EXHIBIT 10.1

 

[Amended]

BAXTER INTERNATIONAL INC.

Non-Employee Director Compensation Plan

adopted May 6, 2003

Terms and Conditions

 

1. Purpose

 

  This Non-Employee Director Compensation Plan (the “Plan”) is adopted by the
Board of Directors (the “Board”) of Baxter International Inc. (“Baxter”). This
Plan is adopted pursuant to the Baxter International Inc. 2003 Incentive
Compensation Program (the “Program”), for the purposes stated in the Program.
Capitalized terms defined in the Program that are used without being defined in
the Plan will have the same meaning as in the Program.

 

2. Participants

 

  Each member of the Board who is not an employee of Baxter or any of its
subsidiaries shall participate in the Plan (a “Participant”).

 

3. Restricted Stock

 

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

 

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

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  3.3 Restricted Stock may not be sold, transferred, assigned, pledged,
hypothecated or otherwise encumbered or disposed of, whether voluntarily,
involuntarily or by operation of law, until vested pursuant to the terms hereof.

 

  3.4 Subject to Section 11.10 of the Program and except as expressly provided
in Sections 3.6 and 3.7, all shares of Restricted Stock shall vest on the date
of and immediately prior to the next Annual Meeting following the date of grant.

 

  3.5 Except as provided in Sections 3.6 and 3.7, if a Participant ceases
service as a member of the Board before his or her Restricted Stock vests, the
Participant will forfeit his or her unvested Restricted Stock immediately upon
ceasing service as a member of the Board.

 

  3.6 If a Participant dies while serving as a member of the Board, his or her
unvested Restricted Stock will not be forfeited and will be fully vested
immediately.

 

  3.7 If a Participant becomes disabled and unable to continue service as a
member of the Board, his or her Restricted Stock will not be forfeited and will,
when the Participant ceases to serve as member of the Board, be fully vested.

 

  3.8 Each Participant receiving Restricted Stock shall have all of the rights
of a stockholder with respect to the shares of Restricted Stock during any
period in which the shares of Restricted Stock are subject to forfeiture or
restrictions on transfer, including the right to vote the shares of Restricted
Stock and to receive dividends and other distributions thereon, unless and until
such shares are forfeited pursuant to Section 3.5; provided, however, that a
dividend or other distribution with respect to Restricted Stock (including,
without limitation, a stock dividend or stock split), other than a cash
dividend, shall be delivered to Baxter (and the Participant shall, if requested
by Baxter, execute and return one or more irrevocable stock powers related
thereto) and shall be subject to the same restrictions as the Restricted Stock
with respect to which such dividend or other distribution was made. Cash
dividends paid on the Restricted Stock will be reinvested in shares of Common
Stock, unless the Participant elects otherwise. Common Stock purchased with
reinvested cash dividends shall not be restricted.

 

  3.9 If requested by Baxter, each Participant receiving Restricted Stock shall
enter into an agreement with Baxter incorporating the terms and conditions of
this Plan. A stock certificate for the shares of Restricted Stock awarded will
be issued in the name of each Participant and deposited, together with a stock
power endorsed in blank by Participant, with Baxter. Each such certificate shall
bear a legend in substantially the following form:

 

The transferability of this certificate and the shares of Common Stock
represented by it are subject to the terms and conditions (including conditions
of forfeiture) contained in the Baxter International Inc. Non-Employee Director
Compensation Plan adopted May 6, 2003. A copy of this Plan is available from the
Corporate Secretary of Baxter International Inc.

 

 

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

 

4. Stock Options

 

  4.1 On the date of Baxter’s Annual Meeting in each year beginning with the
Annual Meeting on May 6, 2003, and subject to availability of shares of Common
Stock under the Program, upon completion of the Annual Meeting each Participant
shall be granted Stock Options having a value equal to $60,000, to be determined
by the Board or the Compensation Committee of the Board (the “Committee”) based
on a Black-Scholes or other option valuation model in the discretion of the
Board or the Committee (rounded to the nearest whole number which is a multiple
of ten) (the “Annual Stock Option Grant Amount”).

 

  4.2 Each Participant elected or appointed on a date other than the date of an
Annual Meeting shall, on the date of such election or appointment and
automatically and without necessity of any action by the Board or any committee
thereof, be granted a Stock Option to purchase that number of shares of Common
Stock equal to the product of (A) the Annual Stock Option Grant Amount (as
defined in Section 4.1, subject to adjustment in accordance with the Program)
for each Stock Option granted on the date of the immediately preceding Annual
Meeting, multiplied by (B) the quotient of (i) the number of full calendar
months before the next Annual Meeting divided by (ii) 12 (rounded to the nearest
whole number which is a multiple of ten). The number of shares of Common Stock
subject to any Stock Option granted under this Section 4.2 shall not exceed the
number available under the Program on the date of grant.

 

  4.3 The purchase price for each share of Common Stock subject to a Stock
Option shall be the Fair Market Value of a share of Common Stock on the date of
grant. The terms of each Stock Option will be as set forth in this Plan and the
Program. To the extent that any provision of the Plan is inconsistent with the
Program, the Program shall control. The Stock Options are not intended to
qualify as Incentive Stock Options within the meaning of Section 422 of the
United States Internal Revenue Code.

 

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  4.4 Subject to Section 11.10 of the Program and except as expressly provided
in Sections 4.8, 4.9 and 4.10, Stock Options shall first become exercisable on
the date of and immediately prior to the next Annual Meeting following the date
of grant.

 

  4.5 After a Stock Option becomes exercisable and until it expires, it may be
exercised in whole or in part, in the manner specified by the Company. Under no
circumstances may a Stock Option be exercised after it has expired. Shares of
Common Stock may be used to pay the purchase price for shares of Common Stock to
be acquired upon exercise of a Stock Option or fulfill any tax withholding
obligation, subject to any requirements or restrictions specified by the
Company.

 

  4.6 Except as provided in Sections 4.8, 4.9 and 4.10, if a Participant ceases
service as a member of the Board before his or her Stock Option becomes
exercisable, the Stock Option will expire when the Participant ceases service as
a member of the Board.

 

  4.7 If a Participant ceases service as a member of the Board after his or her
Stock Option becomes exercisable, the Stock Option will not expire but will
remain exercisable. Subject to Sections 4.8, 4.9, 4.10 and 4.11, the Stock
Option will expire three months after the Participant ceases service as a member
of the Board, unless the Participant dies or becomes disabled during such three
month period in which case the Stock Option will expire on the first anniversary
of the date the Participant ceased serving as a member of the Board.

 

  4.8 If a Participant dies while serving as a member of the Board, his or her
Stock Option will not expire and will remain, or immediately become, fully
exercisable, as the case may be. Subject to Sections 4.10 and 4.11, the Stock
Option will expire on the first anniversary of the Participant’s death.

 

  4.9 If a Participant becomes disabled and unable to continue service as a
member of the Board, his or her Stock Option will not expire and will remain, or
when the Participant ceases to serve as member of the Board become, fully
exercisable, as the case may be. Subject to Sections 4.10 and 4.11, the Stock
Option will expire on the first anniversary of the date the Participant ceases
service as a member of the Board.

 

  4.10 If a Participant who has served as a member of the Board for a continuous
period of at least ten years or who is at least 72 years of age ceases to serve
as a member of the Board (including without limitation by reason of death or
disability), his or her Stock Option will not expire and will remain, or when
the Participant ceases to serve as member of the Board become, fully
exercisable, as the case may be. Subject to Section 4.11, the Stock Option will
expire on the fifth anniversary of the date the Participant ceases service as a
member of the Board.

 

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  4.11 Stock Options that have not previously expired will expire at the close
of business on the tenth anniversary of the date of grant. If a Stock Option
would expire on a date that is not a Business Day, it will expire at the close
of business on the last Business Day preceding that date. A “Business Day” is
any day on which the Common Stock is traded on the New York Stock Exchange.

 

  4.12 An exercisable Stock Option may only be exercised by the Participant, his
or her legal representative, or a person to whom the Participant’s rights in the
Stock Option are transferred by will or the laws of descent and distribution or
in accordance with rules and procedures established by the Committee.

 

5. Cash Compensation

 

  5.1 Baxter shall pay each Participant a meeting fee of $1,000 for each meeting
of the Board or any committee thereof attended, and a Participant acting as the
chairperson of any meeting of a committee of the Board shall receive an
additional $1,000 for each meeting chaired by him or her. Fees shall be paid
quarterly in arrears and are payable if the Participant attends in person, by
conference telephone, or by any other means permitted by the Delaware General
Corporation Law and Baxter’s Bylaws.

 

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

 

  5.3 Participants shall be eligible to defer payment of cash compensation
otherwise payable under this Section 5 pursuant to the terms and conditions of
the Baxter Non-Employee Director Deferred Compensation Plan.

 

6. Availability of Shares

 

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

 

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7. General Provisions

 

  7.1 Subject to the limitations contained in Section 11.9 of the Program, the
Board or the Committee may, at any time and in any manner, amend, suspend, or
terminate the Plan or any Stock Option outstanding under the Plan.

 

  7.2 Participation in the Plan does not give any Participant any right to
continue as a member of the Board for any period of time or any right or claim
to any benefit unless such right or claim has specifically accrued hereunder.

 

 

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Amendment No. 1

to

Baxter International Inc.

Non-Employee Director Compensation Plan

 

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

 

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

 

Amendment No. 2

to

Baxter International Inc.

Non-Employee Director Compensation Plan

 

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

 

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

 

 

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