<PAGE>

                                                                   EXHIBIT 10.17


                                OPTION AGREEMENT

                                  Dated As Of

                                 March 31, 2000



                                  RELATING TO

                           JAPANESE EDWARDS BUSINESS
<PAGE>

                               Table of Contents
                               -----------------
                                  (continued)

                                                                            Page
                                                                            ----

ARTICLE I DEFINITIONS......................................................   1
1.1.   Definitions.........................................................   1
       --------------------------------------------------------------------

ARTICLE II GRANT OF OPTION.................................................   6
2.1.   Grant of Option.....................................................   6
       --------------------------------------------------------------------
2.2.   Exercise Period.....................................................   6
       --------------------------------------------------------------------
2.3.   Manner of Exercise..................................................   6
       --------------------------------------------------------------------
2.4.   Transfer of Purchased Business......................................   6
       --------------------------------------------------------------------

ARTICLE III DETERMINATION OF STRIKE PRICE..................................   6
3.1.   Strike Price........................................................   6
       --------------------------------------------------------------------
3.2.   Opening Net Worth...................................................   6
       --------------------------------------------------------------------
3.3.   Closing Date Net Worth .............................................   7
       --------------------------------------------------------------------
3.4.   Access to Information...............................................   8
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ARTICLE IV PURCHASE AND SALE...............................................   8
4.1.   Purchased Business..................................................   8
       --------------------------------------------------------------------
4.2.   Excluded Assets.....................................................  10
       --------------------------------------------------------------------
4.3.   Assumed Liabilities.................................................  11
       --------------------------------------------------------------------
4.4.   Excluded Liabilities................................................  12
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ARTICLE V CLOSING; POST-CLOSING ADJUSTMENT.................................  12
5.1.   Conditions to Closing...............................................  12
       --------------------------------------------------------------------
5.2.   Closing Date........................................................  13
       --------------------------------------------------------------------
5.3.   Edwards Optionholder's  Deliveries at Closing.......................  13
       --------------------------------------------------------------------
5.4.   Baxter Japan's Deliveries at Closing................................  13
       --------------------------------------------------------------------
5.5.   Post Closing Adjustment.............................................  13
       --------------------------------------------------------------------
5.6.   Non-Assignable Contracts............................................  13
       --------------------------------------------------------------------
5.7.   Further Assurances..................................................  14
       --------------------------------------------------------------------
5.8.   Novation of Assumed Liabilities.....................................  15
       --------------------------------------------------------------------

ARTICLE VI REPRESENTATIONS AND WARRANTIES..................................  16
6.1.   Organization, Good Standing and Authority of Baxter Japan...........  16
       --------------------------------------------------------------------
6.2.   Organization, Good Standing and Authority of Edwards Optionholder...  16
       --------------------------------------------------------------------
6.3.   No Other Representations or Warranties..............................  16
       --------------------------------------------------------------------

ARTICLE VII PRE-CLOSING COVENANTS..........................................  17
7.1.   Operation of Japanese Edwards Business..............................  17
       --------------------------------------------------------------------
7.2.   Consents of Third Parties; Governmental Approvals...................  18
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7.3.   Services............................................................  18
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7.4.   Financial Statements................................................  19
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<PAGE>

                               Table of Contents
                               -----------------
                                  (continued)

                                                                            Page
                                                                            ----

ARTICLE VIII POST-CLOSING COVENANTS........................................  19
8.1.   Collection of Accounts Receivable...................................  19
       --------------------------------------------------------------------
8.2.   Agreements Relating to Edwards Optionholder and Baxter Japan........  20
       --------------------------------------------------------------------
8.3.   Informal, Nondocumented Real Estate Leases..........................  20
       --------------------------------------------------------------------

ARTICLE IX [INTENTIONALLY OMITTED].........................................  21

ARTICLE X EMPLOYEES AND EMPLOYEE BENEFIT MATTERS...........................  21
10.1.  Employment of Edwards Employees.....................................  21
       --------------------------------------------------------------------
10.2.  Terminations/Layoff/Severance.......................................  21
       --------------------------------------------------------------------
10.3.  Employee Benefit Plans..............................................  21
       --------------------------------------------------------------------
10.4.  Transfer of Account Balances and Accrued Benefits...................  22
       --------------------------------------------------------------------
10.5.  Welfare Benefits....................................................  22
       --------------------------------------------------------------------
10.6.  Stock Purchase Plans................................................  23
       --------------------------------------------------------------------
10.7.  Workers' Compensation...............................................  23
       --------------------------------------------------------------------
10.8.  Vacation Pay Policy.................................................  23
       --------------------------------------------------------------------
10.9.  Information to be Provided to Baxter................................  23
       --------------------------------------------------------------------
10.10. Transfer of Employee Files..........................................  23
       --------------------------------------------------------------------
10.11. Employment Solicitation.............................................  23
       --------------------------------------------------------------------

ARTICLE XI INSURANCE MATTERS...............................................  24

ARTICLE XII INDEMNIFICATION................................................  27
12.1.  Indemnification by Edwards Optionholder.............................  27
       --------------------------------------------------------------------
12.2.  Indemnification by Baxter Japan.....................................  27
       --------------------------------------------------------------------
12.3.  Applicability of and Limitation on Indemnification..................  28
       --------------------------------------------------------------------
12.4.  Adjustment of Indemnifiable Losses..................................  28
       --------------------------------------------------------------------
12.5.  Procedures for Indemnification of Third Party Claims................  29
       --------------------------------------------------------------------
12.6.  Procedures for Indemnification of Direct Claims.....................  31
       --------------------------------------------------------------------
12.7.  Remedies Cumulative.................................................  31
       --------------------------------------------------------------------

ARTICLE XIII DISPUTE RESOLUTION............................................  31
13.1.  General.............................................................  31
       --------------------------------------------------------------------
13.2.  Escalation.  .......................................................  32
       --------------------------------------------------------------------
13.3.  Arbitration.  ......................................................  32
       --------------------------------------------------------------------
13.4.  Procedures..........................................................  32
       --------------------------------------------------------------------
13.5.  Injunctive Relief...................................................  33
       --------------------------------------------------------------------

ARTICLE XIV GENERAL PROVISIONS.............................................  33
14.1.  Notices.............................................................  33
       --------------------------------------------------------------------
14.2.  Successors and Assigns..............................................  34
       --------------------------------------------------------------------
14.3.  Access to Records after Closing.....................................  34
       --------------------------------------------------------------------
14.4.  Entire Agreement; Amendments........................................  35
       --------------------------------------------------------------------
<PAGE>

                               Table of Contents
                               -----------------
                                  (continued)

                                                                            Page
                                                                            ----

14.5.  Interpretation......................................................  35
       --------------------------------------------------------------------
14.6.  Waivers.............................................................  35
       --------------------------------------------------------------------
14.7.  Expenses............................................................  35
       --------------------------------------------------------------------
14.8.  Partial Invalidity..................................................  35
       --------------------------------------------------------------------
14.9.  Execution in Counterparts...........................................  35
       --------------------------------------------------------------------
14.10. Governing Law.......................................................  35
       --------------------------------------------------------------------
14.11. Submission to Jurisdiction..........................................  36
       --------------------------------------------------------------------
14.12. Termination.........................................................  36
       --------------------------------------------------------------------
14.13. Survival of Obligations.............................................  36
       --------------------------------------------------------------------
14.14. Currency............................................................  36
       --------------------------------------------------------------------
<PAGE>

EXHIBITS

A    Description of Japanese Edwards Business
B    Form of Instrument of Assignment
C    Form of Instrument of Assumption
D    Valuation Date Balance Sheet
E    Form of TK Agreement

                                   SCHEDULES

1.1    Agreed Accounting Principles
4.1(iv)    Governmental Permits
4.1(v)    Real Estate Leases
4.1(vi)    Personal Property
4.1(vii)    Contracts
4.1(ix)    Product Registrations and Import Licenses
7.3    Services/Facilities
[10.4     Allocation of Pension Plan Assets]
<PAGE>

                                OPTION AGREEMENT


          OPTION AGREEMENT, dated as of March 31, 2000 (this "Agreement"),
                                                              ---------
between Baxter Limited, a Japanese corporation ("Baxter Japan"),  and Edwards
                                                 ------------
Lifesciences Limited, a Japanese corporation ("Edwards Optionholder").
                                               --------------------

          WHEREAS, Baxter Japan currently conducts all of the business of the
Cardiovascular Group of Baxter International Inc. in Japan, all as more
specifically described in Exhibit A hereto (the "Japanese Edwards Business");
                          ---------              -------------------------
and

          WHEREAS, Baxter Japan desires to grant to Edwards Optionholder, and
Edwards Optionholder desires to acquire from Baxter Japan, an irrevocable option
to purchase, on a going concern basis, the Japanese Edwards Business, all on the
terms and subject to the conditions set forth herein;

          NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, it is hereby agreed between Baxter Japan and
Edwards Optionholder as follows:

                                   ARTICLE I
                                  DEFINITIONS

1.1.  Definitions.  In this Agreement, the following terms have the meanings
      -----------
specified or referred to in this Section 1.1 and shall be equally applicable to
                                 -----------
both the singular and plural forms.  Any agreement referred to below shall mean
such agreement as amended, supplemented and modified from time to time to the
extent permitted by the applicable provisions thereof and by this Agreement.

          "Action" means any action, claim, suit, arbitration, inquiry,
           ------
subpoena, discovery request, proceeding or investigation by or before any court
or grand jury, any governmental or other regulatory or administrative entity,
agency or commission or any arbitration tribunal.

          "Affiliate" means, with respect to any Person, any other Person which
           ---------
directly or indirectly controls, is controlled by or is under common control
with such Person.

          "Agreed Accounting Principles" means Japanese generally accepted
           ----------------------------
accounting principles consistently applied, provided that, with respect to any
                                            --------
matter as to which there is more than one Japanese generally accepted accounting
principle, Agreed Accounting Principles means the generally accepted accounting
principles applied in the preparation of the Valuation Date Balance Sheet;

provided further that, notwithstanding the foregoing, Agreed Accounting
-------- -------
Principles shall include the accounting policies and be subject to the
allocation methodology and direct accounts described in Schedule 1.1; and
                                                        ------------
provided further that, for purposes of the Agreed Accounting Principles, no
-------- -------
known adjustments for items or matters, regardless of the amount thereof, shall
be deemed to be immaterial.
<PAGE>

          "Assumed Liabilities" has the meaning specified in Section 4.3.
           -------------------                               -----------

          "Baxter" means Baxter International Inc., a Delaware corporation.
           ------

          "Baxter Japan" has the meaning specified in the first paragraph of
           ------------
this Agreement.

          "Baxter Japan Change in Control" shall mean (i) the acquisition,
           ------------------------------
directly or indirectly, by any Person or Persons of more than 30% of the voting
stock of Baxter Japan or any Person that controls Baxter Japan, other than an
acquisition by Baxter of, or a Person or Persons that are controlled by Baxter
of, Baxter Japan, (ii) any merger or consolidation involving Baxter or any
Affiliate of Baxter that requires a vote of the stockholders of Baxter, or (iii)
the sale, assignment, transfer or other disposition (including any disposition
through a merger) of all or substantially all of the business and assets of any
Person that controls Baxter Japan.

          "Baxter Japan Group Member" means Baxter Japan and its Affiliates and
           -------------------------
their respective successors and assigns.

          "Baxter Japan Pension Plan" has the meaning specified in Section 10.4.
           -------------------------                               ------------

          "Closing" has the meaning specified in Section 5.2.
           -------                               -----------

          "Closing Date" has the meaning specified in Section 5.2.
           ------------                               -----------

          "Closing Date Balance Sheet" means the balance sheet established
           --------------------------
pursuant to the provisions of Section 3.3.
                              ------------

          "Contracts" means all contracts, agreements, arrangements, leases
           ---------
(other than Real Estate Leases), manufacturers' warranties, memoranda,
understandings and offers open for acceptance of any nature, whether written or
oral.

          "Divested Business" means any portion of the Japanese Edwards Business
           -----------------
that is divested by Baxter Japan between the date hereof and the Closing Date.

          "Edwards" means Edwards Lifesciences Corporation, a Delaware
           -------
corporation.

          "Edwards Division President" means any person appointed as President
           --------------------------
of the Edwards division of Baxter Japan and approved by Edwards.

          "Edwards Employees" means the employees of Baxter Japan who are
           -----------------
assigned to the Edwards division of Baxter Japan.

          "Edwards Optionholder" has the meaning specified in the first
           --------------------
paragraph of this Agreement.

          "Edwards Optionholder Change in Control" shall mean (i) the
           --------------------------------------
acquisition, directly or indirectly, by any Person or Persons of more than 30%
of the voting stock of Edwards Optionholder or any Person that controls Edwards
Optionholder, other than an acquisition by Edwards of, or a Person or Persons
that are controlled by

                                       2
<PAGE>

Edwards of, Edwards Optionholder, (ii) any merger or consolidation involving
Edwards or any Affiliate of Edwards that requires a vote of the stockholders of
Edwards, or (iii) the sale, assignment, transfer or other disposition (including
any disposition through a merger) of all or substantially all of the business
and assets of any Person that controls Edwards Optionholder.

          "Edwards Optionholder Group Member" means Edwards Optionholder and its
           ---------------------------------
Affiliates and their respective successors and assigns.

          "Edwards Products" means the products referred to in Exhibit A,
           ----------------
together with any additional products manufactured, imported or distributed by
the Japanese Edwards Business after the date hereof.

          "Encumbrance" means any lien, claim, charge, security interest,
           -----------
mortgage, pledge, easement, conditional sale or other title retention agreement,
defect in title, covenant or other restriction of any kind.

          "Estimated Strike Price" shall mean an amount equal to (Yen) [23.2
           ----------------------
billion plus the (Yen) equivalent of $30MM].

          "Excluded Assets" has the meaning specified in Section 4.2.
           ---------------                               -----------

          "Excluded Liabilities" has the meaning specified in Section 4.4.
           --------------------                               -----------

          "Exercise Period" shall mean the period during which the Option is
           ---------------
exercisable, as specified in Section 2.2.
                             -----------

          "Expense" means any and all expenses incurred in connection with
           -------
investigating, defending or asserting any claim, action, suit or proceeding
incident to any matter indemnified against hereunder (including, without
limitation, court filing fees, court costs, arbitration fees or costs, witness
fees, and reasonable fees and disbursements of legal counsel, investigators,
expert witnesses, consultants, accountants and other professionals).

          "Final TK Balance Sheet" shall mean the balance sheet delivered by
           ----------------------
Baxter Japan as part of its full accounting as of the date of expiration or
termination of the TK Agreement.

          "Governmental Body" means any foreign, federal, state, local or other
           -----------------
governmental authority or regulatory body.

          "Governmental Permits" means all licenses, franchises, permits,
           --------------------
privileges, immunities, approvals and other authorizations from a Governmental
Body.

          "Indemnified Party" shall have the meaning specified in Section 12.4.
           -----------------                                      ------------

          "Indemnifying Party" shall have the meaning specified in Section 12.4.
           ------------------                                      ------------

          "Indemnity Payment" shall have the meaning specified in Section 12.5.
           -----------------                                      ------------

                                       3
<PAGE>

          "Instrument of Assignment" means an Instrument of  Assignment in the
           ------------------------
form of Exhibit B.
        ---------

          "Instrument of Assumption" means an Instrument of Assumption in the
           ------------------------
form of Exhibit C.
        ---------

          "Insurance Amount" has the meaning specified in Section 11.4.
           ----------------                               ------------

          "Insurance Charges" has the meaning specified in Section 11.7.
           -----------------                               ------------

          "IV Business" means the business of importing and distributing
           -----------
Infusors, TDR solutions and sets, EIS infusion pumps, Interlink products,
Epidural trays [and Sabratek pumps].

          "Japan Distribution Agreement" means the Japan Distribution Agreement
           ----------------------------
dated as of [March 31, 2000] between Baxter Japan and Edwards Lifesciences LLC.

          "Japanese Edwards Business" has the meaning specified in the first
           -------------------------
recital.

          "Liability" means any and all debts, liabilities and obligations,
           ---------
absolute or contingent, matured or unmatured, liquidated or unliquidated,
accrued or unaccrued, known or unknown, whenever arising (unless otherwise
specified in this Agreement), including all costs and expenses relating thereto,
and including, without limitation, those debts, liabilities and obligations
arising under any law, rule, regulation, Action, threatened Action, order or
consent decree of any Governmental Body or any award of any arbitrator of any
kind, and those arising under any contract, commitment or undertaking.

          "Loss" means any and all losses, costs, obligations, liabilities,
           ----
settlement payments, awards, judgments, fines, penalties, damages, expenses,
deficiencies or other charges.

          "Net Worth Adjustment" means (i) the Closing Net Worth (as defined in
           --------------------
Section 3.3) minus (ii) the Opening Net Worth (as defined in Section 3.2).
-----------                                                  -----------

          "New Subsidiary" has the meaning specified in Section 2.4.
           --------------                               -----------

          "Notice of Exercise" has the meaning specified in Section 2.3.
           ------------------                               -----------

          "Opening Balance Sheet" means the balance sheet established pursuant
           ---------------------
to the provisions of Section 3.2.
                     -----------

          "Operating Agreements" shall mean the agreements referred to in
           --------------------
Section 7.3.
-----------

          "Option" has the meaning specified in Section 2.1.
           ------                               -----------

          "Owned Real Property" means each parcel of real property owned by
           -------------------
Baxter Japan and used in or relating to the Japanese Edwards Business.

          "Permitted Encumbrances" means (a) liens for taxes and other
           ----------------------
governmental charges and assessments which are not yet due and payable, (b)
liens of landlords and liens of carriers, warehousemen, mechanics and
materialmen and other like liens arising in the ordinary

                                       4
<PAGE>

course of business for sums not yet due and payable and (c) other liens or
imperfections on property which are not material in amount or do not materially
detract from the value or materially impair the existing use of the property
affected by such lien or imperfection.

          "Person" means any individual, corporation, partnership, joint
           ------
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization or Governmental Body.

          "Pre-Closing Claims Administration"  has the meaning specified in
           ---------------------------------
Section 11.6.
------------

          "Purchased Business" has the meaning specified in Section 4.1.
           ------------------                               -----------

          "Real Estate Leases" has the meaning specified in Section 4.1(d).
           ------------------                               --------------

          "Retained Business" means all businesses of Baxter Japan other than
           -----------------
the Japanese Edwards Business.

          "Shared Agreements" has the meaning specified in Section 8.2(a).
           -----------------                               --------------

          "Software" means computer software programs and software systems,
           --------
including, without limitation, all databases, compilations, tool sets,
compilers, higher level or "proprietary" languages, related documentation and
materials, whether in source code, object code or human readable form.

          "Strike Price" has the meaning specified in Section 3.1.
           ------------                               -----------

          "Subsidiary" means, when used with reference to any Person, any
           ----------
corporation or other organization whether incorporated or unincorporated of
which at least a majority of the securities or interests having by the terms
thereof ordinary voting power to elect at least a majority of the board of
directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by such Person or by any one or more of its Subsidiaries, or by such Person and
one or more of its Subsidiaries; provided, however, that no Person that is not
                                 --------  -------
directly or indirectly wholly-owned by any other Person shall be a Subsidiary of
such other Person unless such other Person controls, or has the right, power or
ability to control, that Person.

          "Tax" means any net income, alternative or add-on minimum, gross
           ---
income, gross receipts, consumption, property, sales, use, transfer, gains,
license, excise, employment, payroll, withholding or minimum tax, or any other
tax custom, duty, governmental fee or other like assessment or charge of any
kind whatsoever, together with any interest or any penalty, addition to tax or
additional amount imposed by any Governmental Body.

          "TK Agreement" means a Tokumei Kumiai Agreement between Baxter Japan
           ------------
and Edwards Lifesciences Finance Limited, in substantially the form attached as
Exhibit E hereto.

          "Transferred Employee" has the meaning specified in Section 10.1.
           --------------------                               ------------

                                       5
<PAGE>

          "Valuation Date Balance Sheet" means the December 31, 1999 balance
           ----------------------------
sheet of the Japanese Edwards Business attached as Exhibit D hereto.
                                                   ---------


                                  ARTICLE II
                                GRANT OF OPTION

2.1.  Grant of Option.  In consideration of the payment by Edwards Optionholder
      ---------------
of (Yen) [equivalent of $12.34 MM] and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Baxter Japan hereby grants and issues to Edwards Optionholder, upon the terms
and conditions set forth herein, an irrevocable option (the "Option") to
                                                             ------
purchase all, but not less than all, of the Purchased Business in exchange for
(i) cash in an amount equal to the Strike Price,  and (ii) the assumption by
Edwards Optionholder of the Assumed Liabilities.

2.2.  Exercise Period.  The Option may be exercised at any time (i) from and
      ---------------
including August 1, 2002  through and including the earlier of (x) March 31,
2005 and (y) 180 days after the occurrence of an Edwards Optionholder Change in
Control, (ii) in the event of a Baxter Japan Change in Control, during a period
of 180 days thereafter, and (iii) in the event Baxter Japan provides a notice of
termination under Article 12(4) of the TK Agreement, during a period of 180 days
after such notice is given; provided, however, that if Edwards provides a notice
                            --------  -------
of termination under Article 12(1) of the TK Agreement, the Option may be
exercised only during a period of 180 days after such notice is given, and
clauses (i), (ii) and (iii) above shall no longer apply.

2.3.  Manner of Exercise.  Edwards Optionholder may exercise the Option at any
      ------------------
time during the Exercise Period by delivering a written notice of exercise (the
"Notice of Exercise") to Baxter Japan.
 ------------------

2.4.  Transfer of Purchased Business.  Edwards Optionholder agrees that Baxter
      ------------------------------
Japan may, at its option, at any time prior to the [exercise of the Option]
[Closing Date], transfer all of the Purchased Business and Assumed Liabilities,
determined as of the date of transfer, to a subsidiary of Baxter Japan (the "New
                                                                             ---
Subsidiary").  If so, the parties will amend this Agreement to provide for
----------
Edwards Optionholder to have the option to purchase all of the capital stock of
the New Subsidiary in exchange for cash in an amount equal to the Strike Price,
and the remainder of this Agreement shall be amended to the extent necessary or
advisable as a result of such change in structure.

                                  ARTICLE III
                         DETERMINATION OF STRIKE PRICE

3.1.  Strike Price.  (a)  The "Strike Price" shall be an amount equal to (i)
      ------------
(Yen) [23.2 billion plus the (Yen) equivalent of $30MM] plus (ii) the Net Worth
Adjustment.

3.2.  Opening Net Worth.
      -----------------

                                       6
<PAGE>

(a)  The term "Opening Net Worth" shall mean (i) the sum of all assets reflected
               -----------------
     in the Opening Balance Sheet minus (ii) the sum of all liabilities
     reflected in the Opening Balance Sheet.

(b)  As promptly as practicable following the date hereof, Baxter Japan shall
     prepare, in accordance with the Agreed Accounting Principles, a balance
     sheet as of the date hereof with respect to the Purchased Business and the
     Assumed Liabilities, as if the Closing Date were March 31, 2000  (the
     "Preliminary Opening Balance Sheet"), and shall deliver same to Edwards
     ----------------------------------
     Optionholder.

(c)  Promptly following receipt of the Preliminary Opening Balance Sheet,
     Edwards Optionholder may review the same and, within 30 days after the date
     of such receipt, may deliver to Baxter Japan a certificate (signed by its
     chief financial officer or its chief accounting officer) setting forth its
     objections to the Preliminary Opening Balance Sheet, together with a
     summary of the reasons therefor and calculations which, in its view, are
     necessary to eliminate such objections.  In the event Edwards Optionholder
     does not so object within such 30-day period, the Preliminary Opening
     Balance Sheet shall be final and binding as the Opening Balance Sheet for
     purposes of this Agreement.

(d)  In the event Edwards Optionholder so objects within such 30-day period,
     Edwards Optionholder and Baxter Japan shall use their reasonable efforts to
     resolve by written agreement (the "Opening Agreed Adjustments") any
                                        --------------------------
     differences as to the Opening Balance Sheet and, in the event Baxter Japan
     and Edwards Optionholder so resolve all such differences, the Preliminary
     Opening Balance Sheet, as adjusted by the Opening Agreed Adjustments, shall
     be final and binding as the Opening Balance Sheet for purposes of this
     Agreement.

(e)  If all such differences are not resolved by Opening Agreed Adjustments
     within the 30-day period next following such 30-day objection period, then
     Edwards Optionholder and Baxter Japan shall submit the objections that are
     then unresolved to an international accounting firm acceptable to both
     Baxter Japan and Edwards Optionholder and such firm (the "Accounting Firm")
                                                               ---------------
     shall be directed by Edwards Optionholder and Baxter Japan to resolve the
     unresolved objections (based solely on the presentations by Edwards
     Optionholder and by Baxter Japan as to whether any disputed matter had been
     determined in a manner consistent with the Agreed Accounting Principles) as
     promptly as reasonable practicable and to deliver written notice to each of
     Edwards Optionholder and Baxter Japan setting forth its resolution of the
     disputed matters.  The Preliminary Opening Balance Sheet, after giving
     effect to any Opening Agreed Adjustments and to the resolution of disputed
     matters by the Accounting Firm, shall be final and binding as the Opening
     Balance Sheet for purposes of this Agreement.

3.3.  Closing Date Net Worth .
      -----------------------

(a)  The term "Closing Date Net Worth" shall mean (i) the sum of all assets
               ----------------------
     reflected in the Closing Date Balance Sheet minus (ii) the sum of all
     liabilities reflected in the Closing Date Balance Sheet.

(b)  As promptly as practicable following the Closing Date (but not later than
     30 days after the Closing Date), Baxter Japan shall prepare, in accordance
     with the Agreed

                                       7
<PAGE>

     Accounting Principles, a balance sheet as of the Closing Date with respect
     to the Purchased Business and the Assumed Liabilities (the "Preliminary
                                                                 -----------
     Closing Date Balance Sheet") and shall deliver same to
     --------------------------
     Edwards Optionholder.

(c)  Promptly following receipt of the Preliminary Closing Date Balance Sheet,
     Edwards Optionholder may review the same and, within 30 days after the date
     of such receipt, may deliver to Baxter Japan a certificate (signed by its
     chief financial officer or its chief accounting officer) setting forth its
     objections to the Preliminary Closing Date Balance Sheet, together with a
     summary of the reasons therefor and calculations which, in its view, are
     necessary to eliminate such objections.  In the event Edwards Optionholder
     does not so object within such 30-day period, the Preliminary Closing Date
     Balance Sheet shall be final and binding as the Closing Date Balance Sheet
     for purposes of this Agreement.

(d)  In the event Edwards Optionholder so objects within such 30-day objection
     period, Edwards Optionholder and Baxter Japan shall use their reasonable
     efforts to resolve by written agreement (the "Closing Agreed Adjustments")
                                                   --------------------------
     any differences as to the Preliminary Closing Date Balance Sheet and, in
     the event Baxter Japan and Edwards Optionholder so resolve all such
     differences, the Preliminary Closing Date Balance Sheet as adjusted by the
     Closing Agreed Adjustments shall be final and binding as the Closing Date
     Balance Sheet for purposes of this Agreement.

(e)  If all such differences are not resolved by the Closing Agreed Adjustments
     within the 30-day period next following such 30-day period, then Edwards
     Optionholder and Baxter Japan shall submit the objections that are then
     unresolved to the Accounting Firm and such firm shall be directed by
     Edwards Optionholder and Baxter Japan to resolve the unresolved objections
     (based solely on the presentations by Edwards Optionholder and by Baxter
     Japan as to whether any disputed matter had been determined in a manner
     consistent with the Agreed Accounting Principles) as promptly as reasonably
     practicable and to deliver written notice to each of Edwards Optionholder
     and Baxter Japan setting forth its resolution of the disputed matters.  The
     Preliminary Closing Date Balance Sheet, after giving effect to any Closing
     Agreed Adjustments and to the resolution of disputed matters by the
     Accounting Firm, shall be final and binding as the Closing Date Balance
     Sheet for purposes of this Agreement.

3.4.  Access to Information.  The parties hereto shall make available to each
      ---------------------
other and, if applicable, the Accounting Firm, such books, records and other
information (including work papers) as any of the foregoing may reasonably
request to prepare or review the Preliminary Opening Balance Sheet, the
Preliminary Closing Date Balance Sheet or any matters submitted to the
Accounting Firm pursuant to the terms hereof.  The fees and expenses of the
Accounting Firm hereunder shall be paid 50% by Edwards Optionholder and 50% by
Baxter Japan.

                                  ARTICLE IV
                               PURCHASE AND SALE

4.1.  Purchased Business.  In the event that Edwards Optionholder exercises the
      ------------------
Option, upon the terms and subject to the conditions of this Agreement, on the
Closing Date,

                                       8
<PAGE>

Baxter Japan shall sell, transfer, assign, convey and deliver to Edwards
Optionholder, and Edwards Optionholder shall purchase from Baxter Japan, on a
going concern basis, all of Baxter Japan's right, title and interest in and
under the Japanese Edwards Business and all of the assets and properties of
Baxter Japan of every kind and description, wherever located, real, personal or
mixed, tangible or intangible, relating exclusively to the Japanese Edwards
Business as the same shall exist on the Closing Date (herein collectively called
the "Purchased Business"), including, without limitation, all right, title and
     ------------------
interest of Baxter Japan in, to and under:

(i)  all notes, accounts and other receivables generated by the Japanese Edwards
     Business;

(ii) all prepayments relating exclusively to the Japanese Edwards Business;

(iii)  all raw materials, supplies, work-in-process, spare parts and other
materials relating exclusively to the Japanese Edwards Business, other than
items of inventory relating to products to be supplied by Baxter Japan to
Edwards Optionholder after the Closing under Operating Agreements entered into
pursuant to Section 7.3;
            -----------

(iv) all Governmental Permits that relate exclusively to the Japanese Edwards
     Business including those listed or described in Schedule 4.1(iv);
                                                     ----------------

(v)  the real estate leases and leasehold improvements that relate exclusively
     to the Japanese Edwards Business including those listed or described in
     Schedule 4.1(v) (the "Real Estate Leases");
     ---------------       ------------------

(vi) all machinery, equipment, vehicles, furniture and other personal property
     that relate exclusively to the Japanese Edwards Business including those
     listed or described in Schedule 4.1(vi);
                            ----------------

(vii)  all Contracts that relate exclusively to the Japanese Edwards Business,
including the Japan Distribution Agreement and the Contracts listed or described
in Schedule 4.1(vii);
   -----------------

(viii)  all trade secrets and other proprietary or confidential information used
exclusively in connection with the Japanese Edwards Business;

(ix) all product registrations and import licenses that relate exclusively to
the Japanese Edwards Business including those listed or described in
     Schedule 4.1(ix);
     ----------------

(x)  all (x) Software that relates exclusively to the Japanese Edwards Business,
(y) PC-based Software located on hardware included in the assets of the
Purchased Business and (z) any Contracts related to the aforementioned
Software;

(xi) all of Baxter Japan's rights, claims or causes of action against third
parties relating exclusively to the Japanese Edwards Business;

                                       9
<PAGE>

(xii)  all books and records (including all data and other information stored on
discs, tapes or other media) of Baxter Japan relating exclusively to the
Japanese Edwards Business;

(xiii)  all office supplies, production supplies, purchase orders, forms,
labels, shipping material, art work, catalogues, sales brochures, operating
manuals and advertising and promotional material and all other printed or
written material that relate exclusively to the Japanese Edwards Business;

(xiv)  Baxter Japan's interest in and to all telephone, telex and telephone
facsimile numbers, domain names and other directory listings utilized
exclusively in connection with the Japanese Edwards Business; and

(xv) all other assets, tangible or intangible, including all goodwill and all
deposits or other security from customers of the Japanese Edwards Business,
that are exclusive to the operations of, or otherwise relate exclusively
to, the Japanese Edwards Business.

4.2.  Excluded Assets.  Notwithstanding the provisions of Section 4.1, the
      ---------------                                     -----------
Purchased Business shall not include the following (herein referred to as the

"Excluded Assets"):
----------------
(i)  all cash, bank deposits and cash equivalents, except for (i) all
     deposits or other security from customers of the Japanese Edwards Business,
     (ii) deposits securing bonds, letters of credit, leases and all other
     obligations related to the Japanese Edwards Business and (iii) petty cash
     and impressed funds related to the Japanese Edwards Business;

(ii) the name "Baxter" or any related or similar trade names, trademarks,
     service marks or logos to the extent the same incorporate the name "Baxter"
     or any variation thereof;

(iii)  Baxter Japan's rights, claims or causes of action against third parties
relating to the Japanese Edwards Business which may arise in connection with the
discharge by Baxter Japan of the Excluded Liabilities;

(iv)  [all contracts of insurance;]

(v)  all corporate minute books, stock transfer books, the corporate seal and
     all hanko of Baxter Japan;
         -----
(vi) any right, title or interest of Baxter Japan in any tax refund, credit or
     benefit (including any income with respect thereto) relating to the
     operations of the Japanese Edwards Business prior to the Closing Date;

(vii)  all assets relating to all employee benefit plans of Baxter Japan, other
than as provided in Article X;
                    ---------

                                       10
<PAGE>

(viii)  all real estate owned or leased by Baxter Japan at its Miyazaki plant
and all leasehold improvements thereon except for those leasehold improvements
specifically listed or described in Schedule 4.1(v);
                                    ---------------

(ix)  the IV Business; and

(x)  All other assets, properties and rights of Baxter Japan not used
     exclusively in the conduct of the Japanese Edwards Business and not
     specifically included in the Purchased Business.

4.3.  Assumed Liabilities.  On the Closing Date, Edwards Optionholder shall
      -------------------
assume and agree to discharge, in accordance with their respective terms and
subject to the respective conditions thereof, all contractual and other
Liabilities of Baxter Japan arising out of or related to the Japanese Edwards
Business, any Divested Business and/or any of the past or present facilities of
Baxter Japan used primarily in connection with the Japanese Edwards Business or
any Divested Business, including, without limitation:

(i)  All Liabilities in respect of Taxes except income Taxes;

(ii) All Liabilities of Baxter Japan under the Contracts and Real Estate Leases
     included in the Purchased Business;

(iii)  All Liabilities of Baxter Japan under the TK Agreement, other than
payment obligations under Articles 11 and 12 of the TK Agreement;

(iv) All warranty, performance and similar obligations entered into or made
     prior to the Closing Date with respect to the products or services of the
     Japanese Edwards Business;

(v)  All Liabilities related to any and all Actions asserting a violation of any
     law, rule or regulation related to or arising out of the operations of the
     Japanese Edwards Business, whether before or after the Closing Date;

(vi) All Liabilities arising under any laws regarding the management, control
     and clean-up of hazardous materials (including off-site waste disposal
     liabilities) relating to or arising out of the operations of the Japanese
     Edwards Business, whether before or after the Closing Date;

(vii)  All Liabilities in connection with workers' compensation claims of past,
current or prospective employees of the Japanese Edwards Business, whether
incurred prior to, on or after the Closing Date;

(viii)  All Liabilities relating to severance or termination of any Edwards
Employees whether before or after the Closing Date, and including any Edwards
Employees who do not accept employment by Edwards Optionholder at the Closing
Date;

                                       11
<PAGE>

(ix) All Liabilities associated with the transfer of assets from the Baxter
     Japan Pension Plan to the Edwards Japan Pension Plan; and

(x)  All other Liabilities relating to the Japanese Edwards Business, whether
     existing on the Closing Date or arising at any time or from time to time
     after the Closing Date, and whether based on circumstances, events or
     actions arising before or after the Closing Date, whether or not such
     Liabilities shall have been disclosed herein, and whether or not reflected
     on the books and records of Baxter Japan.

All of the foregoing liabilities and obligations to be assumed by Edwards
Optionholder hereunder (excluding any Excluded Liabilities) are referred to
herein as the "Assumed Liabilities."
               -------------------

4.4.  Excluded Liabilities.  Edwards Optionholder shall not assume or be
      --------------------
obligated to pay, perform or otherwise discharge any Liability of Baxter Japan
not expressly assumed by Edwards Optionholder pursuant to Section 4.3 (all such
                                                          -----------
liabilities and obligations not being assumed being herein called the "Excluded
                                                                       --------
Liabilities") and, notwithstanding anything to the contrary in Section 4.3, none
-----------                                                    -----------
of the following shall be Assumed Liabilities for purposes of this Agreement:

(i)  any Liabilities in respect of income Taxes; and

(ii) any Liabilities or obligations in respect of any Excluded Assets.



                                   ARTICLE V
                        CLOSING; POST-CLOSING ADJUSTMENT

5.1.  Conditions to Closing.  (a)  Following exercise of the Option, the
      ---------------------
obligation of Baxter Japan to close the transactions contemplated hereby is
subject to the satisfaction or the waiver by Baxter Japan of each of the
following conditions:

(i)  The absence of any material statutory, regulatory or judicial prohibition
     to the consummation of the transactions contemplated hereby; and

(ii) The completion of the transfer from Baxter Japan to Edwards Optionholder of
     all material Japanese import approvals and  product registrations for the
     Edwards Products or the receipt by Baxter Japan of an agreement by Edwards,
     in form and substance satisfactory to Baxter Japan in its sole discretion,
     to indemnify Baxter Japan and its Affiliates for any failure to complete
     such transfer.

(b)  Following exercise of the Option, the obligation of Edwards Optionholder to
     close the transactions contemplated hereby is subject to the satisfaction
     or the waiver by Edwards Optionholder of each of the following conditions:

(i)  The absence of any material statutory, regulatory or judicial prohibition
     to the consummation of the transactions contemplated hereby; and

                                       12
<PAGE>

(ii) The completion of the transfer of all material Japanese import approvals
     and product registrations for the Edwards Products from Baxter Japan to
     Edwards Optionholder.

5.2.  Closing Date.  The closing of the transactions contemplated by this
      ------------
Agreement (the "Closing") shall be consummated at __:00 A.M., local time, as
                -------
soon as practicable after satisfaction or waiver of the conditions set forth in

Section 5.1(a) (ii) and 5.1(b)(ii), or at such other date and time as may be
-------------------     ----------
agreed upon by Edwards Optionholder and Baxter Japan, at the offices of
_________________, or at such other place or at such other time as shall be
agreed upon by Edwards Optionholder and Baxter Japan.  The time and date on
which the Closing is actually held are sometimes referred to herein as the
"Closing Date".
-------------

5.3.  Edwards Optionholder's  Deliveries at Closing.  Subject to fulfillment or
      ---------------------------------------------
waiver by Edwards Optionholder of the conditions set forth in Section 5.1(b), at
                                                              --------------
Closing Edwards Optionholder shall (i) pay Baxter Japan an amount equal to the
Estimated Strike Price by wire transfer of immediately available funds to the
account designated in writing by Baxter Japan and (ii) deliver to Baxter Japan a
duly executed Instrument of Assumption and duly executed counterparts of the
Operating Agreements.

5.4.  Baxter Japan's Deliveries at Closing.  Subject to fulfillment or waiver by
      ------------------------------------
Baxter Japan of the conditions set forth in Section 5.1(a), at Closing Baxter
                                            --------------
Japan shall deliver to Edwards Optionholder (i) a duly executed Instrument of
Assignment and duly executed counterparts of the Operating Agreements and (ii)
such other certificates and documents of title, assignment, transfer and
conveyance as the parties shall reasonably deem necessary to transfer title in
and to the Purchased Business.

5.5.  Post Closing Adjustment.  Promptly (but not later than five days) after
      -----------------------
the Closing Date Balance Sheet becomes final and binding pursuant to Section
                                                                     -------
3.3:
---

(a)  if the Strike Price exceeds the Estimated Strike Price, Edwards
     Optionholder shall pay to Baxter Japan, by wire transfer of immediately
     available funds to such bank account of Baxter Japan as Baxter Japan shall
     designate in writing to Edwards Optionholder, the amount of such excess,
     plus interest on such amount from the Closing Date to the date of payment
     thereof at [interest rate to come from Kent Stemper]; or

(b)  if the Estimated Strike Price exceeds the Strike Price, Baxter Japan shall
     pay to Edwards Optionholder, by wire transfer of immediately available
     funds to such bank account of Edwards Optionholder as Edwards Optionholder
     shall designate in writing to Baxter Japan, the amount of such excess, plus
     interest on such excess from the Closing Date to the date of payment
     thereof at [interest rate to come from Kent Stemper].

5.6.  Non-Assignable Contracts.  In the event and to the extent that the parties
      ------------------------
are unable to obtain any consent, approval or amendment to any Contract, lease,
license or other rights relating to the Japanese Edwards Business that otherwise
would be transferred or assigned to Edwards Optionholder or one of its
Subsidiaries as contemplated by this Agreement or any

                                       13
<PAGE>

other agreement or document contemplated hereby, (i) Baxter Japan shall continue
to be bound thereby and the purported transfer or assignment to Edwards
Optionholder shall automatically be deemed deferred until such time as all legal
impediments are removed and/or all necessary consents have been obtained, and
(ii) unless not permitted by the terms thereof or by law, Edwards Optionholder
shall pay, perform and discharge fully all the obligations of Baxter Japan
thereunder from and after the Closing Date, or such earlier date as such
transfer or assignment otherwise would have taken place, and indemnify Baxter
Japan and its Affiliates for all indemnifiable Losses arising out of such
performance by Edwards Optionholder. Baxter Japan shall, without further
consideration therefor, pay and remit to Edwards Optionholder promptly all
monies, rights and other considerations received in respect of such performance.
Baxter Japan shall exercise or exploit its rights and options under all such
Contracts, leases, licenses and other rights and commitments referred to in this
Section 5.6 only as reasonably directed by Edwards Optionholder and at Edwards
-----------
Optionholder's expense. If and when any such consent shall be obtained or such
Contract, lease, license or other right shall otherwise become assignable or be
able to be novated, Baxter Japan shall promptly assign and novate (to the extent
permissible) all of its rights and obligations thereunder to Edwards
Optionholder without payment of further consideration, and Edwards Optionholder
shall, without the payment of any further consideration therefor, assume such
rights and obligations.  To the extent that the assignment of any Contract,
lease, license or other right (or the proceeds thereof) pursuant to this Section
                                                                         -------
5.6 is prohibited by law, the assignment provisions of this Section 5.6 shall
---                                                         -----------
operate to create a subcontract with Edwards Optionholder to perform each
relevant unassignable Contract, lease or license of Baxter Japan at a
subcontract price equal to the monies, rights and other considerations received
by Baxter Japan with respect to the performance by Edwards Optionholder under
such subcontract.

5.7.  Further Assurances.  (a)  In addition to the actions specifically provided
      ------------------
for elsewhere in this Agreement, each of the parties shall use commercially
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things reasonably necessary, proper or advisable under
applicable laws, regulations and agreements to consummate and make effective, in
the most expeditious manner practicable, the transactions contemplated by this
Agreement and the other agreements and documents contemplated hereby.  Without
limiting the generality of the foregoing, each party shall cooperate with the
other party to execute and deliver, or use commercially reasonable efforts to
cause to be executed and delivered, all instruments, including instruments of
conveyance, assignment and transfer, and to make all filings with, and to obtain
all consents, approvals or authorizations of, any Governmental Body or any other
Person under any permit, license, Contract or other instrument, and to take all
such other actions as such party may reasonably be requested to take by the
other party from time to time, consistent with the terms of this Agreement, in
order to confirm the title of Edwards Optionholder to all of the Japanese
Edwards Business, to put Edwards Optionholder in actual possession and operating
control of the Purchased Business and to permit Edwards Optionholder to exercise
all rights with respect thereto and to effectuate the provisions and purposes of
this Agreement, and the other agreements and documents contemplated hereby;
provided, however, that Edwards Optionholder shall be solely liable for the
--------  -------
payment of any costs associated with transferring any import approvals and
product registrations for the Edwards Products; and provided further, that
                                                    -------- -------
except as stated in the previous proviso, neither party shall be obligated to
pay any consideration to any third party in connection with any of the
foregoing.  In addition, Baxter Japan shall use reasonable efforts to remove or
cause to be removed any liens for borrowed money existing on the Purchased
Business immediately prior to the Closing Date other

                                       14
<PAGE>

than liens securing Assumed Liabilities or liens incurred in connection with the
transactions contemplated by this Agreement.

(b)  If, as a result of mistake, oversight or otherwise, any asset reasonably
     necessary to the conduct of the Japanese Edwards Business is not
     transferred to Edwards Optionholder, or any asset reasonably necessary to
     the conduct of the Retained Business is transferred to Edwards
     Optionholder, Edwards Optionholder and Baxter Japan shall negotiate in good
     faith after the Closing Date to determine whether such asset should be
     transferred to Edwards Optionholder or Baxter Japan, as the case may be,
     and/or the terms and conditions upon which such asset shall be made
     available to Edwards Optionholder or Baxter Japan, as the case may be.
     Unless expressly provided to the contrary in this Agreement and the other
     agreements and documents contemplated hereby, if as a result of mistake,
     oversight or otherwise, any Liability arising out of or relating to the
     Japanese Edwards Business is retained by Baxter Japan, or any Liability
     arising out of or relating to the Retained Business is assumed by Edwards
     Optionholder, Edwards Optionholder and Baxter Japan shall negotiate in good
     faith after the Closing Date to determine whether such Liability should be
     transferred to Edwards Optionholder or Baxter Japan, as the case may be,
     and/or the terms and conditions upon which any such Liability shall be
     transferred.

(c)  If either party identifies any commercial or other service that is needed
     to assure a smooth and orderly transition of the Japanese Edwards Business
     in connection with the consummation of the transactions contemplated
     hereby, and that is not otherwise governed by the provisions of this
     Agreement or the Operating Agreements, the parties will cooperate in
     determining whether there is a mutually acceptable arm's-length basis on
     which one party will provide such service to the other party.

5.8.  Novation of Assumed Liabilities.  (a)  It is expressly understood and
      -------------------------------
agreed to by the parties that upon the assumption by Edwards Optionholder of the
Assumed Liabilities, Baxter Japan and its officers, directors, and employees
shall be released unconditionally by Edwards Optionholder from any and all
Liability, whether joint, several or joint and several, for the discharge,
performance or observance of any of the Assumed Liabilities, so that Edwards
Optionholder will be solely responsible for such Assumed Liabilities.

(b)  Edwards Optionholder shall, at the request of Baxter Japan, use
     commercially reasonable efforts to obtain, or cause to be obtained, any
     consent, approval, release, substitution or amendment required to novate
     (including with respect to any government contract) or assume all
     obligations under the Assumed Liabilities, or to obtain in writing the
     unconditional release of all parties to such arrangements other than
     Edwards Optionholder and its Affiliates; provided, however, that Edwards
                                              --------  -------
     Optionholder shall not be obligated to pay any consideration therefor to
     any third party from whom such consents, approvals, releases, substitutions
     or amendments are requested.

(c)  In the event that the Parties are unable to obtain a novation or assignment
     and release with respect to a particular Contract included in the Purchased
     Business, at the expiration of the base term of such Contract, Edwards
     Optionholder agrees that it will not exercise any option to renew such
     Contract or, to the extent such Contract provides for automatic renewal,
     Edwards Optionholder agrees that it will not allow such Contract to enter
     an auto-

                                       15
<PAGE>

     renewal period unless Edwards Optionholder obtains the prior written
     consent of Baxter Japan to such extension or auto-renewal.

                                  ARTICLE VI
                         REPRESENTATIONS AND WARRANTIES

6.1.  Organization, Good Standing and Authority of Baxter Japan.  Baxter Japan
      ---------------------------------------------------------
hereby represents and warrants to Edwards Optionholder as follows: Baxter Japan
is a corporation duly organized and validly existing and in good standing under
the laws of Japan. Baxter Japan has full power and authority to execute, deliver
and perform this Agreement. The execution, delivery and performance of this
Agreement by Baxter Japan have been duly authorized and approved by Baxter
Japan's board of directors and stockholders. This Agreement has been duly
authorized, executed and delivered by Baxter Japan.

6.2.  Organization, Good Standing and Authority of Edwards Optionholder.
      -----------------------------------------------------------------
Edwards Optionholder represents and warrants to Baxter Japan as follows: Edwards
Optionholder is a corporation duly organized and validly existing under the laws
of Japan. Edwards Optionholder has full power and authority to execute, deliver
and perform this Agreement. The execution, delivery and performance of this
Agreement by Edwards Optionholder has been duly authorized and approved by
Edwards Optionholder's board of directors and do not require the further
authorization or consent of Edwards Optionholder or its stockholder. This
Agreement has been duly authorized, executed and delivered by Edwards
Optionholder.

6.3.  No Other Representations or Warranties.  Baxter Japan does not represent
      --------------------------------------
or warrant in any way (i) as to the value or freedom from encumbrance of, or any
other matter concerning, any of the Purchased Business or (ii) as to the legal
sufficiency to convey title to any part of the Purchased Business on the
execution, delivery and filing of the Instrument of Assignment.  ALL ASSETS
INCLUDED IN THE PURCHASED BUSINESS ARE BEING TRANSFERRED ON AN "AS IS, WHERE IS"
BASIS WITHOUT ANY REPRESENTATION OR WARRANTY OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, MARKETABILITY, TITLE, VALUE, FREEDOM FROM ENCUMBRANCE OR ANY
OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, and Edwards Optionholder
shall bear the economic and legal risks that any conveyances of such assets
shall prove to be insufficient or that Edwards Optionholder's title to any such
assets shall be other than good and marketable and free of encumbrances.  Baxter
Japan does not make any representation or warranty with respect to whether the
consents, approvals, or filings and applications obtained or made prior to
consummation of the transactions contemplated by this Agreement shall satisfy
the provisions of all applicable agreements or the requirements of all
applicable laws or judgments, and, subject to Section 5.6, Edwards Optionholder
                                              -----------
shall bear the economic and legal risk that any necessary consents or approvals
are not obtained or that any requirements of law or judgments are not complied
with.

                                       16
<PAGE>

                                  ARTICLE VII
                             PRE-CLOSING COVENANTS

7.1.  Operation of Japanese Edwards Business.  (a)  Until either (i) the Closing
      ---------------------------------------
Date (if the Option is exercised) or (ii) the end of the Exercise Period (if the
Option is not exercised), Baxter Japan shall operate and carry on the Japanese
Edwards Business (pursuant to the terms of the TK Agreement (if applicable))
only in the ordinary course and substantially as presently operated and shall
not, without the express written approval of Edwards Optionholder:

(i)  change the primary line of business of the Japanese Edwards Business; or

(ii) sell, lease (as lessor), transfer or otherwise dispose of, or mortgage or
     pledge, any of the assets of the Japanese Edwards Business that, upon
     exercise of the Option, would constitute part of the Purchased Business
     (including, without limitation, Baxter Japan's rights under the
     Distribution Agreement), other than accounts receivable, inventory and
     other property sold or otherwise disposed of for fair value in the ordinary
     course of the Japanese Edwards Business consistent with past practice;
     provided, however, that this clause (ii) shall not apply to any transfer of
     all of the assets of the Japanese Edwards Business to an Affiliate of
     Baxter Japan in which case all of such transferred assets shall remain
     subject to the Option.

(b)  If the Option is exercised, then from and after the date it receives the
     Notice of Exercise through and including the Closing Date, Baxter Japan
     shall not, without the approval of the Edwards Division President:

(i)  make any change in the Japanese Edwards Business or its operations or make
     any capital expenditure in respect of the Japanese Edwards Business which
     shall exceed the amount budgeted therefor;

(ii) enter into any contract for the purchase or sale of real property that
     would be included in the Purchased Business or exercise any option to
     extend a Real Estate Lease;

(iii)  sell, lease (as lessor), transfer or otherwise dispose of (other than to
an Affiliate of Baxter Japan), or mortgage or pledge, or impose or suffer to be
imposed any lien, charge, security interest, mortgage, pledge or other defect in
title on, any part of the Purchased Business, other than accounts receivable,
inventory and minor amounts of personal property sold or otherwise disposed of
for fair value in the ordinary course of the Japanese Edwards Business
consistent with past practice and other than Permitted Encumbrances;

(iv) cancel any debts owed to or claims held by Japanese Edwards Business
     (including the settlement of any claims or litigation) other than in the
     ordinary course of the Japanese Edwards Business consistent with past
     practice;

(v)  create, incur or assume, or agree to create, incur or assume, any
     indebtedness for borrowed money in respect of the Japanese Edwards Business
     or enter into, as lessee, any capitalized lease obligations (as defined in
     Statement of Financial

                                       17
<PAGE>

     Accounting Standards No. 13);

(vi) accelerate or delay collection of any notes or accounts receivable
     generated by the Japanese Edwards Business in advance of or beyond their
     regular due dates or the dates when the same would have been collected in
     the ordinary course of the Japanese Edwards Business consistent with past
     practice;

(vii)  delay or accelerate payment of any account payable or other liability of
the Japanese Edwards Business beyond or in advance of its due date or the date
when such liability would have been paid in the ordinary course of the Japanese
Edwards Business consistent with past practice;

(viii)  allow the levels of raw materials, supplies, work-in-process or other
materials included in the inventory of the Japanese Edwards Business to vary in
any material respect from the levels customarily maintained;

(ix) institute any increase in any profit-sharing, bonus, incentive, deferred
     compensation, insurance, pension, retirement, medical, hospital,
     disability, welfare or other employee benefit plan with respect to
     employees of the Japanese Edwards Business; or

(x)  make any change in the compensation of the employees of the Japanese
     Edwards Business other than changes made in accordance with normal
     compensation practices and consistent with past compensation practices.

7.2.  Consents of Third Parties; Governmental Approvals.  (a)  If the Option is
      -------------------------------------------------
exercised, Baxter Japan and Edwards Optionholder will act diligently and
reasonably to secure the consent, approval or waiver of any third party that is
reasonably required for the consummation of transactions contemplated by this
Agreement; provided, however, that Edwards Optionholder shall be solely liable
           --------  -------
for the payment of any costs associated with transferring any import approvals
and product registrations for the Edwards Products; and provided further, that
                                                        -------- -------
except as stated in the previous proviso, neither party shall have any
obligation to offer or pay any consideration in order to obtain any such
consents or approvals; and provided further, that Baxter Japan shall not make
                           -------- -------
any agreement or understanding affecting the Purchased Business or the Japanese
Edwards Business as a condition for obtaining any such consents or waivers
except with the prior written consent of Edwards Optionholder.

(b)  If the Option is exercised, Baxter Japan and Edwards Optionholder shall act
     diligently and reasonably, and shall cooperate with each other, to secure
     any consents and approvals of any Governmental Body required to be obtained
     by them in order to assign or transfer any Governmental Permits to Edwards
     Optionholder or to permit the consummation of the transactions contemplated
     by this Agreement; provided that Baxter Japan shall not make any agreement
                        --------
     or understanding affecting the Purchased Business or the Japanese Edwards
     Business as a condition for obtaining any such consents or approvals except
     with the prior written consent of Edwards Optionholder.

7.3.  Services.  If the Option is exercised, Edwards Optionholder and Baxter
      --------
Japan will work together to identify any services (including those relating to
occupation and use

                                       18
<PAGE>

of facilities) that are needed to assure a smooth and orderly transition of the
Japanese Edwards Business and, to the extent practicable, negotiate and prepare
mutually acceptable agreements to govern the provision of such services after
the Closing Date (the "Operating Agreements"). Schedule 7.3 sets forth a
                       --------------------     ------------
non-exclusive list of services and facilities for which Operating Agreements may
be required.

7.4.  Financial Statements.  Until either (i) the Closing Date (if the Option is
      --------------------
exercised) or (ii) the end of the Exercise Period (if the Option is not
exercised), Baxter Japan will deliver to Edwards Optionholder, within 25 days
after the end of each fiscal quarter, an unaudited balance sheet, income
statement with respect to the Japanese Edwards Business, all prepared in
accordance with the Agreed Accounting Principles.

                                 ARTICLE VIII
                             POST-CLOSING COVENANTS

          The following covenants shall apply from and after the Closing Date:

8.1.  Collection of Accounts Receivable.
      ---------------------------------

(a)  Baxter Japan shall be entitled to control all collection actions related to
     the Retained Business, including the determination of what actions are
     necessary or appropriate and when and how to take any such action.

(b)  CVG and its Subsidiaries shall be entitled to control all collection
     actions related to the Purchased Business, including the determination of
     what actions are necessary or appropriate and when and how to take any such
     action.

(c)  If, after the Closing Date, Edwards Optionholder or any of its Affiliates
     shall receive any remittance from any account debtors with respect to the
     accounts receivable arising out of the Retained Business or other amounts
     due Baxter Japan in respect of services rendered or products sold by Baxter
     Japan after the Closing Date, or Baxter Japan or any of its Affiliates
     shall receive any remittance from any account debtors with respect to the
     accounts receivable arising out of the Purchased Business or other amounts
     due Edwards Optionholder or its Affiliates in respect of services rendered
     or products sold by Edwards Optionholder or its Affiliates after the
     Closing Date, such party shall receive and deposit such remittance and
     deliver cash in an amount equal thereto to the other party as soon as
     practicable.  In the absence of any designation of the specific invoice
     being paid by a customer thereby, payments from account debtors shall be
     applied to the earliest invoice outstanding with respect to indebtedness of
     such account debtor owing to either Edwards Optionholder or Baxter Japan.

(d)  Each party shall deliver to the other such schedules and other information
     with respect to the accounts receivable included in the Purchased Business
     and those not included therein as each shall reasonably request from time
     to time in order to permit such parties to reconcile their respective
     records and to monitor the collection of all accounts receivable (whether
     or not included in the Purchased Business).  Each party shall afford the
     other reasonable access to its books and records relating to any accounts
     receivable.

                                       19
<PAGE>

8.2.  Agreements Relating to Edwards Optionholder and Baxter Japan.  (a)  Each
      ------------------------------------------------------------
of Edwards Optionholder and Baxter Japan shall use commercially reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things, reasonably necessary, proper or advisable under applicable
laws, regulations and agreements to consummate, make effective and perform its
or its Subsidiaries' allocable portion of all purchase, distribution and other
obligations under all Contracts with customers, suppliers, vendors or other
third parties relating to both the Japanese Edwards Business and the Retained
Business (the "Shared Agreements").  Each of Baxter Japan and Edwards
               -----------------
Optionholder shall be entitled to the rights and privileges of its allocable
portion of the Shared Agreements.

(b)  Each of Edwards Optionholder and Baxter Japan shall use commercially
     reasonable efforts to take, or cause to be taken, all actions, and to do,
     or cause to be done, all things reasonably necessary, proper or advisable
     under applicable laws, regulations and agreements to afford the rights and
     privileges of the allocable portion of the Shared Agreements to the other.

(c)  Liabilities pursuant to, arising under or relating to a Shared Agreements
     shall be allocated between Baxter Japan, on the one hand, and Edwards
     Optionholder on the other hand, as follows:

(i)  First, if a Liability is incurred exclusively in respect of a benefit
     received by one party, the party receiving such benefit shall be
     responsible for such Liability; and

(ii) Second, if a Liability cannot be so allocated under clause (i), such
     Liability shall be allocated between the parties based on the relative
     proportions of total benefit received (based upon the performance under
     such Shared Agreement during the twelve-month period immediately prior to
     the Closing Date) under the relevant Shared Agreement.  Notwithstanding the
     foregoing, each party shall be responsible for any and all Liabilities
     arising out of or resulting from its breach of the relevant Shared
     Agreement.

(d)  If either Baxter Japan, on the one hand, or Edwards Optionholder, on the
     other hand, improperly receives any benefit or payment under any Shared
     Agreement that was intended for the other, the party receiving such benefit
     or payment will use commercially reasonable efforts to deliver, transfer or
     otherwise afford such benefit or payment to the other party.

8.3.  Informal, Nondocumented Real Estate Leases.  Each party may continue to
      ------------------------------------------
occupy, from and after the Closing Date, such space in the facilities of the
other party as is occupied immediately prior to the Closing Date, or such other
space therein as may be mutually agreed to from time to time by Edwards
Optionholder and Baxter Japan, and which occupancy is otherwise not documented
by any written leasing agreement or otherwise provided for in the Operating
Agreements, on the following terms and conditions:

(a)  The occupying party shall pay to the other party rent with respect to such
     occupied space for the period from and after the Closing Date during which
     such space is so

                                       20
<PAGE>

     occupied, which rent shall be determined by the other party on the same
     basis on which the other party allocates rent with respect to the occupancy
     of space by business units of the other party or as the occupying party
     presently is paying, whichever is lower. Such rent shall be payable from
     time to time by the occupying party (but not more frequently than monthly)
     promptly following delivery by the other party to the occupying party of a
     statement therefor.

(b)  The occupying party may, at any time, upon not less than 15 days' prior
     written notice to Baxter's Director of Corporate Real Estate, with a copy
     to Edwards, terminate its occupancy of any or all of such space.

(c)  The other party may, at any time, upon not less than 30 days' prior written
     notice to the occupying party, require the occupying party to cease
     occupancy of any or all of such space as designated in a notice sent to the
     occupying party.

                                  ARTICLE IX
                            [INTENTIONALLY OMITTED]


                                   ARTICLE X
                     EMPLOYEES AND EMPLOYEE BENEFIT MATTERS

10.1.  Employment of Edwards Employees.  On the Closing Date, Edwards
       --------------------------------
Optionholder shall make an offer to employ each Edwards Employee at the same
salary and wage rate levels (including bonus programs) paid by Baxter Japan as
in effect on the Closing Date; provided, however, that Edwards Optionholder and
                               --------  -------
its Affiliates retain the right to determine the compensation of all such
Edwards Employees after the Closing Date.  Edwards Optionholder and Baxter Japan
shall use commercially reasonable efforts to accomplish any transfers of
employment required by this Section 10.1 in a timely manner.  Each Edwards
                            ------------
Employee who accepts this offer of employment is referred to as a "Transferred
                                                                   -----------
Employee".
--------

10.2.  Terminations/Layoff/Severance.  Edwards Employees shall not be eligible
       -----------------------------
for any severance benefits from Baxter Japan as a result of either their
employment by Edwards Optionholder or its Affiliates or any subsequent
termination of employment with Edwards Optionholder or its Affiliates.

10.3.  Employee Benefit Plans.   (a)  Except as otherwise specifically provided
       ----------------------
in this Article X, all Transferred Employees shall cease to participate in the
        ---------
Baxter Japan employee benefit plans and programs (the "Baxter Plans") as of the
                                                       ------------
Closing Date.

(b)  No later than the Closing Date, Edwards Optionholder and/or its Affiliates
     shall establish its own employee benefit plans and programs for the benefit
     of eligible Transferred Employees including, but not limited to, a pension
     plan (the "Edwards Japan Pension Plan"), [a savings plan (the "Edwards
     Japan Savings Plan"),] a medical plan (including dental and vision), a
     long-term disability plan, a group life insurance plan, an overseas travel
     insurance plan, and a housing loan subsidy program (collectively, the

     "Edwards Welfare Plans").  Additionally, Edwards Optionholder shall
     ----------------------
     continue to contribute to the ["Kosei Nenkin" Old Age Employees' Pension
     Plan] on behalf of Transferred Employees.

                                       21
<PAGE>

     Notwithstanding the foregoing, Edwards Optionholder shall not contribute on
     behalf of the Transferred Employees to the multiemployer fund entitled the
     [Employee Pension Fund].

10.4.  Transfer of Account Balances and Accrued Benefits.  Subject to applicable
       -------------------------------------------------
law and the provisions of the [Baxter Tax Qualified Pension Plan] (the "Baxter
                                                                        ------
Japan Pension Plan"), as soon as administratively practicable following the
------------------
Closing Date, or effective as of any other date as agreed to in writing by the
plan administrator for the Baxter Japan Pension Plan and the plan administrator
for the Edwards Japan Pension Plan, the accrued benefits (the "Transferred
                                                               -----------
Accrued Benefits") of all Baxter Japan Pension Plan participants who are
----------------
Transferred Employees shall be transferred from the Baxter Japan Pension Plan to
[the Edwards Japan Pension Plan] (the "Edwards Japan Pension Plan").  The amount
                                       --------------------------
of Transferred Accrued Benefits shall be determined by the actuaries for the
respective plans by the Closing Date in accordance with the methodology
described in Schedule 10.4.  Each Transferred Employee shall receive credit for
             -------------
all purposes under the Edwards Japan Pension Plan for the periods of service
with Baxter Japan or any of its Subsidiaries or Affiliates.  The plan
administrator for the Edwards Japan Pension Plan shall take any other action
reasonably requested by the plan administrator for the Baxter Japan Pension Plan
that is necessary or advisable, in the opinion of the plan administrator for the
Baxter Pension Plan, to maintain the tax-qualified status of the Baxter Japan
Pension Plan or to avoid the imposition of any penalties with respect to such
plan.

10.5.  Welfare Benefits.
       ----------------

(a)  Each Transferred Employee who becomes eligible to participate in the
     Edwards Welfare Plans shall be credited under such plans with periods of
     service with any Baxter Japan Group Member for all purposes under such
     plans.

(b)  Baxter Japan shall pay all costs associated with the provision of
     disability benefits to any Edwards Employee or former Edwards Employee who
     as of the Closing Date is totally and permanently disabled.  Edwards
     Optionholder shall pay all costs associated with the provision of
     disability benefits to any Edwards Employee or former Edwards Employee
     other than the persons described in the first sentence of this Section
     10.5(b) in an amount equal to the benefits such persons would have received
     if they had remained covered under the Baxter Plans during the period of
     such disability leave.  Notwithstanding the foregoing, any Transferred
     Employee receiving benefits under the [Baxter Japan Long-Term Disability
     Plan] on the Closing Date shall continue to receive benefits under the
     terms of such plan and the insurance contract used to fund such plan, and
     Edwards Optionholder shall not be charged for the payment of such benefits.
     [As of the Closing Date, Edwards Optionholder shall assume all Liabilities
     determined under FAS 112 relating to all Edwards Employees.]

(c)  Baxter Japan shall pay all claims under the [Baxter Japan Medical Plan]
     (including dental and vision benefits) relating to Transferred Employees
     that as of the Closing Date have been incurred but not paid, but only if
     claims for such costs are submitted in written form to the authorized
     agents of Baxter Japan during the six-month period beginning on the Closing
     Date.

                                       22
<PAGE>

10.6.  Stock Purchase Plans.  Except as otherwise provided in the Baxter Stock
       --------------------
Purchase Plan, on the Closing Date, all Transferred Employees shall cease to be
eligible to purchase Baxter Common Stock under the terms of the Baxter
International Inc. Employees Stock Purchase Plan for International Employees
(the "Baxter Stock Purchase Plan").
      --------------------------

10.7.  Workers' Compensation.  As soon as administratively practicable following
       ---------------------
the Closing Date, a risk management representative for each of the parties shall
agree upon the allocation between the parties of responsibility and liability
for workers' compensation claims and expenses relating to current and former
Edwards Employees.

10.8.  Vacation Pay Policy.  After the Closing Date, it is expected that Edwards
       -------------------
Optionholder shall maintain for its employees a vacation pay policy, and Edwards
Optionholder shall be responsible for costs incurred to provide vacation pay to
Transferred Employees following such date.  Edwards Optionholder shall assume
any and all Baxter Japan Liabilities to provide to Transferred Employees
vacation that such persons accrued under the Baxter Japan vacation pay policy as
of the Closing Date, and no payment of such accrued vacation pay shall be made
by Baxter Japan on the Closing Date.

10.9.  Information to be Provided to Baxter Japan.  Edwards Optionholder (or its
       ------------------------------------------
applicable Affiliate) shall provide any information that Baxter Japan may
reasonably request, including information relating to dates of termination of
employment, in order to provide benefits to any eligible Transferred Employee
under the terms and conditions described herein or under the applicable Baxter
Plans.  Any information relating to an employee's termination of employment
shall be provided by Edwards Optionholder to Baxter Japan as soon as available
to Edwards Optionholder or any of its Affiliates, but in any event no later than
30 days after such information is made available to Edwards Optionholder or any
such Affiliates.

10.10.  Transfer of Employee Files.  By a specified date as agreed upon by
        --------------------------
Edwards Optionholder and Baxter Japan following the Closing Date, Baxter Japan
shall transfer to Edwards Optionholder complete copies of the personnel files
relating to all Transferred Employees.

10.11.  Employment Solicitation.  During the period beginning on the Closing
        -----------------------
Date and ending one year after the Closing Date, neither Baxter Japan nor
Edwards Optionholder shall, nor shall they permit any of their respective
Subsidiaries, Affiliates or agents to, directly or indirectly, except as
provided in the following sentence, actively solicit or recruit for employment
any then current employee of the other or of any of the other's Subsidiaries.
Nothing contained in this Section 10.11 shall (i) prohibit the hiring of any
                          -------------
employee who in good faith is believed to be actively seeking employment on his
or her own initiative without prior contact initiated by any employee or agent
of the company where employment is sought, or any of such company's Affiliates;
provided, however, that such employee or the hiring company has obtained
authorization from the Department Manager of Human Resources of his or her
current employer; or (ii) prohibit Baxter Japan or Edwards Optionholder or any
of their respective Subsidiaries from hiring any person who has terminated
employment with the other company.  The foregoing restriction shall cease to
apply one year after the Closing Date.

                                       23
<PAGE>

                                  ARTICLE XI
                               INSURANCE MATTERS

11.1.  Insurance Prior to the Closing Date.  Edwards Optionholder does hereby
       -----------------------------------
agree that Baxter Japan shall not have any Liability whatsoever as a result of
the insurance policies and practices of Baxter Japan in effect at any time prior
to the Closing Date, including any assistance rendered to Edwards Optionholder
by Baxter Japan in the placement of its insurance program, including as a result
of the level or scope of any such insurance, the creditworthiness of any
insurance carrier, the terms and conditions of any policy and the adequacy or
timeliness of any notice to any insurance carrier with respect to any claim or
potential claim or otherwise.

11.2.  Ownership of Existing Policies and Programs.  Baxter Japan shall continue
       -------------------------------------------
to own all property, casualty and liability insurance policies and programs,
including primary and excess general liability, errors and omissions,
automobile, workers' compensation, property, fire, crime, surety and other
similar insurance policies, in effect on or before the Closing Date
(collectively, the "Baxter Japan Policies"  and individually, a "Baxter Japan
                   ----------------------                       -------------
Policy").  [Baxter Japan shall use commercially reasonable efforts to maintain
------
commercially reasonable insurance coverage in full force and effect up to and
including the Closing Date, and, subject to the provisions of this Agreement,
Baxter Japan shall retain all of its rights, benefits and privileges, if any,
under the Baxter Japan Policies.]  Nothing contained herein shall be construed
to be an attempt to assign or to change the ownership of the Baxter Japan
Policies.

11.3.  Procurement of Insurance for Edwards Optionholder.  To the extent not
       -------------------------------------------------
already provided for by the terms of the Baxter Japan Policies, Baxter Japan
shall use commercially reasonable efforts to cause Edwards Optionholder [and its
Affiliates] to be named as additional insureds under Baxter Japan Policies whose
effective policy periods include the Closing Date, in respect of claims for
which coverage is available under the terms and conditions of Baxter's policies,
arising out of or relating to periods prior to the Closing Date; provided,
                                                                 --------
however, that nothing contained herein shall be construed to require Baxter
-------
Japan to pay any additional premium or other charges in respect to, or waive or
otherwise limit any of its rights, benefits or privileges under, any Baxter
Japan Policy in order to effect the naming of Edwards Optionholder [or its
Affiliates] as such additional insureds.

11.4.  Acquisition and Maintenance of Post-Closing Edwards Optionholder's
       ------------------------------------------------------------------
Insurance Policies and Programs.  Commencing on and as of the Closing Date,
--------------------------------
Edwards Optionholder shall be responsible for establishing and maintaining
separate property, casualty and liability insurance policies and programs
(including primary and excess general liability, errors and omissions,
automobile, workers' compensation, property, fire, crime, surety and other
similar insurance policies) for activities and claims involving Edwards
Optionholder and the Japanese Edwards Business.  Edwards Optionholder will
exercise commercially reasonable efforts to secure liability insurance to avoid
potential gaps in coverage for claims arising from events prior to the Closing
Date, which gap would not exist had the Japanese Edwards Business continued to
be covered with the same retroactive dates existing in the Baxter Japan Policies
in effect on the Closing Date.  Edwards Optionholder shall be responsible for
all administrative and financial matters relating to insurance policies
established and maintained by Edwards Optionholder for claims relating to any
period on or after the Closing Date involving Edwards

                                       24
<PAGE>

Optionholder. Notwithstanding any other agreement or understanding to the
contrary, except as set forth in this Section 11.7 with respect to claims
                                      ------------
administration and financial administration of the Baxter Japan Policies, Baxter
Japan shall not have any responsibility for or obligation to Edwards or any of
its Affiliates relating to property and casualty insurance matters for any
period, whether prior to, on or after the Closing Date.

11.5.  Edwards Optionholder Directors' and Officers' Insurance.  Baxter [Japan]
       --------------------------------------------------------
shall use commercially reasonable efforts to cause the persons currently serving
as officers and/or directors of Baxter Japan to be covered for a period of [six
(6)] years from the Closing Date by the directors' and officers' liability
insurance policy maintained by Baxter as of the Closing Date (including
corporate reimbursement) (provided that Baxter Japan may substitute therefor
                          --------
policies of at least the same coverage and amounts containing terms and
conditions that are not less advantageous than such policy) with respect to
matters covered under the existing policy occurring prior to the Closing Date
that were committed by such officers and/or directors in their capacity as such;

provided, however, that in no event shall Baxter be required to expend with
--------  -------
respect to any year more than 200% of the current annual premium expended by
Baxter (the "Insurance Amount" to maintain or procure insurance coverage
            -----------------
pursuant hereto; and provided, further, that if Baxter is unable to maintain or
                     --------  -------
obtain the insurance called for by this Section 11.5, Baxter shall use
                                        ------------
commercially reasonable efforts to obtain as much comparable insurance as
available for the Insurance Amount.  In the event Baxter [Japan] or any of its
successors or assigns (i) consolidates with or merges into any other Person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger, or (ii) transfers or conveys all or substantially all
of its properties and assets to any Person, then, and in each such case, to the
extent necessary, proper provision shall be made so that the successors and
assigns of Baxter [Japan] assume the obligations set forth in this Section 11.5.
                                                                   ------------
The provisions of this Section 11.5 are intended to be for the benefit of, and
                       ------------
shall be enforceable by, each such officer and director and his or her heirs and
representatives.]  As provided in Section 12.4, any amount Edwards Optionholder
                                  ------------
is required to pay to Baxter Japan as an indemnity under this Agreement is
reduced to the extent Baxter Japan receives insurance proceeds from the above
coverage, but only to the extent such proceeds are actually received by Baxter
Japan.

11.6.  Pre-Distribution Insurance Claims Administration.  Edwards Optionholder
       ------------------------------------------------
acknowledges that Baxter Japan has and will continue to experience losses and
receive claims that are, or might be, covered by one or more Baxter Japan
Policies, and prior to the Closing Date will make decisions and commitments
regarding administration of such claims, including reaching agreements and
stipulations regarding such claims (collectively, "Pre-Closing Claims
                                                  -------------------
Administration").  Edwards Optionholder covenants not to contest or challenge in
----------------
any manner any action taken by Baxter Japan prior to the Closing Date in
connection with or relating to Pre-Closing Claims Administration, or to
interfere with the performance of any agreement, commitment or stipulation so
made by Baxter Japan in connection with or relating to Pre-Closing Claims
Administration.

11.7.  Post-Distribution Insurance Claims Administration.  Baxter Japan shall
       --------------------------------------------------
have the primary right, responsibility and authority for claims administration
and financial administration of claims that relate to or affect the Baxter Japan
Policies.  Upon notification by Edwards Optionholder of a claim relating to
Edwards Optionholder [or an Affiliate thereof] under one or more of the Baxter
Japan Policies, Baxter Japan shall cooperate with Edwards

                                       25
<PAGE>

Optionholder in asserting and pursuing coverage and payment for such claim by
the appropriate insurance carrier(s). In asserting and pursuing such coverage
and payment, Baxter Japan shall have sole power and authority to make binding
decisions, determinations, commitments and stipulations on its own behalf and on
behalf of Edwards Optionholder, which decisions, determinations, commitments and
stipulations shall be final and conclusive if made to maximize the overall
economic benefit of the Baxter Japan Policies. Edwards Optionholder assumes
responsibility for, and shall pay to the appropriate insurance carriers or
otherwise, any premiums, retrospectively-rated premiums, defense costs,
indemnity payments, deductibles, retentions or other charges (collectively,
"Insurance Charges") whenever arising, which shall become due and payable under
------------------
the terms and conditions of any applicable Baxter Japan Policy in respect of any
liabilities, losses, claims, actions or occurrences, whenever arising or
becoming known, involving or relating to any of the assets, businesses,
operations or liabilities of the Japanese Edwards Business, whether the same
relate to the period prior to, on or after the Closing Date.  To the extent that
the terms of any applicable Baxter Japan Policy provide that Baxter Japan shall
have an obligation to pay or guarantee the payment of any Insurance Charges
relating to Edwards Optionholder, Baxter Japan shall be entitled to demand that
Edwards Optionholder make such payment directly to the Person [or any of its
Affiliates] entitled thereto.  In connection with any such demand, Baxter Japan
shall submit to Edwards Optionholder a copy of any invoice received by Baxter
Japan pertaining to such Insurance Charges together with appropriate supporting
documentation, to the extent available.  In the event that Edwards Optionholder
fails to pay any such Insurance Charges when due and payable, whether at the
request of the party entitled to payment or upon demand by Baxter Japan, Baxter
Japan may (but shall not be required to) pay such insurance charges for and on
behalf of Edwards Optionholder and, thereafter, Edwards Optionholder shall
forthwith reimburse Baxter Japan for such payment.  Subject to the other
provisions of this Article XI, the retention by Baxter Japan of the Baxter Japan
                   ----------
Policies and the responsibility for claims administration and financial
administration of such policies are in no way intended to limit, inhibit or
preclude any right of Edwards Optionholder, Baxter Japan or any other insured to
insurance coverage for any Insured Claims under the Baxter Japan Policies.

11.8.  Non-Waiver of Rights to Coverage.  An insurance carrier that otherwise
       --------------------------------
would be obligated to pay any claim shall not be relieved of the responsibility
with respect thereto, or, solely by virtue of the provisions of this Article XI,
                                                                     ----------
have any subrogation rights with respect thereto, it being expressly understood
and agreed that no insurance carrier or any third-party shall be entitled to a
windfall (i.e., a benefit they would not be entitled to receive had the Closing
          ----
not occurred or in the absence of the provisions of this Article XI) by virtue
                                                         ----------
of the provisions hereof.


11.9.  Scope of Affected Policies of Insurance.  The provisions of this Article
       ----------------------------------------                         -------
XI relate solely to matters involving liability, casualty and workers'
--
compensation insurance, and shall not be construed to affect any obligation of
or impose any obligation on the parties with respect to any life, health and
accident, dental or medical insurance policies applicable to any of the
officers, directors, employees or other representatives of the parties or their
Affiliates.

                                       26
<PAGE>

                                  ARTICLE XII
                                INDEMNIFICATION

12.1.  Indemnification by Edwards Optionholder.  From and after the Closing
       ---------------------------------------
Date, Edwards Optionholder shall indemnify and hold harmless each Baxter Japan
Group Member from and against any and all Loss and Expense incurred or suffered
by such Baxter Japan Group Member in connection with, relating to, arising our
of or due to, directly or indirectly, any of the following items:

(a)  the Japanese Edwards Business as conducted on or at any time prior to the
     Closing Date (other than Excluded Liabilities);

(b)  the Purchased Business;

(c)  the Assumed Liabilities;

(d)  the breach by Edwards Optionholder of any covenant or agreement set forth
     in this Agreement or the Instrument of Assumption, regardless of when or
     where the loss, claim, accident, occurrence, event or happening giving rise
     to the Expense or Loss took place, or whether any such loss, claim,
     accident, occurrence, event or happening is known or unknown, or reported
     or unreported;

(e)  the employee benefits provided or the actions taken or omitted to be taken
     with respect thereto in connection with this Agreement or otherwise
     relating to the provision of employee benefits to Edwards Employees, their
     beneficiaries, alternate payees or any other person claiming benefits
     through them (except to the extent such Expenses or Losses are specifically
     allocated to Baxter Japan pursuant to Section 12.2(e), including Expenses
                                           ---------------
     or Losses arising in connection with (i) Edwards Optionholders' reduction,
     elimination or failure to provide any benefit accrued by its employees
     (including benefits accrued prior to the Closing Date) and (ii) the
     transfer of account balances and accrued benefits as described in Section
                                                                       -------
     10.4 where such Expenses or Losses are incurred as a result of any act or
     ----
     omission by Edwards Optionholder (or a representative of Edwards
     Optionholder);

(f)  the indemnifiable matters set forth in Section 5.6 and Article X; and
                                            -----------     ---------

(g)  Baxter Japan's inability to terminate the employment of any Edwards
     Employees following the termination or expiration of this Agreement.

12.2.  Indemnification by Baxter Japan.  From and after the Closing Date, Baxter
       -------------------------------
Japan shall indemnify and hold harmless each Edwards Optionholder Group Member
from and against any and all Loss and Expense incurred or suffered by such
Edwards Optionholder Group Member in connection with, relating to, arising out
of or due to, directly or indirectly, any of the following items:

(a)  the business (other than the Japanese Edwards Business) conducted by Baxter
     Japan on or at any time prior to the Closing Date;

                                       27
<PAGE>

(b)  the assets owned by Baxter Japan other than assets included in the
     Purchased Business and the Shared Agreements;

(c)  the Liabilities (including the Excluded Liabilities) of Baxter Japan other
     than the Assumed Liabilities;

(d)  the breach by Baxter Japan of any covenant or agreement set forth in this
     Agreement or the Instrument of Assignment, regardless of when or where the
     loss, claim, accident, occurrence, event or happening giving rise to the
     Expense or Loss took place, or whether any such loss, claim, accident,
     occurrence, event or happening is known or unknown, or reported or
     unreported; and

(e)  Baxter Japan's reduction, elimination or failure to provide any benefit
     previously provided to its employees, other than a benefit assumed by
     Edwards Optionholder pursuant to Article X, or any act or omission by
                                      ---------
     Baxter Japan in connection with the transfer of assets and liabilities as
     described in Section 10.4.
                  ------------

12.3.  Applicability of and Limitation on Indemnification.
       --------------------------------------------------

(a)  EXCEPT AS EXPRESSLY PROVIDED HEREIN, THE INDEMNITY OBLIGATIONS UNDER THIS
     ARTICLE XII SHALL APPLY NOTWITHSTANDING ANY INVESTIGATION MADE BY OR ON
     BEHALF OF ANY INDEMNIFIED PARTY AND SHALL APPLY WITHOUT REGARD TO WHETHER
     THE LOSS, LIABILITY, CLAIM, DAMAGE, COST OR EXPENSE FOR WHICH INDEMNITY IS
     CLAIMED HEREUNDER IS BASED ON STRICT LIABILITY, ABSOLUTE LIABILITY OR
     ARISES AS AN OBLIGATION FOR CONTRIBUTION.

(b)  NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT
     SHALL BAXTER JAPAN BE LIABLE TO ANY EDWARDS OPTIONHOLDER GROUP MEMBER, OR
     EDWARDS OPTIONHOLDER BE LIABLE TO ANY BAXTER JAPAN GROUP MEMBER, UNDER THIS
     AGREEMENT FOR ANY SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE
     DAMAGES, INCLUDING LOSS OF ANTICIPATED PROFITS OR LOSS OR DIMINUTION OF
     REVENUES, REGARDLESS OF THE FORM OF ACTION, WHETHER IN CONTRACT, TORT OR
     OTHERWISE, EXCEPT TO THE EXTENT THAT SUCH LIABILITY HAS BEEN ASSERTED BY A
     THIRD PARTY AGAINST A PARTY ENTITLED TO INDEMNIFICATION HEREUNDER.

12.4.  Adjustment of Indemnifiable Losses.
       ----------------------------------
(a)  The amount that either party (an "Indemnifying Party") is required to pay
                                       ------------------
     to any Person entitled to indemnification hereunder (an "Indemnified
                                                              -----------
     Party") shall be reduced (including retroactively) by any Insurance
     Proceeds and other amounts actually recovered by or on behalf of such
     Indemnified Party in reduction of the related Expense or Loss.  If an
     Indemnified Party receives a payment (an "Indemnity Payment") required by
                                               -----------------
     this Agreement from an Indemnifying Party in respect of any Expense or Loss
     and subsequently actually receives Insurance Proceeds or other amounts in
     respect of such Expense or Loss, then such Indemnified Party shall pay to
     the Indemnifying Party a sum equal to the lesser of (i) the amount

                                       28
<PAGE>

     of such Insurance Proceeds or other amounts actually received or (ii) the
     net amount of Indemnity Payments actually received previously. The
     Indemnified Party agrees that the Indemnifying Party shall be subrogated to
     such Indemnified Party under any insurance policy.

(b)  An insurer who otherwise would be obligated to pay any claim shall not be
     relieved of the responsibility with respect thereto, or, solely by virtue
     of the indemnification provisions hereof, have any subrogation rights with
     respect thereto, it being expressly understood and agreed that no insurer
     or any other third-party shall be entitled to a "windfall" (i.e., a benefit
     he or she would not be entitled to receive in the absence of the
     indemnification provisions) by virtue of the indemnification provisions
     hereof.

(c)  If any Indemnified Party realizes a Tax benefit or detriment in one or more
     Tax periods by reason of having incurred an Expense or a Loss for which
     such Indemnified Party receives an Indemnity Payment from an Indemnifying
     Party (or by reason of the receipt of any Indemnity Payment), then such
     Indemnified Party shall pay to such Indemnifying Party an amount equal to
     the Tax benefit or such Indemnifying Party shall pay to such Indemnified
     Party an additional amount equal to the Tax detriment (taking into account,
     without limitation, any Tax detriment resulting from the receipt of such
     additional amounts), as the case may be.  The amount of any Tax benefit or
     any Tax detriment for a Tax period realized by an Indemnified Party by
     reason of having incurred an Expense or a Loss (or by reason of the receipt
     of any Indemnity Payment) shall be deemed to equal the product obtained by
     multiplying (i) the amount of any deduction or loss or inclusion in income
     for such period resulting from such Expense or Loss (or the receipt of any
     Indemnity Payment or additional amount), as the case may be (without regard
     to whether such deduction or loss or such inclusion in income results in
     any actual decrease or increase in Tax liability for such period), by (ii)
     the highest applicable marginal Tax rate for such period (provided,
     however, that the amount of any Tax benefit attributable to an amount that
     is creditable shall be deemed to equal the amount of such creditable item).
     Any payment due under this Section 12.4(c) with respect to a Tax benefit or
                                ---------------
     Tax detriment realized by an Indemnified Party in a Tax period shall be due
     and payable within 30 days from the time the return for such Tax period is
     due, without taking into account any extension of time granted to the party
     filing such return.

12.5.  Procedures for Indemnification of Third Party Claims.
       ----------------------------------------------------
(a)  If any third-party shall make any claim or commence any arbitration
     proceeding or suit (collectively, a "Third Party Claim") against any one or
                                          -----------------
     more of the Indemnified Parties with respect to which an Indemnified Party
     intends to make any claim for indemnification against Edwards Optionholder
     under Section 12.1 or against Baxter Japan under Section 12.2, such
           ------------                               ------------
     Indemnified Party shall promptly give written notice to the Indemnifying
     Party describing such Third Party Claim in reasonable detail, and the
     following provisions shall apply.  Notwithstanding the foregoing, the
     failure of any Indemnified Party to provide notice in accordance with this

     Section 12.5(a) shall not relieve the related Indemnifying Party of its
     ---------------
     obligations under this Article XII, except to the extent that such
                            -----------
     Indemnifying Party is actually prejudiced by such failure to provide
     notice.

(b)  The Indemnifying Party shall have the right to assume the defense of any
     such Third Party Claim.  If the Indemnifying Party elects not to conduct
     and control the defense

                                       29
<PAGE>

     of such Third Party Claim, the Indemnified Party shall have the right to
     defend, contest, settle or compromise such Third Party Claim in the
     exercise of its exclusive discretion subject to the provisions of
     Section 12.5(c), and the Indemnifying Party shall, upon
     ---------------
     request from any of the Indemnified Parties, promptly pay to such
     Indemnified Parties in accordance with the other terms of this Section
                                                                    -------
     12.5(b) the amount of any Expense or Loss resulting from their liability to
     -------
     the third-party claimant. If the Indemnifying Party assumes the defense of
     the Third Party Claim, the Indemnifying Party shall have the right to
     undertake, conduct and control, through counsel reasonably acceptable to
     the Indemnified Party, and at its sole expense, the conduct and settlement
     of such Third Party Claim, and the Indemnified Party shall cooperate with
     the Indemnifying Party in connection therewith, provided that (i) the
     Indemnifying Party shall not thereby permit any lien, encumbrance or other
     adverse charge to thereafter attach to any asset of any Indemnified Party;
     (ii) the Indemnifying Party shall not thereby permit any injunction against
     any Indemnified Party; (iii) the Indemnifying Party shall permit the
     Indemnified Party and counsel chosen by the Indemnified Party and
     reasonably acceptable to the Indemnifying Party to monitor such conduct or
     settlement and shall provide the Indemnified Party and such counsel with
     such information regarding such Third Party Claim as either of them may
     reasonably request (which request may be general or specific), but the fees
     and expenses of such counsel (including allocated costs of in-house counsel
     and other personnel) shall be borne by the Indemnified Party unless (A) the
     Indemnifying Party and the Indemnified Party shall have mutually agreed to
     the retention of such counsel or (B) the named parties to any such Third
     Party Claim include the Indemnified Party and the Indemnifying Party and in
     the reasonable opinion of counsel to the Indemnified Party representation
     of both parties by the same counsel would be inappropriate due to actual or
     likely conflicts of interest between them, in either of which cases the
     reasonable fees and disbursements of counsel for such Indemnified Party
     (including allocated costs of in-house counsel and other personnel) shall
     be reimbursed by the Indemnifying Party to the Indemnified Party; and (iv)
     the Indemnifying Party shall agree promptly to reimburse to the extent
     required under this Article XII the Indemnified Party for the full amount
                         -----------
     of any Expense or Loss resulting from such Third Party Claim and all
     related expenses incurred by the Indemnified Party.  In no event shall the
     Indemnifying Party, without the prior written consent of the Indemnified
     Party, settle or compromise any claim or consent to the entry of any
     judgment that does not include as an unconditional term thereof the giving
     by the claimant or the plaintiff to the Indemnified Party a release from
     all Liability in respect of such claim.

  If the Indemnifying Party shall not have undertaken the conduct and control of
the defense of the Third Party Claim as provided above, the Indemnifying Party
shall nevertheless be entitled through counsel chosen by the Indemnifying Party
and reasonably acceptable to the Indemnified Party to monitor the conduct or
settlement of such claim by the Indemnified Party, and the Indemnified Party
shall provide the Indemnifying Party and such counsel with such information
regarding such Third Party Claim as either of them may reasonably request (which
request may be general or specific), but all costs and expenses incurred in
connection with such monitoring shall be borne by the Indemnifying Party.

(c)  So long as the Indemnifying Party is contesting any such Third Party Claim
     in good faith, the Indemnified Party shall not pay or settle any such Third
     Party Claim.  Notwithstanding the foregoing, the Indemnified Party shall
     have the right to pay or settle any such Third Party Claim, provided that
     in such event the Indemnified Party shall waive any right

                                       30
<PAGE>

     to indemnity therefor by the Indemnifying Party, and no amount in respect
     thereof shall be claimed as an Expense or a Loss under this Section
                                                                 -------
     12.5(c).
     --------

  If the Indemnifying Party shall have undertaken the conduct and control of the
defense of any Third Party Claim as provided above, the Indemnified Party, on
not less than 30 days prior written notice to the Indemnifying Party, may make
settlement (including payment in full) of such Third Party Claim, and such
settlement shall be binding upon the parties for the purposes hereof, unless
within said 30-day period the Indemnifying Party shall have requested the
Indemnified Party to contest such Third Party Claim at the expense of the
Indemnifying Party.  In such event, the Indemnified Party shall promptly comply
with such request and the Indemnifying Party shall have the right to direct the
defense of such claim or any litigation based thereon subject to all the
conditions of Section 12.5(b).  Notwithstanding anything in this Section 12.5(c)
              ---------------                                    ---------------
to the contrary, if the Indemnified Party, in the belief that a claim may
materially and adversely affect it other than as a result of money damages or
other money payments, advises the Indemnifying Party that it has determined to
settle a claim, the Indemnified Party shall have the right to do so at its own
cost and expense, without any requirement to contest such claim at the request
of the Indemnifying Party, but without any right under the provisions of this
Section 12.5(c) for indemnification by the Indemnifying Party.
---------------

(d)  The provisions of this Section 12.5 and Section 12.6 shall not apply to
                            ------------     ------------
     income Taxes (which are covered by the Tax Sharing Agreement).

12.6.  Procedures for Indemnification of Direct Claims.    Any claim for
       -----------------------------------------------
indemnification on account of an Expense or a Loss made directly by the
Indemnified Party against the Indemnifying Party and that does not result from a
Third Party Claim shall be asserted by written notice from the Indemnified Party
to the Indemnifying Party specifically claiming indemnification hereunder.  Such
Indemnifying Party shall have a period of 30 business days after the receipt of
such notice within which to respond thereto.  If such Indemnifying Party does
not respond within such 30 business day period, such Indemnifying Party shall be
deemed to have accepted responsibility to make payment and shall have no further
right to contest the validity of such claim.  If such Indemnifying Party does
respond within such 30 business-day period and rejects such claim in whole or in
part, such Indemnified Party shall be free to pursue resolution as provided in
Article XIII.
------------

12.7.  Remedies Cumulative.  The remedies provided in this Article XII shall be
       -------------------                                 -----------
cumulative and, subject to the provisions of Article XIII below, shall not
                                             ------------
preclude assertion by an Indemnified Party of any other rights or the seeking of
any and all other remedies against any Indemnifying Party.

                                 ARTICLE XIII
                               DISPUTE RESOLUTION

13.1.  General.  Any dispute arising out of or relating to this Agreement, the
       -------
Instrument of Assignment or the Instrument of Assumption shall be solved in
accordance with the procedures specified in this Article XIII which shall be the
                                                 ------------
sole and exclusive procedures for the resolution of any such disputes.

                                       31
<PAGE>

13.2.  Escalation.  The parties will attempt in good faith to resolve
       ----------
expeditiously any dispute, claim or controversy arising out of or relating to
the execution, interpretation and performance of this Agreement (including the
validity, scope and enforceability of this arbitration provision) promptly by
negotiations between executives who have authority to settle the controversy and
who are at a higher level of management than the persons with direct
responsibility for the administration of this Agreement. Either party may give
the other party written notice (an "Escalation Notice") of any dispute not
                                    -----------------
resolved in the normal course of business. Within fifteen days after delivery of
the Escalation Notice, the receiving party shall submit to the other a written
response. The Escalation Notice and the response thereto shall include (a) a
statement of each party's position and a summary of arguments supporting that
position, and (b) the name and title of the executive who will represent that
party and of any other person who will accompany the executive.  Within 30 days
after delivery of the Escalation Notice, the executives of both parties shall
meet at a mutually acceptable time and place, and thereafter as often as they
reasonably deem necessary, to attempt to resolve the dispute.  All reasonable
requests for information made by one party to the other will be honored.  All
negotiations pursuant to this clause are confidential and shall be treated as
compromise and settlement negotiations for purposes of applicable rules of
evidence.

13.3.  Arbitration.  Any dispute, claim or controversy arising out of or
       -----------
relating to this Agreement or its breach, termination or validity which has not
been resolved by the specified  non-binding procedure set forth in Section 13.2
                                                                   ------------
within 90 days of the date of delivery of the Escalation Notice shall be settled
by binding arbitration in accordance with the CPR Non-Administered Arbitration
Rules in effect on the date of this Agreement, by three independent and
impartial arbitrators, none of whom shall be appointed by either party. The
arbitration shall be governed by the United States Arbitration Act, 9 U. S. C.
(S) (S) 1- 16, as the same may be amended from time to time, and judgment upon
the award rendered by the arbitrators may be entered by any court having
jurisdiction thereof.  The place of the arbitration shall be Lake County,
Illinois or Orange County, California, and shall be determined by the party that
initiated the dispute resolution process. The arbitrators may award attorneys'
fees in their discretion. Otherwise, the arbitrators are not empowered to award
damages in excess of compensatory damages, and each party hereby irrevocably
waives any right to recover such damages.

13.4.  Procedures.  The parties may request limited discovery in accordance with
       ----------
the Federal Rules of Civil Procedure of the United States (the "F.R.C.P.") for a
                                                                --------
period of 120 days after the initiation of the arbitration process. All issues
regarding compliance with discovery requests shall be decided by the arbitrators
pursuant to the F.R.C.P. The parties agree that the recipient of a discovery
request shall have 10 business days after the receipt of such request to object
to any or all portions of such request and shall respond to any portions of such
request not so objected within 30 business days of the receipt of such request.
All objections shall be in writing and shall indicate the reasons for such
objections. The objecting party shall ensure that all objections and responses
are received by the other party within the above time periods; failure to comply
with the specified time period shall be addressed as set forth in F.R.C.P. 37.
Any party seeking to compel discovery following receipt of an objection shall
file with the other party and the arbitrators a motion to compel, including a
copy of the initial request and the objection. The arbitrators shall allow 10
business days for the responses to the motion to compel before ruling. Claims of
privilege and other objections shall be determined as they would be in United
States federal court in a case applying Illinois law. The arbitrators may grant
or deny the motion to

                                       32
<PAGE>

compel, in whole or in part, concluding that the discovery request is or is not
appropriate under the circumstances, taking into account the needs of the
parties and the desirability of making discovery expeditious and cost-effective.
The statute of limitations of the State of Illinois applicable to the
commencement of a lawsuit shall apply to the date of initial written
notification of a dispute and shall be extended until commencement of
arbitration if all interim deadlines have been complied with by the notifying
party.

13.5.  Injunctive Relief.  Nothing contained in this Article XIII shall prevent
       -----------------                             ------------
either party from resorting to judicial process if injunctive or other equitable
relief from a court is necessary to prevent serious and irreparable injury to
one party or to others. The use of arbitration procedures will not be construed
under the doctrine of laches, waiver or estoppel to affect adversely either
party's right to assert any claim or defense.

                                  ARTICLE XIV
                               GENERAL PROVISIONS

14.1.  Notices.  All notices or other communications required or permitted
       -------
hereunder shall be in writing and shall be deemed given or delivered when
delivered personally, or when sent by registered or certified mail or by private
courier or facsimile transmission (provided that in the case of facsimile
transmission, a confirmation copy of the notice shall be delivered by hand or
sent by courier within two days of transmission) addressed as follows:

          If to Edwards Optionholder, to:

          Edwards Lifesciences Limited
          Rokubancho 2-8, Chiyoda-ku
          Tokyo 102-0085 Japan
          Attention:  __________
          Facsimile:  81-3-5213-5802

          with a copy to:

          ______________________
          ______________________
          ______________________
          ______________________
          Attention:  __________

          If to Baxter Japan, to:

          Baxter Limited
          4, Rokubancho, Chiyoda-ku
          Tokyo 102-8468 Japan
          Attention:  __________
          Facsimile:  81-3-5213-5111

          with a copy to:

                                       33
<PAGE>

          ______________________
          ______________________
          ______________________
          ______________________
          Attention:  __________

or to such other address as such party may indicate by a notice delivered to the
other party hereto.

14.2.  Successors and Assigns.  (a)  Either party may assign any of its rights
       ----------------------
under this Agreement, but no such assignment shall relieve such party of its
obligations hereunder.

(b)  This Agreement shall be binding upon and inure to the benefit of the
     parties hereto and their successors and permitted assigns.  The successors
     and permitted assigns hereunder shall include without limitation, in the
     case of Edwards Optionholder, any permitted assignee as well as the
     successors in interest to such permitted assignee (whether by merger,
     liquidation (including successive mergers or liquidations) or otherwise).
     Except to the extent otherwise provided in Section 11.5 or Article XII,
                                                ------------    -----------
     nothing in this Agreement, expressed or implied, is intended or shall be
     construed to confer upon any Person other than the parties and successors
     and assigns permitted by this Section 14.2 any right, remedy or claim under
                                   ------------
     or by reason of this Agreement.

14.3.  Access to Records after Closing.  (a)  For a period of ten years after
       -------------------------------
the Closing Date, Baxter Japan and its representatives shall have reasonable
access to all of the books and records of the Japanese Edwards Business
transferred to Edwards Optionholder hereunder to the extent that such access may
reasonably be required by Baxter Japan in connection with matters relating to or
affected by the operations of the Japanese Edwards Business prior to the Closing
Date.  Such access shall be afforded by Edwards Optionholder upon receipt of
reasonable advance notice and during normal business hours.  Baxter Japan shall
be solely responsible for any costs or expenses incurred by it pursuant to this
Section 14.3(a).  If Edwards Optionholder shall desire to dispose of any of such
---------------
books and records prior to the expiration of such ten-year period, Edwards
Optionholder shall, prior to such disposition, give Baxter Japan a reasonable
opportunity, at Baxter Japan's expense, to segregate and remove such books and
records as Baxter Japan may select.

(b)  For a period of ten years after the Closing Date, Edwards Optionholder and
     its representatives shall have reasonable access to all of the books and
     records relating to the Japanese Edwards Business which Baxter Japan or any
     of its Affiliates may retain after the Closing Date.  Such access shall be
     afforded by Baxter Japan and its Affiliates upon receipt of reasonable
     advance notice and during normal business hours.  Edwards Optionholder
     shall be solely responsible for any costs and expenses incurred by it
     pursuant to this Section 14.3(b).  If Baxter Japan or any of its Affiliates
                      ---------------
     shall desire to dispose of any of such books and records prior to the
     expiration of such ten-year period, Baxter Japan shall, prior to such
     disposition, give Edwards Optionholder a reasonable opportunity, at Edwards
     Optionholder's expense, to segregate and remove such books and records as
     Edwards Optionholder may select.

                                       34
<PAGE>

14.4.  Entire Agreement; Amendments.  This Agreement and the Exhibits and
       ----------------------------
Schedules referred to herein and the documents delivered pursuant hereto contain
the entire understanding of the parties hereto with regard to the subject matter
contained herein or therein, and supersede all prior agreements, understandings
or letters of intent between or among any of the parties hereto.  This Agreement
shall not be amended, modified or supplemented except by a written instrument
signed by an authorized representative of Edwards Optionholder and by the
President of Baxter Japan.

14.5.  Interpretation.  Article titles and headings to sections herein are
       --------------
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.  The Schedules and
Exhibits referred to herein shall be construed with and as an integral part of
this Agreement to the same extent as if they were set forth verbatim herein.

14.6.  Waivers.  Any term or provision of this Agreement may be waived, or the
       -------
time for its performance may be extended, by the party or parties entitled to
the benefit thereof.  Any such waiver shall be validly and sufficiently
authorized for the purposes of this Agreement if, as to any party, it is
authorized in writing by an authorized representative of such party.  The
failure of any party hereto to enforce at any time any provision of this
Agreement shall not be construed to be a waiver of such provision, nor in any
way to affect the validity of this Agreement or any part hereof or the right of
any party thereafter to enforce each and every such provision.  No waiver of any
breach of this Agreement shall be held to constitute a waiver of any other or
subsequent breach.

14.7.  Expenses.  All costs and expenses incident to its negotiation and
       --------
preparation of this Agreement will be paid by Baxter Japan.  Each party will pay
all costs and expenses incident to its performance and compliance with all
agreements and conditions contained herein on its part to be performed or
complied with.

14.8.  Partial Invalidity.  Wherever possible, each provision hereof shall be
       ------------------
interpreted in such manner as to be effective and valid under applicable law,
but in case any one or more of the provisions contained herein shall, for any
reason, be held to be invalid, illegal or unenforceable in any respect, such
provision shall be ineffective to the extent, but only to the extent, of such
invalidity, illegality or unenforceability without invalidating the remainder of
such invalid, illegal or unenforceable provision or provisions or any other
provisions hereof, unless such a construction would be unreasonable.

14.9.  Execution in Counterparts.  This Agreement may be executed in one or more
       -------------------------
counterparts, each of which shall be considered an original instrument, but all
of which shall be considered one and the same agreement, and shall become
binding when one or more counterparts have been signed by each of the parties
hereto and delivered to each of Baxter Japan and Edwards Optionholder.

14.10.  Governing Law.  This Agreement shall be governed by and construed in
        -------------
accordance with the internal laws (as opposed to the conflicts of law
provisions) of the State of Illinois.

                                       35
<PAGE>

14.11.  Submission to Jurisdiction.  Baxter Japan and Edwards Optionholder
        --------------------------
hereby irrevocably submit in any suit, action or proceeding arising out of or
related to this Agreement or any of the transactions contemplated hereby or
thereby to the jurisdiction of the United States District Court for the Northern
District of Illinois and the jurisdiction of any court of the State of Illinois
located in Chicago and waive any and all objections to jurisdiction that they
may have under the laws of the State of Illinois or the United States.

14.12.  Termination.  (a)  Anything contained in this Agreement to the contrary
        -----------
notwithstanding, this Agreement may be terminated at any time by mutual written
consent of Edwards Optionholder and Baxter Japan.  This Agreement shall
terminate automatically if the Exercise Period expires prior to exercise of the
Option.

(b)  If this Agreement is terminated pursuant to this Section 14.12, all further
                                                      -------------
     obligations of the parties under this Agreement shall be terminated without
     further liability of any party to the other, provided that nothing herein
     shall relieve any party from liability for its willful breach of this
     Agreement.

14.13.  Survival of Obligations.  All representations, warranties, covenants and
        -----------------------
obligations contained in this Agreement shall survive the consummation of the
transactions contemplated by this Agreement.

14.14.  Currency.  All payments under this Agreement shall be denominated in
        --------
Yen.

                                       36
<PAGE>

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed the day and year first above written.

                                    BAXTER LIMITED


                                    By:___________________________
                                       Name:  Robert Hurley
                                       Title: President and
                                              Representative Director


                                    EDWARDS LIFESCIENCES LIMITED


                                    By:___________________________
                                       Name:  Takashi Tsumori
                                       Title: Chairman and
                                              Representative Director

                                       37
<PAGE>

                                                                       Exhibit A
                                                                       ---------

                           Japanese Edwards Business

The Cardiovascular Group sells or is engaged in the development of following
product categories in Japan through its three business units (Cardiovascular
Surgery, or CVS, Anesthesia and Medication Delivery, or AMD, and Vascular and
Interventional Cardiology, or VIC):

 .  Tissue and mechanical heart valves and rings, pericardial patches,
oxygenators, and cardiopulmonary bypass circuits including reservoirs and
arterial filters, cardioplegia devices, heart-lung machines, centrifugal pumps,
arterial and venous cannulae, CDI oxygen monitor cells, Novacor left ventricular
assist devices

 .  Thermo-dilution (Swan-Ganz) catheters, pacing catheters, central venous
catheters, venous introducers, Invos cerebral tissue oxygen monitor devices, VIA
continuous arterial blood gas monitor devices

 .  Direct blood pressure monitor kit, disposable pressure transducers,
Embolectomy (Fogarty) catheters, Lifepath abdominal aortic aneurysm endovascular
graft system, Datascope intra-aortic balloon pumps and catheters, VasoSeal
collagen hemostasis devices, UniCath percutaneous transluminal coronary
angioplasty balloon catheters and stents, Medtronic pacemakers

The Cardiovascular Group in Japan also manufacturers Custom Pac cardiopulmonary
circuits and direct blood pressure monitor kits at the Miyazaki plant.

                                       38
<PAGE>

                                                                       Exhibit B
                                                                       ---------

                          BILL OF SALE AND ASSIGNMENT

          Pursuant to that certain Option Agreement dated as of March 31, 2000
(the "Option Agreement")  by and between Baxter Limited, a Japanese corporation
("Baxter Japan"), and Edwards Lifesciences Limited, a Japanese corporation
("Edwards Optionholder"), for good and valuable consideration paid to Baxter
Japan by or on behalf of Edwards Optionholder, the receipt of which is hereby
acknowledged by Baxter Japan, Baxter Japan does hereby sell, transfer, assign,
convey and deliver to Edwards Optionholder the Purchased Business (all
capitalized terms not defined herein shall have the meanings specified in the
Option Agreement); provided, however, as to any lease, contract, agreement,
                   --------  -------
permit or other authorization or rights included in the Purchased Business that
cannot be conveyed, assigned, transferred, contributed, set over or delivered
effectively without the consent of a third party, which consent has not been
obtained, this Bill of Sale and Assignment shall be of no force or effect until
such requisite consent is obtained, whereupon this Bill of Sale and Assignment
shall become of full force and effect with respect thereto.

          EXCEPT FOR THE REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS
SPECIFICALLY PROVIDED FOR IN THE OPTION AGREEMENT, ALL OF THE ASSETS SOLD
HEREUNDER ARE SOLD TO EDWARDS OPTIONHOLDER "AS IS" WITHOUT ANY IMPLIED WARRANTY
OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, MARKETABILITY, TITLE,
VALUE, FREEDOM FROM ENCUMBRANCE OR ANY REPRESENTATION OR WARRANTY, EXPRESSED OR
IMPLIED.

          This Bill of Sale and Assignment shall be binding upon Baxter Japan,
its successors and assigns, and shall inure to the benefit of Edwards
Optionholder, its successors and assigns.

          IN WITNESS WHEREOF, Baxter Japan has caused this instrument to be duly
executed and delivered as of ____________________.


                              BAXTER LIMITED

                              By: _____________________________
                              Name:
                              Title:
<PAGE>

                                                                       Exhibit C
                                                                       ---------


                            INSTRUMENT OF ASSUMPTION
                            ------------------------

          Pursuant to that certain Option Agreement dated as of March 31, 2000
(the "Option Agreement") by and between Baxter Limited, a Japanese corporation
("Baxter Japan"), and Edwards Lifesciences Limited, a Japanese corporation
("Edwards Optionholder"), for good and valuable consideration paid to Edwards
Optionholder by or on behalf of Baxter Japan, the receipt of which is hereby
acknowledged by Edwards Optionholder, Edwards Optionholder does hereby assume
and agree to pay, perform or otherwise discharge, in accordance with their terms
and subject to the respective conditions thereof, the Purchased Business (all
capitalized terms not defined herein shall have the meanings specified in the
Option Agreement).

          This Instrument of Assumption shall be binding upon the successors and
assigns of Edwards Optionholder and shall inure to the benefit of the successors
and assigns of Baxter Japan.

          IN WITNESS WHEREOF, Edwards Optionholder has caused this instrument to
be duly executed and delivered as of ____________.


                                    EDWARDS LIFESCIENCES LIMITED

                                    By:__________________________
                                    Name:
                                    Title: