Exhibit 10.4

EMPLOYEE MATTERS AGREEMENT

BY AND BETWEEN

BAXTER INTERNATIONAL INC.

AND

BAXALTA INCORPORATED

DATED AS OF JUNE 30, 2015

EMPLOYEE MATTERS AGREEMENT

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TABLE OF CONTENTS

 

            Page  

ARTICLE I DEFINITIONS

     1   

Section 1.01

    

Defined Terms

     1   

ARTICLE II GENERAL PRINCIPLES

     10   

Section 2.01

    

Allocation of Liabilities

     10   

Section 2.02

    

Employment with Baxalta

     12   

Section 2.03

    

Establishment of Baxalta Plans

     13   

Section 2.04

    

Non-Hire; Non-Solicit

     14   

Section 2.05

    

Post-Distribution Employment in Deferred Baxalta Local Businesses

     15   

Section 2.06

    

Collective Bargaining

     17   

Section 2.07

    

Distributorship Model

     17   

ARTICLE III U.S. AND PUERTO RICO QUALIFIED AND NON-QUALIFIED RETIREMENT PLANS

     17   

Section 3.01

    

Baxalta Pension Plan

     17   

Section 3.02

    

Incentive Investment Plan

     21   

Section 3.03

    

Supplemental Pension Plan

     23   

Section 3.04

    

Deferred Compensation Plan

     25   

ARTICLE IV NON-U.S. RETIREMENT PLANS

     26   

Section 4.01

    

Establishment of Non-U.S. Retirement Plans and Transfers of Assets and
Liabilities

     26   

Section 4.02

    

Shared Plan Model

     28   

ARTICLE V WELFARE AND FRINGE BENEFIT PLANS

     31   

Section 5.01

    

Health and Welfare Plans

     31   

Section 5.02

    

COBRA and HIPAA

     34   

Section 5.03

    

Vacation, Holidays and Leaves of Absence

     34   

Section 5.04

    

Severance and Unemployment Compensation

     34   

Section 5.05

    

Workers’ Compensation

     35   

ARTICLE VI EQUITY, INCENTIVE, AND DIRECTOR AND EXECUTIVE COMPENSATION PROGRAMS

     35   

Section 6.01

    

Equity Incentive Programs

     35   

Section 6.02

    

Employee Stock Purchase Plan

     40   

Section 6.03

    

Annual Bonus

     41   

Section 6.04

    

Directors’ Plan

     41   

Section 6.05

    

Directors’ Deferred Compensation Plan

     43   

ARTICLE VII MISCELLANEOUS

     45   

Section 7.01

    

Transfer of Records and Information

     45   

Section 7.02

    

Cooperation

     45   

Section 7.03

    

Employee Agreements

     45   

 

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Section 7.04

Repayment Assets

  45   

Section 7.05

Compliance

  46   

Section 7.06

Preservation of Rights

  46   

Section 7.07

Reimbursement

  46   

Section 7.08

Matching Grant Plan

  46   

Section 7.09

Not a Change in Control

  46   

Section 7.10

Incorporation by Reference

  46   

Section 7.11

Limitation on Enforcement

  47   

Section 7.12

Further Assurances and Consents

  47   

Section 7.13

Third Party Consent

  47   

Section 7.14

Effect if Distribution Does Not Occur

  47   

Section 7.15

Disputes

  47   

Section 7.16

Reverse Jurisdiction

  48   

 

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This EMPLOYEE MATTERS AGREEMENT dated as of June 30, 2015, is by and between
BAXTER INTERNATIONAL INC., a Delaware corporation (“Baxter”), and BAXALTA
INCORPORATED, a Delaware corporation (“Baxalta”).

RECITALS:

WHEREAS, the Baxter Board has determined that it is appropriate and advisable to
separate the Baxalta Business from the Baxter Business;

WHEREAS, to achieve the foregoing, the Parties have executed a Separation and
Distribution Agreement which provides for, among other things, the contribution
from Baxter to Baxalta of certain Assets, the assumption by Baxalta of certain
Liabilities from Baxter, the distribution by Baxter of Baxalta Common Stock to
Baxter shareholders, and the execution and delivery of this Agreement and
certain other agreements to facilitate and provide for the foregoing, in each
case subject to the terms and conditions set forth therein;

WHEREAS, the Employees of the Baxalta Business are currently employed by the
Baxter Group and are expected to become Employees of the Baxalta Group; and

WHEREAS, this Agreement describes the principal employment, compensation and
employee benefit plan arrangements between the Parties.

NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained in this Agreement, the Parties hereby agree as follows:

AGREEMENT

ARTICLE I

DEFINITIONS

Section 1.01 Defined Terms. The following capitalized terms as used in this
Agreement shall have the meaning set forth below unless otherwise specified
herein:

“Adjusted Baxter Award” means a Baxter Option or Baxter RSU Award, as adjusted
in accordance with Section 6.01(a).

“Adjusted Baxalta Stock Value” means the product obtained by multiplying (i) the
Baxalta When-Issued Price times (ii) the Distribution Ratio.

“Adjusted Option Value” means (i) the Baxter Stock Value minus (ii) the per
share exercise price of the Baxter Option immediately prior to the Distribution
Date.

“Affiliate” has the meaning set forth in the Separation and Distribution
Agreement.

“Agreement” means this Employee Matters Agreement and each of the Schedules
hereto.

“Applicable Closing Date” has the meaning set forth in Section 4.01(a).

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“Asset” has the meaning set forth in the Separation and Distribution Agreement.

“Baxalta” has the meaning set forth in the Preamble.

“Baxalta Award” means a Baxalta Option, Baxalta PSU Award, or Baxalta RSU Award
granted pursuant to Section 6.01.

“Baxalta Benefit Plan” means, following the Distribution, each Benefit Plan
sponsored by, maintained by, or contributed to by the Baxalta Group, provided
that such term shall include, following the consummation of a Local Closing
Transaction, each Benefit Plan sponsored by, maintained by, or contributed to by
the applicable Deferred Baxalta Local Business.

“Baxalta Board” means the Baxalta board of directors.

“Baxalta Business” has the meaning set forth in the Separation and Distribution
Agreement.

“Baxalta Change of Control” has the meaning set forth in Section 6.01(b).

“Baxalta Common Stock” has the meaning set forth in the Separation and
Distribution Agreement.

“Baxalta DCP” means the Baxalta Incorporated and Subsidiaries Deferred
Compensation Plan.

“Baxalta Directors’ DCP” means the Baxalta Incorporated Directors’ Deferred
Compensation Plan.

“Baxalta Directors’ Plan” means the Baxalta Incorporated Non-Employee Director
Compensation Plan.

“Baxalta Employee” means any Employee who is (i) employed by the Baxalta Group
as of immediately prior to the Distribution Date, (ii) a Post-Distribution
Baxalta Employee, (iii) designated prior to the Distribution Date by Baxter as
an individual whose employment is to transfer from the Baxter Group to the
Baxalta Group, whether or not such transfer occurs prior to, upon or after the
Distribution Date or (iv) designated as a Baxalta Employee by joint agreement of
the Parties (in all cases, other than an Employee who is designated by Baxter
prior to the Distribution Date as intended not to transfer to the Baxalta
Group).

“Baxalta Equity Plan” means the Baxalta Incorporated 2015 Equity Plan.

“Baxalta ESPP” means the Baxalta Incorporated Employee Stock Purchase Plan.

“Baxalta Former Employee” means a Former Employee who, immediately prior to such
individual’s termination of employment with or by the Baxter Group, either
(i) was designated by Baxter as an Employee whose employment was to transfer to
the Baxalta Group or (ii) if not

 

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so designated by Baxter, was primarily employed or engaged in the Baxalta
Business (other than a Former Employee who was designated by Baxter as intended
to become a Baxter Retained Employee).

“Baxalta Group” means Baxalta and its Subsidiaries.

“Baxalta Health and Welfare Plan” means, following the Distribution, a Health
and Welfare Plan sponsored by, maintained by, or contributed to by the Baxalta
Group.

“Baxalta IIP” means the Baxalta Incorporated and Subsidiaries Incentive
Investment Plan.

“Baxalta Incentive Plan” means the Baxalta 2015 Incentive Plan.

“Baxalta Pension Plan” means the Baxalta Incorporated and Subsidiaries Pension
Plan.

“Baxalta Percentage” means the quotient obtained by dividing (i) the Adjusted
Baxalta Stock Value by (ii) the Combined Stock Value.

“Baxalta Pre-Distribution Option Value” means the quotient obtained by dividing
(i) the product obtained by multiplying (A) the Adjusted Option Value times
(B) the Baxalta Percentage by (ii) the Distribution Ratio.

“Baxalta Retiree Health Care Plan” means the Baxalta Incorporated and
Subsidiaries Retiree Plan.

“Baxalta SERP” means the Baxalta Incorporated and Subsidiaries Supplemental
Pension Plan.

“Baxalta SIP” has the meaning set forth in Section 3.02(h).

“Baxalta Stock Value” means the quotient obtained by dividing (i) the product
obtained by multiplying (A) the Baxter Stock Value by (B) the Baxalta
Percentage, by (ii) the Distribution Ratio.

“Baxalta When-Issued Price” means the volume weighted average per share price,
as reported on the NYSE, of Baxalta Common Stock trading “when-issued” during
Regular Trading Hours on the final five Trading Days immediately preceding the
Effective Time.

“Baxter” has the meaning set forth in the Preamble.

“Baxter Benefit Plan” means a Benefit Plan sponsored by, maintained by, or
contributed to by the Baxter Group.

“Baxter Board” means the Baxter board of directors.

“Baxter Business” has the meaning set forth in the Separation and Distribution
Agreement.

 

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“Baxter Change of Control” has the meaning set forth in Section 6.01(b).

“Baxter Common Shares” has the meaning set forth in the Separation and
Distribution Agreement.

“Baxter Compensation Committee” means the compensation committee of the Baxter
Board.

“Baxter DCP” means the Baxter International Inc. and Subsidiaries Deferred
Compensation Plan.

“Baxter Directors’ DCP” means the Baxter International Inc. Directors’ Deferred
Compensation Plan, as amended and restated effective January 1, 2014.

“Baxter Directors’ Plan” means the Baxter International Inc. Non-Employee
Director Compensation Plan.

“Baxter ESPP” means the Baxter International Inc. Employee Stock Purchase Plan.

“Baxter Ex-Distribution Price” means the volume weighted average per share
price, as reported on the NYSE, of Baxter Common Shares trading
“ex-distribution” during Regular Trading Hours on the final five Trading Days
immediately preceding the Effective Time.

“Baxter Former Employee” means a Former Employee who is not a Baxalta Former
Employee.

“Baxter Group” means Baxter and its Subsidiaries (excluding, after the
Distribution, any member of the Baxalta Group).

“Baxter Health and Welfare Plan” means a Health and Welfare Plan sponsored by,
maintained by, or contributed to by the Baxter Group.

“Baxter IIP” means the Baxter International Inc. and Subsidiaries Incentive
Investment Plan.

“Baxter Pension Plan” means the Baxter International Inc. and Subsidiaries
Pension Plan.

“Baxter Percentage” means the quotient obtained by dividing (i) the Baxter
Ex-Distribution Price by (ii) the Combined Stock Value.

“Baxter Pre-Distribution Option Value” means the product obtained by multiplying
(i) the Adjusted Option Value times (ii) the Baxter Percentage.

“Baxter Pre-Distribution Stock Value” means the product obtained by multiplying
(i) the Baxter Stock Value by (ii) the Baxter Percentage.

“Baxter Puerto Rico Pension Plan” shall have the meaning set forth in
Section 3.01(h).

“Baxter Retained Employee” means any Employee other than a Baxalta Employee.

 

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“Baxter Retiree Health Care Plan” means the Baxter International Inc. and
Subsidiaries Retiree Plan.

“Baxter SERP” means the Baxter International Inc. and Subsidiaries Supplemental
Pension Plan.

“Baxter SIP” has the meaning set forth in Section 3.02(h).

“Baxter Stock Programs” means, collectively, (i) the Baxter International Inc.
2000 Incentive Plan, (ii) the Baxter International Inc. 2001 Incentive Plan,
(iii) the Baxter International Inc. 2003 Incentive Plan, (iv) the Baxter
International Inc. 2007 Incentive Plan, (v) the Baxter International Inc. 2011
Incentive Plan, (vi) the Baxter International Inc. 2015 Incentive Plan, and
(vii) any similar prior Baxter plans and all sub-plans or equity plans related
to any of the foregoing, together with any incentive compensation program or
arrangement that governs the terms of equity-based incentive awards assumed by
the Baxter Group in connection with a corporate transaction and that is
maintained by the Baxter Group immediately prior to the Distribution Date, and
any sub-plans established under those programs.

“Baxter Stock Value” means the volume weighted average per share price, as
reported on the NYSE, of Baxter Common Shares trading “regular-way” during
Regular Trading Hours on the final five Trading Days immediately preceding the
Effective Time.

“Benefit Plan” means any (i) “employee benefit plan,” as defined in ERISA
Section 3(3) (whether or not such plan is subject to ERISA); and
(ii) employment, compensation, severance, salary continuation, bonus, thirteenth
month, incentive, retirement, thrift, superannuation, savings, pension, workers’
compensation, termination benefit (including termination notice requirements),
termination indemnity, other indemnification, supplemental unemployment benefit,
redundancy pay, profit sharing, deferred compensation, stock ownership, stock
purchase, stock option, stock appreciation right, restricted stock, “phantom”
stock, performance share unit, restricted stock unit, other stock-based
incentive, change in control, paid time off, perquisite, fringe benefit,
vacation, disability, life, or other insurance, death benefit, hospitalization,
medical, or other compensatory or benefit plan, program, fund, agreement,
arrangement, or policy of any kind (whether written or oral, qualified or
nonqualified, funded or unfunded, foreign or domestic, currently effective or
terminated), and any trust, escrow or similar agreement related thereto, whether
or not funded, excluding any plan, program, fund, agreement, arrangement, or
policy (other than for workers’ compensation Liabilities) that is mandated by
and maintained solely pursuant to applicable Law.

“COBRA” means coverage required by Code Section 4980B or ERISA Section 601 et.
seq.

“Code” means the Internal Revenue Code of 1986, as amended.

“Combined Stock Value” means the sum of (i) the Baxter Ex-Distribution Price and
(ii) the Adjusted Baxalta Stock Value.

“Conveyance and Assumption Instruments” has the meaning set forth in the
Separation and Distribution Agreement.

 

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“Deferred Baxalta Local Business” has the meaning set forth in the Separation
and Distribution Agreement.

“Distribution” has the meaning set forth in the Separation and Distribution
Agreement.

“Distribution Date” has the meaning set forth in the Separation and Distribution
Agreement.

“Distribution Ratio” means the number of shares of Baxalta Common Stock
distributed in the Distribution in respect of one Baxter Common Share.

“Effective Time” has the meaning set forth in the Separation and Distribution
Agreement.

“Employee” means an employee of the Baxter Group or the Baxalta Group, as
applicable, including any employee absent from work on account of long-term
disability or workers’ compensation leave (in each case, unless treated as a
separated employee for employment purposes), vacation, jury duty, funeral leave,
personal leave, sickness, short-term disability, military leave, family leave,
pay continuation leave, or other approved leave of absence or for whom an
obligation to recall, rehire or otherwise return to employment exists under a
contractual obligation or Law.

“Employee Agreement” means any employment contract, whether written or
unwritten, between a member of the Baxter Group and an Employee or Former
Employee, including any standard form employee agreement customarily signed by
certain Employees of the Baxter Group and any other form of employment agreement
signed or otherwise effective under applicable local Law.

“Employee Recoupment Asset” means an employer’s right to repayment from an
employee in respect of a tax equalization payment, sign-on bonus payment,
relocation expense payment, tuition payment, reimbursement, loan, or other
similar item, including any agreement related thereto.

“Employment Tax” means withholding, payroll, social security, workers’
compensation, unemployment, disability and any similar tax imposed by any Tax
Authority or social security authority, and any interest, penalties, additions
to tax, or additional amounts with respect to the foregoing imposed on any
taxpayer or consolidated, combined, or unitary group of taxpayers. With respect
to any Employment Tax, the term “Tax Authority” means the governmental entity or
political subdivision thereof that imposes such Employment Tax, and the agency
(if any) charged with the collection of such Employment Tax for such entity or
subdivision.

“ERISA” means the U.S. Employee Retirement Income Security Act of 1974, as
amended.

“ESOP” means an employee stock ownership plan, as defined in ERISA
Section 407(d)(6) and Code Section 4975(e)(7).

 

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“Former Employee” means any individual whose employment with the Baxter Group
terminated on or prior to the Distribution Date, excluding any employee absent
from work immediately prior to the Distribution Date on account of long-term
disability or workers’ compensation leave (in each case, to the extent not
treated as a separated employee for employment purposes), vacation, jury duty,
funeral leave, personal leave, sickness, short-term disability, military leave,
family leave, pay continuation leave, or other approved leave of absence or for
whom an obligation to recall, rehire or otherwise return to employment exists
under a contractual obligation or Law.

“Health and Welfare Plan” means any Benefit Plan established or maintained to
provide, through the purchase of insurance or otherwise, medical, dental,
prescription, vision, short-term disability, long-term disability, death
benefits, life insurance, accidental death and dismemberment insurance, business
travel accident insurance, employee assistance program, group legal services,
wellness, cafeteria (including premium payment, health care flexible spending
account, and dependent care flexible spending account components), travel
reimbursement, transportation, vacation benefits, apprenticeship or other
training programs, day care centers, or prepaid legal services benefits,
including any “employee welfare benefit plan” (as defined in ERISA Section 3(1))
that is not a severance plan.

“HIPAA” means the Health Insurance Portability and Accountability Act of 1996,
as amended.

“Incurred Claim” means a Liability related to services or benefits provided
under a Benefit Plan, and shall be deemed to be incurred: (i) with respect to
medical, dental, vision, and prescription drug benefits, upon the rendering of
services giving rise to such Liability; (ii) with respect to death benefits,
life insurance, accidental death and dismemberment insurance, and business
travel accident insurance, upon the occurrence of the event giving rise to such
Liability; (iii) with respect to disability benefits, upon the date of
disability, as determined by the disability benefit insurance carrier or claim
administrator, giving rise to such Liability; (iv) with respect to a period of
continuous hospitalization, upon the date of admission to the hospital; and
(v) with respect to tuition reimbursement or adoption assistance, upon
completion of the requirements for such reimbursement or assistance, whichever
is applicable.

“International Commercial Operations Agreement” has the meaning set forth in the
Separation and Distribution Agreement.

“Law” has the meaning set forth in the Separation and Distribution Agreement.

“Liabilities” has the meaning set forth in the Separation and Distribution
Agreement.

“Local Closing Transaction” means the local closing transaction involving a
Deferred Baxalta Local Business.

“Non-U.S. Baxter Benefit Plan” means a Baxter Benefit Plan established,
maintained, or contributed to by the Baxter Group that is primarily for the
benefit of Employees or Former Employees who work primarily outside of the
United States.

“Non-U.S. Baxalta Benefit Plan” means a Baxalta Benefit Plan established,
maintained, or contributed to by the Baxalta Group that is primarily for the
benefit of Employees or Former Employees who work primarily outside of the
United States.

 

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“Non-U.S. Baxalta Employee” means a Baxalta Employee who works primarily outside
of the United States.

“Non-U.S. Health and Welfare Plan” means a Health and Welfare Plan established,
maintained, or contributed to by the Baxter Group or the Baxalta Group, as
applicable, that is primarily for the benefit of Employees (including Former
Employees or Baxalta Former Employees, as appropriate) who work primarily
outside of the United States.

“Offering” has the meaning set forth in the Baxter ESPP.

“Offering Commencement Date” has the meaning set forth in the Baxter ESPP.

“Offering End Date” has the meaning set forth in the Baxter ESPP.

“Option” means (i) when immediately preceded by “Baxter,” an option to purchase
one or more Baxter Common Shares granted under a Baxter Stock Program and
outstanding immediately prior to the Distribution Date (whether or not then
vested or exercisable); (ii) when immediately preceded by “Adjusted Baxter,” an
option to purchase one or more Baxter Common Shares adjusted in accordance with
Section 6.01 or Section 6.04; and (iii) when immediately preceded by “Baxalta,”
an option to purchase one or more shares of Baxalta Common Stock granted by
Baxalta in accordance with Section 6.01 or Section 6.04.

“Parties” means the parties to this Agreement.

“Pension Eligibility Date” has the meaning set forth in Section 3.01(c)(i).

“Pension Split Date” has the meaning set forth in Section 3.01(a).

“Post-Distribution Baxalta Employee” means any Employee whose intended transfer
from the Baxter Group to the Baxalta Group in connection with the Distribution
is to occur after the Distribution Date, including (i) each Employee named as a
Post-Distribution Baxalta Employee in Schedule 1.01, which lists those Employees
transferring only upon a Local Closing Transaction if employed in connection
with a Deferred Baxalta Local Business and (ii) any other Employee whose
intended transfer from the Baxter Group to the Baxalta Group in connection with
the Distribution is to occur after the Distribution Date, including any Employee
hired on or after the Distribution Date (but prior to the applicable Transfer
Date) to the extent such Employee is primarily related to a Deferred Baxalta
Local Business or is hired to replace any terminated or departing Employee who
would have otherwise been a Post-Distribution Baxalta Employee.

“PSU Award” means (i) when immediately preceded by “Baxter,” a performance share
unit award granted pursuant to a Baxter Stock Program and outstanding
immediately prior to the Distribution Date; (ii) when immediately preceded by
“Adjusted Baxter,” a performance share unit award granted pursuant to a Baxter
Stock Program adjusted in accordance with Section 6.01; and (iii) when
immediately preceded by “Baxalta,” a performance share unit award granted by
Baxalta in accordance with Section 6.01.

 

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“QDRO” means a qualified domestic relations order within the meaning of ERISA
Section 206(d) and Code Section 414(p).

“Regular Trading Hours” means the period beginning at 9:30 A.M. New York City
time and ending 4:00 P.M. New York City time.

“RSU Award” means (i) when immediately preceded by “Baxter,” a restricted stock
unit award granted pursuant to a Baxter Stock Program and outstanding
immediately prior to the Distribution Date; (ii) when immediately preceded by
“Adjusted Baxter,” a restricted stock unit award granted pursuant to a Baxter
Stock Program adjusted in accordance with Section 6.01 or Section 6.04; and
(iii) when immediately preceded by “Baxalta,” a restricted stock unit award
granted by Baxalta in accordance with Section 6.01 or Section 6.04.

“Securities Act” means the U.S. Securities Act of 1933, as amended.

“Separation” has the meaning set forth in the Separation and Distribution
Agreement.

“Separation and Distribution Agreement” means the Separation and Distribution
Agreement by and between the Parties, dated as of June 30, 2015.

“Shared Plan Replacement Date” means the date of the establishment of the
applicable Non-U.S. Baxalta Benefit Plan.

“Subsidiary” has the meaning set forth in the Separation and Distribution
Agreement.

“Trading Day” means the period of time during any given calendar day, commencing
with the determination of the opening price on the NYSE and ending with the
determination of the closing price on the NYSE, in which trading and settlement
in Baxter Common Shares or Baxalta Common Stock, as applicable, is permitted on
the NYSE.

“Transfer Date” means, with respect to each (i) Baxalta Employee (other than a
Post-Distribution Baxalta Employee), the Distribution Date; and
(ii) Post-Distribution Baxalta Employee, the date on which such person first
becomes employed by the Baxalta Group following the Distribution Date. With
respect to each Post-Distribution Baxalta Employee who is not employed by a
Deferred Baxalta Local Business, “Transfer Date” means the date determined
jointly by Baxter and Baxalta, or in the absence of such agreement, such date as
Baxter may determine based on the facts and circumstances applicable to such
Post-Distribution Baxalta Employee.

“Transferred Employee” has the meaning set forth in Section 2.02(a)(i).

“Transferred Flexible Spending Account Balances” has the meaning set forth in
Section 5.01(c)(iii).

“Transferred Non-U.S. Employee” means a Transferred Employee who works primarily
outside of the United States.

 

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“Transition Services Agreement” has the meaning set forth in the Separation and
Distribution Agreement.

“United States” means, when used in a territorial sense, the fifty states of the
United States of America and the District of Columbia, but does not, unless
otherwise specifically provided, include Puerto Rico or any other territory of
the United States.

“USERRA” means the Uniformed Services Employment and Reemployment Rights Act of
1994, as amended.

ARTICLE II

GENERAL PRINCIPLES

Section 2.01 Allocation of Liabilities.

(a) Baxalta Liabilities. Except as expressly provided in this Agreement, Baxalta
hereby assumes (or retains) and agrees to pay, perform, fulfill, and discharge
all Liabilities to the extent relating to, arising out of, or resulting from or
with respect to:

(i) the employment (or termination of employment), including with respect to any
statutory or other Liabilities (whether those Liabilities are otherwise the
legal responsibility of the Baxter Group or the Baxalta Group) triggered by or
in connection with the Separation, of each Transferred Employee by the Baxter
Group up to the applicable Transfer Date and by the Baxalta Group on and after
the applicable Transfer Date (including, in each case, all Liabilities with
respect to any such Baxalta Employee relating to, arising out of, or resulting
from Employment Taxes, Employee Agreements, any Baxter Benefit Plan or any
Baxalta Benefit Plan);

(ii) the retention of any individual who is, or was, an independent contractor,
temporary employee, temporary service worker, consultant, freelancer, agency
employee, leased employee, on-call worker, incidental worker, or non-payroll
worker or any other individual in any other similar relationship to the extent
the services provided by any such individual were primarily related to the
Baxalta Group or the Baxalta Business; provided that, for the avoidance of
doubt, this Agreement is not intended to, and does not, address any Liabilities
in respect of the services provided by consulting firms, investment advisory
firms, valuation advisory firms, legal advisors or other third-party entities
retained to provide advice with respect to or in connection with the Separation
and Distribution; and

(iii) Liabilities and responsibilities expressly assumed or retained by Baxalta
pursuant to this Agreement.

(b) Baxter Liabilities. Except as expressly provided in this Agreement, the
Separation and Distribution Agreement or any Ancillary Agreement other than any
Conveyance and Assignment Instrument (to the extent such Ancillary Agreement
provides for allocation of Liability related to services to be provided after
the Distribution Date), Baxter

 

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hereby retains (or assumes) and agrees to pay, perform, fulfill, and discharge
all Liabilities to the extent relating to, arising out of, or resulting from:

(i) the employment (or termination of employment) of each Baxter Retained
Employee by the Baxter Group prior to, on, or after the Distribution Date
(including all Liabilities with respect to any such Baxter Retained Employee to
the extent relating to, arising out of, or resulting from Employment Taxes,
Employee Agreements or any Baxter Benefit Plan);

(ii) the employment (or termination of employment) of each Former Employee and
each Baxalta Employee unless and until such Baxalta Employee becomes a
Transferred Employee (including all Liabilities to the extent relating to,
arising out of, or resulting from Employment Taxes, Employee Agreements or any
Baxter Benefit Plan);

(iii) the retention of any individual who is, or was, an independent contractor,
temporary employee, temporary service worker, consultant, freelancer, agency
employee, leased employee, on-call worker, incidental worker, non-payroll worker
or any other individual in any other similar relationship to the extent the
services provided by any such individual were primarily related to the Baxter
Group or the Baxter Business; provided that, for the avoidance of doubt, this
Agreement is not intended to, and does not, address any Liabilities in respect
of the services provided by consulting firms, investment advisory firms,
valuation advisory firms, legal advisors or other third-party entities retained
to provide advice with respect to or in connection with the Separation and
Distribution; and

(iv) Liabilities and responsibilities expressly retained or assumed by Baxter
pursuant to this Agreement.

(c) Other Liabilities. To the extent that this Agreement does not cover
particular Liabilities or responsibilities that relate to, arise out of, or
result from employment (or termination of employment), Employment Taxes,
Employee Agreements or any Benefit Plan and the Parties later determine that
they should be allocated in connection with the Separation, such Liabilities and
responsibilities shall be handled in a manner similar to the manner in which
this Agreement handles comparable Liabilities and responsibilities, subject to
the mutual agreement of the Parties.

(d) Labor Relations. To the extent required by applicable Law or any contract or
arrangement with a labor union, works council or similar employee organization,
Baxalta shall provide notice, engage in consultation and take any similar action
which may be required after the Distribution Date on its part in connection with
the Separation and shall fully indemnify each member of the Baxter Group against
any Liabilities arising from its failure to comply with such requirements.

 

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Section 2.02 Employment with Baxalta.

(a) Employment Transfers. The Parties intend for Baxalta Employees to transfer
to the Baxalta Group and shall use their respective best efforts and cooperate
with each other to effectuate this intent.

(i) Except as otherwise mutually agreed upon by the Parties, as of each Baxalta
Employee’s Transfer Date, the Baxalta Group shall: (A) continue to employ (on a
basis consistent with Section 2.02(b)) each Baxalta Employee employed in a
jurisdiction where employment continues automatically by operation of Law (and
such individual does not object, where such right exists under applicable Law);
(B) offer to employ (on a basis consistent with Section 2.02(b)) each Baxalta
Employee employed in a jurisdiction where employment does not continue
automatically by operation of Law; and (C) offer to employ (on a basis
consistent with Section 2.02(b) or as otherwise required by applicable Law) each
Former Employee who would have been a Baxalta Employee had such Former Employee
been employed on the Distribution Date, and whose right to re-employment is
protected by any applicable Law, including any Former Employee covered by
USERRA. Each Baxalta Employee who accepts an offer of employment with the
Baxalta Group, or who continues employment with the Baxalta Group following his
or her Transfer Date automatically by operation of Law (and does not object
where such right exists under applicable Law), as the case may be, will be
referred to in this Agreement as a “Transferred Employee.”

(ii) The Baxter Group may terminate the employment of any Baxalta Employee who
does not become a Transferred Employee as of his or her intended Transfer Date,
or, if such Baxalta Employee cannot be terminated in accordance with applicable
Law or otherwise, then the Baxter Group may terminate any other Employee of the
Baxter Group whose employment (in the sole judgment of Baxter) is made redundant
as a result of the continued retention of such Baxalta Employee. The Baxter
Group may also terminate the employment of any Baxalta Employee if retaining
such Employee would constitute a violation of applicable Laws or the Baxter Code
of Conduct. Baxalta will be responsible for, and will indemnify the Baxter Group
from and against, any Liabilities incurred or payments made (including any
severance payments made) in connection with the termination of a Baxalta
Employee or any other Employee of the Baxter Group pursuant to this
Section 2.02(a)(ii) to the extent of any payment occurring on or after the
Distribution Date.

(b) Compensation and Benefits.

(i) Except as expressly provided in this Agreement or in local Conveyance and
Assumption Instruments, no Transferred Employee shall participate in any Baxter
Benefit Plan following his or her Transfer Date.

(ii) Except as expressly provided in this Agreement or as otherwise required by
applicable Law, the Baxalta Group shall provide to each Transferred Employee as
of his or her Transfer Date (A) base salary at the same rate as provided to that
Transferred Employee immediately prior to the Transfer Date, (B) cash

 

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incentive compensation opportunities that are comparable in the aggregate to
those offered under the corresponding Baxter Benefit Plan(s) immediately prior
to the Transfer Date, and (C) benefits under the other Baxalta Benefit Plans
that are comparable in the aggregate to benefits provided under the
corresponding Baxter Benefit Plans immediately prior to the Transfer Date.
Nothing in the preceding sentence shall prevent the Baxalta Group from modifying
the compensation and benefits of a Transferred Employee after such Transferred
Employee’s Transfer Date.

(c) Service Credit. Except as otherwise expressly provided in this Agreement or
to the extent it would result in a duplication of benefits, Baxalta and each
Baxalta Benefit Plan shall, to the extent permitted in accordance with
applicable Law, give each Transferred Employee credit for all service with the
Baxter Group and shall calculate such service as it would be calculated by
Baxter or under the corresponding Baxter Benefit Plan as of the applicable
Transfer Date.

Section 2.03 Establishment of Baxalta Plans.

(a) Generally.

(i) U.S. Prior to the Distribution Date, Baxalta shall adopt Benefit Plans (and
related trusts, if applicable, as determined by the Parties) with terms
comparable in the aggregate to those of the corresponding Baxter Benefit Plans
in the U.S., including in particular those listed in Schedule 2.03(a); provided,
however, that Baxalta may limit participation in any Baxalta Benefit Plan to
Transferred Employees who participated in the corresponding Baxter Benefit Plan
immediately prior to the applicable Transfer Date.

(ii) Non-U.S. (excluding Puerto Rico). Prior to the Distribution Date, the
Baxalta Group shall, except as otherwise mutually agreed upon by the Parties,
adopt Non-U.S. Baxalta Benefit Plans (excluding Non-U.S. Baxalta Benefit Plans
with respect to Non-U.S. Baxalta Employees residing in Puerto Rico), with terms
comparable in the aggregate to those of the corresponding Non-U.S. Baxter
Benefit Plans; provided, however, that Baxalta may limit participation in any
such Non-U.S. Baxalta Benefit Plan to Non-U.S. Baxalta Employees who are
Transferred Employees and who participated in the corresponding Non-U.S. Baxter
Benefit Plan immediately prior to the applicable Transfer Date. As described in
Article IV, or as otherwise mutually agreed upon by the Parties from time to
time, the Baxter Group shall, or shall cause the applicable Non-U.S. Baxter
Benefit Plan’s related trust to, transfer to the Baxalta Group or the relevant
Non-U.S. Baxalta Benefit Plan’s related trust, an amount equal to the trust
Assets, insurance reserves, and other Assets of each Non-U.S. Baxter Benefit
Plan relating to the Liabilities of such Non-U.S. Baxter Benefit Plan assumed by
Baxalta or such Non-U.S. Baxalta Benefit Plan in accordance with this paragraph.
To the extent a Non-U.S. Baxter Benefit Plan is not required to be funded by
applicable Law or is not voluntarily funded, there shall be no transfer of
assets by the Non-U.S. Baxter Benefit Plan or by the Baxter Group. As described
in Article IV, or as otherwise mutually agreed upon by the Parties from time to
time, the Baxalta Group shall, or shall cause the relevant Non-U.S. Baxalta
Benefit Plan to, assume the Liabilities of the corresponding Non-U.S.

 

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Baxter Benefit Plan with respect to all benefits accrued under that Non-U.S.
Baxter Benefit Plan by Non-U.S. Baxalta Employees (other than Non-U.S. Employees
residing in Puerto Rico) who are Transferred Employees.

(iii) Puerto Rico. Prior to the Distribution Date, the Baxalta Group shall,
except as otherwise provided in Article III or as mutually agreed upon by the
Parties, adopt Non-U.S. Baxalta Benefit Plans with respect to Non-U.S. Baxalta
Employees residing in Puerto Rico, with terms comparable in the aggregate to
those of the corresponding Non-U.S. Baxter Benefit Plans; provided, however,
that Baxalta may limit participation in any such Non-U.S. Baxalta Benefit Plan
to Non-U.S. Baxalta Employees who are Transferred Employees and who participated
in the corresponding Non-U.S. Baxter Benefit Plan immediately prior to the
applicable Transfer Date; provided further that to the extent permitted by
applicable Law, the Baxalta Group may provide for Non-U.S. Baxalta Employees
residing in Puerto Rico to participate in a Baxalta Benefit Plan maintained for
Baxalta Employees residing in the United States, in which event such Baxalta
Benefit Plan shall be considered a Non-U.S. Baxalta Benefit Plan with respect to
the portion applicable to such Non-U.S. Baxalta Employees. As described in
Article III, or as otherwise mutually agreed upon by the Parties from time to
time, the Baxter Group shall, or shall cause the applicable Non-U.S. Baxter
Benefit Plan’s related trust to, transfer to the Baxalta Group or the relevant
Non-U.S. Baxalta Benefit Plan’s related trust, an amount equal to the trust
Assets, insurance reserves, and other Assets of each Non-U.S. Baxter Benefit
Plan relating to the Liabilities of such Non-U.S. Baxter Benefit Plan assumed by
Baxalta or such Non-U.S. Baxalta Benefit Plan in accordance with this paragraph.
As described in Article III, or as otherwise mutually agreed upon by the Parties
from time to time, the Baxalta Group shall, or shall cause the relevant Non-U.S.
Baxalta Benefit Plan to, assume the Liabilities of the corresponding Non-U.S.
Baxter Benefit Plan with respect to all benefits accrued under that Non-U.S.
Baxter Benefit Plan by Non-U.S. Baxalta Employees residing in Puerto Rico who
are Transferred Employees.

(b) Plan Information and Operation. Baxter shall provide Baxalta with
information describing each Baxter Benefit Plan election made by a Transferred
Employee that may have application following the applicable Transfer Date.
Baxalta shall determine, in its sole discretion, whether to administer the
Baxalta Benefit Plans using those elections or to require Transferred Employees
to submit new elections with respect to the Baxalta Benefit Plans. Except as
provided in this Agreement, the Distribution and the transfer of any Employee’s
employment to the Baxalta Group shall not cause a distribution from or payment
of benefits under any Baxter Benefit Plan. Each Party shall, upon reasonable
request, provide the other Party and the other Party’s respective Affiliates,
agents, and vendors all information reasonably necessary to the other Party’s
operation or administration of its Benefit Plans.

Section 2.04 Non-Hire; Non-Solicit.

(a) As of the Distribution Date and until the second anniversary of the
Distribution Date, Baxter shall not, and shall cause the Baxter Group not to,
solicit or hire or continue to keep employed (whether as an employee,
consultant, contractor or otherwise) (i) any Baxalta Employee who was an
Employee of the Baxter Group or Baxalta Group at any time

 

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during the six months prior to the Distribution Date; or (ii) any Baxalta
Employee who has rejected any offer of employment made by the Baxalta Group in
connection with Section 2.02(a)(i) (subject in each case to the terms of
Section 2.02(a)(ii)); provided, however, that nothing in this Section 2.04(a)
shall prohibit the Baxter Group from soliciting or hiring any individual who is
involuntarily terminated by the Baxalta Group, or from continuing to employ any
Post-Distribution Baxalta Employee.

(b) As of the Distribution Date and until the second anniversary of the
Distribution Date, Baxalta shall not, and shall cause the Baxalta Group not to,
solicit or hire (whether as an employee, consultant, contractor or otherwise)
(i) any Baxter Retained Employee or Baxter Former Employee who was an Employee
of the Baxter Group or the Baxalta Group within six months prior to the
Distribution Date; or (ii) any Baxter Employee employed by the Baxalta Group who
rejected any offer of employment made by the Baxter Group in connection with the
Separation and Distribution; provided, however, that nothing in this
Section 2.04(b) shall prohibit the Baxalta Group from soliciting or hiring any
individual who is involuntarily terminated by the Baxter Group, from continuing
to employ any Baxter Employee as required by applicable Law, or from employing
any Baxter Employee (if any) whose transfer date to the Baxter Group by
agreement of the Parties will occur after the Distribution Date.

(c) The Parties specifically acknowledge and agree that this provision is
necessary to ensure stabilization of both companies after the Distribution and
does not impede either company from competing in the marketplace or obtaining
sufficient talent to effectively innovate, develop, grow, or sustain their
respective businesses.

(d) The Parties further specifically acknowledge and agree that any remedy at
law for any breach of this Section 2.04 shall be inadequate and that in the
event of any actual or threatened breach of this Section 2.04, the non-breaching
party, in addition to any other relief available to it, shall be entitled to
temporary and permanent injunctive relief without the necessity of proving
actual damage.

(e) The Parties specifically acknowledge and agree that an exception may be made
to this provision at the sole discretion and with the written consent of the CVP
and EVP, as applicable, of Human Resources of each Party. Any exception made
shall not be used as precedent to compel or allow any further exceptions.

Section 2.05 Post-Distribution Employment in Deferred Baxalta Local Businesses.
The following provisions shall apply to the Deferred Baxalta Local Businesses:

(a) During the period commencing on the Distribution Date and ending on the
applicable Transfer Date, Baxter or its appropriate Affiliate shall manage the
employment of each Post-Distribution Baxalta Employee consistently with its
management of the employment of similar Baxter Employees in the ordinary course
of business (including with respect to compensation, annual and other bonuses,
and other compensation, subject to Section 2.05(a)(iii)(E) below); provided that
Baxter and its Affiliates shall have no obligation to make any equity grant or
provide any other equity incentive to any Post-Distribution Baxalta Employee on
or after the Distribution Date, and Baxalta shall have no obligation to Baxter
or any of its Affiliates in respect of any equity grant or other equity
incentive that is provided by Baxter

 

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or its appropriate Affiliate to any Post-Distribution Baxalta Employee on or
after the Distribution Date unless and except Baxter and Baxalta have agreed in
writing otherwise. Baxalta shall be responsible for all cash compensation
liabilities arising during such period; provided that the payment and
reimbursement for such amounts shall occur in accordance with the International
Commercial Operations Agreement. Baxter shall until the time of the applicable
Local Closing Transaction (or such other Transfer Date with respect to any
Post-Distribution Baxalta Employee):

(i) provide Baxalta or its appropriate Affiliate with notice of (A) any material
amendment to the Baxter Code of Conduct to the extent applicable to the
employment of a Post-Distribution Baxalta Employee or (B) the termination of any
Post-Distribution Baxalta Employee due to a violation or potential violation of
Law or the Baxter Code of Conduct, or otherwise pursuant to Section 2.02(a)(ii);

(ii) provide Baxalta or its appropriate Affiliate with at least 30 days’ advance
written notice prior to (A) making any material substantive change to the
Employee Agreement of a Post-Distribution Baxalta Employee unless such change is
required by applicable Law; (B) making any change to the base salary of a
Post-Distribution Baxalta Employee, other than an increase in the ordinary
course of business (including any change required by Law or any contract
existing as of the Distribution Date or otherwise approved by Baxalta) based on
the Employee’s performance rating or seniority; or (C) making any modification
to a Baxter Benefit Plan in which a Post-Distribution Baxalta Employee
participates if such modification would result in a significant change in the
cost of such plan to the employer or the participant; and

(iii) consult with and request a recommendation from Baxalta or its appropriate
Affiliate prior to (A) hiring any individual (other than in the ordinary course
to replace any individual whose employment has terminated, in which case Baxter
shall consult with Baxalta or its appropriate Affiliate prior to such hiring)
who will be classified as a Baxalta Employee unless such headcount addition was
authorized prior to the Distribution Date, (B) terminating any Post-Distribution
Baxalta Employee, except due to a violation of Law or the Baxter Code of
Conduct, or otherwise pursuant to Section 2.02(a)(ii), (C) promoting any
Post-Distribution Baxalta Employee to a position of Vice President or higher
unless such promotion was authorized prior to the Distribution Date,
(D) demoting any Post-Distribution Baxalta Employee, transferring any
Post-Distribution Baxalta Employee to a location more than 20 miles from such
Baxalta Employee’s current office location, or otherwise materially changing the
role or responsibility of any Post-Distribution Baxalta Employee or
(E) establishing targets or goals for bonus and other incentive compensation
awards granted to Post-Distribution Baxalta Employees by Baxter or any member of
the Baxter Group.

(b) Except as otherwise mutually agreed upon by the Parties (such as in a
Conveyance and Assumption Instrument or other agreement), if a Baxalta
Employee’s transfer of employment to the Baxalta Group upon the consummation of
a Local Closing Transaction or otherwise causes, at the time of such transfer, a
forfeiture of awards granted prior to the Distribution Date under a Baxter Stock
Program (or successor thereto), Baxter shall not have any obligation, Liability
or responsibility to such Baxalta Employee with respect to such forfeited
awards, and Baxalta shall equitably compensate the affected Baxalta Employee for
such

 

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forfeited awards in a manner determined by Baxalta in its sole discretion. The
foregoing sentence shall not preclude the Parties from making arrangements, if
allowed by the Baxter Stock Program (or successor thereto) and applicable Law,
to permit affected Baxalta Employees to continue to hold, after the Local
Closing Transaction or other Transfer Date, awards granted prior to the
Distribution Date under a Baxter Stock Program (or successor thereto).

Section 2.06 Collective Bargaining. Baxalta shall cause the appropriate member
of the Baxalta Group to assume all Liabilities arising under any collective
bargaining agreement (including but not limited to any national, sector or local
collective bargaining agreement) with respect to any Transferred Employee. To
the extent necessary, Baxalta shall cause the appropriate member of the Baxalta
Group to join any industrial, employer or similar association or federation if
membership is required for the relevant collective bargaining agreement to
continue to apply.

Section 2.07 Distributorship Model. In the event that Baxalta operates any
Deferred Baxalta Local Business through a local distributor rather than through
an Affiliate, Baxalta agrees to use its best efforts to cause such local
distributor to employ the Baxalta Employees on similar terms and conditions of
employment.

ARTICLE III

U.S. AND PUERTO RICO QUALIFIED AND NON-QUALIFIED RETIREMENT PLANS

Section 3.01 Baxalta Pension Plan.

(a) Establishment of Baxalta Pension Plan. Effective on or about May 1, 2015,
Baxalta shall establish the Baxalta Pension Plan (such effective date, the
“Pension Split Date”), which shall be substantially similar to, and which shall
include benefit formulas that are the same as the benefit formulas in effect
under, the Baxter Pension Plan as of the Pension Split Date. As soon as
practicable after the Pension Split Date and upon receipt by Baxter of (i) a
copy of the Baxalta Pension Plan; (ii) copies of certified resolutions of the
Baxalta Board (or its authorized committee or other delegate) evidencing
adoption of the Baxalta Pension Plan and any related trust(s) and the assumption
by the Baxalta Pension Plan of the Liabilities described in Section 3.01(b); and
(iii) either (A) a favorable determination letter issued by the Internal Revenue
Service with respect to the Baxalta Pension Plan and any related trust, or
(B) an opinion of counsel, which counsel and opinion are reasonably satisfactory
to Baxter, with respect to the qualified status of the Baxalta Pension Plan
under Code Section 401(a) and the tax-exempt status of any related trust under
Code Section 501(a) (which opinion of counsel may assume that Baxalta will make
a timely application for a determination letter and adopt any amendments
required by the Internal Revenue Service as a condition to receipt of such
letter), Baxter shall direct the trustee of the trust described in the Baxter
International Inc. and Subsidiaries Pension Trust Agreement to make the transfer
of Assets described in Section 3.01(b).

 

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(b) ERISA Section 4044 Transfer.

(i) As of the Pension Split Date, Baxalta shall cause the Baxalta Pension Plan
to accept all Assets and assume all Liabilities under the Baxter Pension Plan
for Transferred Employees (other than Post-Distribution Baxalta Employees)
(including Assets and Liabilities in respect of beneficiaries and alternate
payees) and the Baxter Pension Plan shall transfer all such Assets and be
relieved of such Liabilities; provided that, if any such Assets or Liabilities
are transferred to the Baxalta Pension Plan on or prior to the Distribution Date
in respect of any participant who does not become a Transferred Employee as of
the Distribution Date, Baxter and Baxalta shall cause such Assets and
Liabilities to be promptly returned to (and assumed by) the Baxter Pension Plan
(effective as of the Distribution Date), with Assets and Liabilities in respect
of employees who are not Transferred Employees as of the Distribution Date to be
transferred to the Baxalta Pension Plan only to the extent set forth in
Section 3.01(b)(ii). The amount of Assets to be transferred from the Baxter
Pension Plan to the Baxalta Pension Plan in such transfer (or transfers) shall
be determined as of the Pension Split Date in accordance with, and shall comply
with, Code Section 414(l) and, to the extent deemed applicable by the Parties,
ERISA Section 4044. Assumptions used to determine the value (or amount) of the
Assets to be transferred shall be the safe harbor assumptions specified for
valuing benefits in trusteed plans under Department of Labor Regulations
Section 4044.51-57 and, to the extent not so specified, shall be based on the
assumptions used in the annual valuation report most recently prepared prior to
the transfer by the actuary for the Baxter Pension Plan. The transfer amount
described above shall be credited or debited, to the extent applicable, with a
pro rata share of the actual investment earnings or losses allocable to the
transfer amount for the period between the Pension Split Date (or such earlier
transfer date) and an assessment date set by Baxter that is as close as
practicable, taking into account the timing and reporting of valuation of assets
in the trust or trusts described in the Baxter International Inc. and
Subsidiaries Pension Trust Agreement, to the date upon which Assets equal in
value to the transfer amount are actually transferred from the Baxter Pension
Plan to the Baxalta Pension Plan. The ultimate transfer amount shall be credited
or debited by the actual investment earnings or losses from the payment date to
the assessment date set by Baxter above. In addition, during this period,
Baxalta will be responsible for a pro rata share of trustee and administration
fees attributable to the Baxalta Pension Plan assets that remain in the Baxter
Pension Plan. The funding balances and shortfall amortization installments shall
be divided among the Baxter Pension Plan and the Baxalta Pension Plan based on
the guidance provided in Revenue Ruling 81-212 and 86-47.

(ii) As indicated in Section 3.01(b)(i), the Parties anticipate that the Baxalta
Pension Plan accept Assets and assume all Liabilities under the Baxter Pension
Plan for Transferred Employees on or prior to the Distribution Date.
Notwithstanding such transfer and assumption on or prior to the Distribution
Date, the Parties acknowledge and agree that adjustments (including of the type
described in Section 3.01(b)(i)) may be necessary after the Distribution Date to
finalize the intent of Section 3.01(b)(i). Any such adjustments (including the
transfer and assumption of Assets and Liabilities in respect thereof) will,
unless the Parties have determined that the amount is significant enough to
require earlier discussion, be made on or about December 31, 2015. The amount of
such Assets to be transferred shall be determined as provided in
Section 3.01(b)(i) and shall be subject to the applicable provisions of
Section 3.01(b)(i).

 

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(iii) If a participant in the Baxter Pension Plan who is scheduled to become a
Transferred Employee terminates employment after the Pension Split Date, but
before such participant’s Transfer Date, such participant’s benefit will be paid
entirely by the Baxter Pension Plan (and shall include any compensation paid and
service earned after the Pension Split Date) and, to the extent such benefit was
taken into account in determining the amount of Assets transferred to the
Baxalta Pension Plan, an appropriate adjustment shall be made. If a Transferred
Employee terminates from the Baxalta Group after such Transferred Employee’s
Transfer Date, but before the transfer of Assets is completed, such Transferred
Employee’s benefit may initially be paid by the Baxter Pension Plan, but shall
be paid by the Baxalta Pension Plan after the Asset transfer is completed, with
any payment made by the Baxter Pension Plan in accordance with this sentence
credited against the amount transferred to the Baxalta Pension Plan.

(iv) Periodically, at such times as agreed upon by the Parties after the initial
transfer described in Section 3.01(b)(i), Baxalta shall cause the Baxalta
Pension Plan to receive Assets and assume all Liabilities under the Baxter
Pension Plan with respect to Post-Distribution Baxalta Employees who become
Transferred Employees (including Assets and Liabilities in respect of
beneficiaries and/or alternate payees) and the Baxter Pension Plan shall
transfer all such Assets and be relieved of such Liabilities. The amount of such
Assets to be transferred shall be determined as provided in Section 3.01(b)(i).

(c) Baxalta Pension Plan Provisions. The Baxalta Pension Plan shall provide
that:

(i) Transferred Employees shall (A) be eligible to participate in the Baxalta
Pension Plan as of the Pension Split Date, or as of the applicable Transfer Date
with respect to Post-Distribution Baxalta Employees (in either case, the
“Pension Eligibility Date”) to the extent they were eligible to participate in
the Baxter Pension Plan as of the Pension Eligibility Date, and (B) receive
credit for vesting, eligibility and benefit service for all service credited for
those purposes under the Baxter Pension Plan as of the Pension Eligibility Date
as if that service had been rendered to Baxalta;

(ii) the compensation paid by the Baxter Group to a Transferred Employee that is
recognized under the Baxter Pension Plan as of the Pension Eligibility Date
shall be credited and recognized for all applicable purposes under the Baxalta
Pension Plan as though it were compensation from the Baxalta Group;

(iii) the accrued benefit of each Transferred Employee under the Baxter Pension
Plan as of the applicable Pension Eligibility Date shall be payable under the
Baxalta Pension Plan at the time and in a form that would have been permitted
under the Baxter Pension Plan as in effect as of the applicable Pension
Eligibility Date, with employment by the Baxter Group prior to the applicable
Pension Eligibility Date treated as employment by the Baxalta Group under the
Baxalta Pension Plan for purposes of determining eligibility for optional forms
of benefit, early retirement benefits, or other benefit forms; provided that
nothing herein shall preclude Baxalta from changing the forms of benefit
available under the Baxalta Pension Plan to the extent permitted by Code
Section 411(d)(6);

 

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(iv) the Baxalta Pension Plan shall assume and honor the terms of all QDROs in
effect under the Baxter Pension Plan as of the Pension Eligibility Date with
respect to Transferred Employees; and

(v) the Baxalta Pension Plan shall provide the additional benefit accruals, if
any, required by USERRA for a Former Employee who is employed by the Baxalta
Group following the Distribution Date pursuant to Section 2.02(a)(i)(C),
including any amount that relates to the period of military leave that occurred
prior to the Distribution Date.

(d) Determination Letter Request. Baxalta shall submit an application to the
Internal Revenue Service and the Puerto Rico Department of the Treasury either
prior to, or as soon as practicable after, the Pension Split Date (but no later
than the last day of the remedial amendment period as defined in applicable Code
provisions) for a determination letter regarding the qualification of the
Baxalta Pension Plan and the tax status of its related trust as of the Pension
Split Date and shall make any amendments reasonably requested by the Internal
Revenue Service to receive a favorable determination letter regarding the
Baxalta Pension Plan.

(e) Baxter Pension Plan after Distribution Date. From and after the Pension
Split Date, (i) the Baxter Pension Plan shall continue to be responsible for
Liabilities in respect of Employees other than Transferred Employees (and for
Post-Distribution Baxalta Employees until their respective Transfer Dates), and
(ii) no Employees of the Baxalta Group (other than Post-Distribution Baxalta
Employees until their respective Transfer Dates) shall accrue any benefits under
the Baxter Pension Plan. Without limiting the generality of the foregoing,
Transferred Employees shall cease to be active participants in the Baxter
Pension Plan effective as of the applicable Pension Eligibility Date.

(f) Plan Fiduciaries. Prior to the Distribution Date, Baxter’s Administrative
Committee and the Investment Committee shall act as the fiduciaries for the
Baxalta Pension Plan as necessary. For all periods after the Distribution Date,
the Parties agree that the applicable fiduciaries of each of the Baxter Pension
Plan and the Baxalta Pension Plan, respectively, shall have the authority with
respect to the Baxter Pension Plan and the Baxalta Pension Plan, respectively,
to determine the plan investments and such other matters as are within the scope
of their duties under ERISA Section 404.

(g) No Loss of Unvested Benefits; No Distributions. The transfer of any
Transferred Employee’s employment to the Baxalta Group will not result in loss
of that Transferred Employee’s unvested benefits under the Baxter Pension Plan
or the Baxalta Pension Plan and no Transferred Employee shall be entitled to a
distribution of his or her benefit under the Baxter Pension Plan as a result of
such transfer of employment.

(h) Puerto Rico Employees. Transferred Employees who are participants in the
Baxter Healthcare of Puerto Rico Pension Plan (the “Baxter Puerto Rico Pension
Plan”) will have their benefits transferred to the Baxalta Pension Plan as of
the Pension

 

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Split Date such that Assets transferred to the Baxalta Pension Plan will equal
the present value of accrued benefits using reasonable actuarial assumptions.
The terms of the Baxalta Pension Plan will include terms providing that the
benefits of such Transferred Employees will be determined in accordance with the
terms of the Baxter Puerto Rico Pension Plan to the extent such terms differ
from those of the Baxter Pension Plan, except as otherwise required by
applicable Law.

Section 3.02 Incentive Investment Plan.

(a) Establishment of Baxalta Incentive Investment Plan. Effective as of or
before the Distribution Date, Baxalta shall establish the Baxalta IIP. As of the
Distribution Date, the terms of the Baxalta IIP shall be substantially similar
to the terms of the Baxter IIP as of the Distribution Date; provided that the
investment options may be different under the Baxalta IIP. On or prior to the
Distribution Date, Baxalta shall provide Baxter with (i) a copy of the Baxalta
IIP; (ii) a copy of certified resolutions of the Baxalta Board (or its
authorized committee or other delegate) evidencing adoption of the Baxalta IIP
and the related trust(s) and the assumption by the Baxalta IIP of the
Liabilities described in Section 3.02(b); and (iii) either (A) a favorable
determination letter issued by the Internal Revenue Service with respect to the
Baxalta IIP and its related trust or (B) an opinion of counsel, which counsel
and opinion are reasonably satisfactory to Baxter, with respect to the qualified
status of the Baxalta IIP under Code Section 401(a) and the tax-exempt status of
its related trust under Code Section 501(a) (which opinion of counsel may assume
that Baxalta will make a timely application for a determination letter and adopt
any amendments required by the Internal Revenue Service as a condition to
receipt of such letter).

(b) Transfer of Account Balances. As soon as practicable after the Distribution
Date, Baxter shall cause the trustee of the Baxter IIP to transfer from the
trust(s) which forms a part of the Baxter IIP to the trust(s) which forms a part
of the Baxalta IIP amounts equal to the account balances of the Transferred
Employees (including account balances in respect of beneficiaries and alternate
payees established in relation to such individuals) under the Baxter IIP,
determined as of the date of the transfer. Such transfers shall be made in cash,
Baxter Common Shares, shares of Baxalta Common Stock, promissory notes
evidencing outstanding loans and other Assets (including common shares of
Edwards Lifesciences or Cardinal Health, Inc.) or any combination thereof in
cash or in kind, as instructed by the Baxter IIP or the investment committee
thereof. Baxalta shall cause the transferred amounts to be allocated among the
Transferred Employees’ (and beneficiaries’ and/or alternate payees’, as
applicable) Baxalta IIP accounts and to be allocated to the same investment
funds as the accounts were allocated under the Baxter IIP to the extent that
such investment funds are available under the Baxalta IIP and, to the extent
such investment funds are not available, in the manner determined by the
fiduciaries of the Baxalta IIP. Any Asset and Liability transfers pursuant to
this Section 3.02 shall comply in all respects with Code Sections 414(l) and
411(d)(6).

(c) Baxalta Incentive Investment Plan Provisions. The Baxalta IIP shall provide
that:

(i) Transferred Employees shall (A) be eligible to participate in the Baxalta
IIP as of the applicable Transfer Date to the extent they were eligible to
participate in the Baxter IIP as of the applicable Transfer Date, and
(B) receive credit for vesting purposes for all service credited for that
purpose under the Baxter IIP as of the applicable Transfer Date as if that
service had been rendered to Baxalta;

 

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(ii) the account balance of each Transferred Employee under the Baxter IIP as of
the date of the transfer of Assets from the Baxter IIP (including any
outstanding promissory notes) shall be credited to such individual’s account
balance under the Baxalta IIP;

(iii) the Baxalta IIP shall assume and honor the terms of all QDROs in effect
under the Baxter IIP as of the Transfer Date with respect to Transferred
Employees;

(iv) Baxalta shall contribute to the Baxalta IIP on behalf of each Transferred
Employee an amount equal to any Matching Contributions, as defined in the Baxter
IIP, that relate to Elective Deferrals made by such Transferred Employee prior
to the Transfer Date, and who is not entitled to have 2015, or any portion
thereof, treated as a year of service for purposes of determining such
Transferred Employee’s accrued benefit as defined in either the Baxter Pension
Plan, the Baxter Puerto Rico Pension Plan, or the Baxalta Pension Plan, but that
were not made to the Baxter IIP prior to the Transfer Date due to limitations
under the Baxter IIP on the maximum amount of Matching Contributions made in any
payroll period;

(v) Baxalta shall contribute to the Baxalta IIP on behalf of each Transferred
Employee who is employed on the last day of 2015 (or whose employment is
terminated from the Baxalta Group by reason of death or disability following the
applicable Transfer Date) an Employer Non-Matching Contribution (as such term is
used in the Baxter IIP) calculated as provided in Section 5.8 of the Baxter IIP,
based upon the Transferred Employee’s total compensation for the Baxter Group
and the Baxalta Group during 2015; and

(vi) the Baxalta IIP shall provide the opportunity to make up Elective
Deferrals, and any employer contributions, required by USERRA for a Former
Employee who is employed by the Baxalta Group following the Distribution Date
pursuant to Section 2.02(a)(i)(C), including any amount that relates to the
period of military leave that occurred prior to the Distribution Date.

(d) Determination Letter Request. Baxalta shall submit an application to the
Internal Revenue Service either prior to, or as soon as practicable following,
the Distribution Date (but no later than the last day of the remedial amendment
period as defined in applicable Code provisions) for a determination regarding
the qualification of the Baxalta IIP and the tax-exempt status of its related
trust as of the Distribution Date and shall make any amendments reasonably
requested by the Internal Revenue Service to receive a favorable determination
letter regarding the Baxalta IIP.

(e) Baxter Incentive Investment Plan after Distribution Date. From and after the
Distribution Date, (i) the Baxter IIP shall continue to be responsible for
Liabilities in respect of Baxter Retained Employees, Former Employees and (until
the applicable Transfer

 

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Date) Post-Distribution Baxalta Employees, and (ii) no Employees of the Baxalta
Group (other than Post-Distribution Baxalta Employees until their respective
Transfer Dates), shall accrue any benefits under the Baxter IIP. Without
limiting the generality of the foregoing, Transferred Employees shall cease to
be active participants in the Baxter IIP effective as of the applicable Transfer
Date.

(f) Plan Fiduciaries and Stock Considerations. Prior to the Distribution Date,
Baxter’s Administrative Committee and Investment Committee shall act as the
fiduciaries for the Baxalta IIP as necessary. Without limiting the generality of
the foregoing, the Baxter Investment Committee shall determine the initial
investment funds available under the Baxalta IIP, and Baxter shall provide all
Transferred Employees with all blackout notices, and comply with all other
requirements necessary to transfer the accounts of participants in the Baxter
IIP to the Baxalta IIP. For all periods after the Distribution Date, the Parties
agree that the applicable fiduciaries of each of the Baxter IIP and the Baxalta
IIP, respectively, shall have the authority with respect to the Baxter IIP and
the Baxalta IIP, respectively, to determine the investment alternatives, the
terms and conditions with respect to those investment alternatives and such
other matters as are within the scope of their duties under ERISA Section 404.

(g) No Loss of Unvested Benefits; No Distributions. The transfer of any
Transferred Employee’s employment to the Baxalta Group will not result in loss
of that Transferred Employee’s unvested benefits under the Baxter IIP or the
Baxalta IIP Plan and no Transferred Employee shall be entitled to a distribution
of his or her benefit under the Baxter IIP as a result of such transfer of
employment.

(h) Puerto Rico Employees. Effective as of or before the Distribution Date,
Baxalta shall establish a defined contribution plan qualified under the Puerto
Rico Internal Revenue Code for a new Puerto Rico (the “Baxalta SIP”). As of the
Distribution Date, the terms of the Baxalta SIP shall be substantially similar
to the terms of the Baxter Healthcare of Puerto Rico Savings and Investment Plan
(the “Baxter SIP”) as of the Distribution Date (except as described in
Section 3.02(f), including the existence of different investment options).
Transferred Employees who are participants in the Baxter SIP shall have their
accounts in the Baxter SIP fully vested as of the Transfer Date, and shall
thereafter be treated as terminated vested participants for all purposes of the
Baxter SIP. Such participants shall be eligible to participate in the Baxalta
SIP to the extent they were eligible to participate in the Baxter SIP as of the
applicable Transfer Date, and receive credit for vesting purposes for all
service credited for that purpose under the Baxter SIP as of the applicable
Transfer Date as if that service had been rendered to Baxalta. The provisions of
Section 3.02(c) shall also apply to the Baxalta SIP, as applicable.

Section 3.03 Supplemental Pension Plan

(a) Establishment of Baxalta SERP. Effective as of or before the Pension Split
Date, Baxalta shall establish the Baxalta SERP, with terms and funding
arrangements substantially similar to those of the Baxter SERP as of the Pension
Split Date.

 

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(b) Assumption of SERP Liabilities and Transfer from Baxter SERP. Except as
provided below, as of a Transferred Employee’s Pension Eligibility Date, Baxalta
shall, and shall cause the Baxalta SERP to, assume all Liabilities for all
obligations under the Baxter SERP for the benefits of such individual (and any
other individual on whose behalf Liabilities are transferred from the Baxter
Pension Plan to the Baxalta Pension Plan under Section 3.01(b)(ii)) and his or
her beneficiaries and/or alternate payees determined as of the applicable
Transfer Date, and Baxter and the Baxter SERP shall be relieved of all
Liabilities for those benefits.

(c) Baxalta SERP Provisions. As of the Pension Split Date, the Baxalta SERP
shall provide that:

(i) Transferred Employees shall (A) be eligible to participate in the Baxalta
SERP to the extent they were eligible to participate in the Baxter SERP as of
the applicable Pension Eligibility Date, and (B) receive credit for vesting,
eligibility and benefit service for all service credited for those purposes
under the Baxter SERP as of the Pension Eligibility Date as if that service had
been rendered to Baxalta (provided that in the event that any such Transferred
Employee receives a distribution from the Baxter SERP, the value of such
distribution shall be offset against future benefits under the Baxalta SERP to
the extent necessary to avoid a duplication of benefits, the terms of such
offset to be set forth in the Baxalta SERP);

(ii) the compensation paid by the Baxter Group to a Transferred Employee that
was recognized under the Baxter SERP as of the Pension Eligibility Date shall be
credited and recognized for all applicable purposes under the Baxalta SERP as
though it were compensation from the Baxalta Group;

(iii) the accrued benefit of each Transferred Employee under the Baxter SERP as
of the applicable Pension Eligibility Date shall be payable under the Baxalta
SERP at the same time and in the same form that would have been paid under the
Baxter SERP, treating such Transferred Employee’s separation from service from
the Baxalta Group as if it were a separation from service from the Baxter Group,
taking into account any election made by the Transferred Employee relating to
the time and form of his or her payment under the Baxter SERP; provided,
however, that if a participant in the Baxter Pension Plan who is scheduled to
become a Transferred Employee terminates employment after the Pension Split
Date, but before such participant’s Transfer Date, and the Pension Plan benefit
of such participant is transferred back to the Baxter Pension Plan pursuant to
Section 3.01(b)(iii), the accrued benefit of such participant shall be paid
exclusively by the Baxter SERP and shall be calculated as if such participant
had been employed continuously by the Baxter Group through such participant’s
date of termination;

(iv) the Baxalta SERP shall assume and honor the terms of all arrangements
relating to beneficiaries in effect and honored under the Baxter SERP as of the
applicable Transfer Date with respect to Transferred Employees; and

(v) the Baxalta SERP shall provide the additional benefit accruals, if any,
required by USERRA for a Former Employee who is employed by the Baxalta Group
following the Distribution Date pursuant to Section 2.02(a)(i)(C), including any
amount that relates to the period of military leave that occurred prior to the
Distribution Date.

 

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(d) Baxter SERP after Transfer Date. From and after a Transferred Employee’s
Pension Eligibility Date, such Transferred Employee shall not participate in or
accrue any benefits under the Baxter SERP. Without limiting the generality of
the foregoing, each Transferred Employee shall cease to participate in the
Baxter SERP effective as of the applicable Pension Eligibility Date, except as
otherwise provided in Section 3.03(c)(iii). The Baxter SERP shall continue to be
responsible for Liabilities in respect of Baxter Retained Employees, Former
Employees and (until the applicable Transfer Date) Post-Distribution Baxalta
Employees and their beneficiaries. To the maximum extent permitted by Treasury
Regulations Section 1.409A-1(h)(4), a Transferred Employee shall not be
considered to have undergone a “separation from service” for purposes of Code
Section 409A and the Baxter SERP solely by reason of the Separation, and,
following his or her Transfer Date, the determination of whether a Transferred
Employee has incurred a separation from service with respect to his or her
benefit in the Baxalta SERP shall be based solely upon his performance of
services for the Baxalta Group.

Section 3.04 Deferred Compensation Plan.

(a) Establishment of Baxalta DCP. Effective as of or before the Distribution
Date, Baxalta shall establish the Baxalta DCP, with terms comparable in the
aggregate to those of the Baxter DCP as of the Distribution Date; provided that
the investment options thereunder may be different than those available under
the Baxter DCP.

(b) Assumption of DCP Liabilities and Transfer from Baxter DCP.

(i) As of a Transferred Employee’s Transfer Date, Baxalta shall, and shall cause
the Baxalta DCP to, assume all Liabilities for all obligations under the Baxter
DCP for the benefits of such individual and his or her beneficiaries, determined
as of the applicable Transfer Date, and Baxter and the Baxter DCP shall be
relieved of all Liabilities for those benefits.

(ii) As of or as soon as practicable after the applicable Transfer Date, the
Parties shall cooperate to cause the accounts of the applicable Transferred
Employee participating in the Baxter DCP to be transferred to the Baxalta DCP.
Baxalta shall (A) credit each such Transferred Employee’s account with (1) the
amount deferred by such individual into the Baxter DCP as of the applicable
Transfer Date, plus (2) any employer contributions, whether vested or unvested,
deemed to have been made in relation to the amount described in (1), including,
in each case, any earnings thereon, and (B) recognize and honor all deferral and
distribution elections made by such individual (including any deferral election
applicable to any bonus earned but not yet paid as of the applicable Transfer
Date).

(iii) The accrued benefit of each Transferred Employee under the Baxter DCP as
of the applicable Transfer Date shall be payable under the Baxalta DCP at the
same time and in the same form that would have been paid under the Baxter

 

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DCP, treating such Transferred Employee’s separation from service from the
Baxalta Group as if it were a separation from service from the Baxter Group,
taking into account any election made by the Transferred Employee relating to
the time and form of his or her payment under the Baxter DCP.

(iv) Baxalta shall credit to the account of each Transferred Employee in the
Baxalta DCP who was a participant in the Baxter DCP immediately prior to the
Transfer Date an amount equal to the Excess Matching Contributions and Employer
Non-Matching Contributions (in each case as defined in the Baxter DCP), to which
such Transferred Employee would have been entitled had such Transferred Employee
been employed by the Baxter Group throughout 2015, reduced by the amount of
Excess Matching Contributions and Employer Non-Matching Contributions credited
to such Transferred Employee’s account in the Baxter DCP, and shall also make up
any contributions required by USERRA for a Former Employee who is employed by
the Baxalta Group following the Distribution Date pursuant to
Section 2.02(a)(i)(C), including any amount that relates to the period of
military leave that occurred prior to the Distribution Date.

(c) Baxter DCP after Transfer Date. From and after a Transferred Employee’s
Transfer Date, such individual shall not participate in or accrue any benefits
under the Baxter DCP. Without limiting the generality of the foregoing, each
Transferred Employee shall cease to participate in the Baxter DCP effective as
of his or her Transfer Date. The Baxter DCP shall continue to be responsible for
Liabilities in respect of Baxter Retained Employees, Former Employees and (until
the applicable Transfer Date) Post-Distribution Baxalta Employees and their
beneficiaries. To the maximum extent permitted by Treasury Regulations
Section 1.409A-1(h)(4), a Transferred Employee shall not be considered to have
undergone a “separation from service” for purposes of Code Section 409A and the
Baxter DCP solely by reason of the Separation, and, following his Transfer Date,
the determination of whether a Transferred Employee has incurred a separation
from service with respect to his or her benefit in the Baxalta DCP shall be
based solely upon his or her performance of services for the Baxalta Group.

ARTICLE IV

NON-U.S. RETIREMENT PLANS

Section 4.01 Establishment of Non-U.S. Retirement Plans and Transfers of Assets
and Liabilities. Except as mutually agreed upon by the Parties or required under
this Article IV, effective as of or before the Distribution Date, Baxalta or its
appropriate Affiliate will establish pension and retirement plans (whether
defined contribution or defined benefit pension plans) with terms that are
reasonably comparable to those of the corresponding Non-U.S. Baxter Benefit
Plan. For purposes of this Article IV, the term Non-U.S. Baxter Benefit Plan
shall not include the Baxter Puerto Rico Pension Plan or the Baxter SIP.

(a) Transfer of Non-U.S. Retirement Plan Assets and Liabilities. As soon as
practicable prior to, on or after the Distribution Date, except as otherwise
provided in this Agreement, the Assets and Liabilities determined as of the date
of the applicable local closing occurring prior to, on or after the Distribution
Date (such date, the “Applicable Closing

 

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Date”) under the corresponding Non-U.S. Baxter Benefit Plan attributable to
Transferred Non-U.S. Employees (and, with respect to each of the countries or
entities listed in Schedule 4.01(a), Former Employees) who are participants in
that plan, along with any other Assets and Liabilities that Baxalta agrees to
assume with respect to such plan, shall be transferred to the applicable
Non-U.S. Baxalta Benefit Plan. The Non-U.S. Baxter Benefit Plan shall retain all
Assets and Liabilities related to Baxter Retained Employees, Former Employees
(other than Former Employees in the countries or of the entities listed in
Schedule 4.01(a)) and Post-Distribution Baxalta Employees (subject to
Section 4.01(c)), and with respect to all countries and entities set forth in
Schedule 4.02(a) in accordance with Section 4.02(a). Assets will be allocated
between the plans based on the proportion of Liabilities borne by each plan.
Except as otherwise mutually agreed upon by the Parties, such Liabilities will
be valued using the projected benefit obligation based on plan provisions as in
effect at the Applicable Closing Date and applying demographic and other
assumptions used in the most recently completed valuation of the applicable
Non-U.S. Baxter Benefit Plan (and taking into account the requirements of ASC
715 as it exists as of the Applicable Closing Date); provided, however, that all
economic assumptions will be updated as of the Applicable Closing Date. The
transfer amount described above shall be credited or debited, as applicable,
with a pro rata share of the actual investment earnings or losses allocable to
the transfer amount for the period between the Applicable Closing Date and an
assessment date set by Baxter that is as close as practicable, taking into
account the timing and reporting of valuation of the applicable Non-U.S. Baxter
Benefit Plan’s Assets, to the date upon which Assets equal in value to the
transfer amount are actually transferred from the applicable Non-U.S. Baxter
Benefit Plan to the applicable Non-U.S. Baxalta Benefit Plan; provided that, if
actual investment earnings or losses are not then determinable, Baxter and
Baxalta shall then agree on a reasonable alternative methodology (which may
include expected or estimated returns used for other similar purposes by Baxter
in the ordinary course of business). During this period, benefits payable to
Transferred Non-U.S. Employees (and, with respect to those countries or entities
listed in Schedule 4.01(a), Former Employees) shall be paid from the Non-U.S.
Baxter Benefit Plan. Except as otherwise mutually agreed upon by the Parties,
the ultimate transfer amount shall be reduced by the amount of these benefits
and credited or debited by the actual investment earnings or losses from the
payment date to the assessment date set by Baxter above. Any third party fees,
costs or expenses incurred under the applicable Non-U.S. Baxter Benefit Plan
during the period from the Applicable Closing Date to the assessment date set by
Baxter shall be shared by the Parties based on the proportion of Liabilities
borne by the applicable Non-U.S. Baxter Benefit Plan and the applicable Non-U.S.
Baxalta Benefit Plan. The Parties agree to use commercially reasonable efforts
to accomplish each transfer as soon as practicable on or following the
Applicable Closing Date and to cooperate with each other to make such filings
and disclosures and obtain such approvals as may be deemed necessary or
advisable in accordance with applicable Law. Notwithstanding the foregoing, to
the extent a Non-U.S. Baxter Benefit Plan is not required to be funded by
applicable Law or is not voluntarily funded, there shall be no transfer of
Assets by the Non-U.S. Baxter Benefit Plan or by the Baxter Group in respect
thereof.

(b) Non-U.S. Baxalta Retirement Plan Provisions. Each Non-U.S. Baxalta Benefit
Plan shall provide, except as otherwise provided in this Agreement or local
Conveyance and Assumption Instruments that:

(i) Transferred Non-U.S. Employees (and, with respect to each of the countries
or entities listed in Schedule 4.01(a), Former Employees) shall (A) be

 

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eligible to participate in the Non-U.S. Baxalta Benefit Plan to the extent they
were eligible to participate in the corresponding Non-U.S. Baxter Benefit Plan,
and (B) receive credit for vesting, eligibility and benefit service to the same
extent recognized by Baxter as of immediately prior to the Transfer Date for all
service credited for those purposes under the corresponding Non-U.S. Baxter
Benefit Plan as if that service had been rendered to Baxalta;

(ii) the compensation paid by the Baxter Group to a Transferred Non-U.S.
Employee (or, with respect to each of the countries or entities listed in
Schedule 4.01(a), a Former Employee) that is recognized under the Non-U.S.
Baxter Benefit Plan shall be credited and recognized for all applicable purposes
under the corresponding Non-U.S. Baxalta Benefit Plan as though it were
compensation from the Baxalta Group; and

(iii) the accrued benefit of each Transferred Non-U.S. Employee (or, with
respect to each of the countries or entities listed in Schedule 4.01(a), each
Former Employee) under the Non-U.S. Baxter Benefit Plan that is transferred to
the corresponding Non-U.S. Baxalta Benefit Plan pursuant to Section 4.01(a)
shall be paid under such Non-U.S. Baxalta Benefit Plan in accordance with the
terms of such Non-U.S. Baxalta Benefit Plan and applicable Law, with employment
by the Baxter Group treated as employment by the Baxalta Group under the
Non-U.S. Baxalta Benefit Plan for purposes of determining eligibility for
optional forms of benefit, early retirement benefits, or other benefit forms.

(c) Subsequent Transfers. Periodically, at such times as agreed upon by the
Parties after the initial transfer described in Section 4.01(a), Baxalta shall
cause the applicable Non-U.S. Baxalta Benefit Plan to receive Assets and assume
all Liabilities under the applicable Non-U.S. Baxter Benefit Plan for
Post-Distribution Baxalta Employees who become Transferred Employees (including
Assets and Liabilities in respect of beneficiaries and/or alternate payees) and
the applicable Non-U.S. Baxter Benefit Plan shall transfer all such Assets and
be relieved of such Liabilities. The amount of such Assets to be transferred
shall be determined as provided in Section 4.01(a) (and shall include any
employee contributions made by such Post-Distribution Baxalta Employee between
the Distribution Date and the applicable Transfer Date) and shall be subject to
the applicable provisions of Section 4.01(a).

(d) Notwithstanding the foregoing, if pension benefits are funded by
individually linked insurance contracts, such contracts in respect of
Transferred Employees shall be assigned to Baxalta or its applicable Subsidiary
in lieu of the transfers of (and calculations of value with respect to) other
Assets otherwise contemplated hereby.

Section 4.02 Shared Plan Model.

(a) Baxalta Participation in Non-U.S. Baxter Retirement Plans.

(i) In each of the countries or entities listed in Schedule 4.02(a), Baxter or
its appropriate Affiliate will permit Baxalta or its appropriate Affiliate to
continue to participate in the Non-U.S. Baxter Benefit Plan providing retirement

 

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benefits in that country after the Distribution. Except as otherwise mutually
agreed upon by the Parties, such continued participation is subject to the
following requirements: (A) Baxter or its appropriate Affiliate will remain the
principal employer under the plan; (B) the applicable Baxter pension fund (or
such other party or parties have such amendment rights under the terms of the
applicable plan, if any) may amend the plan at any time; (C) any third party
fees, costs or expenses shall be shared by the Parties on the basis of their
proportionate share of the insured salaries under the Non-U.S. Baxter Benefit
Plan; (D) Baxter shall determine the benefit formula or structure under the plan
(which shall apply uniformly to all similarly situated participants); and
(E) such continued participation may not extend beyond two years after the
Distribution Date, unless otherwise mutually agreed by each Party’s CVP or EVP,
as applicable, of Human Resources (or such individual’s delegate).

(ii) At or before the end of the shared plan period, in each of the countries or
entities listed in Schedule 4.02(a), Baxalta or its appropriate Affiliate shall
establish its own plan or arrangement to deliver the benefits due to Baxalta
Employees (and, with respect to each of the countries or entities marked with an
asterisk in Schedule 4.02(a), Former Employees) under the applicable Non-U.S.
Baxter Benefit Plan or otherwise shall be responsible for all costs incurred by
the Parties in connection with winding up or terminating the participation of
Baxalta or its appropriate Affiliate in the Non-U.S. Baxter Benefit Plan.
Following the establishment of the Non-U.S. Baxalta Benefit Plan, the Assets and
Liabilities of the Non-U.S. Baxter Benefit Plan attributable to Baxalta
Employees (and, with respect to each of the countries or entities marked with an
asterisk in Schedule 4.02(a), Former Employees) who are participants in that
plan shall be transferred to the applicable Non-U.S. Baxalta Benefit Plan.
Assets will be allocated between the plans based on the proportion of
Liabilities borne by each plan. Except as otherwise mutually agreed upon by the
Parties, such Liabilities will be valued as of the Shared Plan Replacement Date
using the projected unit credit method based on plan provisions as in effect at
the Shared Plan Replacement Date and applying the demographic and other
assumptions used in the most recently completed valuation of the applicable
Non-U.S. Baxter Benefit Plan (and taking into account the requirements of ASC
715 as it exists as of the Shared Plan Replacement Date); provided, however,
that all economic assumptions will be updated as of the Shared Plan Replacement
Date. The transfer amount described above shall be credited or debited, as
applicable, with a pro rata share of the actual investment earnings or losses
allocable to the transfer amount for the period between the Shared Plan
Replacement Date and an assessment date set by Baxter that is as close as
practicable, taking into account the timing and reporting of valuation of the
applicable Non-U.S. Baxter Benefit Plan’s Assets, to the date upon which Assets
equal in value to the transfer amount are actually transferred from the
applicable Non-U.S. Baxter Benefit Plan to the applicable Non-U.S. Baxalta
Benefit Plan; provided that, if actual investment earnings or losses are not
then determinable, Baxter and Baxalta shall then agree on a reasonable
alternative methodology (which may include expected or estimated returns used
for other similar purposes by Baxter in the ordinary course of business). During
this period, benefits payable to Baxalta Employees (and, with respect to each of
the countries or entities marked with an asterisk in Schedule 4.02(a), Former
Employees) shall be paid from the Non-U.S. Baxter Benefit Plan. Except as
otherwise mutually agreed upon by the Parties, the ultimate transfer amount
shall be

 

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reduced by the amount of these benefits and credited or debited by the actual
investment earnings or losses from the payment date to the assessment date set
by Baxter above. Any third party fees, costs or expenses incurred under the
applicable Non-U.S. Baxter Benefit Plan during the period from the Shared Plan
Replacement Date to the assessment date set by Baxter shall be shared by the
Parties on the basis of their proportionate share of the insured salaries under
the Non-U.S. Baxter Benefit Plan. The Parties agree to use commercially
reasonable efforts to accomplish each transfer as soon as practicable following
the Shared Plan Replacement Date and to cooperate with each other to make such
filings and disclosures and obtain such approvals as may be deemed necessary or
advisable in accordance with applicable Law. Such transfers and any actuarial
assumptions shall be subject to such minimum consents, approvals and other legal
requirements as may apply under applicable Law, including, if required, the
consent of any affected plan participant or any other third party.
Notwithstanding the foregoing, to the extent a Non-U.S. Baxter Benefit Plan is
not required to be funded by applicable Law or is not voluntarily funded, there
shall be no transfer of Assets by the Non-U.S. Baxter Benefit Plan or by the
Baxter Group in respect thereof.

(b) Non-U.S. Baxter Retirement Plan Provisions. Each Non-U.S. Baxter Benefit
Plan described in Section 4.02(a) shall provide, except as otherwise provided in
this Agreement, that:

(i) Baxalta Employees (and, with respect to each of the countries or entities
marked with an asterisk in Schedule 4.02(a), Former Employees) shall (A) be
eligible to participate in the Non-U.S. Baxter Benefit Plan to the extent they
were eligible to participate in such plan immediately prior to the Distribution
Date, and (B) receive credit for vesting, eligibility and benefit service for
all service with the Baxalta Group during the shared plan period as if that
service had been rendered to Baxter;

(ii) the compensation paid by the Baxalta Group to a Baxalta Employee (and, with
respect to each of the countries or entities marked with an asterisk in Schedule
4.02(a), a Former Employee) during the shared plan period shall be credited and
recognized for all applicable purposes under the corresponding Non-U.S. Baxter
Benefit Plan as though it were compensation from the Baxter Group; and

(iii) the accrued benefit of each Baxalta Employee (and, with respect to each of
the countries or entities marked with an asterisk in Schedule 4.02(a), Former
Employee) under the Non-U.S. Baxter Benefit Plan shall be paid at the time and
in a form provided under such plan, with employment by the Baxalta Group during
the shared plan period treated as employment by the Baxter Group under the
Non-U.S. Baxter Benefit Plan for purposes of determining eligibility for
optional forms of benefit, early retirement benefits, or other benefit forms.

(c) Subsequent Transfers. Periodically, at such times as agreed upon by the
Parties after the initial transfer described in Section 4.02(a), Baxalta shall
cause the applicable Non-U.S. Baxalta Benefit Plan to receive Assets and assume
all Liabilities under the applicable Non-U.S. Baxter Benefit Plan for
Post-Distribution Baxalta Employees (and, with

 

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respect to each of the countries or entities marked with an asterisk in Schedule
4.02(a), Former Employees) who become Transferred Employees (including Assets
and Liabilities in respect of beneficiaries and/or alternate payees) and the
applicable Non-U.S. Baxter Benefit Plan shall transfer all such Assets and be
relieved of such Liabilities. The amount of such Assets to be transferred shall
be determined as provided in Section 4.02(a) (and shall include any employee
contributions made by such Post-Distribution Baxalta Employee between the
Distribution Date and the applicable Transfer Date) and shall be subject to the
applicable provisions of Section 4.02(a).

ARTICLE V

WELFARE AND FRINGE BENEFIT PLANS

Section 5.01 Health and Welfare Plans.

(a) Establishment of Baxalta Health and Welfare Plans. Effective as of or before
the Distribution Date, Baxalta shall establish the Baxalta Health and Welfare
Plans, with terms comparable in the aggregate to those of the corresponding
Baxter Health and Welfare Plans as of the Distribution Date unless otherwise
provided in this Article V.

(b) Waiver of Conditions; Benefit Maximums. Baxalta shall, to the extent
commercially reasonable and permitted under applicable Law and, with respect to
Non-U.S. Health and Welfare Plans, to the extent applicable, cause the Baxalta
Health and Welfare Plans to:

(i) with respect to initial enrollment (whether passive or active) prior to, as
of or following the applicable Transfer Date, waive:

(A) all limitations as to preexisting conditions, exclusions, and service
conditions with respect to participation and coverage requirements applicable to
any Transferred Employee, other than limitations that were in effect with
respect to the Transferred Employee under the applicable Baxter Health and
Welfare Plan as of immediately prior to such individual’s Transfer Date, and

(B) any waiting period limitation or evidence of insurability requirement
applicable to a Transferred Employee other than limitations or requirements that
were in effect with respect to such Transferred Employee under the applicable
Baxter Health and Welfare Plan as of immediately prior to such individual’s
Transfer Date; and

(ii) take into account:

(A) with respect to aggregate annual, lifetime, or similar maximum benefits
available under the Baxalta Health and Welfare Plans, a Transferred Employee’s
prior claim experience under the Baxter Health and Welfare Plans and any Benefit
Plan that provides leave benefits; and

 

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(B) any eligible expenses incurred by a Transferred Employee and his or her
covered dependents during the portion of the plan year of the applicable Baxter
Health and Welfare Plan ending on the applicable Transfer Date to be taken into
account under such Baxalta Health and Welfare Plan for purposes of satisfying
all deductible, coinsurance, and maximum out-of-pocket requirements applicable
to such Transferred Employee and his or her covered dependents for the
applicable plan year as if such amounts had been paid in accordance with such
Baxalta Health and Welfare Plan.

(c) Allocation of Health and Welfare Assets and Liabilities.

(i) General Principles. Notwithstanding any other provision hereof and except as
otherwise agreed between the Parties, (A) Baxter shall retain all Liabilities
relating to Incurred Claims of Baxter Retained Employees and Former Employees
under the Baxter Health and Welfare Plans, and shall also retain Assets
(including, without limitation, Medicare reimbursements, pharmaceutical rebates,
and similar items) associated with such Incurred Claims and (B) Baxalta shall be
responsible for Incurred Claims of Baxalta Employees from and after the
applicable Transfer Date. Baxalta shall be responsible for all Liabilities
relating to Incurred Claims under any Baxalta Health and Welfare Plan and shall
also retain Assets (including, without limitation, Medicare reimbursements,
pharmaceutical rebates, and similar items) associated with such Incurred Claims.

(ii) Disability Benefits. Notwithstanding any other provision hereof and except
as otherwise agreed between the Parties, (A) Baxter shall be responsible for
Incurred Claims (including ongoing benefit payments) of Baxter Retained
Employees and Former Employees for short- and long-term disability benefits,
regardless of when the applicable Incurred Claim was incurred and (B) subject to
the immediately following sentence, Baxalta shall be responsible for Incurred
Claims (including ongoing benefit payments) of Baxalta Employees from and after
the applicable Transfer Date for short-term disability benefits and long-term
disability benefits. Notwithstanding the foregoing, a Baxalta Employee who is on
short-term disability leave on the Transfer Date and who subsequently qualifies
for long-term disability without an intervening new Incurred Claim shall receive
long-term disability benefits from the Baxter long-term disability plan, but all
other benefits attributable to his or her disability (including continued
pension accrual, if applicable, and participation in any medical or life
insurance plan for disabled persons) shall be provided by the applicable Baxalta
Benefit Plan, if any, or otherwise be the responsibility of Baxalta, and if
Baxalta does not sponsor a plan providing any such benefits, such Baxalta
Employee shall not be entitled to such benefits from any Baxter Benefit Plan.

(iii) Flexible Spending Accounts. Except as set forth on Schedule 5.01(c)(iii),
the Parties shall take all actions necessary to ensure that, effective as of the
Distribution Date (or, if later, the Transfer Date applicable to a
Post-Distribution Baxalta Employee), (A) the health care and dependent care
flexible spending accounts of Transferred Employees (whether positive or
negative) (the “Transferred Flexible

 

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Spending Account Balances”) under the applicable Baxter Health and Welfare Plan
shall be transferred to the corresponding Baxalta Health and Welfare Plan;
(B) the elections, contribution levels and coverage of the applicable
Transferred Employees shall apply under the Baxalta Health and Welfare Plan in
the same manner as under the corresponding Baxter Health and Welfare Plan; and
(C) the applicable Transferred Employees shall be eligible for reimbursement
from the Baxalta Health and Welfare Plan on the same basis and the same terms
and conditions as under the corresponding Baxter Health and Welfare Plan. As
soon as practicable after the Distribution Date, and in any event within 30
business days after the amount of the Transferred Flexible Spending Account
Balances is determined, Baxter shall pay Baxalta the net aggregate amount of the
Transferred Flexible Spending Account Balances, if such amount is positive, and
Baxalta shall pay Baxter the net aggregate amount of the Transferred Flexible
Spending Account Balances, if such amount is negative.

(d) Retiree Health Care Plan and Retiree Life Insurance. Notwithstanding any
other provision hereof (or any other action taken by Baxter and Baxalta on or
prior to the Distribution Date, including any assignment and assumption of
Assets or Liabilities related thereto), Baxter shall retain the Liabilities and
responsibility for all obligations under the Baxter Retiree Health Care Plan and
the Baxter Health and Welfare Plan (solely with respect to life insurance
benefits in the case of the Baxter Health and Welfare Plan) for benefits due to
Baxter Retained Employees and Former Employees, and shall also retain Assets,
including, without limitation, Medicare reimbursements, pharmaceutical rebates,
and similar items, associated with such benefits. Effective as of or before the
Distribution Date, Baxalta shall establish a health care plan for retirees, with
terms comparable in the aggregate to the Baxter International Inc. Welfare Plan
for Retirees and Disabled Individuals, provided that the Baxalta Plan shall not
be required to provide any benefits previously provided by the Baxter
International Inc. and Subsidiaries Medical and Dental Plan for Disabled
Individuals prior to its merger into the Baxter International Inc. Welfare Plan
for Retirees and Disabled Individuals.

(e) Baxter Health and Welfare Plans after Distribution Date. Transferred
Employees shall cease to participate in the Baxter Health and Welfare Plans
effective as of their respective Transfer Dates.

(f) Shared Health and Welfare Plans.To the extent that, following the
Distribution Date, there is any Non-U.S. Health and Welfare Plan pursuant to
which health and welfare benefits are provided to Employees of both the Baxter
Group and the Baxalta Group, the Parties or their appropriate Affiliates shall
share the costs for such shared plan, except as otherwise mutually agreed upon
by the Parties. Any Baxter Affiliate or Baxalta Affiliate may withdraw from or
otherwise cease to participate in any such shared plan following the
Distribution Date upon at least 90 days’ advance written notice to the other
participating employer(s) of such withdrawal or cessation.

(g) Multi-National Pooling Arrangements. For purposes of this provision, the
term “multi-national pooling arrangement” means a contract or arrangement that
facilitates the purchase or provision of employee benefits. Baxter shall retain
all Assets (including, without limitation, rights to dividends and similar
items) with respect to employee benefits-related pooling contracts to which any
member of the Baxter Group is a party or under

 

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which any member of the Baxter Group pays the premiums. From and after the
Distribution Date, Baxalta shall retain all Assets (including, without
limitation, rights to dividends and similar items) with respect to employee
benefits-related pooling contracts to which any member of the Baxalta Group is a
party or under which any member of the Baxalta Group pays the premiums.

(h) Life Insurance Premium Reserve Refund. The Parties acknowledge and agree
that a cash payment in respect of surplus life insurance premiums paid prior to
the Distribution Date is expected to be received by the Baxter Group in late
2015 or early 2016. Promptly following the Baxter Group’s receipt of any such
amounts, Baxter shall notify Baxalta of the amount of such payment attributable
to employee-paid premiums with respect to Transferred Employees and shall
promptly pay such amounts to the account or accounts directed by Baxalta and
Baxalta shall use such amounts for the benefit of the applicable employees
(whether through a premium holiday, reduced premiums or otherwise).

Section 5.02 COBRA and HIPAA. Baxter shall continue to be responsible for
compliance with the health care continuation requirements of COBRA, the
certificate of creditable coverage requirements of HIPAA, and the corresponding
provisions of the Baxter Health and Welfare Plans with respect to any (a) Baxter
Retained Employees and any Former Employees (and their covered dependents) who
incur a qualifying event under COBRA on, prior to, or following the Distribution
Date, (b) Baxalta Employees who do not at any time become Transferred Employees
(and their covered dependents) who incur a qualifying event under COBRA on,
prior to, or following the Distribution Date, and (c) other Baxalta Employees
(and their covered dependents), with respect to qualifying events under COBRA
incurred prior to or on the applicable Transfer Date. Baxalta shall assume
responsibility for compliance with the health care continuation requirements of
COBRA, the certificate of creditable coverage requirements of HIPAA, and the
corresponding provisions of the Baxalta Health and Welfare Plans with respect to
any Transferred Employees (and their covered dependents) who incur a qualifying
event or loss of coverage under the Baxalta Health and Welfare Plans after their
respective Transfer Dates. The Parties agree that the consummation of the
transactions contemplated by the Separation and Distribution Agreement shall not
constitute a COBRA qualifying event for any purpose of COBRA.

Section 5.03 Vacation, Holidays and Leaves of Absence. Effective as of the
applicable Transfer Date in accordance with Section 2.01(a)(i), Baxalta shall be
responsible for any and all Liabilities to, or relating to, Transferred
Employees in respect of vacation, holiday, personal days, sick days, annual
leave or other leave of absence, and required payments related thereto. Baxter
shall retain all Liabilities with respect to vacation, holiday, annual leave or
other leave of absence, and required payments related thereto, for each Baxter
Retained Employee and Former Employee, as well as Baxalta Employees until the
applicable Transfer Date of such Baxalta Employees.

Section 5.04 Severance and Unemployment Compensation. Effective as of the
applicable Transfer Date, Baxalta shall be responsible for any and all
Liabilities to, or relating to, Transferred Employees in respect of severance
and unemployment compensation. Subject to any specific agreement to the contrary
in the Separation and Distribution Agreement or any Ancillary Agreement and
subject to Section 2.02(a)(ii), Baxter shall be responsible for any and all
Liabilities to, or relating to, Baxter Retained Employees and Former Employees,
as

 

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well as Baxalta Employees until an applicable Transfer Date occurs with respect
to such Baxalta Employees, in respect of severance and unemployment
compensation, regardless of whether the event giving rise to the Liability
occurred prior to, on, or following the Distribution Date. In the event that an
employee receiving severance pay under the Baxter severance plan is hired by
Baxalta or an employee receiving severance pay under the Baxalta severance plan
is hired by Baxter, the remaining severance payable to the employee under the
terms of the Baxter severance plan (or the Baxalta severance plan, as
applicable), if any, shall (to the extent Baxter is, or would be upon such
hiring, processing Baxalta’s payroll with respect to such employee at such time)
be paid in a single lump sum to the extent permitted by Code Section 409A and,
if not so permitted, shall be forfeited.

Section 5.05 Workers’ Compensation. Except as required by applicable Law or as
otherwise determined jointly by the Parties as a result of the requirements of
any Governmental Authority, all United States workers’ compensation Liabilities
relating to, arising out of, or resulting from any claim (a) by Employees
designated internally as working for or assigned to the BioScience or BioLife
commercial units, to the extent such claim was incurred prior to May 1, 2015,
shall be assumed, or retained as the case may be, by Baxalta as of the Transfer
Date or (b) incurred on or after May 1, 2015 shall be assumed, or retained as
the case may be, by the Party (or its applicable Subsidiary) that employed such
Employee as of the time of such claim. The Baxter Group shall be responsible for
all Liabilities relating to, arising out of, or resulting from any United States
workers’ compensation claims incurred prior to May 1, 2015 unless expressly
specified otherwise in the immediately preceding sentence or as required by
applicable Law. Each member of the Baxalta Group and the Baxter Group shall
cooperate with respect to any notification to appropriate governmental agencies
of the disposition and the issuance of new, or the transfer of existing,
workers’ compensation insurance policies and claims handling contracts.

ARTICLE VI

EQUITY, INCENTIVE, AND DIRECTOR AND EXECUTIVE COMPENSATION PROGRAMS

Section 6.01 Equity Incentive Programs.

(a) Options, PSUs and RSUs. The Parties shall use commercially reasonable
efforts to take all actions necessary or appropriate so that each outstanding
Baxter Option, Baxter PSU Award, or Baxter RSU Award granted under a Baxter
Stock Program shall be adjusted or converted as set forth in this Section 6.01.
This Section 6.01(a) shall not apply to grants (including those Baxter RSU
Awards deferred pursuant to the Baxter Directors’ DCP) made under the Baxter
Directors’ Plan (or any successor or predecessor plan), and the sole provisions
with respect to the adjustment and conversion of those grants are set forth in
Section 6.04.

(i) Baxter Options. As determined by the Baxter Compensation Committee pursuant
to its authority under the applicable Baxter Stock Program, each Baxter Option
granted prior to January 1, 2015 (other than new hire grants made on or after
July 1, 2014) that remains outstanding as of immediately prior to the

 

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Distribution Date, regardless of by whom held, whether vested or unvested, shall
be converted concurrently with the Distribution on the Distribution Date into
both an Adjusted Baxter Option and a Baxalta Option. As determined by the Baxter
Compensation Committee pursuant to its authority under the applicable Baxter
Stock Program, each Baxter Option granted on or after January 1, 2015 (or, with
respect to new hire grants, on or after July 1, 2014), but prior to the
Distribution Date that remains outstanding as of immediately prior to the
Distribution Date, regardless of by whom held, whether vested or unvested, shall
be converted concurrently with the Distribution on the Distribution Date into
(x) an Adjusted Baxter Option in the case of Baxter Employees and Baxter Former
Employees or (y) a Baxalta Option in the case of Baxalta Employees or Baxalta
Former Employees. Each such adjusted or converted Option shall, except as
otherwise provided in this Section 6.01, be subject to the same terms and
conditions (including with respect to vesting) after the Distribution Date as
applicable to such Baxter Option immediately prior to the Distribution Date;
provided, however, that upon such adjustment or conversion:

(A) with respect to each Baxter Option granted prior to January 1, 2015 (other
than new hire grants made on or after July 1, 2014), the number of Baxter Common
Shares subject to such Option shall be unchanged from the number of Baxter
Common Shares that were subject to the original unadjusted Baxter Option;

(B) with respect to each Baxter Option granted prior to January 1, 2015 (other
than new hire grants made on or after July 1, 2014), the number of shares of
Baxalta Common Stock subject to the Baxalta Option issued with respect to such
Option, rounded down to the nearest whole share, shall be equal to the product
obtained by multiplying (1) the number of Baxter Common Shares subject to the
Baxter Option immediately prior to the Distribution Date times (2) the
Distribution Ratio;

(C) with respect to each Baxter Option granted on or after January 1, 2015 (or,
with respect to new hire grants, on or after July 1, 2014), the number of Baxter
Common Shares subject to such Adjusted Baxter Option (if any), rounded down to
the nearest whole number, shall be equal to (1) the number of Baxter Common
Shares subject to the Baxter Option immediately prior to the Distribution Date,
divided by (2) the Baxter Percentage;

(D) with respect to each Baxter Option granted on or after January 1, 2015 (or,
with respect to new hire grants, on or after July 1, 2014), the number of shares
of Baxalta Common Stock subject to the Baxalta Option into which such Baxter
Option is converted (if any), rounded down to the nearest whole number, shall be
equal to (1) the product obtained by multiplying (xx) the number of Baxter
Common Shares subject to the Baxter Option immediately prior to the Distribution
Date times (yy) the Distribution Ratio, divided by (2) the Baxalta Percentage;

 

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(E) the per share exercise price of each Adjusted Baxter Option, rounded up to
the nearest hundredth of a cent, shall be equal to (1) the Baxter
Pre-Distribution Stock Value minus (2) the Baxter Pre-Distribution Option Value;
and

(F) the per share exercise price of each Baxalta Option, rounded up to the
nearest hundredth of a cent, shall be equal to (1) the Baxalta Stock Value minus
(2) the Baxalta Pre-Distribution Option Value;

provided, however, that the exercise price, the number of Baxter Common Shares
and shares of Baxalta Common Stock subject to such options, and the terms and
conditions of exercise of such options shall be determined in a manner
consistent with the requirements of Code Section 409A; provided, further, that,
in the case of any Baxter Option to which Code Section 421 applies by reason of
its qualification under Code Section 422 as of immediately prior to the
Distribution Date, the exercise price, the number of Baxter Common Shares and
shares of Baxalta Common Stock subject to such option, and the terms and
conditions of exercise of such option shall be determined in a manner consistent
with the requirements of Code Section 424(a).

(ii) Baxter PSU Awards. As determined by the Baxter Compensation Committee
pursuant to its authority under the applicable Baxter Stock Program, prior to
the Distribution Date, Baxter shall, notwithstanding the existing terms of such
awards, cause such Baxter Awards to be equitably adjusted. Each Baxter PSU Award
granted prior to January 1, 2015 that remains outstanding as of immediately
prior to the Distribution Date shall be converted (regardless of by whom held,
and whether or not vested or unvested) into (A) a number of Baxter Awards equal
to the number of Baxter Common Shares payable in respect of such Baxter Award
and (B) a number of Baxalta Awards equal to the product obtained by multiplying
(1) the number of Baxter Common Shares payable in respect of such Baxter PSU
Award times (2) the Distribution Ratio, in each case as determined by Baxter’s
Compensation Committee. The Baxter Awards and Baxalta Awards received upon
conversion of Baxter PSU Awards in accordance with this Section 6.01(a)(ii) both
shall be subject to substantially the same terms and conditions (including with
respect to vesting) immediately following the Distribution Date as applicable
immediately prior to the Distribution Date for those Baxter Awards from which
such Baxter Awards and Baxalta Awards were converted.

(iii) Baxter RSU Awards. Each holder of Baxter RSU Awards granted prior to
January 1, 2015 (other than new hire grants made on or after July 1, 2014) that
remain outstanding as of immediately prior to the Distribution Date, regardless
of by whom held, whether vested or unvested, shall receive (in addition to
retaining such Baxter RSU Awards) concurrently with the Distribution on the
Distribution Date a number of Baxalta RSU Awards equal to the product obtained
by multiplying (x) the number of such Baxter RSU Awards held by such holder
times (y) the Distribution Ratio. Each Baxter RSU Award granted on or after
January 1, 2015 (or, with respect to new hire grants, on or after July 1, 2014)
but prior to the Distribution Date that remains outstanding as of immediately
prior to the Distribution Date, regardless of by whom held, whether vested or
unvested, shall be converted concurrently with the Distribution on the
Distribution Date into (A) an Adjusted Baxter RSU Award in the case of Baxter

 

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Employees and Baxter Former Employees or (B) a Baxalta RSU Award in the case of
Baxalta Employees or Baxalta Former Employees. Except as set forth in this
Section 6.01(a)(iii), all Adjusted Baxter RSU Awards and Baxalta RSU Awards
issued in accordance with this Section 6.01(a)(iii) shall be subject to
substantially the same terms and conditions (including with respect to vesting)
immediately following the Distribution Date as applicable immediately prior to
the Distribution Date for those Baxter RSU Awards from which such Adjusted
Baxter RSU Awards and Baxalta RSU Awards were converted; provided, however, that
with respect to each Baxter RSU Award granted on or after January 1, 2015 (or,
with respect to new hire grants, on or after July 1, 2014):

(A) the number of units represented by an Adjusted Baxter RSU Award shall be
equal to (1) the number of units subject to the Baxter RSU Award immediately
prior to the Distribution Date, divided by (2) the Baxter Percentage;

(B) the number of units represented by a Baxalta RSU Award shall be equal to
(1) the product obtained by multiplying (xx) the number of units subject to the
Baxter RSU Award immediately prior to the Distribution Date times (yy) the
Distribution Ratio, divided by (2) the Baxalta Percentage.

(iv) Notwithstanding the foregoing, the Parties may mutually agree not to adjust
(or to otherwise adjust as they deem appropriate) certain outstanding Baxter
equity-based awards pursuant to the foregoing provisions of this Section 6.01 to
the extent such actions would create or trigger adverse legal, accounting or tax
consequences or in order to comply with any Employee Agreement or similar
agreement with any affected Employee.

(b) Miscellaneous Award Terms. After the Distribution Date, Adjusted Baxter
Awards, regardless of by whom held, shall be settled by Baxter, and Baxalta
Awards, regardless of by whom held, shall be settled by Baxalta. Except as
otherwise provided in this Agreement, with respect to grants described in this
Section 6.01, (i) no Transferred Employee shall be treated as having incurred a
termination of employment with respect to any Baxter Award solely by reason of
the transfer of employment, (ii) employment with the Baxter Group shall be
treated as employment with Baxalta with respect to Baxalta Awards held by Baxter
Retained Employees, and (iii) employment with the Baxalta Group shall be treated
as employment with Baxter with respect to Adjusted Baxter Awards held by Baxalta
Employees. In addition, neither the Separation nor the Distribution (including,
for the avoidance of doubt, any Local Closing Transaction) shall constitute a
termination of employment for any Employee for purposes of any Adjusted Baxter
Award or any Baxalta Award. Following the Distribution Date, for any award
adjusted or otherwise received in accordance with this Section 6.01, any
reference to a “change in control,” “change of control” or similar definition in
an award agreement, employment agreement or Baxter Stock Program applicable to
such award (A) with respect to Adjusted Baxter Awards, shall be deemed to refer
to a “change in control,” “change of control” or similar definition as set forth
in the applicable award agreement, employment agreement or Baxter Stock Program
(a “Baxter Change of Control”), and (B) with respect to Baxalta Awards, shall be
deemed to refer to a “change in control,” “change of control” or similar
definition as

 

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defined in the Baxalta Equity Plan (a “Baxalta Change of Control”). Without
limiting the foregoing, with respect to provisions related to vesting of awards,
a Baxter Change of Control shall be treated as a Baxalta Change of Control for
purposes of Baxalta Awards held by Baxter Retained Employees or Baxter Former
Employees, and a Baxalta Change of Control shall be treated as a Baxter Change
of Control for purposes of Adjusted Baxter Awards held by Baxalta Employees or
Baxalta Former Employees. The Distribution shall not, in and of itself, be
treated as either a Baxter Change of Control or a Baxalta Change of Control

(c) Tax Reporting and Withholding. Following the Distribution Date, it is
generally expected that (i) Baxter will be responsible for all income, payroll
and other tax remittance and reporting related to income of Baxter Retained
Employees, Baxter Former Employees, and individuals who continue to be Baxter
non-employee directors immediately following the Distribution Date in respect of
Adjusted Baxter Awards and Baxalta Awards; and (ii) Baxalta will be responsible
for all income, payroll and other tax remittance and reporting related to income
of Transferred Employees, Baxalta Former Employees and Baxalta non-employee
directors who do not continue to be Baxter non-employee directors immediately
following the Distribution Date in respect of Adjusted Baxter Awards and Baxalta
Awards. Baxter or Baxalta, as applicable, shall facilitate performance by the
other Party of its obligations hereunder by promptly remitting amounts or shares
withheld in conjunction with a transfer of shares or cash, either (as mutually
agreed by the Parties) directly to the applicable taxing authority or to the
other Party for remittance to such taxing authority. The Parties will cooperate
and communicate with each other and with third-party providers to effectuate
withholding and remittance of taxes, as well as required tax reporting, in a
timely, efficient and appropriate manner. Baxter and Baxalta shall, to the
extent practicable, (x) treat Baxalta (or a member of the Baxalta Group
designated by Baxter) as a “successor employer” and Baxter (or the appropriate
member of the Baxter Group) as a “predecessor,” within the meaning of Sections
3121(a)(1) and 3306(b)(1) of the Code, with respect to Baxalta Employees (upon
the Transfer Date for such Baxalta Employee) for purposes of taxes imposed under
the United States Federal Unemployment Tax Act or the United States Federal
Insurance Contributions Act, and (y) cooperate with each other to avoid, to the
extent possible, the filing of more than one IRS Form W-2 with respect to each
Baxalta Employee for the year in which the Transfer Date for such Baxalta
Employee occurs. The obligations to cooperate and support the other in respect
of such tax withholding and remittance shall not continue beyond the termination
or expiration of such or similar transition services under the Transition
Services Agreement.

(d) Registration and Other Regulatory Requirements. As soon as possible
following (or prior to) the Distribution Date, but in any case before the date
of issuance of any shares of Baxalta Common Stock pursuant to the Baxalta Equity
Plan, Baxalta agrees to file a Form S-8 Registration Statement (or such other
registration statement as may be permitted in lieu thereof if a Form S-8
Registration Statement is not then available for any such awards to be granted
in accordance with the terms of this Agreement) with respect to, and to cause to
be registered pursuant to the Securities Act, the shares of Baxalta Common Stock
authorized for issuance under the Baxalta Equity Plan as required pursuant to
the Securities Act. The Parties shall take such additional actions as are deemed
necessary or advisable to effectuate the foregoing provisions of this
Section 6.01, including compliance with securities Laws and other legal
requirements associated with equity compensation awards in affected non-U.S.
jurisdictions. Baxter agrees to facilitate the adoption and approval of the
Baxalta Equity Plan consistent with the requirements of Treasury Regulations
Section 1.162-27(f)(4)(iii).

 

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(e) Baxter Equity-Based Awards in Certain Non-U.S. Jurisdictions.
Notwithstanding the foregoing provisions of this Section 6.01, the Parties may
mutually agree, in their sole discretion (including as set forth in Schedule
6.01(e)), not to adjust certain outstanding Baxter equity-based awards pursuant
to the foregoing provisions of this Section 6.01, where those actions would
create or trigger adverse legal, accounting or tax consequences for Baxter,
Baxalta, and/or the affected non-U.S. award holders. In such circumstances,
Baxter and/or Baxalta may take any action necessary or advisable to prevent any
such adverse legal, accounting or tax consequences, including, but not limited
to, agreeing that the outstanding Baxter equity-based awards of the affected
non-U.S. award holders shall terminate in accordance with the terms of the
Baxter Stock Programs and the underlying award agreements, in which case Baxalta
or Baxter, as applicable, shall equitably compensate the affected non-U.S. award
holders in an alternate manner determined by Baxalta or Baxter, as applicable,
in its sole discretion, or apply an alternate adjustment method. Where and to
the extent required by applicable Law or tax considerations outside the United
States, the adjustments described in this Section 6.01 shall be deemed to have
been effectuated immediately prior to the Distribution Date.

Section 6.02 Employee Stock Purchase Plan.

(a) Baxter ESPP. The administrator of the Baxter ESPP shall take all actions
necessary and appropriate to provide that: (i) the final purchases to be made
thereunder by Baxalta Employees may, subject to clause (iv), occur (and
reasonable time is provided to allow such purchases to occur) on or before the
applicable Transfer Date to allow such participants to purchase Baxter Common
Shares under the Baxter ESPP on or prior to such Transfer Date; (ii) all
participant payroll deductions and other contributions under the Baxter ESPP by
Baxalta Employees shall cease on or before the final purchases by such Baxalta
Employees pursuant to in clause (i) of this paragraph; (iii) subject to clause
(iv), Baxalta Employees in the Baxter ESPP shall not be eligible to make any
future purchases or participate in any future Offerings (as defined in the
Baxter ESPP) following the applicable Transfer Date; and (iv) any cash remaining
in the Baxter ESPP account of any Baxalta Employee described in clause
(iii) shall either be used to make purchases of Baxter Common Shares under the
Baxter ESPP as of the next regularly scheduled purchase date under the Baxter
ESPP or, to the extent required under applicable local Law, refunded to such
Baxalta Employee. For purposes of this paragraph, the administrator of the
Baxter ESPP may establish an alternate Offering End Date (as defined in the
Baxter ESPP) for a sub-plan of the Baxter ESPP, as it determines to be necessary
or advisable to accommodate the operation and administration of the sub-plan.

(b) Establishment of Baxalta ESPP. Effective as of or before the Distribution
Date, Baxalta shall establish the Baxalta ESPP, with terms substantially similar
to those of the Baxter ESPP as of the Distribution Date; provided, however, that
Baxalta may delay implementation of the Baxalta ESPP or otherwise choose not to
establish such Baxalta ESPP in one or more countries (i) to the extent necessary
to complete those actions and undertakings that Baxalta, in its sole discretion,
determines to be necessary or advisable to comply with applicable Law or (ii) if
Baxalta determines, in its sole discretion, that establishing and maintaining
such Baxalta ESPP in such country would not be commercially reasonable in light
of the facts and circumstances.

 

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Section 6.03 Annual Bonus. The Baxalta Group shall be responsible for all annual
bonus payments or other forms of cash incentive compensation (including
commissions) to Transferred Employees (and Post-Distribution Baxalta Employees
as part of the costs and expenses passed through to Baxalta pursuant to the
International Commercial Operations Agreement) in respect of any plan year, the
payment date for which occurs on or after the applicable Transferred Employee’s
Transfer Date. Notwithstanding the foregoing, the Parties intend to treat the
portion of 2015 ending on the Distribution Date as a separate performance period
for purposes of 2015 annual bonuses. The bonuses attributable to such separate
performance period earned by Transferred Employees shall be paid by Baxalta at
substantially the same time such bonuses are paid to Baxter Retained Employees,
and to the extent that payment is conditioned upon continued employment,
employment by the Baxalta Group shall be treated as employment by the Baxter
Group.

Section 6.04 Directors’ Plan. Effective as of or before the Distribution Date,
Baxalta shall establish the Baxalta Directors’ Plan, with terms and funding
arrangements substantially similar to those of the Baxter Directors’ Plan as of
the Distribution Date. The Parties shall use commercially reasonable efforts to
take all actions necessary or appropriate so that each outstanding Baxter Option
or Baxter RSU Award granted under the Baxter Directors’ Plan shall be adjusted
or converted as set forth in this Section 6.04. For the avoidance of doubt, the
remainder of this Section 6.04 applies only to grants (including those Baxter
RSU Awards deferred pursuant to the Baxter Directors’ DCP) made under the Baxter
Directors’ Plan (or any successor or predecessor plan), while Section 6.01 is
intended to apply to other programs included within the Baxter Stock Programs.

(a) Baxter Options. As determined by the Baxter Compensation Committee pursuant
to its authority under the Baxter Directors’ Plan, each Baxter Option granted
prior to January 1, 2015 (other than new hire grants made on or after July 1,
2014) that remains outstanding as of immediately prior to the Distribution Date,
regardless of by whom held, whether vested or unvested, shall be converted
concurrently with the Distribution on the Distribution Date into both an
Adjusted Baxter Option and a Baxalta Option. As determined by the Baxter
Compensation Committee pursuant to its authority under the Baxter Directors’
Plan, each Baxter Option granted on or after January 1, 2015 (or, with respect
to new hire grants, on or after July 1, 2014) but prior to the Distribution Date
that remains outstanding as of immediately prior to the Distribution Date,
regardless of by whom held, whether vested or unvested, shall be converted
concurrently with the Distribution on the Distribution Date into (i) an Adjusted
Baxter Option in the case of any holder thereof who, as of immediately following
the Distribution Date, is not serving on the Baxalta Board or who is serving on
both the Baxter Board and the Baxalta Board or (ii) a Baxalta Option in the case
of any holder thereof who, as of immediately following the Distribution Date, is
serving on the Baxalta Board, but not the Baxter Board. Each such adjusted or
converted Option shall, except as otherwise provided in this Section 6.04(a), be
subject to the same terms and conditions (including with respect to vesting)
after the Distribution Date as applicable to such Baxter Option immediately
prior to the Distribution Date; provided, however, that upon such adjustment or
conversion:

(A) with respect to each Baxter Option granted prior to January 1, 2015 (other
than new hire grants made on or after July 1, 2014), the number of Baxter Common
Shares subject to such Option shall be unchanged from the number of Baxter
Common Shares that were subject to the original unadjusted Baxter Option;

 

41

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(B) with respect to each Baxter Option granted prior to January 1, 2015 (other
than new hire grants made on or after July 1, 2014), the number of shares of
Baxalta Common Stock subject to the Baxalta Option into which such Baxter Option
is converted, rounded down to the nearest whole share, shall be equal to the
product obtained by multiplying (x) the number of Baxter Common Shares subject
to the Baxter Option immediately prior to the Distribution Date times (y) the
Distribution Ratio;

(C) with respect to each Baxter Option granted on or after January 1, 2015 (or,
with respect to new hire grants, on or after July 1, 2014) to any holder thereof
who, as of immediately following the Distribution Date, is not serving on the
Baxalta Board or who is serving on both the Baxter Board and the Baxalta Board,
the number of Baxter Common Shares subject to such Adjusted Baxter Option (if
any), rounded down to the nearest whole number, shall be equal to (1) the number
of Baxter Common Shares subject to the Baxter Option immediately prior to the
Distribution Date, divided by (2) the Baxter Percentage;

(D) with respect to each Baxter Option granted on or after January 1, 2015 (or,
with respect to new hire grants, on or after July 1, 2014) to any holder thereof
who, as of immediately following the Distribution Date, is serving on the
Baxalta Board, but not the Baxter Board, the number of shares of Baxalta Common
Stock subject to such Baxalta Option (if any), rounded down to the nearest whole
number, shall be equal to (1) the product obtained by multiplying (xx) the
number of Baxter Common Shares subject to the Baxter Option immediately prior to
the Distribution Date times (yy) the Distribution Ratio, divided by (2) the
Baxalta Percentage;

(E) the per share exercise price of each Adjusted Baxter Option, rounded up to
the nearest hundredth of a cent, shall be equal to (1) the Baxter
Pre-Distribution Stock Value minus (2) the Baxter Pre-Distribution Option Value;
and

(F) the per share exercise price of each Baxalta Option, rounded up to the
nearest hundredth of a cent, shall be equal to (1) the Baxalta Stock Value minus
(2) the Baxalta Pre-Distribution Option Value;

provided, however, that the exercise price, the number of Baxter Common Shares
and shares of Baxalta Common Stock subject to such options, and the terms and
conditions of exercise of such options shall be determined in a manner
consistent with the requirements of Code Section 409A.

 

42

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(b) Baxter RSU Awards. Each holder of Baxter RSU Awards granted prior to
January 1, 2015 (other than new hire grants made on or after July 1, 2014) that
remain outstanding as of immediately prior to the Distribution Date, regardless
of by whom held, whether vested or unvested, shall receive (in addition to
retaining such Baxter RSU Awards) concurrently with the Distribution on the
Distribution Date a number of Baxalta RSU Awards equal to the product obtained
by multiplying (i) the number of such Baxter RSU Awards held by such holder
times (ii) the Distribution Ratio. Each Baxter RSU Award granted on or after
January 1, 2015 (or, with respect to new hire grants, on or after July 1, 2014)
but prior to the Distribution Date that remains outstanding as of immediately
prior to the Distribution Date, regardless of by whom held, whether vested or
unvested, shall be converted concurrently with the Distribution on the
Distribution Date into (i) an Adjusted Baxter RSU Award in the case any holder
thereof who, as of immediately following the Distribution Date, is not serving
on the Baxalta Board or who is serving on both the Baxter Board and the Baxalta
Board or (ii) a Baxalta RSU Award in the case of any holder thereof who, as of
immediately following the Distribution Date, is serving on the Baxalta Board,
but not the Baxter Board. Except as set forth in this Section 6.04(b), all
Adjusted Baxter RSU Awards and Baxalta RSU Awards issued in accordance with this
Section 6.04(b) shall be subject to substantially the same terms and conditions
(including with respect to vesting) immediately following the Distribution Date
as applicable immediately prior to the Distribution Date for those Baxter RSU
Awards from which such Adjusted Baxter RSU Awards and Baxalta RSU Awards were
converted; provided, however, that with respect to each Baxter RSU Award
converted in accordance with the immediately preceding sentence:

(A) the number of units represented by an Adjusted Baxter RSU Award shall be
equal to (1) the number of units subject to the Baxter RSU Award immediately
prior to the Distribution Date, divided by (2) the Baxter Percentage;

(B) the number of units represented by a Baxalta RSU Award shall be equal to
(1) the product obtained by multiplying (xx) the number of units subject to the
Baxter RSU Award immediately prior to the Distribution Date times (yy) the
Distribution Ratio, divided by (2) the Baxalta Percentage.

Section 6.05 Directors’ Deferred Compensation Plan.

(a) Establishment of Baxalta Directors’ DCP. Effective as of or before the
Distribution Date, Baxalta shall establish the Baxalta Directors’ DCP, with
terms substantially similar to those of the Baxter Directors’ DCP as of the
Distribution Date. The portion of the compensation paid to a director of Baxalta
in the year that includes the Distribution Date that is deferred pursuant to the
Baxter Directors’ DCP shall be determined by the deferral election, if any, made
by such director for such year pursuant to the Baxter Directors’ DCP.

(b) Assumption of Directors’ DCP Liabilities and Transfer from Baxter Directors’
DCP.

 

43

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(i) As of the Distribution Date, Baxalta shall, and shall cause the Baxalta
Directors’ DCP to, assume all Liabilities for all obligations under the Baxter
Directors’ DCP for the benefits of each person who will serve on the Baxalta
Board, but not the Baxter Board, as of immediately following the Distribution
Date, together with his or her beneficiaries and/or alternate payees, determined
as of the applicable Distribution Date, and Baxter and the Baxter Directors’ DCP
shall be relieved of all Liabilities for those benefits. To the maximum extent
permitted by Treasury Regulations Section 1.409A-1(h)(4), a member of the Baxter
Board whose benefit under the Baxter Director’s DCP is transferred to the
Baxalta Directors’ DCP shall not be considered to have undergone a “separation
from service” for purposes of Code Section 409A and the Baxter Directors’ DCP
solely by reason of the Separation, regardless of whether he continues to serve
on the Baxter Board immediately following the Distribution Date.

(ii) Baxter shall retain all of the Liabilities under the Baxter Directors’ DCP
with respect to the benefits of each person who will serve on both the Baxalta
Board and the Baxter Board as of immediately following the Distribution Date,
together with his or her beneficiaries and/or alternate payees. The time and
form of payment of such Liabilities shall be based upon the date on which such
persons terminate their service on the Baxter Board regardless of whether they
continue to serve on the Baxalta Board.

(iii) As of or as soon as practicable after the Distribution Date, the Parties
shall cooperate to cause the accounts of each person who will serve on the
Baxalta Board, but not the Baxter Board, as of immediately following the
Distribution Date, participating in the Baxter Directors’ DCP to be transferred
to the Baxalta Directors’ DCP. Baxalta shall (A) credit each such director’s
account with (1) the amount deferred by such individual into the Baxter
Directors’ DCP as of the Distribution Date, plus (2) any employer contributions,
whether vested or unvested, deemed to have been made in relation to the amount
described in (1), including, in each case, any earnings thereon, and
(B) recognize and honor all deferral and distribution elections made by such
individual (including any deferral election applicable to any amount earned but
not yet paid as of the Distribution Date).

(iv) The accrued benefit of each director under the Baxter Directors’ DCP as of
the applicable Transfer Date shall be payable under the Baxalta Directors’ DCP
at the same time and in the same form that would have been paid under the Baxter
Directors’ DCP, treating such director’s separation from service from the
Baxalta Group as if it were a separation from service from the Baxter Group, and
taking into account any election made by the director relating to the time and
form of his payment under the Baxter Director’s DCP.

(c) Baxter Directors’ DCP after Transfer Date. From and after the Distribution
Date, each person who will serve on the Baxalta Board, but not the Baxter Board,
as of immediately following the Distribution Date shall not participate in or
accrue any benefits under the Baxter Directors’ DCP. Without limiting the
generality of the foregoing, each such person shall cease to participate in the
Baxter Directors’ DCP effective as of the Distribution Date. The Baxter
Directors’ DCP shall continue to be responsible for Liabilities in respect of
members of the Baxter Board and their beneficiaries and/or alternate payees.

 

44

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ARTICLE VII

MISCELLANEOUS

Section 7.01 Transfer of Records and Information. Baxter shall transfer to
Baxalta originals or copies of any and all employment records and information
(including, but not limited to, any personnel files, performance reviews, and
medical, social security and tax files and forms) with respect to Transferred
Employees and other records reasonably required by Baxalta to enable Baxalta
properly to carry out its obligations under this Agreement. Such transfer of
records and information generally shall occur as soon as administratively
practicable on or after the Distribution Date (or, if later, the applicable
Transfer Date) and shall in each case be required and shall occur only to the
extent permitted by applicable local Law; provided that it is understood and
agreed that certain records required to effect the contemplated transfer of
employment may be provided prior to the Transfer Date to the extent required by
applicable local Law. Each Party will permit the other Party reasonable access
to Employee records and information, to the extent reasonably necessary for such
accessing Party to carry out its obligations hereunder.

Section 7.02 Cooperation. Each Party shall upon reasonable request provide the
other Party and the other Party’s respective Affiliates, agents, and vendors all
information reasonably necessary to the other Party’s performance of its
obligations hereunder. The Parties agree to use their respective best efforts
and to cooperate with each other in order to carry out their obligations
hereunder and to effectuate the terms of this Agreement.

Section 7.03 Employee Agreements. Effective as of the applicable Transfer Date
of each Transferred Employee, Baxter and the applicable members of the Baxter
Group hereby assign to Baxalta or another member of the Baxalta Group, to the
extent a Transferred Employee did not otherwise sign an Employee Agreement to
effect his or her transfer to and hiring by the Baxalta Group, each Employee
Agreement entered into between a member of the Baxter Group and any Baxalta
Employee, and all rights and obligations thereunder; provided, however, that
Baxter and the Baxter Group shall retain all rights under each Employee
Agreement to the extent that such rights are related to any continuing Liability
of the Baxter Group not assumed by Baxalta in connection with the Separation and
Distribution (including herein). Upon written request by Baxter or the Baxter
Group, Baxalta or the Baxalta Group shall make available to Baxter or the Baxter
Group the original copy of any written Employee Agreement (and a summary of the
terms of any unwritten Employee Agreement) that was assigned to Baxalta or the
Baxalta Group under this Agreement.

Section 7.04 Repayment Assets. Effective as of the Distribution Date, the Baxter
Group shall be entitled to all Employee Recoupment Assets in respect of Baxter
Retained Employees and Former Employees, and effective as of the applicable
Transfer Date, the Baxalta Group shall be entitled to all Employee Recoupment
Assets in respect of Baxalta Employees.

 

45

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Section 7.05 Compliance. The agreements and covenants of the Parties hereunder
shall at all times be subject to the requirements and limitations of applicable
Law (including, for purposes of Article IV, local rules and customs relating to
the treatment of pension plans) and collective bargaining agreements. Where an
agreement or covenant of a Party hereunder cannot be effected in compliance with
applicable Law or an applicable collective bargaining agreement, the Parties
agree to negotiate in good faith to modify such agreement or covenant to the
least extent possible in keeping with the original agreement or covenant in
order to comply with applicable Law or such applicable collective bargaining
agreement. Each provision of this Agreement is subject to and qualified by this
Section 7.05, whether or not such provision expressly states that it is subject
to or limited by applicable Law or by applicable collective bargaining
agreements. Each reference to the Code, ERISA, or the Securities Act or any
other Law shall be deemed to include the rules, regulations, and guidance issued
thereunder.

Section 7.06 Preservation of Rights. Unless expressly provided otherwise in this
Agreement, nothing herein shall be construed as a limitation on the right of the
Baxter Group or the Baxalta Group to (a) amend, modify or terminate any Benefit
Plan or (b) terminate the employment of any Employee.

Section 7.07 Reimbursement. The Parties acknowledge that the Baxter Group, on
the one hand, and the Baxalta Group, on the other hand, may incur costs and
expenses (including, without limitation, contributions to Benefit Plans and the
payment of insurance premiums) which are, as set forth in this Agreement, the
responsibility of the other Party. Accordingly, the Parties agree to reimburse
each other for Liabilities and obligations for which such Party is responsible,
and shall provide such reimbursement reasonably promptly and in accordance with
the terms of any agreement between the Parties or their Affiliates expressly
addressing such matters.

Section 7.08 Matching Grant Plan. Baxter covenants and agrees that the Baxter
International Foundation shall retain all Liabilities under the Matching Gifts
Program with respect to donations made by any Transferred Employee prior to the
Transfer Date. Baxter covenants and agrees that the Baxter International
Foundation is to match or cause to be matched all eligible donations made prior
to the Distribution Date, in accordance with the terms of the Matching Gifts
Program.

Section 7.09 Not a Change in Control. The Parties acknowledge and agree that the
transactions contemplated by the Separation and Distribution Agreement and this
Agreement do not constitute a “change in control” or a “change of control” for
purposes of any Benefit Plan.

Section 7.10 Incorporation by Reference. The following sections of the
Separation and Distribution Agreement are hereby incorporated into this
Agreement by reference: Section 9.01. Counterparts, Entire Agreement, Corporate
Power, Facsimile Signatures; Section 9.02. Governing Law; Section 9.03.
Assignability; Section 9.04. Third Party Beneficiaries; Section 9.05. Notices;
Section 9.06. Severability; Section 9.07. Force Majeure; Section 9.08. No Set
Off; Section 9.09. Responsibility for Expenses; Section 9.10. Headings;
Section 9.11. Survival of Covenants; Section 9.13. Waivers; Section 9.14.
Amendments; Section 9.15. Interpretation; Section 9.16. Public Announcements;
Section 9.17. Specific Performance; and Section 9.18. Mutual Drafting.

 

46

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Section 7.11 Limitation on Enforcement. This Agreement is an agreement solely
between the Parties. Nothing in this Agreement, whether express or implied,
shall be construed to: (a) confer upon any current or former Employee of the
Baxter Group or the Baxalta Group, or any other person any rights or remedies,
including, but not limited to any right to (i) employment or recall;
(ii) continued employment or continued service for any specified period; or
(iii) claim any particular compensation, benefit or aggregation of benefits, of
any kind or nature; or (b) create, modify, or amend any Benefit Plan.

Section 7.12 Further Assurances and Consents. In addition to the actions
specifically provided for elsewhere in this Agreement, each of the Parties
hereto shall use commercially reasonable efforts to (a) execute and deliver such
further instruments and documents and take such other actions as the other party
may reasonably request to effectuate the purposes of this Agreement and carry
out the terms hereof; (b) take, or cause to be taken, all actions, and do, or
cause to be done, all things, reasonably necessary, proper or advisable under
applicable Laws and agreements or otherwise to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation,
using commercially reasonable efforts to obtain any consents and approvals and
to make any filings and applications necessary or desirable to consummate the
transactions contemplated by this Agreement; provided that no Party shall be
obligated to pay any consideration therefor (except for filing fees and other
similar charges) to any third party from whom those consents, approvals and
amendments are required or to take any action or omit to take any action if the
taking of action or the omission to take action would be unreasonably burdensome
to the Party or the business thereof.

Section 7.13 Third Party Consent. If the obligation of any Party under this
Agreement depends on the consent of a third party, such as a vendor or insurance
company, and that consent is withheld, the Parties shall use commercially
reasonable efforts to implement the applicable provisions of this Agreement to
the fullest extent practicable. If any provision of this Agreement cannot be
implemented due to the failure of a third party to consent, the Parties shall
negotiate in good faith to implement the provision in a mutually satisfactory
manner, taking into account the original purposes of the provision in light of
the Distribution and communications to affected individuals.

Section 7.14 Effect if Distribution Does Not Occur. If the Distribution does not
occur, then all actions and events that are to be taken under this Agreement, or
otherwise in connection with the Distribution, shall not be taken or occur,
except to the extent specifically provided by Baxter.

Section 7.15 Disputes. The Parties agree to use commercially reasonable efforts
to resolve in an amicable manner any and all controversies, disputes and claims
between them arising out of or related in any way to this Agreement. The Parties
agree that any controversy, dispute or claim (whether arising in contract, tort
or otherwise) arising out of or related in any way to this Agreement that cannot
be amicably resolved informally will be resolved pursuant to the dispute
resolution procedures set forth in Article VII of the Separation and
Distribution Agreement.

 

47

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Section 7.16 Reverse Jurisdiction. Notwithstanding anything in this Agreement to
the contrary, with the exception of Article I, Section 2.01 and this
Section 7.16, the parties acknowledge and agree that for each of the entities or
countries listed in Schedule 7.16, where the context so requires in accordance
with the applicable local Conveyance and Assumption Instruments, each reference
to “Baxalta” in this Agreement shall be construed as a reference to “Baxter,”
and each reference to “Baxter” in this Agreement shall be construed as a
reference to “Baxalta.” For the avoidance of doubt and where such treatment is
reasonable in light of the context, this Section 7.16 shall be interpreted to
provide substantially the same treatment for the entities or jurisdictions
listed in Schedule 7.16 (but with the Baxter and Baxalta roles reversed) to
Baxter Retained Employees who are legally employed by the Baxalta Group for a
period prior to such Employee’s legal transfer back to the Baxter Group by
agreement of the Parties, as the treatment herein with respect to
Post-Distribution Baxalta Employees.

[SIGNATURE PAGE FOLLOWS]

 

48

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The Parties have caused this Agreement to be signed by their authorized
representatives as of the date of this Agreement.

 

BAXTER INTERNATIONAL INC. By:

/s/ James K. Saccaro

Title: 

Corporate Vice President

BAXALTA INCORPORATED By:

/s/ Robert J. Hombach

Title:

Corporate Vice President and Chief Financial Officer

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

Schedule 1.01

Post-Distribution Baxalta Employees

 

Empl ID    Work Country

201120

   United Arab Emirates

389152

   Argentina

409130

   Argentina

364235

   Argentina

369271

   Argentina

369272

   Argentina

410775

   Argentina

428032

   Argentina

413028

   Argentina

392668

   Argentina

318369

   Argentina

219786

   Argentina

235443

   Argentina

217040

   Argentina

235353

   Argentina

388853

   Argentina

238797

   Argentina

185638

   Argentina

355920

   Argentina

223330

   Argentina

213688

   Argentina

415472

   Argentina

290095

   Bulgaria

228826

   Bulgaria

387126

   Bulgaria

428850

   Brazil

422203

   Brazil

389223

   Brazil

392861

   Brazil

414178

   Brazil

394167

   Brazil

397959

   Brazil

390038

   Brazil

389579

   Brazil

159361

   Brazil

423457

   Brazil

363895

   Brazil

196674

   Brazil

394759

   Brazil

305574

   Brazil

388951

   Brazil

404926

   Brazil

236257

   Brazil

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

388132

Brazil

193117

Brazil

422195

Brazil

409496

Brazil

391740

Brazil

210757

Brazil

226225

Brazil

185296

Brazil

410031

Brazil

398603

Brazil

386778

Brazil

388828

Brazil

239326

Brazil

398604

Brazil

395223

Brazil

220979

Brazil

363304

Brazil

416288

Brazil

395874

Brazil

421284

Brazil

218793

Brazil

407419

Brazil

386771

Brazil

415136

Brazil

419197

Brazil

404922

Brazil

150746

Brazil

210784

Brazil

386318

Brazil

414179

Brazil

392059

Brazil

420896

Brazil

387744

Brazil

421553

Brazil

398610

Brazil

416368

Brazil

417561

Brazil

406185

Brazil

422315

Brazil

384525

Brazil

413481

Brazil

418820

Brazil

229002

Brazil

207803

Brazil

364693

Brazil

420267

Brazil

362323

Brazil

218270

Brazil

421730

Brazil

239841

Chile

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

231429

Chile

398279

Chile

388086

China

188658

China

405203

China

382131

China

397128

China

386751

China

394523

China

360880

China

388841

China

414041

China

390884

China

424992

China

427514

China

394391

China

389442

China

427807

China

359344

China

198967

China

184417

China

390799

China

344224

China

397020

China

344069

China

395355

China

391874

China

394498

China

238538

China

385176

China

364441

China

387220

China

425839

China

410774

China

392139

China

361173

China

428053

China

389497

China

398060

China

422963

China

387321

China

393729

China

237927

China

387296

China

232063

China

231576

China

417608

China

415944

China

364442

China

389416

China

 

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

396665

China

428261

China

392308

China

383912

China

394045

China

364834

China

387463

China

419632

China

389921

China

414047

China

364115

China

396447

China

420020

China

427216

China

364199

China

182887

China

394910

China

406124

China

395053

China

238542

China

427574

China

387292

China

420753

China

420751

China

386795

China

204625

China

426791

China

421714

China

388025

China

391225

China

394716

China

419980

China

363450

China

388622

China

415662

China

424754

China

396449

China

387726

China

234685

China

385628

China

383872

China

414856

China

399658

China

207146

China

389411

China

382461

China

362619

China

189034

China

406813

China

344304

China

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

428252

China

228985

China

394246

China

218997

China

364238

China

195159

China

384292

China

417301

China

207761

China

382738

China

408660

China

362198

China

229591

China

423994

China

345016

China

425837

China

362439

China

422046

China

234372

China

417602

China

418798

China

389336

China

390942

China

384180

China

218127

China

389153

China

398831

China

426021

China

396199

China

423992

China

383778

China

198263

China

154558

Costa Rica

388856

Costa Rica

396294

Costa Rica

392608

Czech Republic

395326

Czech Republic

414983

Czech Republic

425991

Czech Republic

427578

Czech Republic

397559

Czech Republic

383917

Czech Republic

111720

Czech Republic

235376

Czech Republic

110804

Czech Republic

418367

Czech Republic

196641

Czech Republic

306777

Czech Republic

239711

Czech Republic

389980

Czech Republic

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

363747

Czech Republic

232011

Czech Republic

203533

Czech Republic

111378

Czech Republic

132641

Czech Republic

111084

Czech Republic

132165

Czech Republic

148048

Czech Republic

113735

Czech Republic

221468

Czech Republic

213534

Czech Republic

110913

Czech Republic

220753

Czech Republic

140344

Czech Republic

159351

Czech Republic

126414

Czech Republic

110805

Czech Republic

206541

Czech Republic

217392

Czech Republic

183779

Czech Republic

140388

Czech Republic

111829

Czech Republic

223311

Czech Republic

151203

Czech Republic

232549

Czech Republic

199245

Czech Republic

201095

Czech Republic

186664

Czech Republic

111293

Czech Republic

111212

Czech Republic

131517

Czech Republic

132178

Czech Republic

207839

Czech Republic

131495

Czech Republic

147697

Czech Republic

234379

Czech Republic

128222

Czech Republic

390221

Ecuador

359192

Ecuador

388053

Ecuador

156439

Ecuador

349801

Ecuador

239727

Estonia

357059

Greece

156102

Greece

355880

Greece

315220

Greece

397654

Greece

355884

Greece

356729

Greece

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

427733

Greece

355881

Greece

352385

Greece

353816

Greece

181475

Greece

103739

Greece

217119

Greece

289971

Greece

407538

Guatemala

383344

Guatemala

424861

Guatemala

218654

Guatemala

189929

Hungary

398488

Hungary

231608

Hungary

226752

Hungary

159795

Hungary

384380

Hungary

289986

Hungary

394549

India

411467

India

385387

India

413524

India

416806

India

167047

India

182428

India

427972

India

411013

India

361631

India

364309

India

413809

India

426669

India

385098

India

399331

India

406600

India

410778

India

392208

India

399948

India

305879

India

167475

India

426371

India

398447

India

411945

India

427500

India

306167

India

228143

India

407926

India

412570

India

195467

India

412007

India

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

182723

India

421562

India

222233

India

229014

India

398929

India

408167

India

424875

India

427132

India

351742

India

177877

India

386762

India

386611

India

417348

India

384277

India

208968

India

411424

India

415013

India

391875

India

360849

India

406487

India

394678

India

410777

India

411470

India

391756

India

195236

India

406541

India

405992

India

381741

India

361129

India

395020

India

425951

India

405658

India

426367

India

423609

India

399570

India

361931

India

411329

India

382657

India

405496

India

364196

India

388448

India

411549

Kazakhstan

409972

Kazakhstan

418080

Kazakhstan

390192

Kazakhstan

301943

Kazakhstan

359570

Kazakhstan

398835

Kazakhstan

416206

Kazakhstan

427491

Kazakhstan

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

412800

Kazakhstan

426909

Kazakhstan

412988

Kazakhstan

239851

Lithuania

239850

Lithuania

159075

Latvia

419765

Latvia

414787

Malaysia

216934

Malaysia

229014

Malaysia

394814

Malaysia

387440

Panama

160405

Poland

384163

Poland

356743

Poland

238593

Poland

382940

Poland

364298

Poland

222762

Poland

290202

Poland

412687

Poland

385790

Poland

212532

Poland

180877

Poland

234344

Poland

290204

Poland

306465

Poland

364296

Poland

235061

Poland

218883

Poland

218888

Poland

385154

Poland

411703

Poland

407930

Poland

392629

Poland

235060

Poland

399477

Poland

290148

Poland

238726

Poland

413991

Poland

200852

Poland

206401

Poland

426434

Poland

384412

Poland

225433

Poland

234705

Poland

217092

Poland

215598

Poland

200029

Poland

426056

Poland

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

410410

Romania

410677

Romania

410738

Romania

410737

Romania

411725

Romania

406099

Romania

407893

Romania

228861

Russia

413557

Russia

423494

Russia

361116

Russia

290236

Russia

395510

Russia

420082

Russia

406951

Russia

414912

Russia

413555

Russia

392403

Russia

238315

Russia

428731

Russia

397359

Russia

226893

Russia

423682

Russia

229683

Russia

412971

Russia

419156

Russia

399066

Russia

414035

Russia

412852

Russia

384566

Russia

236651

Russia

405488

Russia

239335

Russia

362104

Russia

397088

Russia

290262

Russia

414652

Russia

397823

Russia

411056

Russia

157971

Russia

427007

Russia

411623

Russia

384917

Russia

399798

Russia

406346

Russia

357088

Russia

393703

Russia

406945

Russia

416405

Russia

410726

Russia

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

389561

Russia

238222

Russia

382215

Russia

405317

Russia

414911

Russia

417773

Russia

392406

Russia

426359

Russia

416309

Russia

414033

Russia

237128

Russia

421414

Russia

415906

Slovakia

427343

Slovakia

387197

Slovakia

427878

Slovakia

388024

Slovakia

427742

Slovakia

408263

Slovakia

214012

Slovakia

425332

Slovakia

219614

Slovakia

110804

Slovakia

385458

Slovakia

364217

Slovakia

359110

Slovakia

362593

Slovakia

395747

Slovakia

407587

Slovenia

413451

Slovenia

412141

Slovenia

237045

Thailand

235531

Thailand

411709

Thailand

236362

Thailand

417445

Thailand

418034

Thailand

395843

Thailand

406913

Thailand

393318

Thailand

395877

Thailand

385368

Thailand

410161

Thailand

366863

Taiwan

422110

Taiwan

350893

Taiwan

395695

Taiwan

411801

Taiwan

409133

Taiwan

234395

Taiwan

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

392153

Taiwan

427413

Ukraine

416021

Ukraine

427870

Ukraine

204472

Venezuela

384506

Vietnam

389007

Vietnam

393041

Vietnam

427148

Vietnam

 

* Parties may agree from time to time to designate other employees not yet
transferred as of the Distribution Date to the list of Post-Distribution Baxalta
Employees; provided that, for the avoidance of doubt, any such employee shall
(unless the parties expressly agree otherwise) shall be treated as a Baxter
employee as of the Distribution Date for purposes of all equity award
adjustments and conversions in the manner described in the Employee Matters
Agreement.

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

Schedule 2.03(a)

Baxter Benefit Plans

 

    United States   Puerto Rico Retirement   DB Pension Qualified &
Non-Qualified Plans   DB Pension Qualified   DC - Incentive Investment Plan &
Excess Plan   DC – Savings and Investment Plan (SIP) Health & Welfare Plans  
Medical and Prescription Drugs - Active, TPD and COBRA   Medical, Dental and
Prescription Drugs - Active and COBRA, EAP   Dental Plan-Active, TPD and COBRA  
Basic Life Insurance – Active and Disabled   Basic Life Insurance – Active and
Disabled   Business Travel Accident Insurance   Long term disability Insurance  
  Short term disability Pay     Flexible Spending Accounts     Business Travel
Accident Insurance     Retiree Medical     Retiree Life   Optional Employee Paid
Coverage   Supplemental Life   Supplemental Life   Personal Accident Insurance  
Personal Accident Insurance   Long term disability Insurance   Long term
disability Insurance   Long Term Care     Voluntary Benefits & Discounts   Other
Benefit Programs*   Adoption   Educational Assistance   BeWell (Wellenss
Program)   Severance & Terminations   Childcare   Service awards   Educational
Assistance     Employee Assistance Program     Severance & Terminations    
Service awards   Time Off and Leaves of Absence   Bereavement Leave  
Bereavement Leave   Civic/Jury Duty Leave   Family and Medical Leave   Family
and Medical Leave   Military Leave   Military Leave   Personal Leave   Personal
Leave   Sick pay   Sick pay   Vacation and Personal Holiday Pay   Vacation and
Personal Holiday Pay  

 

    Canada   Colombia   Mexico Retirement   Retirement DB     Private DB /DC
Hybrid Pension Plan   Retirement DC     Health & Welfare Plans   Health and
Welfare Benefits   Medical Plan   Life and Medical Mayor Insurance Policies  
Life Insurance   BeWell initiatives and Medical Check Up     Optional Life
insurance, Dependent life   Life and Accident Insurance     AD&D   Disability
/Sick Leave     Long term disability Insurance       Short term disability
Insurance       Medical and Dental Plan       BC Medical     Other Benefit
Programs*   Service awards   InverBaxter Savings Fund   Paid Special Permits  
Car Allowances/Perqs   Meal Tickets   Food Coupons   Leaves/Other benefit
related policies   Car Benefits   Restaurant Coupons   Severance & Terminations
  Vacation Savings   Saving Funds   EAP   Tuition Assistance for employees  
Savings Box     Service Awards   Company Car       Fleet Insurance       Fleet
Services Time Off and Leaves of Absence   Vacation and Holiday   Vacation  
Vacation   Additional Shut down Holidays   Paid Leaves   Holidays

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

    Australia   Japan   South Korea Retirement   Retirement DC   Retirement DB  
Retirement DB     Retirement DC   National Pension Health & Welfare Plans  
Death and TPD   Death and AD&D   Life & AD&D   Medical Plan   Supplementary Long
term disability Insurance   National medical insurance   Health and Wellness  
Medical Plan   Medical Insurance –Supplemental   Business Travel Accident
Insurance   Health Check Up   Medical Checkup     Overseas Business Travel
Accident Insurance   Seasonal flu Vaccine Other Benefit Programs*   Salary
Continuance   Service awards   Car / Transport Allowance   Service awards  
Company provided Housing/ Allowance   Wedding Gift   Car Program   Car Program  
Long Service   Severance & Terminations   Leisure activity support   Festive
Allowance     Severance & Terminations   Birthday & Anniversary Gift       Meal
Allowance       English Education Support Reimbursement       Sports Gym Support
Reimbursement       Mobile Phone Reimbursement       Tuition Assistance
(Reimbursement) Time Off and Leaves of Absence   Leaves/Other benefit related
policies   Leaves/Other benefit related policies   Child Birth   Leave Loading  
Overtime   Bereavement

 

    New Zealand   Singapore Retirement   Retirement DC   Retirement DC – CPF
Health & Welfare Plans   Death and TPD   Life Insurance   Medical Plan   AD&D  
Health and Wellness   Outpatient Clinical   Business Travel Accident Insurance  
Critical Illness / Major Medical     Hospitalization & Surgical Other Benefit
Programs*   Service awards   Transport Allowance   Car Program   Shift allowance
  Severance & Terminations   Long Service Award     Gifts/Awards     Sponsorship
for Educational program     Overtime Meal & Taxi Claim     Severance Time Off
and Leaves of Absence   Leaves/Other benefit related policies   Notice Period  
  Annual Leave and other leaves

 

    Austria   Belgium   Denmark Retirement   Defined Benefit (old plan)  
Pension Plan - DB White Collars (retirement)   Retirement   Defined Contribution
(new plan)   Pension Plan - DB White Collars (death)       Pension Plan - DB
White Collars (disability)       Pension Plan – DC White Collars (retirement)  
    Pension Plan - DC White Collars (Death)       Pension Plan - DC White
Collars (disability)       DC for Blue Collars (retirement)       DC for Blue
Collars(Death)       DC for Blue Collars (Disability)   Health & Welfare Plans  
Accidental Death and Disability   Accident du traveil at Accident Corporels (all
white and blue collars)   Life   Occupational Disease   Assurance Mission  
Disability   Local Business Travel Accident   Mondial assistance   Medical  
Short term Disability   Sick Pay / Medical Benefits—Ambulatoire   Business
travel abroad   Disability (Salary continuation)   Sick Pay / Medical Benefits —
Hosp Insurance   Collective accident insurance   Medical Plan     Other Benefit
Programs*   Transportation Programs   Gift Vouchers   Service Award   Meal
Allowance / Subsidized Eating Facilities   Eco Checks   And other awards  
Service Award   Representation Allowance   Sport Allowance   Discounted Company
Products   Meal Allowance   Meal   Sport   Daily Allowance   Discounts on Other
Company Products or Services   Childcare   Internet   Severance   Company cars  
Termination     Severance Payments       Termination indemnities     Time Off
and Leaves of Absence   Vacation   Vacations   Sick Leave   Other leave   Time
Schedule and leaves   Vacation       Vacation Bonus       Paternity leave only
(statutory)

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

    Finland   France   Germany Retirement   Retirement Plan (TYEL)   Saving Plan
  Defined Benefit Plans (CLOSED PLANS)     Plan d’Epargne Collective (PERCO)  
Pension Plan – Cash Balance White Collars (retirement) Health & Welfare Plans  
Life and Disability   Death and Disability   Life and Disability Accident
Insurance   Medical Plan; Employee Occupational Health   Medical Plan
Hospitalization   Short term disability Insurance   Glasses   Mandatory Physical
examination   Medical and Dental Plan   LOCAL BTA   Additional Physical
examination     Discounts on Other Company Products or Services     Other
Benefit Programs*   Service Award   Severance and termination   Severance &
Terminations   And other awards   Meal Allowance / Subsidized Eating Facilities
  Transportation Programs   Sport voucher   Service Awards   Savings Plan  
Severance   Vaccines   Meal Allowance / Subsidized Eating Facilities     CESU
gift voucher   Service Awards       Kontoführungsgebühr (Bank service
commission)       Family Support       In House doctor Time Off and Leaves of
Absence   Vacation Bonus   Working Schedule   Vacation and Paid Leave  
Miscellaneous Paid Leave   Parental Leave     Vacation   Paternity Leave    
Sick Leave (statutory)   Bereavement Leave     Maternity Leave (statutory)  
Miscellaneous Paid Leave     Paternity Leave (statutory)       Bereavement leave
Only Statutory         Ireland   Italy   Netherlands Retirement   Pension Plan -
DB (Retirement)   Defined Contribution FONCHIM Fund   Retirement DB Plan
(closed)   Pension Plan DB (Death)   Defined Contribution PREVIGEN Fund  
Retirement DC Plan (open)   Pension Plan - DC (retirement)       Pension Plan -
DC (Death)     Health & Welfare Plans   Long Term Disability Plan   Death
Insurance   Life and Accident Insurance   Medical   Accident insurance   Short
term disability (sick pay)   Annual medical check-up   Medical/Dental   Health
and Wellness Programs     Medical/Dental Othr employees   BeWell initiatives    
Medical Check Up   Medical and Dental (optional coverage) Other Benefit
Programs*   Meal Allowance / Subsidized Eating Facilities   TERMINATION
Indemnities - Mandatory   Termination Notice period   Service Award  
Termination   Termination Severance Payment   Discounts on Other Company
Products or Services   Meal Allowance / Subsidized Eating Facilities  
Representation allowance   Cycle to work scheme   Service Awards  
Phone/internet allowance   Employee Assistance Program   Discounted Company
Products   Sport allowance   Company Car Allowance     Commuting allowance  
Termination Indemnities: Lump sum     Service Awards       Meal Allowance /
Subsidized Eating Facilities Time Off and Leaves of Absence   Sick Absence
Policy   Sick pay - White Collars   Vacation   Working hours   Vacation
(including carry-forward and pay-out options)   Maternity Leave   Vacation  
Maternity Leave   Paternity Leave   Public Holidays   Paternity Leave  
Bereavement Leave   Maternity   Parental Leave   Miscellaneous Paid Leave  
Other leaves   Bereavement Leave       Marriage       Other paid leaves  

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

    Norway   Portugal   Spain Retirement   Retirement Plan   Retirement  
Pension Plan - DC (Retirement) Health & Welfare Plans   Life and Disability  
Life and Accident Insurance   Death Insurance Disability Insurance   LOCAL BTA  
Long term disability Insurance   Medical Plan     Local BTA   Medical Check up  
  Medical and Dental Plan       Medical Examination   Other Benefit Programs*  
Service Award   Severance & Terminations   Meal Allowance   Vacation Bonus  
Club Memberships   Service Award   Severance   Meal Allowances   Termination
Indemnities   Sport voucher   Service awards   Working Hours   Work and private
time accident insurance   Vaccines   Preferred provider agreements   Meal
Provided       Travel bag benefit       Other welfare benefits     Time Off and
Leaves of Absence   Vacation   Sick Leave   Sick Leave   Sick leave   Maternity
Leave   Other Holidays (days off)   Maternity Leave   Vacation   Paid leaves  
Paternity Leave   Bereavement Leave     Bereavement Leave   Miscellaneous Paid
Leave       Miscellaneous UnPaid Leave       Sweden   Switzerland   United
Kingdom Retirement   DB Retirement Plan   New Bio Employees DC   Retirement - DB
(unfunded promise)   DC Retirement Plan   New Bio Employees DB   Retirement - DC
  Retirement/Pension Counseling     Health & Welfare Plans   Private Life  
Minimum Mandatory Coverage   Life Assurance   Medical (optional)   Accident
Insurance — UVGZ (on top of minimum Mandatory Coverage)   Short Term Sick Pay  
Group Insurances (optional)   Short Term Sickness   Long term Sick Pay    
Medical allowances   Group Income Protection (Long term Disability)     Medical
Examinations   Local BTA     Business Travel Insurance (in addition to Global)  
Medical Plan Baxter Funded Other Benefit Programs*   Sport Reimbursement  
Transportation   Cash Plan Westfield   Severance   Lunch Allowances, Canteen  
Health Screening Baxter Funded   Service Awards   Club/Sport Membership  
Service Award   Vaccines   Free Vaccinations   Unum Lifeworks   Massage   Awards
(Service, Marriage, wedding, etc.)   Your Benefits (Flexible Benefits)   Eye
Care   Discounts   Discounted Hire car - Hertz.   Stop Smoking     Discounted
Holidays       Discounted Hotel and Cottage stays       Discounted IT Equipment
      Discounted Purple Parking       Costco Membership       Regency Park
Health Club Discount Time Off and Leaves of Absence   Sick Leave   Vacation  
Vacation   Time Schedule   Other paid leaves   Maternity Leave   Flex time  
Maternity Leave   Paternity Leave   Vacation     Parental Leave   Days off    
Bereavement Leave       Miscellaneous Paid Leave

 

* Other Benefit Programs include perqs/allowances but is not intended to be
inclusive of all plans/porgrams within each country.

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

Schedule 4.01(a) / 4.02(a)(ii)

Baxalta Non-U.S. Plans – Former Employees

 

  1. Austria Baxter AG Retirement Plan

  2. Austria Innovations GmbH Retirement Plan

  3. Switzerland Baxter Bioscience

  4. Switzerland Baxter AG

  5. Switzerland Baxter Healthcare

Mutual Agreement Re: Asset Transfer Methodology

The Parties mutually agree, as contemplated by the following provisions of
Section 4.01(a) and Section 4.02(a)(ii) of the Agreement, for the avoidance of
doubt, that where applicable local Laws specify the method for valuation, the
applicable local Laws will be followed (but interpreted as closely as possible
to the language of the Agreement to the extent such an interpretation is
permitted).

Applicable Excerpt – Section 4.01(a)

Assets will be allocated between the plans based on the proportion of
Liabilities borne by each plan. Except as otherwise mutually agreed upon by the
Parties, such Liabilities will be valued using the projected benefit obligation
based on plan provisions as in effect at the Applicable Closing Date and
applying demographic and other assumptions used in the most recently completed
valuation of the applicable Non-U.S. Baxter Benefit Plan (and taking into
account the requirements of ASC 715 as it exists as of the Applicable Closing
Date); provided, however, that all economic assumptions will be updated as of
the Applicable Closing Date.

Applicable Excerpt – Section 4.02(a)(ii)

Assets will be allocated between the plans based on the proportion of
Liabilities borne by each plan. Except as otherwise mutually agreed upon by the
Parties, such Liabilities will be valued as of the Shared Plan Replacement Date
using the projected unit credit method based on plan provisions as in effect at
the Shared Plan Replacement Date and applying the demographic and other
assumptions used in the most recently completed valuation of the applicable
Non-U.S. Baxter Benefit Plan (and taking into account the requirements of ASC
715 as it exists as of the Shared Plan Replacement Date); provided, however,
that all economic assumptions will be updated as of the Shared Plan Replacement
Date.

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

Schedule 4.02(a)

Continued Baxalta Participation in Baxter Non-U.S. Plans

 

  1. Switzerland (*) – Baxter and Baxalta employees will continue to participate
in the existing Baxter Swiss pension foundation until on or about January 1,
2016. On or about January 1, 2016, the existing Baxter Swiss pension foundation
will transfer to Baxalta and active Baxter employees as of such date will
transfer out of the current Swiss pension foundation into a newly established
Baxter Swiss pension foundation or a separate multi-employer foundation.

 

  2. Japan

 

  •   Assets for defined benefit pension plan will be combined until government
approval by MHLW

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

Schedule 5.01(c)(iii)

Flexible Spending Accounts

 

  •   Canada

 

  •   Spending credits will not transfer to Baxalta

 

  •   Participants have been advised that Flex credits need to be used by
June 30th and they have 90 days post June 30th to process claims through Baxter.

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

Schedule 6.01(e)

Equity Adjustment Exceptions

 

  1. Certain re-hire grants made after July 1, 2014 will be subject to the
“basket” approach described in Section 6.01(a) such that those awards (as
determined in agreement with the applicable employee) are treated in the same
manner as 2014 awards that were not new hire grants.

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

Schedule 7.16

Reverse Jurisdictions

 

  1. Austria Baxter AG Retirement Plan

  2. Austria Innovations GmbH Retirement Plan

  3. Switzerland Baxter Bioscience

  4. Switzerland Baxter AG

  5. Switzerland Baxter Healthcare