<PAGE>

                                                                    EXHIBIT 10.1
                                                                    ------------

                           REORGANIZATION AGREEMENT

                          Dated as of March 15, 2000

                                by and between

                           BAXTER INTERNATIONAL INC.

                                      and

                       EDWARDS LIFESCIENCES CORPORATION
<PAGE>

                               TABLE OF CONTENTS
                               -----------------

<TABLE>
<CAPTION>
                                                                                               Page
                                                                                               ----
<S>                                                                                            <C>
 ARTICLE I - DEFINITIONS AND INTERPRETATION...................................................    2
  1.1.   Definitions..........................................................................    2
  1.2.   Interpretation.......................................................................   19

ARTICLE II - THE DISTRIBUTION.................................................................   21
  2.1.   Issuance and Delivery of Edwards Shares..............................................   21
  2.2.   Distribution of Edwards Shares.......................................................   21
  2.3.   Treatment of Fractional Shares.......................................................   21
  2.4.   Baxter Board Action..................................................................   21
  2.5.   Additional Approvals.................................................................   22

ARTICLE III - FOREIGN TRANSFERS...............................................................   22
  3.1.   Edwards World Trade..................................................................   22
  3.2.   Puerto Rico (936)....................................................................   22
  3.3.   Puerto Rico (MS&P)...................................................................   23
  3.4.   Dominican Republic...................................................................   24
  3.5.   Intentionally Omitted................................................................   24
  3.6.   Brazil...............................................................................   25
  3.7.   Canada...............................................................................   25
  3.8.   China................................................................................   26
  3.9.   Taiwan...............................................................................   26
  3.10.  Singapore and the Philippines........................................................   27
  3.11.  Malaysia.............................................................................   28
  3.12.  Thailand.............................................................................   28
  3.13.  Korea................................................................................   29
  3.14.  India................................................................................   29
  3.15.  Latin America........................................................................   30
  3.16.  Switzerland..........................................................................   33
  3.17.  EU Holdings (Denmark)................................................................   35
  3.18.  Germany..............................................................................   35
  3.19.  Austria..............................................................................   36
  3.20.  France...............................................................................   37
  3.21.  Italy................................................................................   37
  3.22.  Belgium/Luxembourg...................................................................   38
  3.23.  Netherlands..........................................................................   39
  3.24.  Uden.................................................................................   40
  3.25.  Spain................................................................................   40
  3.26.  United Kingdom.......................................................................   41
  3.27.  Restrictions on Intercompany Debt....................................................   41
  3.28.  Transfer of Assets...................................................................   41
  3.29.  Transfer of Liabilities..............................................................   41
</TABLE>

                                      -i-
<PAGE>

                               TABLE OF CONTENTS
                               -----------------
                                  (continued)

<TABLE>
<CAPTION>
                                                                                           Page
                                                                                           ----
<S>                                                                                        <C>
  3.30. Transfer of Edwards World Trade to Baxter........................................    42
  3.31. Edwards Holdings Switzerland.....................................................    42
  3.32. Transfer of Inventory............................................................    42

ARTICLE IV - TRANSFERS TO EDWARDS U.S. OPERATING SUBSIDIARY..............................    42
  4.1.  Organization of Edwards U.S. Operating Subsidiary................................    42
  4.2.  Transfer of Assets...............................................................    42
  4.3.  Transfer of Third-Party Distribution Contracts...................................    43
  4.4.  Assumption of Liabilities........................................................    43
  4.5.  Transfer of Intangibles and Operating Subsidiaries...............................    43

ARTICLE V - ORGANIZATION OF EDWARDS LIFESCIENCES CORPORATION.............................    43
  5.1.  Organization of Edwards..........................................................    43
  5.2.  Transfer of Certain Subsidiaries.................................................    44
  5.3.  Transfer of Assets...............................................................    44
  5.4.  Transfer of Liabilities..........................................................    44

ARTICLE VI - EXCLUSIONS FROM TRANSFERS...................................................    44
  6.1.  Retained Assets..................................................................    44
  6.2.  Retained Liabilities.............................................................    45
  6.3.  Termination of Existing Intercompany Agreements..................................    46

ARTICLE VII - ASSET SEPARATION CLOSING MATTERS...........................................    46
  7.1.  Delivery of Instruments of Conveyance............................................    46
  7.2.  Delivery of Other Agreements.....................................................    46
  7.3.  Non-Assignable Contracts.........................................................    46
  7.4.  Further Assurances...............................................................    47
  7.5.  Novation of Assumed Liabilities..................................................    48
  7.6.  Nominee Shares...................................................................    49
  7.7.  Provision of Corporate Records...................................................    49

ARTICLE VIII - REPRESENTATIONS AND WARRANTIES............................................    49
  8.1.  Organization, Good Standing and Authority of Baxter..............................    49
  8.2.  Organization, Good Standing and Authority of Edwards.............................    49
  8.3.  No Other Representations and Warranties..........................................    49

ARTICLE IX - CERTAIN COVENANTS...........................................................    50
  9.1.  Conduct of Edwards Business Pending the Distribution Date........................    50
  9.2.  Registration and Listing.........................................................    50
  9.3.  Funds Distributed to Baxter......................................................    51
  9.4.  Post-Distribution Tax-Related Restrictions.......................................    51
  9.5.  Intercompany Receivables and Payables, Cash Management and True-Up...............    52
  9.6.  Intercompany Debt True-Up........................................................    53
</TABLE>

                                     -ii-
<PAGE>

                               TABLE OF CONTENTS
                               -----------------
                                  (continued)

<TABLE>
<CAPTION>
                                                                                              Page
                                                                                              ----
<S>                                                                                           <C>
  9.7.   Collection of Accounts Receivable..................................................    56
  9.8.   Agreements Relating to Baxter and Edwards..........................................    58
  9.9.   Certain Releases...................................................................    59
  9.10.  Litigation.........................................................................    59
  9.11.  Liability for Previously Delivered Products........................................    59
  9.12.  Edwards Bank Accounts..............................................................    60
  9.13.  Informal, Nondocumented Real Estate Leases.........................................    61
  9.14.  Third Party Consents...............................................................    61
  9.15.  Material Governmental Approvals and Consents.......................................    61
  9.16.  Late Payments......................................................................    61

ARTICLE X - INTELLECTUAL PROPERTY LICENSES..................................................    62
  10.1.  License to Baxter of Transferred Intellectual Property.............................    62
  10.2.  License to Edwards of Retained Baxter Intellectual Property........................    63
  10.3.  Licenses Related to Interlink......................................................    65
  10.4.  Use by Edwards of Baxter's Trademarks..............................................    65
  10.5.  Limitations on Requirements to Supply..............................................    66
  10.6.  Fair Market Value..................................................................    66

ARTICLE XI - CONDITIONS TO THE DISTRIBUTION.................................................    67
  11.1.  Approval by Baxter Board of Directors..............................................    67
  11.2.  Receipt of IRS Private Letter Tax Ruling...........................................    67
  11.3.  Compliance with State and Foreign Securities and...................................    67
  11.4.  SEC Filings and Approvals..........................................................    67
  11.5.  Filing and Effectiveness of Registration Statement; No Stop Order..................    67
  11.6.  Approval of NYSE Listing Application...............................................    67
  11.7.  Receipt of Fairness Opinions of Financial Advisors.................................    67
  11.8.  Ancillary Agreements...............................................................    68
  11.9.  Resignations.......................................................................    68
  11.10. Election of Edwards Board..........................................................    68
  11.11. Consents...........................................................................    68
  11.12. No Actions.........................................................................    68
  11.13. New Credit Facility................................................................    68
  11.14. Consummation of Pre-Distribution Transactions......................................    68
  11.15. No Other Events....................................................................    68
  11.16. Satisfaction of Conditions.........................................................    68

ARTICLE XII - EMPLOYEES AND EMPLOYEE BENEFIT MATTERS........................................    69
  12.1.  Edwards Employees..................................................................    69
  12.2.  Employment of Edwards Employees....................................................    69
  12.3.  Terminations/Layoff/Severance......................................................    69
  12.4.  International Edwards Employees....................................................    69
</TABLE>

                                     -iii-
<PAGE>

                               TABLE OF CONTENTS
                               -----------------
                                  (continued)


<TABLE>
<CAPTION>
                                                                                                     Page
                                                                                                     ----
<S>                                                                                                  <C>
 12.5.  Employment Solicitation...................................................................   70
 12.6.  WARN Act..................................................................................   70
 12.7.  Leave of Absence Policies.................................................................   70
 12.8.  Withdrawal from Participation in Baxter Plans and Establishment of Edwards Plans..........   71
 12.9.  Transfer of Account Balances and Accrued Benefits.........................................   71
 12.10. Entitlement to Distributions Under Pension Plan...........................................   73
 12.11. Welfare Benefits Provided Under Edwards Plans.............................................   73
 12.12. Stock Purchase Plans......................................................................   73
 12.13. Workers' Compensation.....................................................................   74
 12.14. Vacation Pay Policy.......................................................................   74
 12.15. Non-Qualified Deferred Compensation Plans.................................................   74
 12.16. Split-Dollar Life Insurance...............................................................   74
 12.17. Restricted Stock..........................................................................   74
 12.18. Information to be Provided to Baxter......................................................   74
 12.19. Corporate Action; Delegation of Authority.................................................   75
 12.20. Transfer of Employee Files................................................................   75

ARTICLE XIII - INSURANCE MATTERS..................................................................   75
  13.1. Insurance Prior to the Distribution Date..................................................   75
  13.2. Ownership of Existing Policies and Programs...............................................   75
  13.3. Procurement of Insurance for Edwards......................................................   75
  13.4. Acquisition and Maintenance of Post-Distribution Edwards Insurance Policies and Programs..   76
  13.5. Edwards Directors' and Officers' Insurance................................................   76
  13.6. Pre-Distribution Insurance Claims Administration..........................................   77
  13.7  Post-Distribution Insurance Claims Administration.........................................   77
  13.8. Non-Waiver of Rights to Coverage..........................................................   78
  13.9. Scope of Affected Policies of Insurance...................................................   78

ARTICLE XIV - EXPENSE AND TAX MATTERS.............................................................   78
  14.1. Allocation of Expenses....................................................................   78
  14.2. Allocation of Taxes.......................................................................   79

ARTICLE XV - RELEASE AND INDEMNIFICATION..........................................................   79
  15.1. Release of Pre-Distribution Claims........................................................   79
  15.2. Indemnification by Edwards................................................................   81
  15.3. Indemnification by Baxter.................................................................   82
  15.4. Applicability of and Limitation on Indemnification........................................   82
  15.5. Adjustment of Indemnifiable Losses........................................................   83
  15.6. Procedures for Indemnification of Third Party Claims......................................   84
  15.7. Procedures for Indemnification of Direct Claims...........................................   86
</TABLE>

                                     -iv-
<PAGE>

                               TABLE OF CONTENTS
                               -----------------
                                  (continued)

<TABLE>
<CAPTION>
                                                                                               Page
                                                                                               ----
<S>                                                                                            <C>
  15.8.  Contribution.........................................................................   86
  15.9.  No Third-Party Beneficiaries.........................................................   86
  15.10. Remedies Cumulative..................................................................   87
  15.11. Survival.............................................................................   87

ARTICLE XVI - DISPUTE RESOLUTION..............................................................   87
  16.1.  General..............................................................................   87
  16.2.  Escalation...........................................................................   87
  16.3.  Arbitration..........................................................................   87
  16.4.  Procedures...........................................................................   88
  16.5.  Injunctive Relief....................................................................   88

ARTICLE XVII - ACCESS TO INFORMATION AND SERVICES.............................................   88
  17.1.  Access to Financial Information......................................................   88
  17.2.  Ownership of Information.............................................................   89
  17.3.  Compensation for Providing Information...............................................   89
  17.4.  Retention of Records.................................................................   89
  17.5.  Limitations..........................................................................   90
  17.6.  Production of Witnesses..............................................................   90
  17.7.  Confidentiality......................................................................   90
  17.8.  Privileged Matters...................................................................   91

ARTICLE XVIII - MISCELLANEOUS                                                                    92
  18.1.  Entire Agreement.....................................................................   92
  18.2.  Choice of Law and Forum..............................................................   92
  18.3.  Amendment............................................................................   93
  18.4.  Waiver...............................................................................   93
  18.5.  Partial Invalidity...................................................................   93
  18.6.  Execution in Counterparts............................................................   93
  18.7.  Successors and Assigns...............................................................   93
  18.8.  Third Party Beneficiaries............................................................   93
  18.9.  Notices..............................................................................   93
  18.10. Performance..........................................................................   94
  18.11. Force Majeure........................................................................   94
  18.12. No Public Announcement...............................................................   94
  18.13. Termination..........................................................................   95
</TABLE>

                                      -v-
<PAGE>

EXHIBITS
--------
Exhibit A - Edwards Business
Exhibit B - Operating Agreements
Exhibit C - Tax Sharing Agreement
Exhibit D - Transferred Subsidiaries
Exhibit E - Amended and Restated Certificate of Incorporation of Edwards
Exhibit F - Amended and Restated By-laws of Edwards
Exhibit G - Form of Edwards Stockholder Rights Plan
Exhibit H - Board of Directors of Edwards

SCHEDULES
---------
Schedule 1.1(b) - BHC Loans
Schedule 1.1(f) - CERCLA and OSHA Liabilities
Schedule 1.1(g) - Other Assumed Environmental Liabilities
Schedule 1.1(l) - Guarantees and Letters of Credit
Schedule 1.1(m) - Indemnification Agreements
Schedule 1.2(d) - Owned Real Property
Schedule 1.2(e) - Real Property Leases
Schedule 1.2(f) - Aircraft
Schedule 1.2(g)(ii) - Patents
Schedule 1.2(g)(iv) - Trademarks
Schedule 1.2(h)(i) - Contracts Related to Acquisitions or Divestitures
Schedule 1.2(h)(ii) - Customer Contracts
Schedule 1.2(h)(iv) - Government Contracts
Schedule 1.2(h)(v) - Supplier Contracts
Schedule 1.2(h)(vi) - Joint Development and Confidentiality Contracts
Schedule 1.2(h)(vii) - Consulting Contracts
Schedule 1.2(h)(viii) - Distribution Contracts
Schedule 1.2(h)(xi) - Personal Property Leases
Schedule 1.2(h)(xii) - Derivatives Contracts
Schedule 1.2(h)(xiii) - Other Contracts
Schedule 1.2(i) - Permits and Licenses
Schedule 1.2(j) - Claims and Indemnities
Schedule 1.2(k) - Subsidiaries, Joint Ventures and Minority Interests
Schedule 1.2(n) - Intellectual Property Licenses
Schedule 1.2(o) - Software and Software Contracts
Schedule 1.2(p) - Internet Protocol Addresses
Schedule 1.2(q) - Other Assets
Schedule 3.1 - Timing of Foreign Transfers
Schedule 4.3 - Foreign Subsidiaries' Third-Party Distribution Contracts
Schedule 6.1(h) - Baxter Distribution Countries
Schedule 6.2 - Retained Liabilities
Schedule 6.3 - Surviving Intercompany Agreements
Schedule 9.3 - Use of Proceeds Summary
Schedule 9.6(g) - Transfers
                                     -vi-
<PAGE>

Schedule 9.8 - Shared Agreements
Schedule 9.10(a) - Assumed Actions
Schedule 9.10(b) - Transferred Actions
Schedule 9.12 - Transferred Bank Accounts
Schedule 10.2(a) - Licensed Baxter Intellectual Property
Schedule 12.1 - Edwards Employees
Schedule 12.4 - Calculation of Edwards Foreign and Puerto Rico Employees'
Pension Benefits

                                     -vii-
<PAGE>

                           REORGANIZATION AGREEMENT
                           ------------------------

          REORGANIZATION AGREEMENT, dated as of March 15, 2000 (this

"Agreement"), by and between Baxter International Inc., a Delaware corporation
 ---------
("Baxter"), and Edwards Lifesciences Corporation, a Delaware corporation
  ------
("Edwards") which is, as of the date hereof, a wholly-owned Subsidiary (as
  -------
hereinafter defined) of Baxter.

          WHEREAS, Baxter, through its Subsidiaries, provides, inter alia, a
comprehensive line of therapies and services to treat cardiovascular disease (as
more fully described in Exhibit A hereto, the "Edwards Business");
                        ---------              ----------------

          WHEREAS, the Board of Directors of Baxter has determined that it would
be advisable and in the best interests of Baxter and its stockholders for Baxter
to transfer to Edwards and/or one or more of its Subsidiaries the business,
operations, assets and liabilities related to the Edwards Business;

          WHEREAS, Baxter has agreed to transfer and assign, or cause to be
transferred and assigned, to Edwards or one or more of its Subsidiaries
substantially all of the assets and properties related to the Edwards Business
held by Baxter, Baxter Healthcare Corporation, a Delaware corporation ("BHC")
                                                                        ---
and a wholly-owned Subsidiary of Baxter, and, subject to certain exceptions,
certain other Subsidiaries of Baxter, and Edwards has agreed to assume, or cause
to be assumed by one or more of its Subsidiaries, certain liabilities and
obligations arising out of or relating to the Edwards Business;

          WHEREAS, the Board of Directors of Baxter has determined that it would
be advisable and in the best interests of Baxter and its stockholders for Baxter
to distribute on a pro-rata basis to the holders of record of Baxter common
stock, par value $1.00 per share (the "Baxter Common Stock"), without any
                                       -------------------
consideration being paid by such holders, all of the outstanding shares of
Edwards common stock, par value $1.00 per share (the "Edwards Common Stock"),
                                                      --------------------
owned directly and indirectly by Baxter (the "Distribution");
                                              ------------

          WHEREAS, for United States federal income tax purposes, the
Distribution is intended to qualify as a tax-free spin-off within the meaning of
Sections 355 and 368(a)(1)(D) of the United States Internal Revenue Code of
1986, as amended (the "Code"); and
                       ----

          WHEREAS, it is appropriate and desirable to set forth the principal
corporate transactions required to effect the Distribution and certain other
agreements that will govern the relationship of Baxter and Edwards following the
Distribution;

          NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Baxter and Edwards
agree as follows:
<PAGE>

                                   ARTICLE I

                        DEFINITIONS AND INTERPRETATION
                        ------------------------------

          1.1. Definitions. In this Agreement, the following terms have the
               -----------
meanings specified or referred to in this Section 1.1:
                                          -----------

          "Accounts Payable Amount" has the meaning specified in Section 9.6(g).
           -----------------------                               --------------

          "Accounts Receivable Amount" has the meaning specified in Section
           --------------------------                               -------
9.6(g).
------

          "Accounts Receivable Report" has the meaning specified in Section
           --------------------------                               -------
9.7(f).
------

          "Act" has the meaning specified in Section 9.11(a).
           ---                               ---------------

          "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.

          "Active Edwards Employees" means any regular full-time or part-time
           ------------------------
employee of Baxter or one of its Subsidiaries who commences employment with
Edwards or one of its Subsidiaries immediately following the Distribution Date.

          "Actual Balance Sheet" has the meaning specified in Section 9.6(g).
           --------------------                               --------------

          "Actually Using" has the meaning specified in Section 10.1(a).
           --------------                               ---------------

          "Affiliate" means, with respect to any Person, any other Person that
           ---------
directly or indirectly controls, is controlled by or is under common control
with such Person.  For the purpose of this definition, the term "control" means
the power to direct the management of an entity, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and the
term "controlled" has the meaning correlative to the foregoing.  After the
Distribution Date, Edwards and Baxter shall not be deemed to be under common
control for purposes hereof due solely to the fact that Edwards and Baxter have
common stockholders.

          "Aggregate Amount Received" has the meaning specified in Section
           -------------------------                               -------
9.6(g).
------

          "Anasco Division" has the meaning specified in Section 3.2.
           ---------------                               -----------

          "Asset Transfer Amount" has the meaning specified in Section 9.6(g).
           ---------------------                               --------------

          "Assumed Actions" has the meaning specified in Section 9.10(a).
           ---------------                               ---------------

          "Assumed Liabilities" means all contractual and other Liabilities of
           -------------------
Baxter or any of its Subsidiaries (excluding the Retained Liabilities) arising
out of or relating to (but only to the extent relating to) the Edwards Business
any Divested Business and/or any of the past or present facilities of Baxter or
any of its Subsidiaries used primarily in connection with the Edwards Business
or any Divested Business, whether due or to become due, including:

                                      -2-
<PAGE>

          (a)  All Liabilities (excluding, except as provided in subparagraph
(b) below, Loans owed to Baxter or any of its Subsidiaries) that are reflected,
disclosed or reserved for on the Balance Sheet, as such Liabilities may be
increased or decreased in the operation of the Edwards Business from the date of
the Balance Sheet through the Distribution Date in the ordinary course of
business consistent with past practice;

          (b)  The Loans set forth on Schedule 1.1(b) hereto;
                                      ---------------

          (c)  All Liabilities under or related to the Real Estate Leases and
the Edwards Contracts, such assumption to occur as (i) assignee if such Real
Estate Leases and Edwards Contracts are assignable and are assigned or otherwise
transferred to Edwards or one of its Subsidiaries, or (ii) subcontractor,
sublessee or sublicensee as provided in Section 7.3 below if assignment of such
                                        -----------
Real Estate Leases and Edwards Contracts and/or the proceeds thereof is
prohibited by law or by the terms thereof or is not permitted by the other
contracting party;

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

          (e)  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 Edwards Business, whether before or after the Distribution
Date and the Liabilities relating to any Assumed Actions;

          (f)  All Liabilities arising under (i) CERCLA and any other foreign,
federal, state or local laws regarding the management, control and clean-up of
hazardous materials (including off-site waste disposal liabilities) or (ii) the
Occupational Safety and Health Act or similar state laws or regulations, in
either case relating to or arising out of the operations of the Edwards
Business, whether before or after the Distribution Date, including those set
forth on Schedule 1.1(f) hereto;
         ---------------

          (g)  All environmental Liabilities relating to facilities transferred
to Edwards or one of its Subsidiaries in fee or by way of an assignment of a
lease or sublease from a third party, including those set forth on Schedule
                                                                   --------
1.1(g) hereto;
------

          (h)  All Liabilities in connection with claims of past, current or
prospective employees of the Edwards Business, including claims related to any
Baxter Plans, except as otherwise provided in Article XII, whether incurred
                                              -----------
prior to, on or after the Distribution Date;

          (i)  All Liabilities under any mortgage interest subsidy program on
behalf of any Edwards Employee;

          (j)  All Liabilities associated with the transfer of assets from the
Baxter Savings Plan to the Edwards Savings Plan;

          (k)  All Liabilities related to the Transferred Intellectual Property
included as part of the Transferred Assets;

          (l)  All Liabilities under each of the guarantees and letters of
credit set forth on Schedule 1.1(l) hereto;
                    ---------------

                                      -3-
<PAGE>

          (m)  All Liabilities under the indemnification agreements set forth on
Schedule 1.1(m);
---------------

          (n)  All Liabilities for property taxes with respect to any of the
Transferred Assets;

          (o)  All Liabilities for deferred taxes with respect to the Edwards
Business consistent with FAS 109;

          (p)  All Liabilities related to Governmental Permits; and

          (q)  All other Liabilities (other than the Retained Liabilities)
relating to the Edwards Business or any Divested Business, whether existing on
the date hereof or arising at any time or from time to time after the date
hereof, and whether based on circumstances, events or actions arising heretofore
or hereafter, whether or not such Liabilities shall have been disclosed herein,
and whether or not reflected on the books and records of Baxter or Edwards or
the Balance Sheet.

          "Balance Sheet" has the meaning specified in paragraph (a) of the
           -------------
definition of "Transferred Assets."

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

          "Baxter Alaska" has the meaning specified in Section 3.2.
           -------------                               -----------

          "Baxter Austria" has the meaning specified in Section 3.19.
           --------------                               ------------

          "Baxter Asia" has the meaning specified in Section 3.10.
           -----------                               ------------

          "Baxter Belgium" has the meaning specified in Section 3.22.
           --------------                               ------------

          "Baxter Canada" has the meaning specified in Section 3.7.
           -------------                               -----------

          "Baxter Chile" has the meaning specified in Section 3.15(b).
           ------------                               ---------------

          "Baxter China" has the meaning specified in Section 3.8.
           ------------                               -----------

          "Baxter Colombia" has the meaning specified in Section 3.15(a).
           ---------------                               ---------------

          "Baxter Common Stock" has the meaning specified in the fifth paragraph
           -------------------
of this Agreement.

          "Baxter Edwards" means Baxter Edwards AG, a company organized under
           --------------
the laws of Switzerland.

          "Baxter Export Corporation" means Baxter Export Corporation, a Nevada
           -------------------------
corporation.

          "Baxter Foreign Pension Plan" has the meaning specified in Section
           ---------------------------                               -------
12.4.
----

                                      -4-
<PAGE>

          "Baxter France" has the meaning specified in Section 3.20.
           --------------                               ------------

          "Baxter Germany" means Baxter Deutschland GmbH, a German limited
           --------------
company and a wholly-owned Subsidiary of Baxter Germany Holdings.

          "Baxter Germany Holdings" means Baxter Deutschland Holding GmbH, a
           -----------------------
German limited company and a wholly-owned Subsidiary of Baxter World Trade.

          "Baxter Group Member" means Baxter and (a) any corporation that is a
           -------------------
member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as Baxter; (b) a trade or business (whether or not
incorporated) under common control (within the meaning of Section 414(c) of the
Code) with Baxter; (c) any organization (whether or not incorporated) that is a
member of an affiliated service group (within the meaning of Section 414(m) of
the Code) that includes Baxter, a corporation described in clause (a) of this
definition or a trade or business described in clause (b) of this definition or
(d) any other entity that is required to be aggregated with Baxter pursuant to
regulations promulgated under Section 414(o) of the Code.

          "Baxter Hong Kong" has the meaning specified in Section 3.8.
           ----------------                               -----------

          "Baxter Hospitalar" means Baxter Hospitalar Ltda., a company organized
           -----------------
under the laws of Brazil.

          "Baxter Indemnified Parties" has the meaning specified in Section
           --------------------------                               -------
9.11(b).
-------

          "Baxter Italy" has the meaning specified in Section 3.21.
           ------------                               ------------

          "Baxter Japan" means Baxter Limited, a Japanese corporation.
           ------------

          "Baxter Korea" has the meaning specified in Section 3.13.
           ------------                               ------------

          "Baxter Marks" has the meaning specified in Section 10.4.
           ------------                               ------------

          "Baxter Mexico" has the meaning specified in Section 3.15(e).
           -------------                               ---------------

          "Baxter Netherlands" has the meaning specified in Section 3.23.
           ------------------                               ------------

          "Baxter Panama" has the meaning specified in Section 3.4.
           -------------                               -----------

          "Baxter Pension Plan" has the meaning specified in Section 12.10.
           -------------------                               -------------

          "Baxter Peru" has the meaning specified in Section 3.15(d).
           -----------                               ---------------

          "Baxter Pharmacy Services" means Baxter Pharmacy Services Corporation,
           ------------------------
a Delaware corporation.

          "Baxter Philippines" has the meaning specified in Section 3.10.
           ------------------                               ------------

          "Baxter Plans" has the meaning specified in Section 12.8(a).
           ------------                               ---------------

                                      -5-
<PAGE>

          "Baxter Policy" and "Baxter Policies" have the meanings specified in
           -------------       ---------------
Section 13.2.
------------

          "Baxter PR Pension Plan" has the meaning specified in Section 12.9(c).
           ----------------------                               ---------------

          "Baxter PR Savings Plan" has the meaning specified in Section 12.9(b).
           ----------------------                               ---------------

          "Baxter Products" means those products manufactured by Baxter or its
           ---------------
Subsidiaries (as they would exist immediately following the Distribution Date)
(except for products manufactured by Baxter or its Subsidiaries for the Edwards
Business, but including those products manufactured for Baxter and its
Subsidiaries by Edwards or its Subsidiaries pursuant to the Manufacturing
Contracts).

          "Baxter Retiree Welfare Plan" means the Baxter Retiree Medical Plan
           ---------------------------
and the post-retirement life insurance portion of the Baxter Group Term Life
Insurance Plan.

          "Baxter Sales and Distribution" shall have the meaning specified in
           -----------------------------
Section 3.3.
-----------

          "Baxter Savings Plan" has the meaning specified in Section 12.9(a).
           -------------------                               ---------------

          "Baxter Severance Pay Plan" means the Baxter International Inc. and
           -------------------------
Subsidiaries Severance Pay Plan.

          "Baxter Share" means one share of Baxter Common Stock.
           ------------

          "Baxter Spain" has the meaning specified in Section 3.25.
           ------------                               ------------

          "Baxter Stock Purchase Plans" means the Baxter International Inc.
           ---------------------------
Employee Stock Purchase Plan for United States Employees and the Baxter
International Inc. Employee Stock Purchase Plan for International Employees.

          "Baxter Taiwan" has the meaning specified in Section 3.9.
           -------------                               -----------

          "Baxter Thailand" has the meaning specified in Section 3.12.
           ---------------                               ------------

          "Baxter U.K." has the meaning specified in Section 3.26.
           -----------                               ------------

          "Baxter Venezuela" has the meaning specified in Section 3.15(c).
           ----------------                               ---------------

          "Baxter Woodlands" means Baxter Healthcare Pte. Ltd. (Singapore), a
           ----------------
company organized under the laws of Singapore.

          "Baxter World Trade" has the meaning specified in Section 3.1.
           ------------------                               -----------

          "BHC" has the meaning specified in the fourth paragraph of this
           ---
Agreement.

          "BIPL" means Baxter (India) Private Limited, a company organized under
           ----
the laws of India.

                                      -6-
<PAGE>

          "BPCL" means Baxter Participacoes e Commercial Ltda., a company
           ----
organized under the laws of Brazil.

          "BRL" means Baxter Representacoes Ltda., a company organized under the
           ---
laws of Brazil.

          "Board of Directors" means the board of directors of the referenced
           ------------------
corporation or any duly authorized committee thereof.

          "CERCLA" means the Comprehensive Environmental Response, Compensation
           ------
and Liability Act, as amended.

          "Code" has the meaning specified in the sixth paragraph of this
           ----
Agreement.

          "Contracts" means 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.

          "Conveyancing Instruments" has the meaning specified in Section 7.1.
           ------------------------                               -----------

          "Copyrights" means United States and foreign copyrights, both
           ----------
registered and unregistered, along with the registrations and applications to
register any such copyrights.

          "CPR" means the Center for Public Resources Institute for Dispute
           ---
Resolution.

          "Debt True-Up Amount" has the meaning specified in Section 9.6(g).
           -------------------                               --------------

          "Debt True-Up Notice" has the meaning specified in Section 9.6(g).
           -------------------                               --------------

          "Dispute" has the meaning specified in Section 16.2.
           -------                               ------------

          "Distribution" has the meaning specified in the fifth paragraph of
           ------------
this Agreement.

          "Distribution Date" means the date and time determined by the Board of
           -----------------
Directors of Baxter, or a duly authorized committee thereof, as the date on
which the Edwards Shares are distributable to holders of record of Baxter Common
Stock as of the Record Date.

          "Divested Business" means any business primarily related to the
           -----------------
Edwards Business that was divested by Baxter or any of its Subsidiaries at any
time prior to the Distribution Date, including any business divested pursuant to
any of the agreements listed on Schedule 1.2(h)(i) as "Divestitures."
                                ------------------

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

          "Edwards Austria" has the meaning specified in Section 3.19(a).
           ---------------                               ---------------

          "Edwards Belgium" has the meaning specified in Section 3.22(a).
           ---------------                               ---------------

                                      -7-
<PAGE>

          "Edwards Business" has the meaning specified in the second paragraph
           ----------------
of this Agreement.

          "Edwards Canada" has the meaning specified in Section 3.7(a).
           --------------                               --------------

          "Edwards Common Stock" has the meaning specified in the fifth
           --------------------
paragraph of this Agreement.

          "Edwards Contracts" has the meaning specified in paragraph (h) of the
           -----------------
definition of "Transferred Assets".

          "Edwards Credit Facility" has the meaning specified in Section 9.3.
           -----------------------                               -----------

          "Edwards Deferred Compensation Plan" has the meaning specified in
           ----------------------------------
Section 12.8(b).
---------------

          "Edwards Distributable Share" means for each holder of record of
           ---------------------------
Baxter Common Stock as of the Record Date one (1) Edwards Share for every five
(5) Baxter Shares outstanding and held of record by such holder as of the Record
Date.

          "Edwards Employees" has the meaning specified in Section 12.1.
           -----------------                               ------------

          "Edwards EU Holdings" has the meaning specified in Section 3.17(a).
           -------------------                               ---------------

          "Edwards Foreign Employees" has the meaning specified in Section 12.4.
           -------------------------                               ------------

          "Edwards Foreign Entity" means any Subsidiary of Baxter that is
           ----------------------
located or incorporated in a jurisdiction outside the United States and will,
upon consummation of the transactions contemplated by this Agreement, become a
Subsidiary of Edwards.

          "Edwards France" has the meaning specified in Section 3.20(a).
           --------------                               ---------------

          "Edwards Germany" has the meaning specified in Section 3.18(b)(i).
           ---------------                               ------------------

          "Edwards Germany Holdings" has the meaning specified in Section
           ------------------------                               -------
3.18(a)(i).
----------

          "Edwards Holdings Switzerland" has the meaning specified in Section
           ----------------------------                               -------
3.31.
----

          "Edwards Indemnified Parties" has the meaning specified in Section
           ---------------------------                               -------
15.3.
----

          "Edwards Italy" has the meaning specified in Section 3.21(a).
           -------------                               ---------------

          "Edwards Korea" has the meaning specified in Section 3.13(a).
           -------------                               ---------------

          "Edwards Lifesciences AG" has the meaning specified in Section
           -----------------------                               -------
3.16(a)(i).
----------

          "Edwards LLC" has the meaning specified in Section 4.1(a).
           -----------                               --------------

          "Edwards Mexico" has the meaning specified in Section 3.15(e).
           --------------                               ---------------

                                      -8-
<PAGE>

          "Edwards Netherlands" has the meaning specified in Section 3.23(a).
           -------------------                               ---------------

          "Edwards PR Employees" has the meaning specified in Section 12.9(b).
           --------------------                               ---------------

          "Edwards PR Pension Plan" has the meaning specified in Section
           -----------------------                               -------
12.9(c).
-------
          "Edwards PR Savings Plan" has the meaning specified in Section
           -----------------------                               -------
12.9(b).
-------
          "Edwards Products" means those products manufactured by Edwards or its
           ----------------
Subsidiaries (as they would exist immediately following the Distribution Date)
(excluding products manufactured by Edwards or its Subsidiaries for the Retained
Business but including those products manufactured for Edwards and its
Subsidiaries by Baxter or its Subsidiaries pursuant to the Manufacturing
Contracts).

          "Edwards Puerto Rico (936)" has the meaning specified in Section
           -------------------------                               -------
3.2(a).
------

          "Edwards Puerto Rico (MS&P)" has the meaning specified in Section
           --------------------------                               -------
3.3(a).
------

          "Edwards Savings Plan" has the meaning specified in Section 12.8(b).
           --------------------                               ---------------

          "Edwards Severance Pay Plan" has the meaning specified in Section
           --------------------------                               -------
12.8(b).
-------

          "Edwards Share" means one share of Edwards Common Stock.
           -------------

          "Edwards Spain" has the meaning specified in Section 3.25(a).
           -------------                               ---------------

          "Edwards Stock Purchase Plans" means the Edwards Lifesciences
           ----------------------------
Corporation Employee Stock Purchase Plan for United States Employees and the
Edwards Lifesciences Corporation Stock Purchase Plan for International
Employees.

          "Edwards Swiss Commissionaire" has the meaning specified in Section
           ----------------------------                               -------
3.16(c)(i).
----------

          "Edwards Uden" has the meaning specified in Section 3.24(a).
           ------------                               ---------------

          "Edwards UK" has the meaning specified in Section 3.26(a).
           ----------                               ---------------

          "Edwards U.S." has the meaning specified in Section 4.1(b).
           ------------                               --------------

          "Edwards U.S. Employees" has the meaning specified in Section 12.9.
           ----------------------                               ------------

          "Edwards Welfare Plans" has the meaning specified in Section 12.9.
           ---------------------                               ------------

          "Edwards World Trade" has the meaning specified in Section 3.1.
           -------------------                               -----------

          "ELIPL" means Edwards Lifesciences (India) Private Limited, a company
           -----
organized under the laws of India.

          "Escalation Notice" has the meaning specified in Section 16.2.
           -----------------                               ------------

                                      -9-
<PAGE>

          "Exchange Act" means the Securities Exchange Act of 1934, as amended
           ------------
(together with the rules and regulations promulgated thereunder).

          "Exclusively" (and, with correlative meaning, "Exclusive") means, when
           -----------                                   ---------
used in connection with the Edwards Business, used only with or relating only to
the Edwards Business.

          "Expenses" 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 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).

          "FESCO" has the meaning specified in Section 3.8(d).
           -----                               --------------

          "F.R.C.P." has the meaning specified in Section 16.4.
           --------                               ------------

          "Foreign Exchange Rate" means, with respect to any currency other than
           ---------------------
United States dollars, as of any date of determination, the average of the
opening bid and asked rates on such date at which such currency may be exchanged
for United States dollars as quoted by Bank One, NA.

          "Foreign Subsidiaries" has the meaning specified in Section 4.3.
           --------------------                               -----------

          "German Accounts Payable Amount" has the meaning specified in Section
           ------------------------------                               -------
9.6(g).
------

          "German Accounts Receivable Amount" has the meaning specified in
           ---------------------------------
Section 9.6(g).
--------------

          "Governmental Authority" means any foreign, federal, state, local or
           ----------------------
other government, governmental, statutory or administrative authority,
regulatory body or commission or any court, tribunal or judicial or arbitral
body.

          "Governmental Permits" has the meaning specified in paragraph (i) of
           --------------------
the definition of "Transferred Assets."

          "Implementation Agreements" means the agreements implementing the
           -------------------------
transactions referred to in Articles III, IV and V, including the agreements set
                            ------------  --     -
forth on the closing lists with respect to the transactions described in
Articles III, IV and V.
------------  --     -

          "Indemnified Party" has the meaning specified in Section 15.5(a).
           -----------------                               ---------------

          "Indemnifying Party" has the meaning specified in Section 15.5(a).
           ------------------                               ---------------

          "Indemnity Payment" has the meaning specified in Section 15.5(a).
           -----------------                               ---------------

          "Information" has the meaning specified in Section 17.1(a).
           -----------                               ---------------

                                      -10-
<PAGE>

          "Information Statement" has the meaning specified in Section 9.2(a).
           ---------------------                               --------------

          "Insurance Amount" has the meaning specified in Section 13.5.
           ----------------                               ------------

          "Insurance Charges" has the meaning specified in Section 13.7.
           -----------------                               ------------

          "Insurance Proceeds" means those monies (i) received by an insured
           ------------------
from an insurance carrier, (ii) paid by an insurance carrier on behalf of the
insured or (iii) received from any third Person in the nature of insurance,
contribution or indemnification in respect of any Liability, in each such case
net of any applicable premium adjustments (including reserves and
retrospectively rated premium adjustments) and net of any costs or expenses
(including allocated costs of in-house counsel and other personnel) incurred in
the collection thereof.

          "Insured Claims" means those liabilities that, individually or in the
           --------------
aggregate, are covered within the terms and conditions of any of the Baxter
Policies, whether or not subject to deductibles, co-insurance, uncollectability,
premium adjustments (including reserves), retrospectively-rated premium
adjustments or retentions, but only to the extent that such liabilities are
within applicable Baxter Policy limits, including aggregates and deductibles.

          "Intellectual Property" means (a) Copyrights, (b) Patents, (c)
           ---------------------
Trademarks, (d) business and non-technical information, (e) non-patented or non-
patentable technical information, inventions, processes and formulations and (f)
discoveries, trade secrets, know-how and technical data.

          "Intercompany Agreements" means any Contract between Baxter and
           -----------------------
Edwards entered into on or before the Distribution Date.

          "Intercompany Receivables and Payables" means any intercompany
           -------------------------------------
receivables and payables (other than Loans) arising in the ordinary course of
business.

          "Inventory Amount" has the meaning specified in Section 9.6(g).
           ----------------                               --------------

          "IRS" means the Internal Revenue Service.
           ---

          "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 those debts, liabilities and obligations arising under any law,
rule, regulation, Action, threatened Action, order or consent decree of any
Governmental Authority or any award of any arbitrator of any kind, and those
arising under any contract, commitment or undertaking.

          "Licensed Baxter Intellectual Property" has the meaning specified in
           -------------------------------------
Section 10.2(a).
---------------

          "Licensed Edwards Intellectual Property" has the meaning specified in
           --------------------------------------
Section 10.1(a).
---------------

                                      -11-
<PAGE>

          "Loan" means any intercompany indebtedness for borrowed money.
           ----

          "Losses" means any and all losses, costs, obligations, liabilities,
           ------
settlement payments, awards, judgments, fines, penalties, damages, fees,
expenses, deficiencies, claims or other charges, absolute or contingent, matured
or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown
(including the costs and expenses of any and all Actions, threatened Actions,
demands, assessments, judgments, settlements and compromises relating thereto
and attorneys' fees and any and all expenses whatsoever reasonably incurred in
investigating, preparing or defending against any such Actions or threatened
Actions).

          "Macchi" has the meaning specified in Section 3.6.
           ------                               -----------

          "Manufacturing Contracts" means the agreements set forth in Exhibit C
           -----------------------                                    ---------
hereto under the caption "Manufacturing Agreements."

          "Material Governmental Approvals and Consents" means any material
           --------------------------------------------
notices, reports or other filings to be made with or to, or any consents,
registrations, approvals, permits, clearances or authorizations to be obtained
from, any Governmental Authority.

          "New Product" means a product that is either (a) based upon the design
           -----------
of a product that is manufactured and distributed prior to the Distribution
Date, but the design of which is modified from such pre-existing product by
changing the size or other dimensions, the materials or the manufacturing
process; or (b) a replacement for a product that is manufactured and distributed
prior to the Distribution Date but has an improved feature or property while
retaining the overall functionality of such pre-existing product.

          "NYSE" means the New York Stock Exchange, Inc. or any successor
           ----
thereto.

          "Operating Agreements" means the agreements set forth in Exhibit B
           --------------------                                    ---------
hereto and any other agreements between Baxter and Edwards and their respective
Affiliates regarding their ongoing business and service relationships following
the Distribution entered into in contemplation of the Distribution.

          "Party" means Baxter or Edwards.
           -----

          "Pas Palzer KG" has the meaning specified in Section 3.18.
           -------------                               ------------

          "Pas Palzer Verwaltungs" has the meaning specified in Section 3.18.
           ----------------------                               ------------

          "Patents" means United States and foreign patents and applications for
           -------
patents, including any continuations, continuations-in-part, re-examinations,
patents by addition, Supplemental Protection Certificates, patent term
extensions, divisions, renewals, reissues and extensions thereof.

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

                                      -12-
<PAGE>

          "Personal Property Leases" has the meaning specified in paragraph
           ------------------------
(h)(xi) of the definition of "Transferred Assets."

          "PR Transferred Accounts" has the meaning specified in Section
           -----------------------                               -------
12.9(b).
-------
          "PR Transferred Accrued Benefits" has the meaning specified in Section
           -------------------------------                               -------
12.9(c).
-------

          "Pre-Distribution Claims Administration" has the meaning specified in
           --------------------------------------
Section 13.6.
------------

          "Prime Rate" means the rate that Bank One, NA (or any successor
           ----------
thereto or other major money center commercial bank agreed to by the Parties)
announces from time to time as its prime lending rate, as in effect from time to
time.

          "Privilege" or "Privileges" has the meaning specified in Section
           ---------      ----------                               -------
17.8(a).
-------

          "Privileged Information" has the meaning specified in Section 17.8(a).
           ----------------------                               ---------------

          "Products" has the meaning specified in Section 9.11.
           --------                               ------------

          "Real Estate Leases" has the meaning specified in paragraph (e) of the
           ------------------
definition of "Transferred Assets."

          "Receivables" has the meaning specified in paragraph (b)(i) of the
           -----------
definition of "Transferred Assets."

          "Record Date" means the date determined by the Board of Directors of
           -----------
Baxter, or a duly authorized committee thereof, as the record date for
determining stockholders of Baxter entitled to receive shares of Edwards Common
Stock in the Distribution.

          "Refund Amount" has the meaning specified in Section 9.7(f).
           -------------                               --------------

          "Refund Notice" has the meaning specified in Section 9.7(f).
           -------------                               --------------

          "Registration Statement" has the meaning specified in Section 9.2(a).
           ----------------------                               --------------

          "Retained Assets" has the meaning specified in Section 6.1.
           ---------------                               -----------

          "Retained Baxter Intellectual Property" means all of the Intellectual
           -------------------------------------
Property owned by Baxter or its Subsidiaries as of the Distribution Date other
than the Transferred Intellectual Property.

          "Retained Business" means those portions of the business of Baxter and
           -----------------
its current Subsidiaries that are not part of the Edwards Business.

          "Retained Liabilities" has the meaning specified in Section 6.2.
           --------------------                               -----------

          "Rights Plan" means the rights plan referred to in Section 5.1.
           -----------                                       -----------

                                      -13-
<PAGE>

          "SEC" means the United States Securities and Exchange Commission.
           ---

          "Shared Agreements" has the meaning specified in Section 9.8(a).
           -----------------                               --------------

          "Software" means computer software programs, in source code and object
           --------
code form, including all related source diagrams, flow charts, specifications,
documentation and all other materials necessary to allow a reasonably skilled
third-party programmer or technician to maintain, support and enhance the
Software.

          "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.

          "Swiss Sales Branch" has the meaning, specified in Section 3.16.
           ------------------                                ------------

          "Tax" (and, with correlative meaning, "Taxes" and "Taxable") means:
           ---                                   -----       -------

          (i)  any federal, state, local or foreign net income, gross income,
     gross receipts, windfall profit, severance, property, production, sales,
     use, license, excise, franchise, employment, payroll, withholding,
     alternative or add-on minimum, ad valorem, value-added, transfer, stamp, or
     environmental tax, or any other tax, custom, duty, governmental fee or
     other like assessment or charge of any kind whatsoever, together with any
     interest or penalty, addition to tax or additional amount imposed by any
     Governmental Authority; and

          (ii) any liability of either Party for the payment of amounts with
     respect to payments of a type described in clause (i) as a result of being
     a member of an affiliated, consolidated, combined or unitary group, or as a
     result of any obligation of either Party under any Tax sharing arrangement
     or Tax indemnity arrangement.

          "Tax Sharing Agreement" means the tax sharing agreement in
           ---------------------
substantially the form of Exhibit C hereto.
                          ---------

          "Third Party Claim" has the meaning specified in Section 15.6(a).
           -----------------                               ---------------

          "Third Party Consents" has the meaning specified in Section 9.14.
           --------------------                               ------------

          "Trademarks" means all United States, state and foreign trademarks,
           ----------
service marks, trade names and service names (including all assumed or
fictitious names under which Baxter is conducting the Edwards Business), whether
registered or unregistered, including all common law rights in and all goodwill
associated with the foregoing, and all registrations and pending applications to
register the foregoing.

                                      -14-
<PAGE>

          "Transfer Agent" means First Chicago Trust Company of New York, a
           --------------
division of EquiServe, the distribution agent appointed by Baxter to distribute
shares of Edwards Common Stock pursuant to the Distribution.

          "Transferred Accounts" has the meaning specified in Section 12.9(a).
           --------------------                               ---------------

          "Transferred Actions" has the meaning specified in Section 9.10(b).
           -------------------                               ---------------

          "Transferred Assets" means the tangible and intangible assets,
           ------------------
properties, rights and interests relating Exclusively to the Edwards Business
(excluding the Retained Assets), including the following:

          (a)   Balance Sheet Assets.  All assets reflected or disclosed on the
                --------------------
audited balance sheet of the Edwards Business as of December 31, 1999 contained
in the Registration Statement (the "Balance Sheet"), including all machinery,
                                    -------------
equipment, furniture and other tangible personal property, whether owned or
leased, used Exclusively in the operation of the Edwards Business, subject to
acquisitions, dispositions and adjustments in the ordinary course of the Edwards
Business, consistent with past practice, after such date;

          (b)   Receivables.
                -----------

          (i)   All accounts receivable, notes receivable, lease receivables,
     prepayments (other than prepaid insurance), advances and other receivables
     arising out of or produced by the Edwards Business and owing by any Persons
     (the "Receivables");
           -----------

          (ii)  all payments received after the Distribution Date on account of
     the Receivables ;

          (iii) all manufacturers' warranties or guarantees related to the
Transferred Assets or related to any of the Assumed Liabilities; and

          (iv)  any and all manufacturers' or third-party service or replacement
     programs relating to the Transferred Assets;

          (c)   Inventories.
                -----------

          (i)   All work-in-process, finished goods and spare parts inventory of
     Edwards Products, other than (x) finished goods inventory (including
     inventory in transit) in the jurisdictions set forth in Schedule 6.1(h) and
                                                             ---------------
     (y) Edwards Products manufactured by Baxter or one of its Subsidiaries and
     with respect to which title has not yet passed to Edwards or one of its
     Subsidiaries pursuant to the terms of the Manufacturing Contracts or
     Baxter's past practices;

          (ii)  all raw materials inventory related to Edwards Products other
     than Edwards Products manufactured by Baxter or one of its Subsidiaries
     pursuant to the Manufacturing Contracts;

                                      -15-
<PAGE>

          (iii)  all supplies, packaging and other inventories related to the
     Edwards Business but excluding any such items in the possession of Baxter
     or one of its Subsidiaries that relate to Edwards Products manufactured by
     Baxter or one of its Subsidiaries pursuant to the Manufacturing Contracts;
     and

          (iv)   rights with respect to consignment inventory of Edwards
     Products held by others;

          (d)    Owned Real Property.  Those certain parcels of land set forth
                 -------------------
on Schedule 1.2(d) hereto, together with any and all buildings and other
   ---------------
structures and improvements thereon, any and all rights and privileges
pertaining thereto or to any of such buildings or other structures or
improvements, including all ownership interests, oil and mineral interests,
water rights, easements, permits, licenses, rights of way, leases, and purchase
and option agreements with respect to real property, and, to the extent
constituting real property, any and all fixtures, machinery, equipment and other
property attached thereto or located thereon (other than equipment and furniture
located in property to be retained by Baxter or its Subsidiaries hereunder) and
all other rights and interests of any nature in and to any such real estate or
other real estate of the Edwards Business;

          (e)    Real Property Leases.  Those certain real estate leases set
                 --------------------
forth on Schedule 1.2(e) hereto including any amendments thereto (collectively
the "Real Estate Leases") and all rights to use the leased premises including
     ------------------
any and all improvements, fixtures, machinery, equipment and other property
located on the premises demised under such Real Estate Leases (other than
equipment and furniture located in property to be retained by Baxter or its
Subsidiaries hereunder);

          (f)    Vehicles and Aircraft.  All vehicles and aircraft used
                 ---------------------
Exclusively in connection with the Edwards Business, whether owned or leased,
including the interests in the aircraft set forth on Schedule 1.2(f) hereto;
                                                     ---------------

          (g)    Intellectual Property.  All of the following Intellectual
                 ---------------------
Property (collectively, the "Transferred Intellectual Property") along with (1)
                             ---------------------------------
the right to sue, recover and retain such recoveries for infringement of the
Transferred Intellectual Property occurring prior to the Distribution Date, and
(2) the right to continue in the name of Baxter any actions for infringement of
the Transferred Intellectual Property pending as of the Distribution Date and to
recover and retain such recoveries therefrom:

          (i)    All business and non-technical information; non-patented or
     non-patentable technical information, inventions, processes and
     formulations; and discoveries, trade secrets, know-how and technical data
     (A) used Exclusively in connection with the Edwards Business as of the
     Distribution Date and made or conceived by employees, consultants or
     contractors of Baxter or its Subsidiaries or any third-party; or (B) to be
     used Exclusively in connection with the Edwards Business and to be made or
     conceived by third parties pursuant to Contracts with said third parties;

          (ii)   All Patents used Exclusively in connection with the Edwards
     Business as of the Distribution Date (including all such Patents set forth
     on Schedule 1.2(g)(ii)
        -------------------

                                      -16-
<PAGE>

     hereto), all other Patents set forth on Schedule 1.2(g)(ii) hereto that are
                                             -------------------
     not used Exclusively in connection with the Edwards Business (if any), and
     all invention records set forth on Schedule 1.2(g)(ii) hereto;
                                        -------------------

          (iii)  All Copyrights used Exclusively in connection with the Edwards
     Business as of the Distribution Date; and

          (iv)   All Trademarks used Exclusively in connection with the Edwards
     Business as of the Distribution Date (including all such Trademarks set
     forth on Schedule 1.2(g)(iv)), all other Trademarks set forth on Schedule
              -------------------                                     --------
     1.2(g)(iv) that are not used Exclusively in connection with the Edwards
     ----------
     Business (if any), and all common law rights in the EDWARDS, EDWARDS
     LABORATORIES, EDLABS, EDWARDS CARDIOVASCULAR SYSTEM, EDWARDS CVS, EDWARDS
     CARDIOVASCULAR SURGERY, EDWARDS CRITICAL CARE, EDWARDS LIS and EDWARDS LESS
     INVASIVE SURGERY marks (whether used Exclusively in connection with the
     Edwards Business or not);

          (h)    Contracts. All of the following Contracts (such Contracts being
                 ---------
     referred to as the "Edwards Contracts"):
                         -----------------

          (i)    all Contracts related Exclusively to the Edwards Business
     related to acquisitions or divestitures of assets or stock, including
     Contracts related to the transactions set forth on Schedule 1.2(h)(i)
                                                        ------------------
     hereto, except to the extent any such Contracts relate to the Retained
     Business;

          (ii)   all Contracts with customers Exclusive to the Edwards Business,
     including those set forth on Schedule 1.2(h)(ii) hereto but only if the
                                  -------------------
     Contracts so set forth are actually Exclusive to the Edwards Business;

          (iii)  all customer leases under which the underlying equipment is the
     Exclusive marketing responsibility of Edwards;

          (iv)   all government Contracts Exclusive to the Edwards Business,
     including those set forth on Schedule 1.2(h)(iv) hereto;
                                  -------------------

          (v)    all supplier Contracts Exclusive to the Edwards Business
     relating either to raw materials or distributed products, including those
     set forth on Schedule 1.2(h)(v) hereto;
                  ------------------

          (vi)   all joint development and confidentiality Contracts Exclusive
     to the Edwards Business, including those set forth on Schedule 1.2(h)(vi)
                                                           ------------------
     hereto but only if the Contracts so set forth are actually Exclusive to the
     Edwards Business;

          (vii) all consulting Contracts Exclusive to the Edwards Business,
     including those set forth on Schedule 1.2(h)(vii) hereto but only if the
                                  --------------------
     Contracts so set forth are actually Exclusive to the Edwards Business;

                                      -17-

<PAGE>

          (viii) all third-party distribution Contracts Exclusive to the Edwards
Business, including those set forth on Schedule 1.2(h)(viii) hereto but only if
                                       ---------------------
the Contracts so set forth are actually Exclusive to the Edwards Business;

          (ix)   all manufacturing Contracts Exclusive to the Edwards Business;

          (x)    the Shared Agreements, if any, set forth on Schedule 9.8 hereto
                                                             ------------
     that are specifically designated on such Schedule 9.8 as being assigned to
                                              ------------
     Edwards;

          (xi)   those certain machinery, equipment or other tangible personal
     property leases Exclusive to the Edwards Business (the "Personal Property
                                                             -----------------
     Leases") set forth on Schedule 1.2(h)(xi) hereto but only if the Contracts
     ------                -------------------
     so set forth are actually Exclusive to the Edwards Business;

          (xii)  the portion of the Contracts related to derivatives set forth
on Schedule 1.2(h)(xii) equal to the amount set forth on such Schedule
   --------------------                                       --------
1.2(h)(xii); and
-----------

          (xiii) all other Contracts Exclusive to the Edwards Business,
including those set forth on Schedule 1.2(h)(xiii) hereto but only if the
                             ---------------------
Contracts so set forth are actually Exclusive to the Edwards Business;

          (i)  Permits and Licenses.  All permits, approvals, licenses,
               --------------------
franchises, authorizations, product registrations or other rights granted by any
Governmental Authority held or applied for and that are used Exclusively in the
Edwards Business or that relate Exclusively to the Transferred Assets or any of
the Transferred Subsidiaries, and all other consents, grants and other rights
that are used Exclusively for the lawful ownership of the Transferred Assets or
the operation of the Edwards Business (collectively, "Governmental Permits")
                                                      --------------------
including, in each case, those set forth on Schedule 1.2(i) hereto;
                                            ---------------

          (j)  Claims and Indemnities.  All rights, claims, demands, causes of
               ----------------------
action, judgments, decrees, general releases, settlement agreements and rights
to indemnity or contribution, whether contractual or otherwise, in favor of
Baxter or any of its Subsidiaries relating Exclusively to the Edwards Business
or the Transferred Assets, including those set forth on Schedule 1.2(j) hereto,
                                                        ---------------
including the right to sue, recover and retain such recoveries and the right to
continue in the name of Baxter and its Subsidiaries any pending actions relating
to the foregoing, and to recover and retain any damages therefrom, but not
including any such rights, claims, demands, causes of action, judgments, decrees
and rights to indemnity or contribution relating to the Retained Assets,
including in particular any third-party distribution agreements that are
excluded from the Transferred Assets because Baxter or one of its Subsidiaries
is retaining it in its capacity as distributor for Edwards after the
Distribution Date;

          (k)  Subsidiaries, Joint Ventures and Minority Interests.  All shares
               ---------------------------------------------------
 of capital stock or equity or debt or other interests owned by Baxter or its
 Subsidiaries in the Subsidiaries, joint ventures and minority investments set
 forth on Schedule 1.2(k) hereto;
          ---------------

                                      -18-
<PAGE>

          (l)  Books And Records.  All books and records (including all records
               -----------------
pertaining to customers, suppliers and personnel), wherever located, that
relate Exclusively to the Edwards Business;

          (m)  Supplies.  All office supplies, production supplies, spare parts,
               --------
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 Edwards
Business;

          (n)  Intellectual Property Licenses.  All permits, grants, contracts,
agreements and licenses running to or from Baxter or its Subsidiaries relating
to the Transferred Intellectual Property, including those set forth on Schedule
                                                                       --------
1.2(n) hereto;
------

          (o)  Software.  All (i) Software set forth on Schedule 1.2(o) hereto,
               --------                                 ---------------
(ii) shrink-wrapped Software located on hardware included in the Transferred
Assets and (iii) any Contracts related to the aforementioned Software
including those set forth on Schedule 1.2(o) hereto;
                             ---------------

          (p)  Internet Protocol Addresses.  All Class "C" Internet Protocol
               ---------------------------
 addresses set forth on Schedule 1.2(p) hereto; and
                        ---------------

          (q)  Other Assets.  All other assets, tangible or intangible,
               ------------
including all goodwill, that are Exclusive to the operations of, or otherwise
relate Exclusively to, the Edwards Business, including those set forth on
Schedule 1.2(q) hereto.
---------------

          "Transferred Intellectual Property" means the Intellectual Property
           ---------------------------------
described in paragraph (g) of the definition of "Transferred Assets."

          "Transferred Subsidiaries" means the Subsidiaries of Baxter set forth
           ------------------------
on Exhibit D hereto, the issued and outstanding shares of which will be
   ---------
transferred to Edwards or one or more of its Subsidiaries.

          "True-Up Balance Sheet" has the meaning specified in Section 9.6(g).
           ---------------------                               --------------

          "Uden Manufacturing Facility" has the meaning specified in Section
           ---------------------------                               -------
3.24.
----

          "Unbudgeted Transfer Adjustment" has the meaning specified in Section
           ------------------------------                               -------
9.6(a).
------

          "Under Development" has the meaning specified in Section 10.1(a).
           -----------------                               ---------------

          "Variance Amount" has the meaning specified in Section 9.6(g).
           ---------------                               --------------

          "WARN Act" has the meaning specified in Section 12.6.
           --------                               ------------

          "Xenomedica" has the meaning specified in Section 3.16.
           ----------                               ------------

          1.2.  Interpretation.  (a)  In this Agreement, unless the context
                --------------
clearly indicates otherwise:

                                      -19-
<PAGE>

          (i)    words used in the singular include the plural and words in the
     plural include the singular;

          (ii)   reference to any Person includes such Person's successors and
     assigns, but only if such successors and assigns are permitted by this
     Agreement;

          (iii)  reference to any gender includes the other gender;

          (iv)   the word "including" (and with correlative meaning "include")
     means "including but not limited to";

          (v)    reference to any Article, Section, Exhibit or Schedule means
     such Article or Section of, or such Exhibit or Schedule to, this Agreement,
     as the case may be, and references in any Section or definition to any
     clause means such clause of such Section or definition;

          (vi)   the words "herein," "hereunder," "hereof," "hereto" and words
     of similar import shall be deemed references to this Agreement as a whole
     and not to any particular Section or other provision hereof;

          (vii)  reference to any agreement, instrument or other document means
such agreement, instrument or other document as amended, supplemented and
modified from time to time to the extent permitted by the provisions thereof and
by this Agreement;

          (viii) reference to any law (including statutes and ordinances) means
such law (including all rules and regulations promulgated thereunder) as
amended, modified, codified or reenacted, in whole or in part, and in effect at
the time of determining compliance or applicability;

          (ix)   relative to the determination of any period of time, "from"
means "from and including," "to" means "to but excluding" and "through" means
"through and including";

          (x)    accounting terms used herein shall have the meanings
historically ascribed to them by Baxter and its Subsidiaries based upon Baxter's
internal financial policies and procedures in effect prior to the date of this
Agreement;

          (xi)   in the event of any conflict between the provisions of the body
of this Agreement and the Exhibits or Schedules hereto, the provisions of the
body of this Agreement shall control;

          (xii)  the titles to Articles and headings of Sections contained in
this Agreement have been inserted for convenience of reference only and shall
not be deemed to be a part of or to affect the meaning or interpretation of this
Agreement; and

          (xiii) references to "dollars" or "$" shall mean United States Dollars
unless otherwise indicated.

                                      -20-
<PAGE>

          (b)   This Agreement was negotiated by the Parties with the benefit of
legal representation, and no rule of construction or interpretation otherwise
requiring this Agreement to be construed or interpreted against either Party
shall apply to any construction or interpretation hereof. Subject to Section
                                                                     -------
18.5, this Agreement shall be interpreted and construed to the maximum extent
----
possible so as to uphold the enforceability of each of the terms and provisions
hereof, it being understood and acknowledged that this Agreement was entered
into by the Parties after substantial negotiations and with full awareness by
the Parties of the terms and provisions hereof and the consequences thereof.

                                  ARTICLE II

                               THE DISTRIBUTION
                               ----------------



          2.1.  Issuance and Delivery of Edwards Shares.  Edwards shall issue
                ---------------------------------------
to Baxter the number of Edwards Shares required so that the total number of
Edwards Shares held by Baxter on the Distribution Date is equal to the total
number of Edwards Shares distributable pursuant to Section 2.2. Baxter shall
                                                   -----------
deliver to the Transfer Agent one or more stock certificates representing all
the Edwards Shares then issued and outstanding, together with one or more stock
power(s) duly endorsed in blank. The Transfer Agent will then transfer and
distribute such shares in the manner described in Section 2.2 below.
                                                  -----------

          2.2.  Distribution of Edwards Shares. Edwards shall provide to the
                ------------------------------
Transfer Agent sufficient certificates in such denominations as the Transfer
Agent may request in order to effect the Distribution. Promptly following the
Distribution Date, Baxter shall instruct the Transfer Agent to distribute to all
holders of record of Baxter Common Stock as of the Record Date the Edwards
Distributable Share. All the distributed Edwards Shares shall be validly issued,
fully paid and nonassessable and shall be free of any preemptive rights.

          2.3.  Treatment of Fractional Shares.  No certificates or scrip
                ------------------------------
representing fractional Edwards Shares shall be issued in the Distribution. In
lieu of receiving fractional shares, each holder of Baxter Common Stock who
otherwise would be entitled to receive a fractional Edwards Share pursuant to
the Distribution will receive cash (rounded to the nearest cent) for such
fractional share. Baxter and Edwards shall instruct the Transfer Agent to
determine the number of whole Edwards Shares and fractional Edwards Shares
(rounded to the eighth decimal place) allocable to each holder of record of
Baxter Common Stock as of the Record Date, to aggregate all such fractional
shares into whole shares and to sell the whole shares obtained thereby in the
open market at the then prevailing prices on behalf of holders who otherwise
would be entitled to receive fractional share interests, and the Transfer Agent
shall distribute to each such holder such holder's ratable share of the total
proceeds of such sale after making appropriate deductions of any amounts
required for federal tax withholding purposes and after deducting any taxes
attributable to the sale of such fractional share interests. Baxter shall bear
the costs of commissions incurred in connection with such sales.

          2.4.  Baxter Board Action.  The Board of Directors of Baxter, or a
                -------------------
duly authorized committee of the Board of Directors, shall, in its sole
discretion, determine the

                                      -21-
<PAGE>

Record Date and the Distribution Date and all appropriate procedures in
connection with the Distribution. The Board of Directors of Baxter or such
committee also shall have the right to adjust at any time prior to the
Distribution Date the Edwards Distributable Share. The consummation of the
transactions provided for in this Article II shall be effected only after the
                                  ----------
Distribution has been declared by the Board of Directors of Baxter or such
committee and after all of the conditions set forth in Article XI hereof shall
                                                       ----------
have been satisfied or waived by Baxter.

          2.5.  Additional Approvals. Baxter shall cooperate with Edwards in
                --------------------
effecting, and if so requested by Edwards, Baxter shall, as the sole stockholder
of Edwards prior to the Distribution, ratify all actions that are reasonably
necessary or desirable to be taken by Edwards to effectuate, the transactions
referenced in or contemplated by this Agreement in a manner consistent with the
terms of this Agreement.

                                  ARTICLE III

                               FOREIGN TRANSFERS
                               -----------------


          3.1.  Edwards Lifesciences World Trade.  Baxter has caused to be
                --------------------------------
incorporated, under the General Corporation Law of Delaware, Edwards
Lifesciences World Trade Corporation ("Edwards World Trade") as a wholly-owned
                                       -------------------
Subsidiary of Baxter World Trade Corporation, a Delaware corporation and a
wholly-owned Subsidiary of Baxter ("Baxter World Trade"). Edwards World Trade
                                    ------------------
has been qualified as a foreign corporation under the General Corporation Law of
California. Subject to the terms and conditions of this Agreement, Baxter and
Edwards hereby agree to take, or cause to be taken, any and all actions
necessary to effect the transactions described in this Article III, with each
                                                       -----------
transaction occurring at the approximate times and/or in the order described in
Schedule 3.1 hereto.
------------

          3.2.  Puerto Rico (936).  Baxter and Edwards hereby agree to take any
                -----------------
and all actions necessary to effect the transfer to Edwards World Trade of all
of the right, title and interest of Baxter Healthcare Corporation of Puerto
Rico, an Alaska corporation and a wholly-owned Subsidiary of Baxter Pharmacy
Services ("Baxter Alaska"), in and to the Anasco division of Baxter Alaska which
           -------------
is engaged in the Edwards Business, and all of the Transferred Assets and the
Assumed Liabilities related thereto (the "Anasco Division"), as follows:
                                          ---------------

          (a)  Edwards Lifesciences Corporation of Puerto Rico ("Edwards Puerto
                                                                 --------------
Rico (936)") shall be incorporated as a Delaware corporation;
----------

          (b)  Edwards Puerto Rico (936) shall be qualified as a foreign
corporation under the laws of Puerto Rico;

          (c)  Baxter Alaska shall transfer to Edwards Puerto Rico (936) all of
its right, title and interest in and to the Anasco Division in return for 100
shares of capital stock of Edwards Puerto Rico (936);

          (d)  Baxter Alaska shall transfer to Baxter Pharmacy Services all of
its right, title and interest in and to the capital stock of Edwards Puerto Rico
(936);

                                      -22-
<PAGE>

          (e)  Baxter Pharmacy Services shall transfer to Baxter World Trade as
a dividend, all of its right, title and interest in and to the capital stock of
Edwards Puerto Rico (936) as described in Section 3.3(e) below;
                                          --------------

          (f)  Baxter World Trade shall transfer to Edwards World Trade as a
contribution to capital, all of its right, title and interest in and to the
capital stock of Edwards Puerto Rico (936) as described in Section 3.3(f) below;
                                                           --------------

          (g)  Edwards World Trade shall transfer to Edwards Puerto Rico (MS&P)
as a contribution to capital, all of its right, title and interest in and to the
capital stock of Edwards Puerto Rico (936) as described in Section 3.3(g)
                                                           --------------
below; and

          (h)  After the Distribution Date, at the option of Edwards, Edwards
Puerto Rico (936) shall transfer to Edwards Lifesciences AG or its designated
affiliate, by novation, all of its right, title and interest in and to certain
Transferred Assets and the Assumed Liabilities transferred to Edwards Puerto
Rico (936) by Baxter Alaska as part of the Anasco Division, which assets and
liabilities relate to the Edwards Business conducted in the Dominican Republic
prior to the Distribution Date, in return for cash or other consideration equal
to the fair market value of such Transferred Assets net of such Assumed
Liabilities, plus the assumption of such Assumed Liabilities.

          3.3. Puerto Rico (MS&P).  Baxter and Edwards hereby agree to take any
               ------------------
and all actions necessary to effect the transfer to Edwards World Trade of all
of the right, title and interest in and to the Transferred Assets and the
Assumed Liabilities held by Baxter Pharmacy Services, Baxter Sales and
Distribution Corp., a Delaware corporation and a wholly-owned Subsidiary of
Baxter Pharmacy Services ("Baxter Sales and Distribution"), and Edwards
                           -----------------------------
Lifesciences Cardiovascular Resources, Inc., a Pennsylvania corporation, as
follows:

          (a)  Edwards Lifesciences Sales Corporation ("Edwards Puerto Rico
                                                        -------------------
(MS&P)") shall be incorporated as a Delaware corporation and a wholly-owned
------
Subsidiary of Edwards World Trade;

          (b)  Edwards Puerto Rico (MS&P) shall be qualified as a foreign
corporation under the laws of Puerto Rico;

          (c)  Baxter Sales and Distribution shall transfer to Edwards Puerto
Rico (MS&P) all of its right, title and interest in and to the Transferred
Assets and the Assumed Liabilities, including those assets and liabilities
relating to the marketing and sales business conducted in Puerto Rico, in return
for cash or other consideration equal to the fair market value of such
Transferred Assets net of such Assumed Liabilities, plus the assumption of such
Assumed Liabilities;

          (d)  Baxter Pharmacy Services shall transfer to Edwards Puerto Rico
(MS&P) all of its right, title and interest in and to the Transferred Assets and
the Assumed Liabilities, including those assets, if any, liabilities and
employees relating to the perfusion business conducted in Puerto Rico in return
for cash or other consideration equal to the fair market value

                                      -23-
<PAGE>

of such Transferred Assets net of such Assumed Liabilities, plus the assumption
of such Assumed Liabilities;

          (e)  Baxter Pharmacy Services shall transfer to Baxter World Trade as
a dividend, all of its right, title and interest in and to the capital stock of
Edwards Puerto Rico (936) as described in Section 3.2(e) above;
                                          --------------

          (f)  Baxter World Trade shall transfer to Edwards World Trade as a
contribution to capital, all of its right, title and interest in and to the
capital stock of Edwards Puerto Rico (936) as described in Section 3.2(f) above;
                                                           --------------

          (g)  Edwards World Trade shall transfer to Edwards Puerto Rico (MS&P)
as a contribution to capital, all of its right, title and interest in and to the
capital stock of Edwards Puerto Rico (936) as described in Section 3.2(g)
                                                           --------------
above; and

          (h)  Edwards Lifesciences Cardiovascular Resources, Inc., a
Pennsylvania corporation, shall transfer to Edwards Puerto Rico (MS&P) all of
its right, title and interest in and to the Transferred Assets and Assumed
Liabilities, if any, relating to the perfusion business conducted in Puerto
Rico, in exchange for cash or other consideration equal to the fair market value
of such Transferred Assets net of such Assumed Liabilities, plus the assumption
of such Assumed Liabilities.

          3.4.  Dominican Republic.  Baxter and Edwards hereby agree to take
                ------------------
any and all actions necessary to effect the transfer to Edwards Lifesciences AG
of all of the right, title and interest of Baxter Healthcare S. de R.L., a
company organized under the laws of Panama ("Baxter Panama"), in and to the
                                             -------------
Transferred Assets and the Assumed Liabilities, consisting of contracts for the
construction and leasing of a manufacturing facility located in the Dominican
Republic, as follows:

          (a)  A branch office of Edwards Lifesciences AG shall be established
in the Dominican Republic and Edwards Lifesciences AG shall be qualified as a
foreign corporation under the laws of the Dominican Republic;

          (b)  Baxter Panama shall transfer to Edwards Lifesciences AG all of
its right, title and interest in and to the Transferred Assets and the Assumed
Liabilities, consisting of contracts for the construction and leasing of a
manufacturing facility located in the Dominican Republic; and

          (c)  After the Distribution Date, at the option of Edwards, Edwards
Puerto Rico (936) shall transfer to Edwards Lifesciences AG or its designated
affiliate, by novation, all of its right, title and interest in and to certain
Transferred Assets and the Assumed Liabilities transferred to Edwards Puerto
Rico (936) by Baxter Alaska as described in Section 3.2(h) above in return for
                                            --------------
cash or other consideration equal to the fair market value of such Transferred
Assets net of such Assumed Liabilities, plus the assumption of such Assumed
Liabilities.

          3.5. Intentionally Omitted.
               ---------------------

                                      -24-
<PAGE>

          3.6. Brazil. Baxter and Edwards hereby agree to take any and all
               ------
actions necessary to effect the transfer to Edwards World Trade of all the
right, title and interest in Edwards Lifesciences Macchi Ltda., a Brazilian
corporation ("Macchi"), held by BPCL and BRL, as follows:
              ------

          (a)  BRL shall transfer to BPCL all of its right, title and interest
in and to 6,750,947 quotas of Macchi, together with all of its right, title and
interest in the Agreement for the Assignment and Transfer of Quotas of Macchi
and other Covenants dated December 22, 1993, in exchange for the transfer by
BPCL to BRL of all of BPCL's right, title and interest in and to 17,448,432
quotas of Baxter Hospitalar;

          (b)  BRL shall transfer to Edwards all of its right, title and
interest in and to 1 quota of Macchi;

          (c)  BPCL shall transfer to Baxter Export Corporation all of its
right, title and interest in and to 1 quota of Baxter Hospitalar;

          (d)  Baxter World Trade shall transfer to Edwards World Trade as a
contribution to capital all of its right, title and interest in and to
25,158,211 quotas of BPCL;

          (e)  Baxter Export Corporation shall transfer (i) to Edwards World
Trade all of its right, title and interest in and to 764 quotas of BPCL and (ii)
to Edwards all of its right, title and interest in and to 1 quota of BPCL; and

          (f)  Baxter World Trade, S.A., a company organized under the laws of
Belgium, shall transfer to Edwards Lifesciences Japan Holdings, Inc. all of
their right, title and interest in and to debt of Macchi owing to such company
in exchange for cash or other consideration equal to the face value of such debt
plus accrued interest thereon;

          (g)  Macchi shall repay debt, together with accrued interest thereon,
owing to Baxter Uruguay, S.A., a company organized under the laws of Uruguay, in
the amount of $5,643,000; and

          (h)  Edwards World Trade shall pay $2,380,000 to Baxter World Trade,
S.A. as a reduction of the debt owing to Baxter World Trade, S.A. by Baxter
Uruguay, S.A.

          3.7.  Canada.  Baxter and Edwards hereby agree to take any and all
                ------
actions necessary to effect the transfer to Edwards World Trade of all of the
right, title and interest of Baxter Corporation, a company organized under the
laws of Ontario ("Baxter Canada"), in and to the Transferred Assets and the
                  -------------
Assumed Liabilities, which constitutes the Edwards Business conducted in Canada,
as follows:

          (a)  Edwards Lifesciences (Canada) Inc. ("Edwards Canada") shall be
                                                    --------------
incorporated as a Canadian corporation and a wholly-owned Subsidiary of Edwards
World Trade; and

          (b)  Baxter Canada shall transfer to Edwards Canada all of its right,
title and interest in and to the Transferred Assets and the Assumed Liabilities
for cash equal to the fair

                                      -25-
<PAGE>

market value of the Transferred Assets net of such Assumed Liabilities, plus the
assumption of such Assumed Liabilities.

          3.8. China.  Baxter and Edwards hereby agree to take any and all
               -----
 actions necessary to effect the transfer to Edwards World Trade and Edwards LLC
of all of the right, title and interest of Baxter Healthcare Limited, a company
organized under the laws of Hong Kong ("Baxter Hong Kong"), and Baxter (China)
                                        ----------------
Investment Co. Ltd., a company organized under the laws of the People's Republic
of China ("Baxter China"), in and to the Transferred Assets and the Assumed
           ------------
Liabilities, which constitutes the Edwards Business conducted in Hong Kong and
the People's Republic of China, as follows:

          (a)  A representative office of Edwards World Trade shall be
established in Shanghai, China;

          (b)  Baxter Hong Kong and Baxter China shall each directly or
indirectly transfer to Edwards World Trade all of its respective right, title
and interest in and to the Transferred Assets and the Assumed Liabilities
(except for third-party distribution agreements, inventory and accounts
receivable and accounts payable relating to the purchase of products) in return
for cash or other consideration equal to the fair market value of such
Transferred Assets net of such Assumed Liabilities, plus the assumption of such
Assumed Liabilities;

          (c)  Baxter Hong Kong and Baxter China shall each directly or
indirectly transfer to Edwards LLC all of its respective right, title and
interest in and to all third-party distribution agreements relating to the
purchase of products in U.S. dollars in its name but relating Exclusively to the
Edwards Business and all accounts receivable and accounts payable relating to
such sales activity in return for cash or other consideration equal to the fair
market of such agreements and accounts receivable net of such accounts payable
and the Assumed Liabilities under such agreements, plus the assumption of such
accounts payable and the Assumed Liabilities under such agreements; and

          (d)  Baxter Hong Kong shall terminate the Labor Supply Contracts by
and between Baxter Hong Kong and Foreign Enterprise Services Corporation
("FESCO") or another government agency, relating to the contracting from FESCO
  -----
or such other government agency of Baxter Hong Kong employees transferred to
Edwards World Trade, and Edwards World Trade shall enter into agreements with
FESCO or such other government agency providing for the same.

          3.9. Taiwan.  Baxter and Edwards hereby agree to take any and all
               ------
actions necessary to effect the transfer to Edwards World Trade and Edwards LLC
of all of the right, title and interest of Baxter Healthcare Limited, a company
organized under the laws of Taiwan ("Baxter Taiwan"), in and to the Transferred
                                     -------------
Assets and the Assumed Liabilities, which constitutes the Edwards Business
conducted in Taiwan, as follows:

          (a)  A branch office of Edwards World Trade shall be established in
Taipei, Taiwan;

                                      -26-
<PAGE>

          (b)   Baxter Taiwan shall transfer to Edwards World Trade all of its
right, title and interest in and to the product registrations relating
Exclusively to the Edwards Business;

          (c)   Baxter Taiwan shall transfer all third-party distribution
agreements relating to the purchase of products relating Exclusively to the
Edwards Business to Edwards LLC; and

          (d)   Edwards World Trade Taiwan branch shall enter into an agreement
with Edwards LLC whereby the Taiwan branch of Edwards World Trade shall provide,
for a fee, certain sales and promotion activities on behalf of Edwards LLC in
connection with the distribution of Edwards Products by third-party distributors
in Taiwan.

          3.10. Singapore and the Philippines.  Baxter and Edwards hereby
                -----------------------------
agree to take any and all actions necessary to effect the transfer to Edwards
World Trade and Edwards LLC of all of the right, title and interest of Baxter
Healthcare (Asia) Pte. Ltd., a company organized under the laws of Singapore
("Baxter Asia"), in and to the Transferred Assets and the Assumed Liabilities,
  -----------
which constitutes the Edwards Business conducted in Singapore, and of Baxter
Healthcare Philippines Inc., a company organized under the laws of the
Philippines ("Baxter Philippines"), in and to the Transferred Assets and the
              ------------------
Assumed Liabilities, which constitutes the Edwards Business conducted in the
Philippines, as follows :

          (a)   A representative office of Edwards World Trade shall be
established in Singapore;

          (b)   Baxter Asia shall transfer to Edwards World Trade all of its
right, title and interest in and to the Transferred Assets and the Assumed
Liabilities relating Exclusively to the Edwards Business conducted in Singapore
(except for public hospital contracts, third-party distribution agreements,
inventory and accounts receivable and accounts payable relating to the purchase
of products) in return for cash or other consideration equal to the fair market
value of such Transferred Assets net of such Assumed Liabilities, plus the
assumption of such Assumed Liabilities;

          (c)   Baxter Asia shall transfer all of its right, title and interest
in and to certain public hospital contracts relating Exclusively to the Edwards
Business conducted in Singapore to a third-party distributor in return for its
release from its obligations under such contracts;

          (d)   Baxter Philippines shall transfer to third-party distributors
all of its right, title and interest in and to the product registrations in its
name but relating Exclusively to the Edwards Business conducted in the
Philippines;

          (e)   Baxter Asia shall transfer all of its right, title and interest
in and to the third-party distribution agreements related to the purchase of
products relating Exclusively to the Edwards Business conducted in Singapore,
Malaysia, Brunei, Indonesia, Pakistan, Sri Lanka, Taiwan, Myanmar, Laos and
Cambodia and all accounts receivable and accounts payable relating to such sales
activity to Edwards LLC in return for cash or other consideration equal to the
fair market value of such agreements and accounts receivable net of such
accounts payable

                                      -27-
<PAGE>

and the Assumed Liabilities under such agreements, plus the assumption of such
accounts payable and the Assumed Liabilities under such agreements; and

          (f)   Baxter Philippines shall transfer all of its right, title and
interest in and to the third-party distribution agreements related to the
purchase of products relating Exclusively to the Edwards Business conducted in
the Philippines and all accounts receivable and accounts payable relating to
such sales activity to Edwards LLC in return for cash or other consideration
equal to the fair market value of such agreements and accounts receivable net of
such accounts payable and the Assumed Liabilities under such agreements, plus
the assumption of such accounts payable and the Assumed Liabilities under such
agreements.

          3.11. Malaysia.  Baxter and Edwards hereby agree to take any and all
                --------
actions necessary to effect the transfer to Edwards LLC of all of the right,
title and interest of Baxter Asia in and to the Transferred Assets and the
Assumed Liabilities, which constitutes the Edwards Business conducted in
Malaysia, as follows:

          (a)   A representative office of Edwards World Trade shall be
established in Malaysia;

          (b)   Baxter Asia shall transfer all of its right, title and interest
in and to all accounts receivable and accounts payable relating to the purchase
of products relating Exclusively to the Edwards Business conducted in Malaysia
to Edwards LLC in return for cash or other consideration equal to the fair
market value of such accounts receivable net of such accounts payable, plus the
assumption of such accounts payable.

          3.12. Thailand.  Baxter and Edwards hereby agree to take any and all
                --------
actions necessary to effect the transfer to Edwards World Trade and Edwards LLC
of all of the right, title and interest of Baxter Healthcare (Thailand) Co.,
Ltd., a company formed under the laws of Thailand ("Baxter Thailand"), in and to
                                                    ---------------
the Transferred Assets and the Assumed Liabilities, which constitutes the
Edwards Business conducted in Thailand, as follows:

          (a)   A representative office of Edwards World Trade shall be
established in Bangkok, Thailand;

          (b)   Baxter Thailand shall transfer to Edwards World Trade all of its
right, title and interest in and to the fixed assets relating Exclusively to the
Edwards Business conducted in Thailand and the liabilities relating thereto in
return for cash or other consideration equal to the fair market value of such
assets net of such liabilities, plus the assumption of such liabilities;

          (c)   Baxter Thailand shall transfer all of its right, title and
interest in and to all bank guarantee deposits, third-party distribution
agreements relating to the purchase of products in its name but relating
Exclusively to the Edwards Business conducted in Thailand and Vietnam and all
accounts receivable relating to such sales activity to Edwards LLC in return for
cash or other consideration equal to the fair market value of such deposits,
agreements and accounts receivable net of the assumption of the Assumed
Liabilities under such agreements, plus the assumption of the Assumed
Liabilities under such agreements;

                                      -28-
<PAGE>

          (d)    Baxter Thailand shall permit product registrations in its name
but relating Exclusively to the Edwards Business conducted in Thailand to lapse,
and Osotspa Co., Ltd., a third-party distributor of Edwards Products in
Thailand, shall apply for new product registrations for such Edwards Products;
and

          (e)    Edwards World Trade shall reimburse Baxter Thailand for all
severance payments required to be made to Edwards Employees due to the
termination of their employment by Baxter Thailand.

          3.13.  Korea.  Baxter and Edwards hereby agree to take any and all
                 -----
actions necessary to effect the transfer to Edwards World Trade of all of the
right, title and interest of Baxter Korea Co. Ltd., a company organized under
the laws of Korea ("Baxter Korea"), in and to the Transferred Assets and the
                    ------------
Assumed Liabilities, which constitutes the Edwards Business conducted in Korea,
as follows:

          (a)    Edwards Lifesciences Korea Ltd. ("Edwards Korea") shall be
                                                   -------------
organized as a Korean private limited company (chusik hwesa) and a wholly-owned
Subsidiary of Edwards World Trade; and

          (b)    Baxter Korea shall transfer to Edwards Korea all of its right,
title and interest in and to the Transferred Assets and the Assumed Liabilities
in return for cash or other consideration equal to the fair market value of such
Transferred Assets net of such Assumed Liabilities, plus the assumption of such
Assumed Liabilities.

          3.14.  India.  Baxter and Edwards hereby agree to take any and all
                 -----
actions necessary to effect the transfer to Edwards World Trade of (i) all the
right, title and interest in ELIPL held by BIPL and Sanjiv Verma and (ii) all
the remaining right, title and interest of BIPL in and to the Edwards Business
conducted in India, as follows:

          (a)    BIPL shall transfer to Edwards World Trade all of its right,
title and interest in and to 2,999,980 shares of capital stock of ELIPL for
29,999,800 Indian Rupees (approximately $689,000 on March 7, 2000);

          (b)    Sanjiv Verma shall transfer to Edwards all of his right, title
and interest in and to 20 shares of capital stock of ELIPL for 200 Indian Rupees
(approximately $4.60 on March 7, 2000);

          (c)    Edwards World Trade shall subscribe for 15,216,020 additional
shares of capital stock of ELIPL for 152,160,200 Indian Rupees (approximately
$3.49 million on March 7, 2000);

          (d)    Edwards shall subscribe for 183,980 additional shares of
capital stock of ELIPL for 1,839,800 Indian Rupees (approximately $42,200 on
March 7, 2000); and

          (e)    BIPL shall transfer to ELIPL all of its right, title and
interest in and to the Transferred Assets and the Assumed Liabilities as a going
concern, which constitutes the Edwards Business conducted by BIPL in return for
cash or other consideration equal to the fair

                                      -29-
<PAGE>

market value of such Transferred Assets net of such Assumed Liabilities, plus
the assumption of such Assumed Liabilities.

          3.15.  Latin America.  Baxter will continue to serve as distributor
                 -------------
for Edwards on a short-term basis in the Latin American countries set out below.
Accordingly, Baxter will retain the inventory, accounts receivable and accounts
payable relating to the sale of products related Exclusively to the Edwards
Business conducted in each such country until the termination of the
distribution arrangement in such country. Upon termination of the distribution
arrangement, (i) Edwards shall purchase (or cause to be purchased) the
inventory, (ii) Edwards shall pay Baxter for the cost of money to Baxter of
carrying such inventory and (iii) Baxter shall continue to hold and to collect
or pay, as applicable, the accounts receivable and accounts payable, subject to
the obligations of Edwards set forth in Section 9.7(f), all as follows:
                                        --------------

          (a)    Colombia.
                 --------

          (i)    Upon termination of the distribution arrangement for Colombia,
     Edwards shall purchase, or cause another party to purchase, all of the
     right, title and interest of Laboratorios Baxter S.A., a company formed
     under the laws of Colombia ("Baxter Colombia"), in and to the inventory
                                  ---------------
     relating to the sale of products related Exclusively to the Edwards
     Business conducted in Colombia and all other products or equipment related
     Exclusively to the Edwards Business conducted in Colombia but in the
     possession of third parties;

          (ii)   Edwards shall indemnify Baxter Colombia against (A) the
     difference, if any, between the sale price of any inventory sold pursuant
     to Section 3.15(a)(i) that is included in the Retained Assets and the book
        ------------------
     value of such inventory on the Distribution Date in U.S. dollars,
     calculated using the respective Foreign Exchange Rates in effect on the
     date of sale and the Distribution Date and (B) the difference, if any,
     between the sale price of any replacement inventory sold pursuant to
     Section 3.15(a)(i) and the cost of such inventory in U.S. dollars,
     ------------------
     calculated using the respective Foreign Exchange Rates in effect on the
     date of sale and the date of purchase of such inventory, in each case
     accounting for the sale of inventory on a first-in, first-out basis. Any
     payment required pursuant to this Section shall be paid simultaneously with
     the sale of such inventory; and

          (iii)  Edwards shall, simultaneously with the sale pursuant to Section
                                                                         -------
     3.15(a)(i), pay to Baxter Colombia as an indemnity the time value of money
     ----------
     to Baxter Colombia of carrying the inventory included in the Retained
     Assets and any replacement inventory relating Exclusively to the Edwards
     Business conducted in Colombia, from the Distribution Date through the date
     of transfer of such inventory.

          (b)    Chile.
                 -----

          (i)    Upon termination of the distribution arrangement for Chile,
     Edwards shall purchase, or cause another party to purchase, all of the
     right, title and interest of Baxter de Chile Ltda., a company organized
     under the laws of Chile ("Baxter Chile"), in and to the inventory relating
                               ------------
     to the sale of products related Exclusively to the Edwards Business

                                      -30-
<PAGE>

     conducted in Chile and all other products or equipment related Exclusively
     to the Edwards Business conducted in Chile but in the possession of third
     parties;

          (ii)  Edwards shall indemnify Baxter Chile against (A) the difference,
     if any, between the sale price of any inventory sold pursuant to Section
                                                                      -------
     3.15(b)(i) that is included in the Retained Assets and the book value of
     ----------
     such inventory on the Distribution Date in U.S. dollars, calculated using
     the respective Foreign Exchange Rates in effect on the date of sale and the
     Distribution Date plus (B) the difference, if any, between the sale price
     of any replacement inventory sold pursuant to Section 3.15(b)(i) and the
                                                   ------------------
     cost of such inventory in U.S. dollars, calculated using the respective
     Foreign Exchange Rates in effect on the date of sale and the date of
     purchase of such inventory, in each case accounting for the sale of
     inventory on a first-in, first-out basis. Any payment required pursuant to
     this Section shall be paid simultaneously with the sale of such inventory;
     and

          (iii) Edwards shall, simultaneously with the sale pursuant to Section
                                                                        -------
     3.15(b)(i), pay to Baxter Chile as an indemnity the time value of money to
     ----------
     Baxter Chile of carrying the inventory included in the Retained Assets and
     any replacement inventory relating Exclusively to the Edwards Business
     conducted in Chile, from the Distribution Date through the date of transfer
     of such inventory.

          (c)   Venezuela.
                ---------

          (i)   Upon termination of the distribution arrangement for Venezuela,
     Edwards shall purchase, or cause another party to purchase, all of the
     right, title and interest of Baxter de Venezuela C.A., a company organized
     under the laws of Venezuela ("Baxter Venezuela"), in and to the inventory
                                   ----------------
     relating to the sale of products related Exclusively to the Edwards
     Business conducted in Venezuela and all other products or equipment related
     Exclusively to the Edwards Business conducted in Venezuela but in the
     possession of third parties;

          (ii)  Edwards shall indemnify Baxter Venezuela against (A) the
     difference, if any, between the sale price of any inventory sold pursuant
     to Section 3.15(c)(i) that is included in the Retained Assets and the book
        ------------------
     value of such inventory on the Distribution Date in U.S. dollars,
     calculated using the respective Foreign Exchange Rates in effect on the
     date of sale and the Distribution Date and (B) the difference, if any,
     between the sale price of any replacement inventory sold pursuant to
     Section 3.15(c)(i) and the cost of such inventory in U.S. dollars,
     ------------------
     calculated using the respective Foreign Exchange Rates in effect on the
     date of sale and the date of purchase of such inventory, in each case
     accounting for the sale of inventory on a first-in, first-out basis.  Any
     payment required pursuant to this Section shall be paid simultaneously with
     the sale of such inventory; and

          (iii) Edwards shall, simultaneously with the sale pursuant to Section
                                                                        -------
     3.15(c)(i), pay to Baxter Venezuela as an indemnity the time value of money
     ----------
     to Baxter Venezuela of carrying the inventory included in the Retained
     Assets and any replacement inventory relating Exclusively to the Edwards
     Business conducted in Venezuela, from the Distribution Date through the
     date of transfer of such inventory.

                                      -31-
<PAGE>

          (d)   Peru.
                ----

          (i)   Upon termination of the distribution arrangement for Peru,
     Edwards shall purchase, or cause another party to purchase, all of the
     right, title and interest of Laboratorios Baxter de Peru, S.A., a company
     organized under the laws of Peru ("Baxter Peru"), in and to the inventory
                                        -----------
     relating to the sale of products related Exclusively to the Edwards
     Business conducted in Peru and all other products or equipment related
     Exclusively to the Edwards Business conducted in Peru but in the possession
     of third parties;

          (ii)  Edwards shall indemnify Baxter Peru against (A) the difference,
     if any, between the sale price of any inventory sold pursuant to Section
                                                                      -------
     3.15(d)(i) that is included in the Retained Assets and the book value of
     ----------
     such inventory on the Distribution Date in U.S. dollars, calculated using
     the respective Foreign Exchange Rates in effect on the date of sale and the
     Distribution Date and (B) the difference, if any, between the sale price of
     any replacement inventory sold pursuant to Section 3.15(d)(i) and the cost
                                                ------------------
     of such inventory in U.S. dollars, calculated using the respective Foreign
     Exchange Rates in effect on the date of sale and the date of purchase of
     such inventory, in each case accounting for the sale of inventory on a
     first-in, first-out basis.  Any payment required pursuant to this Section
     shall be paid simultaneously with the sale of such inventory; and

          (iii) Edwards shall, simultaneously with the sale pursuant to Section
                                                                       -------
     3.15(d)(i), pay to Baxter Peru as an indemnity the time value of money to
     ----------
     Baxter Peru of carrying the inventory included in the Retained Assets and
     any replacement inventory relating Exclusively to the Edwards Business
     conducted in Peru, from the Distribution Date through the date of transfer
     of such inventory.

          (e)   Mexico.
                ------

          (i)   Edwards Lifesciences Mexico, S.A. de C.V. ("Edwards Mexico")
                                                            --------------
     shall be incorporated as a Mexican corporation and a wholly-owned
     Subsidiary of Edwards World Trade;

          (ii)  Baxter S.A. de C.V., a company organized under the laws of
     Mexico ("Baxter Mexico"), shall transfer to Edwards Mexico all of its
              -------------
     right, title and interest in and to the Transferred Assets, if any, and the
     Assumed Liabilities, if any, relating Exclusively to the Edwards Business
     conducted in Mexico (except for third-party distribution agreements,
     inventory, accounts receivable and accounts payable relating to the
     purchase of products) in return for cash or other consideration equal to
     the fair market value of the Transferred Assets net of such Assumed
     Liabilities, plus the assumption of such Assumed Liabilities;

          (iii) Upon termination of the distribution arrangement for Mexico,
     Edwards Mexico shall purchase all of the right, title and interest of
     Baxter Mexico in and to the inventory relating to the sale of products
     related Exclusively to the Edwards Business conducted in Mexico and all
     other products or equipment related Exclusively to the Edwards Business
     conducted in Mexico but in the possession of third parties;

                                      -32-
<PAGE>

          (iv)  Edwards Mexico shall indemnify Baxter Mexico against (A) the
     difference, if any, between the sale price of any inventory sold pursuant
     to Section 3.15(e)(iii) that is included in the Retained Assets and the
        --------------------
     book value of such inventory on the Distribution Date in U.S. dollars,
     calculated using the respective Foreign Exchange Rates in effect on the
     date of sale and the Distribution Date and (B) the difference, if any,
     between the sale price of any replacement inventory sold pursuant to
     Section 3.15(e)(iii) and the cost of such inventory in U.S. dollars,
     --------------------
     calculated using the respective Foreign Exchange Rates in effect on the
     date of sale and the date of purchase of such inventory, in each case
     accounting for the sale of inventory on a first-in, first-out basis.  Any
     payment required pursuant to this Section shall be paid simultaneously with
     the sale of such inventory; and

          (v)   Edwards shall, simultaneously with the sale pursuant to Section
                                                                        -------
     3.15(e)(iii), pay to Baxter Mexico as an indemnity the time value of money
     ------------
     to Baxter Mexico of carrying the inventory included in the Retained Assets
     and any replacement inventory relating Exclusively to the Edwards Business
     conducted in Mexico, from the Distribution Date through the date of
     transfer of such inventory.

          3.16. Switzerland.  Baxter and Edwards hereby agree to take any and
                -----------
all actions necessary to effect the transfer to Edwards World Trade of (i) all
the right, title and interest of Baxter Edwards in and to the Transferred Assets
and the Assumed Liabilities, which constitutes the Edwards Business conducted in
Switzerland; (ii) all the right, title and interest in Xenomedica AG, a company
organized under the laws of Switzerland and a wholly-owned Subsidiary of Baxter
World Trade ("Xenomedica"), held by Baxter World Trade; and (iii) all the
              ----------
right, title and interest of Baxter Woodlands in and to the Transferred Assets
and the Assumed Liabilities, which constitutes the Swiss sales branch ("Swiss
                                                                        -----
Sales Branch") of Baxter Woodlands, all as follows :
------------

          (a)   Edwards Lifesciences A.G. (Swiss Principal).
                -------------------------------------------

          (i)   Edwards Lifesciences A.G. ("Edwards Lifesciences AG") shall be
                                            -----------------------
     formed as a Swiss corporation;

          (ii)  Baxter Edwards shall transfer to Edwards Lifesciences AG all of
     its right, title and interest in and to the Transferred Assets and the
     Assumed Liabilities, which constitutes the Edwards Business conducted by
     Baxter Edwards (except for the sales employees and related assets and
     Liabilities), in return for 248 shares of capital stock of Edwards
     Lifesciences AG;

          (iii) Peter Wiget and Nicole Sidler shall each subscribe for one share
     of capital stock of Edwards Lifesciences AG;

          (iv)  Baxter Edwards shall transfer to Baxter World Trade as a
     dividend, all of its right, title and interest in and to the stock of
     Edwards Lifesciences AG;

          (v)   Baxter Woodlands shall transfer the Swiss Sales Branch to
     Edwards Lifesciences AG in return for 25,000 Swiss francs (approximately
     $14,900 on March 7,

                                      -33-
<PAGE>

     2000) and assumption by Edwards Lifesciences AG of the Liabilities of the
     Swiss Sales Branch;

          (vi)   Edwards Lifesciences AG shall apply for VAT registrations in
     the European countries in which Edwards' Subsidiaries will have a legal
     presence as described in this Article III;
                                   -----------

          (vii)  The third-party distribution agreements relating to the
     purchase of products relating Exclusively to the Edwards Business, and all
     accounts receivable and accounts payable relating to such sales activity,
     in Malta and Portugal shall be transferred from the applicable Baxter
     Subsidiaries to Edwards Lifesciences AG in return for cash or other
     consideration equal to the fair market value of such agreements and
     accounts receivable net of such accounts payable and the Assumed
     Liabilities under such agreements, plus the assumption of such accounts
     payable and the Assumed Liabilities under such agreements;

          (viii) Baxter World Trade shall transfer to Edwards World Trade as a
     contribution to capital all of its right, title and interest in and to the
     capital stock of Xenomedica; and

          (ix)   Baxter World Trade shall transfer to Edwards World Trade as a
     contribution to capital all of its right, title and interest in and to the
     capital stock of Edwards Lifesciences AG.

          (b)    Baxter AG, Volketswil.
                 ---------------------

          (i)    Baxter AG, Volketswil, will transfer all of its right, title
     and interest in all third-party distribution agreements in its name but
     relating Exclusively to the Edwards Business conducted in Switzerland to
     Edwards Lifesciences AG; and

          (ii)   Baxter AG, Volketswil, will transfer to Edwards Swiss
     Commissionaire all of its right, title and interest in certain assets and
     the Assumed Liabilities related thereto in return for cash or other
     consideration equal to the fair market value of such assets net of such
     Assumed Liabilities, plus the assumption of such Assumed Liabilities.

          (c)    Edwards Swiss Commissionaire.
                 ----------------------------

          (i)    Edwards Lifesciences Marketing GmbH ("Edwards Swiss
                                                       -------------
     Commissionaire") shall be organized as a Swiss limited company (GmbH) and a
     --------------
     wholly-owned Subsidiary of Edwards EU Holdings; and

          (ii)   Baxter Edwards shall transfer to Edwards Swiss Commissionaire
     all of the sales employees relating to the Edwards Business conducted by
     Baxter Edwards together with all of its right, title and interest in
     certain related assets and liabilities in return for cash or other
     consideration equal to the fair market value of such transferred assets net
     of such assumed liabilities, plus the assumption of such assumed
     liabilities.

                                      -34-
<PAGE>

          3.17.  EU Holdings (Denmark).  Baxter and Edwards hereby agree to
                 ---------------------
take any and all actions necessary to establish a holding company in Europe to
hold the stock of all of the Edwards European entities described in Sections
                                                                    --------
3.18 through 3.23, 3.25 and 3.26 below, as follows:
----         ----  ----     ----

          (a)    Edwards Lifesciences Holding A/S ("Edwards EU Holdings") shall
                                                    -------------------
be formed as a Danish corporation;

          (b)    Baxter shall purchase all issued and outstanding capital stock
(500 shares) of Edwards EU Holdings from the organizer of Edwards EU Holdings
for 500,000 Danish Krone (approximately $64,400 on March 7, 2000);

          (c)    Baxter shall transfer to Baxter World Trade as a contribution
to capital all of its right, title and interest in and to the capital stock of
Edwards EU Holdings; and

          (d)    Baxter World Trade shall transfer to Edwards World Trade as a
contribution to capital all of its right, title and interest in and to the
capital stock of Edwards EU Holdings.

          3.18.  Germany.  Baxter and Edwards hereby agree to take any and all
                 -------
actions necessary to effect the transfer to Edwards World Trade of (i) all the
right, title and interest of Baxter Germany in and to the Transferred Assets and
the Assumed Liabilities, which constitutes the Edwards Business conducted in
Germany; (ii) all the right, title and interest in PAS Palzer GmbH & Co. KG, a
German limited company ("Pas Palzer KG"), held by Baxter Germany; and (iii) all
                         -------------
the right, title and interest in PAS Palzer Verwaltungs GmbH, a German limited
company ("Pas Palzer Verwaltungs"), held by Baxter Germany Holdings, all as
          ----------------------
follows:

          (a)    Edwards Germany Holdings.
                 ------------------------

          (i)    Edwards Lifesciences Holding Germany GmbH ("Edwards Germany
                                                             ---------------
     Holdings") shall be formed as a German limited company (GmbH); and
     --------

          (ii)   Edwards EU Holdings shall purchase all issued and outstanding
     capital stock (one share) of Edwards Germany Holdings from the organizer of
     Edwards Germany Holdings for 25,000 Euro (approximately $24,000 on March 7,
     2000).

          (b)    Edwards Germany.
                 ---------------

          (i)    Edwards Lifesciences Germany GmbH ("Edwards Germany") shall be
                                                     ---------------
     formed as a German limited company (GmbH);

          (ii)   Edwards Germany Holdings shall purchase all issued and
     outstanding capital stock (one share) of Edwards Germany from the organizer
     of Edwards Germany for 25,000 Euro (approximately $24,000 on March 7,
     2000);

          (iii)  Baxter Germany shall transfer to Edwards Germany all of its
     right, title and interest in and to the Transferred Assets and the Assumed
     Liabilities (except for inventory, which shall be transferred pursuant to
     Sections 3.18(b)(iv) and (v), and
     --------------------     ---

                                      -35-
<PAGE>

     accounts receivable and accounts payable that are not capable of being
     specifically separated between Baxter Germany and Edwards Germany, which
     shall be Retained Assets and Retained Liabilities, respectively) as well as
     its partnership interest in Pas Palzer KG in return for cash or other
     consideration equal to the fair market value of such Transferred Assets and
     partnership interest net of such Assumed Liabilities, plus the assumption
     of such Assumed Liabilities;

          (iv)   Baxter Germany shall transfer to Baxter Belgium all of its
     right, title and interest in and to certain U.S. sourced inventory relating
     Exclusively to the Edwards Business in Germany in return for cash or other
     consideration equal to the fair market value of such inventory;

          (v)    Baxter Germany shall transfer to Edwards Lifesciences AG all
     other inventory relating Exclusively to the Edwards Business in Germany in
     return for cash or other consideration equal to the fair market value of
     such inventory;

          (vi)   Baxter Germany Holdings shall transfer to Edwards Germany
     Holdings all issued and outstanding capital stock (one share) of Pas Palzer
     Verwaltungs in return for cash or other consideration equal to the fair
     market value of such capital stock; and

          (vii)  After the Distribution Date, Edwards Germany shall transfer to
     Edwards Lifesciences AG all of its right, title and interest in and to the
     accounts receivable held by Edwards Germany in return for cash or other
     consideration equal to the fair market value of such accounts receivable.

          3.19.  Austria.  Baxter and Edwards hereby agree to take any and all
                 -------
actions necessary to effect the transfer to Edwards World Trade of all of the
right, title and interest of Baxter Immuno Vertriebsgesellschaft GmbH, a company
organized under the laws of Austria ("Baxter Austria"), in and to the
                                      --------------
Transferred Assets and the Assumed Liabilities, which constitutes the Edwards
Business conducted in Austria, as follows:

          (a)    Edwards Lifesciences Austria GmbH ("Edwards Austria") shall be
                                                     ---------------
organized as an Austrian limited company (GmbH) and a wholly-owned Subsidiary of
Edwards EU Holdings;

          (b)    Baxter Austria shall transfer to Edwards Austria all of its
right, title and interest in and to the Transferred Assets and the Assumed
Liabilities (except for inventory) in return for cash or other consideration
equal to the fair market value of such Transferred Assets net of such Assumed
Liabilities, plus the assumption of such Assumed Liabilities;

          (c)    Baxter Austria shall transfer to Edwards Lifesciences AG all of
its right, title and interest in and to all inventory relating Exclusively to
the Edwards Business in Austria in return for cash or other consideration equal
to the fair market value of such inventory; and

          (d)    After the Distribution Date, Edwards Austria shall transfer to
Edwards Lifesciences AG all of its right, title and interest in and to the
accounts receivable held by

                                      -36-
<PAGE>

Edwards Austria in return for cash or other consideration equal to the fair
market value of such accounts receivable.

          3.20.  France.  Baxter and Edwards hereby agree to take any and all
                 ------
actions necessary to effect the transfer to Edwards World Trade of all of the
right, title and interest of Baxter S.A. (France), a company organized under the
laws of France ("Baxter France"), in and to the Transferred Assets and the
                 -------------
Assumed Liabilities, which constitutes the Edwards Business conducted in France,
as follows:

          (a)    Edwards Lifesciences SAS ("Edwards France") shall be organized
                                            --------------
as a French SAS;

          (b)    Baxter France shall transfer to Baxter Belgium all of its
right, title and interest in and to certain U.S. sourced inventory relating
Exclusively to the Edwards Business in France in return for cash or other
consideration equal to the fair market value of such inventory;

          (c)    Baxter France shall transfer to Edwards Lifesciences AG all of
its right, title and interest in and to all other inventory relating Exclusively
to the Edwards Business in France in return for cash or other consideration
equal to the fair market value of such inventory;

          (d)    Baxter France shall transfer to Edwards France all of its
right, title and interest in and to the Transferred Assets and the Assumed
Liabilities in return for 4,000 shares of capital stock of Edwards France;

          (e)    Edwards France shall transfer to Edwards Lifesciences AG all of
its right, title and interest in and to all third-party distribution agreements
in its name but relating Exclusively to the Edwards Business conducted in
France;

          (f)    Baxter France shall transfer to Edwards EU Holdings all of its
right, title and interest in and to the capital stock of Edwards France for cash
or other consideration equal to the fair market value of such capital stock; and

          (g)    After the Distribution Date, Edwards France shall transfer to
Edwards Lifesciences AG all of its right, title and interest in and to the
accounts receivable held by Edwards France in return for cash or other
consideration equal to the fair market value of such accounts receivable.

          3.21.  Italy.  Baxter and Edwards hereby agree to take any and all
                 -----
actions necessary to effect the transfer to Edwards World Trade of all of the
right, title and interest of Baxter S.p.A., a company organized under the laws
of Italy ("Baxter Italy"), in and to the Transferred Assets and the Assumed
           ------------
Liabilities, which constitutes the Edwards Business conducted in Italy, as
follows:

          (a)    Baxter Italy shall transfer to Edwards Lifesciences AG all of
its right, title and interest in and to the accounts receivable and inventory
relating to the sale of products relating Exclusively to the Edwards Business
conducted in Italy in return for cash or other consideration equal to the fair
market value of such accounts receivable and inventory;

                                      -37-
<PAGE>

          (b)    Baxter World Trade and Baxter Export Corporation, as
shareholders of Baxter Italy, shall spin off the Transferred Assets and the
Assumed Liabilities, which constitutes the Edwards Business conducted in Italy,
thus creating a new company, under the name CVG Italia S.p.A. ("Edwards Italy");
                                                                -------------

          (c)    As a result, Baxter World Trade and Baxter Export Corporation
shall jointly own the entire share capital of Edwards Italy;

          (d)    Simultaneously with the spin-off pursuant to Section 3.21(b),
                                                              ---------------
Baxter Italy shall transfer to Edwards Lifesciences AG all of its right, title
and interest in and to the accounts receivable relating to the sale of products
relating Exclusively to the Edwards Business conducted in Italy created after
the transfer pursuant to Section 3.21(a) in return for cash or other
                         ---------------
consideration equal to the fair market value of such accounts receivable;

          (e)    Edwards Italy shall transfer to Edwards Lifesciences AG all of
its right, title and interest in and to all third-party distribution agreements
in its name but relating Exclusively to the Edwards Business and the inventory
relating Exclusively to the Edwards Business conducted in Italy in return for
cash or other consideration equal to the fair market value of such agreements
and inventory net of the Assumed Liabilities under such agreements, plus the
assumption of the Assumed Liabilities under such agreements;

          (f)    Baxter World Trade shall transfer to Edwards World Trade as a
contribution to capital all of its right, title and interest in and to the
capital stock of Edwards Italy received pursuant to Sections 3.21(b) and (c);
                                                    ----------------     ---

          (g)    Edwards World Trade shall transfer to Edwards EU Holdings as a
contribution to capital all of its right, title and interest in and to the
capital stock of Edwards Italy received from Baxter World Trade pursuant to
Section 3.21(f);
---------------

          (h)    Baxter Export Corporation shall distribute to Baxter World
Trade all of its right, title and interest in and to the capital stock of
Edwards Italy received pursuant to Sections 3.21(b) and (c);
                                   ----------------     ---

          (i)    Baxter World Trade shall transfer to Edwards World Trade as a
contribution to capital all of its right, title and interest in and to the
capital stock of Edwards Italy received from Baxter Export Corporation pursuant
to Section 3.21(h); and
   ---------------

          (j)    Edwards World Trade shall transfer to Edwards Holdings
Switzerland as a contribution to capital all of its right, title and interest in
and to the capital stock of Edwards Italy received from Baxter World Trade
pursuant to Section 3.21(i).
            ---------------

          3.22.  Belgium/Luxembourg.  Baxter and Edwards hereby agree to take
                 ------------------
 any and all actions necessary to effect the transfer to Edwards World Trade of
all of the right, title and interest of Baxter S.A. (Belgium), a company
organized under the laws of Belgium ("Baxter Belgium"), in and to the
                                      --------------
Transferred Assets and the Assumed Liabilities, which constitutes the Edwards
Business conducted in Belgium and Luxembourg, as follows:

                                      -38-
<PAGE>

          (a)    Edwards Lifesciences S.P.R.L. ("Edwards Belgium") shall be
                                                 ---------------
organized as a Belgian SPRL with Raymond Lauret as a 0.08% holder and Edwards EU
Holdings as a 99.92% holder;

          (b)    Baxter Belgium shall transfer to Edwards Belgium all of its
right, title and interest in and to the Transferred Assets and the Assumed
Liabilities, in return for cash or other consideration equal to the fair market
value of such Transferred Assets net of such Assumed Liabilities, plus the
assumption of such Assumed Liabilities;

          (c)    Edwards Belgium shall transfer to Edwards Lifesciences AG all
of its right, title and interest in and to the inventory relating Exclusively to
the Edwards Business in Germany, France, Belgium, Luxembourg, the Netherlands,
Austria and the U.K. in return for cash or other consideration equal to the fair
market value of such inventory; and

          (d)    After the Distribution Date, Edwards Belgium shall transfer to
Edwards Lifesciences AG all of its right, title and interest in and to the
accounts receivable held by Edwards Belgium in return for cash or other
consideration equal to the fair market value of such accounts receivable.

          3.23.  Netherlands.  Baxter and Edwards hereby agree to take any and
                 -----------
all actions necessary to effect the transfer to Edwards World Trade of all of
the right, title and interest of Baxter B.V., a company organized under the laws
of the Netherlands ( "Baxter Netherlands"), in and to the Transferred Assets and
                      ------------------
the Assumed Liabilities, which constitutes the Edwards Business conducted in the
Netherlands, except for the Uden Manufacturing Facility, as follows:

          (a)   Edwards Lifesciences BV ("Edwards Netherlands") shall be
                                          -------------------
organized as a Dutch corporation and a wholly-owned Subsidiary of Edwards EU
Holdings;

          (b)   Baxter Netherlands shall transfer to Edwards Netherlands all of
its right, title and interest in and to the Transferred Assets and the Assumed
Liabilities (except for inventory, third-party distribution agreements and the
Uden Manufacturing Facility) in return for cash or other consideration equal to
the fair market value of such Transferred Assets net of such Assumed
Liabilities, plus the assumption of such Assumed Liabilities;

          (c)   Baxter Netherlands shall transfer to Baxter Belgium all of its
right, title and interest in and to certain U.S. sourced inventory relating
Exclusively to the Edwards Business in the Netherlands in return for cash or
other consideration equal to the fair market value of such inventory;

          (d)   Baxter Netherlands shall transfer to Edwards Lifesciences AG all
of its right, title and interest in and to all third-party distribution
agreements in its name but relating Exclusively to the Edwards Business
conducted in the Netherlands;

          (e)   Baxter Netherlands shall transfer to Edwards Lifesciences AG all
of its right, title and interest in and to all other inventory relating
Exclusively to the Edwards Business

                                      -39-
<PAGE>

in the Netherlands in return for cash or other consideration equal to the fair
market value of such inventory; and

          (f)    After the Distribution Date, Edwards Netherlands shall transfer
to Edwards Lifesciences AG all of its right, title and interest in and to the
accounts receivable held by Edwards Netherlands in return for cash or other
consideration equal to the fair market value of such accounts receivable.

          3.24.  Uden.  Baxter and Edwards hereby agree to take any and all
                 ----
actions necessary to effect the transfer to Edwards World Trade of all of the
right, title and interest of Baxter Netherlands in the manufacturing facility in
Uden that produces Edwards Products and all of the Transferred Assets plus the
assumption of such Assumed Liabilities related thereto (the "Uden Manufacturing
                                                             ------------------
Facility"), as follows:
--------

          (a)    Edwards Lifesciences Uden BV ("Edwards Uden") shall be
                                                ------------
organized as a Dutch corporation and a wholly-owned Subsidiary of Edwards World
Trade; and

          (b)    Baxter Netherlands shall transfer to Edwards Uden all of its
right, title and interest in and to the Uden Manufacturing Facility in return
for cash or other consideration equal to the fair market value of the Uden
Manufacturing Facility net of the Assumed Liabilities included therein, plus the
assumption of the Assumed Liabilities included therein.

          3.25.  Spain.  Baxter and Edwards hereby agree to take any and all
                 -----
actions necessary to effect the transfer to Edwards World Trade of all of the
right, title and interest of Baxter S.L. (Spain), a company organized under the
laws of Spain ("Baxter Spain"), in and to the Transferred Assets and the Assumed
                ------------
Liabilities, which constitutes the Edwards Business conducted in Spain, as
follows:

          (a)    Edwards Lifesciences, S.L. ("Edwards Spain") shall be
                                              -------------
organized as a Spanish Sociedad Limitada and a wholly-owned Subsidiary of
Edwards EU Holdings;

          (b)    Baxter Spain shall transfer to Edwards Spain all of its right,
title and interest in and to the Transferred Assets and the Assumed Liabilities
(except for inventory and third-party distribution agreements) in return for
cash or other consideration equal to the fair market value of such Transferred
Assets net of such Assumed Liabilities, plus the assumption of such Assumed
Liabilities;

          (c)    Baxter Spain shall transfer to Edwards Lifesciences AG all of
its right, title and interest in and to the inventory relating Exclusively to
the Edwards Business in Spain in return for cash or other consideration equal to
the fair market value of such inventory;

          (d)    Baxter Spain shall transfer to Edwards Lifesciences AG all of
its right, title and interest in and to all third-party distribution agreements
in its name but relating Exclusively to the Edwards Business conducted in Spain;
and

          (e)    After the Distribution Date, Edwards Spain shall transfer to
Edwards Lifesciences AG all of its right, title and interest in and to the
accounts receivable held by

                                      -40-
<PAGE>

Edwards Spain in return for cash or other consideration equal to the fair market
value of such accounts receivable.

          3.26.  United Kingdom.  Baxter and Edwards hereby agree to take any
                 --------------
and all actions necessary to effect the transfer to Edwards World Trade of all
of the right, title and interest of Baxter Healthcare Ltd., a company organized
under the laws of England ("Baxter U.K."), in and to the Transferred Assets and
                            -----------
the Assumed Liabilities, which constitutes the Edwards Business conducted in the
United Kingdom, as follows:

          (a)    Edwards Lifesciences Limited ("Edwards U.K.") shall be
                                                ------------
organized as an English limited liability company and a wholly-owned Subsidiary
of Edwards EU Holdings;

          (b)    Baxter U.K. shall transfer to Edwards U.K. all of its right,
title and interest in and to the Transferred Assets and the Assumed Liabilities
(except for inventory and third-party distribution agreements), in return for
cash or other consideration equal to the fair market value of such Transferred
Assets net of such Assumed Liabilities, plus the assumption of such Assumed
Liabilities;

          (c)    Baxter U.K. shall transfer to Edwards Lifesciences AG all of
its right, title and interest in and to all third-party distribution agreements
in its name but relating Exclusively to the Edwards Business conducted in the
United Kingdom;

          (d)    Baxter U.K. shall transfer to Edwards Lifesciences AG all of
its right, title and interest in and to all inventory relating Exclusively to
the Edwards Business in the United Kingdom in return for cash or other
consideration equal to the fair market value of such inventory; and

          (e)    After the Distribution Date, Edwards U.K. shall transfer to
Edwards Lifesciences AG all of its right, title and interest in and to the
accounts receivable held by Edwards U.K. in return for cash or other
consideration equal to the fair market value of such accounts receivable.

          3.27.  Restrictions on Intercompany Debt.  Neither Baxter nor any
                 ---------------------------------
Affiliate of Baxter shall make any Loan, other than in the ordinary course of
business, to any Edwards Foreign Entity from March 15, 2000 through the
Distribution Date, except as specifically contemplated by this Agreement.

          3.28.  Transfer of Assets.  Subject to the terms and conditions of
                 ------------------
this Agreement, Baxter hereby agrees to convey, assign, transfer, contribute and
set over, or cause to be conveyed, assigned, transferred, contributed and set
over, to Edwards World Trade on or prior to the Distribution Date all of Baxter
World Trade's right, title and interest in and to the Transferred Assets, if
any.

          3.29.  Transfer of Liabilities.  Subject to the terms and conditions
                 -----------------------
 of this Agreement, Edwards shall cause Edwards World Trade to assume, effective
as of the Distribution Date, and pay, comply with and discharge all Assumed
Liabilities of Baxter World Trade.

                                      -41-
<PAGE>

          3.30.  Transfer of Edwards World Trade to Baxter.  Baxter and Edwards
                 -----------------------------------------
hereby agree to take, or cause to be taken, any and all actions necessary to
effect the declaration of a dividend by Baxter World Trade to Baxter of all of
Baxter World Trade's right, title and interest in and to the common stock of
Edwards World Trade.

          3.31.  Edwards Holdings Switzerland.  After the Distribution Date,
                 ----------------------------
Edwards Lifesciences Holding (Switzerland) AG ("Edwards Holdings Switzerland")
                                                ----------------------------
shall be formed as a Swiss corporation, and Edwards World Trade shall transfer
to Edwards Holdings Switzerland all of its right, title and interest in and to
the capital stock of Edwards Lifesciences AG, Edwards EU Holdings and Edwards
Uden in exchange for newly issued shares of capital stock of Edwards Holdings
Switzerland.

          3.32.  Transfer of Inventory.  Prior to the Distribution Date, the
                 ---------------------
inventory, if any, relating Exclusively to the Edwards Business in the following
countries and regions shall be transferred from the applicable Baxter
Subsidiaries to third-party distributors:   Malta, Portugal, Bahrain, Kuwait,
Qatar, Yemen, United Arab Emirates, Oman, Central America, China and Hong Kong
(U.S. $ sales only), Taiwan, Pakistan, Sri Lanka, Bangladesh, Nepal, Singapore,
Brunei, Indonesia, Malaysia, Thailand, Vietnam, Laos, Cambodia, Myanmar and the
Philippines.

                                  ARTICLE IV

                TRANSFERS TO EDWARDS U.S. OPERATING SUBSIDIARY
                ----------------------------------------------

          4.1.  Organization of Edwards U.S. Operating Subsidiary.  (a) Baxter
                -------------------------------------------------
has caused to be formed, under the Limited Liability Company Act of Delaware,
Edwards Lifesciences LLC ("Edwards LLC"), as a wholly-owned Subsidiary of BHC.
                           -----------
Edwards LLC has been qualified as a foreign limited liability company under the
relevant laws of each state within the United States and in each jurisdiction
outside the United States where the ownership of its assets or conduct of its
business makes such qualification necessary.

          (b)   Baxter has caused to be formed, under the General Corporation
Law of Delaware, Edwards Lifesciences (U.S.) Inc. ("Edwards U.S."), as a wholly-
                                                    ------------
owned Subsidiary of BHC.  Edwards U.S. has been qualified as a foreign
corporation under the relevant laws of each state within the United States and
in each jurisdiction outside the United States where the ownership of its assets
or conduct of its business makes such qualification necessary.

          4.2.  Transfer of Assets.  Subject to the terms and conditions of this
                ------------------
Agreement, on or prior to the Distribution Date, Baxter shall convey, assign,
transfer, contribute and set over, or cause to be conveyed, assigned,
transferred, contributed and set over, to Edwards LLC, and Edwards shall cause
Edwards LLC to accept and receive, on or prior to the Distribution Date:

          (a)   all right, title and interest of BHC in and to the Transferred
Assets (other than intangible assets included in the Transferred Assets);

          (b)   all of the right, title and interest of Baxter Export
Corporation in inventory relating Exclusively to the Edwards Business, accounts
receivable relating to the purchase of

                                      -42-
<PAGE>

products relating Exclusively to the Edwards Business and accounts receivable
due from Macchi in return for cash or other consideration equal to the fair
market value of such inventory and accounts receivable; and

          (c)  all right, title and interest of Baxter Export Division of Baxter
Alaska in accounts receivable due from Macchi in return for cash or other
consideration equal to the fair market value of such accounts receivable.

          4.3. Transfer of Third-Party Distribution Contracts.  Subject to the
               ----------------------------------------------
terms and conditions of this Agreement, Baxter shall cause the foreign
Subsidiaries of Baxter World Trade listed on Schedule 4.3 hereto (the "Foreign
                                             ------------              -------
Subsidiaries") to convey, assign, transfer, contribute and set over to Edwards
------------
LLC, and Edwards shall cause Edwards LLC to accept and receive, on or prior to
the Distribution Date, all right, title and interest of the Foreign Subsidiaries
in and to the third-party distribution contracts relating to the purchase of
products relating Exclusively to the Edwards Business, all accounts receivable
and accounts payable relating to such sales activity, except as indicated on
Schedule 4.3, in return for cash or other consideration equal to the fair market
------------
value of such contracts and accounts receivable net of such accounts payable and
the Assumed Liabilities under such contracts, plus the assumption of such
accounts payable and the Assumed Liabilities under such contracts.

          4.4. Assumption of Liabilities.  Except as expressly limited in this
               -------------------------
Article IV, Edwards shall cause one or more of its Subsidiaries to assume,
----------
effective on or before the Distribution Date, and pay, comply with and discharge
the Assumed Liabilities.

          4.5. Transfer of Intangibles and Operating Subsidiaries.  Baxter and
               --------------------------------------------------
Edwards hereby agree to take, or cause to be taken, any and all actions
necessary to cause BHC to contribute to Edwards U.S., in exchange for all of the
capital stock of Edwards U.S. together with the assumption by Edwards U.S. of
$125 million of debt owed by BHC to Baxter World Trade, (i) all of BHC's right,
title and interest in and to the intangible assets included in the Transferred
Assets, (ii) all of BHC's right, title and interest in and to the membership
interests of Edwards LLC and (iii) all of BHC's right, title and interest in and
to the capital stock of Edwards Lifesciences Cardiovascular Resources, Inc., a
Pennsylvania corporation; in each case, on or prior to the Distribution Date and
at the approximate time and in the order described on Schedule 3.1.
                                                      ------------

                                   ARTICLE V

               ORGANIZATION OF EDWARDS LIFESCIENCES CORPORATION
               ------------------------------------------------

          5.1.  Organization of Edwards.  Baxter and Edwards shall take any and
                -----------------------
all action necessary so that, on the Distribution Date, the Certificate of
Incorporation and By-laws of Edwards shall be in the forms attached hereto as
Exhibits E and F, respectively.  Prior to the Distribution Date, the Board of
----------     -
Directors of Edwards shall consider the adoption of a stockholder rights plan in
substantially the form attached hereto as Exhibit G.  On the Distribution Date,
                                          ---------
the Edwards Board of Directors shall consist of, and Baxter and Edwards shall
take all actions that may be required to elect or otherwise appoint as directors
of Edwards on or prior to the

                                      -43-
<PAGE>

Distribution Date, the persons named on Exhibit H. Edwards has taken appropriate
action to be qualified as a foreign corporation under the General Corporation
Law of California.

          5.2.  Transfer of Certain Subsidiaries.  Baxter and Edwards hereby
                --------------------------------
agree to take, or cause to be taken, any and all actions necessary to effect the
following transactions, on or prior to the Distribution Date and at the
approximate times described in Schedule 3.1:
                               ------------

          (a)   BHC shall distribute as a dividend to Baxter all of BHC's right,
title and interest in and to the capital stock of Edwards U.S.; and

          (b)   Baxter shall contribute to Edwards, in exchange for the
assumption by Edwards of $65 million of debt owed by Baxter to Baxter Hemoglobin
Therapeutics, Inc., a Delaware corporation, all of Baxter's right, title and
interest in and to the capital stock of (i) Edwards U.S., (ii) Edwards World
Trade, (iii) Edwards Lifesciences Research Medical, Inc., a Utah corporation,
and (iv) Edwards Lifesciences Sub Inc., a Delaware corporation.

          5.3.  Transfer of Assets.  Subject to the terms and conditions of this
                ------------------
Agreement, Baxter hereby agrees to convey, assign, transfer, contribute and set
over, or cause to be conveyed, assigned, transferred, contributed and set over,
to Edwards on or prior to the Distribution Date, all of Baxter's right, title
and interest in and to the Transferred Assets.

          5.4.  Transfer of Liabilities.  Subject to the terms and conditions of
                -----------------------
this Agreement, Edwards shall assume, or cause to be assumed, effective as of
the Distribution Date, and pay, comply with and discharge, or cause to be paid,
complied with or discharged, all Assumed Liabilities of Baxter.

                                   ARTICLE VI

                           EXCLUSIONS FROM TRANSFERS
                           -------------------------

          6.1.  Retained Assets.  Notwithstanding anything to the contrary
                ---------------
herein, the following assets (the "Retained Assets") are not, and shall not be
                                   ---------------
deemed to be, Transferred Assets:

          (a)   Subject to Section 9.6(e), cash and cash equivalents, any cash
                           --------------
on hand or in bank accounts, certificates of deposit, commercial paper and
similar securities, except for (i) cash and cash equivalents of the Transferred
Subsidiaries, (ii) deposits securing bonds, letters of credit, leases and all
other obligations related to the Edwards Business and (iii) petty cash and
impressed funds related to the Edwards Business;

          (b)   Except as otherwise provided in the Tax Sharing Agreement, any
right, title or interest of Baxter or its Subsidiaries in any foreign, federal,
state or local tax refund, credit or benefit (including any income with respect
thereto) relating to the operations of the Edwards Business prior to the
Distribution Date;

          (c)   Any amounts accrued on the books and records of Baxter or its
Subsidiaries or the Edwards Business with respect to any Retained Liabilities;

                                      -44-
<PAGE>

          (d)   All assets relating to all employee benefit plans of Baxter
other than the assets transferred in accordance with Section 12.9;
                                                     ------------

          (e)   Any corporate allocations of non-Edwards Business-related assets
heretofore made by Baxter or its Subsidiaries to the Edwards Business for
internal management responsibility reporting purposes, other than allocations of
accounts receivable and accounts payable as contemplated by Section 9.7(c);
                                                            --------------

          (f)   Any proprietary rights in and to the BAXTER name and the related
emblem design, and any variants thereof, and the Trademarks used by Baxter or
its Subsidiaries in relation to the Retained Business, except as provided in
Article X;
---------

          (g)   All assets held by Baxter Japan;

          (h)   Contracts with customers or third-party distributors in or with
respect to the countries or regions listed on Schedule 6.1(h) hereto (which are
                                              ---------------
the countries and regions where Baxter, as principal, is serving as the
distributor for Edwards Products) together with the accounts receivable and all
other rights, claims, demands, causes of action and rights to indemnification or
contribution under such Contracts and the inventory (including inventory in
transit) in such countries or regions;

          (i)   All assets used in connection with Baxter's Tisseal product;

          (j)   The accounts receivable of Baxter Germany that are not capable
of being specifically separated between Baxter Germany and Edwards Germany; and

          (k)   All other assets, properties and rights of Baxter and its
Subsidiaries not used Exclusively in the conduct of the Edwards Business and not
specifically included as Transferred Assets.

          6.2.  Retained Liabilities.  Notwithstanding anything to the contrary
                --------------------
in this Agreement, neither Edwards nor any of its Subsidiaries shall assume any
of the following Liabilities of Baxter and its Subsidiaries (the "Retained
                                                                  --------
Liabilities"):
-----------

          (a)    Liabilities of Baxter Japan;

          (b)    The environmental liabilities set forth on Schedule 6.2 hereto;
                                                            ------------

          (c)    The accounts payable relating to sales activity in the
countries and regions listed on Schedule 6.1(h);
                                ---------------

          (d)   Any Liabilities relating to the Cessna Citation VII aircraft,
manufacturer's serial number 650-7085, listed on Schedule 1.2(f) accrued on or
                                                 ---------------
before February 3, 2000, but not including any Liabilities under any Edwards
Contracts other than Liabilities required to be performed on or before such
date;

          (e)   Any Liabilities relating to the Cessna Citation VII aircraft,
manufacturer's serial number 650-7081, listed on Schedule 1.2(f) accrued on or
                                                 ---------------
before the Distribution Date, but

                                      -45-
<PAGE>

not including any Liabilities under any Edwards Contracts other than Liabilities
required to be performed on or before such date;

          (f)   The accounts payable of Baxter Germany that are not capable of
being specifically separated between Baxter Germany and Edwards Germany; and

          (g)   Liabilities or obligations in respect of the Retained Assets.

Nothing contained in this Section 6.2 shall be construed as in any way limiting
                          -----------
the Liabilities of Edwards or any of its Subsidiaries under any of the Operating
Agreements.

          6.3.  Termination of Existing Intercompany Agreements.  Except for
                -----------------------------------------------
this Agreement, the Conveyancing Instruments, the Implementation Agreements, the
Operating Agreements and the agreements set forth on Schedule 6.3 (or as
                                                     ------------
otherwise provided in any such agreements or instruments) and except for the
payable from Edwards Lifesciences AG to Baxter Belgium in respect of the
inventory transferred pursuant to Section 3.22(c), all Intercompany Agreements
                                  ---------------
and all other intercompany arrangements and course of dealings, whether or not
in writing and whether or not binding, in effect immediately prior to the
Distribution Date, shall be terminated and be of no further force and effect
from and after the Distribution Date.

                                  ARTICLE VII

                        ASSET SEPARATION CLOSING MATTERS
                        --------------------------------

          7.1.  Delivery of Instruments of Conveyance.  In order to effectuate
                -------------------------------------
the transactions contemplated by Articles III, IV and V, the Parties shall
                                 ------------  --     -
execute and deliver, or cause to be executed and delivered, prior to or as of
the Distribution Date such deeds, bills of sale, instruments of assumption,
instruments of assignment, stock powers, certificates of title and other
documents of assignment, transfer, assumption and conveyance (collectively, the
"Conveyancing Instruments") as the Parties shall reasonably deem necessary or
 ------------------------
appropriate to effect such transactions.

          7.2.  Delivery of Other Agreements.  Prior to or as of the
                ----------------------------
Distribution Date, the Parties shall execute and deliver, or shall cause to be
executed and delivered, each of the Implementation Agreements, the Operating
Agreements and the Tax Sharing Agreement.

          7.3.  Non-Assignable Contracts.  In the event and to the extent that
                ------------------------
Baxter and its Subsidiaries are unable to obtain any consent, approval or
amendment to any Contract, lease, license, Governmental Permit or other rights
relating to the Edwards Business that otherwise would be transferred or assigned
to Edwards or one of its Subsidiaries as contemplated by this Agreement or any
other agreement or document contemplated hereby, (i) Baxter and its Subsidiaries
shall continue to be bound thereby and the purported transfer or assignment to
Edwards or one of its Subsidiaries shall automatically be deemed deferred until
such time as all legal impediments are removed and/or all necessary consents
have been obtained and/or a new Governmental Permit in the name of Edwards or
one of its Subsidiaries or its designee have been issued and (ii) unless not
permitted by the terms thereof or by law, Edwards or one of its Subsidiaries
shall pay, perform and discharge fully all the obligations of Baxter or its

                                      -46-
<PAGE>

Subsidiaries thereunder from and after the Distribution Date, or such earlier
date as such transfer or assignment otherwise would have taken place.  Edwards
shall indemnify Baxter and its Subsidiaries for all indemnifiable Losses arising
out of the performance by Edwards or its Subsidiaries referred to in the
preceding sentence or any actions of Baxter or any of its Subsidiaries taken in
accordance with this Section 7.3 or at the direction or request of Edwards as
                     -----------
provided in this Section 7.3.  Baxter and its Subsidiaries shall, without
                 -----------
further consideration therefor, pay and remit to Edwards or its Subsidiaries
promptly all monies, rights and other considerations received in respect of such
performance.  Baxter and its Subsidiaries shall exercise or exploit its rights
and options under all such Contracts, leases, licenses, Governmental Permits and
other rights and commitments referred to in this Section 7.3, including
                                                 -----------
instituting or joining as a party legal proceedings, as reasonably directed by
Edwards and at Edwards' expense.  If and when any such consent shall be obtained
or such Contract, lease, license, Governmental Permit or other right shall
otherwise become assignable or be able to be novated or a new Governmental
Permit has been issued in the name of Edwards or one of its Subsidiaries or its
designed, Baxter or its Subsidiaries shall promptly assign and novate (to the
extent permissible) all of its rights and obligations thereunder to Edwards or
its Subsidiaries without payment of further consideration, and Edwards or its
Subsidiaries 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, Governmental Permit or other right (or the proceeds
thereof) pursuant to this Section 7.3 is prohibited by law, the assignment
                          -----------
provisions of this Section 7.3 shall operate to create a subcontract with
                   -----------
Edwards or its Subsidiaries to perform each relevant unassignable Contract or
Governmental Permit of Baxter at a subcontract price equal to the monies, rights
and other considerations received by Baxter or its Subsidiaries with respect to
the performance by Edwards or its Subsidiaries under such subcontract.

          7.4.  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 Authority or any other Person under any
permit, license, product registration, 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 and its Subsidiaries to all of the Edwards
Business, to put Edwards or its Subsidiaries in actual possession and operating
control of the Transferred Assets and to permit Edwards or its Subsidiaries to
exercise all rights with respect thereto and to effectuate the provisions and
purposes of this Agreement, the Conveyancing Instruments, the Implementation
Agreements, the Operating Agreements, the Tax Sharing Agreement and the other
agreements and documents contemplated hereby or thereby; provided, however, that
                                                         --------  -------
neither Party shall be obligated to pay any consideration to any third-party in
connection with the foregoing.  In addition, Baxter shall use reasonable efforts
to remove or cause to be removed any liens for

                                      -47-
<PAGE>

borrowed money existing on the Transferred Assets immediately prior to the
Distribution Date other 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 Edwards Business is not transferred
to Edwards or one of its Subsidiaries, or any asset reasonably necessary to the
conduct of the Retained Business is transferred to Edwards or one of its
Subsidiaries, Baxter and Edwards shall negotiate in good faith after the
Distribution Date to determine whether such asset should be transferred to
Edwards or one of its Subsidiaries or to Baxter or one of its Subsidiaries, as
the case may be, and/or the terms and conditions upon which such asset shall be
made available to Edwards or one of its Subsidiaries or to Baxter or one of its
Subsidiaries, as the case may be.  Unless expressly provided to the contrary in
this Agreement, the Conveyancing Instruments, the Implementation Agreements, the
Operating Agreements or the Tax Sharing Agreement, if as a result of  mistake,
oversight or otherwise, any Liability arising out of or relating to the Edwards
Business is retained by Baxter or its Subsidiaries, or any Liability arising out
of or relating to the Retained Business is assumed by Edwards or its
Subsidiaries, Baxter and Edwards shall negotiate in good faith after the
Distribution Date to determine whether such Liability should be transferred to
Edwards or one of its Subsidiaries or Baxter or one of its Subsidiaries, as the
case may be, and/or the terms and conditions upon which any such Liability shall
be transferred.  The Parties agree that the terms and conditions upon which any
assets or Liabilities are made available or assumed as provided in this Section
                                                                        -------
7.4(b) shall be consistent with the terms of this Agreement, the Implementation
------
Agreements, the Operating Agreements and the Tax Sharing Agreement and that it
is not intended for either Party to pay or receive additional consideration for
any such transfer if such consideration would not have been paid or received if
such transfer had been identified and made at the time of the Distribution.

          (c)  If, after the Distribution Date, either Party identifies any
commercial or other service, product or component that can be provided by the
other Party, that is needed to assure a smooth and orderly transition of the
businesses in connection with the consummation of the transactions contemplated
hereby, and that is not otherwise governed by the provisions of this Agreement,
the Implementation Agreements, the Operating Agreements or the Tax Sharing
Agreement, the Parties will cooperate in determining whether there is a mutually
acceptable arm's-length basis, consistent with the terms of the this Agreement,
the Implementation Agreements, the Operating Agreements and the Tax Sharing
Agreement, on which one Party will provide such service to the other Party.

          7.5. Novation of Assumed Liabilities. (a) Edwards or its Subsidiaries,
               -------------------------------
at the request of Baxter or its Subsidiaries, shall 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
federal government contract) or assign all obligations under the Assumed
Liabilities, or to obtain in writing the unconditional release of all parties to
such arrangements other than Edwards or its Subsidiaries; provided, however,
                                                          --------  -------
that Edwards and its Subsidiaries shall not be obligated to pay any
consideration therefor to any third-party from whom such consents, approvals,
releases, substitutions or amendments are requested.

                                      -48-
<PAGE>

          (b)  Edwards agrees to promptly provide Baxter, upon written request,
with a list of Contracts included in the Transferred Assets under which Baxter
or one of its Subsidiaries remains liable and which has a base term that is
subject to automatic renewal or renewal in the absence of notice at the option
of Edwards or one of its Subsidiaries.  Edwards agrees that if so requested by
Baxter with respect to any individual Contract or Contracts included on such
list or which should have been included on such list, it will not exercise any
option to renew such Contract and, to the extent such Contract provides for
automatic renewal, Edwards agrees that it will not permit such Contract to enter
an auto-renewal period.

          7.6. Nominee Shares.  Baxter agrees to use commercially reasonable
               --------------
efforts to cause to be transferred to, or as directed by, Edwards all director's
qualifying or other shares of capital stock of any of the Transferred
Subsidiaries held as of the Distribution Date by persons who are not Edwards
Employees.  Edwards agrees to use commercially reasonable efforts to cause to be
transferred to, or as directed by, Baxter all director's qualifying or other
shares of capital stock of any Baxter Subsidiary other than Edwards and the
Transferred Subsidiaries held as of the Distribution Date by Edwards Employees.

          7.7. Provision of Corporate Records.  Prior to or as promptly as
               ------------------------------
practicable after the Distribution Date, Baxter shall deliver to Edwards all
corporate books and records of Edwards and copies of all corporate books and
records of Baxter relating to the Edwards Business, including in each case all
active agreements, litigation files and government filings.  From and after the
Distribution Date, all books, records and copies so delivered shall be the
property of Edwards.

                                  ARTICLE VIII

                         REPRESENTATIONS AND WARRANTIES
                         ------------------------------

          8.1. Organization, Good Standing and Authority of Baxter.  Baxter
               ---------------------------------------------------
hereby represents and warrants to Edwards as follows: Baxter is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Baxter has full power and authority to execute, deliver and
perform this Agreement. The execution, delivery and performance of this
Agreement by Baxter have been duly authorized and approved by Baxter's Board of
Directors and do not require any further authorization or consent of Baxter or
its stockholders. This Agreement has been duly authorized, executed and
delivered by Baxter.

          8.2. Organization, Good Standing and Authority of Edwards.  Edwards
               ----------------------------------------------------
represents and warrants to Baxter as follows:  Edwards is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.  Edwards has full power and authority to execute, deliver and perform
this Agreement.  The execution, delivery and performance of this Agreement by
Edwards has been duly authorized and approved by Edwards' Board of Directors and
do not require any further authorization or consent of Edwards or its
stockholder.  This Agreement has been duly authorized, executed and delivered by
Edwards.

          8.3. No Other Representations and Warranties.  Except as expressly set
               ---------------------------------------
forth herein or in any Operating Agreement, and notwithstanding anything
contained in any Implementation Agreement, neither Baxter nor any of its
Subsidiaries represents or warrants in

                                      -49-
<PAGE>

any way (i) as to the value or freedom from encumbrance of, or any other matter
concerning, any of the Transferred Assets or Transferred Subsidiaries or (ii) as
to the legal sufficiency to convey title to any of the Transferred Assets or
Transferred Subsidiaries on the execution, delivery and filing of the
Conveyancing Instruments. SUBJECT TO SECTION 9.11 AND THE OPERATING AGREEMENTS,
                                     ------------
ALL SUCH ASSETS AND SUBSIDIARIES 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 and its
Subsidiaries shall bear the economic and legal risks that any conveyances of
such assets and Subsidiaries shall prove to be insufficient or that Edwards' and
its Subsidiaries' title to any such assets and Subsidiaries shall be other than
good and marketable and free of encumbrances. Except as expressly set forth in
this Agreement or in any Operating Agreement, and notwithstanding anything
contained in any Implementation Agreement, neither Baxter nor any of its
Subsidiaries represents or warrants that the obtaining of the consents or
approvals, the execution and delivery of any amendatory agreements and the
making of the filings and applications 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 7.3, Edwards and its
                                              -----------
Subsidiaries 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.

                                   ARTICLE IX

                               CERTAIN COVENANTS
                               -----------------

          9.1. Conduct of Edwards Business Pending the Distribution Date.  Each
               ---------------------------------------------------------
of the Parties agrees that, from the date hereof until the Distribution Date,
except as otherwise expressly contemplated by this Agreement, it will take, or
cause to be taken, all reasonable efforts to carry on the Edwards Business
diligently in the ordinary course and substantially in the same manner as
heretofore conducted and to preserve intact the business organization and
goodwill of the Edwards Business.

          9.2. Registration and Listing.  Prior to the Distribution Date:
               ------------------------

          (a) Baxter and Edwards shall prepare a registration statement on Form
10, including such amendments or supplements thereto as may be necessary
(together, the "Registration Statement") to effect the registration of the
                ----------------------
Edwards Common Stock under the Exchange Act, which Registration Statement shall
include an information statement to be sent by Baxter to its stockholders in
connection with the Distribution (the "Information Statement").  Edwards shall
                                       ---------------------
file the Registration Statement with the SEC and shall use commercially
reasonable efforts to cause the Registration Statement to become and remain
effective under the Exchange Act as soon as reasonably practicable.  After the
Registration Statement becomes effective, Baxter shall mail the Information
Statement to the holders of Baxter Common Stock as of the Record Date.

                                      -50-
<PAGE>

          (b)  The Parties shall use commercially reasonable efforts to take all
such action as may be necessary or appropriate under state and foreign
securities and "Blue Sky" laws in connection with the transactions contemplated
by this Agreement.

          (c)  Baxter and Edwards shall prepare, and Edwards shall file and seek
to make effective, an application for the listing of the Edwards Common Stock on
the NYSE, subject to official notice of issuance.

          (d)  The Parties shall cooperate in preparing, filing with the SEC and
causing to become effective any registration statements or amendments thereto
that are necessary or appropriate in order to effect the transactions
contemplated hereby or to reflect the establishment of, or amendments to, any
employee benefit plans contemplated hereby.

          9.3. Funds Distributed to Baxter.  On or prior to the Distribution
               ---------------------------
Date, Edwards shall enter into a new credit facility or facilities with
commercial lenders (the "Edwards Credit Facility") and use the proceeds of the
                         -----------------------
indebtedness incurred under the Edwards Credit Facility to execute asset
transfers from Baxter and its Subsidiaries, invest in a Japanese contractual
joint venture (tokumei kumiai), assume debt from Baxter and its Subsidiaries,
pay bank fees related to the credit facility and for general corporate purposes.
The calculation of the amounts set forth in this Section 9.3 is set forth on
                                                 -----------
Schedule 9.3.
------------

          9.4. Post-Distribution Tax-Related Restrictions. (a) In order to avoid
               ------------------------------------------
potentially adverse tax consequences relating to the Distribution, for a period
of two years after the Distribution Date Edwards shall not:

         (i)   cease to engage in the active conduct of a trade or business
     within the meaning of Section 355 of the Code;

         (ii)  issue or redeem any share of stock of Edwards, except for
     issuances and redemptions

                    (A) for the benefit of Edwards' employees, or

                    (B) to effect acquisitions by Edwards in the ordinary course
               of business, or

                    (C) in connection with the issuance of any convertible debt
               by Edwards, or

                    (D) in accordance with the requirements for permitted
               purchases of Edwards stock as set forth in Section 4.05(1)(b) of
               Revenue Procedure 96-30 issued by the IRS; or

         (iii) liquidate or merge with any other corporation;

unless, with respect to (i), (ii) or (iii) above, either (x) an opinion is
obtained from counsel to Baxter reasonably acceptable to Edwards, or (y) a
ruling is obtained from the IRS, in either case

                                      -51-
<PAGE>

to the effect that such act or event will not adversely affect the federal
income tax consequences of the Distribution to Baxter, its stockholders who
receive Edwards Shares or Edwards.

          (b)  If, as a result of any transaction occurring after the
Distribution Date involving either the stock or assets of either Edwards or any
of its Subsidiaries, or any combination thereof, the Distribution fails to
qualify as tax-free under the provisions of Section 355 of the Code, Edwards
shall indemnify Baxter for all Taxes, Liabilities and associated expenses,
including penalties and interest, incurred as a result of such failure of the
Distribution to qualify under Section 355 of the Code.  If the Distribution
fails to qualify as tax-free under the provisions of Section 355 of the Code
other than as a result of a transaction occurring after the Distribution Date
involving either the stock or assets of Edwards or any of its Subsidiaries, or
any combination thereof, then Edwards shall not be liable for such Taxes,
Liabilities or expenses.

          (c)  Notwithstanding Section 9.4(a) above, Baxter and Edwards agree
                               --------------
that as of the Distribution Date, neither Baxter nor Edwards has entered into,
and within the first six months following the Distribution Date, neither Baxter
nor Edwards will enter into any agreements, understandings, arrangements or
substantial negotiations that would result, individually or collectively, in a
change of ownership of 50% or more of either within the meaning of Section
355(e) of the Code.  Further, should Edwards enter into or continue any
negotiations during the first six months following the Distribution Date that
could result in the acquisition of its stock by a third-party, Edwards agrees to
notify the Baxter tax department immediately.

          9.5. Intercompany Receivables and Payables.  (a)  All Intercompany
               -------------------------------------
Receivables and Payables between any Subsidiary of Baxter, on the one hand, and
any Subsidiary of Edwards, on the other hand, shall be settled as of 3:00 p.m.,
Chicago time, on March 28, 2000.  Commencing from the opening of business on
March 28, 2000, Intercompany Receivables and Payables between any Subsidiary of
Baxter, on the one hand, and any Subsidiary of Edwards, on the other hand, shall
be recorded for accounting purposes as third-party trade account receivables and
payables.

          (b)  Subject to the exception contained in Section 6.1(a) and subject
                                                     --------------
to Section 9.6(e), Baxter shall be entitled to all cash bank balances existing
   --------------
immediately prior to the Distribution Date relating to the Edwards Business, or
otherwise utilized or maintained in connection with the Edwards Business,
including cash balances representing deposited checks or drafts for which only a
provisional credit has been allowed in depository accounts, which are to be
transferred to Edwards or any of its Subsidiaries on or prior to the
Distribution Date.  Any such cash balances as of the Distribution Date which
have not been transferred to Baxter shall be paid to Baxter.

          (c)  All Loans owing by Edwards or any of its Subsidiaries to Baxter
or any of its Subsidiaries after giving effect to the transactions contemplated

by Articles III, IV and V shall be repaid no later than the Distribution Date.
   ------------  --     -

          (d)  Edwards or an appropriate Subsidiary thereof shall be responsible
for payment of all checks or drafts issued up to the Distribution Date against
disbursement accounts transferred to Edwards or such Subsidiary, which checks or
drafts have not been charged against

                                      -52-
<PAGE>

such disbursement accounts on or prior to the Distribution Date (other than with
respect to payroll accounts, which will be assumed by Baxter or its
Subsidiaries).

          (e)  Baxter shall assist Edwards and each of its Subsidiaries in
establishing a separate cash management system effective as of and immediately
after the Distribution Date.

          9.6. Intercompany Debt True-Up.
               -------------------------

          (a) Calculation of Operational Cash Flow.  As soon as practicable,
              ------------------------------------
but in any event within 60 days after the Distribution Date, Baxter shall
prepare a statement of operational cash flow for the Edwards Business, for the
period January 1, 2000 through the Distribution Date. The operational cash flow
statement shall be prepared from the books and records of Baxter in a manner
consistent with Baxter's historical cash flow allocation among its various
business units. The statement of operational cash flow will be adjusted (the
"Unbudgeted Transfer Adjustment") to eliminate the operational cash flow impact
 ------------------------------
of any assets, liabilities and reserves transferred to Edwards or its
Subsidiaries pursuant to this Agreement but which was not taken into account in
the initial internal budgeting process upon which this Section 9.6 (including
                                                       -----------
the amount set forth in paragraph (c) against which the cash flow is trued up)
was based.  The Unbudgeted Transfer Adjustment shall not include the impact of
any expenses that Edwards is required to pay under the terms of Section 14.1 or
                                                                ------------
Section 14.2.  The effect of these unbudgeted transfers on operational cash flow
------------
shall be included as a separate schedule accompanying the statement of
operational cash flow.  Subject to Section 9.6(g), the statement of operational
                                   --------------
cash flow delivered by Baxter to Edwards shall be final, binding and conclusive
on the Parties for all purposes of this Agreement and shall provide the basis
for determining the adjustments (if any) specified in Section 9.6(c).
                                                      --------------

          (b)  Definition of Operational Cash Flow.  Operational cash flow for
               -----------------------------------
each Baxter operating unit consists of net income plus depreciation and
amortization, increased or decreased, as appropriate, by cash restructuring
utilization and the net change in "managed capital" (as defined in Baxter
Finance Policy #1402) during the period, but including the effects of any cash
restructuring utilization and acquisitions (excluding acquisitions for up to
$7.5 million in cash) and divestitures on managed capital. The operational cash
flow shall be computed in the same manner as reflected in the Hyperion
Management Report, "Cash Flow Trends" (as defined in Baxter Finance Policy
#1902), but including the effects of any cash restructuring utilization and
acquisitions (excluding acquisitions for up to $7.5 million in cash) and
divestitures.

          (c) Cash Flow True-Up For First Quarter 2000.  In the event that the
              ----------------------------------------
final determination of the cash flow statement indicates that the operational
cash flow is less than $4.6 million plus or minus the Unbudgeted Transfer
Adjustment, the amount of the difference shall be paid by Edwards to Baxter, as
an adjustment to intercompany debt assumed by Edwards or its Subsidiaries
pursuant to Section 9.3, within 10 days after the final determination of such
            -----------
adjustment. In the event that the final determination of the cash flow statement
indicates that the operational cash flow is greater than $4.6 million plus or
minus the Unbudgeted Transfer Adjustment, the amount of the difference shall be
paid by Baxter to Edwards, as an adjustment to intercompany debt assumed by
Edwards, within 10 days after the final determination of such adjustment.

                                      -53-
<PAGE>

          (d)  Cash True-Up for "Lag" Entities. The financial results of
               -------------------------------
certain Baxter foreign subsidiaries (lag entities) are included in the
consolidated financial results of Baxter and Edwards on a one-month lag basis.
Therefore, for the month March, 2000, the financial results of the Edwards
Business operations will be included, for external reporting purposes, in the
post Distribution quarter beginning April 1 through June 30, 2000. Since the
month of March, 2000, is funded by Baxter, there shall be a cash true-up between
Baxter and Edwards based on the operational cash flow generated or used in March
by lag entities. As soon as practicable, but in any event within 60 days after
the Distribution Date, Baxter shall prepare a statement of operational cash flow
for the Edwards Business, for the period March 1, 2000 through the Distribution
Date for lag entities. This statement of operational cash flow will be prepared
as defined in Sections 9.6(a) and 9.6(b), except that the recognition of
              ---------------     ------
deferred intercompany gross profit allocations will be deleted from the earnings
statement to reflect the cost of goods sold at the local subsidiary's cost. If
the operational cash flow results in a positive amount representing the
generation of cash, then Baxter will remit that amount to Edwards within 10 days
of the final determination of such amount. On the other hand, if the
operational cash flow is a negative amount representing a use of cash, then
Edwards will reimburse Baxter for that amount within 10 days of the final
determination of such amount.  If a transfer contemplated by Article III to
                                                             -----------
occur on or prior to March 31, 2000 does not occur on March 31, 2000 for any lag
entity, a separate operational cash flow statement will be prepared (using the
procedures described above) for the period beginning April 1, 2000 through the
actual transfer in the lag country. If the operational cash flow results in a
positive amount representing the generation of cash, then Baxter will remit that
amount to Edwards within 10 days after the final determination of such amount.
On the other hand, if the operational cash flow is a negative amount
representing a use of cash, then Edwards will reimburse Baxter for that amount
within 10 days after the final determination of such amount.

          (e)  "Cash Balance" True-up. As provided in Section 9.5(b) and subject
                ----------------------                --------------
to the exceptions referred to therein, Baxter is entitled to all cash bank
balances existing immediately prior to the Distribution Date, and any such cash
balances as of the Distribution Date which have not been transferred to Baxter
shall be paid to Baxter.  Within 30 days after the Distribution Date, Baxter
shall calculate the amount of cash held by the Transferred Subsidiaries as of
the Distribution Date and shall provide Edwards prompt written notice of such
calculated amount.  If such amount is greater than $10 million, Edwards shall
pay the difference between such amount and $10 million to Baxter as an
adjustment to intercompany debt assumed by Edwards within 10 days after the
final determination of such amount.  If such amount is less than $10 million,
Baxter shall pay the difference between $10 million and such amount to Edwards
within 10 days after the final determination of such amount.

          (f)  Cash True-Up for Tax Liability Generated During Funded Period.
               -------------------------------------------------------------
The Edwards Business activity during the period funded by the Baxter lag
entities described in Section 9.6(d) above, will increase or decrease the tax
                      --------------
liability of the Baxter lag entity funding the Edwards Business operations. The
amount of the tax liability or tax benefit generated during the funded period by
the Edwards Business operations will be calculated by Baxter, as soon as
practicable but in any event within 60 days after the Distribution Date. If the
tax computation results in a tax benefit, then Baxter will remit that amount to
Edwards within 10 days of the final determination of such amount. On the other
hand, if the tax computation results in a tax liability,

                                      -54-
<PAGE>

then Edwards will reimburse Baxter for that amount within 10 days of the final
determination of such amount.

          (g) Assumed Debt True-Up.  Within 90 days of the Distribution Date,
              --------------------
Baxter shall prepare (1) a balance sheet (the "True-Up Balance Sheet") of the
                                               ---------------------
Edwards Business as of the Distribution Date reflecting the transfers and
retentions of assets and liabilities contemplated by Articles III, IV and V and
                                                     ------------  --     -
(2) a balance sheet (the "Actual Balance Sheet") of the Edwards Business as of
                          --------------------
the Distribution Date reflecting the transfers and retentions of assets and
liabilities that actually occurred between Baxter and its Subsidiaries and
Edwards and its Subsidiaries in contemplation of the Distribution.  Both balance
sheets shall be prepared using consistent accounting principles.  Within 20 days
of the preparation of the True-Up Balance Sheet and the Actual Balance Sheet,
Baxter shall calculate (A) the sum of the amounts actually paid to Baxter or its
applicable Subsidiary (including or net of, as applicable, any adjustments in
the purchase prices for such transfers that were actually paid to Baxter or one
of its Subsidiaries by Edwards or one of its Subsidiaries or to Edwards or one
of its Subsidiaries by Baxter or one of its Subsidiaries, as the case may be) in
respect of the transfers set forth on Schedule 9.6(g) hereto in U.S. dollars
                                      ---------------
computed at the Foreign Exchange Rate in effect at the Distribution Date (the
"Asset Transfer Amount"), (B) the book value as of March 31, 2000 of the
 ---------------------
finished goods inventory in the countries or regions set forth in Schedule
                                                                  --------
6.1(h) (the "Inventory Amount"), (C) the book value as of the Distribution Date
------       ----------------
of the accounts receivable relating to the sales activity relating Exclusively
to the Edwards Business in the countries or regions set forth in Schedule 6.1(h)
                                                                 ---------------
in U.S. dollars computed at the Foreign Exchange Rate in effect at the
Distribution Date (the "Accounts Receivable Amount"),  (D) the book value as of
                        --------------------------
the Distribution Date of the accounts receivable of Baxter Germany that are not
capable of being specifically separated between Baxter Germany and Edwards
Germany in U.S. dollars computed at the Foreign Exchange Rate in effect at the
Distribution Date (the "German Accounts Receivable Amount"), (E) the book value
                        ---------------------------------
as of the Distribution Date of the accounts payable relating to the sales
activity relating Exclusively to the Edwards Business in the countries or
regions set forth in Schedule 6.1(h) in U.S. dollars computed at the Foreign
                     ---------------
Exchange Rate in effect at the Distribution Date (the "Accounts Payable
                                                       ----------------
Amount"), (F) the book value as of the Distribution Date of the accounts payable
------
of Baxter Germany that are not capable of being specifically separated between
Baxter Germany and Edwards Germany in U.S. dollars computed at the Foreign
Exchange Rate in effect at the Distribution Date (the "German Accounts Payable
                                                       -----------------------
Amount") and (G) the aggregate net differences, if any, between the assets and
------
liabilities reflected in the True-Up Balance Sheet and the Actual Balance Sheet
resulting from transfers or retentions of assets and liabilities that vary from
the transfers and retentions contemplated by Articles III, IV and V (the
                                             ------------  --     -
"Variance Amount") and shall provide Edwards prompt written notice (the "Debt
 ---------------                                                         ----
True-Up Notice") of such calculations.
--------------

          If (I) the Asset Transfer Amount plus (II) $190 million (representing
                                           ----
the aggregate amount of intercompany debt assumed by Edwards and Edwards U.S.
pursuant to Sections 4.5 and 5.2(b)) plus (III) the Inventory Amount plus (IV)
            ------------     ------  ----                            ----
the Accounts Receivable Amount plus (V) the German Accounts Receivable Amount
                               ----
minus (VI) the Accounts Payable Amount minus (VII) the German Accounts Payable
-----                                  -----
Amount plus or minus, as applicable, (VIII) the Variance Amount (such sum being
       ----    -----
referred to herein as the "Aggregate Amount Received") is:
                           -------------------------

                                      -55-
<PAGE>

        (i) less than $292.5 million (the "Debt True-Up Amount"), Edwards shall,
                                           -------------------
     within 10 days of the delivery of the Debt True-Up Notice, pay to Baxter
     the difference between the Aggregate Amount Received and the Debt True-Up
     Amount by wire transfer of immediately available funds to the account
     designated by Baxter, which payment shall be used by Baxter to repay a
     portion of the debt owed by Baxter to third parties; or

        (ii) greater than the Debt True-Up Amount, Baxter shall, within 10 days
     of the delivery of the Debt True-Up Notice, pay to Edwards the difference
     between the Debt True-Up and the Aggregate Amount Received by wire transfer
     of immediately available funds to the account designated by Edwards.

        (h)  Simultaneously with or promptly after the payment to Baxter Limited
by Edwards Lifesciences Finance Limited for its investment in the Japanese
contractual joint venture referred to in Section 9.3, if the U.S. dollar amount
                                         -----------
of such payment plus the payment made under a related agreement, each calculated
using the Foreign Exchange Rate in effect on the date of payment, is (i) less
than the U.S. dollar amount of such payments calculated using a foreign exchange
rate equal to 107 Japanese yen per U.S. dollar, then Edwards shall pay to Baxter
such difference, or (ii) more than the U.S. dollar amount of such payments
calculated using a foreign exchange rate equal to 107 Japanese yen per U.S.
dollar, then Baxter shall pay to Edwards such difference in U.S. dollars.

          (i) For purposes of this Section 9.6, the Edwards Business shall not
                                   -----------
include any assets or liabilities that are Retained Assets or Retained
Liabilities.

          9.7. Collection of Accounts Receivable.  (a)  Baxter and its
               ---------------------------------
Subsidiaries shall be entitled to control all collection actions related to the
Retained Assets, including the determination of what actions are necessary or
appropriate and when and how to take any such action.

          (b) Subject to Section 9.7(d), Edwards and its Subsidiaries shall be
                         --------------
entitled to control all collection actions related to the Transferred Assets,
including the determination of what actions are necessary or appropriate and
when and how to take any such action.

          (c) If, after the Distribution Date, Edwards or any of its
Subsidiaries shall receive any remittance from any account debtors with respect
to the accounts receivable arising out of the Retained Assets or other amounts
due Baxter or its Subsidiaries in respect of services rendered or products sold
by Baxter or its Subsidiaries after the Distribution Date, or Baxter or any of
its Subsidiaries shall receive any remittance from any account debtors with
respect to the accounts receivable arising out of the Transferred Assets or
other amounts due Edwards or its Subsidiaries in respect of services rendered or
products sold by Edwards or its Subsidiaries after the Distribution 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 Baxter or
Edwards.

                                      -56-
<PAGE>

          (d) The Parties acknowledge that certain accounts receivable and
accounts payable are not capable of being specifically separated between Baxter
and its Subsidiaries, on the one hand, and Edwards and its Subsidiaries, on the
other hand.  Accordingly, the Parties agree that, notwithstanding the foregoing,
Baxter shall cause one or more of its Subsidiaries to administer the collection
of such accounts receivable and the payment of such accounts payable.  Baxter
shall pay or cause to be paid to Edwards or its  appropriate Subsidiary an
allocable portion of the amounts collected with respect to such accounts
receivable determined by Baxter in accordance with Baxter's past practices.
Edwards shall pay or cause to be paid to Baxter or its appropriate Subsidiary an
allocable portion of the amounts paid with respect to such accounts payable
determined by Baxter in accordance with Baxter's past practices.

          (e) Each Party shall deliver to the other such schedules and other
information with respect to the accounts receivable included in the Transferred
Assets 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
Transferred Assets).  Each Party shall afford the other reasonable access to its
books and records relating to any accounts receivable.

          (f) (i)  Within a reasonable period of time after the Distribution
Date, Baxter shall prepare a report of the accounts receivable relating
Exclusively to the Edwards Business included in the Retained Assets (the
"Accounts Receivable Report" As soon as practicable after the first anniversary
 --------------------------
 of the Distribution Date, Baxter shall notify Edwards in writing (the "Refund
                                                                        ------
Notice") of the aggregate amount paid to and received by Baxter in respect of
------
such accounts receivable from the Distribution Date through the first
anniversary of the Distribution Date and the following amount (the "Refund
                                                                    ------
Amount"): (A) the time value of money to Baxter of financing such collected
------
accounts receivable from the Distribution Date through the date of the
respective payment of such accounts, plus or minus, as the case may be, (B) the
                                     ----    -----
loss or gain, if any, to Baxter on such collected accounts receivable, due to
fluctuations in foreign currency exchange rates, calculated by comparing the
Foreign Exchange Rate for the relevant currency as of the date of receipt of
payment in respect of an account receivable to the Foreign Exchange Rate as of
the Distribution Date, plus interest on such loss or gain at a rate equal to
Baxter's time value of money, plus (C) the aggregate face value in U.S. dollars,
                              ----
using, for accounts receivable denominated in a currency other than the U.S.
dollar, the Foreign Exchange Rate as of the Distribution Date, of the accounts
receivable that had not been paid to and received by Baxter prior to such first
anniversary plus (D) the time value of money to Baxter of financing such
            ----
uncollected accounts receivable. If the Refund Amount is a positive number,
within 10 days of the delivery of the Refund Notice, Edwards shall pay to Baxter
the Refund Amount. If the Refund Amount is a negative number, within 10 days of
the delivery of the Refund Notice, Baxter shall pay to Edwards the absolute
value of the Refund Amount.

          (ii)  If any of the accounts receivable that were not paid to and
     received by Baxter prior to the first anniversary of the Distribution Date
     are in fact subsequently collected by Baxter, the amount so collected shall
     be paid by Baxter to Edwards within 15 business days of collection.

                                      -57-
<PAGE>

          (iii)  Invoices to which the uncollected accounts receivable referred
     to in Section 9.7(f)(i)(C) relate shall be assigned to Edwards or the
           --------------------
     appropriate Subsidiary of Edwards by Baxter or the appropriate Subsidiary
     of Baxter.

          9.8. Agreements Relating to Baxter and Edwards.  (a)  Each of Baxter
               -----------------------------------------
and Edwards 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
Edwards Business and the Retained Business (the "Shared Agreements"), including
                                                 -----------------
those Shared Agreements set forth on Schedule 9.8 hereto.  Each of Baxter and
                                     ------------
its Subsidiaries and Edwards and its Subsidiaries shall be entitled to the
rights and privileges of its allocable portion of the Shared Agreements.

          (b) Each of Baxter and Edwards 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) If any of the Shared Agreements contains a minimum purchase
obligation or provides for the payment to Baxter and Edwards of a rebate or
similar payment or reimbursement based upon the volume of purchases, and if such
minimum purchase obligation or rebate or similar payment or reimbursement is not
allocated between Baxter and its Subsidiaries and Edwards and its Subsidiaries
pursuant to the terms of the Shared Agreement, then such minimum purchase
obligation or rebate or similar payment or reimbursement shall be allocated
between the Parties based upon the relative performance of the Retained Business
and the Edwards Business under such Shared Agreement during the twelve-month
period immediately prior to the Distribution Date.

          (d) Liabilities pursuant to, arising under or relating to a Shared
Agreement shall be allocated between Baxter and its Subsidiaries, on the one
hand, and Edwards and its Subsidiaries, 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;

          (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 Distribution 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 a breach of the relevant
     Shared Agreement attributable to the Edwards Business, in the case of
     Edwards, or the Retained Business, in the case of Baxter.

                                      -58-
<PAGE>

          (e)   If either Baxter or its Subsidiaries, on the one hand, or
Edwards or its Subsidiaries, 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.

          9.9.  Certain Releases. Baxter or one or more of its Subsidiaries is a
                ----------------
guarantor of certain obligations of the Edwards Business, including those
obligations set forth on Schedule 1.1(l). Edwards shall use commercially
                         ---------------
reasonable efforts to release Baxter and its Subsidiaries from such guarantees
prior to the Distribution Date and shall indemnify and hold harmless Baxter and
its Subsidiaries from and against any Liabilities relating to such guarantees.

          9.10. Litigation. (a) On or as of the Distribution Date, Edwards or
                ----------
its Subsidiaries, as appropriate, shall assume and pay all Liabilities that may
result from the Assumed Actions (as hereinafter defined) and all fees and costs
relating to the defense of the Assumed Actions, including attorneys' fees and
costs incurred after the Distribution Date.  "Assumed Actions" shall mean those
                                              ---------------
cases, claims and investigations (on which Baxter or its Subsidiaries, other
than Edwards and its Subsidiaries, is a defendant or the party against whom the
claim or investigation is directed) relating to the Edwards Business, including
those listed on Schedule 9.10(a), but only to the extent that they relate to the
                ----------------
Edwards Business.

          (b)   Baxter and its Subsidiaries shall transfer the Transferred
Actions (as hereinafter defined) to Edwards, and Edwards shall receive and have
the benefit of all of the proceeds of such Transferred Actions. "Transferred
                                                                 -----------
Actions" shall mean those cases and claims (on which Baxter or its Subsidiaries
-------
is a plaintiff or claimant) relating to the Edwards Business, including those
listed on Schedule 9.10(b), but only to the extent that they relate to the
          ----------------
Edwards Business.

          9.11. Liability for Previously Delivered Products. The following
                -------------------------------------------
provisions shall apply to all Edwards Products sold or transferred prior to the
Distribution Date to the Retained Business for distribution (the "Products"):
                                                                  --------

          (a)   Edwards warrants to Baxter that, at the time of delivery to
Baxter (or Baxter's designee): (i) the Products shall not be (A) adulterated or
misbranded within the meaning of the Federal Food, Drug and Cosmetic Act (as
amended) (the "Act") or the regulations issued thereunder, (B) products that may
               ---
not, under the provisions of Section 404, 505, 514 or 515 of the Act, be
introduced into interstate commerce, or (C) banned devices under Section 516 of
the Act; (ii) the Products shall not violate any other medical or health law,
statute, regulation or directive applicable to the Products; (iii) the Products
shall not violate any applicable customs, trade or environmental law, statute,
regulation or directive; and (iv) Edwards shall have good and marketable title
to all Products free and clear of all liens or encumbrances (other than any
created by Baxter).  THE FOREGOING WARRANTY IS EXCLUSIVE AND IN LIEU OF ALL
OTHER WARRANTIES OF ANY KIND, WHETHER STATUTORY, WRITTEN, ORAL, EXPRESS OR
IMPLIED, INCLUDING ANY WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE AND
MERCHANTABILITY.  IN NO EVENT, WHETHER AS A RESULT OF BREACH OF CONTRACT, TORT
LIABILITY (INCLUDING NEGLIGENCE) OR OTHERWISE, SHALL EDWARDS BE LIABLE TO BAXTER
FOR

                                      -59-
<PAGE>

ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES. ANY LIABILITY OF
EDWARDS TO BAXTER UNDER THE FOREGOING WARRANTY SHALL BE LIMITED TO THE TOTAL
PRICE PAID BY BAXTER FOR THE PRODUCTS THAT ARE THE SUBJECT OF SUCH LIABILITY
PLUS ALL COSTS FOR FREIGHT AND OTHER DIRECT EXPENSES INCURRED BY BAXTER WITH
RESPECT TO SUCH PRODUCTS. The obligations of Edwards under this Section 9.11
                                                                ------------
are in addition to its obligations contained elsewhere herein, and the
limitations in this Section 9.11 shall in no way limit the obligations of
                    ------------
Edwards under Article XV hereof.
              ----------

          (b)   Edwards shall indemnify and hold Baxter and the Baxter
Indemnified Parties (as hereinafter defined) harmless from and against, and in
respect of, any and all Expenses and Losses that result from a third-party claim
asserted against or incurred by Baxter or any of the Baxter Indemnified Parties
that arise out of or relate to: (i) any tort claim (including any claim for
personal injury, wrongful death or property damage) to the extent such claim
arises from any grossly negligent act or omission or willful misconduct by
Edwards (or its employees or other agents) in connection with the supply of
Products by Edwards or one of its Affiliates to Baxter or one of its Affiliates
for distribution; (ii) defects in the Products; (iii) any actual or alleged
patent, copyright or trademark infringement, or misappropriation or violation of
any other proprietary right related to a Product; (iv) any actual or alleged
breach of any warranty (including written warranties included within the Product
packaging) or obligation, if any, accompanying the Products, subject to the
limitations in Section 9.11(a) to the extent provided therein; and (v) any claim
               ---------------
for personal injury, wrongful death or property damage arising out of the use of
a Product; provided, however, that this Section 9.11(b) shall not apply to any
           --------  -------            ---------------
Losses or Expenses: (A) to the extent that the parties agree; (B) to any actual
or alleged Patent, Copyright or Trademark infringement, or misappropriation or
violation of any other proprietary right, arising in connection with the supply
of Products by Edwards or one of its Affiliates to Baxter or one of its
Affiliates for distribution and the distribution of such Products by Baxter or
one of its Affiliates (but not arising out of or relating to any of the
proprietary rights in the Products as delivered); or (C) any tort claim
(including any claim for personal injury, wrongful death or property damage) to
the extent such claim arises from any grossly negligent act or omission or
willful misconduct by Baxter (or its employees or agents) in the course of its
performance pursuant to this Agreement, including any misrepresentation
concerning the characteristics or method of usage of Products or relating to the
storage, handling or delivery of Products. The "Baxter Indemnified Parties"
                                                --------------------------
shall mean and include (I) Baxter and Baxter's Affiliates, (II) the respective
directors, officers, agents and employees of and counsel to Baxter and its
Affiliates, (III) each other person, if any, controlling Baxter or any of its
Affiliates, and (IV) the successors, assigns, heirs and personal representatives
of any of the foregoing. Expenses shall be reimbursed or advanced when and as
incurred promptly upon submission of statements by Baxter or any Baxter
Indemnified Party to Edwards.

          9.12. Edwards Bank Accounts.  On or prior to the Distribution Date,
                ---------------------
Baxter and its Subsidiaries shall transfer the bank accounts set forth on
Schedule 9.12 hereto to Edwards or one of its Subsidiaries. Edwards shall cause
-------------
any amounts received, by mistake or otherwise, in such accounts after the
Distribution Date on account of the Retained Business to be transferred promptly
to Baxter and its Subsidiaries, as appropriate. Baxter shall cause any amounts

                                      -60-
<PAGE>

received, by mistake or otherwise, after the Distribution Date on account of the
Edwards Business to be transferred promptly to Edwards and its Subsidiaries, as
appropriate.

          9.13. Informal, Nondocumented Real Estate Leases.  Each Party and its
                ------------------------------------------
Subsidiaries may continue to occupy, from and after the Distribution Date, such
space in the facilities of the other Party and its Subsidiaries as is occupied
immediately prior to the Distribution Date, or such other space therein as may
be mutually agreed to from time to time by Baxter and Edwards, 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 Distribution
Date during which such space is so 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.

          9.14. Third Party Consents.  To the extent that the transactions
                --------------------
contemplated by this Agreement require any material consents, approvals or
waivers from third parties (the "Third Party Consents"), the Parties will use
                                 --------------------
commercially reasonable efforts to obtain any such material Third Party
Consents.

          9.15. Material Governmental Approvals and Consents. To the extent that
                --------------------------------------------
the transactions contemplated by this Agreement require any approvals or
consents of any Governmental Authority, the Parties will use commercially
reasonable efforts to obtain any Material Governmental Approvals and Consents.

          9.16. Late Payments.  Any amount not paid when due pursuant to this
                -------------
Agreement or any Implementation Agreement (and any amounts billed or otherwise
invoiced or demanded and properly payable that are not paid within thirty (30)
days of such bill, invoice or other demand) shall accrue interest at a rate per
annum equal to the Prime Rate plus 2%.

                                      -61-
<PAGE>

                                   ARTICLE X

                        INTELLECTUAL PROPERTY LICENSES
                        ------------------------------

          10.1. License to Baxter of Transferred Intellectual Property.
                ------------------------------------------------------

          (a)   Grant of License. Edwards and its Subsidiaries hereby grant, and
                ----------------
Baxter and its Subsidiaries hereby accept, a perpetual, nonexclusive, fully
paid-up, worldwide right and license to use and otherwise practice under the
Transferred Intellectual Property in order to make, have made, import, offer for
sale, sell and distribute (i) any Baxter Products Actually Using the Transferred
Intellectual Property as of the Distribution Date, and (ii) any New Products
developed and manufactured by or for Baxter or its Subsidiaries during the
three-year period commencing on the Distribution Date.  A Party will be deemed
to be "Actually Using" certain Intellectual Property if:  (I) such Party or its
       --------------
Subsidiaries is manufacturing (or has a third party manufacturing for it) a
product incorporating such Intellectual Property; or (II) a New Product
incorporating such Intellectual Property is Under Development by such Party or
its Subsidiaries; provided, however, that a Party will not be deemed to be
                  --------  -------
Actually Using any Intellectual Property the sole use of which is to manufacture
a product for the other Party.  "Under Development" by a Party shall mean, with
                                 -----------------
respect to a New Product, that it (1) is the subject of a funded research and
development project by such Party or its Subsidiaries as of the Distribution
Date; (2) is described by such Party or its Subsidiaries in a pending patent
application filed by such Party or its Subsidiaries prior to the Distribution
Date; (3) is described by such Party or its Subsidiaries in an invention record
that satisfies the enablement requirement of 35 U.S.C. (S) 112 and which is
submitted no less than three months prior to the Distribution Date; or (4) is
(A) described by such Party or its Subsidiaries in an invention record that
satisfies the enablement requirement of 35 U.S.C. (S) 112 and which is submitted
within the three-month period prior to the Distribution Date, and (B)
subsequently commercialized by such Party or its Subsidiaries.  The license
granted pursuant to this Section 10.1(a) shall not include any rights to the
                         ---------------
Transferred Intellectual Property related to (w) the Duraflo treatment and other
biocompatible coatings developed by the Edwards Business which shall be the
subject of a separate supply agreement; (x) Edwards' laser technology including
the laser technology utilized in Edwards' Transmyocardial Laser
Revascularization program; (y) the continuous renal replacement therapy
business; and (z) Edwards' angiogenesis technology including VEGF-B protein,
targeting peptides and zinc finger DNA binding proteins and genes.  Any
Transferred Intellectual Property actually licensed pursuant to this Section
                                                                     -------
10.1(a) shall be deemed to be "Licensed Edwards Intellectual Property."
-------                        --------------------------------------

          (b)   Ownership of the Licensed Edwards Intellectual Property.  Baxter
                -------------------------------------------------------
and its Subsidiaries acknowledge that, subject to the foregoing license, Edwards
and its Subsidiaries, as the case may be, are the sole and exclusive owners of
all right, title and interest in and to the Transferred Intellectual Property.
Baxter and its Subsidiaries agree that they will do nothing inconsistent with
Edwards' or its Subsidiaries' ownership of, or rights in, the Transferred
Intellectual Property.  Notwithstanding the foregoing or Section 17.7, Baxter
                                                         ------------
and its Subsidiaries shall have the right to disclose the Licensed Edwards
Intellectual Property to a third-party contract manufacturer in connection with
Baxter or its Subsidiaries exercising their right pursuant to Section 10.1(a) to
                                                              ---------------
have products made, provided that such third-party contract manufacturer agrees
to be bound by obligations of confidentiality consistent with Section 17.7,
                                                              ------------

                                      -62-
<PAGE>

and Baxter and its Subsidiaries remain liable for any breach of such obligations
by such third-party contract manufacturer. Edwards and its Subsidiaries shall
not allow any registration or other protection for any Licensed Edwards
Intellectual Property to lapse without notifying Baxter thereof at least one
month prior thereto. Upon Baxter's receipt of such notice, (i) Baxter and its
Subsidiaries shall have the right, but not the obligation, to take steps (at
Baxter's expense and in Edwards' and its Subsidiaries' names, if necessary) to
prevent such a lapse, and (ii) Edwards and its Subsidiaries shall cooperate with
Baxter and its Subsidiaries (at Baxter's or its Subsidiaries' reasonable request
and at Baxter's expense) to assign to Baxter or its Subsidiaries such Licensed
Edwards Intellectual Property.

          (c)   Marking and Notices.  Baxter and its Subsidiaries shall ensure
                -------------------
that any products that are made (by them or by third-party manufacturers),
imported, offered for sale, sold or distributed by them pursuant to the license
granted by Edwards and its Subsidiaries in this Section 10.1 shall bear a legal
                                                ------------
or proprietary rights notice in such form as may be reasonably requested by, and
to the extent directed by, Edwards from time to time.

          (d)   Termination of Licenses.  The license granted pursuant to this
                -----------------------
Section 10.1 may be terminated by Edwards only if Baxter or its Subsidiaries are
------------
in breach or default of a material term of this Section 10.1 which breach or
                                                ------------
default continues for sixty (60) days after written notice thereof from Edwards
to Baxter, Edwards may terminate the license granted pursuant to this Section
                                                                      -------
10.1, provided that such termination shall be solely with respect to the
----
Licensed Edwards Intellectual Property that is the subject of such uncured
breach.

          (e)   Divestiture. If Baxter or its Subsidiaries sell, assign,
                -----------
transfer or otherwise divest themselves of ownership of any business unit that
uses, or product line that uses or is manufactured under, the Licensed Edwards
Intellectual Property, the license granted in this Section 10.1 may be assigned
                                                   ------------
without payment of additional consideration, but only with respect to such
business unit or product line and with the written consent of Edwards, which
consent shall not be unreasonably withheld.

          10.2. License to Edwards of Retained Baxter Intellectual Property.
                -----------------------------------------------------------

          (a)   Grant of License.  Baxter and its Subsidiaries hereby grant, and
                ----------------
Edwards and its Subsidiaries hereby accept, a perpetual, nonexclusive, fully
paid-up, worldwide right and license to use and otherwise practice under the
Retained Baxter Intellectual Property (except for the Trademarks that are part
of the Retained Baxter Intellectual Property) in order to make, have made,
import, offer for sale, sell and distribute (i) any Edwards Products Actually
Using the Retained Baxter Intellectual Property as of the Distribution Date, and
(ii) any New Products developed and manufactured by or for Edwards or its
Subsidiaries during the three-year period commencing on the Distribution Date.
Any Baxter Retained Intellectual Property actually licensed pursuant to this
Section 10.2(a) shall be deemed to be "Licensed Baxter Intellectual Property."
---------------                        -------------------------------------
Schedule 10.2(a) contains a listing of (I) the Patents licensed by Baxter and
----------------
its Subsidiaries to Edwards hereunder; and (II) certain Edwards Products Under
Development as of the Distribution Date which may incorporate Licensed Baxter
Intellectual Property.  The parties acknowledge that Schedule 10.2(a) may be
                                                     ----------------
over- or underinclusive, and, accordingly, shall be amended, as necessary, to
include any additional Retained Baxter Intellectual Property that Edwards is
deemed to be Actually Using as of the Distribution Date or to exclude any
Retained

                                      -63-
<PAGE>

Baxter Intellectual Property that Edwards is not deemed to be Actually Using as
of the Distribution Date. Without limiting the terms of Section 7.4, the parties
                                                        -----------
shall cooperate and act reasonably in amending Schedule 10.2(a). The license
                                               ----------------
granted pursuant to this Section 10.2(a) shall not include any rights to the
                         ---------------
Retained Baxter Intellectual Property related to the following:

          (i)   Fibrin sealant biopharmaceuticals and the associated delivery
     devices which shall be the subject of a separate supply agreement;

          (ii)  The spinning membrane separation technology acquired by Baxter
     through the HemaScience acquisition which shall be the subject of a
     separate supply agreement;

          (iii) Continuous renal replacement therapy which shall be the subject
     of separate distribution agreements;

          (iv)  Hemoglobin Therapeutics technology, including human, bovine and
     recombinant hemoglobin based biopharmaceuticals and perfluorocarbon-based
     pharmaceuticals; and

          (v)   Non-polyvinylchloride based film, tubing, containers and
     compositions developed as an alternative/replacement for PVC (only if
     acquired from Bieffe and/or developed under the IV Systems Marc project)
     which shall be the subject of a separate supply agreement.

          (b)   Ownership of the Licensed Baxter Intellectual Property.  Edwards
                ------------------------------------------------------
and its Subsidiaries acknowledge that, subject to the foregoing license, Baxter
and its Subsidiaries, as the case may be, are the sole and exclusive owner of
all right, title and interest in and to the Retained Baxter Intellectual
Property.  Edwards and its Subsidiaries agree that they will do nothing
inconsistent with Baxter's or its Subsidiaries' ownership of, or rights in, the
Retained Baxter Intellectual Property.  Notwithstanding the foregoing or Section
                                                                         -------
17.7, Edwards and its Subsidiaries shall have the right to disclose the Licensed
----
Baxter Intellectual Property to a third-party contract manufacturer in
connection with Edwards or its Subsidiaries exercising their right pursuant to
Section 10.2(a) to have products made, provided that such third-party contract
---------------
manufacturer agrees to be bound by obligations of confidentiality consistent
with Section 17.7, and Edwards and its Subsidiaries remain liable for any breach
     ------------
of such obligations by such third-party contract manufacturer.  Baxter and its
Subsidiaries shall not allow any registration or other protection for any
Licensed Baxter Intellectual Property to lapse without notifying Edwards thereof
at least one  month prior thereto.  Upon Edwards' receipt of such notice, (i)
Edwards and its Subsidiaries shall have the right, but not the obligation, to
take steps (at Edwards' expense and in Baxter's and its Subsidiaries' names, if
necessary) to prevent such a lapse, and (ii) Baxter and its Subsidiaries shall
cooperate with Edwards and its Subsidiaries (at Edwards' or its Subsidiaries'
reasonable request and at Edwards' expense) to assign to Edwards or its
Subsidiaries such Licensed Baxter Intellectual Property.

          (c)   Marking and Notices.  Edwards and its Subsidiaries shall ensure
                -------------------
that any products that are made (by them or by a third-party manufacturer),
imported, offered for sale, sold or distributed by them pursuant to the license
granted by Baxter and its Subsidiaries in this

                                      -64-
<PAGE>

Section 10.2 shall bear a legal or proprietary rights notice in such form as may
------------
be reasonably requested by and to the extent directed by Baxter from time to
time.

          (d)   Termination of Licenses.  The Licenses granted pursuant to this
                -----------------------
Section 10.2 may be terminated by Baxter only if Edwards or its Subsidiaries are
------------
in breach or default of a material term of this Section 10.2 which breach or
                                                ------------
default continues for sixty (60) days after written notice from Baxter to
Edwards, Baxter may terminate the license granted pursuant to this Section 10.2,
                                                                   ------------
provided that such termination shall be solely with respect to the Licensed
Baxter Intellectual Property that is the subject of such uncured breach.

          (e)   Divestiture.  If Edwards or its Subsidiaries sell, assign,
                -----------
transfer or otherwise divest themselves of ownership of any business unit that
uses or product line that uses or is manufactured under the Licensed Baxter
Intellectual Property, the licenses granted in this Section 10.2 may be assigned
                                                    ------------
without payment of additional consideration, but only with respect to such
business unit or product line and the written consent of Baxter, which consent
shall not be unreasonably withheld.

          10.3. Licenses Related to Interlink(TM). In addition to the licenses
                ---------------------------------
granted in Section 10.1 or 10.2, the following shall apply with respect to the
           ------------    ----
Intellectual Property in the needleless access technology known as
Interlink(TM):

          (a)   The license granted by Edwards in Section 10.1 shall also apply
                                                  ------------
to any Baxter Products incorporating such technology, excluding blood sampling
products, to the extent claimed in any United States or foreign patent filed by
Edwards which relies upon U.S. Patent Application Nos. 07/147,414, 07/217,004
and/or 07/325,617 for priority and such claims would be enabled under 35 U.S.C.
(S) 112 by the disclosure found in U.S. Patent Application No. 07/325,617, and
any such licensed Transferred Intellectual Property shall be deemed Licensed
Edwards Intellectual Property.

          (b)   The license granted by Baxter in Section 10.2 shall also apply
                                                 ------------
to any Edwards AVA introducer, central venous catheter, pulmonary artery
catheter, pulmonary artery catheter introducers and hemofiltration device that
currently exists as of the Distribution Date, and New Products thereof, that
have one or more pre-slit injection sites integrally connected or permanently
attached thereto; provided that such pre-slit injection site(s) are covered by
the claims of any United States or foreign patent filed by Baxter which relies
upon U.S. Patent Application Nos. 07/147,414, 07/217,004, and/or 07/325,617 for
priority and such claims would be enabled under 35 U.S.C. (S) 112 by the
disclosure found in U.S. Patent Application No. 07/325,617, and any such
licensed Retained Baxter Intellectual Property shall be deemed Licensed Baxter
Intellectual Property. The license to Edwards shall exclude blunt cannula to the
extent that Intellectual Property for such blunt cannula has been exclusively
licensed to Becton, Dickinson and Company pursuant to the 1991 License Agreement
between BHC and Becton, Dickinson and Company. Pre-slit injection sites packaged
with an Edwards cardiovascular product in a kit or set will be the subject of a
separate supply agreement with Baxter.

          10.4. Use by Edwards of Baxter's Trademarks. Edwards and its
                -------------------------------------
Subsidiaries shall discontinue use of the names BAXTER, BAXTER HEALTHCARE,
BAXTER

                                      -65-
<PAGE>

INTERNATIONAL INC. and all other trademarks, service marks and trade names owned
by or licensed to Baxter (the "Baxter Marks") as follows:
                               ------------

          (a)   Baxter hereby grants to Edwards and its Subsidiaries a
nonexclusive, royalty-free, fully paid-up right and license to use the Baxter
Marks on Edwards Products in all appropriate jurisdictions for only so long as
is reasonably necessary to transfer product registrations, deplete existing
inventory and complete labeling and reimbursement qualifications.  Edwards and
its Subsidiaries shall use their commercially reasonable efforts to cease using
the Baxter Marks as soon as possible after the Distribution Date, but in no
event shall Edwards or its Subsidiaries use the Baxter Marks on Edwards Products
after December 31, 2001.

          (b)   Edwards and its Subsidiaries will use their commercially
reasonable efforts to cease the use of the Baxter Marks on or in connection with
materials other than labels of Edwards Products including signs, stationery,
trucks and customer brochures, as soon as reasonably practical, but in no event
later than December 31, 2001.

          (c)   If delays in obtaining regulatory approval require Edwards or
its Subsidiaries to use the Baxter Marks beyond the time limits set forth above,
Baxter shall be reasonable in granting extensions of the time limits as
necessary.

          (d)   Any use of the Baxter Marks by Edwards or its Subsidiaries
pursuant to the above terms and conditions shall inure to the benefit of Baxter
and shall be in the same form as existed prior to the Distribution Date.  Any
products or processes offered by Edwards or its Subsidiaries for sale under the
Baxter Marks shall meet the same product specifications and quality assurance
standards as existed prior to the Distribution Date.  Baxter shall have the
right to inspect any and all materials and products offered in connection with
the Baxter Marks including label copy and marketing and sales materials.

          (e)   Any use of the Baxter Marks by Edwards or its Subsidiaries shall
indicate that Baxter is the owner of the Baxter Marks and that such use is
pursuant to a license from Baxter.

          (f)   Edwards and its Subsidiaries shall do nothing to impair Baxter's
rights in the Baxter Marks.  Edwards and its Subsidiaries shall inform Baxter
promptly of any infringement of the Baxter Marks.

          10.5. Limitations on Requirements to Supply. Nothing in this Agreement
                -------------------------------------
shall require either Party to supply any composition, formulation or product
that was not commercially available or was not being manufactured as of the
Distribution Date or that is not commercially available or is not being
manufactured at the time the above-referenced supply agreements are executed.

          10.6. Fair Market Value.  Baxter and Edwards agree that the reciprocal
                -----------------
licenses granted under this Article X are in full and adequate fair market value
                            ---------
consideration for each other.

                                      -66-
<PAGE>

                                  ARTICLE XI

                        CONDITIONS TO THE DISTRIBUTION
                        ------------------------------

          The obligation of Baxter to effect the Distribution is subject to the
satisfaction or the waiver by Baxter, at or prior to the Distribution Date, of
each of the following conditions:

          11.1. Approval by Baxter Board of Directors.  This Agreement and the
                -------------------------------------
transactions contemplated hereby, including the declaration of the Distribution,
shall have been duly approved by the Board of Directors of Baxter in accordance
with applicable law and the Amended and Restated Certificate of Incorporation
and Amended and Restated By-laws of Baxter.

          11.2. Receipt of IRS Private Letter Tax Ruling.  Baxter shall have
                ----------------------------------------
received a ruling from the IRS or, at Baxter's sole discretion, an opinion of
its tax counsel Skadden, Arps, Slate, Meagher & Flom, substantially to the
effect that the Distribution will qualify as a tax-free distribution for federal
income tax purposes under Section 355 of the Code and that no income, gain or
loss will be recognized by Baxter, Edwards or their respective stockholders
(other than with respect to cash received in lieu of fractional shares) upon the
distribution to Baxter's stockholders of Edwards Shares.

          11.3. Compliance with State and Foreign Securities and "Blue Sky"
                -----------------------------------------------------------
Laws. The Parties shall have taken all such action as may be necessary or
----
appropriate under state and foreign securities and "Blue Sky" laws in connection
with the Distribution.

          11.4. SEC Filings and Approvals.  The Parties shall have prepared and
                -------------------------
Edwards shall, to the extent required under applicable law, have filed with the
SEC any such documentation and any requisite no action letters that Baxter
determines are necessary or desirable to effectuate the Distribution, and each
Party shall use commercially reasonable efforts to obtain all necessary
approvals from the SEC with respect thereto as soon as practicable.

          11.5. Filing and Effectiveness of Registration Statement; No Stop
                -----------------------------------------------------------
Order. The Registration Statement shall have been filed and declared effective
-----
by the SEC, and no stop order suspending the effectiveness of the Registration
Statement shall have been initiated or, to the knowledge of either of the
Parties, threatened by the SEC.

          11.6. Approval of NYSE Listing Application. The Edwards Common Stock
                ------------------------------------
and the accompanying rights granted pursuant to the Rights Plan shall have been
approved for listing on the NYSE, subject to official notice of distribution.

          11.7. Receipt of Fairness Opinions of Financial Advisors.  The Baxter
                --------------------------------------------------
Board of Directors shall have received written opinions of Credit Suisse First
Boston and J.P. Morgan & Co. Incorporated, in form acceptable to Baxter, to the
effect that the Distribution is fair to Baxter's stockholders from a financial
point of view, which opinions shall not have been withdrawn or modified.

                                      -67-
<PAGE>

          11.8.  Ancillary Agreements. The Tax Sharing Agreement and each of the
                 --------------------
Conveyancing Instruments, Implementation Agreements and Operating Agreements
intended to be executed prior to the Distribution shall have been executed and
delivered, and each of such agreements shall be in full force and effect.

          11.9.  Resignations. On or prior to the Distribution Date, Baxter
                 ------------
shall cause all of its designees to resign or to be removed as officers and from
all Boards of Directors or similar governing bodies of Edwards and its
Affiliates and any Subsidiary of Edwards on which they serve.

          11.10. Election of Edwards Board. The Board of Directors of Edwards
                 -------------------------
as set forth on Exhibit H shall have been duly elected.
                ---------

          11.11. Consents. (a) All Material Governmental Approvals and Consents
                 --------
required to permit the valid consummation of the Distribution shall have been
obtained without any conditions being imposed that would have a material adverse
effect on Baxter or Edwards.

          (b)    Baxter shall have obtained all Third Party Consents required in
connection with the Distribution, except those for which the failure to obtain
such Third Party Consents would not, in the reasonable opinion of Baxter,
individually or in the aggregate have a material adverse effect on Baxter,
Edwards or the consummation of the Distribution.

          11.12. No Actions.  No action, suit or proceeding shall have been
                 ----------
instituted or threatened by or before any court or quasi-judicial or
administrative agency of any federal, state, local or foreign jurisdiction or
before any arbitrator to restrain, enjoin or otherwise prevent the Distribution
or the other transactions contemplated by this Agreement (including a stop order
with respect to the effectiveness of the Registration Statement), and no order,
injunction, judgment, ruling or decree issued by any court of competent
jurisdiction shall be in effect restraining the Distribution or such other
transactions.

          11.13. New Credit Facility.  The definitive agreements governing the
                 -------------------
Edwards Credit Facility shall have been executed.

          11.14. Consummation of Pre-Distribution Transactions. The
                 ---------------------------------------------
pre-Distribution transactions contemplated by Articles III, IV and V of this
                                              ------------  --     -
Agreement shall have been consummated in all material respects.

          11.15. No Other Events.  No other events or developments shall have
                 ---------------
occurred that, in the judgment of the Baxter Board of Directors, would result in
the Distribution having a material adverse effect on Baxter or its stockholders.

          11.16. Satisfaction of Conditions.  The satisfaction of the foregoing
                 --------------------------
conditions are for the sole benefit of Baxter and shall not give rise to or
create any duty on the part of Baxter or the Baxter Board of Directors to waive
or not waive any such condition, to effect the Distribution or in any way limit
Baxter's power of termination set forth in Section 18.13.
                                           -------------

                                      -68-
<PAGE>

                                  ARTICLE XII

                    EMPLOYEES AND EMPLOYEE BENEFIT MATTERS
                    --------------------------------------

          12.1.  Edwards Employees.  Schedule 12.1 describes or otherwise
                 -----------------   -------------
identifies the Parties' current estimate of all employees of the Edwards
Business as of the Distribution Date (the "Edwards Employees"). Within 60 days
                                           -----------------
after the Distribution Date, the Parties shall amend Schedule 12.1 to include a
                                                     -------------
correct list of the Edwards Employees as of the Distribution Date.

          12.2.  Employment of Edwards Employees.  Immediately following the
                 -------------------------------
Distribution Date, Edwards shall, or shall cause its Subsidiaries to, employ or
continue to employ each Edwards Employee.  Edwards and Baxter (and their
respective Subsidiaries) shall use commercially reasonable efforts to accomplish
any transfers of employment required by this Section 12.2 in a timely manner.
                                             ------------
Active Edwards Employees shall be paid by Edwards or one of its Subsidiaries at
the same salary and wage rate levels (including bonus programs) paid by Baxter
or its Subsidiaries as in effect on the Distribution Date; provided, however,
                                                           --------  -------
that Edwards (or the applicable Edwards Subsidiary) retains the right to
determine the compensation of Edwards Employees after the Distribution Date.

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

          (b)    Any Edwards Employee who receives a written notice prior to the
Distribution Date regarding such employee's termination of employment on a fixed
date between the Distribution Date and one year after the Distribution Date from
Edwards or any of its Subsidiaries shall be eligible to receive from Edwards (or
the applicable Edwards Subsidiary) severance pay that is calculated pursuant to
the formula used under the Baxter Severance Pay Plan as in effect on the
Distribution Date.  The manner in which this Section 12.3(b) is implemented
                                             ---------------
shall be governed by the terms of the Edwards Severance Pay Plan.

          (c)    Effective as of the Distribution Date, Edwards (or the
applicable Edwards Subsidiary) shall have the obligation to reimburse Baxter for
the severance benefits paid by Baxter under the Baxter Severance Pay Plan on or
after the Distribution Date to any employee who was terminated by Baxter prior
to the Distribution Date while employed in any Edwards Business unit. Edwards
(or the applicable Edwards Subsidiary) shall have the obligation to pay
severance benefits to any employee terminated by Edwards after the Distribution
Date who is eligible to receive severance benefits under the Edwards Severance
Pay Plan.

          12.4.  International Edwards Employees.  Notwithstanding the remaining
                 -------------------------------
provisions of this Article XII, all issues, other than those addressed in
                   -----------
Sections 12.1 through 12.3, 12.5, 12.7, 12.8, 12.12, 12.14 and 12.17 through
-------------         ----  ----  ----  ----  -----  -----     -----
12.20, relating to any Edwards Employee who, immediately prior to the
-----
Distribution Date, is employed by an Edwards Subsidiary in a foreign
jurisdiction (the "Edwards Foreign Employees") shall be addressed in connection
                   -------------------------
with the Implementation Agreement applicable to such Edwards Subsidiary and are
outside the scope of this Agreement.  Notwithstanding the foregoing, (i) the
amount of pension benefits earned by

                                      -69-
<PAGE>

any Edwards Foreign Employees under any pension plan maintained by Baxter, or
its Subsidiaries or Affiliates, in a foreign jurisdiction (a "Baxter Foreign
                                                              --------------
Pension Plan") that are transferred to a pension plan maintained by Edwards
------------
shall be determined by the actuaries for the respective plans in accordance with
the methodology described in Schedule 12.4 and (ii) Schedule 12.4 describes or
                             -------------          -------------
identifies all Baxter Foreign Pension Plans from which no pension benefits will
be transferred to any Edwards plan, as agreed upon by the Vice President of
Compensation, Benefits and Employee Services of Edwards and the Assistant
Treasurer of Baxter. As of the Distribution Date, Baxter shall retain all
liabilities associated with the Baxter Foreign Pension Plans from which no
pension benefits will be transferred, as identified in Schedule 12.4, with
                                                       -------------
respect to any Edwards Foreign Employee.

          12.5.  Employment Solicitation.  During the period beginning on the
                 -----------------------
Distribution Date and ending one year after the Distribution Date, neither
Baxter nor Edwards 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 Article XII 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 Senior Vice President of Human Resources or the Corporate
Vice President of Human Resources, as the case may be, of his or her current
employer; or (ii) prohibit Baxter or Edwards 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
Distribution Date.

          12.6.  WARN Act. Edwards and its Subsidiaries agree that they shall
                 --------
not, at any time during the 90-day period following the Distribution Date, (i)
effectuate a "plant closing" as defined in the Worker Adjustment and Retraining
Notification Act of 1988 (the "WARN Act") affecting any site of employment or
                               --------
operating units within any site of employment of the Edwards Business, or (ii)
take any action to precipitate a "mass layoff" as defined in the WARN Act
affecting any site of employment of the Edwards Business, except, in either
case, after complying fully with the notice and other requirements of the WARN
Act.  Edwards agrees to indemnify Baxter and its Subsidiaries and to defend and
hold harmless Baxter and its Subsidiaries from and against any and all claims,
losses, damages, expenses, obligations and liabilities (including attorney's
fees and other costs of defense) that Baxter and its Subsidiaries may incur in
connection with any suit or claim of violation brought against Baxter under the
WARN Act, which relates in whole or in part to actions taken by Edwards or its
Subsidiaries with regard to any site of employment of Edwards or operating units
within any site of employment of the Edwards Business.

          12.7.  Leave of Absence Policies.  (a)  Through the Distribution Date,
                 -------------------------
Baxter and its Subsidiaries shall be responsible for administering compliance
with the Baxter leave of absence policies with respect to Edwards Employees.

          (b)    No later than the Distribution Date: (i) Edwards shall adopt,
and shall cause each of its Subsidiaries to adopt, its own leave of absence
policies; (ii) Edwards shall

                                      -70-
<PAGE>

honor, and shall cause each of its Subsidiaries to honor, all the terms and
conditions of leaves of absence that have been granted to any Edwards Employee
under a Baxter leave of absence policy before the Distribution Date by Baxter or
any of its Subsidiaries, including such leaves that are to commence after the
Distribution Date where Baxter or any of its Subsidiaries has approved such
leave or where an employee has submitted appropriate paperwork to Baxter or any
of its Subsidiaries for such leave prior to the Distribution Date; (iii) Edwards
and its Subsidiaries shall be solely responsible for administering leaves of
absence policies and compliance with all applicable laws with respect to the
Edwards Employees; and (iv) Edwards and its Subsidiaries shall recognize all
periods of service of Edwards Employees with Baxter or any of its Subsidiaries,
as applicable, to the extent such service is recognized by Baxter or its
Subsidiaries for the purpose of eligibility for leave entitlement under the
Baxter leave of absence policies; provided, however, that no duplication of
                                  --------  -------
benefits shall be required by the foregoing.

          (c)    As soon as administratively possible after the Distribution
Date and upon request to Baxter's Senior Vice President of Human Resources,
Baxter shall provide to Edwards copies of all records pertaining to the Baxter
leave of absence policies with respect to all Edwards Employees to the extent
such records have not been provided previously to Edwards or one of its
Subsidiaries.

          12.8.  Withdrawal from Participation in Baxter Plans and
                 -------------------------------------------------
Establishment of Edwards Plans. (a) Except as otherwise specifically provided
------------------------------
in this Article XII, no later than the Distribution Date, Edwards Employees
        -----------
shall cease to participate in the Baxter employee benefit plans and programs
(the "Baxter Plans").
      ------------

          (b)    No later than the Distribution Date, Edwards or any Edwards
Subsidiary shall establish its own employee benefit plans and programs for the
benefit of eligible employees of Edwards and its Subsidiaries, including, for
Edwards U.S. Employees, a 401(k) savings plan (the "Edwards Savings Plan"), a
                                                    --------------------
nonqualified executive deferred compensation plan (the "Edwards Deferred
                                                        ----------------
Compensation Plan"), a medical and dental plan, a group vision care plan, a
-----------------
cafeteria plan, a group term life and accidental death and dismemberment plan, a
long-term disability plan and a group legal expense plan (collectively, the
"Edwards Welfare Plans"), a severance plan (the "Edwards Severance Pay Plan")
 ---------------------                           --------------------------
and the Edwards 2000 Incentive Compensation Program, all as described in the
Registration Statement.  Notwithstanding the foregoing, Edwards shall not
establish a plan similar to the Baxter Pension Plan (as hereinafter defined).

          12.9.  Transfer of Account Balances and Accrued Benefits.
                 -------------------------------------------------

          (a)    Baxter Savings Plan. Subject to applicable law and the
                 -------------------
provisions of the Baxter International Inc. and Subsidiaries Incentive
Investment Plan (the "Baxter Savings Plan"), as soon as administratively
                      -------------------
practicable following the establishment of the Edwards Savings Plan, or
effective as of any other date as agreed to in writing by the plan administrator
for the Baxter Savings Plan and the plan administrator for the Edwards Savings
Plan, the account balances (including outstanding loans) of all Baxter Savings
Plan participants who are Edwards Employees whose place of employment is in the
U.S. ("Edwards U.S. Employees") shall be transferred from the Baxter Savings
       ----------------------
Plan to the Edwards Savings Plan (the "Transferred Accounts"). Each Edwards U.S.
                                       --------------------
Employee shall receive credit for all purposes under the

                                      -71-
<PAGE>

Edwards Savings Plan for periods of service with Baxter or any of its
Subsidiaries or Affiliates. The plan administrator for the Edwards Savings Plan
shall distribute any amounts from such Transferred Accounts that may be
necessary in order for the Baxter Savings Plan to satisfy any requirements of
applicable law (including, nondiscrimination rules) as instructed by the plan
administrator for the Baxter Savings Plan. The plan administrator for the
Edwards Savings Plan shall take any other action reasonably requested by the
plan administrator for the Baxter Savings Plan that is necessary or advisable,
in the opinion of the plan administrator for the Baxter Savings Plan, to
maintain the tax-qualified status of the Baxter Savings Plan or to avoid the
imposition of any penalties with respect to such plan.

          (b)    Puerto Rico Savings Plan.  Subject to applicable law and the
                 ------------------------
provisions of the Baxter Healthcare Corporation of Puerto Rico Savings and
Investment Plan (the "Baxter PR Savings Plan"), as soon as administratively
                      ----------------------
practicable following the establishment of the Edwards Lifesciences Corporation
of Puerto Rico Savings and Investment Plan (the "Edwards PR Savings Plan"), or
                                                 -----------------------
effective as of any other date as agreed to in writing by the plan administrator
for the Baxter PR Savings Plan and the plan administrator for the Edwards PR
Savings Plan, the account balances (including outstanding loans) of all Baxter
PR Savings Plan participants who are employees of Edwards Puerto Rico (936) or
Edwards Puerto Rico (MS&P) ("Edwards PR Employees") shall be transferred from
                             --------------------
the Baxter PR Savings Plan to the Edwards PR Savings Plan (the "PR Transferred
                                                                --------------
Accounts").  Each Edwards PR Employee shall receive credit for all purposes
--------
under the Edwards PR Savings Plan for the periods of service with Baxter
Healthcare Corporation of Puerto Rico or any of its Subsidiaries or Affiliates.
The plan administrator for the Edwards PR Savings Plan shall distribute any
amounts from such Transferred Accounts that may be necessary in order for the
Baxter PR Savings Plan to satisfy any requirements of applicable law (including,
nondiscrimination rules) as instructed by the plan administrator for the Baxter
PR Savings Plan.   The plan administrator for the Edwards PR Savings Plan shall
take any other action reasonably requested by the plan administrator for the
Baxter PR Savings Plan that is necessary or advisable, in the opinion of the
plan administrator for the Baxter PR Savings Plan, to maintain the tax-qualified
status of the Baxter PR Savings Plan or to avoid the imposition of any penalties
with respect to such plan.

          (c)    Puerto Rico Pension Plan.  Subject to applicable law and the
                 ------------------------
provisions of the Baxter Healthcare Corporation of Puerto Rico Pension Plan (the
"Baxter PR Pension Plan"), as soon as administratively practicable following the
 ----------------------
establishment of the Edwards Lifesciences Corporation of Puerto Rico Pension
Plan (the "Edwards PR Pension Plan"), or effective as of any other date as
           -----------------------
agreed to in writing by the plan administrator for the Baxter PR Pension Plan
and the plan administrator for the Edwards PR Pension Plan, the accrued benefits
of all Baxter PR Pension Plan participants who are Edwards PR Employees shall be
transferred from the Baxter PR Pension Plan to the Edwards PR Pension Plan (the
"PR Transferred Accrued Benefits").  The amount of PR Transferred Accrued
 -------------------------------
Benefits shall be determined by the actuaries for the respective plans in
accordance with the methodology described in Schedule 12.4.  Each Edwards PR
                                             -------------
Employee shall receive credit for all purposes under the Edwards PR Pension Plan
for the periods of service with Baxter Healthcare Corporation of Puerto Rico or
any of its Subsidiaries or Affiliates.  The plan administrator for the Edwards
PR Pension Plan shall take any other action reasonably requested by the plan
administrator for the Baxter PR Pension Plan that is necessary or advisable, in
the opinion of the plan administrator for the Baxter PR Pension Plan,

                                      -72-
<PAGE>

to maintain the tax-qualified status of the Baxter PR Pension Plan or to avoid
the imposition of any penalties with respect to such plan.

     12.10. Entitlement to Distributions Under Pension Plan.  Each Edwards U.S.
            -----------------------------------------------
Employee shall be treated as having terminated employment with an "Employer" as
defined in the Baxter International Inc. and Subsidiaries Pension Plan (the

"Baxter Pension Plan") effective as of the Distribution Date and shall be fully
 -------------------
vested in his or her accrued benefit under the Baxter Pension Plan as of such
date.  As of the Distribution Date, Baxter shall retain all liabilities
associated with the Baxter Pension Plan relating to any Edwards U.S. Employee.

     12.11. Welfare Benefits Provided Under Edwards Plans.  (a)  Each Edwards
            ---------------------------------------------
U.S. Employee who becomes eligible to participate in the Edwards Welfare Plans
shall be credited under such plan with periods of service with any Baxter Group
Member for all purposes under such plan.

     (b)    Baxter (or the applicable Baxter Subsidiary) shall pay all costs
associated with the provision of disability benefits to any employee or former
employee of the Edwards Business whose place of employment is in the U.S. who as
of the Distribution Date is totally and permanently disabled. Edwards (or the
applicable Edwards Subsidiary) shall pay all costs associated with the provision
of disability benefits to any employee or former employee of the Edwards
Business whose place of employment is in the U.S. other than the persons
described in the first sentence of this Section 12.11(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 Edwards U.S. Employee receiving benefits under the Baxter Long-
Term Disability Plan on the Distribution Date shall continue to receive benefits
under the terms of such plan and the insurance contract used to fund such plan,
and neither Edwards nor any Edwards Subsidiary shall be charged for the payment
of such benefits. As of the Distribution Date, Edwards (or the applicable
Edwards Subsidiary) shall assume all Liabilities determined under FAS 112
relating to all Edwards U.S. Employees.

     (c)    Baxter (or the applicable Baxter Subsidiary) shall pay all claims
under the Baxter Medical Plan and the Baxter Dental Plan relating to Edwards
Employees that as of the Distribution 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 (or the applicable Baxter Subsidiary) during the six-month
period beginning on the Distribution Date.

     (d)    Baxter (or the applicable Baxter Subsidiary) shall pay all costs
associated with the provision of benefits under the terms of the Baxter Retiree
Welfare Plan for all persons who as of the Distribution Date have satisfied the
age and service eligibility requirements for receiving benefits under such plan.
Edwards (or the applicable Edwards Subsidiary) shall assume and pay all costs,
if any, associated with the provision of retiree welfare benefits for all
Edwards U.S. Employees who after the Distribution Date satisfy the age and
service eligibility requirements under the corresponding Edwards plan, if any,
for receiving such benefits.

     12.12. Stock Purchase Plans.  Except as otherwise provided in the plan, on
            --------------------
the Distribution Date, Edwards Employees shall cease to be eligible to purchase
Baxter Common Stock under the terms of the Baxter Stock Purchase Plans, and as
of the record date of the

                                      -73-
<PAGE>

Distribution, Edwards Employees may become eligible to participate in the
Edwards Stock Purchase Plans in accordance with the provisions of such plans.

     12.13. Workers' Compensation.  As soon as administratively practicable
            ---------------------
following the Distribution Date but in no event later than June 30, 2000, 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 employees of the
Parties and their respective Subsidiaries whose place of employment is in the
U.S. or Puerto Rico.

     12.14. Vacation Pay Policy.  After the Distribution Date, it is expected
            -------------------
that Edwards shall maintain for its employees and employees of its Subsidiaries
a vacation pay policy, and Edwards (or the applicable Edwards Subsidiary) shall
be responsible for costs incurred to provide vacation pay to Edwards Employees
following such date.  Edwards (or the applicable Edwards Subsidiary) shall
assume any and all Baxter Liabilities to provide to Edwards Employees vacation
that such persons accrued under the Baxter vacation pay policy as of the
Distribution Date, and no payment of such accrued vacation pay shall be made by
Baxter (or the applicable subsidiary) on the Distribution Date.

     12.15. Non-Qualified Plans.  As of the Distribution Date, Baxter (or the
            -------------------
applicable Baxter Subsidiary) shall retain the Liability to provide benefits
accrued under the Baxter International Inc. and Subsidiaries Supplemental
Pension Plan with respect to all Edwards U.S. Employees and shall retain all
Liabilities associated with such plans with respect to any Edwards U.S.
Employee. Edwards (or the applicable Edwards Subsidiary) shall assume the
Liability to provide benefits accrued as of the Distribution Date under the
Baxter International Inc. and Subsidiaries Deferred Compensation Plan with
respect to Edwards U.S. Employees. No assets shall be transferred between the
Parties with respect to the plans listed in this Section 12.15.
                                                 -------------

     12.16. Split-Dollar Life Insurance.  As of the Distribution Date, Baxter
            ---------------------------
(or the applicable Baxter Subsidiary) shall retain all Liabilities associated
with the provision of all split-dollar life insurance policies relating to any
Edwards U.S. Employee.

     12.17. Restricted Stock.  All shares of Baxter Common Stock issued in the
            ----------------
form of restricted stock that were earned for 1999 performance and are held by
an Edwards Employee as of the Distribution Date will vest on December 31, 2000
as long as such Edwards Employee continues employment with either Edwards or
Baxter (or any of their respective Subsidiaries or Affiliates) through such
date.

     12.18. Information to be Provided to Baxter.  Edwards (or the applicable
            ------------------------------------
Edwards Subsidiary) shall provide any information that Baxter (or any Baxter
Subsidiary) may reasonably request, including information relating to dates of
termination of employment, in order to provide benefits to any eligible Edwards
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 (or the applicable Edwards Subsidiary)
to Baxter as soon as available to Edwards or any of its Subsidiaries, but in any
event

                                      -74-
<PAGE>

no later than 30 days after such information is made available to Edwards
or any such Subsidiaries.

     12.19. Corporate Action; Delegation of Authority.  Any action taken by the
            -----------------------------------------
Senior Vice President of Human Resources for Baxter or the Corporate Vice
President of Human Resources for Edwards shall be considered to be action taken
by either Baxter or Edwards or their respective Subsidiaries for purposes of
this Article XII. Without limiting the generality of the foregoing, the Chief
     -----------
Executive Officer of Baxter or Edwards or their respective Subsidiaries may
delegate in writing to any other person the authority to act on behalf of Baxter
or Edwards, respectively, or their respective Subsidiaries, with respect to
actions required under the terms of this Article XII.
                                         -----------

     12.20. Transfer of Employee Files.  By a specified date as agreed upon by
            --------------------------
Edwards and Baxter following the Distribution Date, Baxter shall transfer to
Edwards the personnel files relating to all Edwards Employees.

                                 ARTICLE XIII

                               INSURANCE MATTERS
                               -----------------

     13.1.  Insurance Prior to the Distribution Date.  Edwards does hereby agree
            ----------------------------------------
that Baxter and its Subsidiaries shall not have any Liability whatsoever as a
result of the insurance policies and practices of Baxter and its Subsidiaries in
effect at any time prior to the Distribution Date, including any assistance
rendered to Edwards by Baxter in the placement of their 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.

     13.2.  Ownership of Existing Policies and Programs.  Baxter or one or more
            -------------------------------------------
of its Subsidiaries 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
Distribution Date (collectively, the "Baxter Policies" and individually, a
                                      ---------------
"Baxter Policy").  Baxter shall use commercially reasonable efforts to maintain
 -------------
the Baxter Policies in full force and effect up to and including the
Distribution Date, and, subject to the provisions of this Agreement, Baxter and
its Subsidiaries shall retain all of their respective rights, benefits and
privileges, if any, under the Baxter Policies.  Nothing contained herein shall
be construed to be an attempt to assign or to change the ownership of the Baxter
Policies.

     13.3.  Procurement of Insurance for Edwards.  To the extent not already
            ------------------------------------
provided for by the terms of the Baxter Policies, Baxter shall use commercially
reasonable efforts to cause Edwards and the appropriate Edwards Subsidiaries to
be named as additional insureds under Baxter Policies whose effective policy
periods include the Distribution 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 Distribution Date; provided, however, that
                                                       --------  -------
nothing contained herein shall be construed to require Baxter or any of its
Subsidiaries to

                                      -75-
<PAGE>

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 Policy in
order to effect the naming of Edwards and its Subsidiaries as such additional
insureds.

     13.4.  Acquisition and Maintenance of Post-Distribution Edwards Insurance
            ------------------------------------------------------------------
Policies and Programs. Commencing on and as of the Distribution Date, Edwards
---------------------
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 or any of its Subsidiaries
or Affiliates. Edwards will exercise commercially reasonable efforts to secure
liability insurance to avoid potential gaps in coverage for claims arising from
events prior to the Distribution Date, which gap would not exist had the Edwards
Business continued to be covered with the same retroactive dates existing in the
Baxter Policies in effect on the Distribution Date. Edwards and each of its
Subsidiaries and Affiliates, as appropriate, shall be responsible for all
administrative and financial matters relating to insurance policies established
and maintained by Edwards and its Subsidiaries or Affiliates for claims relating
to any period on or after the Distribution Date involving Edwards or any of its
Subsidiaries or Affiliates. Notwithstanding any other agreement or
understanding to the contrary, except as set forth in Article XIII with respect
                                                      ------------
to claims administration and financial administration of the Baxter Policies,
neither Baxter nor any of its Subsidiaries or Affiliates shall have any
responsibility for or obligation to Edwards or any of its Subsidiaries or
Affiliates relating to property and casualty insurance matters for any period,
whether prior to, on or after the Distribution Date.

     13.5.  Edwards Directors' and Officers' Insurance.  Baxter shall use
            ------------------------------------------
commercially reasonable efforts to cause the persons currently serving as
officers and/or directors of Baxter or any of its Subsidiaries to be covered for
a period of six (6) years from the Distribution Date by the directors' and
officers' liability insurance policy maintained by Baxter (including corporate
reimbursement) (provided that Baxter 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 Distribution 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 13.5, Baxter shall use commercially reasonable
                   ------------
efforts to obtain as much comparable insurance as available for the Insurance
Amount. In the event Baxter 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
assume the obligations set forth in this Section 13.5.  The provisions of this
                                         ------------
Section 13.5 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 15.5, any amount Edwards or any of its Subsidiaries is
            ------------
required to pay to Baxter as an indemnity under this Agreement is reduced to

                                      -76-
<PAGE>

the extent Baxter receives insurance proceeds from the above coverage, but only
to the extent such proceeds are actually received by Baxter.

     13.6.  Pre-Distribution Insurance Claims Administration.  Edwards and its
            ------------------------------------------------
Subsidiaries and Affiliates acknowledge that Baxter has previously experienced
losses and received claims that were, or might have been, covered by one or more
Baxter Policies, and prior to the Distribution Date will have made decisions and
commitments regarding administration of such claims, including reaching
agreements and stipulations regarding such claims and proceeds of such claims
(collectively, "Pre-Distribution Claims Administration"). Edwards and its
                --------------------------------------
Subsidiaries and Affiliates covenant not to contest or challenge in any manner
any action taken by Baxter prior to the Distribution Date in  connection with or
relating to Pre-Distribution Claims Administration, or to interfere with the
performance of any agreement, commitment or stipulation so made by Baxter in
connection with or relating to Pre-Distribution Claims Administration.

     13.7.  Post-Distribution Insurance Claims Administration.  Baxter and its
            -------------------------------------------------
Subsidiaries shall have the primary right, responsibility and authority for
claims administration and financial administration of claims that relate to or
affect the Baxter Policies. Upon notification by Edwards or one of its
Subsidiaries or Affiliates of a claim relating to Edwards or a Subsidiary or
Affiliate thereof under one or more of the Baxter Policies, Baxter shall
cooperate with Edwards 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 shall have sole power and authority to make binding
decisions, determinations, commitments and stipulations on its own behalf and on
behalf of Edwards and its Subsidiaries and Affiliates, which decisions,
determinations, commitments and stipulations shall be final and conclusive if
made to maximize the overall economic benefit for Baxter and Edwards of the
Baxter Policies. Edwards and its Subsidiaries and Affiliates assume
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 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 Edwards or any of its Subsidiaries or Affiliates,
whether the same relate to the period prior to, on or after the Distribution
Date. To the extent that the terms of any applicable Baxter Policy provide that
Baxter or any of its Subsidiaries shall have an obligation to pay or guarantee
the payment of any Insurance Charges relating to Edwards or any of its
Subsidiaries, Baxter shall be entitled to demand that Edwards make such payment
directly to the Person or entity entitled thereto. In connection with any such
demand, Baxter shall submit to Edwards a copy of any invoice received by Baxter
pertaining to such Insurance Charges together with appropriate supporting
documentation, to the extent available. In the event that Edwards 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, Baxter and its Subsidiaries
may (but shall not be required to) pay such insurance charges for and on behalf
of Edwards and, thereafter, Edwards shall forthwith reimburse Baxter for such
payment. Subject to the other provisions of this Article XIII, the retention by
                                                 ------------
Baxter of the Baxter Policies and the responsibility for claims administration
and financial administration of such policies are in no way intended to limit,

                                      -77-
<PAGE>

inhibit or preclude any right of Edwards, Baxter or any other insured to
insurance coverage for any Insured Claims under the Baxter Policies.

     13.8.  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 XIII, 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 no Distribution occurred or in the absence of the provisions of this

Article XIII) by virtue of the provisions hereof.
------------

     13.9.  Scope of Affected Policies of Insurance.  The provisions of this
            ---------------------------------------
Article XIII 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.

                                  ARTICLE XIV

                            EXPENSE AND TAX MATTERS
                            -----------------------

     14.1.  Allocation of Expenses.  (a)  Except as otherwise provided in this
            ----------------------
Agreement or any other agreement contemplated hereby, or as otherwise agreed to
in writing by the Parties, all fees and expenses incurred in connection with the
transactions contemplated hereby or thereby shall be paid by Baxter.
Specifically, (i) Baxter shall absorb all the costs associated with the
dedication of internal resources and personnel to such transaction at all times
prior to the Distribution Date, and (ii) Baxter shall pay all fees and expenses
that are related directly to the implementation of the Distribution transactions
incurred on or prior to the Distribution Date.

     (b)    Notwithstanding Section 14.1(a) above, Baxter shall be solely
                            ---------------
responsible for the following costs incurred in connection with the transactions
contemplated hereby:  (i) the reasonable fees and expenses of Sidley & Austin in
connection with its representation of Baxter; (ii) the reasonable fees and
expenses of Skadden, Arps, Slate, Meagher & Flom in connection with its
representation of Baxter relating to the tax ruling and the opinion of counsel
on tax matters; (iii) the reasonable fees and expenses of foreign counsel to
Baxter or Edwards in connection with the transactions contemplated by this
Agreement; (iv) the reasonable fees and expenses of Credit Suisse First Boston
and J.P. Morgan & Co. Incorporated relating to their financial advisory services
rendered to Baxter; (v) the reasonable fees and expenses of
PricewaterhouseCoopers LLP in connection with its audit and tax services
rendered to Baxter; (vi) the reasonable fees and expenses of Ernst & Young in
connection with their consulting services relating to the Commissionaire
structure; (vii) the reasonable fees and expenses of Towers, Perrin and Hewitt
Associates in connection with their consulting services relating to benefits
plans rendered to Baxter; (viii) all SEC registration and "blue sky" filing fees
associated with the Registration Statement; (ix) the printing, mailing and
distribution of the Information Statement to Baxter's stockholders; (x) the
reasonable fees and expenses of Edwards' transfer

                                      -78-
<PAGE>

agent and registrar relating to the initial issuance of Edwards Shares as a
dividend to Baxter's stockholders; (xi) the NYSE listing fees for the Edwards
Shares; (xii) the design and initial printing of certificates of the Edwards
Shares; (xiii) the initial distribution of the certificates of Edwards Common
Stock as a dividend to Baxter stockholders; (xiv) the development, search and
registration of the name "Edwards"; and (xv) various other international
professional services related directly to the Distribution, such as valuation
services, legal services and tax services.

     (c)    Notwithstanding Section 14.1(a)(i) above, Edwards shall be solely
                            ------------------
responsible for all fees, expenses and other costs incurred in connection with
the transactions contemplated hereby related to:  (i) the reasonable fees and
expenses of the commercial lenders under the Edwards Credit Facility relating to
their syndication and arrangement of such facility; (ii) the reasonable fees and
expenses of any financial advisors retained by Edwards in connection with any
"road shows" or presentations to investors; (iii) recruiting fees, signing
bonuses and relocation expenses for new and existing Edwards Employees; (iv)
severance payments to Edwards Employees terminated as a result of the
Distribution; (v) fees and expenses related to execution of new company identity
and media launch activities; and (vi) product re-registration fees and product
re-labeling costs.

     14.2.  Allocation of Taxes.  Sales, transfer, V.A.T. or other similar Taxes
            -------------------
or fees payable in connection with the transactions contemplated by this
Agreement shall be determined and paid as provided in the Tax Sharing Agreement.

                                   ARTICLE XV

                          RELEASE AND INDEMNIFICATION
                          ---------------------------

     15.1.  Release of Pre-Distribution Claims.  (a)  Except as provided in
            ----------------------------------
Section 15.1(b), effective as of the Distribution Date, each of Baxter and
---------------
Edwards does hereby, on behalf of itself and its respective Subsidiaries,
Affiliates, successors and assigns and all Persons who at any time prior to the
Distribution Date have been shareholders, directors, officers, agents or
employees of either Party (in each case, in their respective capacities as
such), remise, release and forever discharge the other Party, its Subsidiaries,
Affiliates, successors and assigns and all Persons who at any time prior to the
Distribution Date have been shareholders, directors, officers, agents or
employees of such Party (in each case, in their respective capacities as such),
and their respective heirs, executors, administrators, successors and assigns,
from any and all Liabilities whatsoever, whether at law or in equity (including
any right of contribution), whether arising under any contract or agreement, by
operation of law or otherwise, existing or arising from any acts or events
occurring or failing to occur or alleged to have occurred or to have failed to
occur or any conditions existing or alleged to have existed on or before the
Distribution Date, including in connection with the transactions and all other
activities to implement the Distribution.

     (b)    Notwithstanding the foregoing, nothing contained in Section 15.1(a)
                                                                ---------------
shall release any Party from:

                                     -79-
<PAGE>

          (i)   any Liability transferred, assigned or allocated to, or assumed
     or retained by, a Party in accordance with this Agreement, any Conveyancing
     Instrument, any Implementation Agreement, any Operating Agreement or the
     Tax Sharing Agreement;

          (ii)  any Liability provided in or resulting from this Agreement, any
     Conveyancing Instrument, any Implementation Agreement, any Operating
     Agreement, the Tax Sharing Agreement or any agreement between any of Baxter
     and its Subsidiaries, on the one hand, and Edwards and its Subsidiaries, on
     the other hand, that is not to terminate pursuant to the Distribution or
     any other agreement between any of the Parties entered into in
     contemplation that such agreement would remain in effect after the
     Distribution;

          (iii) any Liability for unpaid amounts for the sale, lease,
     construction or receipt of goods, property or services purchased, obtained
     or used in the ordinary course of business by one Party from the other
     Party prior to the Distribution Date;

          (iv)  any Liability for unpaid amounts for products or services or
     refunds owing on products or services due on a value-received basis for
     work done by one Party at the request or on behalf of the other Party;

          (v)   any Liability that the Parties may have with respect to
     indemnification or contribution pursuant to this Agreement for claims
     brought against the Parties by third Persons, which Liability shall be
     governed by the provisions of this Article XV and, if applicable, the
                                        ----------
     appropriate provisions of any Conveyancing Instrument, any Implementation
     Agreement or the Tax Sharing Agreement;

          (vi)  the Liability for the payable from Edwards Lifesciences AG to
     Baxter Belgium in respect of the inventory transferred pursuant to Section
                                                                        -------
     3.22(c) or
     -------

          (vii) any Liability the release of which would result in the release
     of any party other than a Person released pursuant to this Section 15.1;
                                                                ------------
     provided, however, that the Parties agree not to bring suit or permit any
     --------  -------
     of their Subsidiaries or Affiliates to bring suit against any Person with
     respect to any Liability to the extent that such Person would be released
     with respect to such Liability by this Section 15.1 but for the provisions
                                            ------------
     of this clause (vi).

          (c)   Neither Party shall make, nor permit any of its Subsidiaries or
Affiliates to make, any claim or demand, or commence any Action asserting any
claim or demand, including any claim of contribution or indemnification, against
the other Party, or any other Person released pursuant to Section 15.1(a), with
                                                          ---------------
respect to any Liability released pursuant to Section 15.1(a).
                                              ---------------

          (d)   It is the intent of each of the Parties by virtue of the
provisions of this Section 15.1 to provide for a full and complete release and
                   ------------
discharge of all Liabilities existing or arising from all acts and events
occurring or failing to occur or alleged to have occurred or to have failed to
occur and all conditions existing or alleged to have existed on or before the
Distribution Date, between the Parties (including any contractual agreements or
arrangements

                                      -80-
<PAGE>

existing or alleged to have existed between the Parties on or before the
Distribution Date), except as expressly set forth in Section 15.1(b). At any
                                                     ---------------
time, at the request of either Party, the other Party shall execute and deliver
releases reflecting the provisions hereof.

     15.2.  Indemnification by Edwards.  Except as provided in Section 15.5,
            --------------------------                         ------------
Edwards shall indemnify and hold harmless the Baxter Indemnified Parties from
and against any and all Expenses or Losses incurred or suffered by Baxter
(and/or one or more of the Baxter Indemnified Parties), in connection with,
relating to, arising out of or due to, directly or indirectly, any of the
following items:

     (a)    any claim that the information included in the Registration
Statement or the Information Statement that relates to the Edwards Business, or
any other information relating to the Edwards Business provided to Baxter or
distributed to third parties by employees of Edwards or individuals who were
employees of the Edwards Business prior to the Distribution Date, is or was
false or misleading with respect to any material fact or omits or omitted to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading, regardless of whether the occurrence, action or other
event giving rise to the applicable matter took place prior or subsequent to the
Distribution Date;

     (b)    the Edwards Business as conducted by Baxter or its Subsidiaries,
Affiliates or predecessors on or at any time prior to the Distribution Date;

     (c)    the Transferred Assets;

     (d)    the Assumed Liabilities;

     (e)    the Transferred Subsidiaries;

     (f)    the breach by Edwards or any of its Subsidiaries of any covenant or
agreement set forth in this Agreement, any Conveyancing Instrument, any
Implementation Agreement or the Tax Sharing Agreement, 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;

     (g)    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 employees or former employees
of Edwards (or its Subsidiaries), 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 pursuant to Section 15.3(f)),
                                                           ---------------
including Expenses or Losses arising in connection with (i) Edwards' reduction,
elimination or failure to provide any benefit accrued by its employees or
employees of any of its Subsidiaries (including benefits accrued prior to the
Distribution Date) and (ii) the transfer of account balances and accrued
benefits as described in Section 12.9 where such Expenses or Losses are incurred
                         ------------
as a result of (A) any act or omission by Edwards (or Edwards' representative)
or (B) a determination by the IRS that the transferee plan is not a tax-
qualified plan;

                                      -81-
<PAGE>

          (h)   the Indemnifiable matters set forth in Sections 7.3, 9.4(b) and
                                                       ------------  ------
9.11(b) and Article XII; or
-------    ------------

          (i)   any use of, access to or reliance upon the technical information
or data made available to Edwards or its Subsidiaries pursuant to Section 17.1.
                                                                  ------------

          15.3. Indemnification by Baxter.  Except as provided in Section 15.5,
                -------------------------                         ------------
Baxter shall indemnify and hold harmless Edwards and each of its Subsidiaries,
Affiliates, directors, officers, employees, agents and counsel, and each of the
heirs, executors, successors, assigns and personal representatives of any of the
foregoing (collectively, the "Edwards Indemnified Parties"), from and against
                              ---------------------------
any and all Expenses or Losses incurred or suffered by Edwards (and/or one or
more of the Edwards Indemnified Parties) in connection with, relating to,
arising out of or due to, directly or indirectly, any of the following items:

          (a)   any claim that the information included in the Registration
Statement or the Information Statement that relates to Baxter or the Retained
Business is or was false or misleading with respect to any material fact or
omits or omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, regardless of whether the
occurrence, action or other event giving rise to the applicable matter took
place prior or subsequent to the Distribution Date;

          (b)   the business (other than the Edwards Business) conducted by
Baxter or its Subsidiaries, Affiliates or predecessors on or at any time prior
to the Distribution Date;

          (c)   the assets owned by Baxter or its Subsidiaries other than the
Transferred Assets and the Shared Agreements;

          (d)   the Liabilities (including the Retained Liabilities) of Baxter
or its Subsidiaries other than the Assumed Liabilities;

          (e)   the breach by Baxter or any of its Subsidiaries of any covenant
or agreement set forth in this Agreement, any Conveyancing Instrument, any
Implementation Agreement or the Tax Sharing Agreement, 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;
or

          (f)   Baxter's reduction, elimination or failure to provide any
benefit previously provided to its employees (or employees of its Subsidiaries),
other than a benefit assumed by Edwards pursuant to Article XII or an Assumed
                                                    -----------
Liability, or any act or omission by Baxter in connection with the transfer of
assets and liabilities as described in Section 12.9.
                                       ------------

          15.4. Applicability of and Limitation on Indemnification. (a) EXCEPT
                --------------------------------------------------
AS EXPRESSLY PROVIDED HEREIN, THE INDEMNITY OBLIGATIONS UNDER THIS ARTICLE XV
                                                                   ----------
SHALL APPLY NOTWITHSTANDING ANY INVESTIGATION MADE BY OR ON BEHALF OF ANY
INDEMNIFIED PARTY AND SHALL APPLY WITHOUT

                                      -82-
<PAGE>

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 BE LIABLE TO EDWARDS (OR ANY EDWARDS INDEMNIFIED PARTY),
OR EDWARDS BE LIABLE TO BAXTER (OR ANY BAXTER INDEMNIFIED PARTY), 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.

          15.5. Adjustment of Indemnifiable Losses. (a) The amount that any
                ----------------------------------
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 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

                                      -83-
<PAGE>

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 15.5(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.

          (d)   In the event that an Indemnity Payment shall be denominated in a
currency other than United States dollars, the amount of such payment shall be
translated into United States dollars using the Foreign Exchange Rate for such
currency determined in accordance with the following rules:

          (i)   with respect to an Expense or a Loss arising from payment by a
     financial institution under a guarantee, comfort letter, letter of credit,
     foreign exchange contract or similar instrument, the Foreign Exchange Rate
     for such currency shall be determined as of the date on which such
     financial institution shall have been reimbursed;

          (ii)  with respect to an Expense or a Loss covered by insurance, the
     Foreign Exchange Rate for such currency shall be the Foreign Exchange Rate
     employed by the insurance company providing such insurance in settling such
     Expense or Loss with the Indemnifying Party; and

          (iii) with respect to an Expense or a Loss not covered by clause (i)
     or (ii) above, the Foreign Exchange Rate for such currency shall be
     determined as of the date that notice of the claim with respect to such
     Expense or Loss shall be given to the Indemnified Party.

          15.6. 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 under Section 15.2 or against Baxter under
                                      ------------
Section 15.3, 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 15.6(a) shall not relieve the related Indemnifying Party of its
---------------
obligations under this Article XV, except to the extent that such Indemnifying
                       ----------
Party is actually prejudiced by such failure to provide notice.

          (b) The Indemnifying Party shall have 20 business days after receipt
of the notice referred to in Section 15.6(a) to notify the Indemnified Party
                             ---------------
that it elects to conduct and control the defense of such Third Party Claim.  If
the Indemnifying Party does not give the foregoing notice, 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 15.6(c), and the Indemnifying Party shall, upon request from any of the
---------------

                                     -84-
<PAGE>

Indemnified Parties, promptly pay to such Indemnified Parties in accordance with
the other terms of this Section 15.6(b) the amount of any Expense or Loss
                        ---------------
resulting from their liability to the third-party claimant.  If the Indemnifying
Party gives the foregoing notice, 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 XV
                                                                    ----------
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 any 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 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 15.6(c).
                                ---------------

                                      -85-
<PAGE>

          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 15.6(b).  Notwithstanding anything in
                                 ---------------
this Section 15.6(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 15.6(c) for indemnification by the Indemnifying
                   ---------------
Party.

          (d) The provisions of this Section 15.6 and Section 15.7 shall not
                                     ------------     ------------
apply to Taxes (which are covered by the Tax Sharing Agreement).

          15.7.  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 XVI.
-----------

          15.8.  Contribution.  If the indemnification provided for in this
                 ------------
Article XV is unavailable to an Indemnified Party in respect of any Expense or
----------
Loss arising out of or related to information contained in the Registration
Statement or the Information Statement, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Expense or Loss in such
proportion as is appropriate to reflect the relative fault of the Edwards
Indemnified Parties, on the one hand, or the Baxter Indemnified Parties, on the
other hand, in connection with the statements or omissions that resulted in such
Expense or Loss. The relative fault of any Edwards Indemnified Party, on the one
hand, and of any Baxter Indemnified Party, on the other hand, shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission of a
material fact relates to information about or supplied by the Edwards Business
or an Edwards Indemnified Party, on the one hand, or about or by the Retained
Business or a Baxter Indemnified Party, on the other hand.

          15.9.  No Third-Party Beneficiaries.  Except to the extent expressly
                 ----------------------------
provided otherwise in this Article XV, the indemnification provided for in this
                           ----------
Agreement, the Tax

                                      -86-
<PAGE>

Sharing Agreement, any Implementation Agreement or any Operating Agreement shall
not inure to the benefit of any third-party or parties and shall not relieve any
insurer or other third-party who otherwise would be obligated to pay any claim
or assume the responsibility with respect thereto, or, solely by virtue of the
indemnification provisions hereof, provide any subrogation rights with respect
thereto, and each Party agrees to waive such rights against the other to the
fullest extent permitted.

          15.10. Remedies Cumulative.  The remedies provided in this Article XV
                 -------------------                                 ----------
shall be cumulative and, subject to the provisions of Article XVI 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.

          15.11. Survival.  All covenants and agreements of the Parties
                 --------
contained in this Agreement relating to indemnification shall survive the
Distribution Date indefinitely, unless a specific survival or other applicable
period is expressly set forth herein.

                                  ARTICLE XVI

                               DISPUTE RESOLUTION
                               ------------------

          16.1.  General.  Any dispute arising out of or relating to this
                 -------
Agreement, any of the Implementation Agreements or any of the Conveyancing
Instruments shall be resolved in accordance with the procedures specified in
this Article XVI, which shall be the sole and exclusive procedures for the
     -----------
resolution of any such disputes.

          16.2.  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, any of the
Implementation Agreements or any of the Conveyancing Instruments or the breach,
termination or validity (including the validity, scope and enforceability of
this mediation and arbitration provision) of this Agreement, any Implementation
Agreement or any Conveyancing Instrument (a "Dispute") 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.

          16.3.  Arbitration.  Any Dispute which has not been resolved by the
                 -----------
specified non-binding procedure set forth in Section 16.2 within 90 days of the
                                             ------------
date of delivery of the

                                      -87-
<PAGE>

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.

          16.4.  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 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.

          16.5.  Injunctive Relief.  Nothing contained in this Article XVI 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 XVII

                       ACCESS TO INFORMATION AND SERVICES
                       ----------------------------------

          17.1.  Access to Financial Information.  (a)  At all times from and
                 -------------------------------
after the Distribution Date for a period of ten (10) years, as soon as
reasonably practicable after written request: (i) Baxter shall afford to
Edwards, its Subsidiaries and their authorized accountants,

                                      -88-
<PAGE>

counsel and other designated representatives reasonable access during normal
business hours to, or, at Edwards' expense, provide copies of, all records,
books, contracts, instruments, data, documents and other information
(collectively, "Information") in the possession or under the control of Baxter
                -----------
immediately following the Distribution Date that relates to Edwards, the Edwards
Business or the Edwards Employees; and (ii) Edwards shall afford to Baxter, its
Subsidiaries and their authorized accountants, counsel and other designated
representatives reasonable access during normal business hours to, or, at
Baxter's expense, provide copies of, all Information in the possession or under
the control of Edwards immediately following the Distribution Date that relates
to Baxter, the Retained Business or the employees of Baxter; provided, however,
                                                             --------  -------
that in the event that either Party determines that any such provision of or
access to Information could be commercially detrimental, violate any law or
agreement or waive any attorney-client privilege, the Parties shall take all
reasonable measures to permit the compliance with such obligations in a manner
that avoids any such harm or consequence.

          (b) Either Party may request Information under Section 17.1(a) (i) to
                                                         ---------------
comply with reporting, disclosure, filing or other requirements imposed on the
requesting party (including under applicable securities or tax laws) by a
Governmental Authority having jurisdiction over the requesting party, (ii) for
use in any other judicial, regulatory, administrative, Tax or other proceeding
or in order to satisfy audit, accounting, claims defense, regulatory filings,
litigation, Tax or other similar requirements, (iii) for use in compensation,
benefit or welfare plan administration or other bona fide business purposes or
(iv) to comply with its obligations under this Agreement, any Conveyancing
Instrument, any Implementation Agreement, any Operating Agreement or the Tax
Sharing Agreement.

          (c) After the Distribution Date, (i) Edwards shall maintain in effect
at its own cost and expense adequate systems and controls to the extent
necessary to enable Baxter and its Subsidiaries to satisfy their respective
reporting, accounting, audit and other obligations, and (ii) Edwards shall
provide, or cause to be provided, to Baxter in such form as Baxter shall
request, at no charge to Baxter, all financial and other data and information as
Baxter determines necessary or advisable in order to prepare Baxter financial
statements and reports or filings with any Governmental Authority.

          17.2.  Ownership of Information.  Any Information owned by one Party
                 ------------------------
that is provided to a requesting Party pursuant to Section 17.1 shall be deemed
                                                   ------------
to remain the property of the providing Party. Unless specifically set forth
herein, nothing contained in this Agreement shall be construed to grant or
confer rights of license or otherwise in any such Information.

          17.3.  Compensation for Providing Information.  The Party requesting
                 --------------------------------------
Information agrees to reimburse the providing Party for the reasonable costs, if
any, of creating, gathering and copying such Information, to the extent that
such costs are incurred for the benefit of the requesting Party.  Except as
otherwise specifically provided in this Agreement, such costs shall be computed
in accordance with the providing Party's standard methodology and procedures.

          17.4.  Retention of Records.  To facilitate the possible exchange of
                 --------------------
Information pursuant to this Article XVII after the Distribution Date, the
                             ------------
Parties agree to use commercially reasonable efforts to retain all Information
in their respective possession or control on the

                                      -89-
<PAGE>

Distribution Date in accordance with the policies and procedures of Baxter as in
effect on the Distribution Date. No party will destroy, or permit any of its
Subsidiaries or Affiliates to destroy, any Information that the other Party may
have the right to obtain pursuant to this Agreement prior to the tenth
anniversary of the date hereof, and thereafter without first using commercially
reasonable efforts to notify the other Party of the proposed destruction and
giving the other Party the opportunity to take possession of such Information
prior to such destruction; provided, however, that in the case of any
                           --------  -------
Information relating to Taxes, such period shall be extended to the expiration
of the applicable statute of limitations (giving effect to any extensions
thereof).

          17.5.  Limitations.  (a)  Baxter and Edwards make no representations
                 -----------
or warranties, express or implied, about the accuracy, completeness, adequacy or
sufficiency of the financial and technical information and data compilations and
EXPRESSLY DISCLAIM ALL WARRANTIES WHATSOEVER, WHETHER STATUTORY, WRITTEN, ORAL,
EXPRESS OR IMPLIED, AND EXPRESSLY DISCLAIM EACH SUCH WARRANTY, INCLUDING ANY
WARRANTY OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.  Except as
provided in Article X hereof, the rights of access pursuant to Section 17.1
            ---------                                          ------------
shall not include, however, such Information of either Party and its
Subsidiaries relating to (i) products, materials and components under
development; (ii) Information pertaining to potential acquisitions, divestitures
and other business arrangements; (iii) studies and investigations being
undertaken by either Party and its Subsidiaries for its or their own benefit or
for the benefit of a third party; and (iv) information and data either Party and
its Subsidiaries are obligated to a third party to maintain in confidence.

          (b) No Party shall have any liability to the other Party (i) if any
Information exchanged or provided pursuant to this Agreement that is an estimate
or forecast, or that is based on an estimate or forecast, is found to be
inaccurate, in the absence of willful misconduct by the Party providing such
Information, or (ii) if any Information is destroyed after commercially
reasonable efforts to comply with the provisions of Section 17.4.
                                                    ------------

          17.6.  Production of Witnesses.  At all times from and after the
                 -----------------------
Distribution Date, each Party shall use commercially reasonable efforts to make
available to the other Party (without cost (other than reimbursement of actual
out-of-pocket expenses) to, and upon prior written request of, the other Party)
its directors, officers, employees and agents as witnesses to the extent that
the same may reasonably be required by the other Party in connection with any
legal, administrative or other proceeding in which the requesting Party may from
time to time be involved with respect to the Edwards Business, the Retained
Business or any transactions contemplated hereby.

          17.7.  Confidentiality.  (a)  From and after the Distribution Date,
                 ---------------
each of Baxter and Edwards shall hold, and shall cause their respective
Subsidiaries, directors, officers, employees, agents, consultants, advisors and
other representatives to hold, in strict confidence, with at least the same
degree of care that applies to Baxter's confidential and proprietary information
pursuant to policies in effect as of the Distribution Date, all non-public
information concerning the other Party or any of its Subsidiaries or Affiliates
obtained by it prior to the Distribution Date, accessed by it pursuant to
Section 17.1 hereof, or furnished to it by the other Party or any of its
------------
Subsidiaries or Affiliates pursuant to this Agreement or any agreement or

                                      -90-
<PAGE>

document contemplated hereby, including any trade secrets, technology, know-how
and other non-public, proprietary intellectual property rights licensed pursuant
to Sections 10.1 and 10.2 hereof, and shall not release or disclose such
   -------------     ----
information to any other Person, except its representatives, who shall be bound
by the provisions of this Section 17.7; provided, however, that Baxter and
                          ------------  --------  -------
Edwards and their respective Subsidiaries, directors, officers, employees,
agents, consultants, advisors and other representatives may disclose such
information if, and only to the extent that, (i) a disclosure of such
information is compelled by judicial or administrative process or, in the
opinion of such Party's counsel, by other requirements of law (in which case the
disclosing Party will provide, to the extent practicable under the
circumstances, advance written notice to the other Party of its intent to make
such disclosure), or (ii) such Party can show that such information (A) is
published or is or otherwise becomes available to the general public as part of
the public domain without breach of this Agreement; (B) has been furnished or
made known to the recipient without any obligation to keep it confidential by a
third party under circumstances that are not known to the recipient to involve a
breach of the third party's obligations to a Party hereto; (C) was developed
independently of information furnished to the recipient under this Agreement; or
(D) in the case of information furnished after the Distribution Date, was known
to the recipient at the time of receipt thereof from the other Party.

          (b) Each Party acknowledges that the other Party would not have an
adequate remedy at law for the breach by the acknowledging Party of any one or
more of the covenants contained in this Section 17.7 and agrees that, in the
                                        ------------
event of such breach, the other Party may, in addition to the other remedies
that may be available to it, apply to a court for an injunction to prevent
breaches of this Section 17.7 and to enforce specifically the terms and
                 ------------
provisions of this Section.  Notwithstanding any other Section hereof, the
provisions of this Section 17.7 shall survive the Distribution Date
                   ------------
indefinitely.

          17.8.  Privileged Matters.  (a)  Each of Baxter and Edwards agrees to
                 ------------------
maintain, preserve and assert all privileges, including privileges arising under
or relating to the attorney-client relationship (which shall include without
limitation the attorney-client and work product privileges), not heretofore
waived, that relate to the Edwards Business and the Transferred Assets for any
period prior to the Distribution Date ("Privilege" or "Privileges").  Each Party
                                        ---------      ----------
agrees that it shall not waive any Privilege that could be asserted under
applicable law without the prior written consent of the other Party. The rights
and obligations created by this Section 17.8 shall apply to all information
                                ------------
relating to the Edwards Business as to which, but for the Distribution, either
Party would have been entitled to assert or did assert the protection of a
Privilege ("Privileged Information"), including (i) any and all information
            ----------------------
generated prior to the Distribution Date but which, after the Distribution, is
in the possession of either Party; and (ii) all information generated, received
or arising after the Distribution Date that refers to or relates to Privileged
Information generated, received or arising prior to the Distribution Date.

          (b) Upon receipt by either Party of any subpoena, discovery or other
request that may call for the production or disclosure of Privileged Information
or if either Party obtains knowledge that any current or former employee of
Baxter or Edwards has received any subpoena, discovery or other request that may
call for the production or disclosure of Privileged Information, such Party
shall notify promptly the other Party of the existence of the request and shall
provide the other Party a reasonable opportunity to review the information and
to assert any rights it may have under this Section 17.8 or otherwise to prevent
                                            ------------
the production or disclosure of

                                      -91-
<PAGE>

Privileged Information. Each Party agrees that it will not produce or disclose
any information that may be covered by a Privilege under this Section 17.8
                                                              ------------
unless (i) the other Party has provided its written consent to such production
or disclosure (which consent will not be unreasonably withheld), or (ii) a court
of competent jurisdiction has entered a final, nonappealable order finding that
the information is not entitled to protection under any applicable Privilege.

          (c) Baxter's transfer of books and records and other information to
Edwards, and Baxter's agreement to permit Edwards to possess Privileged
Information existing or generated prior to the Distribution Date, are made in
reliance on Edwards' agreement, as set forth in Sections 17.7 and 17.8, to
                                                -------------     ----
maintain the confidentiality of Privileged Information and to assert and
maintain all applicable Privileges.  The access to information being granted
pursuant to Section 17.1, the agreement to provide witnesses and individuals
            ------------
pursuant to Section 17.6 and the transfer of Privileged Information to Edwards
            ------------
pursuant to this Agreement shall not be deemed a waiver of any Privilege that
has been or may be asserted under this Section 17.8 or otherwise.  Nothing in
                                       ------------
this Agreement shall operate to reduce, minimize or condition the rights granted
to Baxter in, or the obligations imposed upon Edwards by, this Section 17.8.
                                                               ------------

                                 ARTICLE XVIII

                                 MISCELLANEOUS
                                 -------------

          18.1. Entire Agreement.  This Agreement, the Conveyancing Instruments,
                ----------------
the Implementation Agreements, the Operating Agreements and the Tax Sharing
Agreement, including the Schedules and Exhibits referred to herein and therein
and the documents delivered pursuant hereto and thereto, constitute the only
agreements between the Parties with respect to the subject matter contained
herein or therein, and supersede all prior agreements, negotiations,
discussions, understandings, writings and commitments between the Parties with
respect to such subject matter.

          18.2.  Choice of Law and Forum.  This Agreement shall be governed by
                 -----------------------
and construed and enforced in accordance with the substantive laws (except for
any otherwise applicable conflicts of law provisions) of the State of Illinois
and the federal laws of the United States of America applicable therein, as
though all acts and omissions related hereto occurred in Illinois. Subject to
Article XVI, any lawsuit arising from or related to this Agreement, any of the
-----------
Conveyancing Instruments, Implementation Agreements or Operating Agreements, or
the Tax Sharing Agreement shall be brought only in the United States District
Court for the Northern District of Illinois, the Circuit Court of Lake County,
Illinois, the United States District Court for the Central District of
California or the Superior Court of Orange County, California, and the specific
choice from among the foregoing shall be determined by the Party initiating such
lawsuit.  To the extent permissible by law, the Parties hereby consent to the
jurisdiction and venue of such courts.  Each Party hereby waives, releases and
agrees not to assert, and agrees to cause its Affiliates to waive, release and
not to assert, any rights such Party or its Affiliates may have under any
foreign law or regulation that would be inconsistent with the terms of this
Agreement as governed by Illinois law.

                                      -92-
<PAGE>

          18.3.  Amendment.  This Agreement shall not be amended, modified or
                 ---------
supplemented except by a written instrument signed by an authorized
representative of each of the Parties.

          18.4.  Waiver.  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 given for the purposes of this Agreement if, as to any Party, it is
in writing signed by an authorized representative of such Party. The failure of
any Party to enforce at any time any provision of this Agreement shall not be
construed to be a waiver of such provision, or 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.

          18.5.  Partial Invalidity.  Wherever possible, each provision hereof
                 ------------------
shall be interpreted in such a 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 or provisions shall be ineffective to the extent, but
only to the extent, of such invalidity, illegality or unenforceability without
invalidating the remainder of such provision or provisions or any other
provisions hereof, unless such a construction would be unreasonable.

          18.6.  Execution in Counterparts.  This Agreement may be executed in
                 -------------------------
one or more counterparts, each of which shall be deemed 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 and delivered
to each of the Parties.

          18.7.  Successors and Assigns.  This Agreement shall be binding upon
                 ----------------------
inure to the benefit of the Parties and their respective successors and
permitted assigns; provided, however, that the rights of either Party under this
                   --------  -------
Agreement shall not be assignable by such Party without the prior written
consent of the other Party.  The successors and permitted assigns hereunder
shall include, without limitation, 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).

          18.8.  Third Party Beneficiaries.  Except to the extent otherwise
                 -------------------------
provided in Section 13.5 or Article XV hereof the provisions of this Agreement
            ------------    ----------
are solely for the benefit of the Parties and their respective Affiliates,
successors and permitted assigns and shall not confer upon any third Person any
remedy, claim, liability, reimbursement or other right in excess of those
existing without reference to this Agreement. Nothing in this Agreement, the Tax
Sharing Agreement or any Operating Agreement shall obligate Baxter or Edwards to
assist any Edwards Employee to enforce any rights such employee may have with
respect to any of the employee benefits described in this Agreement.

          18.9.  Notices.  All notices, requests, claims, demands and other
                 -------
communications required or permitted hereunder shall be in writing and shall be
deemed given or delivered (i) when delivered personally, (ii) if transmitted by
facsimile when confirmation of

                                      -93-
<PAGE>

transmission is received, (iii) if transmitted by electronic mail when
confirmation of such transmission is received, (iv) if sent by registered or
certified mail, postage prepaid, return receipt requested, on the third business
day after mailing or (v) if sent by private courier when received; and shall be
addressed as follows:

          If to Baxter, to:

                  Baxter International Inc.
                  One Baxter Parkway
                  Deerfield, IL 60015-4633
                  Attention:  General Counsel
                  Facsimile:  (847) 948-2450

          If to Edwards, to:

                  Edwards Lifesciences Corporation
                  17221 Red Hill Avenue
                  Irvine, CA 92614
                  Attention:  General Counsel
                  Facsimile:  (949) 250-6868

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

          18.10. Performance.  Each Party shall cause to be performed, and
                 -----------
hereby guarantees the performance of, all actions, agreements and obligations
set forth herein to be performed by any Subsidiary or Affiliate of such Party.

          18.11. Force Majeure.  No Party shall be deemed in fault of this
                 -------------
Agreement, any Conveyancing Instrument, any Implementation Agreement, any
Operating Agreement or the Tax Sharing Agreement to the extent that any delay or
failure in the performance of its obligations under this Agreement, any
Conveyancing Instrument, any Implementation Agreement, any Operating Agreement
or the Tax Sharing Agreement results from any cause beyond its reasonable
control and without its fault or negligence, including acts of God, acts of
civil or military authority, embargoes, epidemics, war, riots, insurrections,
fires, explosions, earthquakes, floods, unusually severe weather conditions,
labor problems or unavailability of parts, or, in the case of computer systems,
any failure in electrical or air conditioning equipment. In the event of any
such excused delay, the time for performance shall be extended for a period
equal to the time lost by reason of the delay.

          18.12. No Public Announcement.  Neither Baxter nor Edwards shall,
                 ----------------------
without the approval of the other, make any press release or other public
announcement concerning the transactions contemplated by this Agreement, except
as and to the extent that any such Party shall be so obligated by law or the
rules of any stock exchange or quotation system, in which case the other Party
shall be advised and the Parties shall use commercially reasonable efforts to
cause a mutually agreeable release or announcement to be issued; provided,
                                                                 --------
however, that the foregoing shall not preclude communications or disclosures
-------
necessary to implement the

                                      -94-
<PAGE>

provisions of this Agreement or to comply with the accounting and SEC disclosure
obligations or the rules of any stock exchange.

          18.13. Termination.  Notwithstanding any provision hereof, this
                 -----------
Agreement may be terminated and the Distribution abandoned at any time prior to
the Distribution Date by and in the sole discretion of the Board of Directors of
Baxter without the approval of any Person. In the event of such termination,
this Agreement shall forthwith become void and no Party shall have any liability
to any Person by reason of this Agreement, except that Baxter shall be liable
for any costs and expenses, including attorneys' fees, incurred by Edwards or
its Subsidiaries prior to or arising out of such termination.

                                      -95-
<PAGE>

          IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their authorized representatives as of the date first above written.

                              BAXTER INTERNATIONAL INC.



                              By:  /s/ Harry M. Jansen Kraemer, Jr.
                                   --------------------------------
                                   Harry M. Jansen Kraemer, Jr.
                                   Chairman and Chief Executive Officer



                              EDWARDS LIFESCIENCES CORPORATION



                              By:  /s/ Michael A. Mussallem
                                   ------------------------
                                   Michael A. Mussallem
                                   Chairman and Chief Executive Officer


                                Signature Page
                                    to the
                           Reorganization Agreement