Document:

exv10w1

 

Exhibit 10.1

SEVERANCE AGREEMENT

          THIS AGREEMENT, dated _______, 2006, is made by and between Baxter International Inc., a
Delaware corporation (the “Company”), and _______(the “Executive”).

          WHEREAS, the Company considers it essential to the best interests of its stockholders to
foster the continued employment of key management personnel; and

          WHEREAS, the Board recognizes that, as is the case with many publicly held corporations, the
possibility of a Change in Control exists and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or distraction of
management personnel to the detriment of the Company and its stockholders; and

          WHEREAS, the Board has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the Company’s management, including
the Executive, to their assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a Change in Control;

          NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained,
the Company and the Executive hereby agree as follows:

     1. Defined Terms. The definitions of capitalized terms used in this Agreement are
provided in the last Section hereof.

     2. Term of Agreement. The Term of this Agreement shall commence on the date hereof
and shall continue in effect through the second anniversary of the date hereof; provided,
however, that commencing on the first anniversary of the date hereof and on each
anniversary thereafter, the Term shall automatically be extended for one additional year unless,
not later than one year before the end of the then-existing Term, the Company or the Executive
shall have given notice not to extend the Term; and further provided,
however, that if a Change in Control shall have occurred during the Term, the Term shall
expire no earlier than twenty-four (24) months beyond the date on which such Change in Control
occurred.

     3. Company’s Covenants Summarized. In order to induce the Executive to remain in the
employ of the Company and in consideration of the Executive’s covenants set forth in Section 4
hereof, the Company agrees, under the conditions described herein, to pay the Executive the
Severance Payments and the other

 

 

payments and benefits described herein. Except as provided in Section 10.1 hereof, no
Severance Payments shall be payable under this Agreement unless there shall have been (or, under
the terms of the second sentence of Section 6.1 hereof, there shall be deemed to have been) a
termination of the Executive’s employment with the Company following a Change in Control and during
the Term. This Agreement shall not be construed as creating an express or implied contract of
employment and, except as otherwise agreed in writing between the Executive and the Company, the
Executive shall not have any right to be retained in the employ of the Company.

     4. The Executive’s Covenants. The Executive agrees that, subject to the terms and
conditions of this Agreement, in the event of a Potential Change in Control during the Term, the
Executive will remain in the employ of the Company until the earliest of (i) the last day of the
Potential Change in Control Period, (ii) the date of a Change in Control, (iii) the date of
termination by the Executive of the Executive’s employment for Good Reason or by reason of death,
Disability or Retirement, or (iv) the termination by the Company of the Executive’s employment for
any reason.

     5. Compensation Other Than Severance Payments.

          5.1 Following a Change in Control and during the Term, during any period that the Executive
fails to perform the Executive’s full-time duties with the Company as a result of incapacity due to
physical or mental illness, the Company shall pay the Executive’s full salary to the Executive at
the rate in effect at the commencement of any such period, together with all compensation and
benefits payable to the Executive under the terms of any compensation or benefit plan, program or
arrangement maintained by the Company during such period (other than any disability plan), until
the Executive’s employment is terminated by the Company for Disability.

          5.2 If the Executive’s employment shall be terminated for any reason following a Change in
Control and during the Term, the Company shall pay the Executive’s full salary to the Executive
through the Date of Termination at the rate in effect immediately prior to the Date of Termination
or, if higher, the rate in effect immediately prior to the first occurrence of an event or
circumstance constituting Good Reason, together with all compensation and benefits payable to the
Executive through the Date of Termination under the terms of the Company’s compensation and benefit
plans, programs or arrangements as in effect immediately prior to the Date of Termination or, if
more favorable to the Executive, as in effect immediately prior to the first occurrence of an event
or circumstance constituting Good Reason.

          5.3 If the Executive’s employment shall be terminated for any reason following a Change in
Control and during the Term, the Company shall pay

 

 

to the Executive the Executive’s normal post-termination compensation and benefits as such
payments become due. Such post-termination compensation and benefits shall be determined under,
and paid in accordance with, the Company’s retirement, insurance and other compensation or benefit
plans, programs and arrangements as in effect immediately prior to the Date of Termination or, if
more favorable to the Executive, as in effect immediately prior to the occurrence of the first
event or circumstance constituting Good Reason.

          5.4 Upon the occurrence of a Change in Control, notwithstanding any provision of any
non-qualified defined contribution deferred compensation plans to the contrary, in lieu of any
other benefit under such plans, the Company shall pay to the Executive a lump sum amount, in cash,
equal to the then present value of the deferred compensation otherwise payable to the Executive
pursuant to the terms of such plans. The payments required by this Section 5.4 shall be made not
later than the fifth day following the date of a Change in Control (or, if later, as soon as
practicable following the earliest date that will avoid the imposition of a tax under section 409A
of the Code).

     6. Severance Payments.

          6.1 Subject to Section 6.2 hereof, if the Executive’s employment is terminated following a
Change in Control and during the Term, other than (A) by the Company for Cause, (B) by reason of
death or Disability, or (C) by the Executive without Good Reason, then the Company shall pay the
Executive the amounts, and provide the Executive the benefits, described in this Section 6.1
(“Severance Payments”) and Section 6.2 hereof, in addition to any payments and benefits to which
the Executive is entitled under Section 5 hereof, provided that the Executive shall have properly
executed and not revoked a customary release of claims in a form reasonably acceptable to the
Company. For purposes of this Agreement, the Executive’s employment shall be deemed to have been
terminated following a Change in Control by the Company without Cause or by the Executive with Good
Reason, if (i) the Executive’s employment is terminated by the Company without Cause prior to a
Change in Control (whether or not a Change in Control ever occurs) and such termination was at the
request or direction of a Person who has entered into an agreement with the Company the
consummation of which would constitute a Change in Control, (ii) the Executive terminates his
employment for Good Reason prior to a Change in Control (whether or not a Change in Control ever
occurs) and the circumstance or event which constitutes Good Reason occurs at the request or
direction of such Person, or (iii) the Executive’s employment is terminated by the Company without
Cause or by the Executive for Good Reason and such termination or the circumstance or event which
constitutes Good Reason is otherwise in connection with or in anticipation of a Change in Control
(whether or not a Change in Control ever occurs). For purposes of any determination regarding the

 

 

applicability of the immediately preceding sentence, any position taken by the Executive shall
be presumed to be correct unless the Company establishes to the Board by clear and convincing
evidence that such position is not correct.

               (A) In lieu of any further salary payments to the Executive for periods subsequent to the Date
of Termination and in lieu of any severance benefit otherwise payable to the Executive, the Company
shall pay to the Executive a lump sum severance payment, in cash, equal to two times the sum of (i)
the Executive’s base salary as in effect immediately prior to the Date of Termination or, if
higher, in effect immediately prior to the first occurrence of an event or circumstance
constituting Good Reason, and (ii) the Executive’s target annual bonus under any annual bonus or
incentive plan maintained by the Company in respect of the fiscal year in which occurs the Date of
Termination or, if higher, the highest target annual bonus in respect of the fiscal year in which
occurs the Change in Control or the first event or circumstance constituting Good Reason.

               (B) For the twenty-four (24) month period immediately following the Date of Termination (or
such shorter period as may be required to avoid the imposition of a tax under section 409A of the
Code), the Company shall arrange to provide the Executive and his dependents life, accident and
health insurance benefits substantially similar to those provided to the Executive and his
dependents immediately prior to the Date of Termination or, if more favorable to the Executive,
those provided to the Executive and his dependents immediately prior to the first occurrence of an
event or circumstance constituting Good Reason, at no greater after-tax cost to the Executive than
the after-tax cost to the Executive immediately prior to such date or occurrence; provided,
however, that, unless the Executive consents to a different method, such health insurance
benefits shall be provided through a third-party insurer. Benefits otherwise receivable by the
Executive pursuant to this Section 6.1(B) shall be eliminated if benefits of the same type are
received by or made available to the Executive during the twenty-four (24) month period following
the Executive’s termination of employment (and any such benefits received by or made available to
the Executive shall be reported to the Company by the Executive). If the Severance Payments shall
be decreased pursuant to Section 6.2 hereof, and the Section 6.1(B) benefits which remain payable
after the application of Section 6.2 hereof are thereafter reduced pursuant to the immediately
preceding sentence, the Company shall, no later than five (5) business days following such
reduction, pay to the Executive the least of (a) the amount of the decrease made in the Severance
Payments pursuant to Section 6.2 hereof, (b) the amount of the subsequent reduction in these
Section 6.1(B) benefits, or (c) the maximum amount which can be paid to the Executive without
being, or causing any other payment to be, nondeductible by reason of section 280G of the Code.

 

 

               (C) Notwithstanding any provision of any annual or long term incentive plan to the contrary,
the Company shall pay to the Executive a lump sum amount, in cash, equal to the sum of (i) any
unpaid incentive compensation which has been allocated or awarded to the Executive for a completed
fiscal year or other measuring period preceding the Date of Termination under any such plan and
which, as of the Date of Termination, is contingent only upon the continued employment of the
Executive to a subsequent date, and (ii) a pro rata portion to the Date of Termination of the
aggregate value of all contingent incentive compensation awards to the Executive for all then
uncompleted periods under any such plan, calculated as to each such award by multiplying the award
that the Executive would have earned on the last day of the performance award period, assuming the
achievement, at the target level, of the individual and corporate performance goals established
with respect to such award, by the fraction obtained by dividing the number of full months and any
fractional portion of a month during such performance award period through the Date of Termination
by the total number of months contained in such performance award period.

               (D) In addition to the retirement benefits to which the Executive is entitled under each DB
Pension Plan or any successor plan thereto, the Company shall pay the Executive a lump sum amount,
in cash, equal to the excess of (i) the actuarial equivalent of the aggregate retirement pension
(taking into account any early retirement subsidies associated therewith and determined as a
straight life annuity commencing at the date (but in no event earlier than the second anniversary
of the Date of Termination) as of which the actuarial equivalent of such annuity is greatest) which
the Executive would have accrued under the terms of all DB Pension Plans (without regard to any
amendment to any DB Pension Plan made subsequent to a Change in Control and on or prior to the Date
of Termination, which amendment adversely affects in any manner the computation of retirement
benefits thereunder), determined as if the Executive were fully vested thereunder and had
accumulated (after the Date of Termination) twenty-four (24) additional months of age and service
credit thereunder and had been credited under each DB Pension Plan during such period with
compensation equal to the Executive’s compensation (as defined in such DB Pension Plan) during the
twelve (12) months immediately preceding Date of Termination or, if higher, during the twelve
months immediately prior to the first occurrence of an event or circumstance constituting Good
Reason, over (ii) the actuarial equivalent of the aggregate retirement pension (taking into account
any early retirement subsidies associated therewith and determined as a straight life annuity
commencing at the date (but in no event earlier than the Date of Termination) as of which the
actuarial equivalent of such annuity is greatest) which the Executive had accrued pursuant to the
provisions of the DB Pension Plans as of the Date of Termination. For purposes of this Section
6.1(D), “actuarial equivalent” shall be determined using the same assumptions utilized under the
Baxter International Inc. and Subsidiaries Pension Plan immediately prior to the Date of

 

 

Termination or, if more favorable to the Executive, immediately prior to the first occurrence
of an event or circumstance constituting Good Reason. In addition to the benefits to which the
Executive is entitled under each DC Pension Plan, the Company shall pay the Executive a lump sum
amount, in cash, equal to the sum of (i) the amount that would have been contributed thereto by the
Company on the Executive’s behalf during the two years immediately following the Date of
Termination, determined (x) as if the Executive made the maximum permissible contributions thereto
during such period, (y) as if the Executive earned compensation during such period at a rate equal
to the Executive’s compensation (as defined in the DC Pension Plan) during the twelve (12) months
immediately preceding the Date of Termination or, if higher, during the twelve months immediately
prior to the first occurrence of an event or circumstance constituting Good Reason, and (z) without
regard to any amendment to the DC Pension Plan made subsequent to a Change in Control and on or
prior to the Date of Termination, which amendment adversely affects in any manner the computation
of benefits thereunder, and (ii) the excess, if any, of (x) the Executive’s account balance under
the DC Pension Plan as of the Date of Termination over (y) the portion of such account balance that
is nonforfeitable under the terms of the DC Pension Plan.

               (E) If the Executive would have become entitled to benefits under the Company’s
post-retirement health care or life insurance plans, as in effect immediately prior to the Date of
Termination or, if more favorable to the Executive, as in effect immediately prior to the first
occurrence of an event or circumstance constituting Good Reason, had the Executive’s employment
terminated at any time during the period of twenty-four (24) months after the Date of Termination,
the Company shall provide such post-retirement health care or life insurance benefits to the
Executive and the Executive’s dependents commencing on the later of (i) the date on which such
coverage would have first become available and (ii) the date on which benefits described in
subsection (B) of this Section 6.1 terminate.

               (F) The Company shall provide the Executive with outplacement services suitable to the
Executive’s position for a period of two years or, if earlier, until the first acceptance by the
Executive of an offer of employment, in an aggregate amount not exceeding $50,000.

The lump-sum cash payments required pursuant to the preceding provisions of this Section 6.1 hereof
shall be made not later than the fifth day following the Date of Termination (or on the earliest
date that will avoid the imposition of a tax under section 409A of the Code).

 

 

          6.2 The following special payment provisions shall apply:

               (A) Whether or not the Executive becomes entitled to the Severance Payments, if any payment or
benefit received or to be received by the Executive in connection with a Change in Control or the
termination of the Executive’s employment (whether pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with the Company, any Person whose actions result in a Change
in Control or any Person affiliated with the Company or such Person) (all such payments and
benefits, including the Severance Payments, being hereinafter called “Total Payments”) will be
subject (in whole or part) to the Excise Tax, then, subject to the provisions of subsection (B) of
this Section 6.2, the Company shall pay to the Executive an additional amount (the “Gross-Up
Payment”) such that the net amount retained by the Executive, after deduction of any Excise Tax on
the Total Payments and any federal, state and local income and employment taxes and Excise Tax upon
the Gross-Up Payment, shall be equal to the Total Payments. For purposes of determining the amount
of the Gross-Up Payment, the Executive shall be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to
be made and state and local income taxes at the highest marginal rate of taxation in the state and
locality of the Executive’s residence on the Date of Termination (or if there is no Date of
Termination, then the date on which the Gross-up Payment is calculated for purposes of this Section
6.2), net of the maximum reduction in federal income tax which could be obtained from deduction of
such state and local taxes.

               (B) In the event that the amount of the Total Payments does not exceed 110% of the largest
amount that would result in no portion of the Total Payments being subject to the Excise Tax (the
“Safe Harbor”), then subsection (A) of this Section 6.2 shall not apply and the noncash Severance
Payments shall first be reduced (if necessary, to zero), and the cash Severance Benefits shall
thereafter be reduced (if necessary, to zero) so that the amount of the Total Payments is equal to
the Safe Harbor; provided, however, that the Executive may elect to have the cash
Severance Payments reduced (or eliminated) prior to any reduction of the noncash Severance
Payments.

               (C) For purposes of determining whether any of the Total Payments will be subject to the
Excise Tax and the amount of such Excise Tax, (i) all of the Total Payments shall be treated as
“parachute payments” within the meaning of section 280G(b)(2) of the Code, unless in the opinion of
tax counsel (“Tax Counsel”) reasonably acceptable to the Executive and selected by the accounting
firm which was, immediately prior to the Change in Control, the Company’s independent auditor (the
“Auditor”), such other payments or benefits (in whole or in part) do not constitute parachute
payments, including by reason of section 280G(b)(4)(A)

 

 

of the Code, (ii) all “excess parachute payments” within the meaning of section 280G(b)(l) of
the Code shall be treated as subject to the Excise Tax unless, in the opinion of Tax Counsel, such
excess parachute payments (in whole or in part) represent reasonable compensation for services
actually rendered, within the meaning of section 280G(b)(4)(B) of the Code, in excess of the Base
Amount allocable to such reasonable compensation, or are otherwise not subject to the Excise Tax,
and (iii) the value of any noncash benefits or any deferred payment or benefit shall be determined
by the Auditor in accordance with the principles of sections 280G(d)(3) and (4) of the Code. Prior
to the payment date set forth in Section 6.3 hereof, the Company shall provide the Executive with
its calculation of the amounts referred to in this Section 6.2(C) and such supporting materials as
are reasonably necessary for the Executive to evaluate the Company’s calculations. If the
Executive disputes the Company’s calculations (in whole or in part), the reasonable opinion of Tax
Counsel with respect to the matter in dispute shall prevail.

               (D) (I) In the event that (1) amounts are paid to the Executive pursuant to Section 6.2(A)
hereof, (2) there is a Final Determination that the Excise Tax is less than the amount taken into
account hereunder in calculating the Gross-Up Payment, and (3) after giving effect to such Final
Determination, the Severance Payments are to be reduced pursuant to Section 6.2(B) hereof, the
Executive shall repay to the Company, within five (5) business days following the date of the Final
Determination, the Gross-Up Payment, the amount of the reduction in the Severance Payments, plus
interest on the amount of such repayments at 120% of the rate provided in section 1274(b)(2)(B) of
the Code.

                         (II) In the event that (1) amounts are paid to the Executive pursuant to Section 6.2(A)
hereof, (2) there is a Final Determination that the Excise Tax is less than the amount taken into
account hereunder in calculating the Gross-Up Payment, and (3) after giving effect to such Final
Determination, the Severance Payments are not to be reduced pursuant to Section 6.2(B) hereof, the
Executive shall repay to the Company, within five (5) business days following the date of the Final
Determination, the portion of the Gross-Up Payment attributable to such reduction (plus that
portion of the Gross-Up Payment attributable to the Excise Tax and federal, state and local income
and employment taxes imposed on the Gross-Up Payment being repaid by the Executive), to the extent
that such repayment results in a reduction in the Excise Tax and a dollar-for-dollar reduction in
the Executive’s taxable income and wages for purposes of federal, state and local income and
employment taxes, plus interest on the amount of such repayment at 120% of the rate provided in
section 1274(b)(2)(B) of the Code.

                         (III) Except as otherwise provided in clause (IV) below, in the event there is a Final
Determination that the Excise Tax exceeds the

 

 

amount taken into account hereunder in determining the Gross-Up Payment (including by reason of any
payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment),
the Company shall pay to the Executive, within five (5) business days following the date of the
Final Determination, the sum of (1) a Gross-Up Payment in respect of such excess and in respect of
any portion of the Excise Tax with respect to which the Company had not previously made a Gross-Up
Payment, including a Gross-Up Payment in respect of any Excise Tax attributable to amounts payable
under clauses (2) and (3) of this paragraph (III) (plus any interest, penalties or additions
payable by the Executive with respect to such excess and such portion), (2) if Severance Payments
were reduced pursuant to Section 6.2(B) hereof but after giving effect to such Final Determination,
the Severance Payments should not have been reduced pursuant to Section 6.2(B), the amount by which
the Severance Payments were reduced pursuant to Section 6.2(B) hereof, and (3) interest on such
amounts at 120% of the rate provided in section 1274(b)(2)(B) of the Code.

                         (IV) In the event that (1) Severance Payments were reduced pursuant to Section 6.2(B) hereof
and (2) the aggregate value of Total Payments which are considered “parachute payments” within the
meaning of section 280G(b)(2) of the Code is subsequently redetermined in a Final Determination,
but such redetermined value still does not exceed 110% of the Safe Harbor, then, within five (5)
business days following such Final Determination, (x) the Company shall pay to the Executive the
amount (if any) by which the reduced Severance Payments (after taking the Final Determination into
account) exceeds the amount of the reduced Severance Payments actually paid to the Executive, plus
interest on the amount of such repayment at 120% of the rate provided in section 1274(b)(2)(B) of
the Code, or (y) the Executive shall pay to the Company the amount (if any) by which the reduced
Severance Payments actually paid to the Executive exceeds the amount of the reduced Severance
Payments (after taking the Final Determination into account), plus interest on the amount of such
repayment at 120% of the rate provided in section 1274(b)(2)(B) of the Code.

          6.3 The payments provided in subsections (A) (C) and (D) of Section 6.1 hereof and in Section
6.2 hereof shall be made not later than the fifth day following the Date of Termination (or if
there is no Date of Termination, then the date on which the Gross-Up Payment is calculated for
purposes of Section 6.2 hereof); provided, however, that if the amounts of such
payments, and the limitation on such payments set forth in Section 6.2 hereof, cannot be finally
determined on or before such day, the Company shall pay to the Executive on such day an estimate,
as determined in good faith by the Executive or, in the case of payments under Section 6.2 hereof,
in accordance with Section 6.2 hereof, of the minimum amount of such payments to which the
Executive is clearly entitled and shall pay the remainder of such payments (together with interest
on the unpaid remainder (or on all such

 

 

payments to the extent the Company fails to make such payments when due) at 120% of the rate
provided in section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but
in no event later than the thirtieth (30th) day after the Date of Termination. In the event that
the amount of the estimated payments exceeds the amount subsequently determined to have been due,
such excess shall be paid by the Executive to the Company on the fifth (5th) business day after
demand by the Company (together with interest at 120% of the rate provided in section 1274(b)(2)(B)
of the Code). At the time that payments are made under this Agreement, the Company shall provide
the Executive with a written statement setting forth the manner in which such payments were
calculated and the basis for such calculations including, without limitation, any opinions or other
advice the Company has received from Tax Counsel, the Auditor or other advisors or consultants (and
any such opinions or advice which are in writing shall be attached to the statement).

          6.4 The Company also shall pay to the Executive all legal fees and expenses incurred by the
Executive in disputing any issue hereunder relating to the termination of the Executive’s
employment (provided the Executive shall prevail in such dispute), in seeking to obtain or enforce
any benefit or right provided by this Agreement (provided the Executive shall obtain or
successfully enforce such benefit or right) or in connection with any tax audit or proceeding to
the extent attributable to the application of section 409A or section 4999 of the Code to any
payment or benefit provided hereunder. Such payments shall be made within five (5) business days
after delivery of the Executive’s written requests for payment accompanied with such evidence of
fees and expenses incurred as the Company reasonably may require.

     7. Termination Procedures and Compensation During Dispute.

          7.1 Notice of Termination. After a Change in Control and during the Term, any
purported termination of the Executive’s employment (other than by reason of death) shall be
communicated by written Notice of Termination from one party hereto to the other party hereto in
accordance with Section 11 hereof. For purposes of this Agreement, a “Notice of Termination” shall
mean a notice which shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive’s employment under the provision so indicated. Further, a Notice of
Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative
vote of not less than three-quarters (3/4) of the entire membership of the Board at a meeting of
the Board which was called and held for the purpose of considering such termination (after
reasonable notice to the Executive and an opportunity for the Executive, together with the
Executive’s counsel, to be heard before the Board) finding that, in the good faith

 

 

opinion of the Board, the Executive was guilty of conduct set forth in clause (i) or (ii) of
the definition of Cause herein, and specifying the particulars thereof in detail.

          7.2 Date of Termination. “Date of Termination,” with respect to any purported
termination of the Executive’s employment after a Change in Control and during the Term, shall mean
(i) if the Executive’s employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that the Executive shall not have returned to the full-time
performance of the Executive’s duties during such thirty (30) day period), and (ii) if the
Executive’s employment is terminated for any other reason, the date specified in the Notice of
Termination (which, in the case of a termination by the Company, shall not be less than thirty (30)
days (except in the case of a termination for Cause) and, in the case of a termination by the
Executive, shall not be less than fifteen (15) days nor more than sixty (60) days, respectively,
from the date such Notice of Termination is given).

          7.3 Dispute Concerning Termination. If within fifteen (15) days after any Notice of
Termination is given, or, if later, prior to the Date of Termination (as determined without regard
to this Section 7.3), the party receiving such Notice of Termination notifies the other party that
a dispute exists concerning the termination, the Date of Termination shall be extended until the
earlier of (i) the date on which the Term ends or (ii) the date on which the dispute is finally
resolved, either by mutual written agreement of the parties or by a final judgment, order or decree
of an arbitrator or a court of competent jurisdiction (which is not appealable or with respect to
which the time for appeal therefrom has expired and no appeal has been perfected);
provided, however, that the Date of Termination shall be extended by a notice of
dispute given by the Executive only if such notice is given in good faith and the Executive pursues
the resolution of such dispute with reasonable diligence.

          7.4 Compensation During Dispute. If a purported termination occurs following a Change
in Control and during the Term and the Date of Termination is extended in accordance with Section
7.3 hereof, the Company shall continue to pay the Executive the full compensation in effect when
the notice giving rise to the dispute was given (including, but not limited to, salary) and
continue the Executive as a participant in all compensation, benefit and insurance plans in which
the Executive was participating when the notice giving rise to the dispute was given, until the
Date of Termination, as determined in accordance with Section 7.3 hereof. Amounts paid under this
Section 7.4 are in addition to all other amounts due under this Agreement (other than those due
under Section 5.2 hereof) and shall not be offset against or reduce any other amounts due under
this Agreement.

     8. No Mitigation. The Company agrees that, if the Executive’s employment with the
Company terminates during the Term, the Executive is not required to seek other employment or to
attempt in any way to reduce any amounts payable to the

 

 

Executive by the Company pursuant to Section 6 hereof or Section 7.4 hereof. Further, except
as specifically provided in Section 6.1(B) hereof, no payment or benefit provided for in this
Agreement shall be reduced by any compensation earned by the Executive as the result of employment
by another employer, by retirement benefits, by offset against any amount claimed to be owed by the
Executive to the Company, or otherwise.

     9. Certain Restrictive Covenants.

          9.1 Noncompetition. The Executive understands that any entrusting of Confidential
Information to him by the Company is done in reliance on a confidential relationship arising out of
his employment with the Company. The Executive understands that Confidential Information may
include, for example, Trade Secrets, inventions, know-how and products, customer, patient, supplier
and competitor information, sales, pricing, cost, and financial data, research, development,
marketing and sales programs and strategies, manufacturing, marketing and service techniques,
processes and practices, and regulatory strategies. The Executive understands that Confidential
Information also includes all information received by the Company or the Subsidiaries under an
obligation of confidentiality to a third party. The Executive further understands that
Confidential Information that the Executive may acquire or to which the Executive may have access,
especially with regard to research and development projects and findings, formulae, designs,
formulation, processes, the identity of suppliers, customers and patients, methods of manufacture,
and cost and pricing data is of great value to the Company. In consequence of such entrusting and
such consideration, the Executive shall not, directly or indirectly, for a period of two years
after the Date of Termination: (i) render services to any Competing Organization in connection with
any Competing Product within such geographic limits as the Company and such Competing Organization
are, or would be, in actual competition when such rendering of services might potentially involve
the disclosure or use of confidential information or trade secrets; or (ii) provide advice as to
investment in a Competitive Business (including, without limitation, advice with respect to the
purchase, sale, or operation of such business, or advice with respect to financing or other
economic structuring of such business). The Executive understands that services described in the
preceding sentence, including without limitation those rendered to such Competing Organization in
an executive, scientific, administrative, or consulting capacity in connection with Competing
Products are in support of actual competition in various geographic areas and thus fall within the
prohibition of this Agreement regardless of where such services physically are rendered.

          9.2 Solicitation of Customers, Suppliers and Employees. While Executive is employed by
the Company, and for a period of twenty-four (24) months after the Date of Termination for any
reason:

 

 

               (A) The Executive shall not solicit or attempt to solicit any party who is then or, during the
12-month period prior to such solicitation or attempt by the Executive was (or was solicited to
become), a customer or supplier of the Company or Affiliate, provided that the restriction in this
Section 9.2 shall not apply to any activity on behalf of a business that is not a Competing
Organization.

               (B) The Executive shall not solicit, entice, persuade or induce any individual who is employed
by the Company or the Subsidiaries (or was so employed within 90 days prior to the Executive’s
action) to terminate or refrain from renewing or extending such employment or to become employed by
or enter into contractual relations with any other individual or entity other than the Company or
the Subsidiaries, and the Executive shall not approach any such employee for any such purpose or
authorize or knowingly cooperate with the taking of any such actions by any other individual or
entity.

          9.3 Nondisparagement. The Executive agrees that, while he is employed by the Company,
and after his Date of Termination, he shall not make any false, defamatory or disparaging
statements about the Company, the Subsidiaries, or the officers or directors of the Company or the
Subsidiaries that are reasonably likely to cause material damage to the Company, the Subsidiaries,
or the officers or directors of the Company or the Subsidiaries. While the Executive is employed by
the Company, and after his Date of Termination, the Company agrees, on behalf of itself and the
Subsidiaries, that neither the officers nor the directors of the Company or the Subsidiaries shall
make any false, defamatory or disparaging statements about the Executive that are reasonably likely
to cause material damage to the Executive. Notwithstanding the foregoing, nothing in
this paragraph will prevent either the Company or any Executive from (i) responding to incorrect,
disparaging or derogatory public statement by the other to the extent necessary to correct or
refute such public statement or (ii) making any truthful statement to the extent (x) necessary in
connection with any litigation, arbitration or mediation involving this Agreement or (y) required
by law, by any court order or by any arbitrator or mediator in a legal proceeding.

     10. Successors; Binding Agreement.

          10.1 In addition to any obligations imposed by law upon any successor to the Company, the
Company will require any successor (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place. Failure of the
Company to obtain such assumption and agreement prior to the

 

 

effectiveness of any such succession shall be a breach of this Agreement and shall entitle the
Executive to compensation from the Company in the same amount and on the same terms as the
Executive would be entitled to hereunder if the Executive were to terminate the Executive’s
employment for Good Reason after a Change in Control, except that, for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be deemed the Date of
Termination.

          10.2 This Agreement shall inure to the benefit of and be enforceable by the Executive’s
personal or legal representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive shall die while any amount would still be payable to the
Executive hereunder (other than amounts which, by their terms, terminate upon the death of the
Executive) if the Executive had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to the executors, personal
representatives or administrators of the Executive’s estate.

     11. Notices. For the purpose of this Agreement, notices and all other communications
provided for in the Agreement shall be in writing and shall be deemed to have been duly given when
delivered or mailed by United States registered mail, return receipt requested, postage prepaid,
addressed, if to the Executive, to the address inserted below the Executive’s signature on the
final page hereof and, if to the Company, to the address set forth below, or to such other address
as either party may have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon actual receipt:

To the Company:

Baxter International Inc.

One Baxter Parkway

Deerfield, Illinois 60015

Attention: General Counsel

     12. Miscellaneous. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing and signed by the
Executive and such officer as may be specifically designated by the Board. No waiver by either
party hereto at any time of any breach by the other party hereto of, or of any lack of compliance
with, any condition or provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. This Agreement supersedes any other agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof which have been made by
either party; provided, however, that this Agreement shall supersede

 

 

any agreement setting forth the terms and conditions of the Executive’s employment with the
Company only in the event that the Executive’s employment with the Company is terminated on or
following a Change in Control, by the Company other than for Cause or by the Executive for Good
Reason. The validity, interpretation, construction and performance of this Agreement shall be
governed by the laws of the State of Illinois. All references to sections of the Exchange Act or
the Code shall be deemed also to refer to any successor provisions to such sections. Any payments
provided for hereunder shall be paid net of any applicable withholding required under federal,
state or local law and any additional withholding to which the Executive has agreed. The
obligations of the Company and the Executive under this Agreement which by their nature may require
either partial or total performance after the expiration of the Term (including, without
limitation, those under Sections 6, 7 and 9 hereof) shall survive such expiration.

     13. Validity. The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this Agreement, which
shall remain in full force and effect.

     14. Counterparts. This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original but all of which together will constitute one and the same
instrument.

     15. Settlement of Disputes; Arbitration.

          15.1 All claims by the Executive for benefits under this Agreement shall be directed to and
determined by the Board and shall be in writing. Any denial by the Board of a claim for benefits
under this Agreement shall be delivered to the Executive in writing and shall set forth the
specific reasons for the denial and the specific provisions of this Agreement relied upon. The
Board shall afford a reasonable opportunity to the Executive for a review of the decision denying a
claim and shall further allow the Executive to appeal to the Board a decision of the Board within
sixty (60) days after notification by the Board that the Executive’s claim has been denied.
Notwithstanding the above, in the event of any dispute, any decision by the Board hereunder shall
be subject to a de novo review by the arbitrator in accordance with Section 15.2 hereof.

          15.2 Any further dispute or controversy arising under or in connection with this Agreement
shall be settled exclusively by arbitration in Chicago, Illinois in accordance with
the rules of the American Arbitration Association then in effect. Judgment may be entered on the
arbitrator’s award in any court having jurisdiction. Notwithstanding any provision of this
Agreement to the contrary, the Executive shall be entitled to seek specific performance of the

 

 

Executive’s right to be paid until the Date of Termination during the pendency of any dispute
or controversy arising under or in connection with this Agreement.

          15.3 The Executive acknowledges that the Company would be irreparably injured by a violation
of Section 9 hereof, and he agrees that the Company, notwithstanding the foregoing provisions of
this Section 15 and in addition to any other remedies available to it for such breach or threatened
breach, shall be entitled to a preliminary injunction, temporary restraining order, or other
equivalent relief, restraining the Executive from any actual or threatened breach of Section 9. If
a bond is required to be posted in order for the Company to secure an injunction or other equitable
remedy, the parties agree that said bond need not be more than a nominal sum.

     16. Definitions. For purposes of this Agreement, the following terms shall have the
meanings indicated below:

               (A) “Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of
the Exchange Act.

               (B) “Auditor” shall have the meaning set forth in Section 6.2 hereof.

               (C) “Base Amount” shall have the meaning set forth in section 280G(b)(3) of the Code.

               (D) “Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the Exchange Act.

               (E) “Board” shall mean the Board of Directors of the Company.

               (F) “Cause” for termination by the Company of the Executive’s employment shall mean (i) the
willful and continued failure by the Executive to substantially perform the Executive’s duties with
the Company (other than any such failure resulting from the Executive’s incapacity due to physical
or mental illness or any such actual or anticipated failure after the issuance of a Notice of
Termination for Good Reason by the Executive pursuant to Section 7.1 hereof) that has not been
cured within 30 days after a written demand for substantial performance is delivered to the
Executive by the Board, which demand specifically identifies the manner in which the Board believes
that the Executive has not substantially performed the Executive’s duties or (ii) the willful
engaging by the Executive in conduct which is demonstrably and materially injurious to the Company
or its subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of

 

 

this definition, (x) no act, or failure to act, on the Executive’s part shall be deemed
“willful” unless done, or omitted to be done, by the Executive not in good faith and without
reasonable belief that the Executive’s act, or failure to act, was in the best interest of the
Company and (y) in the event of a dispute concerning the application of this provision, no claim by
the Company that Cause exists shall be given effect unless the Company establishes to the Board by
clear and convincing evidence that Cause exists.

               (G) A “Change in Control” shall be deemed to have occurred if the event set forth in any one
of the following paragraphs shall have occurred:

                    (I) any Person is or becomes the Beneficial Owner, directly or indirectly, of
securities of the Company (not including in the securities beneficially owned by such
Person any securities acquired directly from the Company or its Affiliates) representing
30% or more of the combined voting power of the Company’s then outstanding securities,
excluding any Person who becomes such a Beneficial Owner in connection with a merger or
consolidation of the Company or any direct or indirect subsidiary of the Company with any
other corporation immediately following which the individuals who comprise the Board
immediately prior thereto constitute at least a majority of the board of directors of (a)
any parent of the Company or the entity surviving such merger or consolidation (b) if there
is no such parent, of the Company or such surviving entity;

                    (II) the following individuals cease for any reason to constitute a majority of the
number of directors then serving: individuals who, on the date hereof, constitute the Board
and any new director (other than a director whose initial assumption of office is in
connection with an actual or threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of the Company) whose
appointment or election by the Board or nomination for election by the Company’s
stockholders was approved or recommended by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors on the date hereof or whose
appointment, election or nomination for election was previously so approved or recommended;

                    (III) there is consummated a merger or consolidation of the Company or any direct or
indirect subsidiary of the Company with any other corporation or other entity, other than a
merger or consolidation immediately following which the individuals who comprise the Board
immediately prior thereto constitute at least a majority of the board of directors of (a)
any parent of the Company or the entity surviving such

 

 

merger or consolidation or (b) if there is no such parent, of the Company or such
surviving entity; or

                    (IV) the stockholders of the Company approve a plan of complete liquidation or
dissolution of the Company or there is consummated an agreement for the sale or disposition
by the Company of all or substantially all of the Company’s assets, other than a sale or
disposition by the Company of all or substantially all of the Company’s assets immediately
following which the individuals who comprise the Board immediately prior thereto constitute
at least a majority of the board of directors of (a) any parent of the Company or of the
entity to which such assets are sold or disposed or (b) if there is no such parent, of the
Company or such entity.

Notwithstanding the foregoing, a “Change in Control” shall not be deemed to have occurred by virtue
of the consummation of any transaction or series of integrated transactions immediately following
which the record holders of the common stock of the Company immediately prior to such transaction
or series of transactions continue to have substantially the same proportionate ownership in an
entity which owns all or substantially all of the assets of the Company immediately following such
transaction or series of transactions.

               (H) “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

               (I) “Company” shall mean Baxter International Inc. and, except in determining under Section
16(G) hereof whether or not any Change in Control of the Company has occurred, shall include any
successor to its business and/or assets which assumes this Agreement by operation of law, or
otherwise.

               (J) “Competing Products” shall mean products, processes, or services of any person or
organization other than the Company, in existence or under development, which are substantially the
same, may be substituted for, or applied to substantially the same end use as the products,
processes or services with which the Executive works during the time of his employment with the
Company or about which the Executive acquires Confidential Information through his work with the
Company.

               (K) “Competing Organization” shall mean persons or organizations engaged in, or about to
become engaged in, research or development, production, distribution, marketing, providing or
selling of a Competing Product.

 

 

               (L) “Competitive Business” means any business in which the Company or any of the Subsidiaries
was engaged during the 12-month period prior to the Executive’s Date of Termination, any business
if the Company or any Subsidiary has devoted material resources to entering into such business
during such 12-month period prior to the Date of Termination, and any business to the extent that
it is engaged in the investing in or acquisition of all or a portion of the assets or stock of the
Company or the Subsidiaries.

               (M) “Confidential Information” means information relating to the present or planned business
of the Company or the Subsidiaries which has not been released publicly by authorized
representatives of the Company or the Subsidiaries.

               (N) “DB Pension Plan” shall mean any tax-qualified, supplemental or excess defined benefit
pension plan maintained by the Company and any other defined benefit plan or agreement entered into
between the Executive and the Company which is designed to provide the Executive with supplemental
retirement benefits.

               (O) “DC Pension Plan” shall mean any tax-qualified, supplemental or excess defined
contribution plan maintained by the Company and any other defined contribution plan or agreement
entered into between the Executive and the Company which is designed to provide the Executive with
supplemental retirement benefits.

               (P) “Date of Termination” shall have the meaning set forth in Section 7.2 hereof.

               (Q) “Disability” shall be deemed the reason for the termination by the Company of the
Executive’s employment, if, as a result of the Executive’s incapacity due to physical or mental
illness, the Executive shall have been absent from the full-time performance of the Executive’s
duties with the Company for a period of six (6) consecutive months, the Company shall have given
the Executive a Notice of Termination for Disability, and, within thirty (30) days after such
Notice of Termination is given, the Executive shall not have returned to the full-time performance
of the Executive’s duties.

               (R) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to
time.

               (S) “Excise Tax” shall mean any excise tax imposed under section 4999 of the Code.

 

 

               (T) “Executive” shall mean the individual named in the first paragraph of this Agreement.

               (U) “Good Reason” for termination by the Executive of the Executive’s employment shall mean
the occurrence (without the Executive’s express written consent which specifically references this
Agreement) after any Change in Control, or prior to a Change in Control under the circumstances
described in clauses (ii) and (iii) of the second sentence of Section 6.1 hereof (treating all
references in paragraphs (I) through (VII) below to a “Change in Control” as references to a
“Potential Change in Control”), of any one of the following acts by the Company, or failures by the
Company to act, unless, in the case of any act or failure to act described in paragraph (I), (V),
(VI) or (VII) below, such act or failure to act is corrected prior to the Date of Termination
specified in the Notice of Termination given in respect thereof:

                    (I) the assignment to the Executive of any duties inconsistent with the Executive’s
status as a senior executive officer of the Company or a substantial adverse alteration in
the nature or status of the Executive’s responsibilities from those in effect immediately
prior to the Change in Control;

                    (II) a reduction by the Company in the Executive’s annual base salary as in effect on
the date hereof or as the same may be increased from time to time;

                    (III) the relocation of the Executive’s principal place of employment to a location
more than fifty (50) miles from the Executive’s principal place of employment immediately
prior to the Change in Control or the Company’s requiring the Executive to be based
anywhere other than such principal place of employment (or permitted relocation thereof)
except for required travel on the Company’s business to an extent substantially consistent
with the Executive’s present business travel obligations;

                    (IV) the failure by the Company to pay to the Executive any portion of the Executive’s
current compensation or to pay to the Executive any portion of an installment of deferred
compensation under any deferred compensation program of the Company, within seven (7) days
of the date such compensation is due;

                    (V) the failure by the Company to continue in effect any compensation plan in which
the Executive participates immediately prior to the Change in Control which is material to
the

 

 

Executive’s total compensation, including but not limited to the Company’s
equity-based long term incentive plans and annual incentive plans, or any substitute plans
adopted prior to the Change in Control, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect to such plan, or the
failure by the Company to continue the Executive’s participation therein (or in such
substitute or alternative plan) on a basis not materially less favorable, both in terms of
the amount or timing of payment of benefits provided and the level of the Executive’s
participation relative to other participants, as existed immediately prior to the Change in
Control;

                    (VI) the failure by the Company to continue to provide the Executive with benefits
substantially similar to those enjoyed by the Executive under any of the Company’s pension,
savings, life insurance, medical, health and accident, or disability plans in which the
Executive was participating immediately prior to the Change in Control (except for across
the board changes similarly affecting all senior executives of the Company and all senior
executives of any Person in control of the Company), the taking of any other action by the
Company which would directly or indirectly materially reduce any of such benefits or
deprive the Executive of any material fringe benefit enjoyed by the Executive at the time
of the Change in Control, or the failure by the Company to provide the Executive with the
number of paid vacation days to which the Executive is entitled on the basis of years of
service with the Company in accordance with the Company’s normal vacation policy in effect
at the time of the Change in Control; or

                    (VII) any purported termination of the Executive’s employment which is not effected
pursuant to a Notice of Termination satisfying the requirements of Section 7.1 hereof; for
purposes of this Agreement, no such purported termination shall be effective.

The Executive’s right to terminate the Executive’s employment for Good Reason shall not be affected
by the Executive’s incapacity due to physical or mental illness. The Executive’s continued
employment shall not constitute consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason hereunder. For purposes of any determination regarding the
existence of Good Reason, any claim by the Executive that Good Reason exists shall be presumed to
be correct unless the Company establishes to the Board by clear and convincing evidence that Good
Reason does not exist.

               (V) “Gross-Up Payment” shall have the meaning set forth in Section 6.2 hereof.

 

 

               (W) “Items” include documents, reports, drawings, photographs, designs, specifications,
formulae, plans, samples, research or development information, prototypes, tools, equipment,
proposals, marketing or sales plans, customer information, customer lists, patient lists, patient
information, regulatory files, financial data, costs, pricing information, supplier information,
written, printed or graphic matter, or other information and materials that concern the Company’s
or the Subsidiaries’ business that come into his possession or about which the Executive has
knowledge by reason of his employment.

               (X) “Notice of Termination” shall have the meaning set forth in Section 7.1 hereof.

               (Y) “Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified
and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the
Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its Affiliates, (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (iv) a corporation owned,
directly or indirectly, by the stockholders of the Company in substantially the same proportions as
their ownership of stock of the Company.

               (Z) “Potential Change in Control Period” shall mean the period commencing on the occurrence of
a Potential Change in Control and ending upon the occurrence of a Change in Control or, if earlier
(I) with respect to a Potential Change in Control occurring pursuant to Section 16(AA)(I) hereof,
immediately upon the abandonment or termination of the applicable agreement, (ii) with respect to a
Potential Change in Control occurring pursuant to Section 16(AA)(II) hereof, immediately upon a
public announcement by the applicable party that such party has abandoned its intention to take or
consider taking actions which if consummated would result in a Change in Control or (iii) with
respect to a Potential Change in Control occurring pursuant to Section 16(AA)(III) or (IV) hereof,
upon the eighteen month anniversary of the occurrence of such Potential Change in Control (or such
earlier date as may be determined by the Board).

               (AA) “Potential Change in Control” shall be deemed to have occurred if the event set forth in
any one of the following paragraphs shall have occurred:

                    (I) the Company enters into an agreement, the consummation of which would result in
the occurrence of a Change in Control;

 

 

                    (II) the Company or any Person publicly announces an intention to take or to consider
taking actions which, if consummated, would constitute a Change in Control;

                    (III) any Person becomes the Beneficial Owner, directly or indirectly, of securities
of the Company representing 15% or more of either the then outstanding shares of common
stock of the Company or the combined voting power of the Company’s then outstanding
securities (not including in the securities beneficially owned by such Person any
securities acquired directly from the Company or its affiliates); or

                    (IV) the Board adopts a resolution to the effect that, for purposes of this Agreement,
a Potential Change in Control has occurred.

               (BB) “Retirement” shall be deemed the reason for the termination by the Executive of the
Executive’s employment if such employment is terminated in accordance with the Company’s retirement
policy, including early retirement, generally applicable to its salaried employees.

               (CC) “Severance Payments” shall have the meaning set forth in Section 6.1 hereof.

               (DD) “Subsidiary,” for purposes of Section 9 hereof, shall mean any corporation, partnership,
joint venture or other entity during any period in which at least fifty percent in such entity is
owned, directly or indirectly, by the Company.

               (EE) “Tax Counsel” shall have the meaning set forth in Section 6.2 hereof.

               (FF) “Term” shall mean the period of time described in Section 2 hereof (including any
extension, continuation or termination described therein).

               (GG) “Total Payments” shall mean those payments so described in Section 6.2 hereof.

               (HH) “Trade Secrets” include all information encompassed in all Items, and in all
manufacturing processes, methods of production, concepts or ideas, to the extent that such
information has not been released publicly by duly authorized representatives of the Company or the
Subsidiaries.

 

 

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

	 	 	 	 	 
	 	BAXTER INTERNATIONAL INC.

 	 
	 
	 	By:  	 	 
	 	Name:  	 	 
	 	Title:  	 	 
	 
	 	 	 
	 	
 	 
	 	EXECUTIVE 	 
	 	 	 	 
	 
	 	Address:

 	 
	 	 	 
	 	 	 	 
	 	
 	 
	 	 	 	 
	 	
 	 
	 	(Please print carefully)exv10w11

 

Exhibit 10.11

Thursday, September 28, 2006

Mr. Patrick Millsaps

Tyson & Millsaps, LLP

76 East Broad Street

Camilla, Georgia 31730

	 	 	 	 	 
	RE:

	 	Scope of Work for Environmental Assessment
	 	 
	 
	 	 	 	 
	 

	 	United Fuels Property	 	 
	 

	 	Camilla, Georgia	 	 

Dear Mr. Millsaps:

CDG Engineers and Associates, Inc. (CDG) appreciates the opportunity to provide you
with professional environmental services concerning the above named property. CDG
understands the scope of work is to perform an assessment of the current
environmental conditions existing on the subject property.

The scope of work detailed in this proposal presents the tasks required to perform
assessment activities of the soil and groundwater at the subject site.

SCOPE OF WORK

The following sections discuss the scope of work for investigating the current soil
and groundwater conditions at the subject site. CDG understands the scope of work
to include:

	 	•	 	Provide oversight during the advancement of soil borings via direct
push technology (DPT) for the collection of soil samples for field
screening and lithologic purposes. Collected samples will be field
screened using a MicroFid to detect organic vapors, and the borings will
be advanced into the water table to determine the depth to water for
monitoring well placement ;
	 
	 	•	 	Installation of up to three (3) monitoring wells to determine on-site
groundwater flow direction. The depths and locations of the monitoring
wells will be determined based on field conditions observed during the
advancement of the soil borings;
	 
	 	•	 	Collect groundwater samples from the newly installed monitoring wells
for laboratory analysis via RCRA Appendix II list chemical analyses;
	 
	 	•	 	Provide a letter report documenting the findings from the historical
documents reviewed and the field activities completed; and
	 
	 	•	 	Any additional services as requested by the client concerning this
project.

 

 

Scope of
Work for Environmental Assessment

Thursday, September 28, 2006

Page 2
of 3

CDG is prepared to start this project upon receipt of your authorization to
proceed. Please indicate your approval of the proposal by signing below and by
signing the attached Terms and Conditions”. If you should have any questions,
please contact the undersigned at (334) 836-1494. CDG looks forward to working
with you on this project.

Sincerely,

CDG Engineers and Associates, Inc.

/s/ R. Allen Thompson

R. Allen Thompson

Environmental Engineer

The above scope of services including all attachments, has been read and understood
and is hereby agreed to and accepted. It is agreed that the attached “Terms and
Conditions” (which contains a limitation of liability provision), and addendum(s),
if any, form an express part of the Contract, as evidenced by my signature below:

	 	 	 	 	 	 	 	 	 
	Signed By

	 	/s/ Murray Campbell
	 	 
	 	Title
	 	Chairman
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Company

	 	F.U.E.L., LLC
	 	 	 	Date
	 	10/11/06
	 

	 	 	 	 	 	 	 	 

 

 

TERMS AND CONDITIONS

SERVICES TO BE PROVIDED. CDG Engineers & Associates, (hereinafter CDG) is an independent
consultant and agrees to provide Client, for its sole benefit and exclusive use, consulting
services set forth in our proposal.

PAYMENT TERMS. Client agrees to pay our invoice upon receipt. If payment is not received within
30 days from the invoice date, Client agrees to pay a service charge on the past due amount at a
rate of 1.5% per month, and CDG reserves the right to suspend all work until payment is received.
No deduction shall be made from our invoice on account of liquidated damages or other sums withheld
from payments to contractors or others.

TERMINATION. Either party may terminate this Agreement without cause upon 30 days written notice.
In the event Client requests termination prior to completion of the proposed services, Client
agrees to pay CDG for all costs incurred plus reasonable charges associated with termination of the
work.

PROFESSIONAL LIABILITY. Notwithstanding any other provision of this Agreement, the Engineer’s
total liability to the Owner for any loss or damages from claims arising out of or in connection
with this Agreement from any cause including the Engineer’s strict liability, breach of contract,
or professional negligence, errors and omissions (whether claimed in tort, contract, strict
liability, nuisance, by statute or otherwise) shall not exceed the lesser of the total contract
value of this Agreement or the limits of the Engineer’s liability insurance in effect at the time
such claims are made. The Owner hereby releases the Engineer from any liability exceeding such
amount. In no event shall either party to this Agreement be liable to the other for special,
indirect, incidental or consequential damages, whether or not such damages were foreseeable at the
time of the commencement of the work under this Agreement.

SITE OPERATIONS. Client will arrange for right-of-entry to all applicable properties for the
purpose of performing studies, tests and evaluations pursuant to the agreed services. Client
represents that it possesses necessary permits and licenses required for its activities at the
site.

ADDITIONAL SERVICES OF CONSULTANT. If authorized in writing by the Client, CDG shall furnish
additional services that are not considered as an integral part of the Scope of Services outlined
in the Proposal Acceptance Sheet. Under this Agreement, all costs for additional services will be
negotiated as to activities and compensation. In addition, it is possible that unforeseen
conditions may be encountered that could substantially alter the original scope of services. If
this occurs, CDG will promptly notify and consult with Client and any additional services will be
negotiated.

ASSIGNABILITY. CDG shall not assign any interest on this Agreement, and shall not transfer any
interest in the same (whether by assignment or novation), without the prior written consent of the
Client; provided, however, that claims for money by the Client from CDG under this Agreement may be
assigned to a bank, trust company, or other financial institution without such approval. Written
notice of any such assignment or transfer shall be promptly furnished to the Client.

SERVICES TO BE CONFIDENTIAL. All services, including opinions, designs, drawings, plans,
specifications, reports and other services and information, to be furnished by CDG under this
Agreement are confidential and shall not be divulged, in whole or in part, to any person, other
than to duly authorized representatives of the client, without prior written approval of the
Client, except by testimony under oath in a judicial proceeding or as otherwise required by law.
CDG shall take all necessary steps to ensure that no member of its organization divulges any such
information except as may be required by law.

CLAIMS. The parties agree to attempt to resolve any dispute without resort to litigation.
However, in the event a claim is made that results in litigation, and the claimant does not prevail
at trial, then the claimant shall pay all costs incurred in defending the claim, including
reasonable attorney’s fees. The claim will be considered proven if the judgment obtained and
retained through any applicable appeal is at least ten percent greater than the sum offered to
resolve the matter prior to the commencement of trial.

SEVERABILITY. It is understood and agreed by the parties hereto, that if any part, term or
provision of this Agreement is held by any court of competent jurisdiction to be illegal or in
conflict with any applicable law, the validity of the remaining portion or portions of this
Agreement shall not be affected and the rights and obligations of the parties shall be construed
and enforced as if the Agreement did not contain the particular part, term or provision held to be
invalid.

SURVIVAL. All obligations arising prior to the termination of this Agreement and all provisions of
this Agreement allocating responsibility or liability between Client and CDG shall survive the
completion of the services and the termination of this Agreement.

INTEGRATION. This Agreement, the attached documents and those incorporated herein constitute the
entire Agreement between the parties and cannot be changed except by a written instrument signed
by both parties.

GOVERNING LAW. This Agreement shall be governed in all respects by the laws of the State of
Alabama.

	 	 	 
	 

	 	/s/ Anthony J. Flagg
	 

	 	 
	 

	 	Client signature agreeing to above terms

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