Form of Stock Option Plan Terms and Conditions



 EXHIBIT 10.40 
  
 BAXTER INTERNATIONAL INC. 
 Form of Stock Option Plan Terms and Conditions 
  

	1.	Purpose 

  
 This Stock Option Plan (the “Plan”) is adopted by the Compensation Committee of the Board of Directors (the “Committee”) of Baxter International Inc. 
  

	2.	Participants 

  
 Participants in this Plan (a “Participant”) shall be employees of Baxter International Inc. or its subsidiaries (“Company”) who have been selected by the Committee and to whom the Committee makes
an award of an option (an “Option”) under this Plan. 
  

	3.	Awards 

  
 Each Option shall be granted pursuant to and for the purposes stated in the [BAXTER INTERNATIONAL INC. INCENTIVE PROGRAM] (each a “Program”), as specified by the Committee on the Grant Date. Each option
shall be granted as of [DATE] (the “Grant Date”). The purchase price for each share of Common Stock subject to an Option shall be the Fair Market Value of a share of Common Stock on the Grant Date; provided, however, for employees of the
Company’s subsidiaries in Italy the purchase price will be the greater of the “Normal Value” or the “Fair Market Value” on the date of grant. The “Normal Value” is defined as the arithmetic average of the share
price of Common Stock in the month preceding the Grant Date. The terms of each Option will be as set forth in these terms and conditions. To the extent that any of the terms and conditions contained in this Plan are inconsistent with the terms of
the applicable Program, the terms of the applicable Program shall control. Terms defined in the applicable Program shall have the same meaning in these terms and conditions. The Option is not intended to qualify as an Incentive Stock Option within
the meaning of section 422 of the United States Internal Revenue Code. The Company has not selected any country as its home member state under the European Union Directive 2003/71/EC, and the grant of Options pursuant to this Plan is simultaneous.

  

	4.	Vesting, Exercise and Expiration 

  

	4.1	Subject to Section 11.10 of the applicable Program, Options shall first become exercisable on the third anniversary of the Grant Date. After an Option becomes exercisable and
until it expires, it may be exercised in whole or in part, in the manner specified by the Company. Under no circumstances may an Option be exercised after it has expired. Shares of Common Stock may be used to pay the purchase price for shares of
Common Stock to be acquired upon exercise of an Option or fulfill any tax withholding obligation, subject to any requirements or restrictions specified by the Company. 

  

	4.2	Except as otherwise set forth in Sections 4.3 and 4.4 and the following sentence, if a Participant’s employment with the Company terminates before his or her










	 	 
Option becomes exercisable, the Option will expire when the Participant’s employment with the Company terminates. If a Participant is rehired by the
Company within 90 days of termination, the Participant shall be construed to have been continuously employed by the Company for purposes of vesting and exercise. 


  

	4.3	If the employment with the Company of a Participant who is at least 50 years of age and has completed 15 or more years of employment with the Company is terminated (other
than by reason of his or her death or disability) before his or her Option becomes exercisable, the Option will continue to become exercisable for one year from the date on which employment with the Company is terminated. Subject to Section 4.8, the
Option will expire on the fifth anniversary of the termination date. 

  

	4.4	If the employment with the Company of a Participant is terminated due to death or disability more than one year after the date on which the Option is granted before his or
her Option becomes exercisable, the Option will immediately become exercisable and, subject to Section 4.8, the Option will expire on the first anniversary of the date that it becomes exercisable. 

  

	4.5	Except as otherwise set forth in Section 4.6 and 4.7, if a Participant’s employment with the Company terminates after his or her Option becomes exercisable, the Option
will not expire immediately but will remain exercisable. Subject to Section 4.8, the Option will expire three months after the Participant’s employment with the Company terminates. If the participant dies or becomes disabled during the
three-month period, the option will expire on the first anniversary of the termination date. 

  

	4.6	If the employment with the Company of a Participant who is at least 50 years of age and has completed 15 or more years of employment with the Company is terminated (other
than by reason of his or her death or disability) after his or her Option becomes exercisable, the Option will not expire immediately but will remain exercisable. Subject to Section 4.8 and the following sentence, the Option will expire on the fifth
anniversary of the termination date. 

  

	4.7	If the employment with the Company of a Participant is terminated due to death or disability after his or her Option becomes exercisable, the Option will not expire
immediately but will remain exercisable. Subject to Section 4.8, the Option will expire on the first anniversary of the date of death or disability of the Participant. 

  

	4.8	Options that have not previously expired will expire at the close of business on the tenth anniversary of the Grant Date; provided, however, Options granted to employees
residing in Switzerland on the date of grant shall expire on the eleventh anniversary of the Grant Date. If an Option would expire on a date that is not a business day, it will expire at the close of business on the last business day preceding that
date. A business day is any day on which the Common Stock is traded on the New York Stock Exchange. 

  

	4.9	An exercisable Option may only be exercised by the Participant, his or her legal representative, or a person to whom the Participant’s rights in the Option are
transferred by will or the laws of descent and distribution. 

  
 2 








	4.10	A transfer of employment among Baxter and its subsidiaries will not constitute a termination of employment within the meaning of the Plan. 

  

	4.11	A transfer of employment to a company that assumes an Option or issues a substitute option in a transaction to which Section 424 of the United States Internal Revenue Code
applies will not constitute a termination of employment within the meaning of the Plan. 

  

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


  

	5.	Amendment 

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

  
 3