10-K

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                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

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                                   FORM 10-K

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

   For the Fiscal Year Ended December 31, 2000  Commission file number 1-15525

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                        EDWARDS LIFESCIENCES CORPORATION

             (Exact name of Registrant as specified in its charter)

                                      
            DELAWARE                                  36-4316614
 (State or other jurisdiction of          (IRS Employer Identification No.)
 Incorporation or Organization)



                   ONE EDWARDS WAY, IRVINE, CALIFORNIA 92614
              (Address of principal executive offices) (ZIP Code)

                                 (949) 250-2500
              (Registrant's telephone number, including area code)

          SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
         Common Stock, par value $1.00 per share, including associated
         Series A Junior Participating Preferred Stock Purchase Rights

        SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None

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    Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/  No / /

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

    The aggregate market value of the registrant's common stock held by
non-affiliates as of March 20, 2001: $1,095,551,908 based on a closing price of
$18.64 of the registrant's common stock on the New York Stock Exchange. This
calculation does not reflect a determination that persons are affiliates for any
other purpose.

    The number of shares outstanding of the registrant's common stock, $1.00 par
value as of March 20, 2001 was 58,774,244.

                      DOCUMENTS INCORPORATED BY REFERENCE

    Portions of the Registrant's Proxy Statement for the 2001 Annual Meeting of
Stockholders (to be filed on or before April 10, 2001) are incorporated by
reference into Part III, as indicated herein.

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                        EDWARDS LIFESCIENCES CORPORATION
                         FORM 10-K ANNUAL REPORT--2000
                               TABLE OF CONTENTS

                                                                      
PART I
  Item 1.     Business....................................................      3
  Item 2.     Properties..................................................     23
  Item 3.     Legal Proceedings...........................................     23
  Item 4.     Submission of Matters to a Vote of Security Holders.........     24

PART II
  Item 5.     Market for the Registrant's Common Equity and
              Related Stockholder Matters.................................     24
  Item 6.     Selected Financial Data.....................................     24
  Item 7.     Management's Discussion and Analysis of Financial Condition
              and Results of Operations...................................     25
  Item 7A.    Quantitative and Qualitative Disclosures About Market
              Risk........................................................     36
  Item 8.     Financial Statements and Supplementary Data.................     37
  Item 9.     Changes in and Disagreements with Accountants on Accounting
              and Financial Disclosure....................................     73

PART III
  Item 10.    Directors and Executive Officers of the Registrant..........     73
  Item 11.    Executive Compensation......................................     73
  Item 12.    Security Ownership of Certain Beneficial Owners and
              Management..................................................     73
  Item 13.    Certain Relationships and Related Transactions..............     73

PART IV
  Item 14.    Financial Statements and Schedule, Exhibits and Reports on
              Form 8-K....................................................     74
              Signatures..................................................     77



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                                     PART I

ITEM 1  BUSINESS

THE COMPANY

    Edwards Lifesciences Corporation was incorporated in Delaware on
September 10, 1999 as a wholly-owned subsidiary of Baxter International Inc.
("Baxter") to assume the business and operations of Baxter's CardioVascular
business (the "CardioVascular Business"). Effective March 31, 2000, the
business, assets and liabilities of the CardioVascular Business were transferred
to Edwards Lifesciences and its subsidiaries and 100% of the common stock of
Edwards Lifesciences was distributed to the stockholders of Baxter in a tax-free
spin-off (the "Distribution"). Since that time, Edwards Lifesciences has
operated as an independent company. Unless the context indicates otherwise,
references to the "Company" and "Edwards Lifesciences" refer to the
CardioVascular Business for periods prior to April 1, 2000 and to Edwards
Lifesciences Corporation and its subsidiaries for the periods on or after such
date.

    OVERVIEW.  Edwards Lifesciences provides a comprehensive line of products
and services to treat late-stage cardiovascular disease. Edwards Lifesciences'
sales are categorized in four main product areas: cardiac surgery, critical
care, vascular and perfusion products and services. Edwards Lifesciences is
headquartered in Irvine, California, and supplies its products and services to
customers in more than 80 countries, both through direct sales and distributor
relationships. Edwards Lifesciences' products are manufactured in locations
throughout the world, including Brazil, the Dominican Republic, Japan (through a
contractual joint venture with Baxter), The Netherlands, Puerto Rico,
Switzerland and the United States.

    Cardiovascular disease is the number one cause of death in the world, and is
among the top three diseases in terms of health care spending in nearly every
country in the world. We believe that around the world, more than $280 billion
is spent each year for the treatment of cardiovascular disease. Cardiovascular
disease is both progressive and pervasive; progressive, in that it tends to
worsen over time, and pervasive because it often affects an individual's entire
circulatory system. In its later stages, surgery frequently becomes the
preferred treatment option. In 2000, approximately 1.2 million open heart
surgeries were performed worldwide; of these, approximately 64% were coronary
artery bypass graft (CABG) procedures, approximately 24% were heart valve
replacement or repair procedures, and approximately 12% were related to the
repair of congenital heart defects.

    Patients undergoing surgical treatment for cardiovascular disease are likely
to encounter a variety of Edwards Lifesciences' products and services. For
example, an individual with a heart valve disorder may have a faulty valve
re-shaped and repaired with an Edwards Lifesciences annuloplasty ring, or the
surgeon may elect to remove the valve altogether and replace it with one of
Edwards Lifesciences' bioprosthetic tissue heart valves, which can be made of
bovine or porcine tissue. If a patient undergoes other types of open heart
surgery, such as a CABG procedure, the functions of their heart and lungs may be
managed through the use of disposable products and equipment offered in certain
regions of the world by Edwards Lifesciences' perfusion products line. The
perfusion process may be performed by a clinical perfusionist employed by
Edwards Lifesciences' perfusion services. If the circulatory problems are in the
limbs rather than in the heart, the patient's procedure may involve some of
Edwards Lifesciences' vascular products, which include various types of
balloon-tipped catheters that are used to remove blood clots. Finally, virtually
all high-risk patients in the operating room or cardiac care unit are candidates
for having their cardiac function monitored by Edwards Lifesciences' critical
care products.

    BUSINESS STRATEGY.  Treatment of cardiovascular disease represents a
significant, growing opportunity. Edwards Lifesciences' strategy is to develop,
manufacture and market products that result in improved therapeutic outcomes for
patients with coronary artery disease, heart valve disease,

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peripheral vascular disease and congestive heart failure. Edwards Lifesciences
plans to aggressively expand its leading product offerings and develop new
products and therapies that improve the quality of patient care and reduce
overall treatment costs. The key aspects of Edwards Lifesciences' strategy
include:

    LEVERAGE STRENGTH IN LATE-STAGE CARDIOVASCULAR DISEASE THERAPY.  Edwards
Lifesciences has differentiated itself from other competitors by focusing
primarily on late-stage treatments, which tend to rely more heavily on the use
of devices and implantables and less on behavior-modification or drug therapy.
Edwards Lifesciences believes there will be significant opportunity for growth
as the aging global population increases and new technologies are developed.

    INVEST IN TECHNOLOGICAL INNOVATION.  Clinical performance historically has
been the primary driver of commercial success for products used to treat
cardiovascular disease. Edwards Lifesciences' product portfolio includes many
leading technologies, and Edwards Lifesciences has been credited with pioneering
a variety of new treatment techniques. Edwards Lifesciences plans to increase
investment in research and development to enhance existing technologies and to
develop and commercialize new products and therapies.

    EXPAND GLOBAL SALES.  Continuing economic development around the world and
expanded global adoption of established medical procedures will provide
attractive growth opportunities for Edwards Lifesciences. Edwards Lifesciences
expects to broaden its sales, service and distribution channels globally to take
advantage of these opportunities. In 2000, approximately 40% of Edwards
Lifesciences' sales were derived from outside of the United States.

    EVALUATE POTENTIAL INVESTMENTS AND ACQUISITIONS.  Edwards Lifesciences'
operations generate significant operating cash flow, some of which the Company
plans to reinvest to accelerate growth and maximize long-term return to its
stockholders. Edwards Lifesciences plans to evaluate investment opportunities
based on the incremental return on invested capital in excess of the Company's
weighted average cost of capital. Possible acquisition candidates will have
innovative technology positions or well-established product franchises. In
addition, Edwards Lifesciences will continue to critically assess all of its
product lines and offerings to ensure that each is contributing a return on
invested capital that meets Edwards Lifesciences' short-term and long-term
objectives.

EDWARDS LIFESCIENCES' PRODUCT AND SERVICE OFFERINGS

    Edwards Lifesciences' comprehensive line of cardiovascular products and
services are categorized into four main areas:

    - Cardiac Surgery, encompassing heart valve therapy products, and cannulae
      and cardioplegia;

    - Critical Care, featuring cardiac monitoring systems and disposables used
      to evaluate cardiac output and measure blood pressure;

    - Vascular, which includes products used in peripheral vascular surgery,
      surgical accessories, implantable grafts, and endovascular graft systems
      for treating aortic aneurysms; and

    - Perfusion Products and Services, comprised primarily of perfusion services
      and, outside of the United States and Western Europe, oxygenators and
      related disposables used during cardiopulmonary bypass.

CARDIAC SURGERY

    HEART VALVE THERAPY.  Edwards Lifesciences is the world's leading
manufacturer of tissue heart valves and valve repair products, which are used to
replace or repair a patient's diseased or defective heart valve. Edwards
Lifesciences operates two world-class manufacturing facilities in Irvine,
California,

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and Horw, Switzerland, producing pericardial and porcine valves from
biologically inert animal tissue sewn onto proprietary wireforms or stents.

    It is estimated that over 300,000 patients worldwide will have heart valve
surgery in 2001. The procedure can extend lives and provide a higher quality of
life than many patients have experienced in years. Depending on a patient's
valve condition as well as other factors such as overall health, age and
physical activity level, a surgeon may elect to replace a malfunctioning valve
with a prosthetic heart valve made either of metal or tissue, or may perform a
surgical repair of the heart valve, a procedure known as an annuloplasty.

    Edwards Lifesciences expects the number of valve procedures to continue to
grow due, in part, to an aging population; the high incidence in developing
nations of rheumatic fever, which often leads to valvular problems; and the
global growth of cardiovascular disease. Increased health care spending around
the world, and improved diagnostic techniques that allow physicians to detect
valve problems sooner, also are expected to contribute to an increasing number
of heart valve procedures. Edwards Lifesciences has been a pioneer in the
development and commercialization of tissue valves and repair products and is
the world's leader in these areas.

    Although patients of any age may require valve surgery, younger patients are
more likely to receive a human-donated homograft, mechanical valve or repair
product, while older patients are more frequently candidates for tissue valves.
Tissue valves can offer considerable lifestyle advantages over mechanical
valves, in that mechanical valve patients must maintain a life-long regimen of
blood-thinning medications. These medications increase the likelihood of
bleeding and related complications, potentially impairing their physical
activity levels or impacting other health conditions. Implantation rates for
tissue valves are exceeding overall valve procedure growth, as surgeons continue
to demonstrate their preference for tissue valves for certain types of patients.

    The core of Edwards Lifesciences' tissue product line is the
Carpentier-Edwards pericardial valve, the most widely prescribed tissue heart
valve due to its proven durability and performance. The Carpentier-Edwards
pericardial valve is the only pericardial valve available in the United States.

    While stented tissue valves represent the vast majority of tissue implants
and the greatest opportunity for growth, some physicians may choose an unstented
porcine tissue valve for select patients. Edwards Lifesciences offers the Prima
Plus stentless valve, and mechanical valves including the Edwards MIRA
bi-leaflet mechanical valve and the Starr-Edwards silastic ball valve. Edwards
Lifesciences is conducting clinical trials of its Edwards MIRA valve in the
United States.

    In addition to its replacement valves, Edwards Lifesciences is the worldwide
leader in heart valve repair products. Through extended product development,
training and promotion, Edwards Lifesciences has been a major force in the rapid
acceptance of heart valve repair procedures as an alternative to heart valve
replacement. Through its Carpentier-Edwards rings and Cosgrove-Edwards
Annuloplasty System, Edwards Lifesciences offers the broadest offering of heart
valve repair products in the industry.

    CANNULAE AND CARDIOPLEGIA.  Edwards Lifesciences is a leading manufacturer
of cannulae products used during cardiac surgery and offers hundreds of cannulae
and related accessories including cannulae to facilitate vacuum-assisted venous
drainage during perfusion and dispersion aortic cannulae. Edwards Lifesciences
also has a number of products to facilitate coronary artery bypass surgery when
it is performed on a beating heart. Included among these products are the
AnastaFlo coronary shunt used to redirect blood away from the suturing site, and
the VisuFlo humidifying blower to keep the surgical site dry and optimize the
surgeon's visual field during a procedure.

    Edwards Lifesciences also offers cardioplegia products that are used to
preserve the heart muscle tissue during open heart surgery. Through its close
work with clinicians, Edwards Lifesciences helped pioneer a new methodology for
administering cardioplegia through a retrograde approach that delivers

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cardioplegia solutions to the coronary sinus and venous side of the heart,
thereby bypassing the blocked coronary arteries.

CRITICAL CARE

    Edwards Lifesciences is a world leader in hemodynamic monitoring systems
that are used to measure a patient's heart function in surgical and intensive
care settings. Hemodynamic monitoring enables a clinician to balance the oxygen
supply and demand of a critically ill patient. Failure to appropriately manage a
patient's hemodynamic needs can cause organ injury, organ failure or death.
Edwards Lifesciences' systems provide important added clinical value by serving
as a diagnostic tool that prompts clinicians to act when a patient's hemodynamic
balance becomes disrupted.

    In addition, hemodynamic monitoring plays an important role in assuring that
the heart function of millions of patients who have pre-existing cardiovascular
conditions or other critical illnesses is optimized before they undergo a
surgical procedure. The vast majority of high-risk patients undergoing open
heart, major vascular, major abdominal, neurological, and orthopedic procedures
are candidates for Edwards Lifesciences' bedside monitoring technologies, which
are often deployed before, during and after surgery.

    Edwards Lifesciences is credited with pioneering the practice of hemodynamic
monitoring with the launch of the original Swan-Ganz catheter in the 1970s.
Today, we believe that Edwards Lifesciences' extensive line of monitoring
catheters and bedside patient monitoring equipment continue to be considered the
standard in critical care medicine. Edwards Lifesciences has played a major role
in evolving critical care monitoring technologies, selling more than 20 million
catheters and monitors worldwide, with new generations of products performing
increasingly sophisticated functions.

    Edwards Lifesciences also is a global leader in the broader field of
disposable pressure monitoring devices and has introduced a line of innovative
products enabling closed-loop arterial blood sampling to protect both patients
and clinicians from the risk of infection.

    Central venous catheters are the primary route for fluid and medication
delivery to patients undergoing major surgical procedures and/or intensive care.
Bloodstream infections related to central venous catheters have increased
significantly over the past 10 years, and addressing this life-threatening and
costly problem is another therapeutic solution offered by Edwards Lifesciences.

    The Company's new line of AVA 3Xi and AVA HF advanced venous access devices
provide increased convenience, effectiveness and efficiency by integrating the
capabilities of an introducer and multi-lumen central venous access into a
single device. Another Edwards Lifesciences product, the Vantex central venous
catheter, is manufactured from a patented, antimicrobial material.

    The Company recognizes that assessing a patient's physiological balance and
minimizing the risk of infection will remain fundamental requirements for
successful treatment of critically ill patients. Edwards Lifesciences will
continue to leverage its strength in this area and explore further opportunities
in the diagnostics and therapeutic delivery areas.

VASCULAR

    The pervasive nature of cardiovascular disease means that the circulatory
conditions that occur inside of the heart are often mirrored elsewhere in a
patient's body. Outside of the heart, the network of veins and arteries are
collectively referred to as the body's vascular system. Atherosclerotic disease
is one common circulatory condition which involves the thickening of
blood-carrying vessels and the formation of circulation-restricting plaque,
clots, and other substances, and often occurs concurrently in the vascular
system as well as in the heart. When the abdomen, arms or legs are impacted, the
diagnosis is usually peripheral vascular disease ("PVD") which occurs in
millions of patients worldwide, and in very advanced cases, may require
amputation of patients' limbs.

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    Edwards Lifesciences manufactures and sells a variety of products used to
treat PVD, including a line of balloon-tipped, catheter-based products, as well
as surgical clips and inserts, angioscopy equipment and artificial implantable
grafts. Edwards Lifesciences' Fogarty line of embolectomy catheters has been an
industry standard for removing blood clots from peripheral blood vessels for
more than 30 years.

    Edwards Lifesciences has also introduced new innovative technologies to
treat PVD. Edwards Lifesciences' Side Branch Occlusion system was launched in
1998 to help surgeons restore circulation in the legs. By working within the
saphenous veins, the system eliminates the traditional incision along the entire
length of the leg and the extensive complications usually associated with this
procedure.

    Another significant area of interest and investment has been the development
of endovascular grafts. Edwards Lifesciences has developed the Lifepath AAA
System to treat potentially life-threatening abdominal aortic aneurysms with an
endovascular approach. An abdominal aortic aneurysm can form in the aorta, the
body's main circulatory channel, when a portion of the aortic wall becomes
weakened and begins bulging outward. Often, the aneurysm grows until it poses a
life-threatening risk of rupturing. The Lifepath AAA System treats abdominal
aortic aneurysms by inserting an endovascular graft that relines the wall of the
aorta in the damaged area. By accessing and repairing the aneurysm from within
the aorta, rather than making a major incision that exposes most of the body's
internal organs, the endovascular procedure is less traumatic and invasive than
standard aortic repair surgery. The Lifepath AAA System, which the Company had
voluntarily withdrawn from commercial sales in 2000, is expected to resume
clinical trials in the United States and Europe by the end of 2001.

PERFUSION PRODUCTS AND SERVICES

    Edwards Lifesciences maintains the world's largest organization of contract
perfusionists, employing approximately 400 full and part-time clinical
perfusionists in the United States who perform an aggregate of approximately
50,000 perfusion procedures for open heart surgery per year. In all but one
state, Edwards Lifesciences offers hospitals the opportunity to purchase
perfusion supplies and capital equipment as well as contract for highly trained
personnel who perform perfusion during open heart and transplant surgeries,
blood salvage and intra-aortic balloon pumping procedures.

    In regions outside of the United States and Western Europe, Edwards
Lifesciences develops, manufactures and markets a diverse line of disposable
products including oxygenators, blood containers, filters and related devices
used during the practice of bypassing the heart and lungs during open heart
surgical procedures.

COMPETITION

    The medical devices industry is highly competitive. Edwards Lifesciences
competes with many companies ranging from small start-up enterprises to
companies that are larger and more established than Edwards Lifesciences with
access to significant financial resources. Furthermore, rapid product
development and technological change characterize the market in which Edwards
Lifesciences competes. The present or future products of Edwards Lifesciences
could be rendered obsolete or uneconomical by technological advances by one or
more of Edwards Lifesciences' present or future competitors or by other
therapies, including drug therapies. Edwards Lifesciences must continue to
develop and acquire new products and technologies to remain competitive in the
cardiovascular medical devices industry.

    Edwards Lifesciences believes that it competes primarily on the basis of
product reliability and performance, product features that enhance patient
benefit, customer and sales support, and cost-effectiveness.

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    The cardiovascular segment of the medical device industry is dynamic and
currently undergoing significant change due to cost-of-care considerations,
regulatory reform, industry and customer consolidation, and evolving patient
needs. The ability to provide cost-effective products and services that improve
clinical outcomes is becoming increasingly important for medical device
manufacturers.

    Edwards Lifesciences' products and services face substantial competition
from a number of companies. In cardiac surgery, the primary competitors include
St. Jude Medical, Inc., Medtronic, Inc., and Sulzer Medica, Ltd. In critical
care, Edwards Lifesciences' principal competitors include Abbott
Laboratories Inc. and Arrow International, Inc., as well as a number of smaller
companies. In vascular, Edwards Lifesciences' primary competitors include W.L.
Gore and Associates, Inc. and Applied Medical Resources Corporation. In
addition, while Edwards Lifesciences is also the leading contract supplier of
perfusion services in the world, there are many small regional contract service
providers who compete with Edwards Lifesciences for contracts in those hospitals
that outsource perfusion services.

SALES AND MARKETING

    Edwards Lifesciences has a number of broad product lines that require a
sales and marketing strategy tailored to its customers in order to deliver high
quality, cost-effective products and services to all of its customers worldwide.
We believe that Edwards Lifesciences' portfolio includes some of the most
respected product brands in cardiovascular devices today, including
Carpentier-Edwards, Cosgrove-Edwards, Duraflo, Fogarty, Research Medical,
Starr-Edwards and Swan-Ganz.

    Because of the diverse global needs of the population that Edwards
Lifesciences serves, Edwards Lifesciences' distribution system includes a direct
sales force and independent distributors. In the last nine months of 2000,
approximately 12% of Edwards Lifesciences' net sales were from sales to Baxter,
which serves as a distributor of Edwards Lifesciences' products and/or provides
distribution services in various countries outside the United States. The
distribution agreements with Baxter generally extend until December 31, 2001,
subject to renewal. In certain territories Edwards Lifesciences is required to
distribute all covered products through Baxter, subject to certain exceptions.
Baxter distributes Edwards Lifesciences products to a variety of customers,
including hospitals, surgical centers and other health care institutions.
Edwards Lifesciences is not dependent on any single end-user customer and no
single end-user customer accounted for more than 10% of Edwards Lifesciences'
net sales in 2000.

    Sales personnel work closely with the primary decision makers who purchase
Edwards Lifesciences' products, whether they are physicians, material managers,
nurses, biomedical staff, hospital administrators or purchasing managers. Also,
where appropriate, Edwards Lifesciences' sales force actively pursues approval
of Edwards Lifesciences as a qualified supplier for hospital group purchasing
organizations that negotiate contracts with suppliers of medical products.
Edwards Lifesciences already has contracts with a number of national buying
groups and is working with a growing number of regional buying groups that are
emerging in response to cost containment pressures and health care reform in the
United States.

    UNITED STATES.  In the United States, Edwards Lifesciences sells
substantially all of its products through its direct sales force. Substantially
all of its direct sales force consists of employees of Edwards Lifesciences. In
2000, approximately 60% of Edwards Lifesciences' sales were derived from sales
to customers in the United States.

    INTERNATIONAL.  In 2000, approximately 40% of Edwards Lifesciences' sales
were derived internationally through its direct sales force and independent
distributors. Edwards Lifesciences sells its products in more than 80 countries.
Major international countries in which Edwards Lifesciences' products are sold
include: Australia, Belgium, Canada, France, Germany, Italy, Japan (through a
contractual joint venture with Baxter), The Netherlands, Spain and the United
Kingdom. The sales and marketing approach in international geographies varies
depending on each country's size and state of development.

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RAW MATERIALS AND MANUFACTURING

    Edwards Lifesciences uses a diverse and broad range of raw and organic
materials in the design, development and manufacture of its products. Edwards
Lifesciences' non-implantable products are manufactured from man-made raw
materials including resins, chemicals, electronics and metal. Most of Edwards
Lifesciences' heart valve therapy products are manufactured from natural tissues
harvested from animal tissue, as well as man-made materials. Edwards
Lifesciences purchases certain materials and components used in manufacturing
its products from external suppliers. In addition, Edwards Lifesciences
purchases certain supplies from single sources for reasons of quality assurance,
sole source availability, cost effectiveness or constraints resulting from
regulatory requirements.

    Edwards Lifesciences works closely with its suppliers to assure continuity
of supply while maintaining high quality and reliability. Alternative supplier
options are generally considered and identified, although Edwards Lifesciences
does not typically pursue regulatory qualification of alternative sources due to
the strength of its existing supplier relationships and the time and expense
associated with the regulatory process. Although a change in suppliers could
require significant effort or investment by Edwards Lifesciences in
circumstances where the items supplied are integral to the performance of
Edwards Lifesciences' products or incorporate unique technology, management does
not believe that the loss of any existing supply contract would have a material
adverse effect on the Company.

    Edwards Lifesciences follows rigorous sourcing and manufacturing procedures
intended to safeguard humans from potential risks associated with diseases such
as bovine spongiform encephalopathy ("BSE"), commonly known as "mad cow
disease." Health and regulatory authorities have given guidance identifying
three factors contributing to the control of BSE: source of animals, nature of
tissue used and manufacturing process. The Company complies with all current
guidelines regarding risks for products intended to be implanted in humans. The
Company obtains bovine tissue used in its pericardial tissue valve products only
from sources within the United States or Australia, where strong control
measures and surveillance programs exist and where no BSE cases have been
reported. In addition, bovine tissue used in the Company's pericardial tissue
valve products are from tissue types considered by health and regulatory
organizations to have shown no risk of infectibility. The Company's
manufacturing and sterilization processes render tissue biologically safe from
all known infectious agents and viruses, and exceed the worldwide standard for
sterile medical products.

    In 1998, Congress enacted the Biomaterials Access Assurance Act to help
ensure a continued supply of raw materials and component parts essential to the
manufacture of medical devices by allowing for rapid dismissal of claims against
suppliers in product liability lawsuits if certain facts and circumstances
exist. This law has not yet had a material impact, and it is not possible to
assess the long-term impact it will have, on the continued availability of raw
materials. The inability to develop satisfactory alternatives, if required, or a
reduction or interruption in supply or a significant increase in the price of
materials or components could have a material adverse effect on Edwards
Lifesciences' business.

QUALITY ASSURANCE

    Edwards Lifesciences is committed to providing high quality products to its
customers. To meet this commitment, Edwards Lifesciences has implemented modern
quality systems and concepts throughout the organization. The quality system
starts with the initial product specification and continues through the design
of the product, component specification processes and the manufacturing, sales
and servicing of the product. The quality system is designed to build in quality
and to utilize continuous improvement concepts throughout the product life.

    Edwards Lifesciences' operations are certified under the applicable
international quality systems standards, such as ISO 9001, ISO 9002, EN46001 and
EN46002. ISO 9001 and 9002 require, among other items, an implemented quality
system that applies to component quality, supplier control and

                                       9

manufacturing operations. In addition, ISO 9001 and EN46001 require an
implemented quality system that applies to product design. These certifications
can be obtained only after a complete audit of a company's quality system has
been conducted by an independent outside auditor. These certifications require
that Edwards Lifesciences' facilities undergo periodic reexamination.

RESEARCH AND DEVELOPMENT

    Edwards Lifesciences is engaged in ongoing research and development to
introduce clinically advanced new products, to enhance the effectiveness, ease
of use, safety and reliability of its existing products and to expand the
applications of its products as appropriate. Edwards Lifesciences is dedicated
to developing novel technologies that will furnish health care providers with a
more complete line of products to treat late-stage cardiovascular disease.

    Edwards Lifesciences' research and development activities are carried out
primarily in facilities located in the United States. Edwards Lifesciences'
research and development staff is focused on product design and development,
quality, clinical research and regulatory compliance. To pursue primary research
efforts, Edwards Lifesciences has developed alliances with several leading
research institutions and universities. Edwards Lifesciences also works with
leading clinicians around the world in conducting scientific studies on Edwards
Lifesciences' existing and developing products. These studies include clinical
trials, which provide data for use in regulatory submissions and post-market
approval studies involving applications of Edwards Lifesciences' products.

    The Company spent $55 million on research and development in 2000 and 1999
(7% and 6% of net sales, respectively), and approximately $56 million in 1998
(6% of net sales). These funds have been used primarily to develop new products
and to improve and expand the applications for existing products.

PROPRIETARY TECHNOLOGY

    Patents and other proprietary rights are important to the success of Edwards
Lifesciences' business. Edwards Lifesciences also relies upon trade secrets,
know-how, continuing technological innovations and licensing opportunities to
develop and maintain its competitive position. All employees and consultants who
have access to confidential and proprietary information, or who are employed to
perform duties or services that are likely to result in inventions, are required
to sign either the Company's standard employment agreement or the Company's
standard consulting agreement. All third parties who are given access to
confidential and proprietary information are required to sign the Company's
standard outgoing confidentiality agreement. Edwards Lifesciences also reviews
third-party patents and patent applications in an effort to develop an effective
patent strategy, identify licensing opportunities and monitor the patent claims
of others.

    Edwards Lifesciences owns approximately 318 issued United States patents,
135 pending United States patent applications, 381 issued foreign patents and
525 pending foreign patent applications, and has licensed approximately 42
issued United States patents, 51 pending United States patent applications, 144
issued foreign patents and 40 pending foreign patent applications, that relate
to aspects of the technology incorporated in many of Edwards Lifesciences'
products. This proprietary protection often affords Edwards Lifesciences the
opportunity to enhance its position in the marketplace by precluding its
competitors from using or otherwise exploiting Edwards Lifesciences' technology.

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    Most of Edwards Lifesciences' products are protected in some way by issued
patents and/or pending patent applications. Edwards Lifesciences has several key
patents and pending patent applications in the United States, Europe, Australia,
Japan and Canada on improvements to the Carpentier-Edwards pericardial valve
which enhance and extend the original patent coverage on this valve. Although
the original pericardial patent will be expiring in 2002 in most countries,
because of design improvements made since the original filing, management does
not expect this to have a significant effect on its business. Edwards
Lifesciences also has many important United States and foreign patents and
pending patent applications related to mitral valve repair and, in particular,
patent coverage on the Cosgrove-Edwards annuloplasty system and the
Carpentier-Edwards Physio annuloplasty ring. The Lifepath AAA System for
endovascular repair of aortic abdominal aneurysms is an important technology
that is protected by at least ten issued or allowed United States patents and
foreign applications pending in Europe, Canada, Japan and Australia. Edwards
Lifesciences also has numerous key United States and foreign patents and patent
applications that cover catheters, systems and methods for measuring and
monitoring continuous cardiac output ("CCO") and vascular access products,
including combinations of introducers and central venous catheters. Many of the
CCO and vascular access patents were issued only recently and are expected to
protect Edwards Lifesciences' intellectual property rights in such technologies
for the next thirteen to seventeen years. In addition, Edwards Lifesciences has
purchased and licensed extensive United States and foreign patents and patent
applications in the angiogenesis field.

    Although some of Edwards Lifesciences' patents are due to expire within the
next five years, Edwards Lifesciences' patent strategy is to file improvement
patent applications and, in some cases, additional patent applications covering
new aspects or modifications of the affected products, or line extensions of
these products. As a result, the duration of some of the patents covering
Edwards Lifesciences' products can extend up to twenty years from the date of
filing of the patent application. Edwards Lifesciences management does not
believe that the expiration of any one or more of its patents that are due to
expire in the next five years will cause a material adverse effect on the sales
of Edwards Lifesciences' products. In addition, Edwards Lifesciences is a party
to several license agreements with unrelated third parties pursuant to which it
has obtained, for varying terms, the exclusive or non-exclusive rights to
certain patents held by such third parties in consideration for cross-licensing
rights or royalty payments. Edwards Lifesciences has also granted various rights
in its own patents to others under license agreements. There can be no assurance
that pending patent applications will result in issued patents. Competitors may
challenge the validity and enforceability of, or circumvent these patents issued
to or licensed by Edwards Lifesciences. Such patents may also be found to be not
infringed and thus insufficiently broad to provide Edwards Lifesciences with a
competitive advantage.

    Edwards Lifesciences actively monitors the products of its competitors for
possible infringement of Edwards Lifesciences' owned and/or licensed patents.
Historically, litigation has been necessary to enforce certain patent rights
held by Edwards Lifesciences and Edwards Lifesciences plans to continue to
defend and prosecute its rights with respect to such patents. However, Edwards
Lifesciences' efforts in this regard may not be successful. In addition, patent
litigation could result in substantial cost to and diversion of effort by
Edwards Lifesciences. Edwards Lifesciences also relies upon trade secrets for
protection of its confidential and proprietary information. Others may
independently develop substantially equivalent proprietary information and
techniques, and third parties may otherwise gain access to Edwards Lifesciences'
trade secrets.

                                       11

    Edwards Lifesciences owns the following trademarks that are referred to in
this Form 10-K:

    Trademarks registered in the United States Patent and Trademark Office:

                             
AnastaFlo                       Fogarty
Carpentier-Edwards              Perimount
Carpentier-Edwards Physio       Swan-Ganz
Cosgrove-Edwards                Vigilance
Duraflo



    Other trademarks owned by Edwards Lifesciences:

                             
Advanced Venous Access          Research Medical
AVA HF                          Lifepath AAA
AVA 3Xi                         Side Branch Occlusion System
Edwards                         Starr-Edwards
Edwards Lifesciences            Thrombex PMT
Edwards MIRA                    Vantex
Edwards Prima Plus              VisuFlo



    Many of these trademarks have also been registered for use in certain
foreign countries where registration is available and Edwards Lifesciences has
determined it is commercially advantageous to do so.

GOVERNMENT REGULATION AND OTHER MATTERS

    REGULATORY APPROVALS.  In the United States, the Food and Drug
Administration ("FDA"), among other government agencies, is responsible for
regulating the introduction of new medical devices. The FDA regulates laboratory
and manufacturing practices, labeling and record keeping for medical devices,
and review of required manufacturers' reports of adverse experience to identify
potential problems with marketed medical devices. Many of the devices that
Edwards Lifesciences develops and markets are in a category for which the FDA
has implemented stringent clinical investigation and pre-market approval
requirements. The process of obtaining FDA approval to market a product can be
resource-intensive, lengthy and costly. FDA review may involve substantial
delays that adversely affect the marketing and sale of Edwards Lifesciences'
products. Any delay or acceleration experienced by Edwards Lifesciences in
obtaining regulatory approvals to conduct clinical trials or in obtaining
required market clearances (especially with respect to significant products in
the regulatory process that have been discussed in public announcements) may
affect Edwards Lifesciences' operations or the market's expectations for the
timing of such events and, consequently, the market price for Edwards
Lifesciences' common stock. The FDA has the authority to halt the distribution
of certain medical devices, detain or seize adulterated or misbranded medical
devices, or order the repair, replacement or refund of the costs of such
devices. The FDA may also require notification of health professionals and
others with regard to medical devices that present unreasonable risks of
substantial harm to the public health. The FDA may enjoin and restrain certain
violations of the Food, Drug and Cosmetic Act and the Safe Medical Devices Act
pertaining to medical devices, or initiate action for criminal prosecution of
such violations. Moreover, the FDA administers certain controls over the export
of medical devices from the United States and the importation of devices into
the United States.

    Medical device laws are also in effect in the other countries in which
Edwards Lifesciences does business outside of the United States. These range
from comprehensive device approval requirements for some or all of Edwards
Lifesciences' medical device products to requests for product data or
certifications. The number and scope of these requirements are increasing.

                                       12

    HEALTH CARE INITIATIVES.  Government and private sector initiatives to limit
the growth of health care costs, including price regulation and competitive
pricing, are continuing in many countries where Edwards Lifesciences does
business, including the United States. As a result of these changes, the
marketplace has placed increased emphasis on the delivery of more cost-effective
medical therapies. Although Edwards Lifesciences believes it is well positioned
to respond to changes resulting from this worldwide trend toward cost
containment, proposed legislation and/or changes in the marketplace could have
an adverse impact on future operating results.

    Diagnostic-related groups' reimbursement schedules regulate the amount the
United States government, through the United States Health Care Financing
Administration, will reimburse hospitals and doctors for the inpatient care of
persons covered by Medicare. In response to rising Medicare and Medicaid costs,
several legislative proposals in the United States have been advanced that would
restrict future funding increases for these programs. While Edwards Lifesciences
has been unaware of significant domestic price resistance directly as a result
of the reimbursement policies of diagnostic-related groups, changes in these
reimbursement levels and processes could have an adverse effect on Edwards
Lifesciences' domestic pricing flexibility.

    In keeping with the increased emphasis on cost-effectiveness in health care
delivery, the current trend among hospitals and other customers of medical
device manufacturers is to consolidate into larger purchasing groups to enhance
purchasing power. The medical device industry has also experienced some
consolidation, partly in order to offer a broader range of products to large
purchasers. As a result, transactions with customers are larger, more complex
and tend to involve more long-term contracts than in the past. The enhanced
purchasing power of these larger customers may also increase the pressure on
product pricing, although management is unable to estimate the potential impact
at this time.

EMPLOYEES

    As of February 1, 2001, Edwards Lifesciences employed approximately 5,100
employees worldwide, the majority of whom were located at the company's
headquarters in Irvine, California, and at its manufacturing facility in Puerto
Rico. Other major concentrations of employees are located in Europe and Brazil.
Edwards Lifesciences emphasizes competitive compensation, benefits, equity
participation and work environment policies in its efforts to attract and retain
qualified personnel. None of Edwards Lifesciences' North American employees is
represented by a labor union. In various countries outside of North America,
there are a limited number of employees who have relationships with works
councils or trade unions. Edwards Lifesciences considers its relations with its
employees to be good.

CERTAIN BUSINESS RISKS

    RISKS RELATED TO EDWARDS LIFESCIENCES' BUSINESS

    IF EDWARDS LIFESCIENCES DOES NOT INTRODUCE NEW PRODUCTS IN A TIMELY MANNER,
     ITS PRODUCTS MAY BECOME OBSOLETE, AND ITS OPERATING RESULTS MAY SUFFER.

    The cardiovascular products industry is characterized by rapid technological
changes, frequent new product introductions and evolving industry standards.
Without the timely introduction of new products and enhancements, Edwards
Lifesciences' products will likely become technologically obsolete over time, in
which case Edwards Lifesciences' revenue and operating results would suffer. The
success of Edwards Lifesciences' new product offerings will depend on several
factors, including its ability to:

    - properly identify and anticipate customer needs;

    - innovate and develop new technologies and applications;

    - successfully commercialize new technologies in a timely manner;

                                       13

    - manufacture and deliver products in sufficient volumes on time;

    - differentiate Edwards Lifesciences' offerings from competitors offerings;
      and

    - price products competitively.

    In addition, new technologies that Edwards Lifesciences develops may not be
accepted quickly because of industry-specific factors, such as the need for
regulatory clearance, unanticipated restrictions imposed on approved
indications, entrenched patterns of clinical practice, uncertainty over
third-party reimbursement and clinicians' fears of malpractice suits.

    Moreover, significant technical innovations generally will require a
substantial investment before Edwards Lifesciences can determine the commercial
viability of these innovations. Edwards Lifesciences may not have the financial
resources necessary to fund these technical innovations. In addition, even if
Edwards Lifesciences is able to successfully develop enhancements or new
generations of its products, these enhancements or new generations of products
may not produce revenue in excess of the costs of development, and they may be
quickly rendered obsolete by changing customer preferences or the introduction
by Edwards Lifesciences' competitors of products embodying new technologies or
features.

    EDWARDS LIFESCIENCES MAY INCUR PRODUCT LIABILITY AND PROFESSIONAL LIABILITY
     LOSSES AND INSURANCE COVERAGE MAY BE INADEQUATE OR UNAVAILABLE TO COVER
     THESE LOSSES.

    Edwards Lifesciences' business exposes it to potential product liability
risks that are inherent in the design, manufacture and marketing of medical
devices. Edwards Lifesciences' products are often used in surgical and intensive
care settings with seriously ill patients. In addition, some of the medical
devices manufactured and sold by Edwards Lifesciences are designed to be
implanted in the human body for long periods of time. Edwards Lifesciences could
be the subject of product liability suits alleging that component failures,
manufacturing flaws, design defects or inadequate disclosure of product-related
risks or product-related information could result in an unsafe condition or
injury to patients. Product liability lawsuits and claims, safety alerts or
product recalls in the future, regardless of their ultimate outcome, could have
a material adverse effect on Edwards Lifesciences' business and reputation and
on its ability to attract and retain customers. In addition, Edwards
Lifesciences' perfusion services subsidiaries expose it to professional
liability risks. In recent years, physicians, hospitals and other
medical-service providers have become subject to an increasing number of
lawsuits alleging medical malpractice. Medical malpractice suits often involve
large claims and substantial defense costs.

    In connection with the Distribution, Edwards Lifesciences assumed the
defense of litigation involving claims related to Edwards Lifesciences' business
and agreed to indemnify Baxter for all related losses, costs and expenses.
Edwards Lifesciences maintains various third-party product liability and
professional liability coverages; however, product liability claims against
Edwards Lifesciences could exceed the coverage limits of any insurance policies
or cause Edwards Lifesciences to record a self-insured loss. Edwards
Lifesciences maintains professional liability insurance coverage for individuals
employed by the subsidiaries who perform perfusion services, although the amount
of that coverage may not be sufficient. Further, even if any product liability
or professional liability losses are covered by an Edwards Lifesciences
insurance policy, these policies may have substantial retentions or deductibles
that provide that Edwards Lifesciences will not receive insurance proceeds until
the losses incurred by Edwards Lifesciences exceed the amount of those
retentions or deductibles. To the extent that any losses are below these
retentions or deductibles, Edwards Lifesciences will be responsible for paying
these losses. A product liability or professional liability claim in an amount
in excess of applicable insurance could have a material adverse effect on
Edwards Lifesciences.

                                       14

    EDWARDS LIFESCIENCES MAY EXPERIENCE SUPPLY INTERRUPTIONS THAT COULD HARM ITS
     ABILITY TO MANUFACTURE PRODUCTS.

    Edwards Lifesciences uses a diverse and broad range of raw and organic
materials and other items in the design and manufacture of its products. Edwards
Lifesciences' non-implantable products are manufactured from man-made raw
materials including resins, chemicals, electronics and metals. Edwards
Lifesciences' heart valve therapy products are manufactured from natural animal
tissue and man-made materials. Edwards Lifesciences purchases certain of the
materials and components used in the manufacture of its products from external
suppliers. In addition, Edwards Lifesciences purchases certain supplies from
single sources for reasons of quality assurance, cost-effectiveness or
constraints resulting from regulatory requirements. Edwards Lifesciences works
closely with its suppliers to assure continuity of supply while maintaining high
quality and reliability. Alternative supplier options are generally considered
and identified, although Edwards Lifesciences does not typically pursue
regulatory qualification of alternative sources due to the strength of its
existing supplier relationships and the time and expense associated with the
regulatory process. Although a change in suppliers could require significant
effort or investment by Edwards Lifesciences in circumstances where the items
supplied are integral to the performance of Edwards Lifesciences' products or
incorporate unique technology, management does not believe that the loss of any
existing supply contract would have a material adverse effect on the Company.

    In an effort to reduce potential product liability exposure, in the past
certain suppliers have announced that they might limit or terminate sales of
certain materials and parts to companies that manufacture implantable medical
devices. In some cases Edwards Lifesciences has been required to indemnify
suppliers for product liability expenses in order to continue to receive
materials or parts. There can be no assurance that an indemnity from Edwards
Lifesciences will be satisfactory to these suppliers in the future. If Edwards
Lifesciences is unable to obtain these raw materials or there is a significant
increase in the price of materials or components, its business could be harmed.

    EDWARDS LIFESCIENCES MAY NOT SUCCESSFULLY IDENTIFY AND COMPLETE ACQUISITIONS
     OR STRATEGIC ALLIANCES ON FAVORABLE TERMS OR ACHIEVE ANTICIPATED SYNERGIES
     RELATING TO ANY ACQUISITIONS OR ALLIANCES; EDWARDS LIFESCIENCES MAY BE
     REQUIRED TO INCUR ADDITIONAL INDEBTEDNESS TO FUND ANY ACQUISITIONS.

    As part of Edwards Lifesciences' growth strategy, Edwards Lifesciences
regularly reviews potential acquisitions of complementary businesses,
technologies, services or products and potential strategic alliances. Edwards
Lifesciences may be unable to find suitable acquisition candidates. Even if
Edwards Lifesciences identifies appropriate acquisition or alliance candidates,
Edwards Lifesciences may be unable to complete such acquisitions on favorable
terms, if at all. In addition, the process of integrating an acquired business,
technology, service or product into Edwards Lifesciences' existing business and
operations may result in unforeseen operating difficulties and expenditures.
Integration of an acquired company also may require significant management
resources that otherwise would be available for ongoing development of Edwards
Lifesciences' business. Moreover, Edwards Lifesciences may not realize the
anticipated benefits of any acquisition. Future acquisitions could also require
issuances of equity securities, the incurrence of debt, contingent liabilities
or amortization expenses related to goodwill and other intangible assets, any of
which could harm Edwards Lifesciences' business.

    Edwards Lifesciences also intends to pursue strategic alliances with third
parties. Edwards Lifesciences may not identify appropriate partners with which
to form partnerships or strategic alliances. Any alliances may not generate
anticipated financial results.

                                       15

    EDWARDS LIFESCIENCES' BUSINESS IS SUBJECT TO ECONOMIC, POLITICAL AND OTHER
     RISKS ASSOCIATED WITH INTERNATIONAL SALES AND OPERATIONS.

    Because Edwards Lifesciences sells its products in a number of foreign
countries, its business is subject to risks associated with doing business
internationally. Sales of Edwards Lifesciences originating outside of the United
States, as a percentage of total sales, were approximately 40% in 2000. Edwards
Lifesciences anticipates that sales from international operations will continue
to represent a substantial portion of its total sales. In addition, many of
Edwards Lifesciences' manufacturing facilities and suppliers are located outside
of the United States. Edwards Lifesciences management expects to increase its
sales efforts internationally, which could expose it to greater risks associated
with international sales and operations. Accordingly, Edwards Lifesciences'
future results could be harmed by a variety of factors, including:

    - changes in foreign medical reimbursement policies and programs;

    - unexpected changes in foreign regulatory requirements;

    - changes in foreign currency exchange rates;

    - changes in a specific country's or region's political or economic
      conditions, particularly in emerging regions;

    - trade protection measures and import or export licensing requirements;

    - potentially negative consequences from changes in tax laws;

    - difficulty in staffing and managing foreign operations;

    - differing labor regulations; and

    - differing protection of intellectual property.

    EDWARDS LIFESCIENCES IS SUBJECT TO RISKS ARISING FROM CURRENCY EXCHANGE RATE
     FLUCTUATIONS.

    Approximately 40% of Edwards Lifesciences' sales in 2000 were generated from
outside of the United States. Measured in local currency, a substantial portion
of Edwards Lifesciences' foreign-generated sales were generated in Europe (and
primarily denominated in the Euro) and in Japan. The United States dollar value
of Edwards Lifesciences' foreign-generated sales varies with currency exchange
rate fluctuations. Significant increases in the value of the United States
dollar relative to the Euro or the Japanese Yen, as well as other currencies,
could have a material adverse effect on Edwards Lifesciences' results of
operations. Edwards Lifesciences has a hedging policy which attempts to manage
currency exchange rate risks to an acceptable level based on management's
judgment of the appropriate trade-off between risk, opportunity and cost;
however, this hedging policy may not successfully eliminate the effects of
currency exchange rate fluctuations.

    THE CONVERSION TO THE EURO HAS REQUIRED EDWARDS LIFESCIENCES TO MODIFY ITS
     BUSINESS OPERATIONS AND IF THESE MODIFICATIONS ARE NOT SUCCESSFUL OR IF
     THERE ARE ANY NEGATIVE ECONOMIC DEVELOPMENTS IN THE EUROPEAN UNION, EDWARDS
     LIFESCIENCES' BUSINESS MAY BE NEGATIVELY AFFECTED.

    On January 1, 1999, eleven member countries of the European Union
established fixed conversion rates between their existing currencies and one
common currency, the Euro. Uncertainties exist as to the effects the Euro may
have on Edwards Lifesciences' European customers, as well as the impact of the
Euro conversion on the economies of the participating countries. Approximately
40% of Edwards Lifesciences' sales in 2000 were derived from outside the United
States, a significant portion of which were generated in Europe and primarily
denominated in currencies linked to the Euro since January 1, 1999. Any negative
economic developments that occur in the combined European Union economy and

                                       16

the possible devaluation of the Euro could have a material negative impact on
Edwards Lifesciences' business. Potential effects on Edwards Lifesciences'
operations include:

    - the need to modify business systems to recognize the Euro as a functional
      currency; and

    - the competitive impact of cross-border price transparency, which may make
      it more difficult for a business to charge different prices for the same
      products on a country-by-country basis, particularly once the Euro begins
      circulation in 2002.

    Edwards Lifesciences will continue to evaluate the impact of the
introduction of the Euro as Edwards Lifesciences continues to expand its
operations throughout Europe.

    FLUCTUATIONS IN EDWARDS LIFESCIENCES' QUARTERLY OPERATING RESULTS MAY CAUSE
     EDWARDS LIFESCIENCES' STOCK PRICE TO DECLINE.

    Edwards Lifesciences' revenue and operating results may vary significantly
from quarter to quarter. A high proportion of Edwards Lifesciences' costs are
fixed, due in part to significant sales, research and development and
manufacturing costs. Thus, small declines in revenue could disproportionately
affect operating results in a quarter, and the price of Edwards Lifesciences
common stock may fall. Other factors that could affect quarterly operating
results include:

    - demand for and clinical acceptance of products;

    - the timing and execution of customer contracts, particularly large
      contracts that would materially affect Edwards Lifesciences' operating
      results in a given quarter;

    - the timing of sales of products;

    - changes in foreign currency exchange rates;

    - unanticipated delays or problems in introducing new products;

    - competitors' announcements of new products, services or technological
      innovations;

    - changes in Edwards Lifesciences' pricing policies or the pricing policies
      of its competitors;

    - increased expenses, whether related to sales and marketing, raw materials
      or supplies, product development or administration;

    - adverse changes in the level of economic activity in the United States and
      other major regions in which Edwards Lifesciences does business;

    - costs related to possible acquisitions of technologies or businesses;

    - Edwards Lifesciences' ability to expand its operations; and

    - the amount and timing of expenditures related to expansion of Edwards
      Lifesciences' operations.

    EDWARDS LIFESCIENCES' INABILITY TO PROTECT ITS INTELLECTUAL PROPERTY COULD
     HAVE A MATERIAL ADVERSE EFFECT ON ITS BUSINESS.

    Edwards Lifesciences' success and competitive position are dependent, in
part, upon its proprietary intellectual property. Edwards Lifesciences relies on
a combination of patents, trade secrets and nondisclosure agreements to protect
its proprietary intellectual property, and will continue to do so. Although
Edwards Lifesciences seeks to protect its proprietary rights through a variety
of means, Edwards Lifesciences cannot guarantee that the protective steps it has
taken are adequate to protect these rights. Patents issued to or licensed by
Edwards Lifesciences in the past or in the future may be challenged and held
invalid or not infringed by third parties. Competitors may also challenge
Edwards Lifesciences' patents.

                                       17

    Edwards Lifesciences also relies on confidentiality agreements with certain
employees, consultants and other parties to protect, in part, trade secrets and
other proprietary information. These agreements could be breached and Edwards
Lifesciences may not have adequate remedies for any breach. In addition, others
may independently develop substantially equivalent proprietary information or
gain access to Edwards Lifesciences' trade secrets or proprietary information.

    Edwards Lifesciences spends significant resources to monitor and enforce its
intellectual property rights. Edwards Lifesciences may not be able to detect
infringement and may lose its competitive position in the industry. In addition,
competitors may design around Edwards Lifesciences' technology or develop
competing technologies. Intellectual property rights may also be unavailable or
limited in some foreign countries, which could make it easier for competitors to
capture increased market position.

    THIRD PARTIES MAY CLAIM EDWARDS LIFESCIENCES IS INFRINGING THEIR
     INTELLECTUAL PROPERTY, AND EDWARDS LIFESCIENCES COULD SUFFER SIGNIFICANT
     LITIGATION OR LICENSING EXPENSES OR BE PREVENTED FROM SELLING PRODUCTS.

    During recent years, Edwards Lifesciences' competitors have been involved in
substantial litigation regarding patent and other intellectual property rights
in the medical device industry generally. In the future, Edwards Lifesciences
may be forced to defend itself against claims and legal actions alleging
infringement of the intellectual property rights of others. Because intellectual
property litigation can be costly and time consuming, Edwards Lifesciences'
intellectual property litigation expenses could be significant in the future.
Adverse determinations in any such litigation could subject Edwards Lifesciences
to significant liabilities to third parties, could require Edwards Lifesciences
to seek licenses from third parties and could, if such licenses are not
available, prevent Edwards Lifesciences from manufacturing, selling or using
certain of its products, any one of which could have a material adverse effect
on Edwards Lifesciences.

    Third parties could also obtain patents that may require Edwards
Lifesciences to either redesign its products or, if possible, negotiate licenses
to conduct its business. If Edwards Lifesciences is unable to redesign its
products or obtain a license, Edwards Lifesciences may have to exit a particular
product offering.

    EDWARDS LIFESCIENCES MAY NEED TO FUND FUTURE CAPITAL REQUIREMENTS.

    Edwards Lifesciences' capital requirements may vary greatly from quarter to
quarter, depending on, among other things, capital expenditures, fluctuations in
Edwards Lifesciences' operating results, financing activities and build-up of
inventories. Edwards Lifesciences believes that currently available sources of
financing, along with its future cash flow from operations, will be sufficient
to satisfy its working capital, capital expenditure and research and development
requirements for the foreseeable future. However, Edwards Lifesciences may be
required or choose to obtain additional debt or equity financing in the future,
especially for significant acquisitions. Future equity financings could be
dilutive to the existing holders of Edwards Lifesciences' common stock. Future
debt financings could involve restrictive covenants that limit Edwards
Lifesciences' ability to take certain actions. To the extent Edwards
Lifesciences must obtain financing, Edwards Lifesciences cannot guarantee that
financing will be available on favorable terms.

    THE TRANSITIONAL SERVICES BEING PROVIDED TO EDWARDS LIFESCIENCES BY BAXTER
     MAY BE DIFFICULT TO REPLACE WITHOUT OPERATIONAL PROBLEMS.

    Baxter has agreed to provide certain administrative services to Edwards
Lifesciences in various countries around the world. These services include
information systems and telecommunications, human resources, finance and
accounting and other administrative services. In most cases, either party will

                                       18

have the right after 21 months from the Distribution to terminate these
arrangements either in whole or in part. If these arrangements are terminated,
Edwards Lifesciences will need to seek alternative providers of these services.
Edwards Lifesciences may experience operational problems if it is not able to
immediately replace these services or as Edwards Lifesciences transitions to
another provider's systems. In addition, since the prices charged to Edwards
Lifesciences under these arrangements are intended to approximate the costs of
providing the services, the costs of obtaining services from third parties upon
any termination could be in excess of the costs payable by Edwards Lifesciences
to Baxter.

    RISKS RELATED TO THE HEALTH CARE INDUSTRY

    EDWARDS LIFESCIENCES FACES INTENSE COMPETITION AND CONSOLIDATION WITHIN ITS
     INDUSTRY, AND IF EDWARDS LIFESCIENCES DOES NOT COMPETE EFFECTIVELY, ITS
     BUSINESS WILL BE HARMED.

    The cardiovascular medical products industry is highly competitive. Edwards
Lifesciences competes with many companies, some of which have longer operating
histories, better brand or name recognition and greater access to financial and
other resources than Edwards Lifesciences. Furthermore, the industry is
characterized by intensive development efforts and rapidly advancing technology.
Edwards Lifesciences' present and future products could be rendered obsolete or
uneconomical by technological advances by one or more of Edwards Lifesciences'
current or future competitors or by alternative therapies, including drug
therapies. The future success of Edwards Lifesciences will depend, in large
part, on its ability to anticipate technology advances and keep pace with other
developers of cardiovascular therapies and services.

    The medical devices industry has been consolidating and as a result,
transactions with customers are larger, more complex and tend to involve more
long-term contracts. The enhanced purchasing power of these larger customers may
also increase downward pressure on product pricing. In addition, many existing
and potential customers for Edwards Lifesciences' products have combined to form
Group Purchasing Organizations ("GPOs"). GPOs negotiate pricing arrangements
with medical supply manufacturers and distributors and these negotiated prices
are made available to members of GPOs. If Edwards Lifesciences is not one of the
providers selected by a GPO, Edwards Lifesciences may be precluded from making
sales to members of a GPO for several years. Even if Edwards Lifesciences is one
of the selected providers, Edwards Lifesciences may be at a disadvantage
relative to other selected providers that are able to offer volume discounts
based on purchases of a broader range of medical equipment and supplies.
Further, Edwards Lifesciences may be required to commit to pricing that has a
material adverse effect on sales and profit margins, the business, financial
condition and results of operations of Edwards Lifesciences.

    EDWARDS LIFESCIENCES AND ITS CUSTOMERS ARE SUBJECT TO VARIOUS GOVERNMENTAL
     REGULATIONS, AND EDWARDS LIFESCIENCES MAY INCUR SIGNIFICANT EXPENSES TO
     COMPLY WITH THESE REGULATIONS AND DEVELOP ITS PRODUCTS TO BE COMPATIBLE
     WITH THESE REGULATIONS.

    The medical devices manufactured and marketed by Edwards Lifesciences are
subject to rigorous regulation by the FDA and numerous other federal, state and
foreign governmental authorities. The process of obtaining regulatory approvals
to market a medical device, particularly from the FDA and certain foreign
governmental authorities, can be costly and time consuming, and approvals might
not be granted for future products on a timely basis, if at all. Delays in
receipt of, or failure to obtain, approvals for future products could result in
delayed realization of product revenues or in substantial additional costs which
could have material adverse effects on Edwards Lifesciences' business or results
of operations. In addition, there can be no assurance that Edwards Lifesciences
will be or will continue to be in compliance with applicable FDA and other
material regulatory requirements. If the FDA were to conclude that Edwards
Lifesciences was not in compliance with applicable laws or regulations, it could
institute proceedings to detain or seize Edwards Lifesciences' products, issue a
recall, impose operating restrictions, enjoin future violations and assess civil
penalties against Edwards Lifesciences, its

                                       19

officers or its employees and could recommend criminal prosecution to the
Department of Justice. Moreover, the FDA could proceed to ban, or request
recall, repair, replacement or refund of the cost of, any device or product
manufactured or distributed by Edwards Lifesciences. Furthermore, both the FDA
and foreign government regulators have become increasingly stringent, and
Edwards Lifesciences may be subject to more rigorous regulation by governmental
authorities in the future.

    EDWARDS LIFESCIENCES IS SUBJECT TO RISKS ARISING FROM CONCERNS AND/OR
     REGULATORY ACTIONS RELATING TO BSE.

    Certain of Edwards Lifesciences products, including pericardial tissue valve
products, are manufactured using bovine tissue. Concerns relating to the
potential transmission of BSE from cows to humans may result in reduced
acceptance in certain geographies of bovine products. In addition, various
governmental bodies are considering stricter regulation of such products. The
Company obtains its bovine tissue only from sources within the United States or
Australia, where strong control measures and surveillance programs exist and
where no BSE cases have been reported. In addition, the bovine tissue used in
the Company's pericardial tissue valve products are from tissue types considered
by global health and regulatory organizations to have shown no risk of
infectibility. The Company has not yet experienced any adverse impact on its
sales as a result of concerns regarding BSE, but no assurance can be given that
such an impact may not occur in the future.

    IF THIRD-PARTY PAYORS DECLINE TO REIMBURSE EDWARDS LIFESCIENCES CUSTOMERS
     FOR EDWARDS LIFESCIENCES PRODUCTS OR REDUCE REIMBURSEMENT LEVELS, EDWARDS
     LIFESCIENCES' ABILITY TO PROFITABLY SELL ITS PRODUCTS WILL BE HARMED.

    Edwards Lifesciences sells its products and services to hospitals, doctors
and other health care providers, all of which receive reimbursement for the
health care services provided to their patients from third-party payors, such as
government programs (both domestic and international), private insurance plans
and managed care programs. These third-party payors may deny reimbursement if
they determine that a device used in a procedure was not used in accordance with
cost-effective treatment methods, as determined by such third-party payor, or
was used for an unapproved indication. Third-party payors may also decline to
reimburse for experimental procedures and devices. Many of Edwards Lifesciences'
existing and future products are cost-effective because they are intended to
reduce overall health care costs over a long period of time. Edwards
Lifesciences cannot be certain whether these third-party payors will recognize
these cost savings or will merely focus on the lower initial costs associated
with competing therapies. If Edwards Lifesciences' products are not considered
cost-effective by third-party payors, Edwards Lifesciences' customers may not be
reimbursed for Edwards Lifesciences' products.

    In addition, third-party payors are increasingly attempting to contain
health care costs by limiting both coverage and the level of reimbursement for
medical products and services. There can be no assurance that levels of
reimbursement, if any, will not be decreased in the future, or that future
legislation, regulation or reimbursement policies of third-party payors will not
otherwise adversely affect the demand for and price levels of Edwards
Lifesciences' products. In Japan, where Edwards Lifesciences' products are
distributed through a contractual joint venture with Baxter, customers are
reimbursed for Edwards Lifesciences products under a government-operated
insurance system. Under this system, the Japanese government annually reviews
the reimbursement levels for products. If the Japanese government decides to
reduce reimbursement levels for Edwards Lifesciences' products, Edwards
Lifesciences' product pricing may be adversely affected.

                                       20

    RISKS RELATED TO OWNERSHIP OF EDWARDS LIFESCIENCES' COMMON STOCK

    THE PRICE OF EDWARDS LIFESCIENCES' COMMON STOCK MAY FLUCTUATE.

    The prices at which Edwards Lifesciences' common stock trades may fluctuate
significantly. Prices for Edwards Lifesciences' common stock will be determined
in the trading markets and may be influenced by many factors, including:

    - the depth and liquidity of the market for Edwards Lifesciences' stock;

    - developments generally affecting the cardiovascular products market;

    - investor perceptions of Edwards Lifesciences and its business;

    - the financial results of Edwards Lifesciences;

    - Edwards Lifesciences' dividend policy; and

    - general economic and industry conditions.

    In addition, the stock market, in general, frequently experiences extreme
volatility that is often seemingly unrelated to the operating performance of
particular companies. These broad market fluctuations may adversely affect the
trading price of Edwards Lifesciences' common stock. In the past, securities
class action litigation often has been instituted against companies following
periods of volatility in the market price of their securities. Such litigation
could result in substantial costs and a diversion of management's attention and
resources.

    EDWARDS LIFESCIENCES' CHARTER DOCUMENTS AND DELAWARE LAW CONTAIN PROVISIONS
     THAT MAY DISCOURAGE TAKEOVER ATTEMPTS, WHICH COULD PRECLUDE EDWARDS
     LIFESCIENCES' STOCKHOLDERS FROM RECEIVING A CHANGE OF CONTROL PREMIUM.

    Edwards Lifesciences' certificate of incorporation and bylaws and Delaware
law contain anti-takeover provisions that could have the effect of delaying or
preventing changes in control that a stockholder may consider favorable. The
provisions in Edwards Lifesciences' charter documents include the following:

    - a classified board of directors with three-year staggered terms;

    - the ability of Edwards Lifesciences' board of directors to issue shares of
      preferred stock and to determine the price and other terms, including
      preferences and voting rights, of those shares without stockholder
      approval;

    - stockholder action to be taken only at a special or regular meeting;

    - advance notice procedures for nominating candidates to Edwards
      Lifesciences' board of directors or presenting matters at stockholder
      meetings;

    - removal of directors only for cause; and

    - super-majority voting requirements to amend the charter.

    The foregoing could have the effect of delaying, deferring or preventing a
change in control of Edwards Lifesciences, discouraging bids for Edwards
Lifesciences' common stock at a premium over the market price or harming the
market price of, and the voting and other rights of the holders of, Edwards
Lifesciences' common stock. Edwards Lifesciences also is subject to Delaware
laws that could have similar effects. One of these laws prohibits Edwards
Lifesciences from engaging in a business combination with any significant
stockholder for a period of three years from the date the person became a
significant stockholder unless specific conditions are met. In addition, Edwards
Lifesciences has adopted a stockholder rights plan. The preferred stock purchase
rights under this plan, if triggered,

                                       21

would cause substantial dilution to any person or group who attempts to acquire
a significant interest in Edwards Lifesciences without advance approval of
Edwards Lifesciences' board of directors.

FORWARD-LOOKING STATEMENTS

    This Form 10-K and other materials filed or to be filed by Edwards
Lifesciences with the SEC (as well as information included in oral statements or
other written statements made, or to be made, by Edwards Lifesciences) contain,
or will contain, disclosures that are "forward-looking statements."
Forward-looking statements include all statements that do not relate solely to
historical or current facts, and can generally be identified by the use of words
such as "may," "believe," "will," "expect," "project," "estimate," "anticipate,"
"plan," or "continue." These forward-looking statements are based on the current
plans and expectations of management and are subject to a number of
uncertainties and risks that could significantly affect current plans and
expectations and the future financial condition and results of Edwards
Lifesciences. These factors include, but are not limited to:

    - the highly competitive nature of the health care industry;

    - the efforts of insurers, health care providers and others to contain
      health care costs;

    - possible changes in United States or foreign programs that may further
      limit reimbursements to health care providers and insurers;

    - changes in federal, state or local regulation affecting the health care
      industry;

    - the possible enactment of federal or state health care reform;

    - the departure of key executive officers from Edwards Lifesciences;

    - claims and legal actions relating to product and other liability;

    - fluctuations in the market value of Edwards Lifesciences common stock;

    - changes in accounting practices;

    - changes in general economic conditions and foreign currency fluctuations;

    - product demand and risks associated with industry acceptance;

    - new product development and commercialization;

    - the receipt of timely regulatory approvals; and

    - other risk factors described above.

    As a consequence, actual results or performance may differ materially from
those expressed in any forward-looking statements made by or on behalf of
Edwards Lifesciences. Shareholders are cautioned not to unduly rely on such
forward-looking statements when evaluating the information presented in this
Form 10-K.

                                       22

ITEM 2  PROPERTIES

    The locations and uses of the major properties of Edwards Lifesciences are
as follows:

                                                
NORTH AMERICA
Irvine, California                         (1)        Headquarters, Research and Development,
                                                      Regulatory and Clinical Affairs and
                                                      Manufacturing
San Diego, California                      (2)        Administrative, Service Center and
                                                      Warehouse
Memphis, Tennessee                         (1)        Distribution and Logistics
Midvale, Utah                              (1)        Administrative, Research and Development,
                                                      and Manufacturing
Haina, Dominican Republic                  (2)        Manufacturing
Anasco, Puerto Rico                        (2)        Manufacturing

EUROPE
Uden, The Netherlands                      (1)        Warehouse, Distribution, Manufacturing
                                                      and Offices
Horw, Switzerland                          (2)        Manufacturing
Ste Prex, Switzerland                      (2)        European Headquarters

SOUTH AMERICA
Sao Paulo, Brazil                          (1), (2)   Manufacturing



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

(1) Owned property.

(2) Leased property.

    The San Diego, California lease expires in 2006; the Dominican Republic
lease expires in 2006; the Puerto Rico lease expires in 2008; the Horw,
Switzerland lease expires in 2003; the Ste Prex, Switzerland lease expires in
2005; and the Sao Paulo, Brazil lease expires in 2002.

ITEM 3  LEGAL PROCEEDINGS

    Upon the Distribution, Edwards Lifesciences assumed the defense of certain
Baxter litigation involving cases and claims related to the Edwards Lifesciences
business. Edwards Lifesciences has not been named as a defendant in such matters
but is defending and indemnifying Baxter for all related expenses and potential
liabilities. It is possible that Edwards Lifesciences may be added as a
defendant in these cases and claims.

    Edwards Lifesciences is also subject to various environmental laws and
regulations both within and outside of the United States. The operations of
Edwards Lifesciences, like those of other medical device companies, involve the
use of substances regulated under environmental laws, primarily in manufacturing
and sterilization processes. While it is difficult to quantify the potential
impact of compliance with environmental protection laws, management believes
that such compliance will not have a material impact on Edwards Lifesciences'
financial position, results of operations or liquidity.

    As previously reported, on June 29, 2000 Edwards Lifesciences filed a
lawsuit for patent infringement against Medtronic, Inc. alleging infringement of
two of Edwards Lifesciences' United States patents, and filed a lawsuit against
St. Jude Medical, Inc. alleging infringement of three patents. The Medtronic
lawsuit was filed in the United States District Court for the District of
Delaware and the St. Jude lawsuit in the United States District Court for the
Central District of California. Both lawsuits seek monetary damages and
injunctive relief. Each of Medtronic and St. Jude has answered, and asserted
various affirmative defenses and counterclaims. Discovery is proceeding in both
lawsuits.

                                       23

On March 1, 2001 Edwards Lifesciences moved to amend its lawsuit against
Medtronic alleging infringement of one other of Edwards Lifesciences' United
States patents. This motion is pending.

    Edwards Lifesciences is, or may be, a party to pending or threatened
lawsuits, related primarily to products and services currently or formerly
manufactured or performed, as applicable, by Edwards Lifesciences. Such cases
and claims raise difficult and complex factual and legal issues and are subject
to many uncertainties and complexities, including, but not limited to, the facts
and circumstances of each particular case or claim, the jurisdiction in which
each suit is brought, and differences in applicable law. Upon resolution of any
pending legal matters, Edwards Lifesciences may incur charges in excess of
presently established reserves. While such a charge could have a material
adverse impact on Edwards Lifesciences' net income or net cash flows in the
period in which it is recorded or paid, management believes that no such charge
would have a material adverse effect on Edwards Lifesciences' consolidated
financial position.

ITEM 4  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended December 31, 2000.

                                    PART II

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

    MARKET PRICE

    The principal market for Edwards Lifesciences' common stock is the New York
Stock Exchange (the "NYSE"). Edwards Lifesciences' common stock commenced
regular way trading on the NYSE on April 3, 2000. The table below sets forth,
for the calendar quarters indicated, the high and low closing sales prices of
Edwards Lifesciences' common stock as reported by the NYSE.



                                                                     2000
                                                              -------------------
                                                                HIGH       LOW
                                                              --------   --------
                                                                   
Calendar Quarter Ended:
  June 30...................................................   $20.44     $13.75
  September 30..............................................    26.25      19.69
  December 31...............................................    24.19      13.00


    NUMBER OF STOCKHOLDERS

    On March 20, 2001, there were approximately 46,000 shareholders of record of
Edwards Lifesciences' common stock.

    DIVIDENDS

    Edwards Lifesciences has never paid any cash dividends on its capital stock
and does not plan to pay any cash dividends in the foreseeable future. The
current policy of Edwards Lifesciences is to retain any future earnings for use
in the business of the Company.

ITEM 6  SELECTED FINANCIAL DATA

    The following table sets forth selected financial information with respect
to Edwards Lifesciences. The information set forth below should be read in
conjunction with "Edwards Lifesciences' Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the

                                       24

"Consolidated Financial Statements" found elsewhere in this Form 10-K.
Historical per share data for net income and dividends have not been presented
because Edwards Lifesciences was not incorporated until September 1999. Pro
forma net income per share data is presented elsewhere in this Form 10-K. See
Note 4 to the "Consolidated Financial Statements" and "Edwards Lifesciences'
Management's Discussion and Analysis of Financial Condition and Results of
Operations" for discussions of the effect of certain asset divestitures on
Edwards Lifesciences' operations.



AS OF OR FOR THE YEARS ENDED DECEMBER 31                       2000     1999(b)    1998(b)    1997(b)    1996(b)
                                                                                       
- -----------------------------------------------------------------------------------------------------------------
OPERATING      Net sales                                      $  804     $  905     $  865     $  879     $  837
RESULTS        Gross profit                                      381        439        399        416        395
(in millions)  Income (loss) from continuing operations (a)     (272)        82         62        (52)        87
- -----------------------------------------------------------------------------------------------------------------
BALANCE SHEET
DATA           Total assets                                   $1,088     $1,437     $1,483     $1,526     $1,473
(in millions)  Long-term debt and lease obligations              277         --         --         --         --
- -----------------------------------------------------------------------------------------------------------------
COMMON STOCK   Income from continuing operations per
INFORMATION    common share:
               Basic                                          $(4.66)        --         --         --         --
               Diluted                                         (4.66)        --         --         --         --
               Cash dividends declared
               per common share                                   --         --         --         --         --


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

    (a) See Note 4 to the "Consolidated Financial Statements" and "Management's
       Discussion and Analysis of Financial Condition and Results of Operations"
       for additional information regarding a non-recurring $312 million charge
       during 2000. Additionally, during 1997 the Company recorded a
       $132 million in-process research and development charge relating to the
       acquisition of Research Medical, Inc.

    (b) These results present Edwards Lifesciences on a divisional basis as it
       had historically been operated as part of Baxter. Subsequent to the
       Distribution, Edwards Lifesciences' Japan operations are presented on an
       equity basis as opposed to the consolidation method reflected in the
       historical results. As such, certain of the results reflected here are
       not comparable to the presentation subsequent to the Distribution. See
       Note 1 and Note 3 to the "Consolidated Financial Statements."

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

    The following discussion and analysis presents the factors that had a
material effect on Edwards Lifesciences' cash flows and results of operations
during the three years ended December 31, 2000, and the Company's financial
position at that date. This discussion and analysis should be read in
conjunction with the historical Consolidated Financial Statements of Edwards
Lifesciences and related notes thereto included elsewhere in this Form 10-K.

OVERVIEW

    Edwards Lifesciences provides a comprehensive line of products and services
to treat late-stage cardiovascular disease. Edwards Lifesciences' sales are
categorized in four main product areas: cardiac surgery, critical care, vascular
and perfusion products and services. Edwards Lifesciences is headquartered in
Irvine, California, and supplies its products and services to customers in more
than 80 countries, both through direct sales and distributor relationships.
Edwards Lifesciences' products are manufactured in locations throughout the
world, including Brazil, the Dominican Republic, Japan (through a contractual
joint venture with Baxter), The Netherlands, Puerto Rico, Switzerland and the
United States.

                                       25

    Edwards Lifesciences' cardiac surgery portfolio is comprised of products
relating to heart valve therapy, and cannulae and cardioplegia products used
during open-heart surgery. Edwards Lifesciences is the world leader in, and has
been a pioneer in the development and commercialization of, tissue valves and
repair products, used to replace or repair a patient's diseased or defective
heart valve. In the critical care area, Edwards Lifesciences is a world leader
in hemodynamic monitoring systems used to measure a patient's heart function,
and also provides central venous access products for fluid and drug delivery.
Edwards Lifesciences' vascular portfolio includes a line of balloon
catheter-based products, surgical clips and inserts, angioscopy equipment, and
artificial implantable grafts, as well as an endovascular system that is used to
treat life-threatening abdominal aortic aneurysms less invasively. In the
perfusion products and services category, Edwards Lifesciences designs,
develops, manufactures and markets a diverse line of disposable products used
during cardiopulmonary bypass procedures, including oxygenators, blood
containers, filters and related devices, as well as bypass equipment (see
"Disposition of Assets and Other Non-recurring Charges, net"). Edwards
Lifesciences also maintains the world's largest organization of contract
perfusionists, employing approximately 400 full- and part-time clinical
perfusionists in the United States who perform an aggregate of approximately
50,000 perfusion procedures for open heart surgery per year.

    The health care marketplace continues to be competitive. There has been
consolidation in Edwards Lifesciences' customer base and among its competitors,
which has resulted in pricing and market share pressures. Edwards Lifesciences
has experienced increases in its labor and material costs, which are primarily
influenced by general inflationary trends. Competitive market conditions have
minimized inflation's impact on the selling prices of Edwards Lifesciences'
products and services. Management expects these trends to continue.

RESULTS OF OPERATIONS

    NET SALES TRENDS

    The following table is a summary of domestic and international net sales
(dollars in millions):



                                                                                   PERCENT
                                             YEARS ENDED DECEMBER 31,               CHANGE
                                         --------------------------------    --------------------
                                           2000        1999        1998        2000        1999
                                         --------    --------    --------    --------    --------
                                                                          
United States..........................    $482        $504        $508         (4%)        (1%)
International..........................     322         401         357        (20%)        12%
                                           ----        ----        ----
Total net sales........................    $804        $905        $865        (11%)         5%
                                           ====        ====        ====


    The net sales decrease in the United States during 2000 was due primarily to
(a) the Company's partial divestiture of its perfusion products line resulting
from the sale of the Bentley product line (see "Disposition of Assets and Other
Non-recurring Charges, net") and (b) a one-time $5 million sale of a patent
during 1999, partially offset by an increase in 2000 in cardiac surgery sales.

    The decrease in international net sales during 2000 resulted primarily from
a change in accounting for sales in Japan (see "Joint Venture in Japan").
Subsequent to the spin-off by Baxter International Inc. ("Baxter") of Edwards
Lifesciences on March 31, 2000 (the "Distribution"), Edwards Lifesciences only
recognizes as sales its shipments into a joint venture with Baxter, whereas
prior to the Distribution, net sales included sales to the ultimate customers in
Japan. Excluding this change in accounting in Japan, international net sales for
the year 2000 would have increased 2% and total net sales for the year 2000
would have decreased 1%. The adjusted increase in international sales during
2000 resulted primarily from increased sales of cardiac surgery products,
critical care products and distributed products in Japan. The increase in
international net sales during 1999 resulted primarily from increased sales of
cardiac surgery and critical care products.

                                       26

    Net sales were impacted by fluctuations in foreign currency exchange rates,
primarily the movement of the United States dollar against the Euro and the
Japanese Yen. Excluding the change in accounting in Japan and the impact of
changes in foreign currency exchange rates, total net sales for the years ended
December 31, 2000 and 1999 would have remained flat and increased 3%,
respectively. The impact of foreign currency exchange rate fluctuations on net
sales would not necessarily be indicative of the impact on net income due to the
corresponding effect of foreign currency exchange rate fluctuations on
international manufacturing and operating costs, and Edwards Lifesciences'
hedging activities. For more information, see "Quantitative and Qualitative
Disclosure About Market Risk."

    JOINT VENTURE IN JAPAN

    Subsequent to the Distribution, the cardiovascular business in Japan is
being operated pursuant to a joint venture under which a Japanese subsidiary of
Baxter retains ownership of the Japanese business assets, but a subsidiary of
Edwards Lifesciences holds a 90% profit interest. Edwards Lifesciences has an
option to purchase the Japanese business assets that may be exercised no earlier
than 28 months following the Distribution and no later than 60 months following
the Distribution. The Japanese operations are included in the Consolidated
Statements of Operations for periods prior to the Distribution, consistent with
the historical treatment of the Company's operations while a part of Baxter.
Subsequent to the Distribution, Edwards Lifesciences recognizes as sales its
shipments into the joint venture and utilizes the equity method of accounting to
record its interest in the operations of the joint venture.

    NET SALES BY PRODUCT LINE

    The following table is a summary of net sales by product line (dollars in
millions):



                                                                                            PERCENT
                                                    YEARS ENDED DECEMBER 31,                CHANGE
                                              ------------------------------------    -------------------
                                                2000          1999          1998        2000       1999
                                              --------      --------      --------    --------   --------
                                                                                  
Cardiac surgery.........................        $311          $306          $273          2%        12%
Critical care...........................         217           242           221        (10%)       10%
Vascular................................          55            61            60        (10%)        2%
Perfusion products and services.........         207           244           269        (15%)       (9%)
Other...................................          14            52            42        (73%)       24%
                                                ----          ----          ----
Total net sales.........................        $804          $905          $865        (11%)        5%
                                                ====          ====          ====


                                       27

    Excluding the change in accounting for sales in Japan, net sales by product
line would have been as follows (dollars in millions):



                                                                                           PERCENT
                                                   YEARS ENDED DECEMBER 31,                CHANGE
                                             ------------------------------------    -------------------
                                               2000          1999          1998        2000       1999
                                             --------      --------      --------    --------   --------
                                                                                 
Cardiac surgery........................        $318          $306          $273           4%       12%
Critical care..........................         248           242           221           2%       10%
Vascular...............................          57            61            60          (7%)       2%
Perfusion products and services........         222           244           269          (9%)      (9%)
Other..................................          47            52            42         (10%)      24%
                                               ----          ----          ----
Total net sales........................        $892          $905          $865          (1%)       5%
                                               ====          ====          ====


    Excluding the change in accounting for sales in Japan and the impact of
foreign currency exchange rate fluctuations, net sales by product line
("Adjusted Net Sales") would have been as follows (dollars in millions):



                                                                                           PERCENT
                                                   YEARS ENDED DECEMBER 31,                CHANGE
                                             ------------------------------------    -------------------
                                               2000          1999          1998        2000       1999
                                             --------      --------      --------    --------   --------
                                                                                 
Cardiac surgery........................        $329          $308          $276           7%       12%
Critical care..........................         255           246           233           4%        6%
Vascular...............................          59            61            61          (3%)      --
Perfusion products and services........         225           246           272          (9%)     (10%)
Other..................................          46            53            48         (13%)      10%
                                               ----          ----          ----
Total net sales........................        $914          $914          $890          --         3%
                                               ====          ====          ====


    CARDIAC SURGERY

    Effective June 30, 2000, Edwards Lifesciences divested the mechanical
cardiac assist product line (see "Disposition of Assets and Other Non-recurring
Charges, net"). Assuming the divestiture occurred on January 1, 1998, Adjusted
Net Sales of cardiac surgery products would have increased 8% and 12% for the
years ended December 31, 2000 and 1999, respectively.

    Sales growth in 2000 and 1999 in cardiac surgery products resulted primarily
from double-digit sales growth of pericardial tissue valves and repair products,
particularly in Japan. This was partially offset by declines in porcine tissue
valve sales as a result of competition and the absence of distributed cardiac
assist products subsequent to the Distribution. Management expects that its
cardiac surgery products will continue to serve as a key driver of Edwards
Lifesciences' sales growth as a result of the continued market shift from
mechanical to tissue heart valve use, as well as the September 2000 launch of
the Company's Carpentier-Edwards pericardial valve in the United States.

    CRITICAL CARE

    The Adjusted Net Sales growth in 2000 and 1999 in critical care products was
due primarily to strong sales of advanced hemodynamic catheters, and the newer
access and hemofiltration product categories, offset by the decline in base
hemodynamic catheters. Critical care products have been, and are expected to
continue to be, significant contributors to Edwards Lifesciences' total sales,
particularly as the recently FDA approved Vantex central venous catheter becomes
more available and hemofiltration products gain more acceptance in new markets.
In addition, the Company received FDA 510(k) clearance in October 2000 to begin
marketing its catheter for measuring continuous end diastolic volume (CEDV) that
provides clinicians a complete picture of blood circulation in a patient's

                                       28

heart. Management believes that future sales growth of critical care products
could be negatively impacted by global pricing pressures, including anticipated
decreased governmental reimbursement in Japan.

    VASCULAR

    The decline in Adjusted Net Sales for vascular products during 2000 resulted
primarily from lower unit sales in several surgery-based product categories.
During August 2000, Edwards Lifesciences commenced United States sales of its
Thrombex PMT percutaneous mechanical thrombectomy system, a device used for
removing blood clots from the access grafts of hemodialysis patients. Management
expects that this new product will have a positive impact on future vascular
sales.

    PERFUSION PRODUCTS AND SERVICES

    Effective August 31, 2000, Edwards Lifesciences divested the majority of its
perfusion products line to Jostra AG, which allowed Edwards Lifesciences to exit
the perfusion products line in the United States and Western Europe (see
"Disposition of Assets and Other Non-recurring Charges, net"). Assuming the
divestiture occurred on January 1, 1998, Adjusted Net Sales of Perfusion
Products and Services would have remained flat in 2000 and decreased 2% in 1999.
Management believes that the decrease in 1999 was due primarily to an increase
in the number of "beating heart" coronary artery bypass surgeries, particularly
in the United States and Western Europe, and this trend reduced the need for
perfusion services.

    OTHER

    Other sales include a diverse grouping of product lines comprised primarily
of select distributed products that are sold in international regions, and
miscellaneous pharmaceutical products. The Adjusted Net Sales of this product
line declined in 2000 and increased in 1999 primarily from a one-time
$5 million sale of a patent during 1999.

    GROSS MARGIN



                                                YEARS ENDED
                                                DECEMBER 31,            PERCENTAGE POINT CHANGE
                                       ------------------------------   ------------------------
                                         2000       1999       1998        2000          1999
                                       --------   --------   --------   -----------    ---------
                                                                        
Gross margin percentage..............    47.4%      48.5%      46.1%     (1.1) pts.     2.4 pts.


    Reflecting the Japanese operations on the equity method for all periods
presented (see "Joint Venture in Japan"), the gross margin percentage ("Adjusted
Gross Margin Percentage") would have been 46.9% in 2000, 46.6% in 1999 and 44.8%
in 1998. The Adjusted Gross Margin Percentage increase in 2000 resulted
primarily from (a) the divestiture of the lower margin mechanical cardiac assist
product line, (b) increased sales of higher margin cardiac surgery products and
(c) reduced sales of lower margin perfusion services, partially offset by an
unfavorable impact of foreign currency exchange rate fluctuations. The Adjusted
Gross Margin Percentage increase in 1999 resulted primarily from (a) increased
sales of higher margin cardiac surgery products, (b) reduced sales of lower
margin perfusion products and services and (c) the favorable impact of foreign
currency exchange rate fluctuations.

                                       29

    SELLING, GENERAL AND ADMINISTRATIVE ("S, G & A") EXPENSES



                                                       YEARS ENDED              PERCENTAGE POINT
                                                       DECEMBER 31,                  CHANGE
                                              ------------------------------   -------------------
                                                2000       1999       1998       2000       1999
                                              --------   --------   --------   --------   --------
                                                                           
S, G & A expenses as a percentage
  of sales..................................    26.9%      25.7%      25.7%    1.2 pts.         --


    Reflecting the Japanese operations on the equity method for all periods
presented, S, G &A expenses as a percentage of sales ("Adjusted Percentage")
would have been 26.3% in 2000, 23.5% in 1999 and 23.4% in 1998.

    The increase in the Adjusted Percentage for the year ended December 31, 2000
is due primarily to additional personnel costs associated with the Company's
operation as an independent company commencing April 1, 2000, partially offset
by (a) reduced spending associated with the Company's recently divested
perfusion products and mechanical cardiac assist product lines and (b) a
favorable impact of foreign currency exchange rate fluctuations.

    RESEARCH AND DEVELOPMENT EXPENSES



                                                           YEARS ENDED                   PERCENT
                                                           DECEMBER 31,                   CHANGE
                                                  ------------------------------   --------------------
(DOLLARS IN MILLIONS)                               2000       1999       1998       2000        1999
- ---------------------                             --------   --------   --------   ---------   --------
                                                                                
Research and development expenses...............    $55        $55        $56            --       (2%)
Research and development expenses as a
  percentage of sales...........................    6.8%       6.1%       6.5%


    Reflecting the Japan operations on the equity method for all periods
presented and assuming the divestitures of the mechanical cardiac assist and
perfusion product lines occurred on January 1, 1998, research and development
expenses as a percentage of sales would have been 6.3% in 2000, 5.5% in 1999 and
5.3% in 1998.

    Edwards Lifesciences is engaged in ongoing research and development to
introduce new products to maximize the effectiveness, ease of use, safety and
reliability of its existing products and to expand the applications of its
products as appropriate. Edwards Lifesciences has a strong commitment to bolster
its research and development spending in the future with the goal of developing
and commercializing new innovative products and therapies that enhance
performance and patient quality of life, and address cost-containment issues. In
furtherance of this commitment, the Company expects to increase its 2001
research and development expenses by 10% from research and development expenses
in 2000.

    GOODWILL AMORTIZATION

    The reduction in goodwill amortization expense for the year ended
December 31, 2000 resulted from the write-down of goodwill related to the
Company's line of perfusion products. For more information, see "Disposition of
Assets and Other Non-recurring Charges, net."

                                       30

    DISPOSITION OF ASSETS AND OTHER NON-RECURRING CHARGES, NET

    During the year ended December 31, 2000, Edwards Lifesciences recorded
non-recurring charges comprised of the following:

      LOSS ON SALE AND ABANDONMENT OF ASSETS

    Effective July 15, 2000, the Company entered into a definitive agreement to
sell the majority of its United States and Western European assets and rights
related to its perfusion products to Jostra AG (the "Sale"). In accordance with
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of," and Staff Accounting Bulletin No. 100, "Restructuring and Impairment
Charges," the Company recorded a pre-tax impairment charge of $291 million in
the second quarter of 2000 to reduce the carrying value of these assets to fair
value based upon the estimated net proceeds from the Sale. Assets subject to
this impairment charge consisted primarily of goodwill ($245 million) and
special-use manufacturing and support assets. The goodwill impairment charge was
calculated based upon a pro rata allocation of the goodwill using the relative
fair values of the affected long-lived assets and identifiable intangibles
acquired at the inception date of the goodwill. On August 31, 2000, Edwards
Lifesciences completed the Sale for $24 million (consisting of $10 million in
cash and a $14 million note receivable, payable in six equal quarterly
installments through March 1, 2002, plus interest at an annual effective rate of
8%).

    In conjunction with the Sale, during the third quarter of 2000 the Company
recorded charges to establish a $10 million reserve for personnel costs and a
$2 million reserve for exit activities. The personnel costs consist primarily of
severance, medical plan continuation and outplacement services for the
approximately 225 employees impacted by the Sale. The impacted employees are
located in Europe, the United States and Puerto Rico, and primarily work in a
manufacturing capacity. The exit activities consist primarily of information
systems costs, contract termination costs and shutdown expenses.

    The following table summarizes the utilization of these reserves through
December 31, 2000 (in millions):



                                                 INITIAL    UTILIZED THROUGH    REMAINING
                                                 RESERVE    DECEMBER 31, 2000    RESERVE
                                                 --------   -----------------   ---------
                                                                       
Personnel costs................................    $10             $2              $8
Exit activities................................      2              2              --
                                                   ---             --              --
                                                   $12             $4              $8
                                                   ===             ==              ==


      GAIN ON SALE OF ASSETS

    On June 30, 2000, Edwards Lifesciences transferred the rights, intellectual
property and United States' assets related to the Novacor mechanical cardiac
assist product line to World Heart Corporation ("WorldHeart"). In return, the
Company received (a) preferred stock of a subsidiary of WorldHeart which, at
Edwards' option, can be exchanged for approximately five million shares of
WorldHeart's common stock commencing July 2002 and (b) exclusive worldwide
distribution rights to the Novacor left ventricular assist system and any
ventricular assist technologies developed by WorldHeart. Edwards Lifesciences
also will provide components and technical support to WorldHeart for ventricular
assist products at agreed upon prices. The Company recorded a pre-tax gain of
$35 million during the second quarter of 2000 in connection with this
transaction.

    As part of the transaction with WorldHeart, the Company invested
$20 million in WorldHeart convertible preferred stock. The preferred stock bears
a cumulative dividend, is callable at any time by

                                       31

WorldHeart and is convertible by Edwards Lifesciences into WorldHeart common
stock commencing July 2006. Edwards Lifesciences reports its investment in
WorldHeart as available-for-sale securities.

      PRO FORMA DATA

    The following unaudited pro forma consolidated condensed statement of income
for the year ended December 31, 2000 gives effect to the sales to Jostra AG and
WorldHeart by Edwards Lifesciences as if the sales had occurred on the close of
business on December 31, 1999. The unaudited pro forma consolidated condensed
statement of income does not purport to be indicative of either the results of
future operations or the results of operations that would have occurred had the
sales been consummated on the close of business on December 31, 1999. The
following amounts are in millions, except per share amounts:



                                                                  YEAR ENDED
                                                              DECEMBER 31, 2000
                                                              ------------------
                                                           
Net sales...................................................         $ 772
Net income..................................................             8
Net income per share:
  Basic.....................................................         $0.14
  Diluted...................................................          0.14


      OTHER NON-RECURRING CHARGES

    As a result of Edwards Lifesciences' continuing efforts to focus the
Company's product portfolio and effect the Company's business strategy following
the spin-off from Baxter, during the second quarter of 2000 the Company decided
to discontinue certain products in its portfolio that did not meet the
objectives of its business strategy. The long-lived assets or the investments in
these products were evaluated to determine whether any impairment in their
recoverability existed at the determination date. As a result, Edwards
Lifesciences assessed whether the estimated cash flows of the products over the
estimated lives of the related assets were sufficient to recover their costs.
Where such cash flows were insufficient, the Company utilized a discounted cash
flow model to estimate the fair value of assets or investments and recorded an
impairment charge to adjust the carrying values to estimated fair values. As a
result of this evaluation, Edwards Lifesciences recorded a non-cash charge of
$45 million during the second quarter of 2000 primarily related to the
impairment of goodwill unrelated to perfusion products ($37 million), impairment
of other intangibles ($5 million) and the write-down of non-productive assets
($3 million).

    NON-RECURRING SPIN-OFF EXPENSES

    In connection with the spin-off of Edwards Lifesciences from Baxter, certain
one-time costs totaling $18 million were incurred by Edwards Lifesciences during
the year ended December 31, 2000. These costs primarily related to (a) the
coordination and implementation of the transaction and (b) the recruitment of
personnel to perform new corporate administrative functions.

    OTHER OPERATING INCOME

    Other operating income represents the Company's 90% profit interest in the
cardiovascular business in Japan effective April 1, 2000. For more information,
see "Joint Venture in Japan."

    OTHER EXPENSE (INCOME), NET

    Refer to Note 12 to the "Consolidated Financial Statements" for a summary of
the amounts included in other expense (income). Other income in 1998 principally
consisted of $13 million of net

                                       32

insurance proceeds associated with hurricane damage at one of the Company's
manufacturing facilities and a $3 million loss associated with the impairment of
a minority equity investment.

    INCOME TAXES

    The effective income tax rate for the year ended December 31, 2000 was
impacted by the non-deductibility of the majority of the charge recorded for the
disposition of assets and other non-recurring items (see "Disposition of Assets
and Other Non-recurring Charges, net"). Excluding non-recurring charges, the
effective income tax rate for the year ended December 31, 2000 was 27%. The
effective income tax rate for the years ended December 31, 1999 and 1998 was 27%
and 33%, respectively. The reduction in the tax rate for the year ended
December 31, 1999 was due primarily to more favorable tax grants in certain
jurisdictions.

    NET INCOME (LOSS)

    Net income (loss), reflecting pro forma adjustments and excluding
non-recurring charges, was $51 million in 2000, $41 million in 1999 and $27
million in 1998, as follows:



                                                                   YEARS ENDED
                                                                   DECEMBER 31,
                                                          ------------------------------
                                                            2000       1999       1998
                                                          --------   --------   --------
                                                                  (IN MILLIONS)
                                                                       
As Reported.............................................   $(272)      $ 82       $ 62
Pro Forma Adjustments (a)...............................      (9)       (41)       (35)
Non-recurring Charges (b)...............................     332         --         --
                                                           -----       ----       ----
As Adjusted.............................................   $  51       $ 41       $ 27
                                                           =====       ====       ====


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

(a) Assumes that the transactions contemplated by the Distribution had been
    completed as of January 1, 1998. See Note 3 to the Consolidated Financial
    Statements.

(b) See "Disposition of Assets and Other Non-recurring Charges, net" and
    "Non-recurring Spin-off Expenses."

LIQUIDITY AND CAPITAL RESOURCES

    The Company's sources of cash liquidity include cash and cash equivalents on
hand, cash from operations, amounts available under credit facilities and other
external sources of funds. The Company believes that these sources are
sufficient to fund the current requirements of working capital, capital
expenditures and other financial commitments. The Company further believes that
it has the financial flexibility to attract long-term capital to fund short-term
and long-term growth objectives. However, no assurances can be given that such
long-term capital will be available to Edwards Lifesciences on favorable terms,
or at all.

    Effective as of the Distribution, Edwards Lifesciences entered into two
unsecured revolving credit agreements (the "Credit Facilities") providing for up
to an aggregate of $650 million in borrowings in multiple currencies. Borrowings
currently bear interest at the London interbank offering rate (LIBOR) plus
1.00%, which includes a facility fee. One of the credit agreements provides for
long-term borrowings up to an aggregate of $430 million and expires on
March 30, 2005. The other credit agreement provides for short-term borrowings up
to an aggregate of $220 million and expires on March 29, 2001. As of
December 31, 2000, approximately $277 million and $151 million were outstanding
under the $430 million and the $220 million credit agreements, respectively.
Edwards Lifesciences pays a facility fee, regardless of available or outstanding
borrowings, currently at an annual rate of 0.20% for the $430 million credit
agreement and, prior to expiration, 0.175% for the

                                       33

$220 million credit agreement. The Credit Facilities contain various financial
and other covenants of Edwards Lifesciences, including a maximum leverage ratio
and a minimum interest coverage ratio. The Company incurred approximately
$3 million of fees associated with obtaining the Credit Facilities. All amounts
outstanding under the $430 million credit agreement have been classified as
long-term obligations, as these borrowings will continue to be refinanced
pursuant to this credit agreement.

    During February 2001, the Company refinanced $90 million of outstanding
borrowings under the $220 million credit agreement to borrowings under the
$430 million credit agreement. As a result, this $90 million has been classified
as long-term debt as of December 31, 2000 in the accompanying Consolidated
Balance Sheets. The Company anticipates that it will replace, and make effective
as of March 29, 2001, the $220 million credit agreement with a credit agreement
for $175 million through March 28, 2002.

    The Company entered into a securitization agreement in December 2000 with a
financial institution whereby it sells without recourse on a revolving basis an
undivided interest in certain eligible trade accounts receivable. The
significant benefits of the securitization are lower cost of funds,
differentiated sources of liquidity and improved financial ratios due to the
off-balance sheet treatment. Funding of $32 million was received by the Company
in December 2000 and these proceeds were used to reduce revolving lines of
credit. The Company expects to lower its overall cost of funds as a result of
the interest rate spreads it will pay on these advances as opposed to borrowings
under the current LIBOR based credit facility. Additionally, the Company
believes that in diversifying its funding sources, the Company's funding
availability in the capital markets is strengthened. The securitization
agreement expires in December 2001 and is renewable for one-year periods at the
Company's option. Additionally, during 1998 the Company received approximately
$22 million in proceeds relating to the sale of certain trade receivables in
Japan to an independent financial institution.

    Cash flows provided by operating activities for the year 2000 was
$137 million as compared to $176 million in 1999 due primarily to (a) reduced
accounts receivable collections (included in cash flows for 1999 was
approximately $25 million related to insurance proceeds associated with
hurricane damage at one of the Company's manufacturing facilities) and
(b) lower earnings, partially offset by reduced inventory due to the increased
use of distributors. Cash flows for the year 1999 increased $22 million from the
year 1998 due primarily to the hurricane insurance proceeds and higher earnings.

    Uses of cash for investing activities during the year 2000 included the
purchase of two convertible debentures in Sangamo Biosciences, Inc. (totaling
$13 million), which were subsequently converted into common stock during the
second quarter 2000, and investments in A-Med Systems, Inc. (totaling
$8 million) and World Heart Corporation (totaling $20 million). During 2000, the
Company received $12 million related to the sale of certain of the Company's
perfusion product assets (see "Disposition of Assets and Other Non-recurring
Charges, net"). Uses of cash for investing activities during the year 1999
included the purchase of the Century Heart Lung Machine Business of Cobe
Cardiovascular Inc. from Sorin Biomedica, and for the year 1998 related
principally to the acquisition of Research Medical, Inc., a manufacturer of
specialized products used in open-heart surgery.

    Capital expenditures increased $4 million from $42 million in 1999 to
$46 million in 2000. Capital expenditures during 2000 related primarily to
support for manufacturing facilities, information systems, equipment placed at
customers and the expansion and renovation of the Company's corporate
headquarters in Irvine, California. In 2001, the Company expects capital
expenditures to be below $40 million.

EURO CONVERSION

    On January 1, 1999, the European Economic and Monetary Union created and
introduced the Euro, the official single currency for the eleven participating
member countries. A transition period is currently in effect which began
January 1, 1999 and will continue through December 31, 2001, during

                                       34

which time transactions will be executed in both the Euro and the member
countries' individual currencies. Effective January 1, 2002, Euro bank notes
will be introduced and as of July 1, 2002, the Euro will be the sole legal
tender of the European Economic and Monetary Union countries.

    Edwards Lifesciences appointed a team of individuals to address all issues
associated with the conversion to the Euro and expects to be prepared for such
conversion as of the designated dates. At the time Edwards Lifesciences switches
to using the Euro as the sole functional currency for the affected countries,
certain modifications that are primarily related to information systems are
required. The costs associated with preparing for the conversion and continued
use of the Euro will be expensed as incurred and are not expected to be material
to Edwards Lifesciences' financial position, results of operations or cash
flows. The ultimate impact on Edwards Lifesciences' business, including the
impact on the competitive environment in which Edwards Lifesciences operates, is
currently unknown.

NEW ACCOUNTING AND DISCLOSURE STANDARDS ISSUED

    In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities," effective for fiscal years
beginning after June 15, 1999. SFAS No. 133 requires companies to record
derivatives on the balance sheet as assets and liabilities, measured at fair
value. Gains and losses resulting from changes in the values of those
derivatives would be accounted for as either components of earnings or
accumulated other comprehensive income depending on the use of the derivative
and whether it qualifies for hedge accounting. In June 1999, the FASB issued
SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities--Deferral of the Effective Date of FASB Statement No. 133," which
defers the effective date of SFAS No. 133 to fiscal years beginning after
June 15, 2000. In June 2000, the FASB issued SFAS No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities--an Amendment of
FASB Statement No. 133," which amends the accounting and reporting standards of
SFAS No. 133. Adoption of these new accounting standards will result in a
one-time cumulative after-tax reduction in net income of approximately
$1.5 million and in accumulated other comprehensive income of approximately
$5.4 million in the first quarter of 2001. The adoption will also impact assets
and liabilities recorded on the balance sheet.

    In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities." This
statement replaces SFAS No. 125 and revises the standards for accounting for
securitizations and other transfers of financial assets and collateral. SFAS
No. 140 is effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after March 31, 2001. This statement is
effective for recognition and reclassification of collateral and for disclosures
relating to securitization transactions and collateral for fiscal years ending
after December 15, 2000. The Company does not expect the adoption of this
standard to have a material impact on its consolidated financial statements.

NEW ACCOUNTING AND DISCLOSURE STANDARDS ADOPTED

    In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101 "Revenue Recognition in Financial
Statements," which was amended by SAB No. 101A in March 2000 and SAB No. 101B in
June 2000. SAB No. 101A and No. 101B delayed the implementation date of SAB
No. 101. These SABs, which provide guidance on the recognition, presentation and
disclosure of revenue in financial statements, were adopted in the fourth
quarter of 2000. The adoption did not have a material impact on Edwards
Lifesciences' consolidated financial statements.

                                       35

ITEM 7A  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

    The Company's business and financial results are affected by fluctuations in
world financial markets, including currency exchange rates and interest rates.
The Company's hedging policy attempts to manage these risks to an acceptable
level based on management's judgment of the appropriate trade-off between risk,
opportunity and costs.

    Edwards Lifesciences maintains an overall risk management strategy that
utilizes a variety of interest rate and currency derivative financial
instruments to mitigate its exposure to fluctuations in interest rate and
currency exchange exposures. The derivative instruments used include interest
rate swaps, option-based products and forward currency contracts. The Company
does not use any of these instruments for trading or speculative purposes. The
total notional amounts of the Company's derivative financial instruments at
December 31, 2000 and 1999 were $415 million and $302 million, respectively. The
notional amounts of interest rate swap agreements, option-based products, and
forward currency contracts do not represent amounts exchanged by the parties
and, are not a measure of the Company's exposure through its use of derivatives.

INTEREST RATE RISK

    The Company utilizes interest rate swap agreements in managing its exposure
to interest rate fluctuations. Interest rate swap agreements are executed as an
integral part of specific debt transactions or on a portfolio basis. The
Company's interest swap agreements involve agreements to pay fixed and receive a
floating rate at specified intervals, calculated on an agreed-upon notional
amount.

    As part of its overall risk-management program the Company performs
sensitivity analyses to assess potential gains and losses in earnings and
changes in fair values to hypothetical movements in interest rates. A 55
basis-point increase in interest rates (approximately 10 percent of the
Company's weighted average interest rate) affecting the Company's financial
instruments, including debt obligations and related derivatives, and
investments, would have a $0.9 million effect on the Company's annual interest
expense.

CURRENCY RISK

    The Company is primarily exposed to currency exchange-rate risk with respect
to its transactions and net assets denominated in Japanese Yen, the Euro and
Swiss Franc. Business activities in various currencies expose the Company to the
risk that the eventual net dollar cash inflows resulting from transactions with
foreign customers and suppliers denominated in foreign currencies may be
adversely affected by changes in currency exchange rates. The Company manages
these risks utilizing various types of foreign exchange contracts. The Company
also enters into foreign exchange contracts to hedge anticipated, but not yet
committed, sales expected to be denominated in foreign currencies. In addition,
the Company hedges certain of its net investments in international affiliates.
Such contracts hedge the United States dollar value of foreign currency
denominated net assets from the effects of volatility in currency exchange rates
by creating debt denominated in the respective currencies of the underlying net
assets. Any changes in the carrying value of these net investments that are a
result of fluctuations in currency exchange rates are offset by changes in the
carrying value of the foreign currency denominated debt that are a result of the
same fluctuations in currency exchange rates.

    As part of the strategy to manage risk while minimizing hedging costs, the
Company utilizes option-based products in managing its exposure to currency rate
fluctuations. Option-based products consist primarily of purchased put options
in conjunction with written (sold) call options to create collars. Option-based
products are agreements that either grant the Company the right to receive, or
require the Company to make payments at, specified currency rate levels.

                                       36

    As part of its risk-management process, the Company uses a value-at-risk
("VAR") methodology in connection with other management tools to assess and
manage its foreign currency financial instruments and measure any potential loss
in earnings as a result of adverse movements in currency exchange rates. The
Company utilizes a Monte Carlo simulation, with a 95 percent confidence level,
using spot and three-month implied volatilities as stochastic variables and
correlations (as of the measurement date) to estimate this potential loss. The
Company's calculated VAR at December 31, 2000, assuming a one-year holding
period, is $2.1 million. This amount excludes the potential effects of any
changes in the value of the underlying transactions or balances. The Company's
calculated VAR exposure represents an estimate of reasonably possible net losses
that would be recognized on its portfolio of financial instruments assuming
hypothetical movements in future market rates and is not necessarily indicative
of actual results which may occur. It does not represent the maximum possible
loss or any expected loss that may occur. Actual future gains or losses may
differ from (and could be significantly greater than) these estimates based upon
actual fluctuations in market rates, operating exposures and the timing thereof,
and changes in the Company's portfolio of derivatives during the measured
periods. In addition, the assumption within the VAR model is that changes in
currency exchange rates are adverse, which may not be the case. Any loss
incurred on the financial instruments is expected to be offset by the effects of
currency movements on the hedging of all exposures; there may be currency
exchange-rate gains or losses in the future.

CREDIT RISK

    Derivative financial instruments used by the Company involve, to varying
degrees, elements of credit risk in the event a counter party should default and
market risk as the instruments are subject to rate and price fluctuations.
Credit risk is managed through the use of credit standard guidelines, counter
party diversification, monitoring of counter party financial condition and
master netting agreements in place with all derivative counter parties. Credit
exposure of derivative financial instruments is represented by the fair value
effects of contracts with a positive fair value at December 31, 2000 reduced by
the effects of master netting agreements. Additionally, at December 31, 2000,
all derivative financial instruments, based on notional amounts, were with
commercial banks and investment banking firms assigned investment grade ratings
of "AA" or better by national rating agencies. The Company does not anticipate
non-performance by its counter parties and has no reserves related to
non-performance as of December 31, 2000; the Company has not experienced any
counter party default during the three years ended December 31, 2000.

CONCENTRATIONS OF CREDIT RISK

    In the normal course of business, Edwards Lifesciences provides credit to
customers in the health care industry, performs credit evaluations of these
customers and maintains reserves for potential credit losses which, when
realized, have been within the range of management's allowance for doubtful
accounts during all periods presented.

OTHER RISKS

    With respect to the Company's unconsolidated investments, management
believes any reasonably possible near-term losses in earnings, cash flows and
fair values would not be material to Edwards Lifesciences' operations.

ITEM 8  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF MANAGEMENT

    The management of Edwards Lifesciences is responsible for the integrity of
the financial information presented in this Form 10-K. The consolidated
financial statements have been prepared in

                                       37

accordance with generally accepted accounting principles. Where necessary, they
reflect estimates based on management's judgment.

    Management relies upon established accounting procedures and related systems
of internal control for meeting its responsibilities to maintain reliable
financial records. These systems are designed to provide reasonable assurance
that assets are safeguarded and that transactions are properly recorded and
executed in accordance with management's intentions. Internal auditors
periodically review the accounting and control systems, and these systems are
revised if and when weaknesses or deficiencies are found.

    The Audit and Public Policy Committee of the Board of Directors, composed of
directors from outside the Company, meets regularly with management, the
Company's internal auditors and its independent accountants to discuss audit
scope and results, internal control evaluations, and other accounting, reporting
and financial matters. The independent accountants and internal auditors have
access to the Audit and Public Policy Committee without management's presence.

                                            
                                               /S/ MICHAEL A. MUSSALLEM
                                               Chairman and
                                               Chief Executive Officer

                                               /S/ BRUCE J. BENTCOVER
                                               Corporate Vice President,
                                               Chief Financial Officer
                                               and Treasurer



                                       38

            INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
                               DECEMBER 31, 2000



                                                                  PAGE
                                                                  ----
                                                           
Report of Independent Accountants...........................       40
Financial Statements:
  Consolidated Balance Sheets at December 31, 2000 and
    1999....................................................       41
  For the years ended December 31, 2000, 1999 and 1998:
    Consolidated Statements of Operations...................       42
    Consolidated Statements of Cash Flows...................       43
    Consolidated Statements of Stockholders' Equity and
      Comprehensive Income..................................       44
    Notes to Consolidated Financial Statements..............       45
Financial statement schedule for the years ended December
  31, 2000, 1999 and 1998:
  Valuation and Qualifying Accounts.........................       73
  Other schedules are not applicable and have not been
  submitted.


                                       39

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders
of Edwards Lifesciences Corporation:

    In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Edwards Lifesciences Corporation and its subsidiaries at
December 31, 2000 and 1999, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2000, in
conformity with accounting principles generally accepted in the United States of
America. In addition, in our opinion, the financial statement schedule listed in
the accompanying index presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements. These financial statements and financial
statement schedule are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

/S/ PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLP

Orange County, California
February 6, 2001

                                       40

                        EDWARDS LIFESCIENCES CORPORATION

                          CONSOLIDATED BALANCE SHEETS

                        (IN MILLIONS, EXCEPT SHARE DATA)



                                                                 DECEMBER 31,
                                                              -------------------
                                                                2000       1999
                                                              --------   --------
                                                                   
                                     ASSETS
CURRENT ASSETS
  Cash and cash equivalents.................................   $   28    $    --
  Accounts receivable, net of allowances of $5 and $8.......      107        133
  Other receivables.........................................       22         22
  Inventories...............................................       73        169
  Deferred income taxes.....................................       23          9
  Prepaid expenses..........................................       14          4
  Other current assets......................................       15         19
                                                               ------    -------
    Total current assets....................................      282        356
Property, plant and equipment, net..........................      183        226
Goodwill and other intangibles, net.........................      511        839
Investments in unconsolidated affiliates....................       98          1
Other assets................................................       14         15
                                                               ------    -------
    Total assets............................................   $1,088    $ 1,437
                                                               ======    =======
                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
  Accounts payable and accrued liabilities..................   $  158    $   156
  Short-term debt...........................................       61         --
                                                               ------    -------
    Total current liabilities...............................      219        156
                                                               ------    -------
Long-term debt..............................................      367         --
Other liabilities...........................................       62         57
Commitments and contingent liabilities

STOCKHOLDERS' EQUITY
  Preferred stock, $.01 par value, authorized 50,000,000
    shares, no shares outstanding...........................       --         --
  Common stock, $1.00 par value, authorized 350,000,000
    shares, 58,668,393 shares outstanding                          59         --
  Additional contributed capital............................      277         --
  Retained earnings.........................................      103        418
  Investment by Baxter International Inc., net..............       --        833
  Accumulated other comprehensive income (loss).............        1        (27)
                                                               ------    -------
    Total stockholders' equity..............................      440      1,224
                                                               ------    -------
    Total liabilities and stockholders' equity..............   $1,088    $ 1,437
                                                               ======    =======


  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       41

                        EDWARDS LIFESCIENCES CORPORATION

                     CONSOLIDATED STATEMENTS OF OPERATIONS

                                 (IN MILLIONS)



                                                                        YEARS ENDED DECEMBER 31,
                                                                  ------------------------------------
                                                                    2000          1999          1998
                                                                  --------      --------      --------
                                                                                     
Net sales...................................................       $ 804          $905          $865
  Cost of goods sold........................................         423           466           466
                                                                   -----          ----          ----
Gross profit................................................         381           439           399
                                                                   -----          ----          ----
  Selling, general and administrative expenses..............         216           233           222
  Research and development expenses.........................          55            55            56
  Goodwill amortization.....................................          29            34            34
  Disposition of assets and other non-recurring charges,
    net.....................................................         312            --            --
  Non-recurring spin-off expenses...........................          18            --            --
  Other operating income....................................         (14)           --            --
                                                                   -----          ----          ----
                                                                     616           322           312
                                                                   -----          ----          ----
Operating income (loss).....................................        (235)          117            87
  Interest expense, net.....................................          20            --            --
  Other expense (income), net...............................           4             4            (6)
                                                                   -----          ----          ----
Income (loss) before provision for income taxes.............        (259)          113            93
  Provision for income taxes................................          13            31            31
                                                                   -----          ----          ----
Net income (loss)...........................................       ($272)         $ 82          $ 62
                                                                   =====          ====          ====
Share information (Note 1)


  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       42

                        EDWARDS LIFESCIENCES CORPORATION
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN MILLIONS)



                                                                       YEARS ENDED
                                                                       DECEMBER 31,
                                                              ------------------------------
                                                                2000       1999       1998
                                                              --------   --------   --------
                                                                     (BRACKETS DENOTE
                                                                      CASH OUTFLOWS)
                                                                           
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES
  Net income (loss).........................................   ($272)      $ 82       $ 62
  Adjustments
    Dispositions and write-downs of assets and other
      non-recurring charges, net............................     333         --         --
    Depreciation and amortization...........................      74         84         82
    Other...................................................      14         12         14
  Changes in operating assets and liabilities, net of effect
  from de-consolidation of Japan business (Note 1)
    Accounts and other receivables..........................      (8)        14        (13)
    Inventories.............................................      15        (14)        (1)
    Accounts payable and accrued liabilities................      (8)        (1)         6
    Other...................................................     (11)        (1)         4
                                                               -----       ----       ----
      Net cash provided by operating activities.............     137        176        154
                                                               -----       ----       ----
CASH FLOWS FROM INVESTING ACTIVITIES
  Capital expenditures......................................     (46)       (42)       (40)
  Purchase of convertible debentures........................     (13)        --         --
  Investments in unconsolidated affiliates..................     (28)        --         --
  Proceeds from asset dispositions..........................      12         --         --
  Asset acquisitions........................................      --         (7)       (12)
                                                               -----       ----       ----
    Net cash used in investing activities...................     (75)       (49)       (52)
                                                               -----       ----       ----
CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from issuance of short-term debt.................     220         --         --
  Proceeds from issuance of long-term debt..................     449         --         --
  Payments on short-term debt...............................     (69)        --         --
  Payments on long-term debt................................    (159)        --         --
  Proceeds from accounts receivable securitization..........      32         --         22
  Stock issues under employee benefit plans.................       4         --         --
  Debt issuance costs.......................................      (3)        --         --
  Payments to Baxter International Inc., net................    (511)      (127)      (124)
                                                               -----       ----       ----
      Net cash used in financing activities.................     (37)      (127)      (102)
                                                               -----       ----       ----
Effect of currency exchange rate changes on cash............       3         --         --
                                                               -----       ----       ----
Net increase in cash and cash equivalents...................      28         --         --
Cash and cash equivalents at beginning of period............      --         --         --
                                                               -----       ----       ----
Cash and cash equivalents at end of period..................   $  28       $ --       $ --
                                                               =====       ====       ====
SUPPLEMENTAL DISCLOSURES:
Cash paid during the year for:
  Interest..................................................   $  17       $ --       $ --
  Income taxes..............................................       6         --         --
Non-cash transactions:
  De-consolidation of Japan business (Note 1)...............   $  43       $ --       $ --
  Sale of inventory in exchange for note receivable (Note
    4)......................................................      14         --         --
  Net assets sold in consideration for convertible preferred
    stock (Note 4)..........................................      13         --         --


  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       43

                        EDWARDS LIFESCIENCES CORPORATION

    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME

                                 (IN MILLIONS)



                                                                 YEARS ENDED DECEMBER 31,
                                                              ------------------------------
                                                                2000       1999       1998
                                                              --------   --------   --------
                                                                           
COMMON STOCK
Beginning of year...........................................   $  --      $   --     $   --
Common stock issued in connection with the Distribution.....      58          --         --
Common stock issued under employee benefit plans............       1          --         --
                                                               -----      ------     ------
End of year.................................................   $  59      $   --     $   --
                                                               =====      ======     ======
ADDITIONAL CONTRIBUTED CAPITAL
Beginning of year...........................................   $  --      $   --     $   --
Common stock issued in connection with the Distribution.....     270          --         --
Stock options issued to non-employees.......................       2          --         --
Common stock issued under employee benefit plans............       5          --         --
                                                               -----      ------     ------
End of year.................................................   $ 277      $   --     $   --
                                                               =====      ======     ======
RETAINED EARNINGS
Beginning of year...........................................   $ 418      $  336     $  274
De-consolidation of Japan...................................     (43)         --         --
Net income (loss)...........................................    (272)         82         62
                                                               -----      ------     ------
End of year.................................................   $ 103      $  418     $  336
                                                               =====      ======     ======
INVESTMENT BY BAXTER INTERNATIONAL INC., NET
Beginning of year...........................................   $ 833      $  960     $1,084
Investments by and advances from (payments to) Baxter
  International Inc., net...................................    (833)       (127)      (124)
                                                               -----      ------     ------
End of year.................................................   $  --      $  833     $  960
                                                               =====      ======     ======
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Beginning of year...........................................   $ (27)     $  (25)    $  (27)
Other comprehensive income (loss)...........................      28          (2)         2
                                                               -----      ------     ------
End of year.................................................   $   1      $  (27)    $  (25)
                                                               =====      ======     ======
    TOTAL STOCKHOLDERS' EQUITY..............................   $ 440      $1,224     $1,271
                                                               =====      ======     ======
COMPREHENSIVE INCOME
Unrealized net gain (loss) on marketable equity securities,
  net of tax of $1, $(1) and $1.............................   $   2      $   (1)    $    2
Currency translation adjustments............................      (1)         (1)        --
Currency translation adjustment in connection with the
  Distribution..............................................      27          --         --
                                                               -----      ------     ------
Other comprehensive income (loss)...........................      28          (2)         2
Net income (loss)...........................................    (272)         82         62
                                                               -----      ------     ------
Total comprehensive income (loss)...........................   $(244)     $   80     $   64
                                                               =====      ======     ======


  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       44

                        EDWARDS LIFESCIENCES CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS

    Edwards Lifesciences Corporation was incorporated under the original name of
CVG Controlled Inc., in Delaware on September 10, 1999, as a subsidiary of
Baxter International Inc. ("Baxter"). On March 31, 2000 (the "Distribution
Date"), Baxter transferred its cardiovascular business (the "Edwards
Lifesciences Business") to Edwards Lifesciences in connection with a tax-free
spin-off by Baxter of the Edwards Lifesciences Business. The spin-off was
effected on the Distribution Date through a distribution of 58.1 million shares
of Edwards Lifesciences' common stock (the "Distribution") to Baxter
stockholders of record on March 29, 2000, resulting in Edwards Lifesciences
operating as an independent entity commencing April 1, 2000 with publicly traded
common stock. Unless the context indicates otherwise, references to the
"Company" and "Edwards Lifesciences" refer to Baxter's cardiovascular business
for periods prior to April 1, 2000 and to Edwards Lifesciences Corporation and
its subsidiaries for the periods on or after such date. No annual earnings per
share data is presented as the Edwards Lifesciences earnings were part of
Baxter's earnings through the close of business on March 31, 2000.

    Baxter has no ownership interest in Edwards Lifesciences after March 31,
2000, but performs certain services for Edwards Lifesciences pursuant to various
agreements that are outlined in Note 11. However, unless released by third
parties, Baxter may remain liable for certain lease and other obligations and
liabilities that were transferred to and assumed by Edwards Lifesciences.
Edwards Lifesciences is obligated to indemnify Baxter for liabilities related to
those transferred obligations and liabilities.

    Subsequent to the Distribution, the cardiovascular business in Japan is
being operated pursuant to a joint venture under which a Japanese subsidiary of
Baxter retains ownership of the Japanese business assets, but a subsidiary of
Edwards Lifesciences holds a 90% profit interest. Edwards Lifesciences has an
option to purchase the Japanese business assets that may be exercised no earlier
than 28 months following the Distribution Date and no later than 60 months
following the Distribution Date. The Japanese operations are consolidated in the
accompanying Consolidated Statements of Operations for periods prior to the
Distribution, consistent with the treatment of the Company's operations while a
part of Baxter. Subsequent to the Distribution, Edwards Lifesciences recognizes
as sales its shipments into the joint venture and utilizes the equity method of
accounting to record its interest in the operations of the joint venture in
Other Operating Income in the Consolidated Statements of Operations.

    Edwards Lifesciences is a global leader in providing the manufacturing,
marketing and selling of a comprehensive line of products and services to treat
late-stage cardiovascular disease. Edwards Lifesciences' sales are categorized
in four main product areas: (a) cardiac surgery, (b) critical care,
(c) vascular and (d) perfusion products and services. Edwards Lifesciences'
cardiac surgery portfolio is comprised of products relating to heart valve
therapy, and cannulae and cardioplegia products used during open-heart surgery.
Edwards Lifesciences is the world's leader in, and has been a pioneer in the
development and commercialization of, tissue valves and repair products used to
replace or repair a patient's diseased or defective heart valve. In the critical
care area, Edwards Lifesciences is a world leader in hemodynamic monitoring
systems that are used to measure a patient's heart function, and also provides
central venous access products for fluid and drug delivery. Edwards
Lifesciences' vascular portfolio includes a line of balloon catheter-based
products, surgical clips and inserts, angioscopy equipment, and artificial
implantable grafts, as well as an endovascular system under development to be
used to treat life-threatening abdominal aortic aneurysms less invasively. In
the perfusion products and services category, Edwards Lifesciences designs,
develops, manufactures and markets a diverse line of

                                       45

                        EDWARDS LIFESCIENCES CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. DESCRIPTION OF BUSINESS (CONTINUED)
disposable products used during cardiopulmonary bypass procedures, including
oxygenators, blood containers, filters and related devices, as well as bypass
equipment (see Note 4). Edwards Lifesciences also maintains the world's largest
organization of perfusionists, employing approximately 400 full- and part-time
perfusionists in the United States who perform an aggregate of approximately
50,000 perfusion procedures for open heart surgery per year.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    This summary of significant accounting policies is presented to assist the
reader in understanding and evaluating the consolidated financial statements.
These policies are in conformity with Generally Accepted Accounting Principles
in the United States ("GAAP") and have been applied consistently in all material
respects. The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements, the
reported amounts of revenues and expenses during the reporting period, and
related disclosures. Actual results could differ from those estimates.

BASIS OF PRESENTATION

    The consolidated financial statements have been prepared using Baxter's
historical bases in the assets and liabilities and the historical results of
operations of the Edwards Lifesciences Business prior to the Distribution,
operated primarily as a division of Baxter, and continuing as a separate legal
entity, Edwards Lifesciences Corporation and its subsidiaries, subsequent to the
Distribution. All material intercompany balances have been eliminated. Prior to
the Distribution, the combined financial statements included allocations of
certain Baxter corporate assets, liabilities and expenses to the Edwards
Lifesciences Business, which were allocated on the basis that was considered by
Baxter management to reflect most fairly or reasonably the utilization of the
services provided to or the benefit obtained by the Edwards Lifesciences
Business (see Note 11). Typical measures and activity indicators used for
allocation purposes included headcount, sales, payroll expense, or the specific
level of activity related to the allocated item. Management believes the methods
used to allocate amounts were reasonable. However, the financial information
included herein does not necessarily reflect what the financial position,
results of operations and cash flows of the Company would have been had it
operated as a stand-alone public entity during the periods prior to the
Distribution, and may not be indicative of future operations, cash flows or
financial position. The consolidated financial statements do not include an
allocation of Baxter's consolidated debt and interest expense prior to the
Distribution. Certain reclassifications of previously reported amounts have been
made to conform to classifications used in the current year.

FISCAL YEAR OF INTERNATIONAL OPERATIONS

    Certain operations outside the United States and its territories are
included in the consolidated financial statements on the basis of fiscal years
ending November 30 in order to facilitate timely consolidation.

FOREIGN CURRENCY TRANSLATION

    The Company follows the principles of Statement of Financial Accounting
Standards ("SFAS") No. 52, "Foreign Currency Translation." Accordingly, when the
local currency of its foreign entities is

                                       46

                        EDWARDS LIFESCIENCES CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the functional currency, all assets and liabilities, other than those located in
highly inflationary countries, are translated into United States dollars at the
rate of exchange in effect at the balance sheet date. Income and expense items
are translated at the weighted average exchange rate prevailing during the
period. The effects of foreign currency translation adjustments for these
entities are deferred and included as a component of stockholders' equity. When
foreign affiliates operate in highly inflationary countries, non-monetary
amounts are remeasured at historical exchange rates while monetary assets and
liabilities are remeasured at the current rate with the related adjustments
reflected in Other Expense (Income). The effects of foreign currency
transactions denominated in a currency other than the Company's functional
currency are included in Other Expense (Income).

REVENUE RECOGNITION

    The Company recognizes revenue from product sales when title transfers and
for services as performed. For product sales into the Company's Japan joint
venture (see Note 1), the Company recognizes revenue when title transfers from
the joint venture to the customer. For certain products, the Company maintains
consigned inventory at customer locations. For these products, revenue is
recognized at the time the Company is notified that the customer has used the
inventory. The Company reduces revenue with reserves for estimated price
concessions and sales returns, and allowances are provided at the time revenue
is recognized in accordance with SFAS No. 48, "Revenue Recognition When Right of
Return Exists."

CASH EQUIVALENTS

    The Company considers highly liquid investments with maturities of three
months or less from the date of purchase to be cash equivalents. These
investments are valued at cost, which approximates fair value.

ACCOUNTS RECEIVABLE SECURITIZATION

    The Company accounts for the securitization of accounts receivable in
accordance with SFAS No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities." When the Company sells
accounts receivable in securitizations, a subordinated retained interest in the
securitized portfolio is retained. Gain or loss on sale of the accounts
receivable depends in part on the previous carrying amount of the financial
assets involved in the transfer, allocated between the assets sold and the
retained interests based on their relative fair value at the date of transfer.
Because quoted market prices are generally not available to determine the
Company's fair value of the retained interest, the Company estimates the fair
value of the retained interest by estimating future expected credit losses to
determine the future expected cash flows, which, generally, approximate fair
value given the securitized portfolio's short-term weighted average life. At the
time the receivables are sold, the balances are removed from the Consolidated
Balance Sheets. Costs associated with the sale of receivables, primarily related
to the discount and loss on sale, are included in Other Expense (Income). The
Company has adopted SFAS No. 140, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities" provisions relating to the
recognition and reclassification of collateral and disclosures relating to
securitization accounting.

                                       47

                        EDWARDS LIFESCIENCES CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVENTORIES

    Inventories are stated at the lower of cost (first-in, first-out method) or
market value. Market value for raw materials is based on replacement costs, and
for other inventory classifications is based on net realizable value.



                                                                 DECEMBER 31,
                                                              -------------------
                                                                2000       1999
                                                              --------   --------
                                                                 (IN MILLIONS)
                                                                   
Raw materials...............................................    $19        $ 29
Work in process.............................................     19          28
Finished products...........................................     35         112
                                                                ---        ----
                                                                $73        $169
                                                                ===        ====


    Reserves for excess and obsolete inventory were approximately $8 million and
$12 million at December 31, 2000 and 1999, respectively. During the years ended
December 31, 2000, 1999 and 1998, the Company allocated $5 million, $4 million
and $4 million, respectively, of general and administrative costs to inventory.
General and administrative costs included in both the December 31, 2000 and 1999
inventory balances were $1 million.

PROPERTY, PLANT AND EQUIPMENT

    Property, plant and equipment are recorded at cost. Depreciation and
amortization are principally calculated for financial reporting purposes on the
straight-line method over the estimated useful lives of the related assets,
which range from 20 to 50 years for buildings and improvements and from three to
15 years for machinery and equipment. Leasehold improvements are amortized over
the life of the related facility leases or the asset, whichever is shorter.
Straight-line and accelerated methods of depreciation are used for income tax
purposes.



                                                                 DECEMBER 31,
                                                              -------------------
                                                                2000       1999
                                                              --------   --------
                                                                 (IN MILLIONS)
                                                                   
Land........................................................    $ 24       $ 27
Buildings and leasehold improvements........................      61         79
Machinery and equipment.....................................     188        281
Equipment with customers....................................      35         96
Construction in progress....................................      19         13
                                                                ----       ----
                                                                 327        496
Accumulated depreciation and amortization...................    (144)      (270)
                                                                ----       ----
                                                                $183       $226
                                                                ====       ====


    Depreciation expense was $36 million, $37 million and $35 million for the
years ended December 31, 2000, 1999 and 1998, respectively. Repairs and
maintenance expense was $11 million, $8 million and $10 million for the years
ended December 31, 2000, 1999 and 1998, respectively.

                                       48

                        EDWARDS LIFESCIENCES CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
GOODWILL AND OTHER INTANGIBLE ASSETS

    Goodwill represents the excess of cost over the fair value of net assets
acquired and is amortized on a straight-line basis over estimated useful lives
ranging from 15 to 40 years.

    Other intangible assets include purchased patents, trademarks and other
identified rights and are amortized on a straight-line basis over their legal or
estimated useful lives, whichever is shorter (generally not exceeding
20 years).



                                                                 DECEMBER 31,
                                                              -------------------
                                                                2000       1999
                                                              --------   --------
                                                                 (IN MILLIONS)
                                                                   
Goodwill....................................................    $703      $1,144
Accumulated amortization....................................    (271)       (400)
                                                                ----      ------
                                                                 432         744
                                                                ----      ------
Other intangible assets.....................................     181         186
Accumulated amortization....................................    (102)        (91)
                                                                ----      ------
                                                                  79          95
                                                                ----      ------
Total goodwill and other intangible assets..................    $511      $  839
                                                                ====      ======


    Management reviews the carrying amounts of goodwill and other intangibles
whenever events and circumstances indicate that the carrying amounts of an asset
may not be recoverable. Impairment indicators include, among other conditions,
cash flow deficits, historic or anticipated declines in revenue or operating
profit and adverse legal or regulatory developments. If it is determined that
such indicators are present and the review indicates that the assets will not be
fully recoverable, based on undiscounted estimated cash flows over the remaining
amortization periods, their carrying values are reduced to estimated fair market
value. Estimated fair market value is determined primarily using the anticipated
cash flows discounted at a rate commensurate with the risk involved. For the
purpose of identifying and measuring impairment, assets are grouped at the
lowest level for which there is identifiable cash flows that are largely
independent of the cash flows generated by other asset groups. Based upon
management's assessment of the future undiscounted operating cash flows of
acquired businesses, the carrying values of goodwill and other intangible assets
at December 31, 2000 have not been impaired.

INVESTMENTS IN UNCONSOLIDATED AFFILIATES

    Investments in unconsolidated affiliates are accounted for under the cost
method and have been designated as available-for-sale in accordance with the
provisions of SFAS No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." These investments are carried at fair market value, with
unrealized gains and losses reported in stockholders' equity as a component of
Other Comprehensive Income (Loss). Gains or losses on investments sold are based
on the specific identification method. The fair values of certain investments
are estimated based on quoted market prices. For other investments, various
methods are used to estimate fair value, including external valuations and
discounted cash flows.

                                       49

                        EDWARDS LIFESCIENCES CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES

    The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." Under this method, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases.

    Edwards Lifesciences' operations were included in Baxter's consolidated
United States federal and state income tax returns and in the tax returns of
certain Baxter foreign subsidiaries prior to the Distribution. The provision for
income taxes prior to the Distribution has been determined as if Edwards
Lifesciences had filed separate tax returns under its existing structure for the
periods presented. Accordingly, the effective tax rate of Edwards Lifesciences
in future years could vary from its historical effective rates depending upon
Edwards Lifesciences' legal structure and tax elections. Prior to the
Distribution, all income taxes were settled with Baxter on a current basis
through the "Investment by Baxter International Inc., net" account.

INVESTMENT BY BAXTER INTERNATIONAL INC., NET

    Investment by Baxter International Inc., net includes common stock,
additional paid-in capital and net intercompany balances with Edwards
Lifesciences that were contributed at the time of the spin-off. Baxter did not
manage the activity in this account on the basis of separate legal entities.
There is no distinction in this account between net investments in and net
advances to Edwards Lifesciences as there was no term associated with the cash
infusions and no intent or expectation that the infusions would be remitted to
Baxter.

RESEARCH AND DEVELOPMENT EXPENSES

    Research and development costs are charged to expense when incurred.

EARNINGS PER SHARE

    Earnings per share are calculated in accordance with SFAS No. 128, "Earnings
per Share," which requires the Company to report both basic earnings per share,
based on the weighted-average number of common shares outstanding, and diluted
earnings per share, based on the weighted-average number of common shares
outstanding adjusted to include the potentially dilutive effect of outstanding
stock options. No earnings per share data is presented in the Consolidated
Statements of Operations as the Edwards Lifesciences earnings were part of
Baxter's earnings through the close of business on March 31, 2000.

DERIVATIVES

    For periods presented prior to the Distribution, Edwards Lifesciences was
considered in Baxter's overall risk management strategy. Gains and losses and
option premiums relating to qualifying foreign currency hedges of anticipated
transactions were deferred and recognized in income as offsets of gains and
losses resulting from the underlying hedged transactions. Gains relating to
terminations of qualifying hedges were deferred and recognized in income at the
same time as the underlying hedged transactions. In circumstances where the
underlying anticipated transaction was no longer expected to occur, any
remaining deferred amounts were recognized immediately in income. Foreign
currency

                                       50

                        EDWARDS LIFESCIENCES CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
contracts not qualifying for hedge treatment were marked to market at each
balance sheet date with resulting gains and losses recognized in earnings. Cash
flows from derivatives were classified in the same category as the cash flows
from the related hedged activity. Foreign currency financial instruments were
used to hedge economic risks and were not used for trading purposes.

    For periods presented subsequent to the Distribution, Edwards Lifesciences'
derivative policy is to manage its exposure to foreign currency and interest
rate fluctuations, based upon cost-benefit considerations, to minimize earnings
and cash flow volatility associated with foreign exchange rate and interest
changes. In order to reduce the risk of foreign currency exchange rate
fluctuations, Edwards Lifesciences established the policy of hedging a portion
of its expected foreign currency denominated cash flow from operations. The
instruments that Edwards Lifesciences uses for hedging are readily marketable
traded forward contracts and options with financial institutions. Edwards
Lifesciences expects that the changes in fair value of such contracts will have
a high correlation to the price changes in the related hedged cash flow. Edwards
Lifesciences does not expect that the risk of transaction gains or losses from
changes in the fair value of its foreign exchange position will be material
because most transactions will occur in either the functional currency or in a
currency that has a high correlation to the functional currency. The principal
currencies that Edwards Lifesciences hedges are the Japanese Yen and the Euro,
which present the primary risk of loss. Any gains and losses on these hedge
contracts are expected to offset changes in the value of the related exposures.
Edwards Lifesciences will enter into foreign currency transactions only to the
extent that foreign currency exposure exists; it will not enter into foreign
currency transactions for speculative purposes.

COMPREHENSIVE INCOME

    Comprehensive income encompasses all changes in equity other than those
arising from transactions with stockholders, and consists of net income,
currency translation adjustments and unrealized net gains and losses on
marketable equity securities. The Company does not provide for United States
income taxes on foreign currency translation adjustments since it does not
provide for such taxes on undistributed earnings of foreign subsidiaries.

NEW ACCOUNTING AND DISCLOSURE STANDARDS ADOPTED

    In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements," which was amended by SAB No. 101A in March 2000 and SAB No. 101B in
June 2000. SAB 101A and 101B delayed the implementation date of SAB No. 101.
These SABs, which provide guidance on the recognition, presentation and
disclosure of revenue in financial statements were adopted in the fourth quarter
of 2000. The adoption did not have a material impact on Edwards Lifesciences'
consolidated financial statements.

NEW ACCOUNTING AND DISCLOSURE STANDARDS ISSUED

    In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
effective for fiscal years beginning after June 15, 1999. SFAS No. 133 requires
companies to record derivatives on the balance sheet as assets and liabilities,
measured at fair value. Gains and losses resulting from changes in the values of
those derivatives would be accounted for as either components of earnings or
accumulated other

                                       51

                        EDWARDS LIFESCIENCES CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
comprehensive income depending on the use of the derivative and whether it
qualifies for hedge accounting. In June 1999, the FASB issued SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities--Deferral of the
Effective Date of FASB Statement No. 133," which defers the effective date of
SFAS No. 133 to fiscal years beginning after June 15, 2000. In June 2000, the
FASB issued SFAS No. 138, "Accounting for Certain Derivative Instruments and
Certain Hedging Activities--an Amendment of FASB Statement No. 133," which
amends the accounting and reporting standards of SFAS No. 133. Adoption of these
new accounting standards will result in a one-time cumulative after-tax
reduction in net income of approximately $1.5 million and in accumulated other
comprehensive income of approximately $5.4 million in the first quarter of 2001.
The adoption will also impact assets and liabilities recorded on the balance
sheet.

    In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities." This
statement replaces SFAS No. 125 and revises the standards for accounting for
securitizations and other transfers of financial assets and collateral. SFAS
No. 140 is effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after March 31, 2001. This statement is
effective for recognition and reclassification of collateral and for disclosures
relating to securitization transactions and collateral for fiscal years ending
after December 15, 2000. The Company does not expect the adoption of this
standard to have a material impact on its consolidated financial statements.

3. PRO FORMA INFORMATION

    The following unaudited pro forma consolidated statement of operations for
the twelve months ended December 31, 2000 presents the consolidated results of
Edwards Lifesciences assuming that the transactions contemplated by the
Distribution had been completed as of January 1, 2000. The unaudited pro forma
information has been prepared utilizing the historical combined financial
statements of Edwards Lifesciences.

                                       52

                        EDWARDS LIFESCIENCES CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. PRO FORMA INFORMATION (CONTINUED)

                 PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
                (UNAUDITED) (IN MILLIONS, EXCEPT PER SHARE DATA)



                                                             TWELVE MONTHS ENDED DECEMBER 31, 2000
                                                     -----------------------------------------------------
                                                                            PRO FORMA
                                                                           ADJUSTMENTS
                                                                     -----------------------
                                                                     JAPAN ON
                                                                     AN EQUITY                      PRO
                                                     HISTORICAL        BASIS         OTHERS        FORMA
                                                     ----------      ---------      --------      --------
                                                                                      
Net sales..........................................     $ 804         $  (29)(a)      $ --         $  775
Cost of goods sold.................................      (423)            12 (a)        --           (411)
                                                        -----         ------          ----         ------
Gross profit.......................................       381            (17)           --            364
                                                        -----         ------          ----         ------
Selling, general and administrative expenses.......       216            (12)(a)         5 (b)        209
Research and development expenses..................        55             (1)(a)        --             54
Goodwill amortization..............................        29             --            --             29
Disposition of assets and other non-recurring
  charges, net.....................................       312             --            --            312
Non-recurring spin-off expenses....................        18             --            --             18
Other operating income.............................       (14)            (4)(a)        --            (18)
                                                        -----         ------          ----         ------
                                                          616            (17)            5            604
                                                        -----         ------          ----         ------
Operating loss.....................................      (235)            --            (5)          (240)
Interest expense, net..............................        20             --             7 (c)         27
Other expense, net.................................         4             --            --              4
                                                        -----         ------          ----         ------
Loss before provision for income taxes.............      (259)            --           (12)          (271)
Provision (benefit) for income taxes...............        13             --            (3)(d)         10
                                                        -----         ------          ----         ------
Net loss...........................................     $(272)        $   --          $ (9)        $ (281)
                                                        =====         ======          ====         ======
Share information:
  Pro forma net loss per share:
    Basic..........................................                                                $(4.81)
    Diluted........................................                                                 (4.81)

  Weighted average number of common shares
    outstanding:
    Basic..........................................                                                  58.4
    Diluted........................................                                                  58.4


PRO FORMA ADJUSTMENTS

(a) To reflect the Edwards Lifesciences Japanese operations on an equity basis
    for the three months ended March 31, 2000 (Note 1).

(b) To reflect estimated incremental costs associated with being an independent
    public company, for the three months ended March 31, 2000, including costs
    associated with corporate administrative services such as accounting, tax,
    treasury, risk management, insurance, legal, investor relations and human
    resources. The Company's historical combined financial statements for the
    three months

                                       53

                        EDWARDS LIFESCIENCES CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. PRO FORMA INFORMATION (CONTINUED)
    ended March 31, 2000 include all costs incurred by Baxter on behalf of the
    Company. However, there are incremental and continuing costs directly
    attributable to the spin-off, as there is a loss of certain synergies and
    benefits of economies of scale that existed while Edwards Lifesciences was
    part of Baxter. Management estimated such incremental costs utilizing
    Baxter's historical headcount and cost analysis, and the Company's
    organization chart. The following table is a summary of the estimated
    incremental costs by significant function for the three months ended
    March 31, 2000 (in millions):

                                                           
Accounting, tax and legal...................................     $2
Insurance and risk management...............................      1
Human resources.............................................      1
Treasury, investor relations and other costs................      1
                                                                 --
                                                                 $5
                                                                 ==



(c) To reflect the estimated interest expense that would have been incurred by
    Edwards Lifesciences for the three months ended March 31, 2000 based on the
    incurrence of $529 million of debt at a weighted-average interest rate of
    approximately 5.5%. An increase or decrease of 0.189 points in the
    weighted-average interest rate would result in a per annum increase or
    decrease in interest expense of $1 million.

(d) To reflect the estimated tax impact at statutory rates for pro forma
    adjustments (b) and (c), as well as the estimated impact of different tax
    rates available to Edwards Lifesciences as a stand-alone company for the
    three months ended March 31, 2000.

4. DISPOSITION OF ASSETS AND OTHER NON-RECURRING CHARGES, NET

    During the year ended December 31, 2000, Edwards Lifesciences recorded
non-recurring charges comprised of the following:

    LOSS ON SALE AND ABANDONMENT OF ASSETS

    Effective July 15, 2000, the Company entered into a definitive agreement to
sell the majority of its United States and Western European assets and rights
related to its perfusion products to Jostra AG (the "Sale"). In accordance with
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," and SAB No. 100, "Restructuring and
Impairment Charges," the Company recorded a pre-tax impairment charge of
$291 million in the second quarter of 2000 to reduce the carrying value of these
assets to fair value based upon the estimated net proceeds from the sale. Assets
subject to this impairment charge consist primarily of goodwill ($245 million)
and special-use manufacturing and support assets. The goodwill impairment charge
was calculated based upon a pro rata allocation of the goodwill using the
relative fair values of the affected long-lived assets and identifiable
intangibles acquired at the inception date of the goodwill. On August 31, 2000,
Edwards Lifesciences completed the Sale for $24 million (consisting of
$10 million in cash and a $14 million note receivable, payable in six equal
quarterly installments through March 1, 2002, plus interest at an annual
effective rate of 8%).

    In conjunction with the Sale, during the third quarter of 2000 the Company
recorded charges to establish a $10 million reserve for personnel costs and a
$2 million reserve for exit activities. The

                                       54

                        EDWARDS LIFESCIENCES CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. DISPOSITION OF ASSETS AND OTHER NON-RECURRING CHARGES, NET (CONTINUED)
personnel costs consist primarily of severance, medical plan continuation and
outplacement services for the approximately 225 employees impacted by the Sale.
The impacted employees are located in Europe, the United States and Puerto Rico,
and primarily work in a manufacturing capacity. The exit activities consist
primarily of information systems costs, contract termination costs and shutdown
expenses.

    The following table is a summary of the utilization of these reserves
through December 31, 2000 (in millions):



                                                    INITIAL    UTILIZED THROUGH    REMAINING
                                                    RESERVE    DECEMBER 31, 2000    RESERVE
                                                    --------   -----------------   ---------
                                                                          
Personnel costs...................................    $10             $2              $8
Exit activities...................................      2              2              --
                                                      ---             --              --
                                                      $12             $4              $8
                                                      ===             ==              ==


    GAIN ON SALE OF ASSETS

    On June 30, 2000, Edwards Lifesciences transferred the rights, intellectual
property and United States' assets and mechanical cardiac assist product line to
World Heart Corporation ("WorldHeart"). In return, the Company received
(a) preferred stock of a subsidiary of WorldHeart which, at Edwards' option, can
be exchanged for approximately five million shares of WorldHeart's common stock
commencing July 2002 and (b) exclusive worldwide distribution rights to the
Novacor left ventricular assist system and any ventricular assist technologies
developed by WorldHeart. Edwards Lifesciences also will provide components and
technical support to WorldHeart for ventricular assist products at agreed upon
prices. The Company recorded a pre-tax gain of $35 million during the second
quarter of 2000 in connection with this transaction.

    As part of the transaction with WorldHeart, the Company invested
$20 million in WorldHeart convertible preferred stock. The preferred stock bears
a cumulative dividend, is callable at any time by WorldHeart and is convertible
by Edwards Lifesciences into WorldHeart common stock commencing July 2006.
Edwards Lifesciences reports its investment in WorldHeart as available-for-sale
securities.

    PRO FORMA DATA

    The following unaudited pro forma consolidated condensed statement of income
for the year ended December 31, 2000 gives effect to the sales to Jostra AG and
WorldHeart by Edwards Lifesciences as if the sales had occurred on the close of
business on December 31, 1999. The unaudited pro forma consolidated condensed
statement of income does not purport to be indicative of either the results of
future operations or the results of operations that would have occurred had the
sales been

                                       55

                        EDWARDS LIFESCIENCES CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. DISPOSITION OF ASSETS AND OTHER NON-RECURRING CHARGES, NET (CONTINUED)
consummated on the close of business on December 31, 1999. The following amounts
are in millions, except per share amounts:



                                                                 YEAR ENDED
                                                              DECEMBER 31, 2000
                                                              -----------------
                                                           
Net sales...................................................        $ 772
Net income..................................................            8
Net income per share:
    Basic...................................................        $0.14
    Diluted.................................................         0.14


    OTHER NON-RECURRING CHARGES

    As a result of Edwards Lifesciences' continuing efforts to focus the
Company's product portfolio and effect the Company's business strategy following
the spin-off from Baxter, during the second quarter of 2000 the Company decided
to discontinue certain products in its portfolio that did not meet the
objectives of its business strategy. The long-lived assets or the investments in
these products were evaluated to determine whether any impairment in their
recoverability existed at the determination date. As a result, Edwards
Lifesciences assessed whether the estimated cash flows of the products over the
estimated lives of the related assets were sufficient to recover their costs.
Where such cash flows were insufficient, the Company utilized a discounted cash
flow model to estimate the fair value of assets or investments and recorded an
impairment charge to adjust the carrying values to estimated fair values. As a
result of this evaluation, Edwards Lifesciences recorded a non-cash charge of
$45 million during the second quarter of 2000 primarily related to the
impairment of goodwill unrelated to perfusion products ($37 million), impairment
of other intangibles ($5 million) and the write-down of non-productive assets
($3 million).

5. ACCOUNTS RECEIVABLE SECURITIZATION

    Edwards Lifesciences entered into an agreement (the "Receivables Facility")
in December 2000 with a financial institution whereby it sells on a continuous
basis an undivided interest in certain eligible trade accounts receivable.
Pursuant to the Receivables Facility, the Company formed Edwards Lifesciences
Financing LLC ("ELF"), a wholly-owned, special purpose, bankruptcy-remote
subsidiary, for the sole purpose of buying and selling receivables generated by
the Company. Under the Receivables Facility, Edwards Lifesciences, irrevocably
and without recourse, transfers certain of its accounts receivables to ELF. ELF
has sold and, subject to certain conditions, may from time to time sell an
undivided interest in these receivables and is permitted to receive advances for
the sale of such undivided interest. The Company retained servicing
responsibilities and subordinated interests. The Company receives annual
servicing fees approximating one percent of the outstanding balance and rights
to future cash flows arising after the investors in the securitization trust
have received their contractual return. The investors and the securitization
trust have no recourse to the Company's other assets for failure of debtors to
pay when due. The Company's retained interests are subordinate to the investor's
interests. The value of the accounts receivable is subject primarily to credit
risks on the transferred accounts receivable.

    This two-step transaction is accounted for as a sale of receivables under
the provisions of SFAS No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities."

                                       56

                        EDWARDS LIFESCIENCES CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. ACCOUNTS RECEIVABLE SECURITIZATION (CONTINUED)
Sales of receivables under this program result in a reduction of total accounts
receivable on the Company's consolidated balance sheet. Retained interests are
carried at their fair value estimated as the net realizable value, which
considers the relatively short liquidation period and includes an estimated
provision for credit losses. Pursuant to the terms of the Receivables Facility,
the Company had sold approximately $37 million of trade accounts receivable in
the aggregate at December 31, 2000 resulting in a reduction of trade accounts
receivable on the Company's consolidated balance sheet. Costs associated with
the sale of receivables, primarily related to the discount and loss on sale,
were $0.4 million in 2000 and are included in Other Expense (Income). There was
$32 million funded under the Receivables Facility at December 31, 2000.

    At December 31, 2000, key economic assumptions and the sensitivity of the
current fair value of residual cash flows to immediate 10 percent and
20 percent adverse changes in those assumptions are as follows ($ in millions):

                                                           
Carrying amount/fair value of retained interests............   $ 4.8
Weighted-average life (in days).............................      42
Expected credit losses (annual rate)........................   14.43%
Impact on fair value of 10% adverse change..................   $ 0.1
Impact on fair value of 20% adverse change..................   $ 0.1



    These sensitivities are hypothetical and should be used with caution. As the
figures indicate, changes in fair value based on a 10 or 20 percent variation in
assumptions generally cannot be extrapolated because the relationship of the
change in assumption to the change in fair value may not be linear.

6. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES



                                                                 DECEMBER 31,
                                                              -------------------
                                                                2000       1999
                                                              --------   --------
                                                                 (IN MILLIONS)
                                                                   
Accounts payable............................................    $ 49       $ 42
Employee compensation and withholdings......................      41         52
Property, payroll and other taxes...........................      17          9
Other accrued liabilities...................................      51         53
                                                                ----       ----
                                                                $158       $156
                                                                ====       ====


7. LONG-TERM DEBT, CREDIT FACILITIES AND LEASE OBLIGATIONS

    Edwards Lifesciences entered into two unsecured revolving credit agreements
("the Credit Facilities"), as of the Distribution, providing for up to an
aggregate of $650 million in borrowings in multiple currencies. Borrowings
currently bear interest at the London interbank offering rate (LIBOR) plus
1.00%, which includes a facility fee. One of the credit agreements provides for
long-term borrowings up to an aggregate of $430 million and expires on
March 30, 2005. The other credit agreement provided for short-term borrowings up
to an aggregate of $220 million and expires on March 29, 2001. As of
December 31, 2000, approximately $277 million and $151 million were

                                       57

                        EDWARDS LIFESCIENCES CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. LONG-TERM DEBT, CREDIT FACILITIES AND LEASE OBLIGATIONS (CONTINUED)
outstanding under the $430 million and the $220 million credit agreements,
respectively. Edwards Lifesciences pays a facility fee, regardless of available
or outstanding borrowings, currently at an annual rate of 0.20% for the
$430 million credit agreement and, prior to expiration, 0.175% for the
$220 million credit agreement. The Credit Facilities contain various financial
and other covenants of Edwards Lifesciences, including a maximum leverage ratio
and a minimum interest coverage ratio. The Company incurred approximately
$3 million of fees associated with obtaining the Credit Facilities. The Company
capitalized these financing costs and is amortizing them under a method that
approximates the effective interest method. All amounts outstanding under the
$430 million credit agreement have been classified as long-term obligations, as
these borrowings will continue to be refinanced pursuant to this credit
agreement.

    During February 2001, the Company refinanced $90 million of outstanding
borrowings under the $220 million credit agreement to borrowings under the
$430 million credit agreement. As a result, this $90 million has been classified
as long-term debt as of December 31, 2000. The Company anticipates that it will
replace, and make effective as of March 29, 2001, the $220 million credit
agreement with a credit agreement in the amount of $175 million through
March 28, 2002.

    The weighted average interest rate under the Credit Facilities was 5.48% at
December 31, 2000, including the effect of interest rate swap agreements. The
rates have been calculated using rates in effect at December 31, 2000, some of
which are floating rates that reset periodically. The Company manages interest
rate risk using interest rate swap agreements to balance the mix of fixed to
floating rate debt.

    Future minimum lease payments (including interest) under noncancelable
operating leases and aggregate debt maturities at December 31, 2000 were as
follows:



                                                              OPERATING   AGGREGATE DEBT
                                                               LEASES       MATURITIES
                                                              ---------   --------------
                                                                    (IN MILLIONS)
                                                                    
2001........................................................     $ 4           $ 61
2002........................................................       4             --
2003........................................................       2             --
2004........................................................       1             --
2005........................................................       1            367
Thereafter..................................................      --             --
                                                                 ---           ----
Total obligations and commitments...........................     $12           $428
                                                                 ===           ====


    Included in debt at December 31, 2000 were unsecured notes denominated in
various foreign currencies as follows:



                                                              DECEMBER 31,
                                                                  2000
                                                              -------------
                                                              (IN MILLIONS)
                                                           
Japanese Yen................................................     25,854
Swiss Franc.................................................         30


                                       58

                        EDWARDS LIFESCIENCES CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. LONG-TERM DEBT, CREDIT FACILITIES AND LEASE OBLIGATIONS (CONTINUED)
    Certain facilities and equipment are leased under operating leases expiring
at various dates. Most of the operating leases contain renewal options. Total
expense for all operating leases was $5 million, $9 million and $8 million for
the years ended December 31, 2000, 1999 and 1998, respectively.

8. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

FAIR VALUES OF FINANCIAL INSTRUMENTS

    The consolidated financial statements include financial instruments whereby
the fair market value of such instruments may differ from amounts reflected on a
historical basis. Financial instruments of the Company consist of cash deposits,
accounts and other receivables, investments in unconsolidated affiliates,
accounts payable, certain accrued liabilities and debt. The fair values of
certain investments in unconsolidated affiliates are estimated based on quoted
market prices. For other investments, various methods are used to estimate fair
value, including external valuations and discounted cash flows. The carrying
amount of the Company's long-term debt approximates fair market value based on
prevailing market rates. The Company's other financial instruments generally
approximate their fair values based on the short-term nature of these
instruments.

DERIVATIVE FINANCIAL INSTRUMENTS

    The Company utilizes a variety of derivative financial instruments to manage
its currency exchange rate and interest rate risk as summarized below. The
Company does not enter into these arrangements for trading or speculation
purposes.



                                                             2000                      1999
                                                      -------------------       -------------------
                                                      NOTIONAL     FAIR         NOTIONAL     FAIR
                                                       AMOUNT     VALUE          AMOUNT     VALUE
                                                      --------   --------       --------   --------
                                                         (IN MILLIONS)             (IN MILLIONS)
                                                                               
Interest rate swap agreements.......................    $257       $(12)          $ --       $ --
Option-based products...............................     157          1            302          1
Forward currency agreements.........................       1         --             --         --


    The fair value of financial instruments at December 31, 2000 was estimated
using the valuation methodologies described below. Considerable judgment was
employed in interpreting market data to develop estimates of fair value;
accordingly, the estimates presented herein are not necessarily indicative of
the amounts that the Company could realize in a current market exchange. The use
of different market assumptions or valuation methodologies could have a material
effect on the estimated fair value amounts. The methods and assumptions used to
estimate the fair value of financial instruments are summarized as follows:

    INTEREST RATE SWAP AGREEMENTS.  The estimated fair value of the Company's
outstanding interest rate swap agreements was derived by discounting expected
cash flows using quoted market interest rates as of December 31, 2000 and 1999.

    OPTION-BASED PRODUCTS.  The estimated fair value of the Company's
outstanding option-based products was derived by discounting expected cash flows
using market exchange rates and market interest rates as of December 31, 2000
and 1999.

                                       59

                        EDWARDS LIFESCIENCES CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)

    A roll-forward of the activity of the Company's derivative financial
instruments for the year ended December 31, 2000 is as follows:



                                                  INTEREST    OPTION-     FORWARD
                                                 RATE SWAP     BASED     CURRENCY
                                                 AGREEMENTS   PRODUCTS   CONTRACTS
                                                 ----------   --------   ---------
                                                           (IN MILLIONS)
                                                                
December 31, 1999 notional amount..............     $ --        $302     $      --
New agreements.................................      257          11             1
Expired agreements.............................       --        (156)           --
                                                    ----        ----     ---------
December 31, 2000 notional amount..............     $257        $157     $       1
                                                    ====        ====     =========


FOREIGN CURRENCY AND INTEREST RATE RISK MANAGEMENT

    For periods presented prior to the Distribution, Edwards Lifesciences was
considered in Baxter's overall risk management strategy. As part of this
strategy, Baxter used certain financial instruments to reduce its exposure to
adverse movements in foreign exchange rates. These financial instruments were
not used for trading purposes. The financial instruments contained credit risk
in that the banking counterparty may be unable to meet the terms of the
agreements. Such risk was minimized by limiting counterparties to major
financial institutions and by management's monitoring of credit risk. In
addition, where appropriate, Baxter arranged collateralization and
master-netting agreements to minimize the risk of loss.

    As part of this risk management strategy, Baxter entered into foreign
exchange contracts, principally options, with terms generally less than two
years, which hedged anticipated but not yet committed sales expected to be
denominated in foreign currencies. Baxter allocated to Edwards Lifesciences the
net income associated with certain of such contracts in the amounts of
$1 million in 1999 and $3 million in 1998. The approximate notional amounts
associated with the allocated portion of these foreign exchange contracts was
$157 million, $302 million and $177 million at December 31, 2000, 1999 and 1998,
respectively. The allocations were determined based on Edwards Lifesciences'
hedged sales relative to Baxter's total hedged sales, by applicable currency.
With respect to Edwards Lifesciences' foreign currency exposures, Baxter
principally hedged the Japanese Yen and the Euro.

    As a stand-alone company, Edwards Lifesciences manages its exposure to
foreign currency and interest rate fluctuations, based upon cost benefit
considerations, to minimize earnings and cash flow volatility associated with
foreign exchange rate changes. In order to reduce the risk of foreign currency
exchange rate fluctuations, Edwards Lifesciences has established a policy of
hedging a substantial portion of its expected foreign currency denominated cash
flow from operations. The instruments that Edwards Lifesciences uses for hedging
are readily marketable traded forward contracts and options with financial
institutions. Edwards Lifesciences expects that the changes in fair value of
such contracts will have a high correlation to the price changes in the related
hedged cash flow. Edwards Lifesciences does not expect that the risk of
transaction gains or losses from changes in the fair value of its foreign
exchange position will be material because most transactions will occur in
either the functional currency or in a currency that has a high correlation to
the functional currency. The principal currencies that Edwards Lifesciences
hedges are the Japanese Yen and the Euro, which present the primary risk of
loss. Any gains and losses on these hedge contracts are expected to offset
changes in the value of the

                                       60

                        EDWARDS LIFESCIENCES CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
related exposures. Edwards Lifesciences will enter into foreign currency
transactions only to the extent that foreign currency exposure exists; it will
not enter into foreign currency transactions for speculative purposes.

    Edwards Lifesciences utilizes interest rate swap agreements in managing its
exposure to interest rate fluctuations. Interest rate swap agreements are
executed as an integral part of specific debt transactions. The differential
paid or received on interest rate swap agreements is recorded on an accrual
basis as an adjustment to interest expense over the term of the agreements.
Edwards Lifesciences' interest rate swap agreements involve agreements to
receive a floating rate and pay a fixed rate, at specified intervals, calculated
on an agreed-upon notional amount. As of December 31, 2000, Edwards Lifesciences
had in place four interest rate swaps with a total notional amount of
$257 million to swap floating rate United States dollar and Yen denominated debt
obtained under the Company's revolving credit facilities for fixed rates. The
original maturities of the interest rate swap agreements are between three and
five years.

9. COMMON STOCK

    The Edwards Lifesciences Corporation Long-Term Stock Incentive Program (the
"Program"), which became effective April 1, 2000, provides for the grant of
incentive and non-qualified stock options, restricted stock and other
stock-based incentive awards for employees and contractors of the Company. Under
the Program, these grants are generally awarded at a price equal to the fair
market value at the date of grant based upon the closing price on the date
immediately preceding the grant date. Options to purchase shares of the
Company's common stock granted under the Program generally vest over
predetermined periods and expire ten years after the date of grant. As of
December 31, 2000, an aggregate of 12,500,000 shares of the Company's common
stock was reserved for issuance under the Program.

    On April 3, 2000, the Company granted options to purchase shares of Edwards
Lifesciences' common stock under the Program. The grants include two types of
stock options: Founders Options and Conversion Options. The Founders Options
were awarded to all salaried employees of the Company, and permit the purchase
of approximately 5.7 million shares at an exercise price of $13.875, the fair
market value at the date of grant. The Founders Options vest 30% after two
years, and the balance vests after three years. The Founders Options include
approximately 634,000 options granted to non-employees of the Company in Japan
(employees of Baxter dedicated to the joint venture as described in Note 1). In
accordance with SFAS No. 123, "Accounting for Stock-Based Compensation," the
$4.2 million value of these options is being amortized over the three-year
vesting period on a straight-line basis. The Conversion Options permitted the
purchase of approximately 2.2 million shares at an exercise price based upon an
equitable conversion of the exercise price under the Baxter stock option plan,
with reference to the when-issued price of the Company's stock and the closing
price of Baxter's common stock on March 31, 2000. The Conversion Options
retained the vesting periods under the Baxter stock option plan, resulting in
various vesting periods through September 2002.

    The Company also maintains the Nonemployee Directors and Consultants Stock
Incentive Program (the "Nonemployee Program") which became effective April 1,
2000. Under the Nonemployee Program, each non-employee director may elect to
receive all or a portion of the cash retainer to which the director is otherwise
entitled through the issuance of stock options. As of December 31, 2000, 16,200
shares of common stock were reserved for the future issuance of these options.

                                       61

                        EDWARDS LIFESCIENCES CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. COMMON STOCK (CONTINUED)
    Stock option activity during 2000 under the Program and the Nonemployee
Program was as follows (in thousands, except option price data):



                                                                        WEIGHTED
                                                                        AVERAGE
                                                             NUMBER     EXERCISE
                                                           OF OPTIONS    PRICE
                                                           ----------   --------
                                                                  
Outstanding, April 1, 2000...............................        --      $   --
Options issued with the Distribution.....................     7,852       13.37
Options granted during period............................       424       16.87
Options exercised........................................        --          --
Options cancelled........................................      (590)      13.14
                                                              -----      ------
Outstanding, end of year.................................     7,686      $13.59
                                                              =====      ======
Exercisable, end of year.................................       523      $10.20
                                                              =====      ======


    The following table summarizes stock options outstanding at December 31,
2000 (options in thousands):



                                                  OUTSTANDING                   EXERCISABLE
                                      -----------------------------------   --------------------
                                                    AVERAGE      WEIGHTED               WEIGHTED
                                                   REMAINING     AVERAGE                AVERAGE
                                      NUMBER OF   CONTRACTUAL    EXERCISE   NUMBER OF   EXERCISE
      RANGE OF EXERCISE PRICES         OPTIONS    LIFE (YEARS)    PRICE      OPTIONS     PRICE
      ------------------------        ---------   ------------   --------   ---------   --------
                                                                         
  $13.88 (Founders Options).........    5,250         9.3         $13.88        --       $   --
  $10.20-$15.71 (Conversion
    Options)........................    2,012         7.3          12.14       523        10.20
  $15.44-$22.25 (Other options).....      424         9.9          16.87        --           --
                                        -----         ---         ------       ---       ------
                                      7,686..         8.8         $13.59       523       $10.20
                                        =====         ===         ======       ===       ======


    The Company applies the provisions of Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees," in accounting for
stock-based compensation; therefore, no compensation expense has been recognized
for its fixed stock option plans as options generally are granted at fair market
value based upon the closing price on the date immediately preceding the grant
date. The Company has adopted the disclosure requirements for SFAS No. 123,
"Accounting for Stock-Based Compensation." Accordingly, if compensation expense
for the Company's stock options had been recognized, based upon the fair value
of awards granted, the Company's net income would have been reduced by
approximately $7 million, resulting in a net loss of approximately $279 million
for fiscal 2000, or $(4.79) per share for both pro forma basic and diluted net
loss per share. The fair value of each option granted during fiscal 2000 is
estimated based on the date of grant using the Black-Scholes option-pricing
model with the following assumptions: expected life of 5 years, expected
volatility of 45%, risk-free interest rate of 5.8%, and no dividend yield. The
weighted-average fair value for options granted during 2000 was $6.39. The
Company expects to grant additional awards in future years.

RESTRICTED STOCK

    On April 1, 2000, a one-time grant of 5,000 shares of restricted stock was
made to each of the five non-employee directors pursuant to the Nonemployee
Program. These grants vest 50% after one year

                                       62

                        EDWARDS LIFESCIENCES CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. COMMON STOCK (CONTINUED)
and the balance vests after two years from the date of grant. An aggregate of
300,000 shares of the Company's common stock has been authorized for issuance
pursuant to the Nonemployee Program. Grants of restricted stock to non-employees
are charged to Unearned Compensation in Stockholders' Equity at their intrinsic
value and recognized as expense over the vesting period. Compensation expense
recognized for such grants during fiscal year 2000 was approximately
$0.2 million for the Nonemployee Program restricted stock grants.

EMPLOYEE STOCK PURCHASE PLAN

    The Company implemented two employee stock purchase plans ("ESPP") for
eligible employees to purchase shares of the Company's common stock at 85% of
the lower of the fair market value of Edwards Lifesciences common stock on (a)
the effective date of subscription or (b) the date of purchase. Under the ESPP,
employees could authorize the Company to withhold up to 12% of their
compensation during any offering periods for common stock purchases, subject to
certain limitations. The ESPP was implemented on April 3, 2000 and was available
to all active employees of the Company paid from the United States payroll and
to eligible employees of the Company outside the United States to the extent
permitted by local law. The ESPP for United States employees was qualified under
Section 423 of the Internal Revenue Code. The Board of Directors authorized an
aggregate of 375,000 shares of the Company's common stock for issuance under the
ESPP. Effective September 30, 2000, the Company terminated the ESPP due to an
insufficient number of shares remaining within the plans. As of December 31,
2000, approximately 355,000 shares have been issued within the plans.

SPECIAL OWNERSHIP STOCK OPTION PLAN

    Prior to the Distribution, certain employees of Edwards Lifesciences
participated in stock-based compensation plans sponsored by Baxter. Such plans
principally included fixed stock option plans and employee stock purchase plans.
Baxter applied APB Opinion No. 25, and related interpretations in accounting for
such plans. Accordingly, no compensation cost was recognized for the fixed stock
option plans and the employee stock purchase plans. These plans remain the sole
responsibility of Baxter.

    Employees who transferred to Edwards Lifesciences were required to exercise
any vested options within 90 days from the spin-off date from Baxter unless an
employee qualified for certain retirement, disability or other special
provisions, and all unvested Baxter options were cancelled by Baxter on
June 30, 2000.

STOCKHOLDER RIGHTS PLAN

    In connection with the Distribution, the Company adopted a Stockholder
Rights Plan to protect stockholders' rights in the event of a proposed or actual
acquisition of 15% or more of the outstanding shares of the Company's common
stock. As part of this plan, each share of the Company's common stock carries a
right to purchase one one-hundredth (1/100) of a share of Series A Junior
Participating Preferred Stock (the "Rights"), par value $0.01 per share, subject
to adjustment, which becomes exercisable only upon the occurrence of certain
events. The Rights are subject to redemption at the option of the Board of
Directors at a price of $0.01 per right until the occurrence of certain events.
The Rights expire on March 31, 2010, unless earlier redeemed or exchanged by the
Company.

                                       63

                        EDWARDS LIFESCIENCES CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. COMMON STOCK (CONTINUED)
OTHER

    During 2000, Edwards Lifesciences issued to certain hourly employees
approximately 125,000 shares of the Company's common stock valued at
$1.7 million.

10. EMPLOYEE BENEFIT PLANS

DEFINED BENEFIT PLANS

    Prior to the Distribution, Edwards Lifesciences employees participated in
Baxter-sponsored defined benefit pension plans covering substantially all
employees in the United States and Puerto Rico and employees in certain European
countries. The benefits were based on years of service and the employees'
compensation during five of the last 10 years of employment as defined by the
plans. Effective as of the Distribution, Edwards Lifesciences' employees ceased
to be eligible to accrue any additional benefits under the Baxter plan for
United States employees. Edwards Lifesciences did not adopt a pension plan for
United States employees to replace the Baxter plan in the United States. The
pension liability related to Edwards Lifesciences' United States employees'
service prior to the Distribution remains with Baxter. With respect to the
Puerto Rico and certain European plans, Baxter transferred the assets and
liabilities relating to Edwards Lifesciences' employees to Edwards Lifesciences
as of the Distribution. Edwards Lifesciences has adopted a defined benefit
pension plan in Puerto Rico and in certain European countries.

    Pension expense for the Baxter-sponsored plans relating to Edwards
Lifesciences' employees was $0.4 million for the three months ended March 31,
2000 and $5 million and $4 million for the years ended December 31, 1999 and
1998, respectively.

    In addition to pension benefits, Edwards Lifesciences participated in
Baxter-sponsored contributory health care and life insurance benefits for
substantially all domestic retired employees through the Distribution. Baxter
and Edwards Lifesciences froze benefits under these plans as of the Distribution
for Edwards Lifesciences employees. Edwards Lifesciences has not established new
health care and life insurance plans for employees retiring subsequent to the
Distribution. Expense associated with these benefits relating to Edwards
Lifesciences employees was less than $1 million in each of the years 2000, 1999
and 1998.

    Subsequent to the Distribution, Edwards Lifesciences began sponsoring
defined benefit pension plans in Puerto Rico and in certain European countries.
Information about these plans is presented below.

                                       64

                        EDWARDS LIFESCIENCES CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. EMPLOYEE BENEFIT PLANS (CONTINUED)
    RECONCILIATION OF THE PLANS' BENEFIT OBLIGATIONS, ASSETS AND FUNDED STATUS
ARE AS FOLLOWS:



                                                         AS OF OR
                                                      FOR THE PERIOD
                                                           ENDED
                                                     DECEMBER 31, 2000
                                                     -----------------
                                                       (IN MILLIONS)
                                                  
BENEFIT OBLIGATIONS
April 1, 2000......................................        $22.2
Service cost.......................................          1.1
Interest cost......................................          1.1
Participant contributions..........................          0.1
Actuarial loss.....................................          0.6
Curtailment gains..................................         (1.1)
Currency exchange rate changes and other...........         (1.0)
                                                           -----
December 31, 2000..................................        $23.0
                                                           =====
FAIR VALUE OF PLAN ASSETS
April 1, 2000......................................        $18.4
Actual return on plan assets.......................         (0.5)
Employer contributions.............................          0.4
Participant contributions..........................          0.1
Currency exchange rate changes and other...........         (0.8)
                                                           -----
December 31, 2000..................................        $17.6
                                                           =====
FUNDED STATUS
Funded status at December 31, 2000.................        $(5.4)
Unrecognized net losses............................          2.0
Unrecognized prior service cost....................          2.8
                                                           -----
Net amount recognized..............................        $(0.6)
                                                           =====
Prepaid benefit cost...............................        $ 1.0
Accrued benefit liability..........................         (1.6)
                                                           -----
Net amount recognized..............................        $(0.6)
                                                           =====


    For certain of the Company's European pension plans, the accumulated benefit
obligation is in excess of plan assets. The projected benefit obligation and
accumulated benefit obligation for these plans were $0.8 million and
$0.7 million, respectively, at December 31, 2000. There were no assets held in
these plans.

                                       65

                        EDWARDS LIFESCIENCES CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. EMPLOYEE BENEFIT PLANS (CONTINUED)
           NET PERIODIC BENEFIT COST



                                                        PERIOD ENDED
                                                      DECEMBER 31, 2000
                                                      -----------------
                                                        (IN MILLIONS)
                                                   
Service cost........................................        $1.1
Interest cost.......................................         1.1
Expected return on plan assets......................        (1.0)
Amortization of prior service cost..................         0.2
                                                            ----
Net periodic pension benefits cost..................        $1.4
                                                            ====


    Assumptions used in determining benefit obligations are as follows:

                                                   
DISCOUNT RATE
  Puerto Rico plan..................................       7.25%
  International plans (average).....................       5.55%
EXPECTED RETURN ON PLAN ASSETS
  Puerto Rico plan..................................       9.50%
  International plans (average).....................       5.00%
RATE OF COMPENSATION INCREASE
  Puerto Rico plan..................................       4.00%
  International plans (average).....................       3.71%



DEFINED CONTRIBUTION PLANS

    The Company's employees in the United States and Puerto Rico are eligible to
participate in a qualified 401(k) and 1165(e) plan, respectively. Participants
may contribute up to 15% of their annual compensation (subject to tax code
limitation) to the plans. Edwards Lifesciences matches the first three percent
of the participant's annual eligible compensation contributed to the plan on a
dollar for dollar basis. Edwards Lifesciences matches the next two percent of
the participant's annual eligible compensation to the plan on a 50% basis.
Matching contributions relating to Edwards Lifesciences employees were
approximately $4 million in 2000 and approximately $3 million in each of 1999
and 1998.

    The Company has a nonqualified deferred compensation plan for a select group
of management that provides the opportunity to defer a specified percentage of
their cash compensation. Participants may elect to defer up to 100% of bonus and
15% of total annual compensation. The Company's obligations under this plan are
unfunded. The amount accrued under this plan was approximately $2 million at
December 31, 2000 and is recorded in Other Liabilities.

11. RELATED PARTY TRANSACTIONS

    Prior to the Distribution, Baxter provided to the Edwards Lifesciences
Business certain legal, treasury, employee benefit, insurance and administrative
services. Charges for these services were based on actual costs incurred by
Baxter. The amounts charged to Edwards Lifesciences varied depending on the
nature of the service, but generally were determined using headcount, sales,
payroll, square footage or other appropriate data, or were determined on actual
utilization of services. Management believes

                                       66

                        EDWARDS LIFESCIENCES CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. RELATED PARTY TRANSACTIONS (CONTINUED)
that the allocation of service charges are reasonable. However, the terms of
these transactions may differ from those that would result from transactions
with unrelated third parties or had Edwards Lifesciences performed these
functions on its own.

    Prior to the Distribution, Edwards Lifesciences participated in a
centralized cash management program administered by Baxter. Short-term advances
from Baxter or excess cash sent to Baxter have been treated as an adjustment to
the "Investment by Baxter International Inc., net" account as of and through
March 31, 2000. No interest was allocated to Edwards Lifesciences on this
balance.

    Effective on the Distribution, Baxter and Edwards Lifesciences entered into
a series of administrative services agreements pursuant to which Baxter and
Edwards Lifesciences will continue to provide, for a specified period of time,
certain administrative services (primarily information systems support, payroll,
accounting and warehousing and logistics support) that each entity historically
has provided to the other. These agreements require the parties to pay each
other a fee that approximates the actual costs of these services. Additionally,
subsequent to March 31, 2000, Edwards Lifesciences has continuing relationships
with Baxter as a customer and supplier for certain products, and uses Baxter as
a distributor of the Company's products in certain regions of the world.

    The following table summarizes the charges from Baxter for the
above-mentioned services, as recorded in Edwards Lifesciences' Consolidated
Statements of Operations:



                                                                      YEARS ENDED
                                                                      DECEMBER 31,
                                                             ------------------------------
                                                               2000       1999       1998
                                                             --------   --------   --------
                                                                     (IN MILLIONS)
                                                                          
Cost of goods sold.........................................    $ 5        $--        $ 4
Selling, general and administrative expenses...............     19         44         34
Research and development expenses..........................      1          2          4


    Sales to Baxter, acting in the capacity of the Company's distributor,
represented 12% of the Company's total net sales subsequent to the Distribution.

12. OTHER EXPENSE (INCOME), NET



                                                                      YEARS ENDED
                                                                      DECEMBER 31,
                                                             ------------------------------
                                                               2000       1999       1998
                                                             --------   --------   --------
                                                                     (IN MILLIONS)
                                                                          
Foreign exchange...........................................     $2        $ 2        $ 1
Insurance and legal settlements............................     --         (1)       (13)
Asset dispositions and write downs, net....................      1          1          6
Other......................................................      1          2         --
                                                                --        ---        ---
                                                                $4        $ 4        $(6)
                                                                ==        ===        ===


                                       67

                        EDWARDS LIFESCIENCES CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13. INCOME TAXES

    Edwards Lifesciences' operations prior to the Distribution were included in
the consolidated income tax returns of Baxter. The following income tax
information was calculated as if Edwards Lifesciences were a stand-alone
affiliated group for all periods presented.

    Income (loss) before tax expense by category is as follows:



                                                                    YEARS ENDED
                                                                    DECEMBER 31,
                                                           ------------------------------
                                                             2000       1999       1998
                                                           --------   --------   --------
                                                                   (IN MILLIONS)
                                                                        
United States............................................   $(321)      $ 92       $66
International............................................      62         21        27
                                                            -----       ----       ---
                                                            $(259)      $113       $93
                                                            =====       ====       ===


    Income tax expense by category and by income statement classification is as
follows:



                                                                     YEARS ENDED
                                                                     DECEMBER 31,
                                                            ------------------------------
                                                              2000       1999       1998
                                                            --------   --------   --------
                                                                    (IN MILLIONS)
                                                                         
CURRENT
  United States
    Federal...............................................    $ --       $ 13       $16
    State and local, including Puerto Rico................       2          8        11
  International...........................................      12          8         4
                                                              ----       ----       ---
      Current income tax expense..........................      14         29        31
                                                              ----       ----       ---

DEFERRED
  United States
    Federal...............................................      --          2        --
    State and local, including Puerto Rico................      (1)        --        --
  International...........................................      --         --        --
                                                              ----       ----       ---
      Deferred income tax expense (benefit)...............      (1)         2        --
                                                              ----       ----       ---
TOTAL INCOME TAX EXPENSE..................................    $ 13       $ 31       $31
                                                              ====       ====       ===


                                       68

                        EDWARDS LIFESCIENCES CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13. INCOME TAXES (CONTINUED)

    The components of deferred tax assets and liabilities are as follows:



                                                                 DECEMBER 31,
                                                              -------------------
                                                                2000       1999
                                                              --------   --------
                                                                 (IN MILLIONS)
                                                                   
DEFERRED TAX ASSETS
  Compensation and benefits.................................    $  7       $  5
  Accrued liabilities.......................................       5         --
  Allowance for doubtful accounts...........................       4          2
  Inventories...............................................       3          1
  Other.....................................................       4          1
                                                                ----       ----
    Total deferred tax assets...............................      23          9
                                                                ----       ----

DEFERRED TAX LIABILITIES
  Intangible assets.........................................     (27)       (34)
  Property, plant and equipment.............................     (14)       (17)
  Deferred gain on sale of assets...........................     (13)        --
  Net operating loss carryforwards..........................       4          2
  Valuation allowance.......................................      (3)        (1)
  Tax credit carryforwards..................................       1         --
  Other.....................................................      (5)         7
                                                                ----       ----
    Total deferred tax liabilities..........................     (57)       (43)
                                                                ----       ----

Net deferred tax liabilities................................    $(34)      $(34)
                                                                ====       ====


    Deferred income taxes have not been provided on the undistributed earnings
of the Company's foreign subsidiaries of approximately $16 million as of
December 31, 2000 since these amounts are intended to be permanently reinvested
in foreign operations. It is not practicable to calculate the deferred taxes
associated with these earnings; however, foreign tax credits would likely be
available to reduce federal income taxes in the event of distribution.

    Income tax expense differs from income tax expense (benefit) calculated by
using the United States federal income tax rate for the following reasons:



                                                                     YEARS ENDED
                                                                     DECEMBER 31,
                                                            ------------------------------
                                                              2000       1999       1998
                                                            --------   --------   --------
                                                                    (IN MILLIONS)
                                                                         
Income tax expense (benefit) at statutory rate............    $(90)      $40        $33
Nondeductible charges (Note 4)............................     100        --         --
Nondeductible goodwill....................................      10        12         12
Foreign income tax at different rates.....................      (9)      (24)       (18)
State and local taxes.....................................      --         3          4
Other.....................................................       2        --         --
                                                              ----       ---        ---
Income tax expense........................................    $ 13       $31        $31
                                                              ====       ===        ===


                                       69

                        EDWARDS LIFESCIENCES CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13. INCOME TAXES (CONTINUED)
    The Company has manufacturing operations outside the United States,
primarily in Puerto Rico and Switzerland, which benefit from reductions in local
tax rates under various tax incentives.

    As of December 31, 2000, the Company has a United States federal net
operating loss carryforward of approximately $3 million which expires in 2020,
and approximately $1 million in aggregate state net operating loss carryforwards
which expire in 2010. The Company also has a state research and development
income tax credit carryforward of approximately $1 million. The state credit has
no expiration date. The Company has foreign net operating loss carryforwards of
approximately $9 million as of December 31, 2000, of which approximately 10%
expires in 2008; the remainder is non-expiring and has been fully offset by a
valuation allowance.

14. LEGAL PROCEEDINGS

    Upon the Distribution, Edwards Lifesciences assumed the defense of certain
Baxter litigation involving cases and claims related to the Edwards Lifesciences
Business. Edwards Lifesciences has not been named as a defendant in such matters
but is defending and indemnifying Baxter for all related expenses and potential
liabilities. It is possible that Edwards Lifesciences may be added as a
defendant in these cases and claims.

    Edwards Lifesciences is also subject to various environmental laws and
regulations both within and outside of the United States. The operations of
Edwards Lifesciences, like those of other medical device companies, involve the
use of substances regulated under environmental laws, primarily in manufacturing
and sterilization processes. While it is difficult to quantify the potential
impact of compliance with environmental protection laws, management believes
that such compliance will not have a material impact on Edwards Lifesciences'
financial position, results of operations or liquidity.

    As previously reported, on June 29, 2000 Edwards Lifesciences filed a
lawsuit for patent infringement against Medtronic, Inc. alleging infringement of
two of Edwards Lifesciences' United States patents, and filed a lawsuit against
St. Jude Medical, Inc. alleging infringement of three patents. The Medtronic
lawsuit was filed in the United States District Court for the District of
Delaware and the St. Jude lawsuit in the United States District Court for the
Central District of California. Both lawsuits seek monetary damages and
injunctive relief. Each of Medtronic and St. Jude has answered, and asserted
various affirmative defenses and counterclaims. Discovery is proceeding in both
lawsuits. On March 1, 2001 Edwards Lifesciences moved to amend its lawsuit
against Medtronic alleging infringement of one other of Edwards Lifesciences'
United States patents. This motion is pending.

    Edwards Lifesciences is, or may be, a party to pending or threatened
lawsuits, related primarily to products and services currently or formerly
manufactured or performed, as applicable, by Edwards Lifesciences. Such cases
and claims raise difficult and complex factual and legal issues and are subject
to many uncertainties and complexities, including, but not limited to, the facts
and circumstances of each particular case or claim, the jurisdiction in which
each suit is brought, and differences in applicable law. Upon resolution of any
pending legal matters, Edwards Lifesciences may incur charges in excess of
presently established reserves. While such a charge could have a material
adverse impact on Edwards Lifesciences' net income or net cash flows in the
period in which it is recorded or paid, management believes that no such charge
would have a material adverse effect on Edwards Lifesciences' consolidated
financial position.

                                       70

                        EDWARDS LIFESCIENCES CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

15. SEGMENT INFORMATION

    Edwards Lifesciences manages its business on the basis of one reportable
segment. Refer to Note 1 for a description of the Company's business. The
Company's products and services share similar distribution channels and
customers and are sold principally to hospitals and physicians. Management
evaluates its various global product portfolios on a revenue basis, which is
presented below, and profitability is generally evaluated on an enterprise-wide
basis due to shared infrastructures. Edwards Lifesciences' principal markets are
the United States, Europe and Japan.

    Geographic area data includes net sales based on product shipment
destination and long-lived asset data is presented based on physical location.



AS OF OR FOR THE YEAR ENDED DECEMBER 31                  2000       1999       1998
- ---------------------------------------                --------   --------   --------
                                                               (IN MILLIONS)
                                                                    
NET SALES BY GEOGRAPHIC AREA
  United States......................................    $482      $  504     $  508
  Japan..............................................      94         166        138
  Other countries....................................     228         235        219
                                                         ----      ------     ------
                                                         $804      $  905     $  865
                                                         ====      ======     ======

NET SALES BY MAJOR PRODUCT AND SERVICE AREA
  Cardiac Surgery....................................    $311      $  306     $  273
  Critical Care......................................     217         242        221
  Vascular...........................................      55          61         60
  Perfusion Products and Services....................     207         244        269
  Other..............................................      14          52         42
                                                         ----      ------     ------
                                                         $804      $  905     $  865
                                                         ====      ======     ======

LONG-LIVED ASSETS BY GEOGRAPHIC AREA
  United States......................................    $780      $1,035     $1,082
  Other countries....................................      26          46         47
                                                         ----      ------     ------
                                                         $806      $1,081     $1,129
                                                         ====      ======     ======


                                       71

                        EDWARDS LIFESCIENCES CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

16. QUARTERLY FINANCIAL RESULTS AND MARKET FOR THE COMPANY'S STOCK (UNAUDITED)



               YEARS ENDED DECEMBER 31                   First      Second     Third      Fourth     Total
         (IN MILLIONS, EXCEPT PER SHARE DATA)           quarter    quarter    quarter    quarter      year
- ------------------------------------------------------  --------   --------   --------   --------   --------
                                                                                     
2000
  Net sales...........................................    $226      $ 205      $ 186      $ 187      $ 804
  Gross profit........................................     108         90         90         93        381
  Net income (loss)(a,b)..............................      17       (309)         4         16       (272)
  Per common share(c)
    Basic.............................................    0.29      (5.31)      0.08       0.27      (4.66)
    Diluted...........................................    0.29      (5.31)      0.07       0.26      (4.66)
  Dividends...........................................      --         --         --         --         --
  Market price
    High..............................................     n/a      20.44      26.25      24.19      26.25
    Low...............................................     n/a      13.75      19.69      13.00      13.00

1999
  Net sales...........................................    $221      $ 233      $ 217      $ 234      $ 905
  Gross profit........................................     108        118        102        111        439
  Net income..........................................      22         24         17         19         82

n/a -- not applicable


a   The second quarter includes (1) a $291 million pretax charge related to the
    sale of the Bentley line of cardiopulmonary products (perfusion products) to
    Jostra AG, (2) a $54 million pretax charge consisting of the write-down of
    selected goodwill and intangible assets, and other miscellaneous expenses,
    (3) a $35 million pretax gain on the sale of the United States assets of the
    Company's mechanical cardiac assist product line to WorldHeart and (4) a
    $17 million pretax charge consisting of non-recurring expenses related to
    the Company's spin-off from Baxter International Inc.

b  The third quarter includes a $12 million pretax charge related primarily to
    severance costs associated with the sale of the Company's Bentley line of
    cardiopulmonary products.

c   For first quarter and total year, computed as if 58.2 million common shares
    of Edwards Lifesciences had been outstanding as of January 1, 2000
    (comprised of 58.1 million common shares of Edwards Lifesciences distributed
    to Baxter shareholders to effect the Distribution and approximately
    0.1 million common shares of Edwards Lifesciences distributed to Edwards
    Lifesciences' hourly employees subsequent to the Distribution). Due to the
    net loss for the year ended December 31, 2000, the basic and diluted net
    loss per share for the second quarter and for total year are the same
    amounts since the impact of the common stock equivalents (of approximately
    1.1 million and 1.2 million shares, respectively) would be anti-dilutive.

                                       72

                        EDWARDS LIFESCIENCES CORPORATION

                VALUATION AND QUALIFYING ACCOUNTS (IN MILLIONS)



                                                                       ADDITIONS
                                                  BALANCE AT   -------------------------
                                                  BEGINNING    CHARGED TO    CHARGED TO    DEDUCTIONS    BALANCE
                                                      OF       COSTS AND       OTHER          FROM      AT END OF
                                                    PERIOD      EXPENSES    ACCOUNTS (A)    RESERVES     PERIOD
                                                  ----------   ----------   ------------   ----------   ---------
                                                                                         
Year ended December 31, 2000
  Allowance for doubtful accounts and
    returns...................................        $8           $3         $      --        $(6)        $5
  Inventory reserves..........................        12           21                --        (25)         8
  Litigation reserves.........................         2            5                --         (2)         5

Year ended December 31, 1999
  Allowance for doubtful accounts and
    returns...................................         8            5                --         (5)         8
  Inventory reserves..........................        10            9                 1         (8)        12
  Litigation reserves.........................         1            1                --         --          2

Year ended December 31, 1998
  Allowance for doubtful accounts and
    returns...................................         6            8                --         (6)         8
  Inventory reserves..........................        13            4                --         (7)        10
  Litigation reserves.........................         1            1                --         (1)         1


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

(a) Valuation accounts of acquired assets.

ITEM 9  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
  FINANCIAL DISCLOSURE

    None.

                                    PART III

ITEM 10  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

    This information required by this Item is set forth under the headings
"Election of Directors," "Section 16(a) Beneficial Ownership Reporting
Compliance" and "Executive Officers of Edwards Lifesciences" in the definitive
proxy materials to be filed in connection with its 2001 Annual Meeting of
Stockholders (the "Proxy Statement") (which Proxy Statement will be filed with
the Securities and Exchange Commission on or before April 10, 2001). The
information required by this Item to be contained in the Proxy Statement is
incorporated herein by reference.

ITEM 11  EXECUTIVE COMPENSATION

    Except for information referred to in Item 402(a)(8) of Regulation S-K, the
information contained under the headings "Election of Directors" and "Executive
Compensation and Other Information" in the Proxy Statement (which Proxy
Statement will be filed with the Securities and Exchange Commission on or before
April 10, 2001) is incorporated herein by reference.

ITEM 12  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    The information contained under the heading "Security Ownership of Certain
Beneficial Owners and Management" in the Proxy Statement (which Proxy Statement
will be filed with the Securities and Exchange Commission on or before
April 10, 2001) is incorporated herein by reference.

ITEM 13  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    The information contained under the heading "Certain Relationships and
Related Transactions" in the Proxy Statement (which Proxy Statement will be
filed with the Securities and Exchange Commission on or before April 10, 2001)
is incorporated herein by reference.

                                       73

                                    PART IV

ITEM 14  FINANCIAL STATEMENTS AND SCHEDULE, EXHIBITS AND REPORTS ON FORM 8-K

(a)(1)  FINANCIAL STATEMENTS AND SCHEDULE

    Financial Statements of the Registrant are listed in the index to
Consolidated Financial Statements and filed under Item 8, "Financial Statements
and Supplementary Data," included elsewhere in this Form 10-K.

    Financial Statement Schedule of the Registrant is listed in the index to
Consolidated Financial Statements and filed under Item 8, "Financial Statements
and Supplementary Data," included elsewhere in this Form 10-K.

(a)(2)  EXHIBITS

    The following exhibits are filed herewith or are incorporated herein:



EXHIBIT NO.                                     DESCRIPTION
- -----------             ------------------------------------------------------------
                     
          3.1           Amended and Restated Certificate of Incorporation of Edwards
                        Lifesciences Corporation (a)

          3.2           Amended and Restated Bylaws of Edwards Lifesciences
                        Corporation (a)

          3.3           Form of Certificate of Designation for Edwards Lifesciences
                        Corporation Series A Junior Participating Preferred Stock
                        (included as Exhibit A to Exhibit 10.9) (a)

          4.1           Specimen form of certificate representing Edwards
                        Lifesciences Corporation common stock (a)

         10.1           Form of Agreement and Plan of Reorganization, to be entered
                        into between Edwards Lifesciences Corporation and Baxter
                        International Inc. (a)

         10.2           Form of Tax Sharing Agreement, to be entered into between
                        Edwards Lifesciences Corporation and Baxter International
                        Inc. (a)

        *10.3           Edwards Lifesciences Corporation Long-Term Stock Incentive
                        Compensation Program (a)

        *10.4           Form of Edwards Lifesciences Corporation Change in Control
                        Severance Agreement

        *10.5           Employment Agreement for Michael A. Mussallem

         10.9           Form of Rights Agreement between Edwards Lifesciences
                        Corporation and EquiServe Trust Company, N.A, as Rights
                        Agent, dated as of March 31, 2000 (a)

        10.10           Services and Distribution Agreement between Edwards
                        Lifesciences LLC, as successor in interest to Baxter
                        Healthcare Corporation, and Allegiance Healthcare
                        Corporation, dated as of October 1, 1996. CONFIDENTIAL
                        INFORMATION APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND
                        FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
                        IN ACCORDANCE WITH SECTION 24(b) OF THE SECURITIES EXCHANGE
                        ACT OF 1934, AS AMENDED AND RULE 24b-2 PROMULGATED
                        THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH
                        ASTERISKS (a)

       *10.11           Form of Employment Agreement (a)

        10.12           Form of Consulting Agreement (a)

        10.13           Form of Outgoing Confidentiality Agreement (a)


                                       74




EXHIBIT NO.                                     DESCRIPTION
- -----------             ------------------------------------------------------------
                     
       *10.14           Edwards Lifesciences Corporation Nonemployee Directors and
                        Consultants Stock Incentive Program (a)

        10.16           Form of Tokumei Kumiai Agreement by and between Baxter
                        Limited and Edwards Lifesciences Finance Limited, dated as
                        of April 1, 2000 (a)

        10.17           Form of Option Agreement by and between Baxter Limited and
                        Edwards Lifesciences Limited, dated as of April 1, 2000 (a)

        10.18           Form of Japan Distribution Agreement by and between Baxter
                        Limited and Edwards Lifesciences LLC, dated as of April 1,
                        2000 (a)

        10.19           Five Year Credit Agreement dated as of March 30, 2000, among
                        Edwards Lifesciences Corporation, a Delaware corporation;
                        the Swiss Borrowers; the Japanese Borrowers; the Lenders
                        from time to time party hereto; The Chase Manhattan Bank, as
                        Administrative Agent; Chase Manhattan International Limited,
                        as London Agent; The Fuji Bank, Limited, as the Tokyo Agent;
                        Bank One, N.A., as Syndication Agent; and Credit Suisse
                        First Boston, as Documentation Agent (b)

        10.20           364-Day Credit Agreement dated as of March 30, 2000, among
                        Edwards Lifesciences Corporation, a Delaware corporation;
                        the Lenders from time to time party hereto; The Chase
                        Manhattan Bank, as Administrative Agent; Bank One, N.A., as
                        Syndication Agent; and Credit Suisse First Boston, as
                        Documentation Agent (b)

       *10.21           Edwards Lifesciences Corporation Severance Pay Plan (b)

        10.22           Contribution Agreement by and among Edwards Lifesciences
                        LLC, Edwards Novacor LLC, WorldHeart Corporation and
                        Valentine Acquisition Corp. dated as of May 24, 2000 (c)

        10.23           Amendment No. 1, dated as of June 30, 2000, to the Five Year
                        Credit Agreement dated as of March 30, 2000, among Edwards
                        Lifesciences Corporation, a Delaware corporation; the Swiss
                        Borrowers; the Japanese Borrowers; the Lenders from time to
                        time party thereto; The Chase Manhattan Bank, as
                        Administrative Agent; Chase Manhattan International Limited,
                        as London Agent; The Fuji Bank, Limited, as the Tokyo Agent;
                        Bank One, N.A., as Syndication Agent; and Credit Suisse
                        First Boston, as Documentation Agent, and to the 364-Day
                        Credit Agreement dated as of March 30, 2000, among Edwards
                        Lifesciences Corporation, the Lenders from time to time
                        party thereto, The Chase Manhattan Bank, as Administrative
                        Agent, Bank One, N.A., as Syndication Agent and Credit
                        Suisse First Boston, as Documentation Agent (c)

       *10.24           Edwards Lifesciences Corporation Long-Term Stock Incentive
                        Compensation Program (as amended and restated July 12, 2000)
                        (d)

       *10.25           Edwards Lifesciences Corporation Nonemployee Directors and
                        Consultants Stock Incentive Program (as amended and restated
                        July 12, 2000) (d)

       *10.26           Edwards Lifesciences Corporation Executive Option Plan (e)

       *10.27           Edwards Lifesciences Corporation of Puerto Rico Savings and
                        Investment Plan (f)

       *10.28           Edwards Lifesciences Corporation 401(k) Savings and
                        Investment Plan (g)


                                       75




EXHIBIT NO.                                     DESCRIPTION
- -----------             ------------------------------------------------------------
                     
       *10.29           Edwards Lifesciences Corporation 2001 Incentive Plan

         21.1           Subsidiaries of Edwards Lifesciences Corporation

           23           Consent of Independent Accountants


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

    (a) Incorporated by reference to the cited exhibit in Edwards Lifesciences'
       Registration Statement on Form 10 (File No. 001-15525).

    (b) Incorporated by reference to the cited exhibit in Edwards Lifesciences'
       Registration Form 10-Q for the quarterly period ended March 31, 2000,
       under the Securities Exchange Act of 1934.

    (c) Incorporated by reference to the cited exhibit in Edwards Lifesciences'
       Registration Form 10-Q for the quarterly period ended June 30, 2000,
       under the Securities Exchange Act of 1934.

    (d) Incorporated by reference to the cited exhibit in Edwards Lifesciences'
       Registration Form 10-Q for the quarterly period ended September 30, 2000,
       under the Securities Exchange Act of 1934.

    (e) Incorporated by reference to Exhibit 4.4 in Edwards Lifesciences'
       Registration Statement on Form S-8 (File No. 333-52332).

    (f) Incorporated by reference to Exhibit 4.3 in Edwards Lifesciences'
       Registration Statement on Form S-8 (File No. 333-40434).

    (g) Incorporated by reference to Exhibit 4.3 in Edwards Lifesciences'
       Registration Statement on Form S-8 (File No. 333-33056).

    *   Represents management contract or compensatory plan

(b)  REPORTS ON FORM 8-K

    None.

                                       76

                                   SIGNATURES

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

                                                    
                                                       EDWARDS LIFESCIENCES CORPORATION

March 27, 2001                                         /s/ MICHAEL A. MUSSALLEM
                                                       ---------------------------------------------
                                                       Michael A. Mussallem
                                                       Chairman of the Board and
                                                       Chief Executive Officer



    We, the undersigned officers and directors of Edwards Lifesciences
Corporation, hereby severally constitute and appoint Bruce P. Garren and Jay P.
Wertheim, and each of them singly, our true and lawful attorneys, with full
power to them and each of them singly, to sign for us in our names in the
capacities indicated below, all amendments to this Annual Report on Form 10-K,
and generally to do all things in our names and on our behalf in such capacities
to enable Edwards Lifesciences Corporation to comply with the provisions of the
Securities Act of 1934, as amended, and all requirements of the Securities and
Exchange Commission. 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.



                      SIGNATURE                                            TITLE
- -----------------------------------------------------  ----------------------------------------------
                                                    
              /s/ MICHAEL A. MUSSALLEM
     -------------------------------------------                 Chairman of the Board and
                Michael A. Mussallem                              Chief Executive Officer

               /s/ BRUCE J. BENTCOVER
     -------------------------------------------                 Corporate Vice President,
                 Bruce J. Bentcover                        Chief Financial Officer and Treasurer

                 /s/ BRUCE P. GARREN
     -------------------------------------------                 Corporate Vice President,
                   Bruce P. Garren                             General Counsel and Secretary

              /s/ VERNON R. LOUCKS JR.
     -------------------------------------------                          Director
                Vernon R. Loucks Jr.

                /s/ VICTORIA R. FASH
     -------------------------------------------                          Director
                  Victoria R. Fash

                 /s/ PHILIP M. NEAL
     -------------------------------------------                          Director
                   Philip M. Neal

                /s/ DAVID E.I. PYOTT
     -------------------------------------------                          Director
                  David E.I. Pyott

                 /s/ MIKE R. BOWLIN
     -------------------------------------------                          Director
                   Mike R. Bowlin


                                       77

EX-10.4

                                                                    EXHIBIT 10.4

                         CHANGE-IN-CONTROL SEVERANCE AGREEMENT

                         Edwards Lifesciences Corporation

                         April 2000


CONTENTS

- -------------------------------------------------------------------------------
Article 1. Definitions                                                        1

Article 2. Severance Benefits                                                 4

Article 3. Form and Timing of Severance Benefits                              7

Article 4. Excise Tax                                                         7

Article 5. The Company's Payment Obligation                                   8

Article 6. Term of Agreement                                                  8

Article 7. Legal Remedies                                                     9

Article 8. Successors                                                         9

Article 9. Miscellaneous                                                      9




CHANGE-IN-CONTROL SEVERANCE AGREEMENT
EDWARDS LIFESCIENCES CORPORATION

      THIS CHANGE-IN-CONTROL SEVERANCE AGREEMENT is made, entered into, and is
effective as of the _______ day of ________, 2000 (hereinafter referred to as
the "Effective Date"), by and between Edwards Lifesciences Corporation (the
"Company"), a Delaware corporation, and ____________________ (the "Executive").

      WHEREAS, the Executive is currently employed by the Company in a key
management capacity; and

      WHEREAS, the Executive possesses considerable experience and knowledge of
the business and affairs of the Company concerning its policies, methods,
personnel, and operations; and

      WHEREAS, the Company is desirous of assuring insofar as possible, that it
will continue to have the benefit of the Executive's services; and the Executive
is desirous of having such assurances; and

      WHEREAS, the Company recognizes that circumstances may arise in which a
Change in Control of the Company occurs, through acquisition or otherwise,
thereby causing uncertainty of employment without regard to the Executive's
competence or past contributions. Such uncertainty may result in the loss of the
valuable services of the Executive to the detriment of the Company and its
shareholders; and

      WHEREAS, both the Company and the Executive are desirous that any proposal
for a Change in Control will be considered by the Executive objectively and with
reference only to the business interests of the Company and its shareholders;
and

      WHEREAS, the Executive will be in a better position to consider the
Company's best interests if the Executive is afforded reasonable security, as
provided in this Agreement, against altered conditions of employment which could
result from any such Change in Control.

      NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements of the parties set forth in this Agreement, and of
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, agree as
follows:

ARTICLE 1. DEFINITIONS

      Wherever used in this Agreement, the following terms shall have the
meanings set forth below and, when the meaning is intended, the initial letter
of the word is capitalized:

      1.1     "AGREEMENT" means this Change-in-Control Severance Agreement.

                                       1


      1.2     "BASE SALARY" means, at any time, the then-regular annual rate
of pay which the Executive is receiving as annual salary, excluding amounts:
(i) received under short- or long-term incentive or other bonus plans,
regardless of whether or not the amounts are deferred or (ii) designated by
the Company as payment toward reimbursement of expenses.

      1.3     "BOARD" means the Board of Directors of the Company.

      1.4     "CAUSE" shall be determined solely by the Board in the exercise
of good faith and reasonable judgment, and shall mean the occurrence of any
one or more of the following:

               (i)    A continuing material breach by the Executive of the
                      duties and responsibilities of the Executive, which duties
                      shall not differ in any material respect from the duties
                      and responsibilities of the Executive during the 90-day
                      period immediately prior to a Change in Control (other
                      than as a result of incapacity due to a physical or mental
                      condition or illness), which breach is demonstrably
                      willful and deliberate on the Executive's part, is
                      committed in bad faith and without a reasonable belief
                      that such a breach is in the best interests of the
                      Company, and is not remedied in a reasonable period of
                      time after receipt of written demand for substantial
                      performance is delivered to the Executive by the Board
                      that specifically identifies the manner in which the Board
                      believes the Executive has breached such duties and
                      responsibilities; or

               (ii)   The Executive's willfully engaging in conduct that is
                      demonstrably and materially injurious to the Company,
                      monetarily or otherwise; or

               (iii)  The Executive's conviction of a felony.

      However, no act or failure to act on the Executive's part shall be deemed
"willful" unless done, or omitted to be done, by the Executive not in good faith
and without reasonable belief that the action or omission was in the best
interest of the Company.

      1.5     "CHANGE IN CONTROL" of the Company shall mean the occurrence of
any one of the following events:

               (a)    Any "Person," as such term is used in Sections 13(d) and
                      14(d) of the Securities Exchange Act of 1934 (as amended)
                      (other than the Company, any corporation owned, directly
                      or indirectly, by the stockholders of the Company in
                      substantially the same proportions as their ownership of
                      stock of the Company, and any trustee or other fiduciary
                      holding securities under an employee benefit plan of the
                      Company or such proportionately owned corporation), is or
                      becomes the "beneficial owner" (as defined in Rule 13d-3
                      under the Securities Exchange Act of 1934, as amended),
                      directly or indirectly, of securities of the Company
                      representing thirty percent (30%) or more of the combined
                      voting power of the Company's then outstanding securities;
                      or

               (b)    During any period of not more than twenty-four (24)
                      months, individuals who at the beginning of such period
                      constitute the Board of Directors of the Company,

                                       2


                      and any new director (other than a director designated by
                      a Person who has entered into an agreement with the
                      Company to effect a transaction described in Sections
                      1.5(a), 1.5(c), or 1.5(d) of this Section 1.5) whose
                      election by the Board or nomination for election by the
                      Company's stockholders was approved by a vote of at least
                      two-thirds (2/3) of the directors then still in office who
                      either were directors at the beginning of the period or
                      whose election or nomination for election was previously
                      so approved, cease for any reason to constitute at least a
                      majority thereof; or

               (c)    The consummation of a merger or consolidation of the
                      Company with any other entity, other than: (i) a merger or
                      consolidation which would result in the voting securities
                      of the Company outstanding immediately prior thereto
                      continuing to represent (either by remaining outstanding
                      or by being converted into voting securities of the
                      surviving entity) more than sixty percent (60%) of the
                      combined voting power of the voting securities of the
                      Company or such surviving entity outstanding immediately
                      after such merger or consolidation; or (ii) a merger or
                      consolidation effected to implement a recapitalization of
                      the Company (or similar transaction) in which no Person
                      acquires more than thirty percent (30%) of the combined
                      voting power of the Company's then outstanding securities;
                      or

              (d)    The Company's stockholders approve a plan of complete
                     liquidation or dissolution of the Company, or an agreement
                     for the sale or disposition by the Company of all or
                     substantially all of the Company's assets (or any
                     transaction having a similar effect).

      1.6     "CODE" means the Internal Revenue Code of 1986, as amended.

      1.7     "COMPANY" means Edwards Lifesciences Corporation, a Delaware
corporation (including any and all subsidiaries), or any successor thereto as
provided in Article 8 herein.

      1.8     "DISABILITY" shall have the meaning ascribed to such term in
the Executive's governing long-term disability plan as of the Effective Date.

      1.9     "EFFECTIVE DATE" means the date specified in the opening
sentence of this Agreement.

      1.10    "EFFECTIVE DATE OF TERMINATION" means the date on which a
Qualifying Termination occurs, as provided in Section 2.2 herein, which
triggers the payment of Severance Benefits hereunder.

      1.11    "GOOD REASON" means, without the Executive's express written
consent, the occurrence after a Change in Control of the Company of any one
or more of the following:

              (i)     The assignment of the Executive to duties materially
                      inconsistent with the Executive's authorities, duties,
                      responsibilities, and status (including offices, titles,
                      and reporting requirements) as an executive and/or officer
                      of the Company, or a material reduction or alteration in
                      the nature or status of the Executive's authorities,
                      duties, or responsibilities from those in effect as of
                      ninety (90)

                                       3


                      calendar days prior to the Change in Control, other than
                      an insubstantial and inadvertent act that is remedied by
                      the Company promptly after receipt of notice thereof given
                      by the Executive;

              (ii)    The Company's requiring the Executive to be based at a
                      location in excess of fifty (50) miles from the location
                      of the Executive's principal job location or office
                      immediately prior to the Change in Control; except for
                      required travel on the Company's business to an extent
                      substantially consistent with the Executive's then present
                      business travel obligations;

              (iii)   A reduction by the Company of the Executive's Base Salary
                      in effect on the Effective Date hereof, or as the same
                      shall be increased from time to time;

               (iv)   The failure of the Company to continue in effect any of
                      the Company's short- and long-term incentive compensation
                      plans, or employee benefit or retirement plans, policies,
                      practices, or other compensation arrangements in which the
                      Executive participates, unless the Executive is permitted
                      to participate in other plans that provide the Executive
                      with substantially comparable benefits; or the failure by
                      the Company to continue the Executive's participation
                      therein on substantially the same basis, both in terms of
                      the amount of benefits provided and the level of the
                      Executive's participation relative to other participants,
                      as existed immediately prior to the Change in Control of
                      the Company;

              (v)     The failure of the Company to obtain a satisfactory
                      agreement from any successor to the Company to assume and
                      agree to perform the Company's obligations under this
                      Agreement, as contemplated in Article 8 herein; and

              (vi)    The Company, or any successor company, commits a material
                      breach of any of the material provisions of this
                      Agreement.

      The Executive's right to terminate employment for Good Reason shall not be
affected by the Executive's incapacity due to physical or mental illness. The
Executive's continued employment shall not constitute consent to, or a waiver of
rights with respect to, any circumstance constituting Good Reason herein.

      1.12    "QUALIFYING TERMINATION" means any of the events described in
Section 2.2 herein, the occurrence of which triggers the payment of Severance
Benefits hereunder.

      1.13    "SEVERANCE BENEFITS" means the payment of severance
compensation as provided in Section 2.3 herein.

ARTICLE 2. SEVERANCE BENEFITS

      2.1     RIGHT TO SEVERANCE BENEFITS. The Executive shall be entitled to
receive from the Company Severance Benefits as described in Section 2.3
herein, if there has been a Change in Control of the Company and if, within
twenty-four (24) calendar months thereafter, the Executive's employment with
the Company shall end for any reason specified in Section 2.2 herein as being
a Qualifying Termination.

                                       4


      The Executive shall not be entitled to receive Severance Benefits if he is
terminated for Cause, or if his employment with the Company ends due to death,
Disability, voluntary normal retirement (as defined under the then established
rules of the Company's tax-qualified retirement plan), or due to a voluntary
termination of employment for a reason other than that specified in Section
2.2(b) herein.

      2.2     QUALIFYING TERMINATION. The occurrence of either of the
following events within twenty-four (24) calendar months after a Change in
Control of the Company shall trigger the payment of Severance Benefits to the
Executive under this Agreement:

               (a)    The Company's involuntary termination of the Executive's
                      employment without Cause; or

               (b)    The Executive's voluntary employment termination for Good
                      Reason.

      In addition, if the Executive's employment is involuntarily terminated
without Cause by the Company within six (6) months prior to a Change in Control,
such termination shall also be considered a Qualifying Termination occurring
during the twenty-four (24) month period following a Change in Control. For
purposes of this Agreement, a Qualifying Termination shall not include a
termination of employment by reason of death, Disability, or voluntary normal
retirement (as such term is defined under the then established rules of the
Company's tax-qualified retirement plan), the Executive's voluntary termination
for a reason other than that specified in Section 2.2(b) herein, or the
Company's involuntary termination for Cause.

      2.3     DESCRIPTION OF SEVERANCE BENEFITS. In the event that the
Executive becomes entitled to receive Severance Benefits, as provided in
Sections 2.1 and 2.2 herein, the Company shall pay to the Executive and
provide him with total Severance Benefits equal to all of the following:

              (a)    A lump-sum amount equal to the Executive's unpaid Base
                     Salary, accrued vacation pay, unreimbursed business
                     expenses, and all other items earned by and owed to the
                     Executive through and including the Effective Date of
                     Termination.

              (b)    A lump-sum amount equal to the Executive's annual target
                     bonus amount, established under the annual bonus plan in
                     which the Executive is then participating, for the bonus
                     plan year in which the Executive's Effective Date of
                     Termination occurs, multiplied by a fraction the numerator
                     of which is the number of full completed months in the
                     bonus plan year through the Effective Date of Termination,
                     and the denominator of which is twelve (12). This payment
                     will be in lieu of any other payment to be made to the
                     Executive under the annual bonus plan in which the
                     Executive is then participating for that plan year.

              (c)    A lump-sum amount equal to three (3) multiplied by the
                     higher of the Executive's annual rate of Base Salary in
                     effect upon the Effective Date of Termination, or the
                     Executive's highest annual rate of Base Salary in effect
                     during the twelve (12) months preceding the date of the
                     Change in Control.

                                       5


              (d)    A lump-sum amount equal to three (3) multiplied by the
                     higher of the Executive's annual target bonus established
                     under the annual bonus plan in which the Executive is then
                     participating for the bonus plan year in which the
                     Executive's Effective Date of Termination occurs, or the
                     actual annual bonus payment made to the Executive under the
                     annual bonus plan in which the Executive participated in
                     the year preceding the year in which the Effective Date of
                     Termination occurs.

              (e)    All long-term incentive awards shall be subject to the
                     treatment provided under the Company's Long-Term Stock
                     Incentive Compensation Program (as amended, or any
                     successor plans thereto) and/or the applicable award
                     agreements thereunder.

              (f)    A continuation for thirty-six (36) months of the
                     Executive's medical insurance and dental insurance
                     coverage. These benefits shall be provided by the Company
                     to the Executive beginning immediately upon the Effective
                     Date of Termination. Such benefits shall be provided to the
                     Executive at the same coverage level (with all premium
                     costs borne by the Company) as in effect as of the
                     Executive's Effective Date of Termination for a period of
                     thirty-six (36) months following the Executive's Effective
                     Date of Termination.

                     Notwithstanding the above, these medical and dental
                     insurance benefits shall be discontinued prior to the end
                     of the stated continuation period in the event the
                     Executive receives substantially similar benefits from a
                     subsequent employer, as determined solely by the Board in
                     good faith. However, if the benefits received from the
                     subsequent employer do not cover the preexisting medical
                     conditions of the Executive or a covered member of the
                     Executive's family, the continuation period shall continue,
                     but not beyond the thirty-sixth (36th) month following the
                     Executive's Effective Date of Termination. For purposes of
                     enforcing this offset provision, the Executive shall be
                     deemed to have a duty to keep the Company informed as to
                     the terms and conditions of any subsequent employment and
                     the corresponding benefits earned from such employment and
                     shall provide, or cause to provide, to the Company in
                     writing correct, complete, and timely information
                     concerning the same.

              (g)    For a period of up to thirty-six (36) months following a
                     Change in Control, the Executive shall be entitled, at the
                     expense of the Company, to receive standard outplacement
                     services from a nationally recognized outplacement firm of
                     the Executive's selection. However, the Company's total
                     obligation shall not exceed seventy-five thousand dollars
                     ($75,000.00).

      2.4     TERMINATION DUE TO DISABILITY. Following a Change in Control,
if the Executive's employment is terminated with the Company due to
Disability, the Executive's benefits shall be determined in accordance with
the Company's retirement, insurance, and other applicable plans and programs
then in effect.

      2.5     TERMINATION DUE TO RETIREMENT OR DEATH. Following a Change in
Control, if the Executive's employment with the Company is terminated by
reason of his voluntary normal retirement (as defined under the then
established rules of the Company's tax-qualified retirement

                                       6


plan), or death, the Executive's benefits shall be determined in accordance with
the Company's retirement, survivor's benefits, insurance, and other applicable
programs then in effect.

      2.6     TERMINATION FOR CAUSE OR BY THE EXECUTIVE OTHER THAN FOR GOOD
REASON. Following a Change in Control, if the Executive's employment is
terminated either: (i) by the Company for Cause; or (ii) voluntarily by the
Executive for a reason other than that specified in Section 2.2(b) herein,
the Company shall pay the Executive his full Base Salary at the rate then in
effect, accrued vacation, and other items earned by and owed to the Executive
through the Effective Date of Termination, plus all other amounts to which
the Executive is entitled under any compensation plans of the Company at the
time such payments are due, and the Company shall have no further obligations
to the Executive under this Agreement.

      2.7     NOTICE OF TERMINATION. Any termination of the Executive's
employment by the Company for Cause or by the Executive for Good Reason shall
be communicated by Notice of Termination to the other party. For purposes of
this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied
upon, and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment
under the provision so indicated.

ARTICLE 3. FORM AND TIMING OF SEVERANCE BENEFITS

      3.1     FORM AND TIMING OF SEVERANCE BENEFITS. The Severance Benefits
described in Sections 2.3(a), 2.3(b), 2.3(c), and 2.3(d) herein shall be paid
in cash to the Executive in a single lump sum as soon as practicable
following the Effective Date of Termination, but in no event beyond ten (10)
calendar days from such date. The Severance Benefits described in Section
2.3(f) shall be provided over the period specified; the Severance Benefits
described in Section 2.3(g) shall be paid or provided as and when invoiced.

      3.2     WITHHOLDING OF TAXES. The Company shall withhold from any
amounts payable under this Agreement all federal, state, city, or other taxes
as legally shall be required.

ARTICLE 4. EXCISE TAX

      4.1     EXCISE TAX PAYMENT. If any portion of the Severance Benefits or
any other payment under this Agreement, or under any other agreement with, or
plan of the Company (in the aggregate, "Total Payments") would constitute an
"excess parachute payment," such that a golden parachute excise tax is due,
the Company shall provide to the Executive, in cash, an additional payment in
an amount sufficient to cover the full cost of any excise tax and all of the
Executive's additional state and federal income, excise, and employment taxes
that arise on this additional payment (cumulatively, the "Full Gross-Up
Payment"), such that the Executive is in the same after-tax position as if he
had not been subject to the excise tax. For this purpose, the Executive shall
be deemed to be in the highest marginal rate of federal and state taxes. This
payment shall be made as soon as possible following the date of the
Executive's Qualifying Termination, but in no event later than ten (10)
calendar days from such date.

      For purposes of this Agreement, the term "excess parachute payment" shall
have the meaning assigned to such term in Section 280G of the Internal Revenue
Code, as amended (the "Code"), and the term "excise tax" shall mean the tax
imposed on such excess parachute payment pursuant to Sections 280G and 4999 of
the Code.

                                       7


      4.2     SUBSEQUENT RECALCULATION. In the event the Internal Revenue
Service subsequently adjusts the excise tax computation herein described, the
Company shall reimburse the Executive for the full amount necessary to make
the Executive whole on an after-tax basis (less any amounts received by the
Executive that the Executive would not have received had the computations
initially been computed as subsequently adjusted), including the value of any
underpaid excise tax, and any related interest and/or penalties due to the
Internal Revenue Service.

ARTICLE 5. THE COMPANY'S PAYMENT OBLIGATION

      5.1     PAYMENT OBLIGATIONS ABSOLUTE. The Company's obligation to make
the payments and the arrangements provided for herein shall be absolute and
unconditional, and shall not be affected by any circumstances including,
without limitation, any offset, counterclaim, recoupment, defense, or other
right which the Company may have against the Executive or anyone else. All
amounts payable by the Company hereunder shall be paid without notice or
demand. Each and every payment made hereunder by the Company shall be final,
and the Company shall not seek to recover all or any part of such payment
from the Executive or from whomsoever may be entitled thereto, for any
reasons whatsoever.

      The Executive shall not be obligated to seek other employment in
mitigation of the amounts payable or arrangements made under any provision of
this Agreement, and the obtaining of any such other employment shall in no
event effect any reduction of the Company's obligations to make the payments
and arrangements required to be made under this Agreement, except to the
extent provided in Section 2.3(f) herein.

      5.2     CONTRACTUAL RIGHTS TO BENEFITS. This Agreement establishes and
vests in the Executive a contractual right to the benefits to which he is
entitled hereunder. However, nothing herein contained shall require or be
deemed to require, or prohibit or be deemed to prohibit, the Company to
segregate, earmark, or otherwise set aside any funds or other assets, in
trust or otherwise, to provide for any payments to be made or required
hereunder.

ARTICLE 6. TERM OF AGREEMENT

      This Agreement will commence on the Effective Date first written above,
and shall continue in effect irrevocably for three (3) full calendar years.
However, at the end of the first year of such three-year (3) period, this
Agreement shall be extended automatically for one (1) additional year, unless
the Company notifies the Executive in writing, prior to the occurrence of the
automatic extension, that the term of this Agreement will not be extended.
Moreover, upon the end of each subsequent year, this Agreement shall also be
extended automatically for one (1) additional year, unless the Company
otherwise notifies the Executive in writing prior to the occurrence of such
automatic extension. In the case where the Company properly notifies the
Executive that the Agreement will no longer be extended, the Agreement will
terminate at the end of the term, or extended term, then in progress.

      However, in the event a Change in Control occurs during the original or
any extended term, this Agreement will remain in effect for twenty-four (24)
months beyond the month in which such Change in Control occurred.

                                       8


ARTICLE 7. LEGAL REMEDIES

      7.1     DISPUTE RESOLUTION. The Executive shall have the right and
option to elect to have any good faith dispute or controversy arising under
or in connection with this Agreement settled by litigation or arbitration. If
arbitration is selected, such proceeding shall be conducted by final and
binding arbitration before a panel of three (3) arbitrators in accordance
with the rules and under the administration of the American Arbitration
Association.

      7.2     PAYMENT OF LEGAL FEES. In the event that it shall be necessary
or desirable for the Executive to retain legal counsel and/or to incur other
costs and expenses in connection with the enforcement of any or all of his
rights under this Agreement, the Company shall pay (or the Executive shall be
entitled to recover from the Company) the Executive's attorneys' fees, costs,
and expenses in connection with a good faith enforcement of his rights
including the enforcement of any arbitration award. This shall include,
without limitation, court costs and attorneys' fees incurred by the Executive
as a result of any good faith claim, action, or proceeding, including any
such action against the Company arising out of, or challenging the validity
or enforceability of this Agreement or any provision hereof.

ARTICLE 8. SUCCESSORS

      The Company shall require any successor (whether direct or indirect, by
purchase, merger, reorganization, consolidation, acquisition of property or
stock, liquidation, or otherwise) of all or substantially all of the assets
of the Company by agreement, in form and substance satisfactory to the
Executive, to expressly assume and agree to perform this Agreement in the
same manner and to the same extent that the Company would be required to
perform if no such succession had taken place. Regardless of whether such
agreement is executed, this Agreement shall be binding upon any successor in
accordance with the operation of law and such successor shall be deemed the
"Company" for purposes of this Agreement.

ARTICLE 9. MISCELLANEOUS

      9.1     EMPLOYMENT STATUS. This Agreement is not, and nothing herein
shall be deemed to create, an employment contract between the Executive and
the Company or any of its subsidiaries. Subject to the terms of any
employment contract between the Executive and the Company, the Executive
acknowledges that the rights of the Company remain wholly intact to change or
reduce at any time and from time to time his compensation, title,
responsibilities, location, and all other aspects of the employment
relationship, or to discharge him prior to a Change in Control (subject to
such discharge possibly being considered a Qualifying Termination pursuant to
Section 2.2).

      9.2     ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the Company and the Executive with respect to the subject
matter hereof. In addition, the payments provided for under this Agreement in
the event of the Executive's termination of employment shall be in lieu of
any severance benefits payable under any employment contract between the
Executive and the Company or any severance plan, program, or policy of the
Company to which he might otherwise be entitled.

      9.3     NOTICES. All notices, requests, demands, and other
communications hereunder shall be sufficient if in writing and shall be
deemed to have been duly given if delivered by hand or if sent by registered
or certified mail to the Executive at the last address he has filed in
writing with the Company or, in the case of the Company, at its principal
offices.

                                       9


      9.4     EXECUTION IN COUNTERPARTS. This Agreement may be executed by
the parties hereto in counterparts, each of which shall be deemed to be an
original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.

      9.5     CONFLICTING AGREEMENTS. The executive hereby represents and
warrants to the Company that his entering into this Agreement, and the
obligations and duties undertaken by him hereunder, will not conflict with,
constitute a breach of, or otherwise violate the terms of, any other
employment or other agreement to which he is a party, except to the extent
any such conflict, breach, or violation under any such agreement has been
disclosed to the Board in writing in advance of the signing of this Agreement.

      9.6     SEVERABILITY. In the event any provision of this Agreement
shall be held illegal or invalid for any reason, the illegality or invalidity
shall not affect the remaining parts of the Agreement, and the Agreement
shall be construed and enforced as if the illegal or invalid provision had
not been included. Further, the captions of this Agreement are not part of
the provisions hereof and shall have no force and effect.

      Notwithstanding any other provisions of this Agreement to the contrary,
the Company shall have no obligation to make any payment to the Executive
hereunder to the extent, but only to the extent, that such payment is prohibited
by the terms of any final order of a Federal or state court or regulatory agency
of competent jurisdiction; provided, however, that such an order shall not
affect, impair, or invalidate any provision of this Agreement not expressly
subject to such order.

      9.7     MODIFICATION. No provision of this Agreement may be modified,
waived, or discharged unless such modification, waiver, or discharge is
agreed to in writing and signed by the Executive and by a member of the
Board, as applicable, or by the respective parties' legal representatives or
successors.

      9.8     APPLICABLE LAW. To the extent not preempted by the laws of the
United States, the laws of Delaware shall be the controlling law in all
matters relating to this Agreement without giving effect to principles of
conflicts of laws.

      IN WITNESS WHEREOF, the parties have executed this Agreement as of this
_____ day of _________, 2000.

                                       10

EX-10.5

                         EMPLOYMENT AGREEMENT FOR
                         MICHAEL A. MUSSALLEM

                         Edwards Lifesciences Corporation

                         December 2000





CONTENTS





================================================================================
Article 1. Definitions                                                        1

Article 2. Term of Employment Agreement                                       2

Article 3. Employment Duties and Compensation                                 3

Article 4. Employment Termination                                             6

Article 5. Restrictive Covenants                                              9

Article 6. Indemnification                                                   10

Article 7. Assignment                                                        10

Article 8. Dispute Resolution and Notice                                     11

Article 9. Miscellaneous                                                     11




EMPLOYMENT AGREEMENT FOR MICHAEL A. MUSSALLEM
EDWARDS LIFESCIENCES CORPORATION

      This EMPLOYMENT AGREEMENT (the "Agreement") is made, entered into, and is
effective as of the      day of           2000 (the "Effective Date"), by and
                    ----        ---------
between Edwards Lifesciences Corporation, a Delaware corporation (the
"Company"), and Michael A. Mussallem (the "Executive").

      WHEREAS, the Executive possesses considerable experience and knowledge of
the business and affairs of the Company concerning its policies, methods,
personnel, and operations; and

      WHEREAS, the Executive has demonstrated unique qualifications to act in an
executive capacity for the Company; and

      WHEREAS, the Company is desirous of assuring the employment of the
Executive as Chief Executive Officer ("CEO") after the company spins off from
Baxter International Inc. and becomes an independent publicly traded entity, and
the Executive is desirous of having such assurances.

      NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements of the parties set forth in this Agreement, and of
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, agree as
follows:

ARTICLE 1. DEFINITIONS
      As used in this Agreement, unless the context expressly indicates
otherwise, the following terms have the following meanings:

      1.1 "BASE SALARY" means, at any time, the then-regular annual rate of pay
which the Executive is receiving as annual salary, excluding amounts: (i)
designated by the Company as payment toward reimbursement of expenses or (ii)
received under short-term or long-term incentive or other bonus plans,
regardless of whether or not the amounts are deferred.

      1.2 "BOARD" means the Board of Directors of the Company.

      1.3 "CAUSE" shall be determined solely by the Board in the exercise of
good faith and reasonable judgment, and shall mean the occurrence of either of
the following:

            (i)   The Executive's willfully engaging in conduct that is
                  demonstrably and materially injurious to the Company,
                  monetarily or otherwise; or

            (ii)  The Executive's conviction of a felony.

      However, no act or failure to act on the Executive's part shall be deemed
"willful" unless done, or omitted to be done, by the Executive not in good faith
and without reasonable belief that the action or omission was in the best
interest of the Company.

      1.4 "CHANGE IN CONTROL" has the same meaning as in the Severance
Agreement.

                                       1



      1.5 "DISABILITY" shall have the meaning ascribed to such term in the
Executive's governing long-term disability plan, or if no such plan exists, it
shall have the meaning ascribed to such term in the Executive's governing
long-term disability plan in effect as of the Effective Date.

      1.6 "EMPLOYMENT TERM" means the original or extended term of employment of
this Agreement as provided in Article 2 herein.

      1.7 "RETIREMENT" means any voluntary termination of the Executive's
employment after age fifty-five (55), provided that the Executive has at least a
combined ten (10) years of service with the Company and Baxter International,
Inc. The Executive's number of years of service with the Company and Baxter
International, Inc. shall be determined by calculating the number of complete
twelve-month (12) periods of employment from the Executive's original date of
hire with Baxter International, Inc. to the Executive's date of voluntary
employment termination.

      1.8 "SEVERANCE AGREEMENT" means the Chief Executive Officer Change in
Control Severance Agreement dated                      between the Company and
                                  --------------------
the Executive, as amended, or any successor agreement thereto.

      1.9 "SEVERANCE PAYMENTS" means the payments designated as such in Section
4.3 herein and that may be provided to the Executive pursuant to such section.

      1.10 "SUBSIDIARY" means a corporation, company, or other entity: (i) more
than fifty percent (50%) of whose outstanding shares or securities (representing
the right to vote for the election of directors or other managing authority)
are; or (ii) which does not have outstanding shares or securities (as may be the
case in a partnership, joint venture, or unincorporated association), but more
than fifty percent (50%) of whose ownership interest representing the right
generally to make decisions for such other entity is, now or hereafter, owned or
controlled, directly or indirectly, by the Company.

ARTICLE 2. TERM OF EMPLOYMENT AGREEMENT
      This Agreement will commence on the Effective Date first written above,
and shall continue in effect for three (3) full calendar years, that is, until
December 31, 2003. However, at the end of the second year of such three-year
period, this Agreement shall be extended automatically for one (1) additional
year, unless the Company notifies the Executive in writing within 180 days prior
to the occurrence of the automatic extension, that the term of this Agreement
will not be extended. Moreover, upon the end of each subsequent year, this
Agreement shall also be extended automatically for one (1) additional year,
unless the Company otherwise notifies the Executive in writing 180 days prior to
the occurrence of such automatic extension. In the case where the Company
properly notifies the Executive that the Agreement will no longer be extended,
the Agreement will terminate at the end of the term, or extended term, then in
progress.

      However, in the event a Change in Control occurs during the original or
any extended term, this Agreement will remain in effect for twenty-four (24)
months beyond the month in which such Change in Control occurred.

                                       2



ARTICLE 3. EMPLOYMENT DUTIES AND COMPENSATION
      3.1     EMPLOYMENT DUTIES. During the Employment Term, the Executive shall
              serve as CEO of the Company. In his capacity as CEO of the
              Company, the Executive shall report directly to the Board and
              shall maintain the level of duties and responsibilities as in
              effect on the Effective Date, or such higher level of duties and
              responsibilities as he may be assigned during the Employment Term.
              In his capacity as CEO, the Executive shall have the same status,
              privileges, and responsibilities normally inherent in such
              capacity in corporations of similar size and character to the
              Company.

      In addition, during the Employment Term, the Executive shall be entitled
to the benefits listed in Sections 3.2 through 3.8 herein and be subject to the
covenants contained in Section 3.9.

      3.2     BASE SALARY. The Company shall pay the Executive an annual Base
              Salary of at least five hundred and twenty-five thousand dollars
              ($525,000) during the Employment Term. The Executive's Base Salary
              shall be paid in substantially equal installments throughout the
              year, consistent with the normal payroll practices of the Company.
              Further, the Base Salary shall be reviewed at least annually
              following the Effective Date of this Agreement to ascertain
              whether, in the sole judgment of the Board or the Board's
              designee, such Base Salary should be changed. If so changed, the
              Base Salary as stated above shall, likewise, be increased for all
              purposes of this Agreement.

      3.3 ANNUAL BONUS. Subject to Section 3.10, the Company shall provide the
Executive with the opportunity to earn an annual cash bonus at a level which is
in line with the Company's then current compensation philosophies and the then
current opportunities provided to other top executives at the Company, and
commensurate with the business opportunities and direction of the Company at the
time, as determined by the Board or the Board's designee.

      3.4 LONG-TERM INCENTIVES INCLUDING STOCK OPTIONS. Subject to section 3.10,
the Company shall provide the Executive the opportunity to earn a long-term
performance incentive award and/or stock options pursuant to the Company's
Long-Term Stock Incentive Compensation Program (as amended, or any successor
plans thereto) at a level which is in line with the Company's current
compensation philosophies and the opportunities provided to other top executives
at the Company, and commensurate with the business opportunities and direction
of the Company at the time, as determined by the Board or the Board's designee.

      3.5 RETIREMENT BENEFITS. Subject to Section 3.10, the Company shall
provide the Executive with participation in all tax qualified retirement plans
in effect from time to time, including, but not limited to, the Company's 401(k)
Savings and Investment Plan (as amended, or any successor plans thereto),
subject to the eligibility and participation requirements of each plan.

      In addition, also subject to Section 3.10, the Company shall provide the
Executive with participation in all existing nonqualified retirement plans, in
effect from time to time including, but not limited to, the Edwards Lifesciences
Nonqualified Deferred Compensation Plan (as amended, or any successor plans
thereto).

                                       3





      3.6 EMPLOYEE BENEFITS. Subject to Section 3.10 and as otherwise provided
within the provisions of each of the respective plans, the Company shall provide
to the Executive all benefits other employees of the Company are entitled to
receive, in accordance with the terms and conditions of any policies or plans
applicable to such benefits. Such benefits shall include, but not be limited to,
group term life insurance, health insurance, short- and long-term disability
insurance and vacation.

      The Executive shall be entitled to the number of weeks of paid vacation
per year provided to other top Company executives and in line with competitive
market practices for comparably situated executives, but in no event less than
five (5) weeks per year.

      The Executive shall likewise participate in any additional benefits as may
be established during the Employment Term, by standard written policy of the
Company

      3.7 PERQUISITES. Subject to Section 3.10, the Company shall provide to the
Executive all perquisites that other executives of the Company generally are
entitled to receive, and such other perquisites, which are available generally
to top executives with the Company and that are suitable to the character of the
Executive's position with the Company and adequate for the performance of his
duties hereunder. In addition, the Company shall provide the Executive with a
monthly car allowance of one thousand one hundred dollars ($1,100), a home
security system, and annual membership at two (2) country clubs of the
Executive's choice.

      3.8 EXPENSES. The Company shall pay, or reimburse the Executive, for all
ordinary and necessary expenses in a reasonable amount which the Executive
incurs in performing his duties under this Agreement including, but not limited
to, travel (including, but not limited to, the cost of chartering a private
aircraft when reasonably necessary for Company business), entertainment,
professional dues and subscriptions, and all dues, fees, and expenses associated
with membership in various professional, business, and civic associations and
societies of which the Executive's participation is in the best interests of the
Company as determined in good faith by the Executive. The expenses will be
accounted for and reimbursed through the Company's normal expense reporting and
approval process.

      3.9 STANDARD OF CARE. During the Employment Term, the Executive agrees to
devote substantially all of his time, attention, and energies to the Company's
business and shall not be engaged in any other business activity, whether or not
such business activity is pursued for gain, profit, or other pecuniary
advantage. However, subject to Article 5 herein, and subject to prior approval
by the Board (except where the Executive was serving as a director of another
company as of the Effective Date), the Executive may serve as a director of
other companies and participate in civic, religious, and charitable
organizations, so long as such service is not injurious to the Company. The
Executive covenants, warrants, and represents that, during the Employment Term,
he shall:

            (a)   Devote his full time and best efforts to the fulfillment of
                  his employment obligations;

                                       4





            (b)   Exercise the highest degree of loyalty and the highest
                  standards of conduct in the performance of his duties; and

            (c)   Do nothing that harms, in any way, the business or reputation
                  of the Company.

      This Section 3.9 shall not be construed as preventing the Executive from
investing assets in such form or manner as will not require his services in the
daily operations of the affairs of the companies in which such investments are
made.

      3.10 RIGHT TO CHANGE PLANS. The Company shall not be obligated by reason
of any of the provisions of this Article 3, to institute, maintain, or refrain
from changing, amending, or discontinuing any compensation or benefit plan,
program, or perquisite (including but not limited to, changes in the amount of
target annual bonus or target long-term performance incentives), provided that
if any changes are made they will apply to the Executive on a basis that is no
less favorable to the Executive than when applied to other top executives of the
Company.

      3.11 STATE TAX EQUALIZATION PAYMENT. For the year 2000 only, the Company
intends that the Executive will pay the same amount of state income tax
attributable to the Base Salary paid to him by the Company in the year 2000 for
services rendered to the Company in the year 2000 as if the Executive had
remained employed for all of the year 2000 in Illinois and not been subject to
California income tax. To achieve this, an accounting firm agreeable to both the
Company and the Executive will determine the difference between (i) the sum of
the Illinois and California income tax actually owed by the Executive for the
year 2000 that is attributable to his Base Salary from the Company in 2000 and
(ii) the amount of Illinois income tax that the Executive would have paid for
the year 2000 on such Base Salary had he been taxed as an Illinois resident only
for the entire year. The Company will then pay the Executive an amount equal to
the difference so calculated (the "Tax Equalization Payment") plus an amount
sufficient to cover all of the Executive's additional state and federal income,
employment and other taxes (the "Additional Tax") that arise on the Tax
Equalization Payment such that the Executive is in the same after-tax position
as if he had not been subject to the Additional Tax. For this purpose, the
Executive shall be deemed to pay the highest marginal rate of federal and state
income taxes. The sum of the Tax Equalization Payment and the payment
attributable to the Additional Tax shall be made no later than the earlier of
(i) April 1, 2001 or (ii) fifteen (15) calendar days after the date that the
accounting firm determines the amount of the Tax Equalization Payment and the
Additional Tax.

      In the event that the accounting firm cannot precisely determine the sum
of the Tax Equalization Payment and the payment attributable to the Additional
Tax by April 1, 2001, an estimated amount of such sum shall be made to the
Executive before April 15, 2001 with any subsequent adjustments (including, if
necessary, repayment by the Executive) made once the final determination of the
sum is made (with such final determination occurring no later than October 15,
2001).

                                       5





      3.12 HOME RELOCATION LOAN. The Company will provide the Executive with a
mortgage loan in an amount of up to three million dollars ($3,000,000) (the
"Home Relocation Loan") to purchase a primary residence in California (the
"Residence") provided that the amount of the Home Relocation Loan, when combined
with any other mortgage loans on the Residence, shall not exceed eighty percent
(80%) of the purchase price of the Residence. The Home Relocation Loan will be
secured by a mortgage on the Residence and is intended to qualify as an
employee-relocation loan pursuant to Treasury Regulation Sections
1.7872-5T(b)(6) and (c)(1) and be exempt from the provisions of Code Section
7872. The term of the Home Relocation Loan will be five (5) years with repayment
in full due upon the earlier of (i) the fifth (5th) anniversary of the date on
which the Home Relocation Loan was made, (ii) forty-five (45) days after the
date of the Executive's termination of employment for any reason other than
following a Change in Control, or (iii) the sale of the Residence. Without the
written consent of the Executive, and notwithstanding anything to the contrary
in this Agreement or the documents evidencing the Home Relocation Loan, the
terms of the Home Relocation Loan may not be changed following a Change in
Control nor will the Company or any successor to the Company have the ability to
accelerate the repayment of the Home Relocation Loan following a Change in
Control even in the event of the subsequent termination of the Executive's
employment. The other specific provisions of the Home Relocation Loan will be
outlined in documents executed between the Company and the Executive including a
certificate of borrower and a promissory note that comply with the requirements
of Treasury Regulation Sections 1.7872-5T(b)(6) and (c)(1) and any other
applicable laws or regulations.

ARTICLE 4. EMPLOYMENT TERMINATION
      4.1 TERMINATION DUE TO RETIREMENT, DISABILITY, OR DEATH. In the event the
Executive's employment during the Employment Term is terminated by reason of
Retirement, Disability, or death, the Executive's benefits shall be determined
in accordance with the Company's retirement, survivor's benefits, annual bonus
and long-term incentive plans, insurance, and other applicable programs then in
effect.

      In addition, upon the effective date of such termination, the Company
shall pay to the Executive or his beneficiary or estate, as the case may be, his
base salary as earned but unpaid through the effective date of termination.
Further, the Executive shall receive all other benefits to which the Executive
has a vested right at that time.

      The Company shall also pay to the Executive (or the Executive's estate or
beneficiaries as the reason may be), within thirty (30) calendar days of the
Executive's termination, a lump-sum cash amount equal to the Executive's target
annual bonus under the Company's annual bonus plan in effect for the bonus plan
year in which the Executive's date of termination occurs, multiplied by a
fraction, the numerator of which is the number of full completed months in the
bonus plan year through the effective date of termination, and the denominator
of which is twelve (12). This payment will be in lieu of any other payment to be
made to the Executive under such annual bonus plan for such plan year.

      The Company's obligation to pay and provide to the Executive base salary,
annual bonus, and long-term incentives (as provided in Sections 3.2, 3.3, and
3.4 herein, respectively) shall immediately thereafter expire and, with the
exception of the covenants contained in Article 5 herein (which shall survive
such termination), the Company and the Executive thereafter shall have no
further obligations under this Agreement.

                                       6



      The provisions of Section 4.3 shall supersede this Section 4.1 in the
event that the Company involuntarily terminates the Executive's employment
without Cause.

      4.2 VOLUNTARY TERMINATION BY THE EXECUTIVE OTHER THAN RETIREMENT OR
INVOLUNTARY TERMINATION FOR CAUSE. The Executive may terminate this Agreement at
any time by giving the Board written notice of intent to terminate, delivered at
least ninety (90) calendar days prior to the effective date of such termination.
The termination automatically shall become effective upon the expiration of the
ninety (90) day notice period.

      Nothing in this Agreement shall be construed to prevent the Board from
terminating the Executive's employment under this Agreement for "Cause" at any
time.

      In the event that the Executive voluntarily terminates employment (other
than by Retirement) or if he is involuntarily terminated by the Company for
Cause, upon the effective date of such a termination, the Company shall pay to
the Executive or his beneficiary or estate, as the case may be, his base salary
as earned but unpaid and any accrued vacation time through the effective date of
termination. The Executive also shall receive all other benefits to which he has
a vested right at that time.

      The Company's obligation to pay and provide the Executive base salary,
annual bonus, and long-term incentives (as provided in Sections 3.2, 3.3, and
3.4 herein, respectively) shall immediately expire. With the exception of the
covenants contained in Article 5 herein (which shall survive such termination),
the Company and the Executive thereafter shall have no further obligations under
this Agreement.

      4.3 INVOLUNTARY TERMINATION BY THE COMPANY WITHOUT CAUSE. The Company may
terminate the Executive's employment, as provided under this Agreement, at any
time, for any reason other than death, Disability, or for Cause, by notifying
the Executive in writing of the Company's intent to terminate, at least thirty
(30) calendar days prior to the effective date of such termination. Subject to
the payment of the Severance Payments provided below, the termination
automatically shall become effective upon the expiration of the thirty (30)
calendar day notice period. Thereafter, this Agreement, along with all
corresponding rights, duties, and covenants, shall automatically expire. A
nonrenewal or nonextension of this Agreement or any term of this Agreement, as
described in Article 2 herein, shall not be deemed an involuntary termination
under this Section 4.3 and, thereby, shall not trigger the payment of the
Severance Payments described below.

      Subject to Section 4.4, upon the effective date of an involuntary
termination without Cause under this Section 4.3, the Company shall pay to the
Executive and provide the Executive with the following "Severance Payments":

      (a)     A lump-sum cash amount equal to the Executive's unpaid Base
              Salary, accrued vacation pay, unreimbursed business expenses, and
              all other items earned by and owed to the Executive through and
              including the effective date of the termination (including, but
              not limited to, annual bonus or performance-based long-term
              incentives that have been earned, but not paid). Such payment
              shall constitute full satisfaction for these amounts owed to the
              Executive.

                                       7



      (b)     A lump-sum cash amount equal to the Executive's target annual
              bonus under the Company's annual bonus plan in effect for the
              bonus plan year in which the Executive's date of termination
              occurs, multiplied by a fraction, the numerator of which is the
              number of full completed months in the bonus plan year through the
              effective date of termination, and the denominator of which is
              twelve (12). This payment will be in lieu of any other payment to
              be made to the Executive under such annual bonus plan for such
              plan year.

      (c)     A cash amount equal to two (2) times the sum of the Executive's
              Base Salary and the greater of: (i) the Executive's target annual
              bonus under the Company's annual bonus plan in effect for the
              bonus plan year in which his employment with the Company
              terminates; or (ii) the actual annual bonus earned by the
              Executive in the bonus plan year prior to the year of employment
              termination under the annual bonus plan in effect for such prior
              plan year. For the purposes of this calculation, the Executive's
              highest Base Salary during the twelve (12) months prior to his
              termination of employment shall be used.

      (d)     All long-term incentive awards shall be subject to the treatment
              provided under the Company's Long-Term Stock Incentive
              Compensation Program (as amended, or any successor plans thereto)
              and/or the applicable award agreements thereunder.

      (e)     A continuation for a twenty-four (24) month period of the
              Executive's medical insurance and dental insurance coverage. These
              benefits shall be provided by the Company to the Executive
              beginning immediately upon the date of the Executive's
              termination. Such benefits shall be provided to the Executive at
              the same coverage level (with all premium costs borne by the
              Company) as in effect as of the date of the Executive's
              termination for a period of twenty-four (24) months following the
              Executive's date of termination.

              Notwithstanding the above, these medical and dental insurance
              benefits shall be discontinued prior to the end of the stated
              continuation period in the event the Executive receives
              substantially similar benefits from a subsequent employer, as
              determined solely by the Board in good faith. However, if the
              benefits received from the subsequent employer do not cover the
              preexisting medical conditions of the Executive or a covered
              member of the Executive's family, the continuation period shall
              continue, but not beyond the twenty-fourth (24th) month following
              the Executive's date of termination. For purposes of enforcing
              this offset provision, the Executive shall be deemed to have a
              duty to keep the Company informed as to the terms and conditions
              of any subsequent employment and the corresponding benefits earned
              from such employment and shall provide, or cause to provide, to
              the Company in writing correct, complete, and timely information
              concerning the same.

      If triggered, the Severance Payments provided under this Section 4.3 and
any State Tax Equalization Payment under Section 3.11 shall be in lieu of all
other benefits provided to the Executive under the provisions of this Agreement.

                                       8



      4.4 COORDINATION WITH SEVERANCE AGREEMENT. In the event that the Executive
receives any severance benefits pursuant to the Severance Agreement, he shall
not be entitled to receive the Severance Payments provided for in Section 4.3
herein.

ARTICLE 5. RESTRICTIVE COVENANTS
      5.1 DISCLOSURE OF INFORMATION. Without the prior written consent of the
Company, or except to the extent required in the good faith execution of his
duties with the Company, the Executive shall not, at any time, directly or
indirectly, use, attempt to use, disclose, or otherwise make known to any person
or entity (other than the Board):

      (a)     Any confidential or proprietary knowledge or information,
              including without limitation, lists of customers or suppliers,
              trade secrets, know-how, inventions, discoveries, processes, and
              systems, as well as any data and records pertaining thereto, which
              the Executive may acquire in the course of his employment.

      (b)     Any confidential or proprietary knowledge or information of a
              confidential nature (including, but not limited to, all
              unpublished matters) relating to, without limitation, the
              business, properties, accounting, books and records, computer
              systems and programs, trade secrets, or memoranda of the Company
              or a Subsidiary.

      5.2 EMPLOYMENT. Without the prior written consent of the Company, during
the Employment Term, and for a period of twenty-four (24) calendar months
following the Executive's employment termination for any reason, the Executive
shall not, directly or indirectly employ or retain or solicit for employment or
arrange to have any other person, firm, or other entity employ or retain or
solicit for employment or otherwise participate in the employment or retention
of any person who is an employee or consultant of the Company or any Subsidiary.

      5.3 NONDISPARAGEMENT. Without the prior written consent of the Company, or
except to the extent required in the good faith execution of his duties with the
Company, the Executive shall not, at any time, directly or indirectly, make
statements or representations, or otherwise communicate, in writing, orally, or
otherwise, or take any action that may disparage or be damaging to the Company
or any Subsidiary or their respective officers, directors, employees, advisors,
businesses or reputations. Notwithstanding the foregoing, nothing in this
Agreement shall preclude Executive from making truthful statements or
disclosures that are required by applicable law, regulation or legal process.

      5.4 ACKNOWLEDGEMENT OF COVENANTS. The Company and the Executive
acknowledge that the Executive's services are of a special, extraordinary, and
intellectual character which gives him unique value, and that the business of
the Company and its Subsidiaries is highly competitive, and that violation of
any of the covenants provided in this Article 5 would cause immediate,
immeasurable, and irreparable harm, loss, and damage to the Company and/or a
Subsidiary not adequately compensable by a monetary award. The Executive
acknowledges that the time and scope of activity restrained by the provisions of
this Article 5 are reasonable and do not impose a greater restraint than is
necessary to protect the goodwill of the Company's business and/or that of any
Subsidiary. The Executive further acknowledges that he and the Company have
negotiated and bargained for the terms of this Agreement, and that the Executive
has received adequate consideration for entering into this Agreement. In the
event of any such breach or threatened breach

                                       9



by the Executive of any one or more of such covenants, the Company shall be
entitled to such equitable and injunctive relief as may be available to restrain
the Executive from violating the provisions hereof. Nothing herein shall be
construed as prohibiting the Company from pursuing any other remedies available
at law or in equity for such breach or threatened breach, including the recovery
of damages and the immediate termination of the employment of the Executive
hereunder.

      5.5 ENFORCEABILITY. If any court determines that the foregoing covenant,
or any part thereof, is unenforceable because of the duration or scope of such
provision, or for any other reason, the duration or scope of such provision, as
the case may be, shall be reduced so that such provision becomes enforceable
and, in its reduced form, such provision shall then be enforceable and shall be
enforced.

ARTICLE 6. INDEMNIFICATION
      The Company hereby covenants and agrees to indemnify and hold harmless the
Executive fully, completely, and absolutely against and in respect to any and
all actions, suits, proceedings, claims, demands, judgments, costs, expenses
(including attorneys' fees), losses, and damages resulting from the Executive's
good faith performance of his duties and obligations under the terms of this
Agreement, to the maximum extent permitted under applicable law.

ARTICLE 7. ASSIGNMENT
      7.1 ASSIGNMENT BY THE COMPANY. The Company shall require any successor
(whether direct or indirect, by purchase, merger, reorganization, consolidation,
acquisition of property or stock, liquidation, or otherwise) of all or a
significant portion of the assets of the Company by agreement, in form and
substance satisfactory to the Executive, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform if no such succession had taken place.
Regardless of whether such agreement is executed, this Agreement shall be
binding upon any successor in accordance with the operation of law and such
successor shall be deemed the "Company" for purposes of this Agreement.

      Failure of the Company to obtain such agreement prior to the effectiveness
of any such succession shall be a breach of this Agreement and shall immediately
entitle the Executive to the Severance Payments as provided in Section 4.3.

      Except as herein provided, this Agreement may not otherwise be assigned by
the Company.

      7.2 ASSIGNMENT BY EXECUTIVE. This Agreement shall inure to the benefit of
and be enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees, and
legatees. If the Executive should die while any amounts payable to the Executive
hereunder remain outstanding, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to the
Executive's beneficiary, devisee, legatee, or other designee or, in the absence
of such designee, to the Executive's estate.

      The Executive shall not assign any obligations or responsibilities he has
under this Agreement.

                                       10



ARTICLE 8. DISPUTE RESOLUTION AND NOTICE
      8.1 DISPUTE RESOLUTION. The Executive shall have the right and option to
elect (in lieu of litigation) to have any dispute or controversy arising under
or in connection with this Agreement settled by arbitration, conducted before a
panel of three (3) arbitrators sitting in a location selected by the Executive
within fifty (50) miles from the location of the Company's principal place of
business, in accordance with the rules of the American Arbitration Association
then in effect. The Executive's election to arbitrate, as herein provided, and
the decision of the arbitrators in that proceeding, shall be binding on the
Company and the Executive.

      Judgment may be entered on the award of the arbitrator in any court having
jurisdiction. All expenses of such arbitration, including the fees and expenses
of the counsel for the Executive, shall be borne by the Company.

      8.2 PAYMENT OF LEGAL FEES. Unless a court shall find the Executive's claim
to be arbitrary and capricious, the Company shall pay all legal fees, costs of
litigation, prejudgment interest, and other expenses which are incurred in good
faith by the Executive (or the Executive's estate or beneficiaries as the case
may be) as a result of the Company's refusal to provide the benefits to which
the Executive becomes entitled under this Agreement, or as a result of the
Company's (or any third party's) contesting the validity, enforceability, or
interpretation of the Agreement, or as a result of any conflict between the
parties pertaining to this Agreement.

      8.3 NOTICE. Any notices, requests, demands, or other communications
provided for by this Agreement shall be sufficient if in writing and if sent by
registered or certified mail to the Executive at the last address he has filed
in writing with the Company or, in the case of the Company, at its principal
offices.

ARTICLE 9. MISCELLANEOUS
      9.1 ENTIRE AGREEMENT. This Agreement supersedes any prior agreements or
understandings, oral or written, between the parties hereto and contains the
entire understanding of the Company and the Executive with respect to the
subject matter hereof.

      9.2 MODIFICATION. This Agreement shall not be varied, altered, modified,
canceled, changed, or in any way amended except by mutual agreement of the
parties in a written instrument executed by the parties hereto or their legal
representatives.

      9.3 SEVERABILITY. If any provision of this Agreement or the application
thereof is held invalid, such invalidity shall not affect other provisions or
applications of the Agreement that can be given effect without the invalid
provision or application and, to such end, the provisions of this Agreement are
declared to be severable.

      9.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same Agreement.

      9.5 TAX WITHHOLDING. The Company may withhold from any benefits payable
under this Agreement all federal, state, city, or other taxes as may be required
pursuant to any law or governmental regulation or ruling.

                                       11



      9.6 BENEFICIARIES. The Executive may designate one or more persons or
entities as the primary and/or contingent beneficiaries of any amounts to be
received under this Agreement. Such designation must be in the form of a signed
writing acceptable to the Board or the Board's designee. The Executive may make
or change such designation at any time.

      9.7 WAIVER OF CLAUSES. At its discretion, the Company may require the
Executive to sign a waiver of all legal claims against the Company or any
Subsidiary upon the Executive's employment termination.

      9.8 GOVERNING LAW. To the extent not preempted by federal law, the
provisions of this Agreement shall be construed and enforced in accordance with
the laws of the state of Delaware without giving effect to principles of
conflicts of laws.

      IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as of
the Effective Date.

ATTEST                                    Edwards Lifesciences Corporation



By:______________________________         By:___________________________________
     Bruce P. Garren                         Robert C. Reindl
     Corporate Secretary                     Vice President, Human Resources


                                          Executive:


                                          ______________________________________
                                          Michael A. Mussallem


                                       12

EX-10.29

                              EDWARDS LIFESCIENCES

                              INCENTIVE PLAN (EIP)



                                      2001






PLAN OBJECTIVE

The Edwards Lifesciences Incentive Plan (EIP) for 2001 is an annual cash bonus
program designed to motivate eligible participants to achieve Edwards' financial
and strategic objectives.

ELIGIBILITY

Edwards employees in all locations worldwide are eligible to participate in the
2001 EIP if they meet ALL of the following criteria:

o    Broad Pay Group (BPG) is equivalent to "F" or higher (some selected
     positions in "D" and "E" may also be eligible)
o    Date of hire is before October 1, 2001
o    Not a participant in any other commission or management incentive
     compensation plan intended to replace EIP; and
o    Participation has been submitted to and approved by the Plan Administrator
     or its designee.

Employees who are hired or are promoted into an EIP bonus-eligible position
between January 1 and September 30 will be eligible for prorated target bonuses
based on full calendar months of service.

Part-time employees regularly scheduled to work at least 20 hours per week will
be eligible for prorated target bonuses based on a ratio of their regular
scheduled hours per week to 40.

The Plan Administrator or its designee will consider exceptions to these general
eligibility criteria on a case-by-case basis.

ELIGIBILITY FOR AND PARTICIPATION IN THIS PLAN IN NO WAY CONSTITUTES A CONTRACT
OF EMPLOYMENT BETWEEN EDWARDS LIFESCIENCES AND THE EMPLOYEE. ELIGIBLE POSITIONS
AND TARGET BONUS LEVELS WILL BE EVALUATED AND DETERMINED ON AN ANNUAL BASIS.

EDWARDS LIFESCIENCES RESERVES THE RIGHT TO AMEND OR TERMINATE THIS PLAN IN WHOLE
OR IN PART AT ANY TIME WITHOUT ANY ADVANCE NOTIFICATION.

PLAN YEAR

The EIP plan year corresponds with the calendar year beginning January 1 and
ending December 31.

                                                                     Page 2 of 6





PLAN ADMINISTRATOR

The EIP Plan Administrator is the Edwards Lifesciences Compensation Committee.
The Plan Administrator may delegate responsibility for plan administration to a
designee.

BONUS FUNDING

The EIP will be funded based on a percentage of Edwards' financial performance
as modified by the participant organization's achievement of its Key Operating
Drivers (KODs).

FINANCIAL PERFORMANCE
Edwards Financial Performance will be measured on the following criteria,
weighted as noted:
         Net Income                 50%
         Free Cash Flow*            25%
         Revenue Growth**           25%
         *  Defined as cash flow from operations less capital expenditures.
         ** Assumes constant foreign exchange and excludes divested businesses.

Exhibit 1 (attached) illustrates funding levels based on financial performance.
Actual funding levels for each category will be interpolated at 1% intervals.
Performance resulting in below 50% funding will result in zero payout for that
category. Results from 50% to 125% will be specified in 1% increments. Under no
circumstances will a category achieve higher than 125% funding. The funding for
each category will be weighted accordingly and added together to achieve a total
financial performance funding amount.

KEY OPERATING DRIVERS (KODS)
With the exception of regions, EIP bonus funding will be further modified by
achievement of the five Edwards Lifesciences Key Operating Drivers (KODs). All
regions will establish their own KODs for measurement.

Each Executive Leadership Team member responsible for a region will:
   - Identify and communicate KODs for their respective business, region or
     function;
   - Track and communicate progress on the KODs; and
   - Determine KOD% achievement for payout.

The rest of the Edwards organization will be measured on the following five
KODs:

- - Achieve global tissue and repair penetration goal of $272.9 million
- - Execute growth opportunities to add $20 million in incremental Horizon 2
  sales
- - Reduce the complaints per million (CPMs) on CCO catheters, Access products,
  and CEP Mitral*

                                                                     Page 3 of 6



- - Attain on-time achievement of at least 70% of key R&D milestones
- - Implement manufacturing cost savings of $3 million in 2002 P&L plan vs.
  2001 plan

* Reduce CCO catheters and Access products by 36% in Q4 2001 and CEP Mitral
cumulatively by 20% in Q2 2001 and 50% in Q4 2001 as compared to Q4 2000.

Exhibit 1 provides an EXAMPLE of how the bonus amount will be funded based on
financial performance AND modified by KOD achievement for an organization with
five KODs.

TARGET BONUS LEVELS

Target bonus amounts are expressed as a percentage of an employee's 2001
eligible earnings. If a participant had a job change during the plan year that
affected bonus level, the target bonus will be calculated using the target bonus
at the end of the year applied to the participant's eligible earnings for the
year.

If a participant transferred to another Edwards Lifesciences business, region or
function during the plan year, the KOD % achievement of the organization that
the participant belonged to at year-end will be used for calculating bonus
funding.

Participants may receive more or less than their target bonus amounts depending
on bonus funding and PMO achievement.

ACTUAL BONUS PAYOUTS

A participant's actual bonus payout amount will be based on individual
achievement of 2001 Performance Management Objectives (PMOs). These PMOs must be
established with the participant's manager at the beginning of the year. PMOs
should reflect a balance between team and individual goals, financial and
non-financial goals, and be clearly aligned with Edwards' business goals and the
organization's Key Operating Drivers.

At the end of the plan year, managers and EIP participants will evaluate and
discuss individual PMO achievement levels. Achievement percentages may range
from 0% to 200%. However for every 1% awarded over 100%, a corresponding
discount of 1% below 100% should be awarded to another participant so that the
total PMO pool adds up to approximately 100% (changes up or down must offset
each other). Under no circumstances will a participant receive a payout greater
than 200%. Actual bonus payouts will then be calculated as follows:
    PAYOUT = TARGET BONUS X EIP BONUS FUNDING % X PMO ACHIEVEMENT %

PAYMENT OF BONUSES

                                                                     Page 4 of 6



The Edwards Lifesciences Compensation Committee or its designee will review the
bonus award recommendations in February 2002.

A participant must be on the Edwards payroll with an "active" status when the
bonus amount is paid except as provided in the Termination of Employment
Section. EIP payout will be issued as soon as possible following the February
Board of Directors meeting.

The appropriate withholding for FICA, U.S., state and local taxes will be
deducted from the bonus award including any withholding for employees subject to
tax laws of other countries. EIP bonuses are also considered to be part of
Benefit Pay. Contributions to the Edwards 401(k) Savings and Investment Plan
will also be deducted where appropriate. Employee Stock Purchase Plan payments
will not be deducted from bonus pay.

TERMINATION OF EMPLOYMENT

Participants who voluntarily sever their employment with Edwards or who are
involuntarily terminated for reasons other than those listed below, during the
plan year or in the following year before bonus payments are actually made, are
ineligible for EIP bonus payouts.

Participants who:

1.   are involuntarily terminated due to a reduction in force, departmental
     restructuring or job redefinition,
2.   become permanently disabled,
3.   retire, or
4.   die

after at least six months of service during the plan year are eligible for
prorated bonus payouts based on their full calendar months of service. The bonus
amounts in these cases will be based on the full year of business performance
for funding purposes and the participant's actual level of PMO completion.

EXCEPTIONS

The Plan Administrator or its designee must approve any exception to these
guidelines.

                                                                     Page 5 of 6




                                                                       EXHIBIT 1


FUNDING AND PAYOUT DETERMINATION FOR 2001 EIP BONUS PLAN



                                FINANCIAL GOALS FOR 2001
            ------------------------------------------------------------------

            ---------------           ---------------          ---------------            ----------------
              NET INCOME                FREE CASH                 REVENUE                  PERCENTAGE OF
              ($M) (50%                 FLOW ($M)               GROWTH (25%                TARGET PAYOUT
               WEIGHT)                 (25% WEIGHT)               WEIGHT)                     EARNED
            ------------------------------------------------------------------            ----------------

                                                                                         
MIN                  $56.0                     $75.0                     1.0%                         50%
                     $59.0                     $79.0                     2.0%                         85%
TARGET               $68.1                     $88.7                     6.2%                        100%
MAX                  $70.0                     $95.0                     6.9%                        125%
            ---------------           ---------------          ---------------            ----------------





            ------------------------------------------------------------------
            ASSUMPTIONS BOX

                                                                   
            BASE SALARY:                                              $50,000
            TARGET BONUS OPPORTUNITY:                                     10%
            TARGET BONUS AMOUNT:                                       $5,000

            WEIGHTING
            Net Income:                                                   50%
            Free Cash Flow:                                               25%
            Revenue Growth:                                               25%
            ------------------------------------------------------------------






KOD MODIFIER
                                                 FUNDING BASED ON FINANCIALS AND KOD MODIFIER
                # KODS                                @80% OF     @100% OF     @150% OF
               ACHIEVED     MODIFIER                  TARGET       TARGET       TARGET

                                                                    
5 KODS                   5        150%                   $9,000        $7,500      $16,875
                         4        125%                   $6,250        $6,250      $11,719
                         3        100%                   $4,000        $5,000       $7,500
                         2         75%                   $2,250        $3,750       $4,219
                         1         50%                   $1,000        $2,500       $1,875
                         0         25%                     $250        $1,250         $469




PAYOUT (ASSUMING 100% FUNDING AND 100% PMO COMPLETION)
               Funding        PMO%        Payout
                $5,000        100%        $5,000

                                                                     Page 6 of 6

EX-21.1(A)

EXHIBIT 21.1 (A)

    The following corporations are wholly-owned subsidiaries of Edwards
Lifesciences Corporation:



                                                                 STATE OF        COUNTRY OF
                                                              INCORPORATION/   INCORPORATION/
LEGAL ENTITY                                                    FORMATION         FORMATION
- ------------                                                  --------------   ---------------
                                                                         
Benchmark, Inc.                                               Utah             U.S.A.
Edwards Lifesciences Asset Management Corporation             Delaware         U.S.A.
Edwards Lifesciences Cardiovascular Resources, Inc.           Pennsylvania     U.S.A.
Edwards Lifesciences Corporation of Puerto Rico               Delaware         U.S.A.
Edwards Lifesciences Finance LLC                              Delaware         U.S.A.
Edwards Lifesciences Japan Holdings Inc.                      Delaware         U.S.A.
Edwards Lifesciences LLC                                      Delaware         U.S.A.
Edwards Lifesciences Research Medical, Inc.                   Utah             U.S.A.
Edwards Lifesciences Sales Corporation                        Delaware         U.S.A.
Edwards Lifesciences Sub Inc.                                 Delaware         U.S.A.
Edwards Lifesciences (U.S.) Inc.                              Delaware         U.S.A.
Edwards Lifesciences World Trade Corporation                  Delaware         U.S.A.
PSICOR Merger Corporation                                     Delaware         U.S.A.
Edwards Lifesciences Austria GmbH                                              Austria
Edwards Lifesciences FSC Ltd.                                                  Barbados
Edwards Lifesciences S.P.R.L.                                                  Belgium
Edwards Lifesciences Macchi Ltda.                                              Brazil
Edwards Lifesciences Participacoes e Comercial Ltda.                           Brazil
Edwards Lifesciences (Canada) Inc.                                             Canada
Edwards Lifesciences Holding A/S                                               Denmark
Edwards Lifesciences Limited                                                   United Kingdom
Edwards Lifesciences SAS                                                       France
Edwards Lifesciences Holding Germany GmbH                                      Germany
Edwards Lifesciences Germany GmbH                                              Germany
PAS Palzer GmbH & Co. KG                                                       Germany
PAS Palzer Verwaltungs GmbH                                                    Germany
Edwards Lifesciences (India) Private Limited                                   India
Edwards Lifesciences Italia SpA                                                Italy
Edwards Lifesciences (Japan) Limited                                           Japan
Edwards Lifesciences Finance Limited                                           Japan
Edwards Lifesciences Korea Co., Ltd.                                           Korea
Edwards Lifesciences Mexico, S.A. de C.V.                                      Mexico
Edwards Lifesciences B.V.                                                      The Netherlands
Edwards Lifesciences Uden B.V.                                                 The Netherlands
Edwards Lifesciences Export (Puerto Rico) Corporation                          Puerto Rico
Edwards Lifesciences S.L.                                                      Spain
Edwards Lifesciences AG                                                        Switzerland
Edwards Lifesciences Holding AG                                                Switzerland
Edwards Lifesciences GmbH                                                      Switzerland

EX-23.1

EXHIBIT 23

                       CONSENT OF INDEPENDENT ACCOUNTANTS

    We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 333-33054, 333-33056, 333-40434, 333-52332,
333-52334 and 333-52346) of Edwards Lifesciences Corporation of our report dated
February 6, 2001 relating to the financial statements and financial statement
schedule, which appears in this Form 10-K.

/S/ PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLP

Orange County, California
March 27, 2001