Exhibit 10.18

 

EDWARDS LIFESCIENCES CORPORATION

 

401(K) SAVINGS AND INVESTMENT PLAN

 

(Restated Effective January 1, 2009)

 

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TABLE OF CONTENTS

 

 

 

Page

 

 

 

ARTICLE I

INTRODUCTION

1

 

 

 

1.1

The Plan

1

1.2

Effective Date

1

1.3

Plan Objectives

1

1.4

Supplements and Appendices

1

 

 

 

ARTICLE II

DEFINITIONS

1

 

 

 

2.1

“Accounting Date”

1

2.2

“Accounts” or “Account Balances”

2

2.3

“Actual Deferral Percentage”

2

2.4

“Administrative & Investment Committee”

2

2.5

“Base Pay”

2

2.6

“Baxter Common Stock”

3

2.7

“Beneficiary” or “Beneficiaries”

3

2.8

“Board of Directors”

3

2.9

“Code”

3

2.10

“Commonly Controlled Entity”

3

2.11

“Company”

3

2.12

“Company Common Stock”

3

2.13

“Compensation”

3

2.14

“Disability”

7

2.15

“Effective Date”

7

2.16

“Eligible Employee”

7

2.17

“Employee”

8

2.18

“Employer”

8

2.19

“Employment Date”

8

2.20

“Entry Date”

9

2.21

“ERISA”

9

2.22

“Forfeiture”

9

2.23

“Highly Compensated Employee”

9

2.24

“Hour of Service”

9

 

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TABLE OF CONTENTS

(continued)

 

 

 

Page

 

 

 

2.25

“Investment Manager”

11

2.26

“Matching Contribution Percentage”

11

2.27

“Maternity/Paternity Absence”

11

2.28

“Normal Retirement Date”

12

2.29

“One-Year Break In Service”

12

2.30

“Participant”

12

2.31

“Part-Time Employee”

12

2.32

“Plan”

12

2.33

“Plan Year”

12

2.34

“Prior Plan”

12

2.35

“Prior Plan Participant”

13

2.36

“Spouse”

13

2.37

“Termination of Employment” or “Severance of Employment”

13

2.38

“Trust”

13

2.39

“Trust Agreement”

13

2.40

“Trust Fund”

13

2.41

“Trustee”

13

2.42

“Year of Vesting Service” or “Vesting Service”

13

 

 

 

ARTICLE III

PARTICIPATION

14

 

 

 

3.1

Participation

14

3.2

Cessation of Participation

14

3.3

Reemployment

14

3.4

Transfer of Employment

14

3.5

Reemployment of Veterans

14

 

 

 

ARTICLE IV

CONTRIBUTIONS

16

 

 

 

4.1

Contributions

16

4.2

Certification of Employer Contributions

18

4.3

Contribution Limitations

18

4.4

Annual Addition

19

 

 

 

ARTICLE V

PARTICIPANT CONTRIBUTIONS/CONTRIBUTION LIMITATIONS

19

 

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TABLE OF CONTENTS

(continued)

 

 

 

Page

 

 

 

5.1

Pay Deferral Contributions

19

5.2

Change in Rate of Pay Deferral Contributions/Reemployment

20

5.3

Annual Limitations on Pay Deferral Contributions

20

5.4

General Limitations on Pay Deferral Contributions

21

5.5

Nondiscrimination Rules Applicable to Pay Deferral and Matching Contributions

21

5.6

Rollover Contributions

26

 

 

 

ARTICLE VI

INVESTMENTS AND PLAN ACCOUNTING

26

 

 

 

6.1

Participant Account Balance

26

6.2

Investment of Accounts

28

6.3

Investment Funds

28

6.4

Investment Elections

29

6.5

Information Provided Under ERISA Section 404(c)

33

6.6

Investment Fund Accounting

34

6.7

Expenses

35

6.8

Accounting Dates

36

6.9

Crediting Employer Contributions

36

6.10

Crediting Pay Deferral Contributions

36

6.11

Adjustment of Account Balances

36

 

 

 

ARTICLE VII

DISTRIBUTION OF ACCOUNT BALANCES

37

 

 

 

7.1

Retirement, Disability or Death

37

7.2

Resignation or Dismissal

37

7.3

Special Vesting Rules Upon Sale of Business

38

7.4

Forfeitures

38

7.5

Benefit Commencement Date

39

7.6

Methods of Benefit Payment

42

7.7

Direct Rollovers

44

7.8

RESERVED

45

7.9

Maximum Installment Period

45

7.10

Minimum Rate of Installment Payments

46

7.11

Surviving Spouse or Designated Beneficiaries

47

 

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TABLE OF CONTENTS

(continued)

 

 

 

Page

 

 

 

7.12

Missing Beneficiaries of Deceased or Missing Participants

48

7.13

Incapacitated Participants or Beneficiaries

49

7.14

Reemployment after Distributions Commence

49

7.15

Erroneous Payments

49

7.16

Finality of Distributions

49

 

 

 

ARTICLE VIII

WITHDRAWALS AND LOANS

49

 

 

 

8.1

Withdrawals

49

8.2

Loans to Participants

53

8.3

No Representation Regarding Tax Effect of Withdrawals or Loans

57

 

 

 

ARTICLE IX

PLAN COMMITTEES

57

 

 

 

9.1

Membership of Administrative & Investment Committees

57

9.2

Administrative & Investment Committee Powers and Duties

58

9.3

Administrative & Investment Committee Powers and Duties

59

9.4

Conflicts of Interest

61

9.5

Compensation; Reimbursement

61

9.6

Standard of Care

61

9.7

Action by Committees

61

9.8

Resignation or Removal of Committee Member

61

9.9

Uniform Application of Rules by Administrative & Investment Committee

62

9.10

Claims Procedure

62

9.11

Investments in Company Common Stock

63

 

 

 

ARTICLE X

AMENDMENT, TERMINATION OR PLAN MERGER

63

 

 

 

10.1

Amendment

63

10.2

Plan Termination

64

10.3

Continuation by a Successor or Purchaser

64

10.4

Plan Merger or Consolidation

64

10.5

Notice to Participants of Amendments Terminations or Plan Mergers

65

10.6

Vesting and Distribution on Termination

65

 

 

 

ARTICLE XI

GENERAL PROVISIONS

65

 

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TABLE OF CONTENTS

(continued)

 

 

 

Page

 

 

 

11.1

No Employment Guarantee

65

11.2

Nonalienation of Plan Benefits

65

11.3

Action by an Employer

66

11.4

Applicable Law

66

11.5

Participant Litigation

66

11.6

Participant and Beneficiary Duties

66

11.7

Individual Account Statements

67

11.8

Gender and Number

67

11.9

Adequacy of Evidence

67

11.10

Notice to Participants and Beneficiaries

67

11.11

Waiver of Notice

67

11.12

Successors

67

11.13

Severability

67

11.14

Nonreversion

67

11.15

Qualification of Plan and Trust

68

11.16

Certain Indemnification

68

11.17

Voice Response Unit Deemed Written Consent

68

11.18

Effective January 1, 2002

68

 

 

 

ARTICLE XII

SPECIAL TOP-HEAVY RULES

69

 

 

 

12.1

Application

69

12.2

Special Terms

69

12.3

Vested Percentage

71

12.4

Minimum Contribution

72

12.5

Termination of Top-Heavy Status

72

 

 

 

ARTICLE XIII

ADOPTION AND WITHDRAWAL FROM PLAN

72

 

 

 

13.1

Procedure for Adoption

72

13.2

Procedure for Withdrawal

72

13.3

Adoption of Plan by Unrelated Employers

73

 

v

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EDWARDS LIFESCIENCES CORPORATION

 

401(K) SAVINGS AND INVESTMENT PLAN

 

ARTICLE I

 

INTRODUCTION

 

1.1                               The Plan. Effective as of the close of
business on March 31, 2000, Baxter International Inc. (“Baxter”) spun-off its
cardiovascular group business to Baxter shareholders through a distribution of
all of the shares of Edwards Lifesciences Corporation (“Edwards”) (the
“Spin-Off’). In connection with the Spin-Off, Edwards has adopted this Plan (the
“Edwards Savings Plan”) for the benefit of certain employees. As soon as
practicable after March 31, 2000, Baxter will cause the Trustee of the Baxter
International Inc. and Subsidiaries Incentive Investment Plan (the “IIP”) to
transfer assets from the IIP trust fund to the Trustee of this Plan with respect
to the accounts of Edwards employees. The Edwards Savings Plan is intended to
qualify as a profit sharing plan within the meaning of section 401(a) of the
Internal Revenue Code of 1986, as amended (the “Code”), with a qualified cash or
deferred arrangement described in section 401(k) of the Code, as its related
trust is intended to be tax-exempt under section 501 (a) of the Code.  The Plan
was restated effective January 1, 2009.

 

1.2                               Effective Date. This Plan is effective as of
April l, 2000.

 

1.3                               Plan Objectives. The Plan is a profit sharing
plan maintained by the Company to stimulate interest, initiative and increased
efficiency among Participants, to encourage Participants to set aside funds for
retirement, to share with Participants the economic benefits produced by their
efforts and to assist in providing Participants with retirement benefits.

 

1.4                               Supplements and Appendices. Supplements and
appendices to the Plan may be adopted, attached to and incorporated in the Plan
at any time. The provisions of any such supplements and appendices shall have
the same effect that such provisions would have if they were included within the
basic text of the Plan. Supplements and appendices will specify the persons
affected and shall supersede the other provisions of the Plan to the extent
necessary to eliminate inconsistencies between the Plan provisions and the
provisions of such supplements and appendices.

 

ARTICLE II

 

DEFINITIONS

 

The following terms, whenever used in the following capitalized form, shall have
the meaning set forth below unless the context clearly indicates otherwise, or
unless modified by a supplement or appendix attached hereto:

 

2.1                               “Accounting Date” means each day of the Plan
Year that the New York Stock Exchange is open for trading.

 

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2.2                               “Accounts” or “Account Balances” refer to all
of the accounts described in Section 6.1 which are maintained on behalf of a
Participant.

 

2.3                               “Actual Deferral Percentage” means a
percentage calculated for purposes of Section 5.5(a) for (i) the group of
Participants who are Highly Compensated Employees or (ii) the group of all other
Participants, as follows:

 

(a)                                 For the group of Participants (including any
Eligible Employee who is eligible with respect to a Plan Year to make Pay
Deferral Contributions but chooses not to do so) who are Highly Compensated
Employees for a Plan Year, the Actual Deferral Percentage (referred to herein as
the “HCE Actual Deferral Percentage”) for the Plan Year shall be the average of
the following percentages (calculated separately for each member of the group):
Pay Deferral Contributions on behalf of the group member for the Plan Year,
divided by his Compensation for the Plan Year.

 

(b)                                 For the group of all other Participants
(including any Eligible Employee who is not a Highly Compensated Employee for a
Plan Year and who is eligible with respect to the Plan Year to make Pay Deferral
Contributions but chooses not to do so), the Actual Deferral Percentage
(referred to herein as the “NHCE Actual Deferral Percentage”) for the Plan Year
shall be the average of the following percentages (calculated separately for
each member of the group): Pay Deferral Contributions on behalf of the group
member for the Plan Year, divided by his Compensation for the Plan Year. The
NHCE Actual Deferral Percentage shall be determined without regard to whether an
Employee is a non-Highly Compensated Employee for the current Plan Year.

 

The deferral percentages for individuals and the Actual Deferral Percentage for
each specified group shall be calculated to the nearest one-hundredth of one
percent. To the extent necessary to satisfy the nondiscrimination tests in
Section 5.5(a) in a particular Plan Year, and to the extent permitted by law,
the Administrative & Investment Committee may elect to add to the numerator of
the Actual Deferral Percentage fraction (i) any portion of additional
nonelective contributions made by any Employer that may be treated as a
“qualified nonelective contribution” under Code Section 401(k) or (ii) any
portion of that Plan Year’s Matching Contributions that may be treated as a
“qualified matching contribution” under Code Section 401(k). Salary reduction
contributions made by a Participant under any other tax-qualified defined
contribution plan maintained by the Participant’s Employer or any Commonly
Controlled Entity of such Employer shall be included in computing his deferral
percentage to the extent the Company elects to aggregate such other defined
contribution plan with the Plan for purposes of the nondiscrimination test of
Section 5.5(a) or the coverage test of Code Section 410(b).

 

2.4                               “Administrative & Investment Committee” means
the committee which is responsible for administering the Plan and directing the
investment of the Trust Fund in accordance with Article IX.

 

2.5                               “Base Pay” means regular straight-time
earnings plus commissions and payments in lieu of regular earnings (such as
vacation, sick pay and holiday pay). In the case of a part-time hourly employee,
such employee’s base pay shall be determined by

 

2

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multiplying such employee’s hourly rate of pay by the number of regularly
scheduled hours of work for such employee.

 

2.6                               “Baxter Common Stock” means common stock of
Baxter International Inc.

 

2.7                               “Beneficiary” or “Beneficiaries” means the
persons, trusts or estates validly designated by a Participant or the Plan
pursuant to Section 7.11 to receive any benefits payable on behalf of such
Participant after his death.

 

2.8                               “Board of Directors” means the Board of
Directors of the Company.

 

2.9                               “Code” means the Internal Revenue Code of
1986, as amended from time to time.

 

2.10                        “Commonly Controlled Entity” means any corporation,
trade or business that, together with the Company, is a member of a controlled
group of corporations as defined in Section 414(b) of the Code, is under common
control as defined in Section 414(c) of the Code, is a member of an affiliated
service group as defined in Section 414(m) of the Code or is required to be
aggregated pursuant to Section 414(o) of the Code; provided, however, that
solely for purposes of Section 4.3, the standard of control under Sections
414(b) and 414(c) of the Code shall be deemed to be “more than 50%” rather than
“at least 80%.”

 

2.11                        “Company” means Edwards Lifesciences Corporation.

 

2.12                        “Company Common Stock” means common stock of Edwards
Lifesciences Corporation.

 

2.13                        “Compensation” means the amount determined with
respect to a Participant in accordance with the following alternative
definitions:

 

(a)                                 Compensation Generally. Except as required
by subsection (b), (c) or (d) below, for each Participant, “Compensation” means
the amounts paid by the Employers during the Plan Year to such Participant for
services as an Employee which is included in such Compensation under the
rules set forth in subparagraph (a)(i) below other than such Compensation which
is excluded under the rules set forth in subparagraph (a)(ii) below.

 

(i)                                     Included Pay. For purposes of this
Section 2.13(a), a Participant’s Compensation shall include:

 

(A)                               All earnings as an employee which are required
to be reported as taxable income on Form W-2, including:

 

1.                                      bonuses, including incentive bonuses
under the Edwards Incentive Plan, the Edwards Performance Bonus Plan and any
other bonus plans approved by the Company or its delegate as constituting
Compensation hereunder,

 

3

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payments in lieu of salary increases, and bonuses paid to sales representatives
if included in the compensation plan;

 

2.                                      call in pay;

 

3.                                      commission pay;

 

4.                                      differential wage payments, defined in
Code Section 3401(h)(2) to Participants in qualified military service, effective
January 1, 2009, to the extent required by Code Section 414(u);

 

5.                                      double time pay;

 

6.                                      draws toward commissions;

 

7.                                      funeral pay;

 

8.                                      holiday pay;

 

9.                                      jury duty pay;

 

10.                               lead pay;

 

11.                               mileage pay for long haul truckers;

 

12.                               military pay;

 

13.                               overtime pay;

 

14.                               paid absences;

 

15.                               retroactive pay;

 

16.                               salary or other regular pay;

 

17.                               shift differentials;

 

18.                               sick pay or other short-term disability pay;

 

19.                               straight time pay; and

 

20.                               vacation pay.

 

(B)                               Amounts treated as salary or cash deferred
contributions under a cafeteria plan described in Section 125 include any
amounts not available in cash in lieu of group health coverage because the
Participant is unable to certify that he has other health coverage,  Effective
January 1, 2001, for purposes of measuring contribution limitations under
Section 4.3, Compensation is further expanded

 

4

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to include elective salary reductions not included in gross income under Code
Section 132(f)(4) consistent with the Community Renewal Tax Relief Code of 2000.

 

(ii)                                  Excluded Pay. For purposes of this
subsection (a), a Participant’s Compensation shall exclude:

 

(A)                               Amounts constituting imputed income arising
from an Employer’s moving expense reimbursement policies, an Employer’s life
insurance plans or an Employer’s other fringe benefit plans;

 

(B)                               Amounts paid to replace benefits not provided
under this Plan or any other tax-qualified plan due to the contribution or
benefit limitations or the nondiscrimination restrictions of the Code; and

 

(C)                               The following amounts paid, accrued or
imputed:

 

1.                                      attendance awards;

 

2.                                      automobile allowances;

 

3.                                      business expense reimbursements;

 

4.                                      cash prizes or awards;

 

5.                                      Christmas gifts;

 

6.                                      contest pay;

 

7.                                      deferred compensation, including
deferred bonuses;

 

8.                                      discretionary awards;

 

9.                                      employee referral awards;

 

10.                               executive perquisite allowances;

 

11.                               hiring bonuses;

 

12.                               income from sale of stock;

 

13.                               income from the exercise of stock options;

 

14.                               interest earnings on deferred compensation,
including deferred bonuses;

 

15.                               invention fees and awards;

 

16.                               long term disability pay;

 

5

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17.          mortgage differential payments;

 

18.          noncash prizes or awards;

 

19.          pay for unused sick time;

 

20.          performance shares;

 

21.          promotional awards;

 

22.          relocation expense reimbursements;

 

23.          restricted stock rights;

 

24.          retention bonuses;

 

25.          severance pay;

 

26.          stock appreciation rights;

 

27.          tax equalization payments to expatriates;

 

28.          technical achievement awards;

 

29.          travel allowances;

 

30.          tuition reimbursements;

 

31.          workers’ compensation benefits; and

 

32.          Income paid after severance from employment, as defined in
Section 1.415(c)-2(e)(3) of the Treasury Regulations except for payments to an
individual who does not currently perform services for the Company by reason of
qualified military service (within the meaning of Code section 414(u)(1) to the
extent these payments do not exceed the amounts the individual would have
received if the individual had continued to perform services for the Company
rather than entering qualified military service.

 

(b)           Compensation of Commissioned Sales Representatives. Except as
provided in subsections (c) and (d) below, the definition of Compensation set
forth in subsection (a) shall apply with respect to a Participant who is a
commissioned sales representative not reimbursed for expenses, except that only
85% of the amounts included in Compensation shall be recognized.

 

(c)           Compensation For Discrimination Tests. For purposes of the
definition of “Highly Compensated Employee” contained in Section 2.23 and for
purposes of the nondiscrimination limitations of Section 5.5, the “Compensation”
of a Participant means the amounts paid by the Employers during the Plan Year to
such

 

6

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Participant for personal services as an Employee which are required to be
reported as taxable income on Form W-2 and the amount described in subparagraph
(a)(i)(B) above.

 

(d)           Compensation For Contribution and Benefit Limitations. For
purposes of Sections 4.3, 4.4, and 12.2(g), “Compensation” of a Plan Participant
shall have the same meaning as under subsection (c) above, except that the
Compensation of a Participant shall include all amounts paid to such Participant
by a Commonly Controlled Entity of his Employer which is not itself an Employer
hereunder which would constitute Compensation for purposes of this subsection
(d) if such Commonly Controlled Entity were an Employer.

 

(e)           Maximum Amount of Compensation. The amount of a Participant’s
Compensation that may be taken into account for any purpose of the Plan,
including the alternative definitions of “Compensation” described in (a), (b),
(c) and (d) above and the Top-Heavy provisions of Article XII, shall not exceed
(i) for the initial Plan Year $170,000 (the amount is $200,000 in 2001, 2002 and
2003) and (ii) for each subsequent Plan Year, the amount prescribed by
Section 401(a)(17) of the Code (as adjusted for increases in the cost-of-living
pursuant to Section 401(a)(17)(B) of the Code).

 

In computing the Compensation of a Participant for all Plan purposes,
Compensation paid in currency other than United States dollars shall be
converted to United States dollars at the rate of exchange used at that time by
his Employer for such purpose. Compensation paid to a Participant before he
commences participation in the Plan, and Compensation paid to a Participant
after he ceases to receive credit for Hours of Service under the Plan, will not
be recognized under the Plan, except where required by applicable law or where
the Plan specifically indicates to the contrary.

 

2.14        “Disability”. means a mental or physical condition which renders a
Participant eligible for and in actual receipt of a disability benefit under the
federal Social Security Act.

 

2.15        “Effective Date”. means April 1, 2000.

 

2.16        “Eligible Employee”. means an Employee on the payroll of an Employer
incorporated in the United States whose Compensation constitutes wages from
employment within the meaning of Sections 3121(a) and (b) of the Federal
Insurance Contribution Act on and after the effective date of the adoption of
the Plan by the Employer, but excluding:

 

(a)           An Employee who is a member of a group of Employees represented by
a collective bargaining representative, with respect to which the Plan has not
been extended by a currently effective collective bargaining agreement between
his Employer and the collective bargaining representative of the group of
Employees of which he is a member after good faith bargaining on the subject of
employee benefits;

 

(b)           An Employee who is otherwise excluded from all of the groups of
Employees to whom the Plan is extended by the Employers;

 

7

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(c)           A leased employee who is considered an Employee under
Section 2.17; and

 

(d)           Any other individual who performs services for an Employer
pursuant to an agreement (written or oral) that classifies such individual as an
independent contractor or as an employee of another entity, or that otherwise
contains a waiver of participation in this Plan, regardless of such individual’s
employment status under common law

 

2.17        “Employee” means any person who is a common law employee of an
Employer or a Commonly Controlled Entity of an Employer and who is in active
employment or on an approved leave of absence. Notwithstanding the foregoing,
the following rules shall apply in determining a person’s status as an Employee:

 

(a)           Leased Employees. An individual who is considered a “leased
employee” of an Employer under the provisions of Code Section 414(n)(2) shall be
considered an Employee, but not an Eligible Employee, for all purposes of the
Plan; provided, however, that such individual shall not be considered an
Employee if the leasing organization that employs him covers such individual
with a plan providing benefits at least as generous as those described in Code
Section 414(n)(5).

 

(b)           United States Citizenship. Individuals employed by an Employer who
generally satisfy the requirements of this Section need not be United States
citizens to be Employees; provided, however, that individuals who are not United
States citizens and who are employed at an Employer’s facility in the United
States or one of its possessions solely on the understanding that such United
States employment is temporary for purposes of training or familiarization with
such facility or with such Employer’s operations or practices shall not be
considered to be Employees; and

 

(c)           Certain Citizens Employed Abroad. Ordinarily an individual must be
employed by an Employer and must be employed at one or more of its facilities in
the United States or possessions of the United States to be considered an
Employee. A United States citizen employed by an Employer at one of its
facilities outside of the United States and its possessions may become an
Employee if he satisfies the other requirements of this Section and if the
applicable requirements of Sections 401 (a) and 404A of the Code and Section 406
or 407 of the Code are satisfied with respect to such Employee.

 

2.18        “Employer” means the Company or any Commonly Controlled Entity of
the Company on and after the Effective Date of its adoption of the Plan in
accordance with Section l3. I . “Employer” shall also mean any organization that
is not a Commonly Controlled Entity of the Company if such organization adopts
the Plan in accordance with Section 13.3.

 

2.19        “Employment Date” means the day a person first earns an Hour of
Service, or, in the case of an Employee who incurs a Termination of Employment
prior to becoming a Participant and who is not reemployed within one year of
such Termination

 

8

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of Employment, the first day on which the Employee earns an Hour of Service upon
his rehire as an Employee.

 

2.20        “Entry Date” means as soon as administratively practicable the
thirty-first day after an Employee is credited with an Hour of Service.

 

2.21        “ERISA” means the Employee Retirement Income Security Act of 1974,
as amended from time to time.

 

2.22        “Forfeiture” means the portion of a Participant’s Accounts which is
forfeited pursuant to Section 7.4.

 

2.23        “Highly Compensated Employee” for a Plan Year means an Employee who:

 

(a)           is a 5%-owner (as defined in Section 416(1)(1) of the Code) of an
Employer at any time during the Plan Year or the preceding Plan Year; or

 

(b)           is paid Compensation in excess of $80,000 (as adjusted for
increases in the cost of living in accordance with Section 414(q)(1)(B)(ii) of
the Code) from an Employer for the preceding Plan Year.         If the
Administrative & Investment Committee so elects for a Plan Year, the Employees
taken into account under this paragraph (b) shall be limited to those Employees
who were members of the “top-paid group” for the preceding Plan Year. For
purposes of the foregoing, an Employee is in the top-paid group for any year if
such Employee is in the group consisting of the top 20% of the Employees when
ranked on the basis of compensation paid during such year. Such an election
shall be included in the written minutes of the Administrative & Investment
Committee.

 

The Plan is intended to satisfy the qualification requirements of the Code,
including the coverage and nondiscrimination provisions of Code Sections
410(b) and 401(a)(4). If the Administrative & Investment Committee determines
this Plan would violate such restrictions, then the Administrative & Investment
Committee is authorized to construe the Plan in a manner necessary to avoid
discrimination in favor of Highly Compensated Employees, if the express
provisions of the Plan permit such interpretation.

 

2.24        “Hour of Service” means:

 

(a)           Duty Hours. Each hour for which an Employee is directly or
indirectly paid or entitled to payment by an Employer for the performance of
duties.

 

(b)           Non-Duty Hours (Paid). Each hour for which an Employee is directly
or indirectly paid or entitled to payment by an Employer for reasons (such as
vacation, holidays, sickness, short-term disability, long-term disability,
medical leave, family medical leave or jury duty) other than the performance of
duties.

 

(c)           Non-Duty Hours (Unpaid). Each hour for which an Employee is not
paid due to medical leave, family medical leave or layoff. Up to a total of 501
Hours

 

9

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of Service shall be credited under this subsection (b) (with such 501 limit
reduced by one Hour of Service for each Hour of Service credited under
subsection (b)) to an Employee in a computation period on account of any single
continuous period during which the Employee performs no duties, provided,
however, that if such continuous period extends into the next computation
period, up to 501 additional Hours of Service shall be credited in such
computation period, and further provided that no Hours of Service shall be
credited under this subsection (b) for any period of time after the Employee’s
Termination of Employment.

 

(d)           Back-Pay Hours. Each hour for which no credit has been given under
subsections (a), (b) or (c) above, but for which back pay, irrespective of
mitigation of damages, has been either awarded or agreed to by an Employer.

 

(e)           Military Service Hours. To the extent not taken into account under
another subsection of this Section, each hour of the normally scheduled work
week during a period when the Employee is absent from employment with an
Employer for voluntary or involuntary military service with the armed forces of
the United States, provided that such Employee returns to work within 90 days
after his discharge date or within such longer period of time as may be
prescribed by the Uniformed Services Employment and Reemployment Rights Act of
1994 (“USERRA”).

 

(f)            Worker’s Compensation. No Hours of Service will be credited if
payment is made solely to comply with applicable worker’s compensation or
disability insurance laws.

 

(g)           Intermittent Family Leave. An Employee shall be credited with 45
Hours of Service for each week in which he is on Intermittent Family Leave.
Subsections (b) and (c) shall not apply to such Employees. “Intermittent Family
Leave” has the meaning given in the Employer’s policies and procedures manual
for an Employee who periodically needs time off for the treatment and care of
himself or family members due to conditions which require ongoing medical
treatment but which do not require the Employee to take an extended leave of
absence to provide or obtain such care.

 

The number of Hours of Service to be credited to any Part-Time Employee shall be
calculated based on records maintained by the Employee’s Employer indicating the
actual hours for which the Employee is compensated.  The number of Hours of
Service credited to any other Employee shall be calculated based on 45 hours for
each week for which the Employee would be entitled to at least One Hour of
Service. In the case of a payment which is made or due on account of a period
during which an Employee performs no duties and which results in the crediting
of Hours of Service under subsection (b), (c) or (e) above, or in the case of an
award or agreement for back pay made with respect to a period described in
subsection (d) above, the number of Hours of Service to be credited shall be in
accordance with the provisions of the Rules and Regulations for Minimum
Standards for Employee Pension Benefit Plans, U.S. Department of Labor, 29
C.F.R. Section 2530.200b-2(b) which are hereby incorporated by reference. Such
rules and regulations shall apply to subsection (b) above as if absences
described in such Section were paid absences. Hours of Service shall be credited
to a Plan

 

10

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year in accordance with the provisions of subsection (b) of the above-cited
Department of Labor Regulations. Hours required to be credited for more than one
reason under this Section which pertain to the same period of time shall be
credited only once.

 

2.25        “Investment Manager” means any bank, trust company, firm or
institution appointed by the Administrative & Investment Committee to invest
part or all of the Trust Fund in accordance with ARTICLE VI.

 

2.26        “Matching Contribution Percentage” means a percentage calculated for
purposes of Section 5.5(b) for (1) the group of Participants who are Highly
Compensated Employees or (ii) the group of all other Participants, as follows:

 

(a)           For the group of Participants (including an Eligible Employee who
is eligible with respect to a Plan Year to receive an allocation of Matching
Contributions, but who fails to do so solely on account of the Employee’s
failure to elect to make Pay Deferral Contributions during the Plan Year) who
are Highly Compensated Employees for a Plan Year, the Matching Contribution
Percentage (referred to herein as the “HCE Matching Contribution Percentage”)
for the Plan Year shall be the average of the following percentages (calculated
separately for each member of the group): Matching Contributions on behalf of
the group member for the Plan Year, divided by his Compensation for the Plan
Year.

 

(b)           For the group of all other Participants (including any Eligible
Employee who is not a Highly Compensated Employee for a Plan Year and who fails
to receive an allocation of Matching Contributions solely on account of the
Employee’s failure to elect to make Pay Deferral Contributions during the Plan
Year), the Matching Contribution Percentage (referred to herein as the “NHCE
Matching Contribution Percentage”) for the Plan Year shall be the average of the
following percentages (calculated separately for each member of the group):
Matching Contributions on behalf of the group member for the prior Plan Year,
divided by his Compensation for the prior Plan Year. The NHCE Matching
Contribution Percentage shall be determined without regard to whether an
Employee is a non-Highly Compensated Employee for the current Plan Year.

 

The Matching Contribution Percentages for individuals and the Matching
Contribution Percentage for each specified group shall be calculated to the
nearest one-hundredth of one percent. Matching Contributions made on behalf of a
Participant under any other tax-qualified defined contribution plan maintained
by the Participant’s Employer or any Commonly Controlled Entity of such Employer
shall be included in computing his Matching Contribution Percentage to the
extent the Company elects to aggregate such other defined contribution plan with
the Plan for purposes of the nondiscrimination test of Section 5.5(b) or the
coverage test of Code Section 410(b).

 

2.27        “Maternity/Paternity Absence” means a paid or unpaid absence from
employment (including an unapproved leave of absence) with an Employer or a
Commonly Controlled Entity of an Employer (a) by reason of the pregnancy of the
Employee; (b) by reason of the birth of a child of the Employee; (c) by reason
of the

 

11

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placement of a child under age 18 in connection with the adoption of the child
by the Employee (including a trial period prior to adoption); and (d) for
purposes of caring for a child immediately following birth or adoption. The
Employee must prove to the satisfaction of the Administrative & Investment
Committee that the absence meets the above requirements and must supply
information concerning the length of the absence unless the Administrative &
Investment Committee has access to relevant information without the Employee
submitting it.

 

2.28        “Normal Retirement Date” means the date on which a Participant
attains age 65.

 

2.29        “One-Year Break In Service” means a Plan Year in which an Employee
has fewer than 501 Hours of Service; provided, however, that an Employee shall
not have a One-Year Break In Service for any Plan Year if he is an Employee on
the last day of the Plan Year. In addition, an Employee who is absent from work
due to a Maternity/Paternity Absence or due to an unpaid leave of absence for
which credit is required pursuant to the Family Medical Leave Net of 1993, as
amended, to be given for purposes of avoiding a break in service shall be
treated as having completed certain Hours of Service for a limited period. The
Employee will be treated as completing either (1) the number of Hours of Service
that normally would have been credited but for the absence (i.e., 45 Hours of
Service per week) or (ii) if the normal work hours are unknown, eight Hours of
Service for each normal workday during the leave, to a maximum per Plan Year of
501 Hours of Service. The Hours of Service required to be credited under this
subsection must be credited only to prevent a One-Year Break in Service in the
Plan Year in which the absence begins for one of the permitted reasons or, if
crediting in such year is not necessary to prevent a One-Year Break in Service
in the Plan Year, in the following Plan Year.

 

2.30        “Participant” means an Eligible Employee who elects to make Pay
Deferral Contributions under the Plan pursuant to Section 5.1, or if earlier,
receives a Profit Sharing Contribution pursuant to Section 4.1 (c) or elects to
make a Rollover Contribution to the Plan pursuant to Section 5.6.

 

2.31        “Part-Time Employee” means an Employee who is normally scheduled to
work less than 20 hours per week for Employee’s Employer.

 

2.32        “Plan” means the Edwards Lifesciences Corporation 401(k) Investment
and Savings Plan.

 

2.33        “Plan Year” means the twelve consecutive month period beginning
January 1 and ending December 31; provided, however, that the first Plan Year
shall be the period beginning on the Effective Date and ending on December 31.

 

2.34        “Prior Plan” means the Baxter International Inc. and Subsidiaries
Incentive Investment Plan, as in effect immediately prior to the Effective Date.

 

12

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2.35        “Prior Plan Participant” means an individual who was a participant
in the Prior Plan immediately prior to the Effective Date and who became an
Eligible Employee on the Effective Date.

 

2.36        “Spouse” means the person who is or was married to the Participant
within the meaning of the laws of the State in which the Participant lives, and,
for purposes of determining who is entitled to the survivor annuity under a
Joint and Survivor Annuity, the person who as of the date a Participant’s
annuity payments begin is alive and married to the Participant within the
meaning of the laws of the State in which the Participant lives.

 

2.37        “Termination of Employment” or “Severance of Employment” when a
person ceases to be an Employee and ceases to be on the payroll of an Employer
or a Commonly Controlled Entity of an Employer. Transfer of employment from an
Employer to another Employer or Commonly Controlled Entity or from one Commonly
Controlled Entity to another Commonly Controlled Entity or to an Employer, shall
not constitute a Termination of Employment for purposes of the Plan.
Notwithstanding the foregoing, an individual who has ceased to be an Employee
but who remains for a limited period of time on the payroll of an Employer or a
Commonly Controlled Entity of an Employer solely for administrative purposes
shall incur a Termination of Employment on the date he ceases to be an Employee.

 

2.38        “Trust” means the legal entity resulting from the Trust Agreement
between the Company and the Trustee, pursuant to which assets of the Plan are
received, held, invested and distributed to or for the benefit of Participants,
Spouses and Beneficiaries.

 

2.39        “Trust Agreement” means the agreement between the Company and the
Trustee establishing the Trust, as amended.

 

2.40        “Trust Fund” means all assets held by the Trustee, Investment
Managers and insurance institutions in accordance with the Trust Agreement and
the Plan.

 

2.41        “Trustee” means any individual(s) or corporation(s) designated in
the Trust Agreement to execute the duties of the Trustee as set forth in the
Trust Agreement.

 

2.42        “Year of Vesting Service” or “Vesting Service” means the period
credited to an Employee for purposes of determining the extent to which the
Employee is vested in his Employer Matching Account under the vesting schedule
set forth in Section 7.2. Under the Plan, an Employee is credited with a Year of
Vesting Service if the Employee completes at least 1,000 Hours of Service during
any Plan Year. An Employee’s period of service with a corporation that becomes a
Commonly Controlled Entity of an Employer shall be taken into account for
purposes of this Section if the Employee is employed on the date the corporation
becomes a Commonly Controlled Entity. An individual who became an Employee on
December 20, 2007 who immediately prior to such date was an employee of
CardioVations Division of Ethicon shall have their service with CardioVations
Division of Ethicon taken into account for purposes of this

 

13

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Section.  Credit shall be given at the rate of 45 Hours of Service for each week
during such period (but not to exceed 1,000 Hours of Service for any twelve
month period). If an Employee is credited with at least one Year of Vesting
Service, he shall never lose such service regardless of when he returns to
employment as an Employee. Notwithstanding the foregoing, an individual (i) who
immediately prior to the Effective Date was employed by Baxter or a Commonly
Controlled Entity of Baxter and (ii) who becomes an Eligible Employee on the
Effective Date shall be credited with the number of Years of Vesting Services
such individual earned while employed with Baxter or a Commonly Controlled
Entity of Baxter.

 

ARTICLE III

 

PARTICIPATION

 

3.1          Participation. Each Prior Plan Participant shall become a
Participant on the Effective Date. Each other Eligible Employee shall become a
Participant as of the Entry Date coincident with or immediately following the
Participant’s satisfaction of the applicable eligibility service requirement as
described in the next two sentences. An Employee who is not a Part-Time Employee
shall satisfy the eligibility service requirement on the thirty-first (31st) day
of employment. An Employee who is a Part-Time Employee shall satisfy the
eligibility service requirement at the end of the first twelve-month period
beginning on the date of the Employee’s employment, or beginning on any
subsequent January 1, during which the Employee completes 1,000 or more Hours of
Service during such twelve month period.

 

3.2          Cessation of Participation. A Participant shall cease to be a
Participant on the later of the date on which such Participant ceases to be an
Eligible Employee or the date on which the Participant’s Accounts are
distributed for his benefit in accordance with the Plan.

 

3.3          Reemployment. An Eligible Employee who was a Participant or was
eligible to participate prior to his Termination of Employment and is reemployed
as an Eligible Employee shall be eligible to recommence participation in the
Plan on the first Entry Date following the (late of his reemployment.

 

3.4          Transfer of Employment. In the event an Employee transfers from
employment with an Employer to employment with a division or unit of the Company
or a Commonly Controlled Entity of the Company that has not adopted the Plan in
accordance with Section 13.1, the Employee’s period of employment with such
non-participating division, unit or Commonly Controlled Entity shall be treated
as employment with a participating Employer solely for purposes of
(1) determining the Participant’s Years of Vesting Service and (ii) determining
when the Participant has incurred a Termination of Employment entitling the
Participant to a distribution pursuant to ARTICLE VII.

 

3.5          Reemployment of Veterans. The provisions of this Section shall
apply in the case of the reemployment by an Employer of an Eligible Employee,
within the period

 

14

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prescribed by USERRA, after the Employee’s completion of a period of qualified
military service (as defined in Code Section 414(u)(5)). The provisions of this
Section are intended to provide such Employees with the rights required by
USERRA and Section 414(u) of the Code, and shall be interpreted in accordance
with such intent.

 

(a)           Make Up of Pay Deferral Contributions. Such Employee shall have
the right to make contributions under the Plan (“Make Up Deferrals”), in
addition to any Pay Deferral Contributions which the Employee elects to have
made under the Plan pursuant to Section 5.1. From time to time while employed by
an Employer, such Employee may elect to make such Make Up Deferrals during the
period beginning on the date of such Employee’s reemployment and ending on the
earlier of:

 

(i)            the end of the period equal to the product of three and such
Employee’s period of qualified military service, and

 

(ii)           the fifth anniversary of the date of such reemployment.

 

Such Employee shall not be permitted to contribute Make Up Deferrals to the Plan
in excess of the amount which the Employee could have elected to have made under
the Plan in the form of Pay Deferral Contributions if the Employee had continued
in employment with his Employer during such period of qualified military
service. Such Employee shall be deemed to have earned “Compensation” from his
Employer during such period of qualified military service for this purpose in
the amount prescribed by Code Sections 414(u)(2)(B) and 414(u)(7) (“Qualified
Military Service”). The manner in which an Eligible Employee may elect to make
up deferrals pursuant to this subsection (a) shall be prescribed by the
Administrative & Investment Committee.

 

(b)           Make Up of Employer Matching Contributions. An Eligible Employee
who makes Make Up Deferrals as described in subsection (a) shall be entitled to
an allocation of matching contributions (“Make Up Matching Contributions”) in an
amount equal to the amount of Employer Matching Contributions which would have
been allocated to the Account of such Eligible Employee under the Plan if such
Make Up Deferrals had been made in the form of Pay Deferral Contributions during
the period of such Employee’s qualified military service (as determined pursuant
to Code Section 414(u)). The amounts necessary to make such allocation of Make
Up Matching Contributions shall be derived from Forfeitures not yet applied
towards Employer Matching Contributions for the Plan Year in which the Make Up
Deferrals are made, and if such Forfeitures are not sufficient for this purpose,
then the Eligible Employee’s Employer shall make a special contribution which
shall be utilized solely for purposes of such allocation.

 

(c)           Profit Sharing Contributions. Such Employee shall be entitled to
share in allocations of Profit Sharing Contributions with respect to such period
of Qualified Military Service as an Eligible Employee. Such Employee shall be
deemed to have earned “Compensation” from his or her Employer during such period
of Qualified

 

15

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Military Service for this purpose in the amount prescribed by sections
414(u)(2)(B) and 414(u)(7) of the Code.

 

(d)           Inapplicability of Limitations. Any contributions made by an
Eligible Employee or an Employer pursuant to this Section on account of a period
of qualified military service in a prior Plan Year shall not be subject to the
limitations prescribed by Sections 4.3, 5.3 and 5.4 of the Plan (relating to
Sections 402(g), 404 and 415 of the Code) for the Plan Year in which such
contributions are made. The Plan shall not be treated as failing to satisfy the
nondiscrimination rules of Section 5.5 of the Plan (relating to Sections
401(k)(3) and 401(m) of the Code) for any Plan Year solely on account of any
make up contributions made by an Eligible Employee or an Employer pursuant to
this Section.

 

(e)           Individuals Receiving Differential Wage Payments While on
Qualified Military Service.  Effective January 1, 2009, an individual performing
qualified military service who is receiving a differential wage payment, as
defined in Code Section 3401(h)(2), from the Employer is deemed to be an
Employee.  However for purposes of the limitations on in-service withdrawals as
described in Article VIII, such individual is treated as having incurred a
Termination of Employment during any period such individual is performing
services in the uniformed services described in Code Section 3401(h)(2)(A). If
such individual elects to receive a distribution because of such deemed
Termination of Employment, the individual shall be precluded from making any
further Pay Deferral Contributions and from having further Employer Matching
Contributions made on his behalf under the Plan or any other plan of deferred
compensation, as described in Section 8.1(e)(v) of the Plan.

 

ARTICLE IV

 

CONTRIBUTIONS

 

4.1          Contributions. Each Plan Year each Employer shall contribute to the
Trust the following amounts:

 

(a)           Pay Deferral Contributions made in accordance with Section 5.1 for
such Plan Year by its Employees who are Participants.

 

(b)           Matching Contributions in an amount equal to (i) 100% of the
aggregate amount of each such Participant’s Pay Deferral Contributions (not
including Catch Up Contributions) made in accordance with Section 5.1 for such
Plan Year, up to the first 3% of such Participant’s annual Compensation and
(ii) 50% of the aggregate amount of each such Participant’s Pay Deferral
Contributions (not including Catch Up Contributions) made in accordance with
Section 5.1 for such Plan Year on the next 2% of such Participant’s annual
Compensation.

 

(c)           In the case of each Participant who is an hourly manufacturing
employee, Discretionary Profit Sharing Contributions, paid quarterly, in an
amount targeted at 3% (which may be more or less than 3%) of each such
Participant’s annual

 

16

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Base Pay based on the achievement of certain performance measures to be
established by the Administrative & Investment Committee in its discretion.

 

(d)           In the case of each Participant who is an hourly manufacturing
employee and whose. employment was transferred as of March 31, 2000 (the
“Distribution Date”) to an Employer from a Commonly Controlled Entity of Baxter,
as of the Effective Date, fifty shares of Company Common Stock to be held in the
Participant’s Stock Grant Account.

 

(e)           In the case of each Participant whose employment was transferred
as of the Effective Date to an Employer from a Commonly Controlled Entity of
Baxter and who is a salaried non-exempt or hourly manufacturing employee on the
last day of the applicable Plan Year (as listed in Schedule A hereto), the
following Transition Contributions:

 

(i)            Each Participant with 75 or more “points” (as determined under
the terms of the Baxter International Inc. and Subsidiaries Pension Plan (the
“Baxter Pension Plan”)) as of the Effective Date will receive an annual
Transition Contribution equal to five percent of the Participant’s Base Pay.

 

(ii)           Each Participant with 70-74 “points” (as determined under the
terms of the Baxter Pension Plan) as of the Effective Date will receive an
annual Transition Contribution equal to three percent of the Participant’s Base
Pay.

 

(iii)          Each Participant with 65-69 “points” (as determined under the
terms of the Baxter Pension Plan) as of the Effective Date will receive an
annual Transition Contribution equal to two and one half percent of the
Participant’s Base Pay.

 

(iv)          Each Participant with 60-64 “points” and at least 10 years of
“benefit service” (as determined under the terms of the Baxter Pension Plan) as
of the Effective Date will receive an annual Transition Contributions equal to
one percent of the Participant’s Base Pay.

 

(v)           Each Participant with 55-59 “points” and at least 10 years of
“benefit service” (as determined under the terms of the Baxter Pension Plan) as
of the Effective Date will receive an annual Transition Contribution equal to
one half of one percent of the Participant’s Base Pay.

 

Such annual Transition Contributions shall continue until the earlier of (1) the
date on which the Participant terminates employment or (2) the first day of the
Plan Year following the Plan Year during which such Participant attains age 65.

 

Each Employer may also make contributions in accordance with Sections 3.5, and
7.12(b). The Employers may make such contributions annually or more frequently.
Such contributions may be credited ratably as of each Accounting Date as
provided in Section 6.9 whether or not such contributions are actually made
ratably during the Plan Year..

 

17

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Pay Deferral Contributions shall be paid by an Employer to the Trust no later
than the 15th business day of the month following the month in which such
contributions would have been payable to each Participant in cash but for the
Participant’s election to participate herein (or such other time prescribed by
law). Matching Contributions shall be determined and paid by an Employer to the
Trust no later than the filing date for the Employer’s federal income tax return
1-or such Plan Year, including extensions. Notwithstanding the foregoing, Profit
Sharing Contributions made pursuant to paragraph (c) above shall be made as
quarterly cash contributions which shall be invested according to the
Participant’s investment elections. If the Participant has made no investment
elections, then the contributions shall be used to purchase units o f the
Company Common Stock Fund in each such Participant’s Account. Transition
Contributions made pursuant to paragraph (e) above shall be made annually as
cash contributions which shall be invested according to the Participant’s
investment elections. If the Participant has made no investment elections, then
the contributions shall be used to purchase units of the Company Common Stock
Fund in each such Participant’s Account. Shares of Company Common Stock
contributed pursuant to paragraph (d) above are not subject to reinvestment. In
no event shall the Employer contributions for any Plan Year exceed the amount
deductible by the Employer under Section 404 of the Code for the taxable year
during which such Plan Year ends.

 

4.2          Certification of Employer Contributions. An Employer may in its
discretion obtain a certification of the correctness of any calculations
relating to its contributions under the Plan. A certificate of an independent
accountant prepared for this purpose shall conclusively determine such issue.

 

4.3          Contribution Limitations. The following contribution limitations
under the Code shall be applied with respect to a limitation year which
coincides with the Plan Year.  The Annual Addition (as defined in Section 4.4)
allocated to any Participant’s Accounts under the Plan and under any other
defined contribution plan maintained by his Employer or a Commonly Controlled
Entity of his Employer (“Related Defined Contribution Plans”), shall not exceed
the lesser of (a) $30,000 (effective January 1, 2002,  $40,000 as adjusted for
increases in the cost of living under section 415 of the Code or regulations
thereunder) or (b) 25% of the Participant’s total Compensation (effective
January 1, 2002,  100% of the Participant’s Compensation within the meaning of
Section 415(c)(3) of the Code) paid during the Plan Year by his Employer or a
Commonly Controlled Entity of his Employer.  Effective January 1, 2002, the
Compensation limit referred to in clause (b) above shall not apply to any
contributions for medical benefits after separation from service (within the
meaning of Section 401(h) or Section 419A(f)(2) of the Code) which is otherwise
treated as an Annual Addition.  Annual Addition shall also not include
restoration payments that are allocated to Participant’s Account and catch-up
contributions, as defined in Code Section 414(v).  In applying the preceding
limitation, the Annual Addition to a Participant’s accounts in any Related
Defined Contribution Plans constituting money purchase pension plans and the
Annual Addition to a Participant’s accounts under any other Related Defined
Contribution Plans (other than money purchase pension plans) shall be limited
before the Annual Addition to his accounts are limited, to the extent such
action is not inconsistent with such other plans.  Except as provided in
Section 5.1 in the event any Employer

 

18

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contributions cannot be credited to a Participant’s Accounts because of the
limitations of this Section, excess amounts shall be corrected  in accordance
with the procedures described in IRS guidance under the Employee Plans
Compliance Resolution System (i.e. Rev. Proc. 2008-50) or any applicable
subsequent or replacement guidance.  To the extent required by regulations under
Section 415 of the Code, the Employer contributions allocated to any Participant
shall be limited by this Section to take into consideration any allocations made
for the benefit of such participant in prior Plan Years in excess of the Annual
Addition limitations then in effect or any applicable cumulative limitations. 
In applying the rules of this Section, the Administrative & Investment Committee
shall make appropriate adjustments to reflect the proper application of
Section 415 of the Code with respect to Plan Years of less than 12 months.

 

4.4          Annual Addition. The Annual Addition for each Participant for each
Plan Year means the sum of the following:

 

(a)           Employer contributions credited to the Participant’s Accounts
under Section 4.1 and employer contributions credited to the Participant’s
accounts under any Related Defined Contribution Plans (as defined in
Section 4.3);

 

(b)           Remainders and forfeitures credited to the Participant’s Accounts
and to his accounts under any Related Defined Contribution Plans;

 

(c)           After-tax contributions made by the Participant to any Related
Defined Contribution Plan; and

 

(d)           Amounts credited for the benefit of a Key Employee (as defined in
Section 12.2(g)) to a separate retiree health or life account maintained by an
Employer or a Commonly Controlled Entity of that Employer or maintained under a
Funded Welfare Plan to which the Employer or Commonly Controlled Entity
contributes. A “Funded Welfare Plan” means a trust fund established under
Section 501(c)(9) of the Code or any other trust, corporation, arrangement or
employer account which is treated as a welfare benefit fund for purposes of
Section 419(e) of the Code.  Effective January 1, 2008, the determination of
amounts included or excluded as Annual Additions under the Plan shall be made in
accordance with the final Treasury Regulations under Section 415 of the Code
dated April 5, 2007.

 

ARTICLE V

 

PARTICIPANT CONTRIBUTIONS/CONTRIBUTION LIMITATIONS

 

5.1          Pay Deferral Contributions. An Eligible Employee may elect in the
manner described below to have his Employer reduce his Compensation via payroll
deduction in an amount not less than 1% nor more than 25% (prior to January 1, 
2003, the maximum percentage was 15%) of his Compensation, in whole multiples of
1%.  Such salary reductions shall constitute Pay Deferral Contributions and
shall be contributed to the Trust by the Employer in accordance with
Section 4.1. A Participant’s salary reduction election shall be made
electronically via telephone or in any such

 

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manner prescribed by the Administrative & Investment Committee. Salary reduction
elections will become effective as of the first pay period beginning after such
elections are properly made. No salary reduction election will become effective
unless the Participant properly selects the Plan investment fund or funds to
which his Pay Deferral Contributions are to be allocated (in the manner
described in Section 6.4). Salary reduction elections shall continue in effect
(with automatic adjustments for any change in Compensation) until the
Participant alters such election in accordance with Section 5.2 or until the
Participant ceases to be an Eligible Employee.

 

Notwithstanding the percentage limit or dollar limits described in Section 5.3,
a Participant who is not less than age 50 by the end of a Plan Year beginning on
or after January 1, 2003 may contribute an additional amount of Pay Deferral
Contributions (referred to as “Catch Up Contributions”), up to the limit
described in Code Section 414(v) as in effect for the Plan Year in which the
Catch Up Contribution is made, consistent with procedures established by the
Committee.  For Catch Up Contribution purposes the salary reduction election
percentages shall be made in whole multiples of 1% limited by the amount
required to make the required employment tax and other benefit withholding.  The
Pay Deferral Contribution percentage attributable to Catch Up Contributions will
not be taken into account for purposes of the provisions of the Plan
implementing the required limitations of Code Sections 402(g) and 415.  The Plan
will not be treated as failing to satisfy the provisions of the Plan that
implement the requirements of Code Sections 401(k)(3), 401(k)(11), 401(k)(12),
410(b) or 416, as applicable, because of authorizing such Catch Up
Contributions.

 

5.2          Change in Rate of Pay Deferral Contributions/Reemployment. Within
the limitations of Section 5.1, a Participant may elect to change the rate of
his Pay Deferral Contributions effective once per payroll period. Any such
election shall be made electronically via telephone or in any such manner
prescribed by the Administrative & Investment Committee. Election changes shall
become effective as of the pay period beginning after the election is properly
made. A Participant may also elect to suspend or resume making Pay Deferral
Contributions in the same manner. If a former Participant is reemployed within
one month of his Termination of Employment, his Pay Deferral Contributions will
recommence in accordance with the most recent elections received from such
Participant prior to such Termination of Employment. Otherwise, the Participant
must make new elections in accordance with Section 5.1. Notwithstanding the
foregoing, any Participant who elects to contribute a portion of his salary to a
non-qualified deferred compensation arrangement maintained by his Employer or a
Commonly Controlled Entity of such Employer may not change the rate of his Pay
Deferral Contributions, except that he may do so at the end of each Plan Year,
to be effective as of the beginning of the following Plan Year.

 

5.3          Annual Limitations on Pay Deferral Contributions. A Participant’s
annual Pay Deferral Contributions (along with deferrals under any other salary
reduction arrangement under Code Section 401(k)) shall be limited to the amount
specified in Code Section 402(g) (which in 2000 is $10,500, and shall be
adjusted from time to time by the Internal Revenue Service under Code
Section 402(g)(i)).  Upon reaching this limit in any Plan Year, a Participant’s
Pay Deferral Contributions shall cease for the remainder of

 

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such Plan Year.  Alternatively, if a Participant’s Pay Deferral Contributions
are not ceased and exceed this limit for any Plan Year, such Pay Deferral
Contributions and the attributable earnings shall (effective January 1, 2008,
gap period income shall not be distributed) be returned to the Participant no
later than April 15 following the close of such Plan Year.

 

5.4          General Limitations on Pay Deferral Contributions. For purposes of
applying the limitations of Sections 404 and 415 of the Code, Employer
contributions (including Pay Deferral Contributions) will be reduced to the
extent necessary (with Pay Deferral Contributions reduced First) to satisfy the
following requirements:

 

(a)           With respect to all Participants, the sum of all Pay Deferral
Contributions and Matching Contributions for any Plan Year shall not exceed the
maximum deductible amount for Employer contributions for such year under the
Code; and

 

(b)           With respect to each Participant, the sum of all Pay Deferral
Contributions and Matching Contributions for any Plan Year shall not exceed the
maximum amount which can be credited for such year under Section 4.3.

 

Any reduction of Pay Deferral Contributions required under this Section 5.4
shall be made in accordance with the procedures described in Section 5.5 below.
In applying the limitations of this Section 5.4, the Administrative & Investment
Committee may consider any other Employer contributions and cash or deferred or
salary reduction contributions permitted to be reflected for such purposes under
applicable federal regulations.

 

5.5          Nondiscrimination Rules Applicable to Pay Deferral and Matching
Contributions.

 

(a)           Actual Deferral Percentage Test. For each Plan Year, at least one
of the following nondiscrimination tests under Code Section 401(k)(3) shall be
satisfied:

 

(i)            The HCE Actual Deferral Percentage shall not be more than 125% of
the NHCE Actual Deferral Percentage; or

 

(ii)           The HCE Actual Deferral Percentage shall not be more than two
percentage points higher than, nor more than 200% of, the NHCE Actual Deferral
Percentage.

 

(b)           Matching Contribution Percentage Test. For each Plan Year, at
least one of the following nondiscrimination tests under Code
Section 401(m) shall be satisfied:

 

(i)            The HCE Matching Contribution Percentage shall not be more than
125% of the NHCE Matching Contribution Percentage; or

 

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(ii)           The HCE Matching Contribution Percentage shall not be more than
two percentage points higher than, nor more than 200% of, the NHCE Matching
Contribution Percentage.

 

(c)           Multiple Use Limitation. This subsection describes a limitation on
the multiple use of the alternative limits set forth in subparagraphs
(a)(ii) and (b)(ii) above. If the sum of the HCE Actual Deferral Percentage
(“ADP”) and HCE Matching Contribution Percentage (“MCP”) exceeds the “Aggregate
Limit,” then the HCE ADP and/or the HCE MCP shall be reduced until the Aggregate
Limit is no longer exceeded, as described in paragraph (d) below. The HCE ADP
and HCE MCP shall be determined for purposes of this paragraph after any
corrections required to meet the tests in subsections (a) and (b) above,
respectively. A “multiple use” shall not be considered to occur, and this
subsection shall not apply, if either the HCE ADP or the HCE MCP does not exceed
1.25 multiplied by the NHCE ADP or NHCE MCP, respectively. The term “Aggregate
Limit” means the greater of the following two paragraphs:

 

(i)            The sum of (1) 125% of the greater of the NHCE ADP or the NHCE
MCP, and (2) two percentage points plus the lesser of the NHCE ADP or the NHCE
MCP. In no event may the amount in clause (2) exceed twice the lesser of the
NHCE ADP or the NHCE MCP.

 

(ii)           The sum of (1) 125% of the lesser of the NHCE ADP or the NHCE
MCP, and (2) two percentage points plus the greater of the NHCE ADP or the NHCE
MCP. In no event may the amount in clause (2) exceed twice the greater of the
NHCE ADP or the NHCE MCP.

 

(d)           Remedial Actions to Satisfy Tests. If the nondiscrimination
rules of subsection (a) or (b) would otherwise not be satisfied for a Plan Year,
the Administrative & Investment Committee shall take such steps during the Plan
Year as it deems necessary or appropriate to adjust the Pay Deferral
Contributions for the remainder of the Plan Year on behalf of each Participant
who is a Highly Compensated Employee in order for one of the tests to be
satisfied. If after the end of the Plan Year, it is determined that such
nondiscrimination rules would not be satisfied for such Plan Year, the
Administrative & Investment Committee shall take all or any of the actions
described below.

 

(i)            Actual Deferral Percentage Tests.

 

(A)          Return of Excess Contributions.

 

If one of the nondiscrimination tests set forth in subsection (a) would
otherwise not be satisfied for a Plan Year, the Administrative & Investment
Committee shall calculate a total amount by which Pay Deferral Contributions
must be reduced in order to satisfy such tests, in the manner prescribed by
Section 401(k)(8)(B) of the Code (the “excess contributions amount”). The amount
to be returned to each Participant who is a Highly

 

22

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Compensated Employee shall be determined by first reducing the Pay Deferral
Contributions of each Participant whose actual dollar amount of Pay Deferral
Contributions for such Plan Year is highest until the such reduced dollar amount
equals the next highest actual dollar amount of Pay Deferral Contributions made
for such Plan Year on behalf of any Highly Compensated Employee, or until the
total reduction equals the excess contributions amount. If further reductions
are necessary, then such Pay Deferral Contributions on behalf of each
Participant who is a Highly Compensated Employee and whose actual dollar amount
of Pay Deferral Contributions made for such Plan Year is the highest (determined
after the reduction described in the preceding sentence) shall be reduced in
accordance with the preceding sentence. Such reductions shall continue to be
made to the extent necessary so that the total reduction equals the excess
contributions amount.

 

The Company shall distribute to each such Participant (1) the amount of the
reductions prescribed by the preceding paragraph plus any income and minus any
loss allocable thereto and (ii) any corresponding Matching Contributions related
thereto plus any income and minus any loss allocable thereto in which the
Participant would be vested if he incurred a Termination of Employment on the
last day of such Plan Year (or earlier if such Participant actually incurred a
Termination of Employment at any earlier date), and any corresponding Matching
Contributions in which the Participant would not be vested plus any income and
minus any loss allocable thereto shall be forfeited. The amount of a
Participant’s corresponding Matching Contributions considered to be vested for
this purpose shall be determined as if all corresponding Matching Contributions
to be distributed or forfeited are the only amounts credited to the
Participant’s Employer Matching Account upon the hypothetical or actual
Termination of Employment described in the preceding sentence.

 

The amounts to be returned pursuant to this subparagraph shall be distributed no
later than the date which is 2 1/2 months after the end of the Plan Year (or if
distribution by such date is administratively impracticable, no later than the
last day of the subsequent Plan Year) for which such adjustment is made. The
amount of Pay Deferral Contributions distributed to a Participant shall be
reduced by any Pay Deferral Contributions previously distributed to such
Participant pursuant to Section 5.3 in order to comply with the limitations of
Section 402(g) of the Code. The amount of any income or loss allocable to any
such excess deferrals to be so paid including income or loss attributable to the
gap period, as described in the Treasury Regulations shall be determined
pursuant to the applicable Treasury Regulations.  The

 

23

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unadjusted amount of any reductions so distributed shall be treated as an Annual
Addition for purposes of Section 4.3.

 

(B)          Qualified Nonelective Contributions.

 

In addition to or in lieu of the actions described in subparagraph (A) above, to
the extent permitted by law, any Employer may make additional nonelective
contributions to the Plan to the extent necessary to satisfy one of the tests
set forth in subsection (a). The Administrative & Investment Committee shall
designate the Participants for whom such contributions are made. The additional
contributions must be made no later than 30 days after the end of the Plan Year,
shall satisfy the requirements under Code Section 401(k) for treatment as
“qualified nonelective contributions,” and shall be credited to the Before-Tax
Account of each Participant for whom any such contribution is made.

 

(C)          Qualified Matching Contributions.

 

In addition to or in lieu of the actions described in subparagraphs (A) or
(B) above, to the extent permitted by law, any portion of that Plan Year’s
Matching Contributions that may be treated as a “qualified matching
contribution” under Code Section 401(k).

 

(ii)           Matching Contribution Percentage Tests.

 

(A)          Return of Excess Aggregate Contributions.

 

If one of the nondiscrimination tests set forth in subsection (b) would
otherwise not be satisfied for a Plan Year, the Administrative & Investment
Committee shall calculate a total amount by which Matching Contributions must be
reduced in order to satisfy such tests, in the manner prescribed by
Section 401(m)(6)(B) of the Code (the “excess aggregate contributions amount”).
The amount of reduction applicable to each Participant who is a Highly
Compensated Employee shall be determined by first reducing the Matching
Contributions of each Participant whose actual dollar amount of Matching
Contributions for such Plan Year is highest until the such reduced dollar amount
equals the next highest actual dollar amount of Matching Contributions made for
such Plan Year on behalf of any Highly Compensated Employee, or until the total
reduction equals the excess aggregate contributions amount. If further
reductions are necessary, then such Matching Contributions on behalf of each
Participant who is a Highly Compensated Employee and whose actual dollar amount
of Matching Contributions made for such Plan Year is the highest

 

24

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(determined after the reduction described in the preceding sentence) shall be
reduced in accordance with the preceding sentence. Such reductions shall
continue to be made to the extent necessary so that the total reduction equals
the excess aggregate contributions amount.

 

The Company shall distribute to each such Participant the portion of the
reductions applicable to the Matching Contributions related thereto plus any
income and minus any loss allocable thereto in which the Participant would be
vested if he incurred a Termination of Employment on the last day of such Plan
Year (or earlier if such Participant actually incurred a Termination of
Employment at any earlier date), and any Matching Contributions in which the
Participant would not be vested plus any income and minus any loss allocable
thereto shall be forfeited. The amount of a Participant’s Matching Contributions
considered to be vested for this purpose shall be determined as if all
corresponding Matching Contributions to be distributed or forfeited are the only
amounts credited to the Participant’s Employer Matching Account upon the
hypothetical or actual Termination of Employment described in the preceding
sentence.

 

The amounts to be returned pursuant to this subparagraph shall be distributed no
later than the date which is 2 1/2 months after the end of the Plan Year (or if
distribution by such date is administratively impracticable, no later than the
last day of the subsequent Plan Year) for which such adjustment is made. The
amount of any income or loss allocable to any reductions to be distributed or
forfeited shall be determined in accordance with applicable U.S. Treasury
Regulations. The unadjusted amount of any reductions so distributed shall be
treated as an Annual Addition for purposes of Section 4.3.  The amount of any
income or loss allocable to any such excess deferrals to be so paid including
income or loss attributable to the gap period, as described in the Treasury
Regulations shall be determined pursuant to the applicable Treasury Regulations.

 

(B)          Additional Matching Contributions.

 

In addition to or in lieu of the actions described in subparagraph (A) above,
any Employer may make additional Matching Contributions to the Plan to the
extent necessary to satisfy one of the tests set forth in subsection (b). The
Administrative & Investment Committee shall designate the Participants for whom
such contributions are made. The additional contributions shall be credited to
the Employer Matching Account of each Participant for whom any such contribution
is made.

 

(iii)          Multiple Use Test.

 

If after making the adjustments required by paragraphs (1) and (2) of this
subsection for a Plan Year the Administrative & Investment

 

25

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Committee determines that the sum of the HCE ADP and the HCE MCP exceeds the
aggregate limit for such Plan Year, the Administrative & Investment Committee
shall, no later than the last day of the subsequent Plan Year, reduce the Pay
Deferral Contributions made for such Plan Year on behalf of each Participant who
is a Highly Compensated Employee and any corresponding Matching Contributions to
the extent necessary to eliminate such excess. Such reduction shall be effected
by reducing the Pay Deferral Contributions made on behalf of each Participant
who is a Highly Compensated Employee in the manner described in paragraph (1) of
this subsection.  Effective for Plan years beginning after 2001, the Multiple
Use test is repealed.

 

5.6                               Rollover Contributions.  On such forms and in
such manner as prescribed by the Administrative & Investment Committee, the Plan
will accept a direct rollover of an eligible rollover distribution from (i) a
qualified plan described in Section 401(a) or 403(a) of the Code, excluding
after-tax employee contributions, (ii) an annuity contract described in
Section 403(b) of the Code, excluding after-tax employee contributions, or
(iii) an eligible plan under Section 457 of the Code which is maintained by a
state, political subdivision of a state, or any agency or instrumentality of a
stock or political subdivision of a state.  The Plan will accept a Participant
contribution of a Participant rollover contribution of the portion of a
distribution from an individual retirement account or annuity described in Code
Section 408(a) or 408(b) that is eligible to be rolled over and would otherwise
be includible in gross income.

 

The Trustee may accept rollover amounts on behalf of a Participant only to the
extent such amounts constitute “eligible rollover distributions” (as defined in
Code Section 402(c)(4)).  A Participant who has ceased to be an Employee may
only elect to roll over to the Plan an amount credited on his behalf to the
Baxter International Inc. and Subsidiaries Pension Plan and only to the extent
such amount constitutes an “eligible rollover distribution” (as provided
above).  “Rollover Contributions” will be credited to a Rollover Account
maintained for the Participant pursuant to Section 6.1(h) as soon as
administratively practicable after such contributions are remitted to the
Administrative & Investment Committee.  No rollover election will become
effective unless the Participant properly selects the Plan investment fund or
funds to which the Rollover Contribution is to be allocated (in the manner
described in Section 6.4).  A Participant who has previously made an investment
election applicable to his Pay Deferral Contributions must apply the same
election to his Rollover Contributions and any election to the contrary shall be
disregarded.

 

ARTICLE VI

 

INVESTMENTS AND PLAN ACCOUNTING

 

6.1                               Participant Account Balance. The
Administrative & Investment Committee shall establish and maintain the following
separate accounts with respect to Participants:

 

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(a)                                 Before-Tax Account. A “Before-Tax Account”
shall be maintained for each Participant. This account shall represent the
amount of such Participant’s Pay Deferral Contributions and the expenses,
distributions, earnings and losses attributable to such account.

 

(b)                                 Employer Matching Account. An “Employer
Matching Account” shall be maintained for each Participant. This account shall
represent the portion of the Employer Matching Contributions allocated to such
Participant under the Plan and the expenses, distributions, earnings and losses
attributable to such account.

 

(c)                                  Prior Employer Matching Account. A “Prior
Employer Matching Account” shall be maintained for each Participant who received
a direct transfer of matching account assets from the Prior Plan to the Plan.
The Participant shall be 100% vested at all times in such account.

 

(d)                                 Profit Sharing Account. A “Profit Sharing
Account” shall be maintained for each Participant (i) on whose behalf a profit
sharing account was maintained under the Prior Plan or (ii) who receives a
Profit Sharing Contribution as described in Section 4.1(c). Such Profit Sharing
Account shall reflect the expenses, distributions, earnings and losses
attributable to such account.

 

(e)                                  Stock Grant Account. A “Stock Grant
Account” shall be maintained for each Participant who receives a contribution of
Company Common Stock as described in Section 4.1(d). Such Stock Grant Account
shall reflect the expenses, distributions, earnings and losses attributable to
such account.

 

(f)                                   Transition Contribution Account. A
“Transition Contribution Account” shall be maintained for each Participant who
receives Transition Contributions as described in Section 4.1(e). Such account
shall reflect the expenses, distributions, earnings and losses attributable to
such account.

 

(g)                                  After-Tax Account. An “After-Tax Account”
shall be maintained for each Participant on whose behalf an after-tax account
was maintained under the Prior Plan. Such After-Tax Account shall reflect the
expenses, distributions, earnings and losses attributable to such account. To
the extent applicable, separate subaccounts shall be established to account for
any after-tax contributions made under a predecessor plan prior to 1987, and
after-tax contributions made under a predecessor plan after 1986.

 

(h)                                 Rollover Account. A “Rollover Account” shall
be maintained for each Participant whose benefits under another plan described
in Section 401 (a) of the Code, are transferred to the Trust Fund in accordance
with Section 5.6 for the subsequent payment of such amounts in accordance with
this Plan. This account shall reflect the expenses, distributions, earnings and
losses attributable to such account.

 

The Accounts represent the Participants’ interests in the Plan and Trust Fund
and are intended as bookkeeping account records to assist the Administrative &
Investment Committee in the administration of the Plan.

 

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6.2                               Investment of Accounts. The Trustee, the
Investment Managers and any insurance institutions responsible for investment of
the Trust Fund are permitted to commingle the assets of the Trust Fund for
purposes of investment with the assets of other plans or trusts which are
intended to qualify for plan qualification and federal tax exemption under
Sections 401 (a) and 501 (a) of the Code, respectively. Any documents which are
required to be incorporated in the Plan and the Trust Agreement to permit such
commingled investments are hereby incorporated. Except to the extent required by
Sections 6.3 and 6.4, segregated investment of Plan and Trust Fund assets shall
not be required with respect to any one or more Participants. Each of the
Accounts invested in a particular investment fund shall represent an undivided
interest in such investment fund which corresponds to the balance of such
Account.

 

6.3                               Investment Funds. From time to time the
Administrative & Investment Committee may cause the Trustee, an Investment
Manager or an insurance institution to establish one or more investment funds
for the investment and reinvestment of the Trust Fund. Although the
Administrative & Investment Committee may arrange with the Trustee, Investment
Managers and insurance institutions for the establishment of investment funds,
the continued availability of these funds cannot be assured nor is it possible
to assure that the arrangements or the investment funds managed by a particular
Investment Manager, by the Trustee or by an insurance institution will continue
to be available on the same or similar terms. Participants may invest the total
amount of their Accounts (as provided in Section 6.4) among the investment funds
made available by the Administrative & Investment Committee from time to time
for such purpose. Such funds shall allow Participants to select from a range of
alternatives that offer different types of investments and different risk and
return characteristics.

 

If the Administrative & Investment Committee determines that Participants shall
exercise direction and control over the investment of their accounts in a manner
intended to insulate Plan fiduciaries from liability for investments under
Section 404(c) of ERISA, the investment funds established by the
Administrative & Investment Committee pursuant to this Section 6.3 shall afford
Participants with a broad range of investment alternatives whereby each
Participant has a reasonable opportunity to:

 

(a)                                 Affect materially the potential return on
amounts in his Accounts and the degree of risk to which such amounts are
subject;

 

(b)                                 Choose from at least three investment
alternatives:

 

(i)                                     each of which is diversified and each of
which has materially different risk and return characteristics;

 

(ii)                                  which, to the extent normally appropriate
for Participants, allow them to achieve portfolios with respect to the aggregate
of their Accounts which have risk and return characteristics at any point within
the range of all alternatives; and

 

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(iii)                               each of which when combined with investments
in the other alternatives tends to minimize the overall risk of each
Participant’s portfolio with respect to the aggregate of his Accounts through
diversification.

 

(c)                                  Diversify the investments of his Accounts
so as to minimize the risk of large losses.

 

6.4                               Investment Elections. Each Participant, in
accordance with rules promulgated under the Plan shall direct the investment of
his Accounts described in Section 6.1 in one or more of the investment funds
available under the Plan. Notwithstanding anything herein to the contrary, a
Participant may not exercise any investment discretion with respect to the
shares of Company Common Stock contributed pursuant to Section 4.1 (d) or the
earnings thereon; provided, however, that a Participant may direct the sale (but
not the repurchase) of such Company Common Stock subject to the limitations
contained in the following subsections. The Administrative and Investment
Committee has the authority to implement trading restrictions on all the
investment options available under the Plan.  With respect to the investment
funds referred to in Section 6.3 above and to the shares of Company Common Stock
contributed pursuant to Section 4.1(d) (and earnings thereon), such investment
elections shall be subject to the following limitations:

 

(a)                                 Initial Investment Election. At the same
time and in the same manner that a Participant makes his initial salary
reduction election (in accordance with the requirements of Section 5.2), or if
earlier, the same time that an Eligible Employee makes a rollover contribution
to the Plan (in accordance with Section 5.6), the Participant must direct the
Trustee (electronically via telephone or in any such manner prescribed by the
Administrative & Investment Committee) as to the investment funds to which the
amounts credited to his Accounts shall be invested. Participants shall invest
the total amount of the Accounts in any combination (in 1 % increments) of the
available investment funds. All investment elections shall continue in force
until properly changed in accordance with subsection (b) below.

 

(b)                                 Changes in Investment Elections. Subject to
the trading restriction provisions of Section 6.4(d) and (e), a Participant may
change his investment decisions daily with the understanding that once a
Participant purchases an interest in an investment fund (other than as a result
of a periodic payroll salary reduction election or the automatic quarterly
re-balancing option), he may not sell that interest for five (5) business days. 
This five (5) day business day restriction does not apply to a sale of a
Participant’s interest in the Company Common Stock Fund.  A Participant may
change his investment direction as to future contributions, as to the amounts
already in his Accounts or as to both. Changes in investment elections shall be
effected electronically via telephone or in any such manner prescribed by the
Administrative & Investment Committee and shall become effective on the day the
election is properly made (or on the following business day, if made after
3:00 p.m. central time), subject to the restrictions in Section 6.4(d) and (e).

 

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(c)                                  Applicability of Investment Elections. Both
with respect to initial investment elections and changes in investment
elections, unless the Administrative & Investment Committee prescribes
otherwise, one election shall apply to the balance, as of the effective date of
the election, in the Participant’s Employer Matching Account, Profit Sharing
Account, Before-Tax Account, After-Tax Account, Prior Employer Matching Account,
Transition Contribution Account and Rollover Account, and additions thereto;
provided that, with respect to an initial election by a Participant who makes a
rollover contribution prior to making Pay Deferral Contributions under the Plan,
such election shall apply to the balance, as of the effective date of the
election, in the Participant’s Rollover Account.

 

(d)                                 Special Limitations and Procedures
Applicable to the Company Common Stock Fund. The following limitations and
procedures shall be applicable to investment elections which specify investment
of a portion of the Participant’s Accounts in the Company Common Stock Fund:

 

(i)                                     The aggregate amount of the assets of
the Plan which may be invested in the Company Common Stock Fund shall be limited
by the Administrative & Investment Committee to the extent the Administrative &
Investment Committee deems necessary to prevent the Plan from holding 5% or more
of then outstanding Common Stock of the Company or such other amount as shall be
necessary to assure that the Plan does not become subject to the provisions of
Section 13(d) of the Securities Exchange Act of 1934.

 

(ii)                                  Voting of Common Stock of the Company.
Pursuant to the terms set forth in the Trust Agreement, each Participant having
an interest in the Company Common Stock Fund shall have the right to direct the
manner in which the Trustee shall vote the Company Common Stock credited to the
Participant’s Accounts. Before each annual or special meeting of shareholders of
the Company, there will be sent to each applicable Participant a copy of the
proxy solicitation material for such meeting, together with a form requesting
instructions to the Trustee on how to vote the Company Common Stock allocated to
such Participant’s Accounts. Instructions will be mailed directly to the Trustee
to preserve confidentiality. Upon receipt of such instructions, the Trustee will
vote such shares as instructed. The Trustee will vote Company Common Stock
allocated to Participants’ Accounts for which the Trustee receives no valid
voting instructions and Company Common Stock not credited to Participant’s
Accounts, if any, held in the Trust Fund in a manner consistent with the
provisions of the Trust Agreement and applicable law. The Administrative &
Investment Committee may, but is not required to, direct the Trustee with
respect to the voting of Company Common Stock described in the previous
sentence, and the Trustee will follow such directions except where to do so
would be a breach of the Trustee’s duties under the Trust Agreement or
applicable law. The Trustee may not divulge information with respect to any
Participant’s directions regarding voting of Company Common Stock allocated to
his Accounts. A Participant is deemed to be a named fiduciary of the Plan with
regard to all instructions the Participant provides to the Trustee as to the
manner to which it shall vote the Company Common Stock credited to such
Participant’s account.

 

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(iii)                               Offers for Company Common Stock. Pursuant to
the terms set forth in the Trust Agreement, in the event that the stockholders
of the Company have received an offer, including a tender offer, for the
purchase or exchange of their shares of Company Common Stock, the following
provisions shall apply:

 

(A)                               Each Participant having an interest in the
Company Common Stock Fund shall have the right to direct the Trustee concerning
the sale or tendering of the number of shares of Company Common Stock credited
to the Participant’s Accounts. A Participant is deemed to be a named fiduciary
of the Plan with regard to all instructions the Participant provides to the
Trustee as to the manner to which it shall vote the Company Common Stock
credited to such Participant’s account.

 

(B)                               The Trustee will use its best efforts to
communicate or cause to be communicated to all Participants the provisions of
the Plan and Trust Agreement relating to such offer, all communications directed
generally to the owners of the securities to whom the offer is made or
available, and any communications that the Trustee may receive from persons
making the offer or any other interested party (including the Company) relating
to the offer. The Company and the Administrative & Investment Committee will
provide the Trustee with such information and assistance as the Trustee may
reasonably request in connection with these communications to Participants.
Neither the Company nor the Trustee may interfere in any manner with any
Participant’s investment decision with respect to such an offer.

 

(C)                               If the offer is for all Company Common Stock
held by the Trustee in the Trust Fund, then the Trustee will:

 

1.                                      Accept or reject the offer with respect
to Company Common Stock allocated to each Participant’s Accounts according to
that Participant’s investment decision, except where to do so would be a breach
of the Trustee’s duties under the Trust Agreement or applicable law; and

 

2.                                      Accept or reject the offer with respect
to Company Common Stock allocated to Participants’ Accounts for which no valid
investment decision was received by the Trustee and with respect to unallocated
Company Common Stock held in the Trust Fund in the Trustee’s sole discretion.

 

The Trustee may not divulge information with respect to any Participant’s
investment decision regarding the offer.

 

(D)                               If the offer is for less than all the Company
Common Stock held by the Trustee in the Trust Fund, all provisions of paragraphs
(A) through (C) will be applied to that offer, except that each Participant will
have the opportunity to make an investment decision for a pro rata portion of
the Company Common Stock allocated to his Accounts and the Trustee, after
effecting those investment decisions, will make its acceptance or rejection of
the offer with respect to a pro rata portion of the Company Common Stock
allocated to Accounts for which it received no valid investment instructions or
which is held unallocated in the Trust Fund,

 

31

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so that the offer has been accepted or rejected with respect to the full amount
of Company Common Stock held by the Trustee in the Trust Fund which was subject
to the offer.

 

(E)                                Notwithstanding the provisions of paragraphs
(C) and (D) above, the Administrative & Investment Committee may, but is not
required to, direct the Trustee with respect to the acceptance or rejection of
any offer described in paragraph (C) or (D) with respect to Company Common Stock
allocated to Participants’ Accounts for which no valid investment instructions
are received by the Trustee and with respect to unallocated Company Common Stock
held in the Trust Fund, and the Trustee shall accept or reject any such offer in
accordance with any such directions from the Administrative & Investment
Committee to the Trustee with respect to the offer, except where to do so would
be a breach of the Trustee’s duties under the Trust Agreement or applicable law.

 

(F)                                 Following the Trustee’s sale or tender of
shares pursuant to the terms of this subsection, each affected Participant’s
interest in the Company Common Stock Fund shall be eliminated and the proceeds
from the sale or tender of the shares credited to the Participant’s Accounts
shall be subject to the Participant’s investment direction.

 

(iv)                              Special Limitations and Procedures Applicable
to the Baxter Common Stock Fund. The shareholder rights in the event of a tender
offer described in subparagraph (d)(iii) shall also be applicable to
Participants in the Baxter Common Stock Fund with respect to a pro rata portion
of the unallocated shares of Baxter Common Stock in the Baxter Common Stock Fund
determined as described above. For purposes of this paragraph, references to
“Company” and “Company Common Stock” in paragraph (d) shall mean “Baxter” and
“Baxter Common Stock,” respectively.

 

(v)                                 Company Common Stock Fund Trading
Restrictions.  Purchases and sales of an interest in the Company Common Stock
Fund other than pursuant to a Participant’s periodic salary reduction investment
election are subject to the limitations imposed by the Company’s insider trading
policy.  Those Participants who are deemed to be Section 16(b) officers may have
additional restrictions on trading within the Company Common Stock Fund.

 

(e)                                  Generally Applicable Trading Restrictions. 
A Participant shall be allocated three (3) trades within the Plan’s investment
options per calendar quarter.  For purposes of this clause, one trade is equal
to the sale of an interest in one of the Plan’s investment options and the
reinvestment of the sale proceeds in one or more of the Plan’s other investment
options.  Upon execution of three (3) trades within a calendar quarter, a
Participant shall be prohibited from purchasing any interest in the Plan’s
investment options (other than pursuant to a Participant’s periodic payrolls
salary reduction election, the automatic quarterly re-balancing option, or the
purchase of an interest in the money market and/or stable value fund equivalent
investment option available in the Plan) for the period beginning on the date
such trade is executed, and ending on the last day of the calendar quarter in
which the trade was executed.  The number of time a Participant may

 

32

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redirect investments from other investment options (including the Company Common
Stock Fund) into the Plan’s money market and/or stable value fund equivalent
investment option is not limited.

 

6.5                               Information Provided Under ERISA
Section 404(c).

 

(a)                                 Participant’s Opportunities to Exercise
Control. The Administrative & Investment Committee shall communicate its
rules to Participants in a manner calculated to ensure that each Participant has
a reasonable opportunity to direct the investment of his Accounts. In addition,
if the Administrative & Investment Committee determines that Participants shall
exercise direction and control over the investment of their Accounts in a manner
intended to insulate Plan fiduciaries from liability for investments under
Section 404(c) of ERISA, it shall provide Participants with:

 

(i)                                     A statement that the Plan is intended to
constitute a plan described in Section 404(c) of ERISA and that the Plan’s
fiduciaries may be relieved of liability for any losses which are the direct and
necessary result of investment instructions given by the Participant;

 

(ii)                                  A description of the investment funds
under the Plan and a general description of the investment objectives and risk
and return characteristics of each such fund, including information relating to
the type and diversification of assets comprising the investment fund;

 

(iii)                               The identity of each investment fund’s
Investment Manager;

 

(iv)                              An explanation of any specified limitations on
transfers to or from a designated investment fund and any restrictions on the
exercise of voting, tender and similar rights appurtenant to the Participant’s
investment in the investment fund;

 

(v)                                 A description of any transaction fees and
expenses which affect the Participant’s Accounts in connection with purchases or
sales of interests in the investment funds;

 

(vi)                              A description of the procedures established to
provide for the confidentiality of information relating to the purchase, holding
and sale of Company Common Stock, and the exercise of voting, tender and similar
rights by Participants through investment in the Company Common Stock Fund;

 

(vii)                           In the case of an investment fund which is
subject to the Securities Act of 1933, and in which the Participant has no
assets invested immediately following or immediately prior to the Participant’s
initial investment in that fund, a copy of the most recent prospectus provided
to the Plan; and

 

33

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(viii)                        Any materials provided to the Plan relating to the
exercise of voting, tender or similar rights which are incidental to the holding
in the Account of a Participant of an ownership interest in the Company Common
Stock Fund.

 

(b)                                 Additional Information Provided Upon
Request. If the Administrative & Investment Committee determines that
Participants shall exercise direction and control over the investment of their
Accounts in a manner intended to insulate Plan fiduciaries from liability for
investments under Section 404(c) of ERISA, it shall provide Participants, upon
their request, with the following information:

 

(i)                                     A description of the annual operating
expenses of each investment fund (e.g., investment management fees,
administrative fees, transaction costs) which reduce the rate of return to
Participants, and the aggregate amount of such expenses expressed as a
percentage of average net assets of the fund;

 

(ii)                                  Copies of any prospectuses, financial
statements and reports, and of any other materials relating to the investment
funds, to the extent such information is provided to the Plan;

 

(iii)                               A list of the assets comprising the
portfolio of each investment fund and the value of each such asset; and

 

(iv)                              Information concerning the value of shares or
units in the investment funds, as well as the past and current investment
performance of such funds, determined, net of expenses, on a reasonable and
consistent basis.

 

6.6                               Investment Fund Accounting. The undivided
interest of each Participant’s Accounts in an investment fund shall be
determined in accordance with the accounting procedures specified in the Trust
Agreement, investment management agreement, insurance contract, custodian
agreement or other document under which such investment fund is maintained (the
“Investment Fund Document”). To the extent not inconsistent with such
procedures, the following rules shall apply:

 

(a)                                 Deposits. Amounts deposited in an investment
fund shall be deposited by means of a transfer of such amounts to such
investment fund to conform with the investment elections properly received in
accordance with Section 6.4.

 

(b)                                 Transfers. Amounts required to be
transferred from an investment fund to satisfy benefit payments and required
transfers to effectuate investment elections in accordance with Section 6.4
shall be transferred from such investment funds as soon as practicable following
receipt by the Trustee or Investment Manager of proper instructions to complete
such transfers.

 

(c)                                  Allocation of Fund Earnings. Except as
provided in the applicable Investment Fund Document, all amounts deposited in an
investment fund shall be invested as soon as practicable following receipt of
such deposit. Notwithstanding the primary purpose or investment policy of an
investment fund, assets of any investment fund which are not invested in the
primary investment vehicle authorized by the

 

34

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Investment Fund Document shall be invested in such short term instruments or
funds as the Trustee or applicable Investment Manager or insurance institution
shall determine pending investment in accordance with such Investment Fund
Document.

 

(d)                                 Accounting for Purchases and Sales of
Company Common Stock. Purchases and sales of Company Common Stock shall be made
for the Company Common Stock Fund in accordance with the provisions of the Trust
Agreement and in accordance with the following:

 

(i)                                     No commissions shall be paid in
connection with purchases or sales of Company Common Stock from or to any
disqualified person or party in interest (as defined for purposes of
Section 4975(e)(2) of the Code or Section 3(14) of ERISA).

 

(ii)                                  Purchases of Company Common Stock other
than purchases on the New York Stock Exchange (the “Exchange”) shall be at a
price not greater than the last recorded sales price quoted for such shares on
the Exchange on the last trading day on which there was a recorded sale of such
shares immediately preceding the date of such purchases (the “Exchange Trading
Price”).

 

(iii)                               Sales of Company Common Stock other than
sales on the Exchange shall be at a price not less than the Exchange Trading
Price (as defined in subparagraph (ii) above).

 

(iv)                              In-kind contributions of the Employers,
including contributions of Company Common Stock, are valued at fair market
value. For this purpose Company Common Stock shall be valued as of the date of
such contribution at the then Exchange Trading Price (as defined in subparagraph
(ii) above but determined as of the end of the date on which such contribution
is made if such date is a trading day on the Exchange). If there are no sales of
Company Common Stock on the date as of which the Exchange Trading Price is
determined, then the fair market value of such common stock shall be the mean of
the bid and asked prices for such date.

 

(v)                                 If the Administrative & Investment Committee
is unable to determine the Exchange Trading Price (as defined in subparagraph
(ii) above) because sales prices on the Exchange are not so quoted, such quotes
are not available to the Administrative & Investment Committee or for any other
reason, then the Administrative & Investment Committee may utilize a composite
index price or other price which is generally accepted for the establishment of
fair market value in lieu of the Exchange Trading Price for purposes of the
restrictions of subparagraphs (ii) and (iii) above.

 

6.7                               Expenses. Unless paid by the Employers, all
costs and expenses incurred in connection with the general administration of the
Plan and Trust shall be allocated among each investment funds in the proportion
in which the amount invested in each such fund bears to the amount invested in
all funds as of the Accounting Date preceding the date of allocation. All costs
and expenses directly identifiable to one fund shall be

 

35

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allocated to that fund. No commission expenses shall be paid from the Plan with
respect to transactions described in Section 6.6(d)(i).

 

6.8                               Accounting Dates. All Accounts shall be
adjusted in accordance with Section 6.11 as of each Accounting Date.

 

6.9                               Crediting Employer Contributions.

 

(a)                                 Employer Matching Contributions shall be
credited to the appropriate Accounts of Participants as of the first Accounting
Date coincident with or next following the end of the payroll period for which
such contributions are made, regardless of the date such contributions are
actually made. Expenses, distributions, earnings or losses attributable to such
amounts shall be separately credited pursuant to Sections 6.7 and 6.11.

 

(b)                                 Employer Profit Sharing Contributions shall
be credited to the appropriate Accounts of Participants as of the first
Accounting Date coincident with or next following the end of the calendar
quarter for which such contributions are made, regardless of the date such
contributions are actually made. Expenses, distributions, earnings or losses
attributable to such amounts shall be separately credited pursuant to Sections
6.7 and 6.11.

 

(c)                                  Transition Contributions shall be credited
to the appropriate Accounts of Participants as of the first Accounting Date
coincident with or next following the end of the Plan Year for which such
contributions are made, regardless of the date such contributions are actually
made. Expenses, distributions, earnings or losses attributable to such amounts
shall be separately credited pursuant to Sections 6.7 and 6.11.

 

6.10                        Crediting Pay Deferral Contributions. Pay Deferral
Contributions shall be credited to the appropriate Accounts as of the first
Accounting Date coincident with or next following the end of the payroll period
for which such contributions are made, regardless of the date such contributions
are actually made. Expenses, distributions, earnings or losses attributable to
such amounts shall be separately credited pursuant to Sections 6.7 and 6.11.

 

6.11                        Adjustment of Account Balances. As of each
Accounting Date the Administrative & Investment Committee shall cause the
Accounts of Participants to be adjusted to reflect adjustments in the value of
the Trust Fund, to reflect contributions (net of Forfeitures) credited in
accordance with Sections 6.9 and 6.10 and to reflect distributions of benefits
(including transfers and withdrawals) as follows:

 

(a)                                 First, adjust the Accounts as of the last
Accounting Date of all Participants to reflect the Adjusted Net Worth (as
described below) of the Trust Fund by applying the earnings adjustment
rules applicable to each investment fund and crediting earnings for segregated
investments to the appropriate Accounts of the Participants to whom such
investments pertain; and

 

36

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(b)                                 Next, credit Employer Matching
Contributions, (including Forfeitures applied towards such contributions in
accordance with Section 7.4) Profit Sharing Contributions, Transition
Contributions, and Participant Pay Deferral Contributions to the proper
Accounts; and

 

(c)                                  Finally, charge to the proper Accounts all
distributions made since the previous Accounting Date.

 

The “Adjusted Net Worth” of the Trust Fund as of any date means the fair market
value of the Trust Fund as determined by the Trustee. If an error in the
adjustment of Accounts under this Section is discovered, the Administrative &
Investment Committee shall correct such error either (i) by crediting or
changing the adjustment necessary to make such correction to or against income
or unclaimed amounts or as an expense of the Trust Fund for the Plan Year in
which the correction is made or (ii) by requiring the Participant’s Employer to
make a special contribution to the Plan.

 

ARTICLE VII

 

DISTRIBUTION OF ACCOUNT BALANCES

 

7.1                               Retirement, Disability or Death. If a
Participant incurs a Termination of Employment, while employed by an Employer or
a Commonly Controlled Entity of an Employer, on or after his attainment of age
55 or because of his Disability or death, the balance in his Accounts, after all
adjustments required under the Plan have been made, shall be determined as soon
as practicable and shall be fully vested and nonforfeitable. Such amount shall
be distributable to the Participant or, in the event of the Participant’s death,
to his Spouse or Beneficiary in accordance with Section 7.6.  Effective
January 1, 2007,  if a Participant dies while performing qualified military
service, the Participant’s Spouse or Beneficiaries shall be entitled to any
additional benefits (other than benefit accruals relating to the period of
qualified military service) provided under the Plan had the Participant resumed
Employment and then incurred a Termination of Employment on account of death.

 

7.2                               Resignation or Dismissal. If a Participant
incurs a Termination of Employment for reasons other than a Termination of
Employment on or after his attainment of age 55, Disability or death, the
balance in his Prior Employer Matching Account, Before-Tax Account, Profit
Sharing Account, Stock Grant Account (if any), Transition Contribution Account
(if any), After-Tax Account, Rollover Account and the vested portion of his
Employer Matching Account determined in accordance with the vesting schedule
below, after all adjustments required under the Plan have been made, shall be
determined as soon as practicable and shall be fully vested and nonforfeitable.
The portion of such Account which is vested, based upon the balances of all such
Accounts as of the Accounting Date coincident with or next preceding the date of
distribution (after adjustments required under the Plan as of that date have
been made) shall be distributable to the Participant in accordance with
Section 7.6.

 

37

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Vesting Schedule

 

Years of Vesting Service

 

Vested Percentage

 

 

 

 

 

Less than 1 year

 

0

%

 

 

 

 

1 year but less than 2 years

 

20

%

 

 

 

 

2 years but less than 3 years

 

40

%

 

 

 

 

3 years but less than 4 years

 

60

%

 

 

 

 

4 years but less than 5 years

 

80

%

 

 

 

 

5 or more years

 

100

%

 

7.3                               Special Vesting Rules Upon Sale of Business.
In the event of a sale by the Company of the stock or substantially all of the
assets of an entity that is an Employer, so that the entity ceases to be a
participating Employer in this Plan, the Administrative & Investment Committee,
in its sole discretion, may determine that all or a portion of the affected
Participants (i.e., those who are employed by such participating  Employer) of
said entity shall be fully vested in their Account Balances, determined on the
date as of which the entity is no longer a participating Employer in this Plan,
provided that such Participant is not rehired before actual payment. In lieu of
full vesting upon such a sale, the Administrative & Investment Committee may
direct that, in accordance with an agreement between the Company and the
purchaser of such stock or assets, periods of a Participant’s service following
the effective date of such sale be counted towards determination of such
Participant’s Vesting Service hereunder. In the absence of Administrative &
Investment Committee action, no accelerated vesting or other special vesting
rules shall apply to any Participant in connection with any such sale, except as
otherwise required by law. The special vesting rules prescribed by this
Section shall be applied in a uniform and nondiscriminatory manner to all
similarly situated classes of affected Participants.  Effective January 1, 2002
an affected Participant shall be deemed to have a Severance from Employment and
thereby be entitled to a distribution of his or her Account Balance.  However,
such a distribution shall be subject to the other provisions of the Plan
regarding distributions, other than provisions that require a Severance from
Employment before such amounts may be distributed.

 

7.4                               Forfeitures. The portion of any Participant’s
Employer Matching Account which is not vested under Section 7.2 or 7.3 will
become a Forfeiture upon such Participant’s Termination of Employment and,
except as provided in subsection (c) below, will be applied to reduce Employer
Matching Contributions on a periodic basis. However, if such Participant resumes
employment with an Employer or Commonly Controlled Entity of an Employer before
incurring five consecutive One-Year Breaks In Service, the Forfeiture
(unadjusted for subsequent earnings or losses) shall be restored to the
Participant’s Employer Matching Account if the Participant restores to the Plan
the amount previously distributed in accordance with subsection (a) below unless
such restoration is not required under an applicable supplement or appendix to
this Plan. The

 

38

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restorations of a Participant’s Employer Matching Account are subject to the
following rules:

 

(a)                                 Buy-Back Contribution. The Forfeiture shall
be restored if within 60 months following such Participant’s resumption of
employment, he deposits with the Administrative & Investment Committee an amount
equal to the portion of his Employer Matching Account which was previously
distributed.

 

(b)                                 Restoration of Forfeitures. As of the first
Accounting Date following receipt by the Administrative & Investment Committee
of the deposit described in subsection (a) above (or as soon as practicable
thereafter), the Participant’s Employer Matching Account shall be credited with
the Forfeiture.

 

(c)                                  Source of Restoration. The amounts
necessary to restore the Forfeiture in accordance with subsection (b) above
shall be allocated for such purpose from Forfeitures not yet applied towards
Employer Matching Contributions, and if such Forfeitures are not sufficient for
this purpose, then, to the extent necessary to satisfy such restoration, the
balance of such Forfeitures in accordance with subsection (b) above shall be
restored by a special allocation of Employer Matching Contributions which shall
reduce the amounts available to credit to all other Participants as of such
Accounting Date. In lieu of such method of restoring the Forfeiture, the
Participant’s Employer may make a special contribution which shall be utilized
solely for purposes of such restoration.

 

7.5                               Benefit Commencement Date. Except as otherwise
provided in this Section or Section 10.6, the Accounts of a Participant who
incurs a Termination of Employment shall be distributed in accordance with
Section 7.6 as soon as practicable following the Participant’s Normal Retirement
Date. Notwithstanding the preceding sentence, the following rules shall apply
for purposes of determining the benefit commencement date for any Participant or
Beneficiary:

 

(a)                                 Cash-Out of Small Amounts. (i) If the vested
portion of a Participant’s Accounts does not exceed $5,000, the Administrative &
Investment Committee shall direct the Trustee to distribute such amount to the
Participant (or to the Beneficiary, if appropriate) in a single sum without the
consent of the Participant. The remaining portion shall be treated as a
Forfeiture. A distribution pursuant to this subsection shall be made as soon as
administratively practicable following the Participant’s Termination of
Employment. (ii) In the event of a distribution greater than $1,000, in
accordance with the provisions of clause (i) above, if the Participant does not
elect to have such distribution paid directly to an eligible retirement plan
specified by the Participant in a direct rollover or to receive the distribution
directly in accordance with Article VIII, then the Administrative and Investment
Committee will pay the distribution in a direct rollover to an individual
retirement plan designated by the Administrative and Investment Committee.

 

(b)                                 Restrictions on Immediate Distribution. If
the vested portion of a Participant’s Accounts exceeds $5,000, the Participant
must consent to any distribution

 

39

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

 

commencement prior to his Normal Retirement Date; provided, however, that
consent under this subsection is not required to make distributions necessary to
satisfy Code Section 401(a)(9), 401(k)(3), 401(m), 402(g) or 415.  In order for
a distribution to commence prior to a Participant’s Normal Retirement Date, the
Participant must elect such a distribution electronically via telephone or in
any such manner prescribed by the Administrative Committee.  Any consent by a
Participant to receive a distribution prior to his Normal Retirement Date will
not be valid unless such consent satisfies the requirements of (i) and (ii):

 

(i)                                     The Participant receives a notice,
advising him of (A) his right to defer distribution to his Normal Retirement
Date, (B) the eligibility requirements for, the material features of, and the
relative values of, the optional forms of benefits available under the Plan, and
(C) his right to authorize a rollover of the vested portion of his Accounts. 
The notice will be given no less than 30 nor more than 90 days prior to the
Participant’s benefit commencement date, or as otherwise required under Code
Section 411(a)(11).  Notice may be provided under any method approved under
Treasury Regulation Section 1.411(a)-11.

 

(ii)                                  The Participant’s consent is provided no
less than 30 nor more than 90 days prior to the Participant’s benefit
commencement date, or as otherwise required under Code Section 411(a)(11).  A
Participant who has received the notice and, if required, a summary thereof, may
make an affirmative election to receive payment prior to the expiration of the
30-day period provided, (A) the Administrative Committee or its delegate informs
the Participant that he or she has a right to a period of at least 30 days after
receiving the notice to consider the decision as to whether to elect a
distribution and, if applicable, a particular distribution option, and (B) the
Participant, after receiving the notice, affirmatively elects a distribution.

 

(c)                                  Commencement Date in Absence of Participant
Direction. Subject to Section 10.6, unless a Participant elects otherwise (in
the time and manner prescribed by the Administrative & Investment Committee),
distribution of a Participant’s Accounts which are distributable in accordance
with Sections 7.1 or 7.2 shall commence no later than the 60th day after the end
of the Plan Year in which the latest of (i), (ii) or (iii) below occurs.

 

(i)                                     The Participant’s Normal Retirement
Date;

 

(ii)                                  The date of the Participant’s Termination
of Employment; or

 

(iii)                               The 5th anniversary of his initial Plan
participation.

 

If such Participant incurs a Termination of Employment prior to his Normal
Retirement Date, the Participant will be deemed to have made an election to
defer distribution to the earlier of (i) the date the Participant provides
written consent to a distribution consistent with the requirements described in
subsection (c) or his Normal Retirement Date.

 

40

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

 

(d)                                 Benefit Commencement Date of Beneficiary. If
a Participant dies prior to the commencement of his benefits, and the vested
portion of the Participant’s Accounts exceeds $5,000, benefits payable to his
Spouse or other Beneficiary shall commence in accordance with the election of
such Spouse or Beneficiary, pursuant to Section 7.6. Notwithstanding the
foregoing, the commencement and duration of benefit payments to Spouses and
other Beneficiaries shall be subject to the requirements of Code
Section 401(a)(9), as described in Sections 7.9 and 7.10. In addition, no
benefits shall be paid to any Spouse or other Beneficiary prior to the
completion by the Administrative & Investment Committee of its determination of
the status of such Spouse or other Beneficiary as a proper payee with respect to
such Participant. If the Participant’s surviving Spouse dies prior to
commencement of such benefits, the benefits payable to any contingent
Beneficiary shall commence no later than December 31 of the calendar year
following the calendar year in which such surviving Spouse’s date of death
occurs. For purposes of this subsection, a Participant’s benefits shall be
deemed to have commenced on the date the Participant requests payment of his
distribution, in accordance with subsection (b).

 

(e)                                  Alternate Payee Commencement Date. Benefits
payable to a former Spouse or other member or former member of the Participant’s
family pursuant to a Qualified Domestic Relations Order (as defined in Code
Section 414(p)) will commence no sooner than the date the Administrative &
Investment Committee or its delegate completes its determination that the order
satisfies the requirements set forth in Code Section 414(p). If the value of the
alternate payee’s distribution does not exceed $5,000, it shall be distributed
in a single sum without the consent of the alternate payee as soon as
practicable following the date referred to in the preceding sentence. If the
value of the alternate payee’s distribution exceeds $5,000, then the
commencement of benefits payable to the alternate payee shall be made at the
time prescribed by the terms of the Qualified Domestic Relations Order, subject,
however, to the rules set forth herein as applied to the applicable Participant.
For such purpose, the alternate payee shall have the same payment options as are
available to Participants other than a joint and survivor annuity with the
alternate payee’s subsequent spouse.

 

(f)                                   Minimum Required Distribution Rules. The
requirements of this subsection are intended to reflect the applicable rules of
Code Section 401(a)(9) for pre-death distributions and shall take precedence
over any inconsistent provisions of the Plan. The entire interest of a
Participant must be distributed or begin to be distributed no later than the
Participant’s “required beginning date.” Distributions in all cases will be made
in accordance with Section 401(a)(9) of the Code and Treasury Regulations
promulgated thereunder.

 

(i)                                     Participants Who Are Not 5%-Owners. The
provisions of this paragraph shall apply only to a Participant who was not a
5%-owner (as defined in Code Section 416(i)) at any time during the Plan Year in
which the Participant attains age 70½. With respect to a Participant who attains
age 70½. during the 1996 Plan Year, such Participant’s required beginning date
shall be April 1, 1997 unless that Participant makes an election, in the time
and manner prescribed by the Administrative & Investment Committee, to defer
commencement until after his Termination of Employment. With

 

41

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

 

respect to a Participant who attains age 70½. on or after January l, 1997, the
required beginning date is April 1 of the calendar year following the later of
(i) the calendar year in which the Participant attains age 70½. and (ii) subject
to subsection (c) above, the calendar year in which contains the Participant’s
Termination of Employment. Notwithstanding the preceding sentence, to the extent
required by U.S. Treasury Regulations or other guidance of general applicability
of the Internal Revenue Service, a Participant’s required beginning date shall
be April 1 of the calendar year following the calendar year in which the
Participant attains age 70½., if the Participant so elects.

 

(ii)                                  5%-Owners. The required beginning date of
a Participant who is a 5%-owner (as described above) is April 1 of the calendar
year following the calendar year in which the Participant attains age 70½..

 

If the Participant’s benefit is to be distributed pursuant to this subsection in
the form of installments, the following minimum distribution rules shall apply
on or after the required beginning date:

 

(iii)                               If a Participant’s benefit is to be
distributed over (A) a period not extending beyond the life expectancy of the
Participant or the joint life expectancy of the Participant and Beneficiary or
(B) a period not extending beyond the life expectancy of the Beneficiary, the
amount required to be distributed for each calendar year must be at least equal
to the quotient obtained by dividing the Participant’s benefit by the applicable
life expectancy.

 

(iv)                              Life expectancy (or joint life expectancy) may
be calculated by reference to the Uniform Lifetime Table and Joint and Last
Survivor Table set forth in Treasury Regulation Section 401(a)(9)-9.  Except as
provided in Section 7.10(e), life expectancy shall not be recalculated.

 

The hierarchy for distributions required to be made pursuant to this subsection
(f) shall be the hierarchy applicable to installment distributions provided in
Section 7.6(c).

 

The date on which distribution of a Participant’s Accounts to a Participant or
Beneficiary commences under this Section 7.5 is his “Benefit Commencement Date.”

 

7.6                               Methods of Benefit Payment. Participants and,
if applicable, Beneficiaries shall make elections regarding the methods of
benefit payments in such manner and at such times as the Administrative &
Investment Committee shall require. A Participant’s Accounts shall be
distributed to him, or in the event of his death to his Beneficiary, in one of
the following methods:

 

(a)                                 Single Sum Form of Payment. This is the
normal form of benefit payment. Unless an optional method of payment is elected
by the Participant in accordance with subsection (b), (c), or (d) below, or by
the Participant’s Beneficiaries in accordance with subsection (c) or (d) below,
the Participant’s Accounts will be distributed in a single sum, provided that if
the Participant’s Accounts exceed $5,000,

 

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distribution thereof in a single sum may not be made prior to certain designated
times without the Participant’s or Beneficiaries’ consent, if required pursuant
to Section 7.5.

 

(b)                                 RESERVED

 

(c)                                  Optional Installment Form of Payment. If
the Participant’s Accounts exceed $5,000, the Participant or his Beneficiaries,
as applicable, may elect to have the Participant’s Accounts distributed in the
form of substantially equal annual, semi annual, quarterly or monthly
installment payments. Such installment payments shall not be payable over a
period of time in excess of the “maximum installment period” (as defined in
Section 7.9). Installment distributions shall be deducted from the Participant’s
Accounts in the following order (and shall be deducted on a pro rata basis from
the investment funds to which amounts in such Accounts are allocated):

 

(i)                                     The portion of the Participant’s
After-Tax Account attributable to after-tax contributions made prior to 1987.

 

(ii)                                  The portion of the Participant’s After-Tax
Account attributable to after-tax contributions made after 1986 (if any), and
the portion of such account attributable to earnings, in the proportion
prescribed by section 72 of the Code.

 

(iii)                               Rollover Account.

 

(iv)                              Prior Employer Matching Account.

 

(v)                                 Vested portion of Employer Matching Account.

 

(vi)                              Profit Sharing Account.

 

(vii)                           Transition Contribution Account.

 

(viii)                        Before-Tax Account.

 

(ix)                              Stock Grant Account.

 

(d)                                 Partial Single Sum Form of Payment. A
Participant or his Beneficiaries, as applicable, may elect to have less than
100% of the Participant’s Accounts paid in a single sum. Such election shall be
made in accordance with the procedures described in Section 7.5(c). The
hierarchy for distributions made pursuant to this subsection shall be the
hierarchy applicable to installment distributions provided in subsection
(c) above.

 

Benefits may be distributed in cash or, if applicable, in whole shares of
Company Common Stock from the Company Common Stock Fund or Baxter Common Stock
from the Baxter Common Stock Fund, provided that property distributed in Company
Common Stock may only be distributed if the requirements of Section 9.11 are
satisfied. As part of the distribution election, a Participant or his
Beneficiaries, as applicable, must indicate the amount, if any, of the balance
in the Participant’s Accounts invested in the

 

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Company Common Stock Fund that he wishes to receive in Company Common Stock.

 

Neither the Employers nor the Administrative & Investment Committee shall be
obligated to consider the tax effects upon a Participant, Spouse, or other
Beneficiary of receipt by that Participant or such Spouse or other Beneficiary
of Plan benefits. It shall be the responsibility of Participants to consider the
tax effects of the time and manner of benefit distribution and the disposition
of distributions upon receipt by a Participant, Spouse, or other Beneficiary.

 

7.7                               Direct Rollovers. Notwithstanding any
provision of the Plan to the contrary that would otherwise limit a distributee’s
election hereunder, a distributee may elect, at the time and in the manner
prescribed by the Plan Administrator, to have any portion of an eligible
rollover distribution paid directly to an eligible retirement plan specified by
the distributee in a direct rollover.

 

(a)                                 Notice of Rights. Each distributee shall be
provided with a notice as described in Code Section 402(f) of his or her rights
under this subsection no less than 30 days (or such shorter period permitted by
applicable U.S. Treasury regulations) and no more than 180 days before the
commencement of an eligible rollover distribution to the distributee from the
Plan. Written consent of the distributee to the distribution must not be made
before the distributee receives the notice and must not be made more than 90
days before such commencement.  A participant who has received the 402(f) Notice
and, if required, the summary thereof, may waive the 30-day notice requirement
by making an affirmative election to make or not to make a direct rollover of
all or a portion of his or her Vested Interest.  The 402(f) Notice may be
provided under any method approved under Treasury Regulation section
1.411(a)-11.

 

(b)                                 Definitions.

 

(i)                                     Eligible rollover distribution:  An
eligible rollover distribution is any distribution of all or any portion of the
balance to the credit of the distributee, except that an eligible rollover
distribution does not include:  any distribution that is one of a series of
substantially equal periodic payments (not less frequently than annually) made
for the life (or life expectancy) of the distributee or the joint lives (or
joint life expectancies) of the distributee and the distributee’s designated
Beneficiary, or for a specified period of 10 years or more; any distribution to
the extent that distribution is required under Code Section 401(a)(9); effective
January 1, 1999, any hardship distribution described in Code
Section 401(k)(2)(B)(i)(IV); and the portion of any distribution that is not
includible in gross income (determined without regard to the exclusion for net
unrealized appreciation with respect to employer securities).  Effective with
respect to distributions made on and after January 1, 2002, (i) no portion of a
hardship distribution is includible in an eligible rollover distribution and
(ii) a portion of a distribution will not fail to be an eligible rollover
distribution merely because it consists of after-tax employee contributions that
are not includible in gross income, provided, however, that such portion may be
transferred only to an individual retirement account or annuity described in
Code Sections 408(a) or (b), or to a qualified defined contribution plan
described in Code Sections 401(a) or 403(a) that agrees to separately account
for the

 

44

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transferred amounts, including separately accounting for the portion includible
in gross income and the part that is not so includible.

 

(ii)                                  Eligible retirement plan: An eligible
retirement plan is an individual retirement account described in Code
Section 408(a), an individual retirement annuity described in Code
Section 408(b), an annuity plan or contract described in Code Section 403(a),  a
qualified trust described in Code Section 401(a) that accepts the distributee’s
eligible distribution; or an eligible plan under Code Section 457(b) which is
maintained by a state, political subdividision of a state, or any agency or
instrumentality of a state or political subdivision of a state and which agrees
to separately account for amounts transferred into such plan from this Plan. 
However, in the case of an eligible rollover distribution to the surviving
spouse or non-spouse, an eligible retirement plan is an individual retirement
account or individual retirement annuity.

 

(iii)                               Additional Rollover Options. In addition,
effective for distributions made on or after January 1, 2008, qualified rollover
contributions from this Plan to a Roth IRA may be made in accordance with the
requirements of Section 408A(e) of the Code. Effective January 1, 2010, a direct
trustee-to-trustee transfer from the Plan to an individual retirement account
described in Code Section 408(b) established for the benefit of a deceased
Participant’s non-spouse Beneficiary, as described in Code Section 402(c)(11),
shall be treated as an Eligible Rollover Distribution.

 

(iv)                              Distributee: A distributee includes an
Employee or former Employee. In addition, the Employee’s or former Employee’s
surviving Spouse and the Employee’s or former Employee’s divorced Spouse who is
the alternate payee under a qualified domestic relations order, as defined in
Code Section 414(p), are distributees with regard to the interest of the Spouse
or former Spouse.

 

(v)                                 Direct rollover:  A direct rollover is a
payment by the Plan to the eligible retirement plan specified by the
distributee.

 

7.8                               RESERVED.

 

7.9                               Maximum Installment Period. Except as
expressly provided to the contrary in this ARTICLE VII, the period over which
installment payments may be made with respect to any person shall be determined
by the Participant. In no event will the period over which installment payments
are made exceed a Participant’s Maximum Installment Period. A Participant’s
“Maximum Installment Period” shall be determined pursuant to the following
rules:

 

(a)                                 Life Expectancy Limitation. In no event
shall installment payments be made over a period in excess of the life
expectancy of the Participant or the life expectancy of the Participant and the
Participant’s designated Beneficiary. The Administrative & Investment Committee
shall not adjust installment payments to take into account changes in the life
expectancy of a Participant or of his Spouse or Beneficiary.

 

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(b)           Incidental Benefit Limitation. In no event will installment
payments which commence during the lifetime of the Participant be scheduled over
a period which would result in less than 50% of the value of the Participant’s
Accounts being distributed over the Participant’s life expectancy, or which
otherwise violates the incidental benefit rules of Code Section 401(a)(9),
unless the Participant’s Spouse is his Beneficiary.

 

(c)           Death after Commencement of Benefits. If distribution of a
Participant’s benefits over a period (“Prior Payment Period”) not in excess of
the period described in subsection (a) above has begun and the Participant dies
before the entire balance in his Accounts has been distributed to him, the
remaining portion shall be distributed over a period no longer than the
remainder of the Prior Payment Period.

 

(d)           Death before Commencement of Benefits. If a Participant dies
before the distribution of his benefits has begun, distribution of the entire
balance in his Accounts shall be made no later than December 31 of the calendar
year which contains the fifth anniversary of the Participant’s death. However,
such five-year limitation shall not apply in the case of any portion of the
Accounts to be distributed to the Participant’s designated Beneficiary if such
portion is distributed over the life of such designated Beneficiary or over a
period not extending beyond the life expectancy of such Beneficiary and such
distribution begins not later than December 31 of the calendar year following
the calendar year which contains the date of the Participant’s death.
Notwithstanding the foregoing, if the designated Beneficiary is the
Participant’s surviving Spouse, the date on which distribution must begin as
provided in the preceding sentence shall not be earlier than December 31 of the
calendar year in which the Participant would have attained age 70½, had he
survived. If the Participant’s surviving Spouse dies before distribution begins,
this subsection shall be applied as if the surviving Spouse were the Participant
except that the provisions applicable to the surviving Spouse of a Participant
shall not be applicable to a spouse of the Participant’s surviving Spouse.

 

For purposes of this Section, a Participant’s “Designated Beneficiary” means the
Participant’s Beneficiary determined in accordance with Section 7.11.

 

7.10        Minimum Rate of Installment Payments. Except as expressly provided
to the contrary in this ARTICLE VII, a Participant who has selected an
installment method of payment may select the rate at which his benefits are
paid, provided the rate or amount of such installment payments satisfies all of
the following rules, to be applied in a uniform and nondiscriminatory manner:

 

(a)           Dollar Limitation. The Administrative & Investment Committee may
establish a minimum dollar amount for any installment payment.

 

(b)           Frequency of Payment. Installments may be paid monthly, quarterly,
semi-annually or annually.

 

(c)           Equal Payments. Installments must be payable in substantially
equal amounts, provided that the Administrative & Investment Committee may
adjust

 

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such amounts annually or more frequently to reflect earnings, losses or other
adjustments to the Participant’s Accounts.

 

(d)           Incidental Benefit Limitation. In no event will installment
payments which commence during the lifetime of the Participant be scheduled at a
rate which would result in less than 50% of the value of the Participant’s
Accounts being distributed over the Participant’s life expectancy, or which
otherwise violates the incidental benefit rules of Code Section 401(a)(9),
unless the Participant’s Spouse is his Beneficiary.

 

(e)           Rate of Payment Under Code Section 401(a)(9). Notwithstanding the
provisions of Section 7.9 or any other provisions of this Section, the
frequency, timing and rate at which installment payments are made to a
Participant shall comply with the minimum rate of payment requirements of
Section 401(a)(9) of the Code. Solely for purposes of such redetermination, the
life expectancy of the Participant and his Spouse or Beneficiary may be adjusted
as of such Plan Year end. The Administrative & Investment Committee shall
redetermine the amount of such installment as of each subsequent Plan Year to
assure continued compliance with such requirements but no further adjustments
shall be made to reflect further changes in such life expectancies.

 

(f)            Death after Commencement of Benefits. If distribution of a
Participant’s benefits has begun and the Participant dies before the entire
balance in his Accounts has been distributed to him, the remaining portion shall
be distributed at least as rapidly as under the method of distribution being
used as of the date of the Participant’s death.

 

(g)           Death before Commencement of Benefits. If a Participant dies
before the distribution of his benefits has begun, distribution of the entire
balance in his Accounts shall be made over the period specified in
Section 7.9(d) and shall be payable in an amount and at a rate of payment which
complies with the requirements of Code Section 401(a)(9). The Administrative &
Investment Committee may redetermine the amount of such payments from time to
time to assure continued compliance with such requirements.

 

7.11        Surviving Spouse or Designated Beneficiaries. Except as provided in
this Section, a Participant’s Spouse shall be his designated Beneficiary and any
benefits remaining to be paid hereunder following a Participant’s death shall be
distributed to the Participant’s surviving Spouse, if any. Except as provided
below, any such benefits which remain to be paid following the death of the
Participant’s surviving Spouse shall be paid to the estate of the Participant’s
surviving Spouse. If there is no surviving Spouse or if the surviving Spouse of
such Participant consents in the manner described below, the benefits remaining
to be paid shall be distributed to the Participant’s designated Beneficiary or
Beneficiaries. A Beneficiary designation must be completed and filed with the
Administrative & Investment Committee during the Participant’s lifetime. A
Beneficiary designation properly completed and filed with the Administrative &
Investment Committee will cancel all such designations dated earlier. A
Participant may designate contingent or successive Beneficiaries and may name
natural persons, legal

 

47

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persons or entities, trusts, estates, trustees or legal representatives as the
Beneficiaries. If a married Participant designates a Beneficiary or contingent
Beneficiary other than his Spouse and the estate of such Spouse, the
Participant’s Spouse must consent in writing to such designation and such
consent must be witnessed by a notary public or Plan representative. If the
Spouse does not so consent, then such Beneficiary designation shall not be
effective unless the Spouse dies before the Participant unless following the
death of the Participant his surviving Spouse disclaims all rights to the
Participant’s benefits.

 

If the Participant dies leaving no surviving Spouse and either (a) the
Participant failed to file a valid beneficiary designation form, or (b) all
persons designated on the beneficiary designation form have predeceased the
Participant, the Participant’s benefit shall be paid in the following order:
(i) to the Participant’s surviving children (including legally adopted children)
in equal shares, (ii) to the Participant’s surviving parents (including legally
adoptive parents) in equal shares, (iii) to the Participant’s surviving brothers
and sisters in equal shares, then (iv) to the Participant’s estate.

 

7.12        Missing Beneficiaries of Deceased or Missing Participants. Subject
to all applicable laws relating to unclaimed property, if the Trustee mails by
registered or certified mail, postage prepaid, to the last known address of a
Participant or Beneficiary, a notification that he is entitled to a Plan
distribution, and if the notification is returned by the United States Postal
Service as being undeliverable because the addressee cannot be located at the
address indicated, and if the Trustee has no knowledge of such Participant’s or
Beneficiary’s whereabouts for three years after the date the notification was
mailed (or if for three years after the date the notification was mailed to the
Participant or Beneficiary he does not respond by informing the Trustee of his
or her whereabouts), then, subject to the applicable state laws concerning
escheat, the aggregate amount of such Participant’s Accounts shall be treated as
a Forfeiture and used to reduce Employer Matching Contributions, subject to the
following:

 

(a)           Restoration of Forfeiture. If following a Forfeiture under this
Section 7.12, the Participant or Beneficiary is located, the Forfeiture
(unadjusted for subsequent earnings or losses), shall be restored by crediting
such amount to the appropriate Accounts of the Participant as of the next
Accounting Date.

 

(b)           Source of Restoration. The amounts necessary to restore the
Forfeiture in accordance with (a) above shall be allocated for such purpose from
Forfeitures not yet applied towards Employer Matching Contributions and if
Forfeitures are not sufficient then from an initial allocation of Employer
Matching Contributions to the extent necessary to satisfy such restoration,
which special allocation shall reduce the amounts available for allocation to
all other Participants in accordance with Section 6.9 as of the relevant
Accounting Date. In lieu of such method of restoring the Forfeiture, the
Participant’s Employer may make a special contribution which shall be allocated
solely for purposes of such restoration.

 

Participants and Beneficiaries are required to maintain current post office
addresses on file with the Administrative & Investment Committee.

 

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7.13        Incapacitated Participants or Beneficiaries. If a Participant or
Beneficiary is incompetent or a minor, and a conservator, guardian, or other
person legally charged with his care has been appointed, any benefits to which
such Participant or Beneficiary is entitled shall be payable to such
conservator, guardian, or other person legally charged with his care. The
decision of the Administrative & Investment Committee in such matters shall be
final, binding, and conclusive upon all affected or interested parties. Neither
the Plan nor any representative of the Plan has any duty to see to the proper
application of such payments.

 

7.14        Reemployment after Distributions Commence. If a Participant has
elected an installment form of distribution, all such payments shall cease if
the Participant is rehired as an Eligible Employee. The portion of the Accounts
not distributed shall remain in such Participant’s Accounts. Payments under an
annuity contract shall continue during any period of reemployment.

 

7.15        Erroneous Payments. All benefits under the Plan shall be paid to the
Participant, Spouse or Beneficiary entitled thereto (“Payee”) in cash and/or in
Company Common Stock, provided that if any such payment shall be made in error
or in excess of the amount due, the Payee shall be required to return any such
payment or excessive portion of any payment upon request of the Administrative &
Investment Committee.

 

7.16        Finality of Distributions. Payments made in accordance with this
Article VII shall discharge all liabilities for such payments under the Plan.

 

ARTICLE VIII

 

WITHDRAWALS AND LOANS

 

8.1          Withdrawals. Except as provided in an applicable supplement or
appendix to this Plan, Accounts of Participants who have not ceased to be
Employees may be withdrawn in accordance with the following rules:

 

(a)           After-Tax/Rollover Contributions. A Participant may elect to
withdraw all or a portion of the total value (determined as of the date
described below) of his After-Tax Account and/or Rollover Account including
earnings thereon.  A Section 16b officer of the Company must obtain permission
from the Company in order to receive an in-service distribution under this
subsection.  Only one withdrawal of After-Tax Contributions per calendar month
may be made pursuant to this subsection.

 

(b)           Employer Matching, Prior Employer Matching, Transition
Contribution and Profit Sharing Account Withdrawals.  A Participant who would be
fully vested in his Employer Matching Contributions Under Section 7.1 or 7.2 if
his Accounts were then distributable and who is fully vested and has completed
five or more years of Plan participation may elect to withdraw all or a portion
of the total value (determined as of the date described below) of his Employer
Matching Account, Prior Employer Matching Account, Transition Contribution
Account and Profit Sharing Account.  The amount to be withdrawn is satisfied by
reducing the value determined for each such

 

49

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Account by the amount requested to be withdrawn by the Participant, without
regard to any distinction between contributions and earnings.  A Participant who
receives a withdrawal under this subsection (b) is ineligible to make Pay
Deferral Contributions under Section 5.1 for a period of six months commencing
on the first day of the first pay period following the date on which the
Accounts are valued under this subsection for purposes of such withdrawal.  Such
Participant’s Pay Deferral Contributions shall recommence on the first day of
the first pay period following the date on which such Contributions were
suspended and shall be at the same rate as in effect at the time of suspension
(unless the Participant elects otherwise).  A Section 16(b) officer of the
Company must obtain permission from the Company in order to receive an
in-service distribution under this subsection. Only one withdrawal per calendar
month may be made pursuant to this subsection.

 

(c)           Stock Grant Account. A Participant is not permitted to withdraw
the shares contributed to his Stock Grant Account until he has incurred a
Termination of Employment.

 

(d)           Withdrawals after Age 59 1/2. Except as otherwise provided in an
applicable supplement or appendix to this Plan, a Participant who has attained
age 59 1/2 and who is fully vested and has completed five years of Plan
participation may elect to withdraw 100% of the value (determined as of the date
described below) of his Accounts other than his Stock Grant Account. A
Section 16(b) Officer of the Company must obtain permission from the Company in
order to receive an in-service distribution under this sub-section.  Only one
withdrawal per calendar month may be made pursuant to this subsection.

 

(e)           Hardship Withdrawal. A Participant who has withdrawn all amounts
permitted to be withdrawn under subsections (a), (b), (c) and (d) above and who
has established hardship (as described below) may elect to withdraw a specified
dollar amount up to the total value (determined as of the date described below)
of his vested Accounts, other than his Stock Grant Account, according to the
hierarchy set forth in 1(h) below. Such withdrawals shall be subject to the
following:

 

(i)            Immediate and Heavy Financial Need. A withdrawal shall be deemed
to be made on account of a hardship only if it is made on account of an
immediate and heavy financial need of the Participant and is necessary to
satisfy such financial need. The determination of whether a Participant has an
immediate and heavy financial need is to be made on the basis of all relevant
facts and circumstances.

 

(ii)           Exhaustion of Other Resources. A withdrawal will not be deemed to
be necessary to satisfy the immediate and heavy financial need requirement of
subparagraph (i) above unless the Participant has first obtained all
distributions and withdrawals, other than hardship withdrawals, and all
nontaxable loans currently available under all plans maintained by the Employers
and Commonly Controlled Entities of the Employers. A withdrawal generally may be
treated as necessary to satisfy the immediate and heavy financial need if the
need cannot reasonably be relieved:

 

50

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(A)          Through reimbursement or compensation by insurance or otherwise;

 

(B)          By reasonable liquidation of the Participant’s assets, to the
extent such liquidation would not itself cause an immediate and heavy financial
need;

 

(C)          By cessation of Pay Deferral Contributions under the Plan, and the
cessation of any similar contributions under all qualified and nonqualified
plans of deferred compensation maintained by the Participant’s Employer or any
Commonly Controlled Entity; or

 

(D)          By other distributions or nontaxable loans (at the time of the
loan) from the Plan or any other plan maintained by the Participant’s Employer
or any Commonly Controlled Entity, or by borrowing from commercial sources on
reasonable commercial terms.

 

For purposes of this Section, the Participant’s resources shall be deemed to
include those assets of his Spouse and minor children that are reasonably
available to the Participant. A financial need shall not fail to qualify as
immediate and heavy merely because such need was reasonably foreseeable or
voluntarily incurred by the Participant.

 

(iii)          Specific Hardship. A withdrawal shall be deemed to be made on
account of an immediate and heavy financial need of a Participant if the
withdrawal is made on account o£

 

(A)          Expenses for medical care that would be deductible under Code
Section 213(d) (determined without regard to whether the expenses exceed 7.5% of
adjusted income);

 

(B)          The purchase of a principal residence of the Participant (excluding
mortgage payments);

 

(C)          Payment of tuition, room and board, and related educational fees
for p to  the next 12 months of post-secondary education for the Participant, or
his Spouse, children, or dependents (as defined in Code Section 152);

 

(D)          The need to prevent the eviction of the Participant from his
principal residence or foreclosure on the mortgage of the Participant’s
principal residence;

 

(E)           Payments for burial or funeral expenses for the Participant’s
deceased parent, spouse, children or dependents (as defined in Code Section 152
without regard to section 152(d)(1)(b));

 

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(F)           Expenses for the repair of damage to the Participant’s principal
residence that would qualify for the casualty deduction under Code Section 165
(determined without regard to whether the loss exceeds 10% of adjusted gross
income); or

 

(G)          Such other reasons as the Commissioner of Internal Revenue may
prescribe. The amount of an immediate and heavy financial need may include any
amounts necessary to pay any federal, state or local income taxes or penalties
reasonably anticipated to result from the withdrawal.

 

(iv)          Withdrawal Limited to Need. A withdrawal shall not be treated as
necessary to satisfy an immediate and heavy financial need of a Participant to
the extent the amount of the withdrawal is in excess of the amount required to
relieve the financial need or to the extent such need may be satisfied from
other resources that are reasonably available to the Participant. This
determination generally is to be made on the basis of all relevant facts and
circumstances.

 

(v)           Impact of Withdrawal on Future Participation. Upon receiving a
hardship withdrawal, a Participant shall be precluded from making any further
Pay Deferral Contributions and from having further Employer Matching
Contributions made on his behalf under the Plan or any other plan of deferred
compensation maintained by his Employer or any Commonly Controlled Entity until
the beginning of the first pay period coincident with or next following the end
of a period of 12 months (6 months effective January 1, 2002) commencing with
the date of such withdrawal. The Participant’s Pay Deferral Contributions shall
recommence at the same rate.  The denial of a Participant’s request for a
hardship withdrawal shall be treated as a denial of a claim for a benefit under
the Plan, and shall thus be subject to the claim and review procedures set forth
under Section 9.10.  For purposes of this subparagraph (v) the phrase “other
plan of deferred compensation” means all qualified and nonqualified plans of
deferred compensation, including a cash or deferred arrangement that is part of
a cafeteria plan within the meaning of Code Section 125; however, it does not
include any mandatory  employee contribution portion of a defined benefit plan,
or a health or welfare benefit plan (including one that is part of a cafeteria
plan.) For purposes of the six-month suspension of contributions, the phrase
“plans maintained by the Employer” also includes stock option, stock purchase or
similar plans maintained by the Employer.

 

(f)            Requesting Withdrawals. A Participant may request a withdrawal
electronically via telephone or in any such manner prescribed by the
Administrative & Investment Committee. Upon receipt and approval of a withdrawal
request, the Trustee shall mail a federally mandated tax information notice to
the Participant. To receive payment of a withdrawal, the Participant must
telephone the Trustee (in the manner prescribed by the Administrative &
Investment Committee) no earlier than seven days and no later than 30 days after
the day he requested the withdrawal. If the Participant fails to telephone the
Trustee within this period, the withdrawal request shall be canceled.

 

(g)           Spousal Consent. No withdrawal shall be made to a married
Participant who has elected to have his Accounts distributed in an annuity form
unless the

 

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Participant’s Spouse consents to the withdrawal in the manner prescribed by the
Administrative & Investment Committee. Such consent must be in writing and
witnessed by a notary public.

 

(h)           Hierarchy. Hardship withdrawals shall be deducted from the
Participant’s Accounts in the following order (and shall be deducted on a pro
rata basis from the investment funds to which amounts in such Accounts are
allocated):

 

(i)            The portion of the Participant’s After-Tax Account attributable
to after-tax contributions made prior to 1987.

 

(ii)           The portion of the Participant’s After-Tax Account attributable
to after-tax contributions made after 1986 (if any), and the-portion of such
account attributable to earnings, in the proportion prescribed by section 72 of
the Code.

 

(iii)          Rollover Account.

 

(iv)          Prior Employer Matching Account.

 

(v)           Vested portion of Employer Matching Account.

 

(vi)          Profit Sharing Account.

 

(vii)         Transition Contribution Account.

 

(viii)        Before-Tax Account.

 

After a withdrawal in accordance with this Section, amounts remaining in the
Participant’s accounts, if any, shall continue to be held, invested and adjusted
in accordance with the Plan and Trust Agreement until such amounts are
subsequently withdrawn or otherwise distributable in accordance with
ARTICLE VII. Withdrawals under this Section shall ordinarily be based on a
valuation of the applicable Accounts as of the Accounting Date immediately
preceding the date on which such request is processed and/or approved by the
Trustee or Administrative & Investment Committee. Actual distribution of amounts
withdrawn shall ordinarily occur as soon as practicable after the request is
processed.

 

8.2          Loans to Participants.  Loans shall be extended to Participants who
are Employees of participating Employers (those Employees classified as
Section 16(b) officers of the Company must obtain permission from the Company in
order to receive a loan under this Section), but excluding:  (i) Participants,
located outside the United States who, at the time the loan is made, is not
receiving regular payments of compensation under a United States payroll system,
(ii) those Employees classified as parties in interest, (iii) Participants who
have a domestic relations order pending with the Plan, (iv) those individuals
who are receiving benefits under the Company’s long term disability plan, and
(v) Participants who are on an unpaid leave of absence or severance.  Loans to
Participants are subject to the following rules::

 

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(a)           Authority. The Administrative & Investment Committee, upon request
by a Participant in the manner described in subsection (n) below, shall direct
the Trustee to make a loan from the Trust Fund to a Participant.

 

(b)           Loan Documents. Each loan shall be evidenced by a written
promissory note providing for repayment and interest. As described in subsection
(n) below, the promissory note shall consist of a loan agreement, to which the
Participant shall indicate his agreement by endorsing the loan check. The
Administrative & Investment Committee shall make appropriate arrangements with
the Trustee regarding the custody of such notes.

 

(c)           Applicability. The Administrative & Investment Committee shall
exercise its authority under this Section in a manner which makes loans
available to all eligible Plan Participants on a reasonably equivalent basis.
Loans shall also be made available to any other person who has an account
balance under the Plan if the person is a “party in interest” with respect to
the Plan, as defined in section 3(14) of ERISA (each such person referred to in
this Section as a “Participant”).

 

(d)           Frequency and Number. The Administrative & Investment Committee
may establish conditions on the frequency and number of loans to Participants.
As of the Effective Date, no Participant may have more than two loans
outstanding at any given time.

 

(e)           Term of Loan. The term of the loan will be for a period of time
not exceeding five years. Notwithstanding the foregoing, the term of the loan
may be for a period of up to ten years if the loan is used to acquire any
dwelling unit which within a reasonable time is to be used as a principal
residence of the Participant in accordance with Section 72(p)(2) of the Code.
The Administrative & Investment Committee shall be entitled to rely on any
representation made by a Participant with regard to the purpose for which a loan
is requested.

 

(f)            Minimum Loan. From time to time the Administrative & Investment
Committee may establish a minimum loan amount, provided that such limitation
shall not exceed $1,000.  As of the Effective Date the minimum loan amount is
$500.

 

(g)           Maximum Loan. The principal amount of the loan may not exceed the
lesser of:

 

(i)            $50,000, provided that such dollar limit shall be reduced by the
highest outstanding balance of loans to the Participant from the Plan and any
other “qualified employer plan” (as defined in Code Section 72(p)(4)) maintained
by the Employer or any Commonly Controlled Entity of the Employer at any time in
the prior 12 consecutive month period; or

 

(ii)           50% of the sum of the Participant’s vested Accounts under this
Plan (excluding the Participant’s Stock Grant Account), provided that such

 

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percentage limit shall be reduced by the percentage of such Participant’s
Accounts which is then invested in any other loans.

 

The limitations of subparagraphs (1) and (ii) above shall be applied as of the
Accounting Date immediately preceding or coincident with the day the loan is
requested pursuant to the procedures specified in subsection (n) below;
provided, however, that the Participant’s vested Accounts as of such request
date shall be reduced by the amount of any withdrawals made to such Participant
between the date of the loan request and the date such loan is processed by the
Trustee.

 

(h)           Interest Rate. The interest rate charged to Participants for loans
under this Section shall be determined by the Administrative & Investment
Committee from time to time. The rate selected by the Administrative &
Investment Committee for this purpose shall be a rate which the Administrative &
Investment Committee determines is within the range of prevailing rates which
would be charged by commercial lenders for loans of a similar type. For this
purpose the Administrative & Investment Committee may rely on such evidence as
it may deem reliable concerning such prevailing rates and all decisions of the
Administrative & Investment Committee regarding such rates shall be conclusive.
The interest rate applicable as of the Effective Date is the prime rate (as
published in the Wall Street Journal on the last Accounting Date of the month
preceding the month in which the loan is made) plus 1°/o.

 

(i)            Security. Loans shall be secured by all of the balances in the
Participant’s Accounts, together with such additional collateral as the
Administrative & Investment Committee may require either at the time of the loan
or from time to time thereafter. In determining the adequacy of such security,
the Administrative & Investment Committee shall not consider any non-vested
portion of the Participant’s Accounts and a Participant’s vested Accounts shall
not be considered adequate security unless immediately prior to disbursement of
the loan the vested portions of the Participant’s Accounts (as of the most
recent Accounting Date) have an aggregate value equal to at least twice the sum
of the face amount of such loan and the then outstanding balances of all prior
loans to such Participant.

 

(j)            Loan Fees. An application fee shall be charged against the
Participant’s Account for each loan processed. The amount of such fee shall be
established by the Administrative & Investment Committee from time to time. As
of the Effective Date, such fee is $50.

 

(k)           Repayment Terms. All Plan loans shall be repaid under a written
repayment schedule by payroll deduction and shall be evidenced by a written
promissory note payable to the Trustee.  If a Participant with an outstanding
loan incurs a Termination of Employment thereby making payroll deductions
impossible, then, unless the Participant elects to roll over such loan and the
transferee plan agrees to accept such roll over, the Participant must repay the
entire outstanding balance of the loan upon the earlier of (i) the expiration of
the original term of the loan and (ii) the date which is 90 days after such
Termination of Employment.  In no event shall principal and interest

 

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payments be less frequent than quarterly on a level amortization basis in
substantially non-increasing installments. Loans may be prepaid in full at any
time. Loan repayments under this Plan may be suspended with respect to a
Participant in military service to the extent required by USERRA and in
accordance with Section 414(u)(4) of the Code.

 

(l)            Distribution Prior to Loan Repayment. Notwithstanding any other
provision of the Plan, any distribution under this Plan to or on behalf of a
Participant to whom one or more loans are then outstanding shall first be
applied by the Trustee to reduce the outstanding balances of such loans. For
this purpose loan reductions shall first be applied to satisfy any loan
installments in default. Payments shall be applied to loans which are not in
default pro rata.

 

(m)          Events of Default. In the event of a default in payment of either
principal or interest that is due under the terms of any loan, the Plan
Administrator may declare the full amount of the loan due and payable and may
take whatever action may be lawful to remedy the default.  With respect to a
Participant who terminates employment, default will be deemed to have occurred
if any loan is not rolled over or paid in full within 90 days following his
Termination of Employment, as described in subsection (k) above.  With respect
to a Participant who is an Employee on an unpaid leave of absence, default will
be deemed to have occurred if any payment is not made within one year following
the due date for any payment of principal and/or interest for which no payment
is made by the Participant. The Trustee may offset amounts owed by the
Participant against Plan benefits owed to him or her without being in violation
of Section 11.2.

 

(n)           Requesting Loans. A Participant may request a loan electronically
via telephone or in any such manner prescribed by the Administrative &
Investment Committee.

 

(i)            Non-Residential Loans. Upon receipt and approval of a request for
a non-residential loan, the Trustee shall mail a loan agreement (including a
promissory note) along with a loan check to the Participant. By endorsing the
check, the Participant shall indicate his agreement to the terms and conditions
of the loan, as described in the loan agreement.

 

(ii)           Residential Loans. Upon receipt of a request for a loan to be
used for the purchase of the Participant’s primary residence, the Trustee shall
send the Participant a loan agreement along with information as to what
supporting documentation the Participant must submit in connection with such
loan request. The Participant must then submit this supporting documentation
within 30 days. If the loan request is approved, the Trustee shall mail a loan
agreement (including a promissory note) along with a loan check to the
Participant. By endorsing the check, the Participant shall indicate his
agreement to the terms and conditions of the loan, as described in the loan
agreement. If the loan request is denied, the Trustee shall notify the
Participant and inform the Participant of the reason for such denial within a
reasonable period of time after the loan request.

 

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(o)           Hierarchy. Loan amounts shall be deducted from the Participant’s
Accounts in the following order (and shall be deducted on a pro rata basis from
the investment funds to which amounts in such Accounts are allocated):

 

(i)            Matched portion of Before-Tax Account.

 

(ii)           Non-matched portion of Before-Tax Account.

 

(iii)          Transition Contribution Account.

 

(iv)          Prior Employer Matching Account.

 

(v)           Vested portion of Employer Matching Account.

 

(vi)          Profit Sharing Account.

 

(vii)         Rollover Account

 

(viii)        After-Tax Account.

 

Repayments of loan principal will be credited to the Participant’s Accounts in
the same order as above. Repayments of interest will be credited on a pro rata
basis to the Accounts from which the loan was deducted. All loan repayments will
be allocated to investment funds in accordance with the Participant’s existing
investment elections for the applicable Accounts.

 

Notwithstanding anything in this Section 8.2 to the contrary, neither the shares
contributed to a Participant’s Stock Grant Account nor the earnings thereon
shall be available for loans.

 

8.3          No Representation Regarding Tax Effect of Withdrawals or Loans.
Neither the Employers, the Administrative & Investment Committee, the Trustee
nor any other Plan representative shall be construed as representing the tax
effects of any withdrawals or loans made in accordance with this ARTICLE VIII.
It shall be the responsibility of Participants requesting withdrawals or loans
to consider the tax effects of such withdrawals or loans.

 

ARTICLE IX

 

PLAN COMMITTEES

 

9.1          Membership of Administrative & Investment Committees. The
Administrative & Investment Committee, consisting of at least three persons,
shall be appointed by the Compensation Committee of the Board of Directors.  The
Secretary of the Company shall certify to the Trustee from time to time the
appointment to (and termination from) office of each member of the
Administrative & Investment Committee and the persons, if any, who are selected
as secretaries of the Administrative &

 

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Investment Committee. The appointment of a member of either Committee and
acceptance of such appointment by any person constitutes an agreement by and
between the Company and such Committee member that the member, acting in concert
with the other Committee members, shall have and will exercise the powers and
duties described herein, including, with respect to the Administrative &
Investment Committee, the power and duty to interpret this Plan and determine
the benefits to which Participants are entitled hereunder.

 

9.2          Administrative & Investment Committee Powers and Duties. The
Administrative & Investment Committee shall have such powers and duties
necessary to discharge its duties hereunder, including, but not limited to, the
following:

 

(a)           Within its complete and unfettered discretion to construe and
interpret the terms of the Plan and Trust Agreement provisions and to resolve
all questions arising under the Plan including questions of Plan participation,
eligibility for benefits and the rights of Employees, Participants,
Beneficiaries and other persons to benefits under the Plan and to determine the
amount, manner and time of payment of any benefits hereunder;

 

(b)           To prescribe procedures, rules and regulations to be followed by
Employees, Participants, Beneficiaries and other persons or to be otherwise
utilized in the efficient administration of the Plan consistent with the Trust;

 

(c)           To make determinations as to the rights of Employees,
Participants, Beneficiaries and other persons to benefits under the Plan and to
afford any Participant or Beneficiary dissatisfied with such determination with
rights pursuant to a claims procedure adopted by the Administrative & Investment
Committee;

 

(d)           To enforce the Plan in accordance with the terms of the Plan and
the Trust and to enforce its procedures, rules and regulations;

 

(e)           To be responsible for the preparation and maintenance of records
necessary to determine the rights and benefits of Employees, Participants and
Beneficiaries or other persons under the Plan and the Trust and to request and
receive from the Employers such information necessary to prepare such records;

 

(f)            To prepare and distribute in such manner as it deems appropriate
and to prepare and file with appropriate government agencies information,
disclosures, descriptions and reporting documents regarding the Plan, and in the
preparation and review of such reports the Administrative & Investment Committee
is entitled to rely upon information supplied to it by the Employees,
accountants, counsel, actuaries, the Investment Managers and any insurance
institutions described in the Trust Agreement;

 

(g)           To appoint or employ individuals to assist in the administration
of the Plan and other agents (corporate or individual) that the Administrative &
Investment Committee deems advisable, including legal counsel and such clerical,
medical, accounting, auditing, actuarial and other services as the
Administrative & Investment Committee may require in carrying out the provisions
of the Plan. However, no agent

 

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except an Investment Manager or fiduciary named in the Plan shall be appointed
or employed in a position that would require or permit him or her: (i) to
exercise discretionary authority or control over the acquisition, disposition or
management of Trust assets; (ii) to render investment advice for a fee; or
(iii) to exercise discretionary authority or responsibility for Plan
administration;

 

(h)           To cause to be prepared and to cause to be distributed, in such
manner as the Trustee determines to be appropriate, information explaining the
Plan and Trust;

 

(i)            To furnish to the Employers upon request such annual or other
reports with respect to the administration of the Plan as are reasonable and
appropriate;

 

(j)            To receive, review and keep on file (as it deems convenient or
proper) reports of the financial condition, receipts and disbursements, and
assets of the Trust; and

 

(k)           To discharge all other duties set forth in the Plan.

 

The Administrative & Investment Committee has no power to add to, subtract from
or modify any of the terms of the Plan, nor to change or add to any benefits
provided by the Plan, nor to waive or fail to apply any requirements of
eligibility for benefits under the Plan.

 

9.3          Administrative & Investment Committee Powers and Duties. The
Administrative & Investment Committee has such powers necessary to discharge its
duties hereunder, including, but not limited to, the following:

 

(a)           To establish and from time to time revise the investment policy of
the Plan, to communicate and consult with the Company, the Administrative &
Investment Committee and the Trustee and any Investment Manager or insurance
institution regarding the investment policy applicable to the Plan as a whole or
to any individual investment fund;

 

(b)           To supervise the performance by the Trustee and any Investment
Manager or insurance institution regarding their responsibilities under the Plan
and Trust. The Investment Committee shall review and analyze performance
information supplied by the Trustee and the Investment Managers or insurance
institutions to the Investment Committee and/or any such performance information
obtained. independently by the Investment Committee and shall report the results
of such analysis to the Finance Committee of the Board of Directors from time to
time in such form and with such degree of frequency as the Administrative &
Investment Committee shall determine proper. Such responsibilities of the
Administrative & Investment Committee with respect to supervision, review and
analysis shall be performed no less frequently than once each Plan Year and
shall ordinarily not be required more frequently than once each calendar
quarter. The Trustee, the Administrative & Investment Managers and insurance
institutions have been allocated the responsibility for day-to-day investment
management of the Plan and Trust and the responsibilities of the
Administrative & Investment

 

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Committee hereunder are not intended to relieve the Trustee, Investment Managers
or insurance institutions of such on-going investment management
responsibilities;

 

(c)           To instruct the Trustee, the Administrative & Investment Managers
and insurance institutions with respect to the proper application of
contributions made under the Plan;

 

(d)           To determine the proper allocation of investment responsibilities
with respect to the assets of the Plan between the Trustee and any Investment
Manager or insurance institution acting hereunder or under the terms of the
Trust and to allocate fiduciary responsibilities among these parties;

 

(e)           To the extent not provided to the contrary in the Trust Agreement,
to appoint the Trustee and any Investment Managers or insurance institutions, to
direct the establishment of any investment fund and to remove the Trustee and
any Investment Managers or insurance institutions or appoint additional
Trustees, Investment Managers or insurance institutions;

 

(f)            To review any accounts submitted by the Trustee and any
Investment Managers or insurance institutions and to report to the Finance
Committee of the Board of Directors with respect to any such accounts;

 

(g)           Following the Administrative & Investment Committee’s
determination of the benefit rights of any Participant or Beneficiary, to
aggregate information concerning such benefits and authorize and direct the
Trustee with respect to the commencement, modification or cessation of such
benefit payments;

 

(h)           To supervise the performance of fiduciary responsibilities by
others including the Trustee and any Investment Managers;

 

(i)            To appoint and utilize the services of administrative staff
employees of the Company and the other Employers for the performance of duties
delegated to the Administrative & Investment Committee hereunder and to rely
upon information received from such staff employees; provided that in both cases
the Administrative & Investment Committee reasonably believes the performance of
such services and the preparation of such information is within the competence
of such staff employees;

 

(j)            To furnish to the Employers, upon reasonable request, such annual
or other reports as the Employers deem necessary regarding the administration of
the Plan; and

 

(k)           To employ reputable agents (who may also be Employees) and to
delegate to them any of the administrative powers or duties imposed upon the
Administrative & Investment Committee or the Employers.

 

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9.4          Conflicts of Interest. No member of the Administrative & Investment
Committee shall participate in any action on matters involving solely such
member’s rights or benefits as a Participant under the Plan.

 

9.5          Compensation; Reimbursement. No member of the Administrative &
Investment Committee shall receive compensation for his services, but the
Employers shall reimburse him for any necessary expenses incurred in the
discharge of his duties.

 

9.6          Standard of Care. The Administrative & Investment Committee shall
perform their duties under this Plan in accordance with the terms of this
document and the Trust Agreement solely in the interest of the Participants and
for the exclusive purposes of providing retirement benefits to Participants and
defraying the reasonable expenses of Plan administration and operation. The
Administrative & Investment Committee shall also perform their duties under this
Plan with the care, skill, prudence and diligence under the circumstances then
prevailing that a prudent man, acting in a like capacity and familiar with such
matters, would use in the conduct of an enterprise of a like character and with
like aims.

 

9.7          Action by Committees. Action by each Plan Committee (i.e., the
Administrative & Investment Committee) is subject to the following special
rules:

 

(a)           Each Committee may act by meeting or by document signed without
meeting and documents may be signed through the use of a single document or
concurrent documents.

 

(b)           Each Committee shall act by a majority, and such action shall be
as effective as if such action had been taken by all Committee members, provided
that by majority action one or more Committee members or other persons may be
authorized to act with respect to particular matters on behalf of all Committee
members.

 

(c)           Each Committee may, but is not required to, select a secretary,
who may but need not be a Committee member, and the certificate of such
secretary that the Committee has taken or authorized any action shall be
conclusive in favor of any person relying upon such certificate.

 

(d)           Each Committee may act through agents or other delegates and may
retain legal counsel, auditors or other specialists (who may also be Employees)
to aid in the Committee’s performance of its responsibilities.

 

9.8          Resignation or Removal of Committee Member.  Any person serving as
an Administrative & Investment Committee member may resign from such Committee
at any time by written notice to the Compensation Committee of the Board of
Directors or may be removed by the Compensation Committee at any time by written
notice to such member. Any person serving as an Administrative & Investment
Committee member may resign from such Committee at any time by written notice to
the Finance Committee of the Board of Directors or may be removed by the Finance
Committee at any time by written notice to such member. The Compensation
Committee shall fill any vacancy in the membership of the Administrative &
Investment Committee as soon as practicable.

 

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The Finance Committee Company shall fill any vacancy in the membership of
Administrative & Investment Committee as soon as practicable. Until any such
vacancy is filled, the remaining members of the applicable Committee may
exercise all of the powers, rights and duties conferred on the Committee.

 

9.9          Uniform Application of Rules by Administrative & Investment
Committee. The Administrative & Investment Committee shall apply all rules,
regulations, procedures and decisions uniformly and consistently to all
Employees and Participants similarly situated. Any ruling, regulation, procedure
or decision of the Administrative & Investment Committee which is not
inconsistent with the provisions of the Plan or the Trust shall be conclusive
and binding upon all persons affected by it. There shall be no appeal of any
ruling by the Administrative & Investment Committee which is within its
authority, except as provided in Section 9.10 below. When making a determination
or a calculation, the Administrative & Investment Committee is entitled to rely
on information supplied by the Employer, Trustee, Investment Managers, insurance
institutions, accountants and other professionals including legal counsel for
the Company.

 

9.10        Claims Procedure.  Each person entitled to benefits under the Plan
(the “Applicant”) must submit a written claim for benefits to the
Administrative & Investment Committee.  If a claim for benefits by the Applicant
is denied, in whole or in part, the Administrative & Investment Committee shall
furnish the Applicant within 90 days after receipt of such claim (or within 180
days after receipt if special circumstances require an extension of time), a
written notice which (i) specifies the reason for the denial, (ii) refers to the
pertinent provisions of the Plan on which the denial is based, (iii) describes
any additional material or information necessary for properly completing the
claim and explains why such material or information is necessary, (iv) explains
the claim review procedures of this Section 9.10, and (v) advises the Applicant
of his or her right to bring a civil action under ERISA Section 502(a) following
the denial or adverse benefit determination on appeal, provided Participant
brings the action within 1 year following the denial or adverse benefit
determination on appeal.  If special circumstances require an extension of the
initial 90 day review period, the Administrative & Investment Committee shall
furnish the Applicant, prior to the termination of the initial 90-day review
period, with a written notice of the extension indicating the special
circumstances requiring an extension and the date by which the Administrative &
Investment Committee expects to render a decision.  Any Applicant whose claim is
denied under the provisions described above, or who has not received from the
Administrative & Investment Committee a response to his claim within the time
periods specified in the provisions described above may request a review of the
denied claim by written request to the Administrative & Investment Committee
within 60 days after receiving notice of the denial.  In connection with such
request, the Applicant or his authorized representative may review pertinent
documents and may submit issues and comments in writing.  If such a request is
made, the Administrative & Investment Committee shall make a full and fair
review of the denial of the claim and shall make a decision not later than 60
days after receipt of the request, unless special circumstances (such as the
need to hold a hearing) require an extension of time, in which case a decision
shall be made as soon as possible but not later than 120 days after receipt of
the request for review, and written notice of the extension shall be given to
the Applicant before the commencement

 

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of the extension.  The decision on review shall be in writing and shall include
specific reasons for the decision and specific references to the pertinent
provisions of the Plan on which the decision is based.  No person entitled to
benefits under the Plan shall have any right to seek review of a denial of
benefits, or to bring any action to enforce a claim for benefits, in any court
prior to his filing a claim for benefits and exhausting all of his rights under
this Section 9.10.  Although not required to do so, an Applicant may choose to
state the reason or reasons he believes he is entitled to benefits, and may
choose to submit written evidence, during the initial claim process or review of
claim denial process.  An Applicant shall be entitled to bring a civil action
under ERISA Section 502(a) following a denial or an adverse benefit
determination on appeal, provided Applicant brings the action within one year
following the denial or adverse benefit determination on appeal.  If an
Applicant’s claim is approved, but Applicant believes he or she is entitled to a
different amount of benefits, Applicant can file a written claim for adjustment
within one year of the date of the initial payment.

 

9.11        Investments in Company Common Stock. The Administrative & Investment
Committee is responsible for directing the Trustee with respect to investments
of Plan assets in Company Common Stock. In connection with such investments, the
Administrative & Investment Committee has the authority to cause the Trustee to
exercise or sell in the open market any options, rights or warrants which
entitle the Plan to subscribe to or purchase shares of Company Common Stock. As
provided in Section 6.6, the Administrative & Investment Committee is
responsible for determining the appropriate value for Company Common Stock
contributed to the Plan or purchased by the Plan. Notwithstanding the foregoing,
all certificates for shares of Company Common Stock held on behalf of the Plan
shall be in the custody of the Trustee and shall be held in the name of the
Trustee or a nominee of the Trustee. Prior to any distribution of Plan assets in
the form of Company Common Stock pursuant to Section 10.6 or any other provision
of the Plan, the Administrative & Investment Committee shall cause such Common
Stock held by the Trust, to the extent not registered under the Securities Act
of 1933, to be registered to the extent required under said Act.

 

ARTICLE X

 

AMENDMENT, TERMINATION OR PLAN MERGER

 

10.1        Amendment. The Administrative & Investment Committee shall have the
right at any time to amend in whole or in part any or all of the provisions of
this Plan except as expressly set forth below

 

(a)           Except as expressly provided in Section 11.14 below, no amendment
may result in, authorize or permit any part of the Trust Fund, the income from
the Trust Fund or any Plan assets to be distributed to or for the benefit of
anyone other than the Participants and any other persons entitled to benefits
under the Plan.

 

(b)           No amendment may be adopted which will reduce any Participant’s
benefits to an amount less than the benefit that the Participant would be
entitled to receive if he had resigned from the employ of the Employers and all

 

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Commonly Controlled Entities of the Employers immediately prior to the effective
date of such amendment.

 

(c)           No amendment may increase the duties of either the
Administrative & Investment Committee without its consent.

 

10.2        Plan Termination. The Plan will terminate as to all Employers on the
earlier of the date the Plan is terminated by the Company with respect to all
Employers or the earliest date on which one of the events described in
subsections (a) through (d) below has occurred with respect to all Employers.
The Plan will terminate with respect to an individual Employer on the first to
occur of the following dates:

 

(a)           Any date that the Plan is terminated with respect to an individual
Employer by action of that Employer, provided that the Company and the Trustee
have been given prior written notice of such termination and provided that the
Company does not elect to continue the Plan as it applies to such Employer.

 

(b)           Any date that the Employer is judicially declared bankrupt or
insolvent unless the Company elects to continue the Plan as it applies to such
Employer.

 

(c)           Any date an Employer completely discontinues its contributions
under the Plan unless the Company elects to continue such contributions.

 

(d)           Any date the Employer is dissolved, merged, consolidated or
reorganized or the date on which the assets of the Employer are completely or
substantially sold, unless arrangements have been made whereby the Plan will be
continued by the Company or the other Employers or by a successor to the
Employer or purchaser of its assets under Section 10.3.

 

10.3        Continuation by a Successor or Purchaser. The Plan and the Trust
shall not terminate with respect to an Employer in the event of dissolution,
merger, consolidation or reorganization of such Employer or sale by such
Employer of its entire assets or substantially all of its assets if arrangements
are made in writing among the Employer, the Company and any successor to the
Employer or purchaser of all or substantially all of its assets whereby such
successor or purchaser will continue the Plan and the Trust. If such
arrangements are made, such successor or purchaser shall be substituted for the
Employer under the Plan and the Trust.

 

10.4        Plan Merger or Consolidation. The Company may cause the Plan or the
Trust or both to be merged or consolidated with, or may transfer the assets or
liabilities under the Plan to, any other qualified plan or from any other
qualified plan, provided that the documents and other arrangements regarding
such merger, consolidation or transfer provide safeguards which would cause each
Participant in the Plan, if the Plan terminated, to receive a benefit in the
event of a termination immediately after such merger, consolidation or transfer
which is equal to. or greater than the benefit the Participant would have been
entitled to receive if the Plan had terminated immediately prior to such merger,
consolidation or transfer.

 

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10.5        Notice to Participants of Amendments Terminations or Plan Mergers.
Participants shall be notified by the Company within a reasonable time following
any significant amendment, termination, Plan merger or consolidation. The
Administrative & Investment Committee, in its sole discretion, shall determine
whether an amendment is “significant” for purposes of the preceding sentence.

 

10.6        Vesting and Distribution on Termination. There shall be no Employer
contributions (including Pay Deferral Contributions) after the date the Plan
terminates. However, the Trust shall remain in existence, and all of the
provisions of the Plan (other than the provisions relating to contributions)
which in the sole opinion of the Trustee are necessary, shall remain in full
force and effect until all the assets of the Plan are distributed in accordance
with the terms of the Plan and the Trust. The benefits of each Participant
affected by a termination or partial termination will be fully vested and will
be payable to such Participant in a lump sum as soon as practicable, unless
other arrangements are previously made in accordance with ARTICLE VII.
Notwithstanding the foregoing, if the Plan assets to be distributed to
Participants in accordance with this Section 10.6 include Company Common Stock,
prior to such distribution the Company shall cooperate with the Administrative &
Investment Committee to cause all such Company Common Stock, to the extent not
registered under the Securities Act of 1933, to be registered to the extent
required under said Act.

 

ARTICLE XI

 

GENERAL PROVISIONS

 

11.1        No Employment Guarantee. The establishment of the Plan, any
modification thereof, the creation of any fund or Account, or the payment of any
benefits shall not be construed as giving to any Participant or other person any
legal or equitable right against the Employers, the Administrative & Investment
Committee, the Trustee or any Plan representative except as herein provided.
Under no circumstances shall the terms of employment with the Employer of any
Participant be modified or in any way affected hereby. The maintenance of this
Plan shall not constitute a contract of employment with the Employer.
Participation in the Plan will not give any Participant a right to be retained
as an Employee of any Employer.

 

11.2        Nonalienation of Plan Benefits. The rights or interests of any
Participant or any Beneficiary to any benefits or future payments hereunder
shall not be subject to attachment or garnishment or other legal proceeding or
process by any creditor of any such Participant or Beneficiary nor shall any
such Participant or Beneficiary have any right to alienate, anticipate, commute,
pledge, attach, encumber or assign any of the benefits or rights which he may
expect to receive, contingently or otherwise under the Plan except as may be
required by the tax withholding provisions of the Code or of a state’s income
tax act, or as may be required by Section 8.2.

 

(a)           The rule against alienation in this Section 11.2 shall not apply
to a “Qualified Domestic Relations Order” (as defined in Code Section 414(p)).
The Administrative & Investment Committee shall establish written procedures
consistent

 

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with Code Section 414(p) and ERISA Section 206(d)(3) to determine the qualified
status of any domestic relations order.

 

(b)                                 The rule against alienation in this
Section 11.2 shall not apply, to the extent permitted by law, to any offset of a
Participant’s benefits under the Plan against an amount that the Participant is
ordered or required to pay to the Plan pursuant to (1) a judgment of conviction
for a crime involving the Plan, (ii) a civil judgment in connection with a
violation (or alleged violation) of Part 4 of Subtitle B of Title I of ERISA or
(iii) a settlement agreement between the Secretary of Labor and the Participant
or the Pension Benefit Guaranty Corporation and the Participant in connection
with a violation (or alleged violation) of Part 4 of Subtitle B of Title I of
ERISA.

 

11.3                           Action by an Employer. Action required or
permitted to be taken by an Employer may be taken by action of the board of
directors of that Employer or by a person or committee of persons authorized to
act by said board. The Company’s powers may be exercised by the Board of
Directors or a person or committee of persons authorized to act by the Board of
Directors or by the Company’s chief executive officer or his delegate.

 

11.4                           Applicable Law. The Plan and Trust shall be
construed in accordance with the provisions of ERISA and other applicable
federal laws. To the extent not inconsistent with such laws, this Plan shall be
construed in accordance with the laws of California.

 

11.5                           Participant Litigation. In any action or
proceeding regarding the Plan assets or any property constituting a portion or
all thereof or regarding the administration of the Plan, Employees or former
employees of the Employers or their Beneficiaries or any other persons having or
claiming to have an interest in this Plan shall not be necessary parties and
shall not be entitled to any notice or process. Any final judgment which is not
appealed or appealable and may be entered in any such action or proceeding shall
be binding and conclusive on the parties hereto and all persons having or
claiming to have any interest in this Plan. To the extent permitted by law, if a
legal action is begun against the Employers, the Administrative & Investment
Committee, or the Trustee by or on behalf of any person and such action results
adversely to such person or if a legal action arises because of conflicting
claims to a Participant’s or other person’s benefits, the costs to the
Employers, the Administrative & Investment Committee, or the Trustee of
defending the action will be charged to the sums, if any, which were involved in
the action or were payable to the Participant or other person concerned. To the
extent permitted by applicable law, acceptance of participation in this Plan
shall constitute a release of the Employers, the Administrative & Investment
Committee, the Trustee and their agents from any and all liability and
obligation not involving willful misconduct or gross neglect.

 

11.6                           Participant and Beneficiary Duties. Each person
entitled to benefits under the Plan shall furnish the Administrative &
Investment Committee with all appropriate documents, evidence, data or
information which the Administrative & Investment Committee considers necessary
or desirable in administering the Plan.

 

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11.7                           Individual Account Statements. At least once each
year the Administrative & Investment Committee will issue to each Participant an
Account Balance statement. As of the Effective Date, such statements are
provided quarterly.

 

11.8                           Gender and Number. Words denoting the masculine
gender shall include the feminine and neuter genders and the singular shall
include the plural and the plural shall include the singular wherever required
by the context.

 

11.9                           Adequacy of Evidence. Evidence which is required
of anyone under this Plan shall be executed or presented by proper individuals
or parties and may be in the form of certificates, affidavits, documents or
other information which the Administrative & Investment Committee, the Trustee,
the Employer or other persons acting on such evidence consider pertinent and
reliable.

 

11.10                     Notice to Participants and Beneficiaries. A notice
mailed to a Participant or Beneficiary at his last address filed with the
Administrative & Investment Committee will be binding on the Participant or
Beneficiary for all purposes of the Plan.

 

11.11                     Waiver of Notice. To the extent permitted by
applicable law, any notice under this Plan may be wholly or partially waived by
the person entitled to notice.

 

11.12                     Successors. This Plan and the Trust will be binding on
all persons entitled to benefits hereunder and their respective heirs and legal
representatives, and on the Administrative & Investment Committee, the Trustee
and their successors.

 

11.13                     Severability. If any provision of the Plan is held
illegal or invalid for any reason, such illegal or invalid provision shall not
affect the remaining provisions of the Plan, and the Plan shall be construed and
enforced as if such illegal or invalid provisions had never been contained in
the Plan.

 

11.14                     Nonreversion. Except as provided below, the Employers
have no right, title or interest in the assets of the Plan or in the Trust Fund
and no portion of the Trust Fund or the assets of the Plan or interest therein
shall at any time revert or be repaid to the Employers. Notwithstanding the
preceding sentence, the following Employer contributions or Participant
contributions may be returned to the Employer or the Participant, as the case
may be:

 

(a)                                  The Employer contributions which cannot be
credited to a Participant’s Account because of the limitations of Sections 4.3
or 4.4 may be returned to the Employer.

 

(b)                                 Employer contributions which are conditioned
upon their deductibility under Code Section 404 shall be returned to the
applicable Employer or Employers to the extent any such contributions are
determined to be nondeductible. Employer contributions and Participant
contributions which are made as a result of a mistake of fact may be returned to
the Employer or the Participant making those contributions. Employer
contributions may only be repaid under this subsection within 12 months after
the date the error or nondeductibility is discovered by the Employer.

 

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(c)                                  Employer contributions which are
conditioned upon qualification of the Plan and the Trust may be returned to the-
Employer if the Plan is not initially determined to be qualified.

 

11.15                     Qualification of Plan and Trust. The Trust and the
Plan taken together are intended to qualify under Section 401(a) so as to be
tax-exempt under Section 501(a) of the Code, as amended. Each of the Trust and
the Plan shall also be deemed to be mutually incorporated by reference and to
implement and form a part of each other such document. Unless and until advised
to the contrary, the Administrative & Investment Committee, the Trustee, any
Investment Managers, any insurance institutions and persons dealing with them
shall be entitled to assume that the Trust and this Plan are so qualified and
tax-exempt.

 

11.16                     Certain Indemnification. To the extent permitted by
applicable law and to the extent that he is not indemnified or saved harmless
under any liability insurance contracts, any present or former Administrative &
Investment Committee or Investment Committee member and any officer, Employee or
director of any Employer or its subsidiaries or affiliates shall be indemnified
and saved harmless by the Employers from and against any and all liabilities or
allegations of liability, joint or several to which he may be subjected by
reason of any act done or omitted to be done in good faith in the administration
and operation of the Plan and Trust (and for the acts and omissions of his
agents or co-fiduciaries), including all expenses reasonably incurred in the
defense of any action, suit or proceeding (including reasonable attorneys’ fees
and reasonable costs of settlement) in the event that the Employers fail to
provide such defense after having been requested to do so.

 

11.17                     Voice Response Unit Deemed Written Consent. Where the
written consent of a Participant, Spouse, Beneficiary, or alternate payee is
required pursuant to the terms of the Plan and/or applicable law, electronic
telephone entries made by any such individual via the Company’s automated “voice
response unit” system shall constitute such written consent for purposes of the
Code and U.S. Treasury regulations.

 

11.18                     Effective January 1, 2002. With respect to any
distribution or severance from employment on or after that date, a Participant’s
benefits will become payable upon the Participant’s termination of employment
due to death, disability or severance from employment or, subject to Code
Section 401(k)(10), a termination of the Plan without establishment of a
successor plan.  Prior to 2002, Plan benefits will become distributable when
(a) the Participant separates from service, including but not limited to a
separation due to death, disability or retirement, (b) subject to Code
Section 401(k)(10), if substantially all the assets of a trade or business are
sold to an unrelated corporation, the Participant continues employment with the
unrelated corporation and the Employer continues to maintain this Plan, or
(c) subject to Code Section 401(k)(10), if an Employer’s interest in a
subsidiary is sold to an unrelated entity and the Participant continues
employment with the subsidiary and the Employer continues to maintain this Plan.

 

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ARTICLE XII

 

SPECIAL TOP-HEAVY RULES

 

12.1                           Application. Notwithstanding any provisions of
the Plan to the contrary, the provisions of this ARTICLE XII shall apply and be
effective for any Plan Year for which the Plan shall be determined to be a
“Top-Heavy Plan” as provided and defined herein.

 

12.2                           Special Terms. For purposes of this ARTICLE XII,
the following terms shall have the following meanings:

 

(a)                                  “Aggregate Benefit” means the sum of:

 

(i)                                     The present value of the accrued benefit
under each and all defined benefit plans in the Aggregation Group determined on
each plan’s individual Determination Date as if there were a Termination of
Employment on the most recent date the plan is valued by an actuary for purposes
of computing plan costs under Section 412 of the Code within the 12-month period
ending on the Determination Date of each such plan, but with respect to the
first plan year of any such plan determined by taking into account the estimated
accrued benefit as of the Determination Date; provided that the actuarial
assumptions to be applied for purposes of this subparagraph (i) shall be the
same assumptions as those applied for purposes of determining the actuarial
equivalents of optional benefits under the particular plan, except that the
interest rate assumption shall be 5%;

 

(ii)                                  The present value of the accrued benefit
(i.e., account balances) under each and all defined contribution plans in the
Aggregation Group, valued as of the valuation date coinciding with or
immediately preceding the Determination Date of each such plan, including
(A) contributions made after the valuation date but on or prior to the
Determination Date, (B) with respect to the first plan year of any plan, any
contribution made subsequent to the Determination Date but allocable as of any
date in the first plan year or (C) with respect to any defined contribution plan
subject to Section 412 of the Code, any contribution made after the
Determination Date that is allocable as of a date on or prior to the
Determination Date; and

 

(iii)                               The sum of each and all amounts distributed
(other than a rollover or plan-to-plan transfer) from any Aggregation Group
Plan, plus a rollover or plan-to-plan transfer initiated by the Employee and
made to a plan which is not an Aggregation Group Plan within the Current Plan
Year, however, (1) that in the case of a distribution made for a reason other
than a Participant’s Termination of Employment, death or Disability, such sums
shall include all amounts distributed within the Current Plan Year or within the
preceding four plan years of any such plan and (ii) that provided such amounts
are not already included in the present value of the accrued benefits as of the
valuation date coincident with or immediately preceding the Determination Date.

 

The Aggregate Benefit shall not include the value of any rollover or plan-

 

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to-plan transfer to an Aggregation Group Plan, the contribution or transfer of
which was initiated by a Participant, was from a plan which was not an
Aggregation Group Plan and was made after December 31, 1983, nor shall the
Aggregate Benefit include the value of employee contributions which are
deductible pursuant to Section 219 of the Code.

 

(b)                                 “Aggregation Group” means the Plan and any
plan (including a plait that has terminated) which is described in Section 401
(a) of the Code, is an annuity contract described in Section 403(a) of the Code,
is a simplified employee pension described in Section 408(k) of the Code or is a
simple retirement account described in Section 408(p) of the Code maintained or
adopted by an Employer or a Commonly Controlled Entity of the Employer in the
Current Plan Year which is either a “Required Aggregation Group” or a
“Permissive Aggregation Group.

 

(i)                                     A “Required Aggregation Group” means all
Aggregation Group Plans (A) in which a Key Employee participates or (B) which
enable any Aggregation Group Plan in which a Key Employee participates to
satisfy the requirements of Section 401(a)(4) or Section 410 of the Code;

 

(ii)                                  A “Permissive Aggregation Group” means all
Aggregation Group Plans included in the Required Aggregation Group, plus one or
more other Aggregation Group Plans as designated by the Administrative &
Investment Committee in its sole discretion, which satisfy the requirements of
Section 401(a)(4) and Section 410 of the Code when considered with the other
component plans of the Required Aggregation Group.

 

(c)                                  “Aggregation Group Plan” means the Plan and
each other plan in the Aggregation Group.

 

(d)                                 “Current Plan Year” means (i) with respect
to the Plan, the Plan Year in which the Determination Date occurs, and (ii) with
respect to each other Aggregation Group Plan, the plan year of such other plan
in which occurs the Determination Date of such other plan.

 

(e)                                  “Determination Date” means (i) with respect
to the Plan and its Plan Year, the last day of the preceding Plan Year, or
(ii) with respect to any other Aggregation Group Plan in any calendar year
during which the Plan is not the only component plan of an Aggregation Group,
the determination date of each plan in such Aggregation Group to occur during
the calendar year as determined under the provisions of each such plan.

 

(f)                                    “Former Key Employee” means an Employee
(including a terminated Employee) who is not a Key Employee in the Current Plan
Year but who was a Key Employee at any time prior to the Current Plan Year.

 

(g)                                 “Key Employee” means an Employee (including
a terminated Employee) who at any time during the Current Plan Year is:

 

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(i)                                     An officer of an Employer or a Commonly
Controlled Entity of an Employer whose total Compensation from the Employer and
the Commonly Controlled Entities during the Plan Year is greater than the amount
in effect under Section 416(i)(1)(A)(i) of the Code (as adjusted for
cost-of-living increases by the Secretary of the Treasury) for the calendar year
in which the Plan Year ends; provided, however, that no more than the lesser of
(A) 50 Employees, or (B) the greater of (1) three Employees or (2) 10% (rounded
to the next whole integer) of the greatest number of Employees during the
Current Plan Year shall be considered as officers for this purpose.  Such
officers considered will be those with the greatest annual Compensation as an
officer during the one-year period ending on the Determination Date

 

(ii)                                  A person who owns more than 5% of the
value of the outstanding stock of an Employer or of any Commonly Controlled
Entity of the Employer or more than 5% of the total combined voting power of all
stock of the Employer or any Commonly Controlled Entity of the Employer
(considered separately); or

 

(iii)                               A person who owns more than 1% of the value
of the outstanding stock of an Employer or a Commonly Controlled Entity of the
Employer or more than 1 % of the total combined voting power of all stock of the
Employer or of the Commonly Controlled Entity (considered separately) and whose
total annual Compensation from the Employer and the Commonly Controlled Entity
is in excess of $150,000.

 

The rules of Section 416(i)(1)(B) and (C) of the Code shall be applied for
purposes of determining an Employee’s ownership interest in an Employer or a
Commonly Controlled Entity of an Employer for purposes of subparagraphs
(iii) and (iv) above. For purposes of this subsection (g), “value” means fair
market value. A Beneficiary (who would not otherwise be considered a Key
Employee) of a deceased Key Employee shall be deemed to be a Key Employee in
substitution for such deceased Key Employee.

 

(h)                                 “Top-Heavy Plan” means the Plan with respect
to any Plan Year if the Aggregate Benefit of all Key Employees or the
Beneficiaries of Key Employees determined on the Determination Date is an amount
in excess of 60% of the Aggregate Benefit of all persons who are Employees
within the Current Plan Year, excluding Former Key Employees. With respect to
any calendar year during which the Plan is not the only Aggregation Group Plan,
the ratio determined under the preceding sentence shall be computed based on the
sum of the Aggregate Benefits of each Aggregation Group Plan totaled as of the
last Determination Date of any Aggregation Group Plan to occur during the
calendar year.

 

12.3                           Vested Percentage. For any Plan Year that the
Plan is a Top-Heavy Plan, the non-forfeitable percentage of the Employer
Matching Account of any person who is an Employee for such Plan Year shall be
determined under the vesting schedule in Section 7.2.

 

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12.4                           Minimum Contribution. For any Plan Year that the
Plan shall be a Top-Heavy Plan, each Participant who is (a) an Eligible Employee
but who is neither a Key Employee nor a Former Key Employee and (b) who is an
Employee on the last day of the Plan Year regardless of how many Hours of
Service he earned during the Plan Year shall have allocated to his Employer
Matching Account the sum of Employer Matching Contributions in an amount equal
to not less than the lesser of 3% of such Participant’s Compensation, or an
amount which is the same ratio or percentage of Employer Matching Contributions
to such Compensation for the Plan Year as for the Key Employee who has the
highest such ratio or percentage for the Plan Year. The amount of Employer
Matching Contributions required to be allocated under this Section for any Plan
Year shall be reduced by the amount of Employer contributions and Forfeitures
allocated on behalf of the Participant under any other defined contribution plan
in the Aggregation Group for the Plan Year.  For Plan Years beginning after
2001, Matching Contributions will be taken into account as Employer
Contributions for purposes of the minimum contribution in a top-heavy Plan Year.

 

12.5                           Termination of Top-Heavy Status. If the Plan has
been determined to be a Top-Heavy Plan for one or more Plan Years and thereafter
ceases to be a Top-Heavy Plan, the provisions of this ARTICLE XII shall cease to
apply to such Plan effective as of the Determination Date on which the Plan is
not a Top-Heavy Plan.

 

ARTICLE XIII

 

ADOPTION AND WITHDRAWAL FROM PLAN

 

13.1                           Procedure for Adoption. Any Employer and certain
unrelated companies (as provided in Section 13.3) may adopt the Plan for the
benefit of their Employees as of a date specified. No such adoption shall be
effective until such adoption has been approved by the Administrative &
Investment Committee. Notwithstanding any term or provision of the Plan to the
contrary (including, but not limited to, terms and conditions concerning Vesting
Service, Eligibility Service, Compensation and amount of retirement benefits),
the terms and provisions as may be imposed with respect to such Employer
Employers and their Employees in an applicable supplement or appendix to the
Plan shall govern. Any Employer who adopts the Plan in accordance with this
Section or Section 13.3 agrees to be bound by all the terms, provisions,
conditions and limitations of the Plan and the accompanying Trust Agreement
which are pertinent to any entity defined as an “Employer” in the Plan with
respect to its Eligible Employees under the Plan. Such Employer further agrees
that the Administrative & Investment Committee shall act for the Employer and
its Eligible Employees under the provisions of the Plan. Such Employer further
agrees to furnish from time to time such information with reference to its
Eligible Employees as may be required by the Administrative & Investment
Committee.

 

13.2                           Procedure for Withdrawal. Any Employer (other
than the Company) may, with the consent of the Company, and subject to such
conditions as may be imposed by the Company, terminate its adoption of the Plan.
Upon discontinuance of an Employer’s participation in the Plan, the Trustee
shall cause a determination to be made of the

 

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equitable part of the Plan assets held on account of Participants of the
withdrawing Employer and their Beneficiaries. The Administrative & Investment
Committee shall direct the Trustee to transfer assets representing such
equitable part to a separate fund for the plan of the withdrawing Employer. Such
withdrawing Employer may thereafter exercise, in respect of such separate fund,
all the rights and powers reserved to the Company with respect to Plan assets.
The plan of the withdrawing Employer shall, until amended by the withdrawing
Employer, continue with the same terms as the Plan herein, except that with
respect to the separate plan of the withdrawing Employer the words “Employer,”
“Employers,” and “Company” shall thereafter be considered to refer only to the
withdrawing Employer. Any discontinuance of participation by an Employer shall
be effected in such manner that each Participant or Beneficiary would (if the
Plan and the plan of the withdrawing Employer then terminated) receive a benefit
immediately after such discontinuance of participation which is equal to or
greater than the benefit he or she would have been entitled to receive
immediately before such discontinuance of participation if the Plan had then
terminated. No transfer of assets pursuant to this Section shall be effected
until such statements with respect thereto, if any, required by ERISA to be
filed in advance thereof have been filed.

 

13.3                           Adoption of Plan by Unrelated Employers. The
Company may authorize companies that are not Commonly Controlled Entities with
respect to the Company to adopt the Plan. Such authorization may extend to an
individual company or to a group of related companies. Any such company that is
authorized to adopt the Plan for the benefit of its employees shall do so in
accordance with Section 13.1. For purposes of such adoption and for purposes of
its participation in the Plan, any such company shall be deemed to be an
“Employer” hereunder and shall be subject to all terms of the Plan applicable to
an Employer.

 

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IN WITNESS WHEREOF, a duly authorized officer of the Company has caused this
Plan to be executed on the 23rd day of December, 2010.

 

 

EDWARDS LIFESCIENCES CORPORATION

 

 

 

 

 

By:

/s/ Robert C. Reindl

 

Its:

Corporate Vice President, Human Resources

 

 

ATTEST:

 

 

 

 

 

 

ACKNOWLEDGMENT

 

The undersigned, as Secretary of the Administrative & Investment Committee under
the Edwards Lifesciences 401(k) Savings and Investment Plan and on behalf of the
other members of such Committee, acknowledges receipt of the foregoing amendment
instrument and approves thereof.

 

Dated this 23rd day of December, 2010.

 

 

ADMINISTRATIVE & INVESTMENT

 

COMMITTEE

 

 

 

under

 

 

 

EDWARDS LIFESCIENCES CORPORATION

 

401(K) SAVINGS AND INVESTMENT PLAN

 

 

 

 

 

By:

/s/ Christine McCauley

 

Its

Secretary as Aforesaid

 

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