Exhibit 10.17
AMENDED AND RESTATED SEVERANCE AGREEMENT
          THIS AGREEMENT, dated December 19, 2006 (the “Effective Date”), as
amended and restated as of December 18, 2008, is made by and between Baxter
International Inc., a Delaware corporation (the “Company”), and
                     (the “Executive”).
          WHEREAS, the Company considers it essential to the best interests of
its stockholders to foster the continued employment of key management personnel;
and
          WHEREAS, the Board recognizes that, as is the case with many publicly
held corporations, the possibility of a Change in Control exists and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its stockholders;
          WHEREAS, the Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of
members of the Company’s management, including the Executive, to their assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a Change in Control; and
          NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Executive hereby agree as
follows:
     1. Defined Terms. The definitions of capitalized terms used in this
Agreement are provided in the last Section hereof.
     2. Term of Agreement. The Term of this Agreement shall commence on the
Effective Date and shall continue in effect through the second anniversary of
the Effective Date; provided, however, that commencing on the first anniversary
of the Effective Date and on each anniversary thereafter, the Term shall
automatically be extended for one additional year unless, not later than one
year before the end of the then-existing Term, the Company or the Executive
shall have given notice not to extend the Term; and further provided, however,
that if a Change in Control shall have occurred during the Term, the Term shall
expire no earlier than twenty-four (24) months beyond the date on which such
Change in Control occurred.
     3. Company’s Covenants Summarized. In order to induce the Executive to
remain in the employ of the Company and in consideration of the Executive’s
covenants set forth in Section 4 hereof, the Company agrees, under the
conditions described herein, to pay the Executive the Severance Payments and the
other

 

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payments and benefits described herein. No Severance Payments shall be payable
under this Agreement unless there shall have been (or, under the terms of the
second sentence of Section 6.1 hereof, there shall be deemed to have been) a
termination of the Executive’s employment with the Company following a Change in
Control and during the Term, all subject to the terms and conditions set forth
herein and provided that such termination of employment constitutes a
“separation from service” for purposes of Section 409A of the Code. This
Agreement shall not be construed as creating an express or implied contract of
employment and, except as otherwise agreed in writing between the Executive and
the Company, the Executive shall not have any right to be retained in the employ
of the Company.
     4. The Executive’s Covenants. The Executive agrees that, subject to the
terms and conditions of this Agreement, in the event of a Potential Change in
Control during the Term, the Executive will remain in the employ of the Company
until the earliest of (i) the last day of the Potential Change in Control
Period, (ii) the date of a Change in Control, (iii) the date of termination by
the Executive of the Executive’s employment for Good Reason or by reason of
death, Disability or Retirement, or (iv) the termination by the Company of the
Executive’s employment for any reason.
     5. Compensation Other Than Severance Payments.
          5.1 Following a Change in Control and during the Term, during any
period that the Executive fails to perform the Executive’s full-time duties with
the Company as a result of incapacity due to physical or mental illness, the
Company shall pay the Executive’s full salary to the Executive at the rate in
effect at the commencement of any such period, together with all compensation
and benefits payable to the Executive under the terms of any compensation or
benefit plan, program or arrangement maintained by the Company during such
period (other than any disability plan), until the Executive’s employment is
terminated by the Company for Disability.
          5.2 If the Executive’s employment shall be terminated for any reason
following a Change in Control and during the Term, the Company shall pay the
Executive’s full salary to the Executive through the Date of Termination at the
rate in effect immediately prior to the Date of Termination or, if higher, the
rate in effect immediately prior to the first occurrence of an event or
circumstance constituting Good Reason, together with all compensation and
benefits payable to the Executive through the Date of Termination under the
terms of the Company’s compensation and benefit plans, programs or arrangements
as in effect immediately prior to the Date of Termination or, if more favorable
to the Executive, as in effect immediately prior to the first occurrence of an
event or circumstance constituting Good Reason.

 

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          5.3 If the Executive’s employment shall be terminated for any reason
following a Change in Control and during the Term, the Company shall pay to the
Executive the Executive’s normal post-termination compensation and benefits as
such payments become due. Such post-termination compensation and benefits shall
be determined under, and paid in accordance with, the Company’s retirement,
insurance and other compensation or benefit plans, programs and arrangements as
in effect immediately prior to the Date of Termination or, if more favorable to
the Executive, as in effect immediately prior to the occurrence of the first
event or circumstance constituting Good Reason.
          5.4 Upon the occurrence of a change in the ownership or effective
control of the Company or in the ownership of a substantial portion of the
assets of the Company (in any case within the meaning of Section 409A of the
Code), notwithstanding any provision of any non-qualified defined contribution
deferred compensation plans to the contrary, in lieu of any other benefit under
such plans attributable to the period before 2009 or for a year commencing after
the date of this Agreement, the Company shall pay to the Executive a lump sum
amount, in cash, equal to the then present value of the deferred compensation
otherwise payable to the Executive pursuant to the terms of such plans. The
payments required by this Section 5.4 shall be made not later than the fifth day
following the date of such change in ownership or control of the Company or
change in asset ownership. The provisions of this Section 5.4 shall survive the
termination of this Agreement.
          5.5 For the two-year period commencing immediately following a Change
in Control, the Company agrees: (A) to continue in effect any compensation plan
in which the Executive participates immediately prior to the Change in Control
which is material to the Executive’s total compensation, including but not
limited to the Company’s equity-based long term incentive plans and annual
incentive plans, or any substitute plans adopted prior to the Change in Control,
unless an equitable arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such plan; (B) to continue the
Executive’s participation in the plans described in the foregoing paragraph (A)
(or in such substitute or alternative plan) on a basis not materially less
favorable, both in terms of the amount or timing of payment of benefits provided
and the level of the Executive’s participation relative to other participants,
as existed immediately prior to the Change in Control; and (C) to continue to
provide the Executive with benefits substantially similar to those enjoyed by
the Executive under any of the Company’s pension, savings, life insurance,
medical, health and accident, or disability plans in which the Executive was
participating immediately prior to the Change in Control (except for across the
board changes similarly affecting all senior executives of the Company and all
senior executives of any Person in control of the Company), not to take any
other action which would directly or indirectly materially reduce any of such
benefits or deprive the Executive of any material fringe benefit enjoyed by the
Executive at the time of

 

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the Change in Control, and to provide the Executive with the number of paid
vacation days to which the Executive is entitled on the basis of years of
service with the Company in accordance with the Company’s normal vacation policy
in effect at the time of the Change in Control.
     6. Severance Payments.
          6.1 Subject to Section 6.2 hereof, if the Executive’s employment is
terminated following a Change in Control and during the Term (provided that such
termination of employment constitutes a “separation from service” within the
meaning of Section 409A of the Code), other than (A) by the Company for Cause,
(B) by reason of death or Disability, or (C) by the Executive without Good
Reason, then the Company shall pay the Executive the amounts, and provide the
Executive the benefits, described in this Section 6.1 (“Severance Payments”) and
Section 6.2 hereof, in addition to any payments and benefits to which the
Executive is entitled under Section 5 hereof, provided that the Executive shall
have properly executed, within forty-seven (45) days of his Date of Termination,
and not revoked a customary release of claims in a form reasonably acceptable to
the Company. For purposes of this Agreement, the Executive’s employment shall be
deemed to have been terminated following a Change in Control by the Company
without Cause or by the Executive with Good Reason, if (i) the Executive’s
employment is terminated by the Company without Cause prior to a Change in
Control (whether or not a Change in Control ever occurs) and such termination
was at the request or direction of a Person who has entered into an agreement
with the Company the consummation of which would constitute a Change in Control,
(ii) the Executive terminates his employment for Good Reason prior to a Change
in Control (whether or not a Change in Control ever occurs) and the circumstance
or event which constitutes Good Reason occurs at the request or direction of
such Person, or (iii) the Executive’s employment is terminated by the Company
without Cause or by the Executive for Good Reason and such termination or the
circumstance or event which constitutes Good Reason is otherwise in connection
with or in anticipation of a Change in Control (whether or not a Change in
Control ever occurs). For purposes of any determination regarding the
applicability of the immediately preceding sentence, any position taken by the
Executive shall be presumed to be correct unless the Company establishes to the
Board by clear and convincing evidence that such position is not correct.
               (A) In lieu of any further salary payments to the Executive for
periods subsequent to the Date of Termination and in lieu of any severance
benefit otherwise payable to the Executive, the Company shall pay to the
Executive a lump sum severance payment, in cash, equal to two times the sum of
(i) the Executive’s base salary as in effect immediately prior to the Date of
Termination or, if higher, in effect immediately prior to the first occurrence
of an event or

 

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circumstance constituting Good Reason, and (ii) the Executive’s target annual
bonus under any annual bonus or incentive plan maintained by the Company in
respect of the fiscal year in which occurs the Date of Termination or, if
higher, the highest target annual bonus in respect of the fiscal year in which
occurs the Change in Control or the first event or circumstance constituting
Good Reason.
               (B) (I) For the twenty-four (24) month period immediately
following the Date of Termination, the Company shall arrange to provide the
Executive and his dependents life, accident and health insurance benefits
substantially similar to those provided to the Executive and his dependents
immediately prior to the Date of Termination or, if more favorable to the
Executive, those provided to the Executive and his dependents immediately prior
to the first occurrence of an event or circumstance constituting Good Reason, at
no greater after-tax cost to the Executive than the after-tax cost to the
Executive immediately prior to such date or occurrence; provided, however, that
such health and welfare benefits shall be provided, as applicable, through an
arrangement that satisfies the requirements of Section 105 or 106 of the Code
and, to the extent the payments represent a reimbursement of expenses incurred
by the Participant, shall be paid not later than the last day of the year
following the year in which the underlying expenses were incurred. Benefits
otherwise receivable by the Executive pursuant to this Section 6.1(B) shall be
eliminated if benefits of the same type are received by or made available to the
Executive during the twenty-four (24) month period following the Executive’s
termination of employment (and any such benefits received by or made available
to the Executive shall be reported to the Company by the Executive). If the
Severance Payments shall be decreased pursuant to Section 6.2 hereof, and the
Section 6.1(B) benefits which remain payable after the application of
Section 6.2 hereof are thereafter reduced pursuant to the immediately preceding
sentence, the Company shall, no later than five (5) business days following such
reduction, pay to the Executive the least of (a) the amount of the decrease made
in the Severance Payments pursuant to Section 6.2 hereof, (b) the amount of the
subsequent reduction in these Section 6.1(B) benefits, or (c) the maximum amount
which can be paid to the Executive without being, or causing any other payment
to be, nondeductible by reason of section 280G of the Code.
                    (II) In addition, if the Executive would have become
entitled to benefits under the Company’s post-retirement health care or life
insurance plans, as in effect immediately prior to the Date of Termination or,
if more favorable to the Executive, as in effect immediately prior to the first
occurrence of an event or circumstance constituting Good Reason, had the
Executive’s employment terminated at any time during the period of twenty-four
(24) months after the Date of Termination, the Company shall provide such
post-retirement health care or life insurance benefits to the Executive and the
Executive’s dependents commencing on

 

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the later of (i) the date on which such coverage would have first become
available and (ii) the date on which benefits described in subsection
(I) terminate.
                    (III) To the extent the benefits to be made available under
this subsection 6.1(B) are not medical expenses within the meaning of Treas.
Reg. § 1.409A-1(b)(9)(v)(B) and are not short-term deferrals within the meaning
of Section 409A of the Code, then during the first six months following the Date
of Termination the Executive shall pay to the Company, at the time such benefits
are provided, the fair market value of such benefits, and the Company shall
reimburse the Executive for any such payment not later than the fifth day
following the expiration of such six-month period unless the Company reasonably
determines, based on the advice of counsel, that the benefits can be provided
during such six-month period without causing the Executive to be subject to an
“additional tax” under Section 409A(a)(2) of the Code.
               (C) Notwithstanding any provision of any annual or long term
incentive plan to the contrary, the Company shall pay to the Executive a lump
sum amount, in cash, equal to the sum of (i) any unpaid incentive compensation
which has been allocated or awarded to the Executive for a completed fiscal year
or other measuring period preceding the Date of Termination under any such plan
and which, as of the Date of Termination, is contingent only upon the continued
employment of the Executive to a subsequent date, and (ii) a pro rata portion to
the Date of Termination of the aggregate value of all contingent incentive
compensation awards to the Executive for all then uncompleted periods under any
such plan, calculated as to each such award by multiplying the award that the
Executive would have earned on the last day of the performance award period,
assuming the achievement, at the target level, of the individual and corporate
performance goals established with respect to such award, by the fraction
obtained by dividing the number of full months and any fractional portion of a
month during such performance award period through the Date of Termination by
the total number of months contained in such performance award period. The
provisions of this Section 6.1(C) shall survive the termination of this
Agreement in respect of awards granted under any such annual or long-term
incentive plans before the date of such termination.
               (D) In addition to the retirement benefits to which the Executive
is entitled under each DB Pension Plan or any successor plan thereto, the
Company shall pay the Executive a lump sum amount, in cash, equal to the excess
of (i) the actuarial equivalent of the aggregate retirement pension (taking into
account any early retirement subsidies associated therewith and determined as a
straight life annuity commencing at the date (but in no event earlier than the
second anniversary of the Date of Termination) as of which the actuarial
equivalent of such annuity is greatest) which the Executive would have accrued
under the terms of all DB Pension

 

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Plans (without regard to any amendment to any DB Pension Plan made subsequent to
a Change in Control and on or prior to the Date of Termination, which amendment
adversely affects in any manner the computation of retirement benefits
thereunder), determined as if the Executive were fully vested thereunder and had
accumulated (after the Date of Termination) twenty-four (24) additional months
of age and service credit thereunder and had been credited under each DB Pension
Plan during such period with compensation equal to the Executive’s compensation
(as defined in such DB Pension Plan) during the twelve (12) months immediately
preceding Date of Termination or, if higher, during the twelve months
immediately prior to the first occurrence of an event or circumstance
constituting Good Reason, over (ii) the actuarial equivalent of the aggregate
retirement pension (taking into account any early retirement subsidies
associated therewith and determined as a straight life annuity commencing at the
date (but in no event earlier than the Date of Termination) as of which the
actuarial equivalent of such annuity is greatest) which the Executive had
accrued pursuant to the provisions of the DB Pension Plans as of the Date of
Termination. For purposes of this Section 6.1(D), “actuarial equivalent” shall
be determined using the same assumptions utilized under the Baxter International
Inc. and Subsidiaries Pension Plan immediately prior to the Date of Termination
or, if more favorable to the Executive, immediately prior to the first
occurrence of an event or circumstance constituting Good Reason. In addition to
the benefits to which the Executive is entitled under each DC Pension Plan, the
Company shall pay the Executive a lump sum amount, in cash, equal to the sum of
(i) the amount that would have been contributed thereto by the Company on the
Executive’s behalf during the two years immediately following the Date of
Termination, determined (x) as if the Executive made the maximum permissible
contributions thereto during such period, (y) as if the Executive earned
compensation during such period at a rate equal to the Executive’s compensation
(as defined in the DC Pension Plan) during the twelve (12) months immediately
preceding the Date of Termination or, if higher, during the twelve months
immediately prior to the first occurrence of an event or circumstance
constituting Good Reason, and (z) without regard to any amendment to the DC
Pension Plan made subsequent to a Change in Control and on or prior to the Date
of Termination, which amendment adversely affects in any manner the computation
of benefits thereunder, and (ii) the excess, if any, of (x) the Executive’s
account balance under the DC Pension Plan as of the Date of Termination over
(y) the portion of such account balance that is nonforfeitable under the terms
of the DC Pension Plan.
               (E) The Company shall provide the Executive with outplacement
services suitable to the Executive’s position for a period of two years or, if
earlier, until the first acceptance by the Executive of an offer of employment,
in an aggregate amount not exceeding $50,000. Subject to the foregoing, in no
event shall any payment described in this Section 6.1(E) be made after the end
of the calendar year following the calendar year in which the services were
provided.

 

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               (F) The lump-sum cash payments required pursuant to the preceding
provisions of this Section 6.1 hereof shall be made not later than the fifth day
following the Date of Termination. Notwithstanding the above, the Executive
shall not be considered to have terminated employment with the Company for
purposes of this Agreement and no payments shall be due to the Executive under
this Agreement unless the Executive would be considered to have incurred a
“separation from service” from the Company within the meaning of Section 409A of
the Code. Each amount to be paid or benefit to be provided under this Agreement
shall be construed as a separate identified payment for purposes of Section 409A
of the Code. Any payments described in this Agreement that are due within the
“short term deferral period” within the meaning of Section 409A of the Code or
that are otherwise exempt from application of Section 409A of the Code, shall
not be treated as deferred compensation unless applicable law requires
otherwise. If the Executive, at the Date of Termination, is a “specified
employee” as defined in the Baxter International Inc. and Subsidiaries Deferred
Compensation Plan, amounts that would otherwise be payable and benefits that
would otherwise be provided pursuant to this Agreement during the six-month
period immediately following the Executive’s termination of employment shall
instead be paid on the first business day after the date that is six months
following the Executive’s termination of employment (or upon the Executive’s
death, if earlier) unless the Company reasonably determines, based on the advice
of counsel, that such delayed commencement is not required to avoid an
“additional tax” under Section 409A(a)(2) of the Code. In addition, to the
extent required in order to avoid accelerated taxation and/or tax penalties
under Section 409A of the Code, in the event that the Executive’s termination of
employment occurs within fifty-five (55) days prior to the end of a calendar
year, amounts that would otherwise be payable and benefits that would otherwise
be provided pursuant to this Agreement on or before December 31 of the year in
which the termination of employment occurs shall, subject to the previous
sentence of this section, instead be paid on the first business day following
January 1 of the first calendar year beginning after the Executive’s termination
of employment.

 

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          6.2 The following special payment provisions shall apply:
               (A) Whether or not the Executive becomes entitled to the
Severance Payments, if any payment or benefit received or to be received by the
Executive in connection with a Change in Control or the termination of the
Executive’s employment (whether pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with the Company, any Person whose actions
result in a Change in Control or any Person affiliated with the Company or such
Person) (all such payments and benefits, including the Severance Payments, being
hereinafter called “Total Payments”) will be subject (in whole or part) to the
Excise Tax, then, subject to the provisions of subsection (B) of this
Section 6.2, the Company shall pay to the Executive an additional amount (the
“Gross-Up Payment”) such that the net amount retained by the Executive, after
deduction of any Excise Tax on the Total Payments and any federal, state and
local income and employment taxes and Excise Tax upon the Gross-Up Payment,
shall be equal to the Total Payments. For purposes of determining the amount of
the Gross-Up Payment, the Executive shall be deemed to pay federal income taxes
at the highest marginal rate of federal income taxation in the calendar year in
which the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of the Executive’s
residence on the Date of Termination (or if there is no Date of Termination,
then the date on which the Gross-up Payment is calculated for purposes of this
Section 6.2), net of the maximum reduction in federal income tax which could be
obtained from deduction of such state and local taxes.
               (B) In the event that the amount of the Total Payments does not
exceed 110% of the largest amount that would result in no portion of the Total
Payments being subject to the Excise Tax (the “Safe Harbor”), then subsection
(A) of this Section 6.2 shall not apply and the noncash Severance Payments shall
first be reduced (if necessary, to zero), and the cash Severance Benefits shall
thereafter be reduced (if necessary, to zero) so that the amount of the Total
Payments is equal to the Safe Harbor; provided, however, that, to the extent it
would not result in the imposition of an additional tax under Section 409A of
the Code, the Executive may elect to have the cash Severance Payments reduced
(or eliminated) prior to any reduction of the noncash Severance Payments.
               (C) For purposes of determining whether any of the Total Payments
will be subject to the Excise Tax and the amount of such Excise Tax, (i) all of
the Total Payments shall be treated as “parachute payments” within the meaning
of section 280G(b)(2) of the Code, unless in the opinion of tax counsel (“Tax
Counsel”) reasonably acceptable to the Executive and selected by the accounting
firm which was, immediately prior to the Change in Control, the Company’s
independent auditor (the “Auditor”), such other payments or benefits (in whole
or in part)

 

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do not constitute parachute payments, including by reason of section
280G(b)(4)(A) of the Code, (ii) all “excess parachute payments” within the
meaning of section 280G(b)(l) of the Code shall be treated as subject to the
Excise Tax unless, in the opinion of Tax Counsel, such excess parachute payments
(in whole or in part) represent reasonable compensation for services actually
rendered, within the meaning of section 280G(b)(4)(B) of the Code, in excess of
the Base Amount allocable to such reasonable compensation, or are otherwise not
subject to the Excise Tax, and (iii) the value of any noncash benefits or any
deferred payment or benefit shall be determined by the Auditor in accordance
with the principles of sections 280G(d)(3) and (4) of the Code. Prior to the
payment date set forth in Section 6.3 hereof, the Company shall provide the
Executive with its calculation of the amounts referred to in this Section 6.2(C)
and such supporting materials as are reasonably necessary for the Executive to
evaluate the Company’s calculations. If the Executive disputes the Company’s
calculations (in whole or in part), the reasonable opinion of Tax Counsel with
respect to the matter in dispute shall prevail.
               (D) (I) In the event that (1) amounts are paid to the Executive
pursuant to Section 6.2(A) hereof, (2) there is a Final Determination that the
Excise Tax is less than the amount taken into account hereunder in calculating
the Gross-Up Payment, and (3) after giving effect to such Final Determination,
the Severance Payments are to be reduced pursuant to Section 6.2(B) hereof, the
Executive shall repay to the Company, within five (5) business days following
the date of the Final Determination, the Gross-Up Payment, the amount of the
reduction in the Severance Payments, plus interest on the amount of such
repayments at 120% of the rate provided in section 1274(b)(2)(B) of the Code.
                    (II) In the event that (1) amounts are paid to the Executive
pursuant to Section 6.2(A) hereof, (2) there is a Final Determination that the
Excise Tax is less than the amount taken into account hereunder in calculating
the Gross-Up Payment, and (3) after giving effect to such Final Determination,
the Severance Payments are not to be reduced pursuant to Section 6.2(B) hereof,
the Executive shall repay to the Company, within five (5) business days
following the date of the Final Determination, the portion of the Gross-Up
Payment attributable to such reduction (plus that portion of the Gross-Up
Payment attributable to the Excise Tax and federal, state and local income and
employment taxes imposed on the Gross-Up Payment being repaid by the Executive),
to the extent that such repayment results in a reduction in the Excise Tax and a
dollar-for-dollar reduction in the Executive’s taxable income and wages for
purposes of federal, state and local income and employment taxes, plus interest
on the amount of such repayment at 120% of the rate provided in section
1274(b)(2)(B) of the Code.

 

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                    (III) Except as otherwise provided in clause (IV) below, in
the event there is a Final Determination that the Excise Tax exceeds the amount
taken into account hereunder in determining the Gross-Up Payment (including by
reason of any payment the existence or amount of which cannot be determined at
the time of the Gross-Up Payment), the Company shall pay to the Executive,
within five (5) business days following the date of the Final Determination, the
sum of (1) a Gross-Up Payment in respect of such excess and in respect of any
portion of the Excise Tax with respect to which the Company had not previously
made a Gross-Up Payment, including a Gross-Up Payment in respect of any Excise
Tax attributable to amounts payable under clauses (2) and (3) of this paragraph
(III) (plus any interest, penalties or additions payable by the Executive with
respect to such excess and such portion), (2) if Severance Payments were reduced
pursuant to Section 6.2(B) hereof but after giving effect to such Final
Determination, the Severance Payments should not have been reduced pursuant to
Section 6.2(B), the amount by which the Severance Payments were reduced pursuant
to Section 6.2(B) hereof, and (3) interest on such amounts at 120% of the rate
provided in section 1274(b)(2)(B) of the Code.
                    (IV) In the event that (1) Severance Payments were reduced
pursuant to Section 6.2(B) hereof and (2) the aggregate value of Total Payments
which are considered “parachute payments” within the meaning of section
280G(b)(2) of the Code is subsequently redetermined in a Final Determination,
but such redetermined value still does not exceed 110% of the Safe Harbor, then,
within five (5) business days following such Final Determination, (x) the
Company shall pay to the Executive the amount (if any) by which the reduced
Severance Payments (after taking the Final Determination into account) exceeds
the amount of the reduced Severance Payments actually paid to the Executive,
plus interest on the amount of such repayment at 120% of the rate provided in
section 1274(b)(2)(B) of the Code, or (y) the Executive shall pay to the Company
the amount (if any) by which the reduced Severance Payments actually paid to the
Executive exceeds the amount of the reduced Severance Payments (after taking the
Final Determination into account), plus interest on the amount of such repayment
at 120% of the rate provided in section 1274(b)(2)(B) of the Code.
          6.3 The payments provided in subsections (A) (C) and (D) of
Section 6.1 hereof and in Section 6.2 hereof shall be made not later than the
fifth day following the Date of Termination (or if there is no Date of
Termination, then the date on which the Gross-Up Payment is calculated for
purposes of Section 6.2 hereof), but in any event not later than the end of the
taxable year following the year in which the Excise Tax is incurred; provided,
however, that if the amounts of such payments, and the limitation on such
payments set forth in Section 6.2 hereof, cannot be finally determined on or
before such day, the Company shall pay to the Executive on such day an estimate,
as determined in good faith by the Executive or, in the case

 

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of payments under Section 6.2 hereof, in accordance with Section 6.2 hereof, of
the minimum amount of such payments to which the Executive is clearly entitled
and shall pay the remainder of such payments (together with interest on the
unpaid remainder (or on all such payments to the extent the Company fails to
make such payments when due) at 120% of the rate provided in section
1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but
in no event later than the thirtieth (30th) day after the Date of Termination.
In the event that the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall be paid by the
Executive to the Company on the fifth (5th) business day after demand by the
Company (together with interest at 120% of the rate provided in section
1274(b)(2)(B) of the Code). At the time that payments are made under this
Agreement, the Company shall provide the Executive with a written statement
setting forth the manner in which such payments were calculated and the basis
for such calculations including, without limitation, any opinions or other
advice the Company has received from Tax Counsel, the Auditor or other advisors
or consultants (and any such opinions or advice which are in writing shall be
attached to the statement). If the Executive at the time of such separation from
service is a “specified employee” as defined in the Baxter International Inc.
and Subsidiaries Deferred Compensation Plan, no payments shall be made to the
Executive prior to the earlier of (a) the expiration of the six (6) month period
measured from the date of the Executive’s “separation from service” (as such
term is defined in Section 409A of the Code), or (b) the date of the Executive’s
death unless the Company reasonably determines, based on the advice of counsel,
that such delayed commencement is not required to avoid an “additional tax”
under Section 409A(a)(2) of the Code.
          6.4 The Company also shall pay to the Executive all legal fees and
expenses incurred by the Executive in disputing any issue hereunder relating to
the termination of the Executive’s employment (provided the Executive shall
prevail in such dispute), in seeking to obtain or enforce any benefit or right
provided by this Agreement (provided the Executive shall obtain or successfully
enforce such benefit or right) or in connection with any tax audit or proceeding
to the extent attributable to the application of Section 409A of the Code or
Section 4999 of the Code to any payment or benefit provided hereunder. Such
payments shall be made within five (5) business days after delivery of the
Executive’s written requests for payment accompanied with such evidence of fees
and expenses incurred as the Company reasonably may require; provided that no
such payment shall be made in respect of fees or expenses incurred by the
Executive after the later of the tenth anniversary of the Date of Termination or
the Executive’s death, and provided further, that, upon the Executive’s
separation from service with the Company, in no event shall any additional such
payments be made prior to the date that is six months after the date of the
Executive’s separation from service unless the Company reasonably determines,
based on the advice of counsel, that such delay is not required to avoid an
“additional tax” under Section 409A(a)(2) of the Code.

 

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     7. Termination Procedures.
          7.1 Notice of Termination. After a Change in Control and during the
Term, any purported termination of the Executive’s employment (other than by
reason of death) shall be communicated by written Notice of Termination from one
party hereto to the other party hereto in accordance with Section 11 hereof. For
purposes of this Agreement, a “Notice of Termination” shall mean a notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive’s employment under the
provision so indicated. Further, a Notice of Termination for Cause is required
to include a copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board which was called and held for the purpose of considering
such termination (after reasonable notice to the Executive and an opportunity
for the Executive, together with the Executive’s counsel, to be heard before the
Board) finding that, in the good faith opinion of the Board, the Executive was
guilty of conduct set forth in clause (i) or (ii) of the definition of Cause
herein, and specifying the particulars thereof in detail.
          7.2 Date of Termination. “Date of Termination,” with respect to any
purported termination of the Executive’s employment after a Change in Control
and during the Term, shall mean (i) if the Executive’s employment is terminated
for Disability, thirty (30) days after Notice of Termination is given (provided
that the Executive shall not have returned to the full-time performance of the
Executive’s duties during such thirty (30) day period), and (ii) if the
Executive’s employment is terminated for any other reason, the date specified in
the Notice of Termination (which, in the case of a termination by the Company,
shall not be less than thirty (30) days (except in the case of a termination for
Cause) and, in the case of a termination by the Executive, shall not be less
than fifteen (15) days nor more than sixty (60) days, respectively, from the
date such Notice of Termination is given); provided that Executive shall not be
considered to have terminated employment with the Company for purposes of this
Agreement and no payments shall be due to the Executive under this Agreement
unless the Executive would be considered to have incurred a “separation from
service” from the Company within the meaning of Section 409A of the Code.
          7.3 Dispute Concerning Termination. If within fifteen (15) days after
any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be extended
until the earlier of (i) the date on which the Term ends or (ii) the date on
which the dispute is finally resolved, either by

 

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mutual written agreement of the parties or by a final judgment, order or decree
of an arbitrator or a court of competent jurisdiction (which is not appealable
or with respect to which the time for appeal therefrom has expired and no appeal
has been perfected); provided, however, that the Date of Termination shall be
extended by a notice of dispute given by the Executive only if such notice is
given in good faith and the Executive pursues the resolution of such dispute
with reasonable diligence; and further provided, however, that the provisions of
this Section 7.3 shall apply only to the extent that, pursuant to Treas. Reg. §
1.409A-3(g), they will not cause an additional tax under Section 409A of the
Code.
     8. No Mitigation. The Company agrees that, if the Executive’s employment
with the Company terminates during the Term, the Executive is not required to
seek other employment or to attempt in any way to reduce any amounts payable to
the Executive by the Company pursuant to Section 6 hereof or Section 7.4 hereof.
Further, except as specifically provided in Section 6.1(B) hereof, no payment or
benefit provided for in this Agreement shall be reduced by any compensation
earned by the Executive as the result of employment by another employer, by
retirement benefits, by offset against any amount claimed to be owed by the
Executive to the Company, or otherwise.
     9. Certain Restrictive Covenants.
          9.1 Noncompetition. The Executive understands that any entrusting of
Confidential Information to him by the Company is done in reliance on a
confidential relationship arising out of his employment with the Company. The
Executive understands that Confidential Information may include, for example,
Trade Secrets, inventions, know-how and products, customer, patient, supplier
and competitor information, sales, pricing, cost, and financial data, research,
development, marketing and sales programs and strategies, manufacturing,
marketing and service techniques, processes and practices, and regulatory
strategies. The Executive understands that Confidential Information also
includes all information received by the Company or the Subsidiaries under an
obligation of confidentiality to a third party. The Executive further
understands that Confidential Information that the Executive may acquire or to
which the Executive may have access, especially with regard to research and
development projects and findings, formulae, designs, formulation, processes,
the identity of suppliers, customers and patients, methods of manufacture, and
cost and pricing data is of great value to the Company. In consequence of such
entrusting and such consideration, the Executive shall not, directly or
indirectly, for a period of two years after the Date of Termination: (i) render
services to any Competing Organization in connection with any Competing Product
within such geographic limits as the Company and such Competing Organization
are, or would be, in actual competition when such rendering of services might
potentially involve the disclosure or use of confidential information

 

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or trade secrets; or (ii) provide advice as to investment in a Competitive
Business (including, without limitation, advice with respect to the purchase,
sale, or operation of such business, or advice with respect to financing or
other economic structuring of such business). The Executive understands that
services described in the preceding sentence, including without limitation those
rendered to such Competing Organization in an executive, scientific,
administrative, or consulting capacity in connection with Competing Products are
in support of actual competition in various geographic areas and thus fall
within the prohibition of this Agreement regardless of where such services
physically are rendered.
          9.2 Solicitation of Customers, Suppliers and Employees. While
Executive is employed by the Company, and for a period of twenty-four
(24) months after the Date of Termination for any reason:
               (A) The Executive shall not solicit or attempt to solicit any
party who is then or, during the 12-month period prior to such solicitation or
attempt by the Executive was (or was solicited to become), a customer or
supplier of the Company or Affiliate, provided that the restriction in this
Section 9.2 shall not apply to any activity on behalf of a business that is not
a Competing Organization.
               (B) The Executive shall not solicit, entice, persuade or induce
any individual who is employed by the Company or the Subsidiaries (or was so
employed within 90 days prior to the Executive’s action) to terminate or refrain
from renewing or extending such employment or to become employed by or enter
into contractual relations with any other individual or entity other than the
Company or the Subsidiaries, and the Executive shall not approach any such
employee for any such purpose or authorize or knowingly cooperate with the
taking of any such actions by any other individual or entity.
          9.3 Nondisparagement. The Executive agrees that, while he is employed
by the Company, and after his Date of Termination, he shall not make any false,
defamatory or disparaging statements about the Company, the Subsidiaries, or the
officers or directors of the Company or the Subsidiaries that are reasonably
likely to cause material damage to the Company, the Subsidiaries, or the
officers or directors of the Company or the Subsidiaries. While the Executive is
employed by the Company, and after his Date of Termination, the Company agrees,
on behalf of itself and the Subsidiaries, that neither the officers nor the
directors of the Company or the Subsidiaries shall make any false, defamatory or
disparaging statements about the Executive that are reasonably likely to cause
material damage to the Executive. Notwithstanding the foregoing, nothing in this
paragraph will prevent either the Company or any Executive from (i) responding
to incorrect, disparaging or derogatory public statement by the other to the
extent necessary to correct or refute such public statement or (ii) making any
truthful statement to the extent (x)

 

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necessary in connection with any litigation, arbitration or mediation involving
this Agreement or (y) required by law, by any court order or by any arbitrator
or mediator in a legal proceeding.
     10. Successors; Binding Agreement.
          10.1 In addition to any obligations imposed by law upon any successor
to the Company, the Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place.
          10.2 This Agreement shall inure to the benefit of and be enforceable
by the Executive’s personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive shall
die while any amount would still be payable to the Executive hereunder (other
than amounts which, by their terms, terminate upon the death of the Executive)
if the Executive had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
the executors, personal representatives or administrators of the Executive’s
estate.
     11. Notices. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed, if to the
Executive, to the address inserted below the Executive’s signature on the final
page hereof and, if to the Company, to the address set forth below, or to such
other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon actual receipt:
To the Company:
Baxter International Inc.
One Baxter Parkway
Deerfield, Illinois 60015
Attention: General Counsel
     12. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other

 

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party hereto of, or of any lack of compliance with, any condition or provision
of this Agreement to be performed by such other party shall be deemed a waiver
of similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. This Agreement supersedes any other agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof which have been made by either party; provided, however,
that this Agreement shall supersede any agreement setting forth the terms and
conditions of the Executive’s employment with the Company only in the event that
the Executive’s employment with the Company is terminated on or following a
Change in Control, by the Company other than for Cause or by the Executive for
Good Reason. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Illinois. All references
to sections of the Exchange Act or the Code shall be deemed also to refer to any
successor provisions to such sections. Any payments provided for hereunder shall
be paid net of any applicable withholding required under federal, state or local
law and any additional withholding to which the Executive has agreed. The
obligations of the Company and the Executive under this Agreement which by their
nature may require either partial or total performance after the expiration of
the Term (including, without limitation, those under Sections 6, 7 and 9 hereof)
shall survive such expiration. To the extent applicable, it is intended that the
Agreement comply with the provisions of Section 409A of the Code. The Agreement
will be administered and interpreted in a manner consistent with this intent,
and any provision that would cause the Agreement to fail to satisfy Section 409A
of the Code will have no force and effect until amended to comply therewith
(which amendment may be retroactive to the extent permitted by Section 409A of
the Code).
     13. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
     14. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
     15. Settlement of Disputes; Arbitration.
          15.1 All claims by the Executive for benefits under this Agreement
shall be directed to and determined by the Board and shall be in writing. Any
denial by the Board of a claim for benefits under this Agreement shall be
delivered to the Executive in writing and shall set forth the specific reasons
for the denial and the specific provisions of this Agreement relied upon. The
Board shall afford a reasonable opportunity to the Executive for a review of the
decision denying a claim and shall further allow the Executive to appeal to the
Board a decision of the Board

 

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within sixty (60) days after notification by the Board that the Executive’s
claim has been denied. Notwithstanding the above, in the event of any dispute,
any decision by the Board hereunder shall be subject to a de novo review by the
arbitrator in accordance with Section 15.2 hereof.
          15.2 Any further dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in Chicago,
Illinois in accordance with the rules of the American Arbitration Association
then in effect. Judgment may be entered on the arbitrator’s award in any court
having jurisdiction. Notwithstanding any provision of this Agreement to the
contrary, the Executive shall be entitled to seek specific performance of the
Executive’s right to be paid until the Date of Termination during the pendency
of any dispute or controversy arising under or in connection with this
Agreement.
          15.3 The Executive acknowledges that the Company would be irreparably
injured by a violation of Section 9 hereof, and he agrees that the Company,
notwithstanding the foregoing provisions of this Section 15 and in addition to
any other remedies available to it for such breach or threatened breach, shall
be entitled to a preliminary injunction, temporary restraining order, or other
equivalent relief, restraining the Executive from any actual or threatened
breach of Section 9. If a bond is required to be posted in order for the Company
to secure an injunction or other equitable remedy, the parties agree that said
bond need not be more than a nominal sum.
     16. Definitions. For purposes of this Agreement, the following terms shall
have the meanings indicated below:
               (A) “Affiliate” shall have the meaning set forth in Rule 12b-2
promulgated under Section 12 of the Exchange Act.
               (B) “Auditor” shall have the meaning set forth in Section 6.2
hereof.
               (C) “Base Amount” shall have the meaning set forth in section
280G(b)(3) of the Code.
               (D) “Beneficial Owner” shall have the meaning set forth in
Rule 13d-3 under the Exchange Act.
               (E) “Board” shall mean the Board of Directors of the Company.

 

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               (F) “Cause” for termination by the Company of the Executive’s
employment shall mean (i) the willful and continued failure by the Executive to
substantially perform the Executive’s duties with the Company (other than any
such failure resulting from the Executive’s incapacity due to physical or mental
illness or any such actual or anticipated failure after the issuance of a Notice
of Termination for Good Reason by the Executive pursuant to Section 7.1 hereof)
that has not been cured within 30 days after a written demand for substantial
performance is delivered to the Executive by the Board, which demand
specifically identifies the manner in which the Board believes that the
Executive has not substantially performed the Executive’s duties or (ii) the
willful engaging by the Executive in conduct which is demonstrably and
materially injurious to the Company or its subsidiaries, monetarily or
otherwise. For purposes of clauses (i) and (ii) of this definition, (x) no act,
or failure to act, on the Executive’s part shall be deemed “willful” unless
done, or omitted to be done, by the Executive not in good faith and without
reasonable belief that the Executive’s act, or failure to act, was in the best
interest of the Company and (y) in the event of a dispute concerning the
application of this provision, no claim by the Company that Cause exists shall
be given effect unless the Company establishes to the Board by clear and
convincing evidence that Cause exists.
               (G) A “Change in Control” shall be deemed to have occurred if the
event set forth in any one of the following paragraphs shall have occurred:
               (I) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company (not including in the securities
beneficially owned by such Person any securities acquired directly from the
Company or its Affiliates) representing 30% or more of the combined voting power
of the Company’s then outstanding securities, excluding any Person who becomes
such a Beneficial Owner in connection with a merger or consolidation of the
Company or any direct or indirect subsidiary of the Company with any other
corporation immediately following which the individuals who comprise the Board
immediately prior thereto constitute at least a majority of the board of
directors of (a) any parent of the Company or the entity surviving such merger
or consolidation (b) if there is no such parent, of the Company or such
surviving entity;
               (II) the following individuals cease for any reason to constitute
a majority of the number of directors then serving: individuals who, on the date
hereof, constitute the Board and any new director (other than a director whose
initial assumption of office is in connection with an actual or threatened
election contest, including but not limited to a consent solicitation, relating
to the election of directors of the

 

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Company) whose appointment or election by the Board or nomination for election
by the Company’s stockholders was approved or recommended by a vote of at least
two-thirds (2/3) of the directors then still in office who either were directors
on the date hereof or whose appointment, election or nomination for election was
previously so approved or recommended;
               (III) there is consummated a merger or consolidation of the
Company or any direct or indirect subsidiary of the Company with any other
corporation or other entity, other than a merger or consolidation immediately
following which the individuals who comprise the Board immediately prior thereto
constitute at least a majority of the board of directors of (a) any parent of
the Company or the entity surviving such merger or consolidation or (b) if there
is no such parent, of the Company or such surviving entity; or
               (IV) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or there is consummated an agreement
for the sale or disposition by the Company of all or substantially all of the
Company’s assets, other than a sale or disposition by the Company of all or
substantially all of the Company’s assets immediately following which the
individuals who comprise the Board immediately prior thereto constitute at least
a majority of the board of directors of (a) any parent of the Company or of the
entity to which such assets are sold or disposed or (b) if there is no such
parent, of the Company or such entity.
Notwithstanding the foregoing, a “Change in Control” shall not be deemed to have
occurred by virtue of the consummation of any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity which owns all or substantially all of the assets of the Company
immediately following such transaction or series of transactions.
               (H) “Code” shall mean the Internal Revenue Code of 1986, as
amended from time to time.
               (I) “Company” shall mean Baxter International Inc. and, except in
determining under Section 16(G) hereof whether or not any Change in Control of
the Company has occurred, shall include any successor to its business and/or
assets which assumes this Agreement by operation of law, or otherwise.

 

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               (J) “Competing Products” shall mean products, processes, or
services of any person or organization other than the Company, in existence or
under development, which are substantially the same, may be substituted for, or
applied to substantially the same end use as the products, processes or services
with which the Executive works during the time of his employment with the
Company or about which the Executive acquires Confidential Information through
his work with the Company.
               (K) “Competing Organization” shall mean persons or organizations
engaged in, or about to become engaged in, research or development, production,
distribution, marketing, providing or selling of a Competing Product.
               (L) “Competitive Business” means any business in which the
Company or any of the Subsidiaries was engaged during the 12-month period prior
to the Executive’s Date of Termination, any business if the Company or any
Subsidiary has devoted material resources to entering into such business during
such 12-month period prior to the Date of Termination, and any business to the
extent that it is engaged in the investing in or acquisition of all or a portion
of the assets or stock of the Company or the Subsidiaries.
               (M) “Confidential Information” means information relating to the
present or planned business of the Company or the Subsidiaries which has not
been released publicly by authorized representatives of the Company or the
Subsidiaries.
               (N) “DB Pension Plan” shall mean any tax-qualified, supplemental
or excess defined benefit pension plan maintained by the Company and any other
defined benefit plan or agreement entered into between the Executive and the
Company which is designed to provide the Executive with supplemental retirement
benefits.
               (O) “DC Pension Plan” shall mean any tax-qualified, supplemental
or excess defined contribution plan maintained by the Company and any other
defined contribution plan or agreement entered into between the Executive and
the Company which is designed to provide the Executive with supplemental
retirement benefits.
               (P) “Date of Termination” shall have the meaning set forth in
Section 7.2 hereof.
               (Q) “Disability” shall be deemed the reason for the termination
by the Company of the Executive’s employment, if, as a result of the Executive’s
incapacity due to physical or mental illness, the Executive shall have

 

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been absent from the full-time performance of the Executive’s duties with the
Company for a period of six (6) consecutive months, the Company shall have given
the Executive a Notice of Termination for Disability, and, within thirty
(30) days after such Notice of Termination is given, the Executive shall not
have returned to the full-time performance of the Executive’s duties.
               (R) “Exchange Act” shall mean the Securities Exchange Act of
1934, as amended from time to time.
               (S) “Excise Tax” shall mean any excise tax imposed under section
4999 of the Code.
               (T) “Executive” shall mean the individual named in the first
paragraph of this Agreement.
               (U) “Good Reason” for termination by the Executive of the
Executive’s employment shall mean the occurrence (without the Executive’s
express written consent which specifically references this Agreement) after any
Change in Control, or prior to a Change in Control under the circumstances
described in clauses (ii) and (iii) of the second sentence of Section 6.1 hereof
(treating all references in paragraphs (I) through (V) below to a “Change in
Control” as references to a “Potential Change in Control”), of any one of the
following acts by the Company, or failures by the Company to act, unless such
act or failure to act is corrected prior to the Date of Termination specified in
the Notice of Termination given in respect thereof:
                    (I) the assignment to the Executive of any duties
inconsistent with the Executive’s status as a senior executive officer of the
Company or a substantial adverse alteration in the nature or status of the
Executive’s responsibilities from those in effect immediately prior to the
Change in Control;
                    (II) a material reduction by the Company in the Executive’s
annual base salary as in effect on the date hereof or as the same may be
increased from time to time;
                    (III) a material change in the location of the Executive’s
principal place of employment, including for this purpose any relocation more
than fifty (50) miles from the Executive’s principal place of employment
immediately prior to the Change in Control or the Company’s requiring the
Executive to be based anywhere other than such principal place of employment (or
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the Company’s business to an extent substantially consistent with the
Executive’s present business travel obligations; or
                    (IV) the failure by the Company to pay to the Executive any
portion of the Executive’s current compensation, or to pay to the Executive any
portion of an installment of deferred compensation under any deferred
compensation program of the Company, within seven (7) days of the date such
compensation is due;
                    (V) any other action or inaction that constitutes a material
breach of this Agreement, including without limitation Sections 5.5 and 10.1.
The Executive’s right to terminate the Executive’s employment for Good Reason
shall not be affected by the Executive’s incapacity due to physical or mental
illness. The Executive’s continued employment shall not constitute consent to,
or a waiver of rights with respect to, any act or failure to act constituting
Good Reason hereunder. For purposes of any determination regarding the existence
of Good Reason, any claim by the Executive that Good Reason exists shall be
presumed to be correct unless the Company establishes to the Board by clear and
convincing evidence that Good Reason does not exist.
               (V) “Gross-Up Payment” shall have the meaning set forth in
Section 6.2 hereof.
               (W) “Items” include documents, reports, drawings, photographs,
designs, specifications, formulae, plans, samples, research or development
information, prototypes, tools, equipment, proposals, marketing or sales plans,
customer information, customer lists, patient lists, patient information,
regulatory files, financial data, costs, pricing information, supplier
information, written, printed or graphic matter, or other information and
materials that concern the Company’s or the Subsidiaries’ business that come
into his possession or about which the Executive has knowledge by reason of his
employment.
               (X) “Notice of Termination” shall have the meaning set forth in
Section 7.1 hereof.
               (Y) “Person” shall have the meaning given in Section 3(a)(9) of
the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof,
except that such term shall not include (i) the Company or any of its
subsidiaries, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its Affiliates, (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities, or (iv) a corporation

 

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owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company.
               (Z) “Potential Change in Control Period” shall mean the period
commencing on the occurrence of a Potential Change in Control and ending upon
the occurrence of a Change in Control or, if earlier (I) with respect to a
Potential Change in Control occurring pursuant to Section 16(AA)(I) hereof,
immediately upon the abandonment or termination of the applicable agreement,
(ii) with respect to a Potential Change in Control occurring pursuant to
Section 16(AA)(II) hereof, immediately upon a public announcement by the
applicable party that such party has abandoned its intention to take or consider
taking actions which if consummated would result in a Change in Control or
(iii) with respect to a Potential Change in Control occurring pursuant to
Section 16(AA)(III) or (IV) hereof, upon the eighteen month anniversary of the
occurrence of such Potential Change in Control (or such earlier date as may be
determined by the Board).
               (AA) “Potential Change in Control” shall be deemed to have
occurred if the event set forth in any one of the following paragraphs shall
have occurred:
               (I) the Company enters into an agreement, the consummation of
which would result in the occurrence of a Change in Control;
               (II) the Company or any Person publicly announces an intention to
take or to consider taking actions which, if consummated, would constitute a
Change in Control;
               (III) any Person becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing 15% or more of either the
then outstanding shares of common stock of the Company or the combined voting
power of the Company’s then outstanding securities (not including in the
securities beneficially owned by such Person any securities acquired directly
from the Company or its affiliates); or
               (IV) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control has occurred.
               (BB) “Retirement” shall be deemed the reason for the termination
by the Executive of the Executive’s employment if such employment is terminated
in accordance with the Company’s retirement policy, including early retirement,
generally applicable to its salaried employees.

 

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               (CC) “Severance Payments” shall have the meaning set forth in
Section 6.1 hereof.
               (DD) “Subsidiary,” for purposes of Section 9 hereof, shall mean
any corporation, partnership, joint venture or other entity during any period in
which at least fifty percent in such entity is owned, directly or indirectly, by
the Company.
               (EE) “Tax Counsel” shall have the meaning set forth in
Section 6.2 hereof.
               (FF) “Term” shall mean the period of time described in Section 2
hereof (including any extension, continuation or termination described therein).
               (GG) “Total Payments” shall mean those payments so described in
Section 6.2 hereof.
               (HH) “Trade Secrets” include all information encompassed in all
Items, and in all manufacturing processes, methods of production, concepts or
ideas, to the extent that such information has not been released publicly by
duly authorized representatives of the Company or the Subsidiaries.

 

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          IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.

                  BAXTER INTERNATIONAL INC.    
 
           
 
  By:        
 
  Name:  
 
Robert L. Parkinson, Jr.    
 
  Title:   Chairman and Chief Executive Officer    
 
           
 
                          EXECUTIVE    
 
                Address:    
 
                     
 
           
 
                     
 
           
 
                          (Please print carefully)