or appointment and automatically and without necessity of any action by the Board or any committee thereof, receive the number of Restricted Stock Units equal to the product of (A) the Annual Restricted Stock Unit Grant Amount (as defined in Section 3.1, subject to adjustment in accordance with the Program) for the Restricted Stock Units awarded on the date of the immediately preceding Annual Meeting, multiplied by (B) the quotient of (i) the number of full calendar months before the next Annual Meeting divided by (ii) 12 (rounded to the nearest whole number which is a multiple of ten). The number of Restricted Stock Units granted under this Section 3.2 shall not exceed the number available under the Program on the date of grant.
3.3	Restricted Stock Units may not be sold, transferred, assigned, pledged, hypothecated or otherwise encumbered or disposed of, whether voluntarily, involuntarily or by operation of law.

3.4	Subject to Section 11.10 of the Program and except as expressly provided in Sections 3.6 and 3.7, all Restricted Stock Units shall vest on the date of and immediately prior to the next Annual Meeting following the date of grant.
3.5	Except as provided in Sections 3.6 and 3.7, if a Participant ceases service as a member of the Board before his or her Restricted Stock Units vest, the Participant will forfeit his or her unvested Restricted Stock Units immediately upon ceasing service as a member of the Board.
3.6	If a Participant dies while serving as a member of the Board, his or her unvested Restricted Stock Units will not be forfeited and will be fully vested immediately.
3.7	If a Participant becomes disabled and unable to continue service as a member of the Board, his or her Restricted Stock Units will not be forfeited and will, when the Participant ceases to serve as member of the Board, be fully vested.
3.8	No Participant receiving Restricted Stock Units shall have the rights of a stockholder with respect to those shares of Common Stock underlying the Restricted Stock Units. Participants shall not be permitted to vote the Restricted Stock Units. Participants shall be permitted to receive cash payments equal to the dividends and distributions paid on shares of stock to the same extent as if each Restricted Stock Unit was a share of stock, and those shares were not subject to the restrictions imposed by this Plan; provided, however, that no dividends or distributions shall be payable to or for the benefit of the Participant with respect to the record dates for such dividends or distributions occurring on or after the date, if any, on which the Participant has forfeited the Restricted Stock Units. Cash dividend and distribution equivalents paid on those shares of Common Stock underlying the Restricted Stock Units pursuant hereto shall be reinvested in additional Restricted Stock Units.
3.9	Participants shall be eligible to defer payment and taxation of those shares of Common Stock underlying the Restricted Stock Units otherwise payable under this Section 3 pursuant to the terms and conditions of the Baxter Directors' Deferred Compensation Plan.

3.10 If requested by Baxter, each Participant receiving Restricted Stock Units shall enter into an agreement with Baxter incorporating the terms and conditions of this Plan. Subject to the terms of the Program, after the Restricted Stock Units vest, shares of Common Stock free and clear of all restrictions will be delivered to the Participant (or to the Participant’s legal representative, beneficiary or heir).

2. Subsection 5.1 of the Plan is amended to read in its entirety as follows:

5.1 Baxter shall pay each Participant a meeting fee of $1,500 for each meeting of the Board or any committee thereof attended, and a Participant acting as the chairperson of any meeting of a committee of the Board shall receive an additional $1,500 for each meeting chaired by him or her. Fees shall be paid quarterly in arrears and are payable if the Participant attends in person, by conference telephone, or by any other means permitted by the Delaware General Corporation Law and Baxter’s Bylaws, as amended.

3. Subsection 5.2 of the Plan is amended to read in its entirety as follows:

5.2 Baxter shall pay each Participant a total annual cash retainer of $50,000 per calendar year (“Annual Cash Retainer”). Baxter shall pay an additional annual cash retainer of $25,000 per calendar year to the Lead Director (“Lead Director Retainer”). Both the Annual Cash Retainer and Lead Director Retainer shall be paid quarterly in arrears. For purposes of determining the amount of such quarterly payment(s), a Participant and/or the Lead Director must be a member of the Board on or prior to the 15^th day of a month in order to be entitled to receive such payment(s) with respect to that month.

4. Section 6 of the Plan is amended to read in its entirety as follows:

6. Availability of Shares

If on any grant date, the number of shares of Common Stock which would otherwise be granted in the form of Restricted Stock Units or subject to Stock Options granted under the Plan shall exceed the number of shares of Common Stock then remaining available under the Program, the available shares shall be allocated among the Stock Options and Restricted Stock Units to be granted Participants in proportion to the number of shares subject to Stock Options and Restricted Stock Units that Participants would

otherwise be entitled to receive, and allocated evenly between Restricted Stock Units and Stock Options.

EX-10.2

Exhibit 10.2

BAXTER INTERNATIONAL INC.
DIRECTORS’ DEFERRED COMPENSATION PLAN

(Amended and Restated Effective January 1, 2005)

BAXTER INTERNATIONAL INC.
DIRECTORS’ DEFERRED COMPENSATION PLAN

(Amended and Restated Effective January 1, 2005)

ARTICLE I

PURPOSE AND EFFECTIVE DATE

     1.1 Purpose. The Baxter International Inc. Directors’ Deferred Compensation Plan (the “Plan”) has been adopted by Baxter International Inc. (“Baxter”). The Plan is intended to help Baxter retain the services of qualified individuals to serve as outside members of its Board of Directors by offering them the opportunity to defer payment of their retainers and directors’ fees through an unfunded deferred compensation arrangement.

     1.2 Effective Date. The original effective date of this Plan is July 1, 2003. Effective January 1, 2005, the Plan is being amended and restated in its entirety in order to comply with the requirements of §409A of the Internal Revenue Code (“Code”), as enacted by the American Jobs Creation Act of 2004, and for certain other purposes.

ARTICLE II

DEFINITIONS

     2.1 Account. The bookkeeping account established to record a Participant’s interest in the Plan as provided in Article IV.

     2.2 Administrator. The person or entity appointed to administer the Plan as provided in Article VII.

     2.3 Baxter. Baxter International Inc., a Delaware corporation, and any other company that succeeds to the obligations of Baxter under this Plan pursuant to Section 9.8.

     2.4 Beneficiary. A Participant’s Beneficiary, as defined in Article VI, is the Beneficiary designated to receive the Participant’s Account, if any, from the Plan, upon the death of the Participant.

     2.5 Board. The Board of Directors of Baxter.

     2.6 Compensation. All cash compensation payable by Baxter to a Participant for his/her services as a member of the Board, including the annual retainer, meeting fees, and additional fees for serving on committees of the Board.

     2.7 Compensation Committee. The Compensation Committee of the Board.

     2.8 Deferral. The Deferral is the amount of the Participant’s Compensation which the Participant elected to defer and contribute to the Plan which, but for such election, would have otherwise been paid to him/her.

     2.9 Deferral Election Form. The form which a Participant must complete and return to the Administrator, in accordance with the rules and procedures as may be established by the Administrator, in order to elect to defer a portion of his or her Compensation into the Plan.

     2.10 Distribution Election Form. The form which a Participant must complete and return to the Administrator, in accordance with the rules and procedures as may be established by the Administrator. This form is to be used by Participants for two purposes:

(a)	To elect the manner in which the Participant’s Account will be distributed upon Termination. Only one election form shall be filed with respect to distribution of a Participant’s Account following Termination.
(b)	Prior to January 1, 2005, a Participant could also file a Distribution Election Form to request a scheduled in-service distribution of all or a portion of his or her Account, in accordance with Section 5.2(B). Effective January 1, 2005, scheduled in-service distributions are no longer permitted.

To be effective, a Distribution Election Form must be filed within the time prescribed by the Administrator.

     2.11 Outside Director. Any member of the Board who is not an employee of Baxter or its subsidiaries and who receives Compensation for his services as a member of the Board.

     2.12 Participant. A Participant is any Outside Director or former Outside Director who has an Account balance in the Plan.

     2.13 Plan Year. The Plan Year is the calendar year. The first Plan Year shall be the six month period commencing July 1, 2003, and ending December 31, 2003.

     2.14 Termination. For purposes of the Plan, Termination means a Participant ceasing to be a member of the Board for any reason, including resignation, removal, or failure to be re-elected. A Participant who ceases to be an Outside Director, but is still a member of the Board, shall not have incurred a Termination. Notwithstanding the foregoing, for purposes of determining when a Participant’s Account becomes payable, Termination shall not be considered to have occurred until the Participant incurs a separation from service as defined in Treasury Regulations issued pursuant to §409A of the Code.

     2.15 Unforeseeable Emergency. A severe financial hardship resulting from a sudden or unexpected illness or accident of the Participant or one of his or her dependents, loss of the Participant’s property due to casualty or similar extraordinary and unforeseeable circumstances arising as a result of one or more recent events beyond the control of the Participant, as determined by the Administrator in accordance with the standards established by regulations issued under §457 of the Code or other applicable law.

ARTICLE III

ELIGIBILITY FOR COMPENSATION DEFERRALS

     3.1 Compensation Deferral Elections. Any Outside Director may elect to defer a portion of his or her Compensation as set forth on his or her Deferral Election Form, in accordance with applicable rules and procedures established by the Administrator. An Outside Director Participant may elect to defer up to a total of 100% of his or her Compensation, or any lesser amount; provided that the Administrator may establish reasonable procedures requiring Deferral Elections to be stated in whole dollar amounts or whole percentages.

     3.2 Timing of and Changes in Deferral Election. An Outside Director may make a Deferral Election for each Plan Year during the annual enrollment period established by the Administrator prior to the beginning of the Plan Year, and such Deferral Election shall apply to all Compensation payable to such Outside Director during the Plan Year. A person who is elected as an Outside Director during a Plan Year may make a Deferral Election 30 days after the Outside Director’s election, and such election shall apply to all Compensation earned after the election is made in the remainder of the Plan Year. A Participant who has a Deferral Election in effect may not change such election during the Plan Year, and may only revoke such election in accordance with procedures established by the Administrator consistent with Treasury Regulations issued pursuant to §409A of the Code.

ARTICLE IV

CREDITING OF ACCOUNTS

     4.1 Crediting of Accounts. All amounts deferred by a Participant under the Plan shall be credited to his/her Account in the Plan. Each Participant’s Account shall be credited or charged with its share of investment earnings or losses determined in accordance with Section 4.2, and shall be charged with all distributions made to the Participant or his/her Beneficiary. Accounts shall be maintained for bookkeeping purposes only, and shall not require the segregation of funds or establishment of a separate fund.

     4.2 Earnings. Each Participant’s Account shall be adjusted upward or downward, on a weekly (or as otherwise determined by the Administrator) basis to reflect the investment return that would have been realized had such amounts been invested in one or more investments selected by the Participant from among the assumed investment alternatives designated by the Administrator for use under the Plan. The Administrator may designate and change investment alternatives in its sole discretion from time to time, and designate the manner in which Accounts shall be invested in default of any election; provided that until otherwise determined by the Administrator the investment alternatives shall be the same as those available under the Baxter International Inc. and Subsidiaries Deferred Compensation Plan, and Accounts for which no election is made shall be invested in the Stable Income Fund. Prior to the first day of each calendar quarter (or at such other intervals as may be determined by the Administrator), Participants may change the assumed investment alternatives in which their Account will be deemed invested for such quarter. Participant elections of assumed investment alternatives shall be made at the time and in the form determined by the Administrator, and shall be subject to such other restrictions and limitations as the Administrator shall determine.

     4.3 Account Statements. Account Statements will be generated effective as of the last day of each calendar quarter and mailed to each Participant as soon as administratively feasible. Account Statements will reflect all Account activity during the reporting quarter, including Account contributions, distributions and earnings credits. Notwithstanding the foregoing, the failure to provide an Account Statement shall not constitute a breach of this Plan or entitle any Participant to any amount that he would not otherwise be entitled to under the Plan.

     4.4 Vesting. Subject to Sections 9.1 and 9.2, a Participant is always 100% vested in his or her Account in the Plan at all times.

ARTICLE V

DISTRIBUTION OF BENEFITS

     5.1 Distribution of Benefits. Subject to §5.2, distribution of a Participant’s Account, if any, will commence in accordance with the Participant’s Distribution Election Form as soon as administratively feasible after the Participant’s Termination. Anything else in this Plan to the contrary notwithstanding, effective October 22, 2004, (i) in no event shall the distribution of any Account be accelerated to a time earlier than which it would otherwise have been paid, whether by amendment of the Plan, exercise of the Compensation Committee’s discretion, or otherwise, except as permitted by Treasury Regulations issued pursuant to §409A of the Code, and (ii) in the event that the Compensation Committee, in its sole discretion, determines that any time or form of distribution provided for in the Plan, or the existence of a right to elect a different time or form of distribution, would cause the Plan to fail to meet the requirements of §409A of the Code, or otherwise cause Participants to be subject to any adverse federal income tax consequences, the Compensation Committee shall amend the Plan to modify or remove the form of distribution or election right. The distribution restrictions under §409A of the Code shall apply to Participant’s entire account balances under the Plan, whether deferred before or after January 1, 2005.

     5.2 Distribution.

          A. Distribution Election Form – Termination. A Participant’s Account will be paid after the Participant’s Termination , in accordance with the form of payment designated in such Participant’s Distribution Election Form. Only one Distribution Election Form may be submitted with respect to distribution of a Participant’s Account following Termination, and such election shall apply to the Participant’s entire Account balance at his or her Termination. A Participant may change the form of payment designated on his or her Distribution Election Form from time to time in accordance with procedures established by the Administrator; provided that (i) distribution of the Account following the change shall commence not earlier than five years after the distribution would otherwise have begun, and (ii) if the Participant incurs a Termination within 12 months after changing the form of payment designated, other than by reason of death, the change shall be disregarded and his/her Account shall be distributed in accordance with the form of payment designated prior to the change.

          B. In-Service Distribution. Prior to January 1, 2005, a Participant could elect to receive a distribution of all or a portion of his or her Account at a specified future date, by filing a Distribution Election Form with the Compensation Committee, specifying the dollar amount of the distribution, at least 12 months prior to the distribution date. Effective January 1, 2005, such in-service distributions are no longer permitted. In-service distributions shall be made in accordance with Distribution Election Forms filed within the 12 month period prior to January 1, 2005, but in no event shall the amount of any such in-service election exceed the Participant’s total account balance as of December 31, 2004. If the balance in the Participant’s Account on the specified distribution date is less than the dollar amount requested, the entire balance of the Account shall be distributed. If the Participant has a Termination prior to the

specific date requested on such Distribution Election Form, such form shall be ignored and the Participant’s distribution election with respect to Termination shall be followed.

          C. Forms of Distribution. The forms of distribution are:

(a) a lump sum payment, or

(b) annual installments of at least 2 years, but not to exceed 15 years.

Annual installments will commence in the first quarter of the Plan Year as specified in the Participant’s Deferral Election Form or Distribution Election Form. Subsequent installments will be paid annually in the first quarter of subsequent Plan Years, and each installment shall be equal to the remaining balance in the Participant’s Account immediately prior to such payment divided by the number of installments remaining to be paid. Lump sum payments will be made in the first quarter of the Plan Year as specified in the Participant’s Deferral Election Form.

Lump sum payments pursuant to a Distribution Election Form relating to payments following Termination will be made in the first quarter following the Plan Year in which the Participant incurs a Termination or any subsequent Plan Year as indicated on the Distribution Election Form. All distributions of a Participant’s Account prior to Termination of Employment will be paid in a lump sum as soon as administratively feasible after the date elected by the Participant in the Distribution Election Form.

If a Participant does not elect a form of distribution by the time the Deferral Election Form or the Distribution Election Form is required to be completed, the Participant’s election will default to a lump sum payment in the first quarter of the Plan Year following the Plan Year in which the Participant incurs a Termination of Employment.

Notwithstanding the above, a Participant whose Account totals less than $50,000 as of the last day of the Plan Year in which he or she incurs a Termination will receive lump sum payment of his or her Account in the first quarter of the Plan Year following the Plan Year in which the Participant incurs a Termination.

The Administrator has the right to postpone the payment of any Account for up to one year from the date on which the credits would otherwise be paid.

     5.3 Effect of Payment. Payment to the person, trust or other entity reasonably and in good faith determined by the Administrator to be the Participant’s Beneficiary will completely discharge any obligations Baxter or any other Employer may have under the Plan. If a Plan benefit is payable to a minor or a person declared to be incompetent or to a person the Administrator in good faith believes to be incompetent or incapable of handling the disposition of property, the Administrator may direct payment of such Plan benefit to the guardian, legal representative or person having the care and custody of such minor and such decision by the Administrator is binding on all parties. The Administrator may initiate whatever action it deems appropriate to ensure that benefits are properly paid to an appropriate guardian.

The Administrator may require proof of incompetence, minority, incapacity or guardianship as it may deem appropriate prior to distribution of the Plan benefit. Such distribution will completely discharge the Administrator and the Employer from all liability with respect to such benefit.

     5.4 Taxation of Plan Benefits. It is intended that each Participant will be taxed on amounts credited to him or her under the Plan at the time such amounts are received, and the provisions of the Plan will be interpreted consistent with that intention.

     5.5 Withholding and Payroll Taxes. Baxter will withhold from payments made hereunder any taxes required to be withheld for the payment of taxes to the Federal, or any state or local government.

     5.6 Distribution Due to Unforeseeable Emergency. Upon written request of a Participant and the showing of Unforeseeable Emergency, the Administrator may authorize distribution of all or a portion of the Participant’s Accounts, and or the acceleration of any installment payments being made from the Plan, but only to the extent reasonably necessary to relieve the Unforeseeable Emergency. In any event, payment may not be made to the extent such Unforeseeable Emergency is or may be satisfied through reimbursement by insurance or otherwise, including, but not limited to, liquidation of the Participant’s assets, to the extent that such liquidation would not in and of itself cause severe financial hardship. In addition, such Participant is precluded from enrolling in the Plan for the entire Plan Year beginning January 1 after the request is approved.

ARTICLE VI

BENEFICIARY DESIGNATION

     6.1 Beneficiary Designation. Each Participant has the right to designate one or more persons, trusts or, with the Administrator’s approval, other entity as the Participant’s Beneficiary, primary as well as secondary, to whom benefits under this Plan will be paid in the event of the Participant’s death prior to complete distribution to the Participant of the benefits due under the Plan. Each Beneficiary designation will be in a written form prescribed by the Administrator and will be effective only when filed with the Administrator during the Participant’s lifetime.

     6.2 Amendments to Beneficiary Designation. Any Beneficiary designation may be changed by a Participant without the consent of any Beneficiary by the filing of a new Beneficiary designation with the Administrator. Filing a Beneficiary designation as to any benefits available under the Plan revokes all prior Beneficiary designations effective as of the date such Beneficiary designation is received by the Administrator. If a Participant’s Account is community property, any Beneficiary designation will be valid or effective only as permitted under applicable law.

     6.3 No Beneficiary Designation. In the absence of an effective Beneficiary designation, or if all Beneficiaries predecease the Participant, the Participant’s estate will be the Beneficiary. If a Beneficiary dies after the Participant and before payment of benefits under this Plan has been completed, and no secondary Beneficiary has been designated to receive such Beneficiary’s share, the remaining benefits will be payable to the Beneficiary’s estate.

ARTICLE VII

ADMINISTRATION

     7.1 Administration. The Plan is administered by the Compensation Committee, which shall be the Administrator for all purposes of the Plan. Notwithstanding the foregoing, all authority to administer the Plan on an ongoing basis, including the authority to adopt and implement all rules and procedures for the administration of the Plan, shall be exercised by such persons as may be designated by the Corporate Vice President-Human Resources of Baxter, subject to the authority of the Compensation Committee, and all references to the Administrator herein shall, as appropriate, be construed to refer to such person or persons.

     7.2 Administrator Powers. The Administrator has such powers as may be necessary to discharge its duties hereunder, including, but not by way of limitation, the power, right and duty to construe, interpret and enforce the Plan provisions and to determine all questions arising under the Plan including, but not by way of limitation, questions of Plan participation, eligibility for Plan benefits and the rights of Outside Directors, Participants, Beneficiaries and other persons to benefits under the Plan and to determine the amount, manner and time of payment of any benefits hereunder, and to adopt procedures, rules, regulations and forms to be utilized in the efficient administration of the Plan which may alter any procedural provision of the Plan without the necessity of an amendment. The Administrator is empowered to employ agents (who may also be employees of Baxter) and to delegate to them any of the administrative duties imposed upon the Administrator or Baxter

     7.3 Finality of Decisions. Any ruling, regulation, procedure or decision of the Administrator will be conclusive and binding upon all persons affected by it. There will be no appeal from any ruling by the Administrator which is within its authority, except as provided in Section 7.4 below.

     7.4 Claims Procedure. Any claim for benefits by a Participant, his or her Beneficiary or Beneficiaries, or any other person claiming the right to receive any benefit from the Plan by reason of his or her relationship to a Participant or Beneficiary (the “applicant”) shall be in writing and filed in accordance with procedures specified by the Administrator not more than one year after the claimant knows or with the exercise of reasonable diligence should have known of the basis for the claim. If the claim is denied, the Administrator will furnish the applicant within a reasonable period of time with a written notice which specifies the reason for the denial, and explains the claim review procedures of this Section 7.4. If, within 60 days after receipt of such notice, the applicant so requests in writing, the Administrator will review its earlier decision. The Administrator’s decision on review will be in writing, will include specific reasons for the decision, and will be given to the claimant with a reasonable period of time after the request for review is received. By participating in the Plan, each Participant agrees, on behalf of himself or herself and all persons claiming through him or her, not to commence any action or proceeding for payment of any amount claimed to be due under the Plan without first complying with the foregoing procedures.

     7.5 Indemnity. To the extent permitted by applicable law and to the extent that they are not indemnified or saved harmless under any liability insurance contracts, any present or former employees, officers, or directors of Baxter, or its subsidiaries or affiliates, if any, will be indemnified and saved harmless by Baxter from and against any and all liabilities or allegations of liability to which they may be subjected by reason of any act done or omitted to be done in good faith in the administration of the Plan, including all expenses reasonably incurred in their defense in the event that Baxter fails to provide such defense after having been requested in writing to do so.

ARTICLE VIII

AMENDMENT AND TERMINATION OF PLAN

     8.1 Amendment. The Compensation Committee may amend the Plan at any time, except that no amendment will decrease the Accounts of Participants and Beneficiaries at the time of the amendment. Notwithstanding the foregoing, the Administrator may adopt any amendment to the Plan that is technical, ministerial or procedural in nature, and any rule or procedure properly adopted by the Administrator that is technical, ministerial or procedural in nature shall be deemed an amendment to the Plan to the extent of any inconsistency between such rule or procedure and the provisions hereof.

     8.2 Right to Terminate. The Compensation Committee may at any time terminate the Plan.

     8.3 Payment at Termination. If the Plan is terminated payment of each affected Participant’s Account to the Participant or Beneficiary for whom they are held will commence within 60 days of such termination in the form determined under Article V, , provided that such payment is permitted by Treasury Regulations issued pursuant to §409A of the Code. To the extent the Administrative Committee, in its sole discretion, determines that such payment is not permitted, the Accounts of Participants shall continue to be held until distributed in accordance with Article V.

ARTICLE IX

MISCELLANEOUS

     9.1 Unfunded Plan. This Plan is intended to be an unfunded deferred compensation plan. All credited amounts are unfunded, general obligations of Baxter. This Plan is not intended to create an investment contract. Participants are members of the Board of Baxter, who, by virtue of their position, are uniquely informed as to Baxter’s operations and have the ability to affect materially Baxter’s profitability and operations.

     9.2 Unsecured General Creditor. In the event of Baxter’s insolvency, Participants and their Beneficiaries, heirs, successors and assigns will have no legal or equitable rights, interest or claims in any property or assets of Baxter or any of its subsidiaries, nor will they be beneficiaries of, or have any rights, claims or interests in any life insurance policies, annuity contracts or the proceeds therefrom owned or which may be acquired by such Baxter (the “Policies”) greater than those of any other unsecured general creditors. In that event, any and all of Baxter’s assets and Policies will be, and remain, the general, unpledged, unrestricted assets of Baxter. Baxter’s obligation under the Plan will be merely that of an unfunded and unsecured promise of Baxter to pay money in the future.

     9.3 Nonassignability. Neither a Participant nor any other person will have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be nonassignable and nontransferable. No part of the amounts payable will, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant’s or any other person’s bankruptcy or insolvency. Nothing contained herein will preclude Baxter from offsetting any amount owed to it by a Participant against payments to such Participant or his or her Beneficiary.

     9.4 Protective Provisions. A Participant will cooperate with Baxter by furnishing any and all information requested by Baxter, in order to facilitate the payment of benefits hereunder.

     9.5 Governing Law. The provisions of this Plan will be construed and interpreted according to the laws of the State of Illinois.

     9.6 Severability. In the event any provision of the Plan is held invalid or illegal for any reason, any illegality or invalidity will not affect the remaining parts of the Plan, but the Plan will be construed and enforced as if the illegal or invalid provision had never been inserted, and Baxter will have the privilege and opportunity to correct and remedy such questions of illegality or invalidity by amendment as provided in the Plan, including, but not by way of limitation, the opportunity to construe and enforce the Plan as if such illegal and invalid provision had never been inserted herein.

     9.7 Notice. Any notice or filing required or permitted to be given to Baxter or the Administrator under the Plan will be sufficient if in writing and hand delivered, or sent by

registered or certified mail to Baxter’s Chief Financial Officer and, if mailed, will be addressed to the principal executive offices of Baxter. Notice to a Participant or Beneficiary may be hand delivered or mailed to the Participant or Beneficiary at his or her most recent address as listed in the employment records of Baxter. Notices will be deemed given as of the date of delivery or mailing or, if delivery is made by certified or registered mail, as of the date shown on the receipt for registration or certification. Any person entitled to notice hereunder may waive such notice.

     9.8 Successors. The provisions of this Plan will bind and inure to the benefit of Baxter, the Participants and Beneficiaries, and their respective successors, heirs and assigns. The term successors as used herein will include any corporate or other business entity, which, whether by merger, consolidation, purchase or otherwise acquires all or substantially all of the business and assets of Baxter, and successors of any such corporation or other business entity.

     9.9 Action by Baxter. Except as otherwise provided herein, any action required of or permitted by Baxter under the Plan will be by resolution of the Compensation Committee or any person or persons authorized by resolution of the Compensation Committee.

     9.10 Participant Litigation. In any action or proceeding regarding the Plan, Outside Directors, Participants, Beneficiaries or any other persons having or claiming to have an interest in this Plan will not be necessary parties and will not be entitled to any notice or process. Any final judgment which is not appealed or appealable and may be entered in any such action or proceeding will be binding and conclusive on the parties hereto and all persons having or claiming to have any interest in this Plan. To the extent permitted by law, if a legal action is begun against Baxter, the Administrator, or any member of the Compensation Committee by or on behalf of any person and such action results adversely to such person or if a legal action arises because of conflicting claims to a Participant’s or other person’s benefits, the costs to such person of defending the action will be charged to the amounts, if any, which were involved in the action or were payable to the Participant or other person concerned. To the extent permitted by applicable law, acceptance of participation in this Plan will constitute a release of Baxter, the Administrator and each member of the Compensation Committee, and their respective agents from any and all liability and obligation not involving willful misconduct or gross neglect.

*       *       *

     IN WITNESS WHEREOF, the undersigned duly authorized officer has caused this Amended and Restated Plan to be executed this 1st day of January, 2005.

BAXTER INTERNATIONAL INC.
By:	/s/ Karen May
	Its Corporate Vice President of Human Resources

Amendment No. 1
to
Baxter International Inc.
Directors’ Deferred Compensation Plan

     Effective as of January 1, 2007, the Baxter International Inc. Directors’ Deferred Compensation Plan, as amended and restated effective as of January 1, 2005 (the “Plan”) is amended as follows:

1.	Section 2.6 is amended to read in its entirety as follows:
	2.6 Compensation. All compensation (other than Stock Options) payable by Baxter to a Participant for his/her services as a member of the Board, including without limitation any annual retainer, fees for attending meetings of the Board or any committee thereof, fees for acting as chairperson of any Board or committee meeting, and any other fees as may become payable to a Non-Employee Director.
2.	A new Section 3.3 is added to read in its entirety as follows:
	3.3 Deferral of Restricted Stock Units. Effective January 1, 2007, each Participant may elect to defer the receipt of all (but not fewer than all) of the shares of Common Stock the Participant is entitled to receive upon the vesting of any annual grant of Restricted Stock Units to the Participant for service on the Board. Such deferral election must be made, in accordance with procedures established by the Administrator, during the enrollment period described in Section 3.2 for the Plan Year in which the Restricted Stock Units are granted, or in the case of a newly elected Director within 30 days after his or her election to the Board. If a Participant elects to defer an annual grant of Restricted Stock Units, the Common Stock underlying such grant shall be distributed on the third anniversary of the date on which such grant (and may not be deferred to any other date), provided that if the Director’s membership on the Board terminates before such date (and the Director incurs a separation from service as defined in Code §409A), the Common Stock, to the extent vested, shall be distributed as soon as practical after the termination. A Participant’s deferred Restricted Stock Units shall be accounted for separately as part of the Participant’s Account, and shall not be subject to Section 4.1, 4.2, 5.2 or 5.6, but shall otherwise be subject to the provisions of this Plan.