Document:

exv10w36

 

Exhibit 10.36

SUMMARY SHEET

OF

2007 COMPENSATION

Director Compensation

     Our non-employee directors receive an annual retainer of $50,000 and an additional fee of
$1,500 for each Board and committee meeting they attend. In addition, committee chairs receive an
annual fee of $7,500. At the end of each calendar quarter, non-employee directors are paid
one-fourth of their annual retainers and committee chair annual fees and fees for attending Board
and committee meetings held during the quarter.

     Each non-employee director also receives 500 deferred share units (“DSUs”) as of the date of
each annual meeting of stockholders. The value of each DSU is equal to the value of a share of our
common stock. The DSUs are immediately vested and subject to mandatory deferral until the
director’s retirement or other termination of service from the Board. Continuing non-employee
directors (including directors who are elected or re-elected) also receive restricted stock units
(“RSUs”) as of the date of each annual meeting of stockholders with an initial value, based on the
price of our common stock on the date of grant, equal to $40,000. The RSUs are immediately vested
and subject to mandatory deferral until the later of (1) the director’s retirement or other
termination of service from the Board or (2) the date that is three years after the grant date.
Both the DSUs and the RSUs are settled in shares of our common stock.

     The terms and conditions of the RSU grants, as well as other equity-based awards that
non-employee directors are eligible to receive, are set forth in the Stock Plan for Non-Employee
Directors, filed as Exhibit 10.6 to our Current Report on Form 8-K dated August 6, 2001. The First
Amendment to the Stock Plan for Non-Employee Directors is filed as Exhibit 10.3 to our Current
Report on Form 8-K dated December 15, 2005. The form of RSU award agreement is filed as Exhibit
10.1 to our Current Report on Form 8-K filed February 21, 2006.

     The terms and conditions of the DSU grants are set forth in our Restated Deferred Compensation
Plan for Non-Employee Directors, filed as Exhibit 10.2 to our Current Report on Form 8-K dated
December 15, 2005. Pursuant to this plan, we require that 50% of a director’s annual retainer for
Board service be deferred and credited to a deferred compensation account in the form of DSUs, the
value of which account is determined by the value of our common stock, until the director owns a
total of 5,000 DSUs.

     We also provide non-employee directors with travel accident insurance when on Zimmer business
and reimburse or pay the reasonable travel, lodging and meal expenses incurred by non-employee
directors when traveling on Zimmer business.

Named Executive Officer Compensation

     Our executive officers serve at the discretion of the Board of Directors. From time to time,
the Compensation and Management Development Committee of the Board of Directors reviews and
determines the salaries that are paid to our executive officers. The following are the current base
salaries for our Chief Executive Officer, Chief Financial Officer and three of the four most highly
compensated executive officers (the “Named Executive Officers”) identified in the definitive proxy
statement dated March 22, 2006. Richard Fritschi, former President, Zimmer Europe and Australasia,
who was one of the Named Executive Officers listed in the 2006 proxy statement, is no longer
employed by us.

 

 

	 	 	 	 	 
	Name and Position	 	2007 Base Salary	 
	J. Raymond Elliott

Chairman, President and Chief Executive Officer
	 	$	750,000	 
	Sam R. Leno

Executive Vice President, Finance and Corporate Services
and Chief Financial Officer
	 	$	525,000	 
	Bruno A. Melzi

Chairman, Europe, Middle East and Africa
	 	€	383,000	 
	David C. Dvorak

Group President, Global Businesses and Chief Legal Officer
	 	$	415,000	 
	Sheryl L. Conley

Group President, Americas and Global Marketing and Chief
Marketing Officer
	 	$	380,000	 

     During 2007, each of Messrs. Leno, Melzi and Dvorak and Ms. Conley is also eligible to receive
an annual cash incentive award, based upon a specified percentage of his or her base salary, under
our Executive Performance Incentive Plan (the “Incentive Plan”) and to receive awards under our
2006 Stock Incentive Plan, as amended (the “Stock Plan”). A copy of the Incentive Plan is filed as
Exhibit 10.6 to our Annual Report on Form 10-K for the year ended December 31, 2003. A copy of the
Stock Plan is filed as Exhibit 10.1 to our Current Report on Form 8-K filed December 13, 2006. For
2007, the performance goals under the Incentive Plan for these officers include goals based upon
earnings per share (representing 50% of each award), revenue (representing 25% of each award) and
cash flow (representing 25% of each award). The target amount under the Incentive Plan for each of
these officers is 60% of base salary for Mr. Leno, 50% of base salary for Mr. Melzi, 60% of base
salary for Mr. Dvorak and 60% of base salary for Ms. Conley.

     In November 2006, Mr. Elliott notified us that he intends to resign from his positions as our
President and Chief Executive Officer in the first half of 2007, assuming a successor CEO has been
named. We entered into an employment agreement with Mr. Elliott that will become effective on the
date that he resigns from his positions as President and Chief Executive Officer (the “effective
date”) and will end on November 30, 2007, unless both parties agree to extend the term. Under the
employment agreement, Mr. Elliott will continue to serve as Chairman of the Board and will receive
a base salary equal to his base salary in effect immediately prior to the effective date. During
the term of the employment agreement, Mr. Elliott will not be entitled to receive any new grants or
awards under the Incentive Plan or the Stock Plan.

     The Named Executive Officers are also eligible to participate in other employee benefit plans
and arrangements as described in our proxy statements, including a defined benefit pension plan, a
supplemental pension plan, a savings and investment (401(k)) plan and a supplemental savings and
investment plan. Each of the Named Executive Officers has also entered into a change in control
severance agreement that provides certain severance benefits following a change in control of
Zimmer and termination of the executive’s employment.exv10w27

 

Exhibit 10.27

BAXTER INTERNATIONAL INC. AND SUBSIDIARIES

SUPPLEMENTAL PENSION PLAN

(Amended and Restated Effective January 1, 2007)

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	ARTICLE I GENERAL
	 	 	1	 
	1.1 Purpose and Effective Date
	 	 	1	 
	1.2 Plan Administration; Source of Benefit Payments
	 	 	1	 
	1.3 Limitation on Provisions
	 	 	1	 
	1.4 Inactive Participation
	 	 	1	 
	1.5 Plan Supplements
	 	 	2	 
	 
	 	 	 	 
	ARTICLE II DEFINITIONS.
	 	 	3	 
	2.1 Accrued Benefit
	 	 	3	 
	2.2 Administrative Committee
	 	 	3	 
	2.3 Code
	 	 	3	 
	2.4 Corporation
	 	 	3	 
	2.5 Deferred Compensation Plan
	 	 	3	 
	2.6 Effective Date
	 	 	3	 
	2.7 ERISA
	 	 	3	 
	2.8 Excess Benefit
	 	 	3	 
	2.9 Non-Participating Employer
	 	 	3	 
	2.10 Participant
	 	 	3	 
	2.11 Participating Employer
	 	 	3	 
	2.12 Pension Make-Whole Benefit
	 	 	3	 
	2.13 Pension Plan
	 	 	3	 
	2.14 Plan
	 	 	3	 
	2.15 Qualified Benefit
	 	 	3	 
	2.16 Special Supplemental Benefit
	 	 	3	 
	 
	 	 	 	 
	ARTICLE III PARTICIPATION IN THE PLAN
	 	 	4	 
	3.1 Eligibility
	 	 	4	 
	3.2 Restricted Participation
	 	 	4	 
	3.3 No Contract of Employment
	 	 	4	 
	3.4 Participation Freeze
	 	 	4	 
	 
	 	 	 	 
	ARTICLE
IV AMOUNT AND PAYMENT OF PLAN BENEFITS.
	 	 	6	 
	4.1 Plan Benefits
	 	 	6	 
	4.2 Excess Benefit
	 	 	6	 
	4.3 Pension Make-Whole Benefit
	 	 	6	 
	4.4 Special Supplemental Benefits
	 	 	6	 
	4.5 Actuarial Equivalence
	 	 	7	 
	4.6 Time and Form of Payment
	 	 	7	 
	4.7 Withholding Taxes
	 	 	7	 
	4.8 Beneficiaries
	 	 	8	 
	4.9 Limitations on Payment
	 	 	8	 
	 
	 	 	 	 
	ARTICLE V ADMINISTRATION.
	 	 	9	 
	5.1 Administrative Committee
	 	 	9	 
	5.2 Administrative Committee Powers
	 	 	9	 
	5.3 Uniform Application of Rules
	 	 	10	 
	5.4 Claims Procedure
	 	 	10	 
	5.5 Action by Administrative Committee
	 	 	11	 
	5.6 Indemnity
	 	 	11	 

-i- 

 

TABLE OF CONTENTS

	 	 	 	 	 
	ARTICLE VI AMENDMENT AND TERMINATION 
	 	 	12	 
	6.1 Amendment and Termination 
	 	 	12	 
	6.2 Successors and Assigns 
	 	 	12	 
	 
	 	 	 	 
	ARTLCLE VII MISCELLANEOUS 
	 	 	13	 
	7.1 Unfunded Plan 
	 	 	13	 
	7.2 Unsecured General Creditor 
	 	 	13	 
	7.3 Nonassignability 
	 	 	13	 
	7.4 Not a Contract of Employment 
	 	 	13	 
	7.5 Protective Provisions 
	 	 	14	 
	7.6 Governing Law 
	 	 	14	 
	7.7 Severability 
	 	 	14	 
	7.8 Notice 
	 	 	14	 
	7.9 Successors 
	 	 	14	 
	7.10 Action by Corporation 
	 	 	14	 
	7.11 Effect on Benefit Plans 
	 	 	14	 
	7.12 Participant Litigation 
	 	 	14	 

-ii- 

 

BAXTER INTERNATIONAL INC. AND SUBSIDIARIES

SUPPLEMENTAL PENSION PLAN

(Amended and Restated Effective January 1, 2007)

ARTICLE I

GENERAL

     1.1 Purpose and Effective Date. Baxter International Inc. (the “Corporation”)
established the Baxter International Inc. and Subsidiaries Supplemental Pension Plan (the
“Plan”), effective as of January 1, 1989, to assist in providing retirement and other benefits
to certain employees of the Corporation and its affiliates which are in addition to those
provided under the Baxter International Inc. and Subsidiaries Pension Plan (the “Pension Plan”). The
Plan was previously amended effective January 1, 2005. The following provisions constitute an
amendment and restatement of the Plan effective as of January 1, 2007, the “Effective Date” of
the Plan set forth herein. The Plan is intended to constitute an “excess benefit plan” within
the meaning of Section 3(36) of ERISA with respect to the benefits provided under Section 4.2 that
are in excess of those that may be provided under the Pension Plan because of the application
of Code Section 415, and an unfunded plan maintained primarily for the purpose of providing
deferred compensation to a select group of management or highly compensated employees with
respect to the other benefits provided under the Plan.

     1.2 Plan Administration; Source of Benefit Payments. The authority to control and
manage the operation and administration of the Plan shall be vested in the Administrative
Committee, which shall be the “administrator” of the Plan for purposes of Section 3(16)(A) of
ERISA. In controlling and managing the operation and administration of the Plan, the
Administrative Committee shall have the same rights, powers and duties as those delegated to
such Committee under the Pension Plan, and any ruling, regulation, procedure or decision of
the Administrative Committee, or any person acting under its authority, shall be conclusive and
binding upon all persons affected by it. A Participating Employer’s obligation under the Plan
shall be reduced to the extent that any amounts due under the Plan are paid from one or more
trusts, the assets of which are subject to the claims of general creditors of the
Participating Employer or any affiliate thereof, provided, however, that nothing in the Plan shall require
the Corporation or any Participating Employer to establish any trust to provide benefits under the
Plan.

     1.3 Limitation on Provisions. Any benefit payable under the Pension Plan shall be
paid solely in accordance with the terms and conditions of the Pension Plan and nothing in the
Plan shall operate or be construed in any way to modify, amend or affect the terms and
provisions of the Pension Plan.

     1.4 Inactive Participation. Except as otherwise specifically provided herein, the
benefits, if any, payable to or on behalf of Participants who terminated employment with the
Corporation and its affiliates prior to the Effective Date shall be determined in accordance
with the terms of the Plan as in effect on such termination of employment.

 

 

     1.5 Plan Supplements. The provisions of the Plan as applied to any Participating
Employer or Participant may be modified and/or supplemented from time to time by the adoption of
one or more Supplements. In the event of any inconsistency between a Supplement and the Plan
document, the terms of the Supplement shall govern.

2

 

ARTICLE II

DEFINITIONS

     2.1 Accrued Benefit. Accrued Benefit shall have the meaning ascribed to such term
under the Pension Plan.

     2.2 Administrative Committee. Administrative Committee shall have the meaning
ascribed to such term under the Pension Plan.

     2.3 Code. Code means the Internal Revenue Code of 1986, as amended.

     2.4 Corporation. Corporation has the meaning ascribed to such term in Section 1.1.

     2.5 Deferred Compensation Plan. Deferred Compensation Plan means Baxter
International Inc. and Subsidiaries Deferred Compensation Plan.

     2.6 Effective Date. Effective Date means January 1, 2002.

     2.7 ERISA. ERISA means the Employee Retirement Income Security Act of 1974, as
amended.

     2.8 Excess Benefit. Excess Benefit means the benefit determined under Section 4.2.

     2.9 Non-Participating Employer. A Non-Participating Employer means any
Employer which is not a Participating Employer.

     2.10 Participant. Participant means an employee of a Participating Employer who is
eligible for an Excess Benefit, Pension Make-Whole Benefit or Special Supplemental Benefit, as
set forth in Section 3.1.

     2.11 Participating Employer. Participating Employer means the Corporation and any
affiliate of the Corporation, which is a Participating Employer under the Pension Plan.

     2.12 Pension Make-Whole Benefit. Pension Make-Whole Benefit means the benefit
determined under Section 4.3.

     2.13 Pension Plan. Pension Plan has the meaning ascribed to such term in Section
1.1.

     2.14 Plan. Plan has the meaning ascribed to such term in Section 1.1.

     2.15 Qualified Benefit. Qualified Benefit means the Participant’s actual Accrued
Benefit payable under the Pension Plan.

     2.16 Special Supplemental Benefit. Special Supplement Benefit means the benefit
determined under Section 4.4.

3

 

ARTICLE III

PARTICIPATION IN THE PLAN

     3.1 Eligibility. An employee of a Participating Employer shall become a Participant
in the Plan on the first date such employee is eligible for an Excess Benefit, Pension Make-Whole Benefit or Special Supplemental Benefit, in accordance with the following:

	 	(a)	 	Each participant in the Pension Plan who has a fully vested interest in his or
her
Accrued Benefit under the Pension Plan and whose benefit under the Pension Plan
is limited by reason of the application Section 415 or Section 401(a)(17) of the
Code shall be eligible for an Excess Benefit, determined in accordance with
Section 4.2.
	 
	 	(b)	 	Each participant in the Pension Plan who has a fully vested interest in his or
her
Accrued Benefit under the Pension Plan and who also is a participant in the
Deferred Compensation Plan shall be eligible for a Pension Make-Whole Benefit,
determined in accordance with Section 4.3.
	 
	 	(c)	 	The Administrative Committee (or the person or persons delegated such authority
by the Administrative Committee), in its sole discretion, shall designate the
individuals, if any, who shall be eligible for Special Supplemental Benefits.

     3.2 Restricted Participation. Notwithstanding any other provision of the Plan to the
contrary, if the Administrative Committee determines that participation by one or more
Participants shall cause the Plan as applied to any Participating Employer to be subject to
Part 2,
3 or 4 of Subtitle B of Title I of ERISA, the entire interest of such Participants under the
Plan
shall be immediately paid to them by each applicable Participating Employer, or shall
otherwise
be segregated from the Plan in the discretion of the Administrative Committee, and such
Participants shall cease to have any interest under the Plan. In the event the Participant has
died,
the foregoing provisions of this Section 3.2 shall apply to the Participant’s interest, if
any, which
is payable to the Participant’s surviving spouse or other beneficiary.

     3.3 No Contract of Employment. The Plan does not constitute a contract of
employment, and participation in the Plan will not give any employee the right to be retained
in
the employ of the Corporation or any Participating Employer nor any right or claim to any
benefit under the Plan, unless such right or claim has specifically accrued under the terms of
the
Plan.

     3.4 Participation Freeze. Participation in the Plan is frozen effective December 31,
2006, and no Employees shall become Participants after such date, subject to the following:

	 	(a)	 	No Employee who is hired by a Participating Employer after December 31,
2006, or who was hired by a Non-Participating Employer prior to January 1, 2007, and
transferred to a Participating Employer after December 31, 2006, shall be eligible to
Participate in the Plan.

4

 

	 	(b)	 	An Eligible Employee who was employed by a Participating Employer on
December 31, 2006, but who had not satisfied the requirements of Section 3.1(b)
of the Pension Plan on such date, shall become a Participant on the first Entry
Date after he satisfies such requirements, unless he elects not to become a
Participant as provided in subparagraph (c) below.
	 
	 	(c)	 	The election of a Participant or Eligible Employee (as defined in the Pension
Plan) to either cease accruing benefits as of December 31, 2006, under the
Pension Plan, or not to become a Participant in the Pension Plan after December
31, 2006, shall also apply under this Plan. The Plan Benefit of a Participant who
elects under the Pension Plan to cease accruing benefits shall thereafter be equal
to his Plan Benefit as of December 31, 2006, which shall not be adjusted for
subsequent changes in his Average Monthly Compensation, Years of Service,
Projected Benefit Service, or Primary Social Security Benefit, but such Participant
shall continue to earn Years of Service for purposes of vesting, and Points (as
such terms are defined in the Pension Plan), and his Plan Benefit shall be payable
upon retirement or other Termination of Employment as otherwise provided
herein. An Eligible Employee who elects not to become a Participant in the
Pension Plan shall thereafter be ineligible to become a Participant in this Plan.
	 
	 	(d)	 	To the extent permitted by Section 4.4, an Employee not otherwise eligible to
participate in the Plan may be eligible to receive a Special Supplemental Benefit.

5

 

ARTICLE IV

AMOUNT AND PAYMENT OF PLAN BENEFITS

     4.1 Plan Benefits. Eligible Participants under the Plan shall receive an Excess
Benefit, Pension Make-Whole Benefit or Special Supplemental Benefit, in the amount and
payable at the times set forth in the following provisions of this Article 4.

     4.2 Excess Benefit. As of any date, an eligible Participant’s “Excess Benefit” under
the Plan shall be an amount equal to the Qualified Benefit the Participant would be eligible
for
under the Pension Plan as of such date if such Qualified Benefit were determined without
regard
to limitations of Section 415 and Section 401(a)(17) of the Code, reduced by the Participant’s
Qualified Benefit as of such date. A Participant’s Excess Benefit, if any, shall be paid at
the time
and in the form provided in Section 4.6.

     4.3 Pension Make-Whole Benefit. As of any date, an eligible Participant’s “Pension
Make-Whole Benefit” under the Plan shall be an amount equal to:

	 	(a)	 	the Qualified Benefit the Participant would be eligible for under the Pension
Plan
as of such date if such Qualified Benefit were determined (i) without exclusion of
compensation deferred under the Deferred Compensation Plan, and (ii) without
regard to the limitations of Code Sections 415 and 401(a)(17),
	 
	 	 	 	reduced by
	 
	 	(b)	 	the sum of (i) the Participant’s actual Qualified Benefit under the Pension
Plan as
of such date, and (ii) the amount of any Excess Benefit determined under Section
4.2 without regard to such deferred compensation.

A Participant’s Pension Make-Whole Benefit, if any, shall be paid at the time and in the form
provided in Section 4.6.

     4.4 Special Supplemental Benefits. The amount, if any, of a Participant’s “Special
Supplemental Benefit” shall be determined by the Administrative Committee, shall be subject to
such terms and conditions as the Administrative Committee may establish, and shall be payable
at the times and in the form determined by the Administrative Committee. Effective as of
January 1, 2005, the time and form of payment of any Special Supplemental Benefit shall be
specified by the Administrative Committee at the time the Administrative Committee establishes
the Participant’s right to the Special Supplemental Benefit. In the event that any right to a
Special Supplemental Benefit was not fully vested on December 31, 2004, and is not amended
not later than December 31, 2006 (or such later date as may be permitted in transitional
relief
issued by the Secretary of the Treasury) to specify the time and form of payment in a manner
that
satisfies the requirements of Section 409A (as defined in Section 4.7), such Special
Supplemental Benefit shall be paid in the form specified in Section 4.6. The Administrative
Committee, in its sole discretion, may delegate its authority under this Section 4.4 to any
person
or persons in connection with the award of Special Supplemental Benefits to a particular
Participant, a class of Participants, or all Participants. All rights to Special Supplemental
Benefits shall be set forth in writing, which writing may include an employment contract or

6

 

similar agreement, and a copy of all actions taken by the Administrative Committee or its delegate
with respect to Special Supplemental Benefits under the Plan shall be sent to the Corporate Counsel
in charge of the Company’s employee benefit plans. Anything else contained herein to the contrary
notwithstanding, no person shall have any right to a Special Supplemental Benefit in the absence of
a written instrument setting forth the terms of such Special Supplemental Benefit.

     4.5 Actuarial Equivalence. To the extent applicable, the benefits payable to any
person under the Plan shall be determined by applying the appropriate interest rate and other
actuarial assumptions set forth in the Pension Plan.

     4.6 Time and Form of Payment. The Excess Benefit and Pension Make-Whole
Benefit, if any, of a Participant whose Qualified Benefit commences not later than December
31,
2007 (or such later date as may be determined under the last sentence of this Section 4.6),
shall
commence at the same time and be paid in the same manner as the Participant’s Pension Plan
benefit. The Excess Benefit and Pension Make-Whole Benefit, if any, of a Participant whose
Qualified Benefit commences after December 31, 2007 (or such later date) shall commence on
the earliest date after the Participant has incurred a termination of employment on which the
Participant could elect to commence the payment of his Qualified Benefit under the terms of
the
Pension Plan in effect on December 31, 2007. If the Participant elects to commence his
Qualified Benefit on the same date, the Excess Benefit and Pension Make-Whole Benefit shall
be paid in the same form as the Qualified Benefit, provided that the Qualified Benefit is paid
either in the normal form of benefit, as defined in Section 7.1 of the Pension Plan, or in one
of
the optional forms permitted by Section 7.2(a), (b) or (c) of the Pension Plan, as both such
sections are in effect on December 31, 2007. If the Participant does not elect to commence the
payment of his Qualified Benefit on such date, his Excess Benefit and Pension Make-Whole
Benefit shall be paid in the normal form of benefit, as defined in the preceding sentence, and
shall be adjusted by the appropriate Early Retirement Reduction Factors provided in the
Pension
Plan as if the Qualified Benefit had begun on the same date; provided that the Administrative
Committee may, but shall not be obligated to, permit such Participant to elect any of the
optional
forms described in the prior sentence to the extent permissible under Section 409A (as defined
in
Section 4.9). The provisions of this Section 4.6 are subject to the limitations set forth in
Section
4.9. Notwithstanding the foregoing, if the Secretary of the Treasury further extends the
transitional relief contained in Section 3.03 of IRS Notice 2006-79 to apply to Qualified
Benefits
that begin after December 31, 2007, the date to which such transitional relief is extended
shall be
substituted for December 31, 2007, in the first two sentences of this Section 4.6.

     4.7 Withholding Taxes. Benefits and payments under the Plan are subject to the
withholding of all applicable taxes. Notwithstanding any provision of the Plan to the
contrary, a
Participant’s initial benefit payment under the Plan shall be in an amount sufficient pay any
remaining employment tax required to be withheld with respect to Plan benefits. To the extent
such amount is in excess of the first distribution that would otherwise have been made based
on
the form of benefit elected by the Participant, subsequent payments will not begin until the
aggregated payments that would have been made under the form of benefit elected by the
Participant exceed the amount of such initial distribution.

7

 

     4.8
Beneficiaries. A Participant’s beneficiary under the Plan
with respect to benefits payable under the Plan following the Participant’s death, if any, shall be the Participant’s
beneficiary under the Pension Plan.

     4.9 Limitations on Payment. Anything else in this Plan to the contrary
notwithstanding, effective January 1, 2005, (i) no amount shall be paid to any Participant by
reason of the Participant’s retirement or other termination of employment unless such
Participant
has incurred a “separation from service” as defined in Section 409A of the Code, as enacted by
the American Jobs Creation Act of 2004 and as interpreted by Treasury Regulations or other
authority issued thereunder (“Section 409A”), (ii) no amount shall be paid to any Participant
who
is a “key employee”, as defined in Section 409A, until six months after such Participant has
incurred a separation from service, and any amounts that would otherwise have been paid during
such six month period shall be accumulated and paid in a lump sum, without interest, at the
expiration of such period, (iii) in no event shall the payment of any benefit be accelerated
to a
time earlier than which it would otherwise have been paid, whether by amendment of the Plan,
exercise of the Administrative Committee’s discretion, or otherwise, except as permitted by
Section 409A, and (iv) in the event that the Administrative Committee, in its sole discretion,
determines that any time or form of payment provided for in the Plan, or the existence of a
right
to elect a time or form of distribution (including without limitation the payment of benefits
in the
same form elected by a Participant under the Pension Plan), would cause the Plan to fail to
meet
the requirements of Section 409A, or otherwise cause Participants to be subject to any adverse
federal income tax consequences, the Administrative Committee shall amend the Plan to modify
or remove the form of distribution or election right. Except as otherwise determined by the
Administrative Committee, the foregoing restrictions under Section 409A shall apply to the
entire benefit of a Participant if any portion of the Participant’s benefit was accrued or
vested on
or after January 1, 2005, but shall not apply to a Participant whose entire benefit was
accrued and
vested prior to such date. For purposes of clause (ii), the status of Participants as key
employees
shall be determined as of December 31 of each year, and if a Participant is determined to be a
key employee on any December 31, the restriction of clause (ii) shall apply if and only if he
incurs a termination of employment at any time during the twelve month period commencing on
the following April 1.

8

 

ARTICLE V

ADMINISTRATION

     5.1 Administrative Committee. The Plan is administered by the Administrative
Committee, which is the Plan Administrator for purposes of Section 3(16)(A) of the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”). Baxter has appointed the
members of the Administrative Committee to administer the Plan. Members of the
Administrative Committee may be Participants in the Plan.

     5.2 Administrative Committee Powers. The Administrative Committee has such
powers as may be necessary to discharge its duties hereunder, including, but not by way of
limitation, the following powers, rights and duties:

	 	(a)	 	Interpretation of Plan. The Administrative Committee has the power,
right and
duty to construe, interpret and enforce the Plan provisions and to determine all
questions arising under the Plan including, but not by way of limitation, questions
of Plan participation, eligibility for Plan benefits and the rights of employees,
Participants, Beneficiaries and other persons to benefits under the Plan and to
determine the amount, manner and time of payment of any benefits hereunder;
	 
	 	(b)	 	Plan Procedures. The Administrative Committee has the power, right and
duty to
adopt procedures, rules, regulations and forms to be followed by employees,
Participants, Beneficiaries and other persons or to be otherwise utilized in the
efficient administration of the Plan which may alter any procedural provision of
the Plan without the necessity of an amendment, and which procedures may
provide for any election or consent to be made by electronic mail, internet
website, voice response system or other electronic method to the extent permitted
by applicable law;
	 
	 	(c)	 	Benefit Determinations. The Administrative Committee has the power,
right and
duty to make determinations as to the rights of employees, Participants,
Beneficiaries and other persons to benefits under the Plan and to afford any
Participant or beneficiary dissatisfied with such determination with rights
pursuant to a claims procedure adopted by the Committee; and
	 
	 	(d)	 	Allocation of Duties. The Administrative Committee is empowered to
employ
agents (who may also be employees of Baxter) and to delegate to them any of the
administrative duties imposed upon the Administrative Committee or Baxter.
	 
	 	(e)	 	Plan Amendments. The Administrative Committee has the power and right,
at
any time, to amend or supplement the Plan. Notwithstanding the foregoing
provisions of this Section 5.2(e), no amendment of the Plan shall reduce the
benefit to which a Participant would be entitled if he had terminated employment
immediately prior to the adoption of the resolution amending the Plan; provided,
however, the Administrative Committee or Corporation, as applicable, may
amend the Plan at any time to take effect retroactively or otherwise, as deemed

9

 

	 	 	 	necessary or advisable for purposes of conforming the Plan to any present or
future law, regulations or rulings relating to plans of this or a similar
nature.

     5.3 Uniform Application of Rules. The Administrative Committee will apply all
rules, regulations, procedures and decisions uniformly and consistently to all Participants
similarly situated. Any ruling, regulation, procedure or decision of the Administrative
Committee will be conclusive and binding upon all persons affected by it. There will be no
appeal from any ruling by the Administrative Committee which is within its authority, except
as
provided in Section 5.4 below. When making a determination or a calculation, the
Administrative Committee will be entitled to rely on information supplied by any Employer,
accountants and other professionals including, but not by way of limitation, legal counsel for
Baxter or any Employer.

     5.4 Claims Procedure. Each person entitled to benefits under the Plan (the
“Applicant”) must submit a written claim for benefits to the Administrative Committee. Such
claim shall be filed not more than one year after the Applicant knows, or with the exercise of
reasonable diligence would know, if the basis for the claim. A formal claim shall not be
required
for the distribution of a Participant’s Accounts in the ordinary course of business, but in
any case
a claim that relates to a dispute over the amount of a distribution shall be filed not more
than one
year after the distribution is paid. The Administrative Committee may, in its sole discretion
(and
notwithstanding the first sentence of Section 5.3) accept a claim that is filed late if it
determines
that special circumstances warrant acceptance of the claim.

     If a claim for benefits by the Applicant is denied, in whole or in part, the Administrative
Committee, or its delegate, shall furnish the Applicant within 90 days after receipt of such claim,
a written notice which specifies the reason for the denial, refers to the pertinent provisions of
the Plan on which the denial is based, describes any additional material or information necessary
for properly completing the claim and explains why such material or information is necessary, and
explains the claim review procedures of this Section 5.4. Such notice will further describe that
the Applicant has a right to bring a civil action under Section 502 of ERISA if his claim is denied
after an appeal and review. The 90 day period may be extended by up to an additional 90 days if
special circumstances required, in which event the Applicant shall be notified in writing by the
end of the initial 90 day period of the reason for the extension and an estimate of when the claim
will be processed.

     Any Applicant whose claim is denied under the provisions described above, or who has not
received from the Administrative Committee a response to his claim within the time periods
specified in the provisions described above may request a review of the denied claim by written
request to the Administrative Committee within 60 days after receiving notice of the denial. If
such a request is made, the Administrative Committee shall make a full and fair review of the
denial of the claim and shall make a decision not later than 60 days after receipt of the request,
unless special circumstances (such as the need to hold a hearing) require an extension of time, in
which case a decision shall be made as soon as possible but not later than 120 days after receipt
of the request for review, and written notice of the reason for the extension and an estimate of
when the review will be complete shall be given to the Applicant before the commencement of the
extension. The decision on review shall be in writing and shall include specific reasons for the
decision and specific references to the pertinent provisions of the Plan on which the decision

10

 

is based. Such notice will further describe that the Applicant has a right to bring a civil
action under Section 502 of ERISA.

     No person entitled to benefits under the Plan shall have any right to seek review of a denial
of benefits, or to bring any action to enforce a claim for benefits, in any court or administrative
agency prior to his filing a claim for benefits and exhausting all of his rights under this Section
5.4, or more than 180 days after he receives the Administrative Committee’s decision on review of
the denial of his claim. Although not required to do so, an Applicant, or his representative, may
choose to state the reason or reasons he believes he is entitled to benefits, and may choose to
submit written evidence, during the initial claim process or review of claim denial process.
However, failure to state any such reason or submit such evidence during the initial claim process
or review of claim denial process, shall permanently bar the Applicant, and his successors in
interest, from raising such reason or submitting such evidence in any forum at any later date. An
Applicant whose claim is denied initially or on review is entitled to receive, on request and free
of charge, reasonable access to, and copies of, all documents, records, and other information
relevant to such claim for benefits.

     5.5 Action by Administrative Committee. Action by the Administrative Committee
will be subject to the following special rules:

	 	(a)	 	Meetings and Documents. The Administrative Committee may act by meeting
or
by document signed without meeting and documents may be signed through the
use of a single document or concurrent documents.
	 
	 	(b)	 	Action by Majority. The Administrative Committee will act by a majority
decision which action will be as effective as if such action had been taken by all
Administrative Committee members, provided that by majority action one or
more Administrative Committee members or other persons may be authorized to
act with respect to particular matters on behalf of all Administrative Committee
members.
	 
	 	(c)	 	Resolving Deadlocks. If there is an equal division among the
Administrative Committee members with respect to any question a disinterested party may be
selected by a majority vote to decide the matter. Any decision by such
disinterested party will be binding.

     5.6 Indemnity. To the extent permitted by applicable law and to the extent that they
are not indemnified or saved harmless under any liability insurance contracts, any present or
former Administrative Committee members, officers, or directors of Baxter, the Employers or
their subsidiaries or affiliates, if any, will be indemnified and saved harmless by the
Employers
from and against any and all liabilities or allegations of liability to which they may be
subjected
by reason of any act done or omitted to be done in good faith in the administration of the
Plan,
including all expenses reasonably incurred in their defense in the event that Baxter fails to
provide such defense after having been requested in writing to do so.

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ARTICLE VI

AMENDMENT AND TERMINATION

     6.1 Amendment and Termination. As indicated in Section 5.2 above, the
Administrative Committee may, at any time, amend or supplement the Plan. The Board of
Directors of the Corporation may, at any time, terminate the Plan. Notwithstanding the
foregoing provisions of Sections 5.2 or 6.1, neither an amendment or termination of the Plan
shall reduce the benefit to which a Participant would be entitled if he had terminated
employment immediately prior to the adoption of the resolution amending or terminating the
Plan; provided, however, the Administrative Committee or Corporation, as applicable, may
amend or terminate the Plan at any time to take effect retroactively or otherwise, as deemed
necessary or advisable for purposes of conforming the Plan to any present or future law,
regulations or rulings relating to plans of this or a similar nature. Upon termination of the
Plan,
all benefits accrued through the date of termination shall be paid as provided herein;
provided
that the Administrative Committee may, to the extent permitted under Section 409A, provide for
the payment of actuarially equivalent lump sums in full satisfaction of some or all of the
accrued
benefits.

     6.2 Successors and Assigns. The obligations of the Corporation and the Participating
Employers under the Plan shall be binding upon any assignee or successor in interest thereto.

12

 

ARTICLE VII

MISCELLANEOUS

     7.1 Unfunded Plan. This Plan is intended to be an unfunded retirement plan
maintained primarily to provide retirement benefits for a select group of management or highly
compensated employees. All credited amounts are unfunded, general obligations of the
appropriate Participating Employer. This Plan is not intended to create an investment
contract,
but to provide retirement benefits to eligible employees who participate in the Plan. Eligible
employees are members of a select group of management or are highly compensated employees,
who, by virtue of their position with a Participating Employer, are uniquely informed as to
such
Participating Employer’s operations and have the ability to affect materially Participating
Employer’s profitability and operations.

     7.2 Unsecured General Creditor. In the event of a Participating Employer’s
insolvency, Participants and their Beneficiaries, heirs, successors and assigns will have no
legal
or equitable rights, interest or claims in any property or assets of such Participating
Employer,
nor will they be Beneficiaries of, or have any rights, claims or interests in any life
insurance
policies, annuity contracts or the proceeds therefrom owned or which may be acquired by such
Participating Employer (the “Policies”) greater than those of any other unsecured general
creditors. In that event, any and all of the Participating Employer’s assets and Policies will
be,
and remain, the general, unpledged, unrestricted assets of Participating Employer.
Participating
Employer’s obligation under the Plan will be merely that of an unfunded and unsecured promise
of Participating Employer to pay money in the future.

     7.3 Nonassignability. Neither a Participant nor any other person will have any right
to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber,
transfer,
hypothecate or convey in advance of actual receipt the amounts, if any, payable hereunder, or
any part thereof, which are, and all rights to which are, expressly declared to be
nonassignable
and nontransferable. No part of the amounts payable will, prior to actual payment, be subject
to
seizure or sequestration for the payment of any debts, judgments, alimony or separate
maintenance owed by a Participant or any other person, nor be transferable by operation of law
in the event of a Participant’s or any other person’s bankruptcy or insolvency. Nothing
contained herein will preclude a Participating Employer from offsetting any amount owed to it
or
to any other Employer by a Participant against payments to such Participant or his or her
beneficiary.

     7.4 Not a Contract of Employment. The terms and conditions of this Plan will not be
deemed to constitute a contract of employment between a Participant and such Participant’s
Participating Employer, and neither the Participant nor the Participant’s beneficiary will
have
any rights against such Participant’s Participating Employer except as may otherwise be
specifically provided herein. Moreover, nothing in this Plan is deemed to give a Participant
the
right to be retained in the service of his or her Participating Employer or to interfere with
the
right of such Participating Employer to discipline or discharge him or her at any time.

13

 

     7.5 Protective Provisions. A Participant will cooperate with the Corporation by
furnishing any and all information requested by the Corporation, in order to facilitate
the
payment of benefits hereunder.

     7.6 Governing Law. The provisions of this Plan will be construed and interpreted
according to the laws of the State of Illinois, to the extent not preempted by ERISA.

     7.7 Severability. In the event any provision of the Plan is held invalid or illegal for
any reason, any illegality or invalidity will not affect the remaining parts of the Plan, but
the Plan
will be construed and enforced as if the illegal or invalid provision had never been inserted,
and
the Corporation will have the privilege and opportunity to correct and remedy such questions
of
illegality or invalidity by amendment as provided in the Plan, including, but not by way of
limitation, the opportunity to construe and enforce the Plan as if such illegal and invalid
provision had never been inserted herein.

     7.8 Notice. Any notice or filing required or permitted to be given to the Corporation
or the Administrative Committee under the Plan will be sufficient if in writing and hand
delivered, or sent by registered or certified mail to any member of the Administrative
Committee, or to the Corporation’s Chief Financial Officer and, if mailed, will be addressed
to
the principal executive offices of the Corporation. Notice to a Participant or beneficiary may
be
hand delivered or mailed to the Participant or beneficiary at his or her most recent address
as
listed in the employment records of the Corporation. Notices will be deemed given as of the
date
of delivery or mailing or, if delivery is made by certified or registered mail, as of the date
shown
on the receipt for registration or certification. Any person entitled to notice hereunder may
waive such notice.

     7.9 Successors. The obligations of the Corporation and the Participating Employers
under the Plan shall be binding upon any assignee or successor in interest thereto. The
provisions of this Plan will bind and inure to the benefit of the Corporation and the
Participating
Employers, the Participants and Beneficiaries, and their respective successors, heirs and
assigns.
The term successors as used herein will include any corporate or other business entity, which,
whether by merger, consolidation, purchase or otherwise acquires all or substantially all of
the
business and assets of the Corporation, and successors of any such corporation or other
business
entity.

     7.10 Action by Corporation. Except as otherwise provided herein, any action required
of or permitted by the Corporation under the Plan will be by resolution of the Compensation
Committee or any person or persons authorized by resolution of the Compensation Committee.

     7.11 Effect on Benefit Plans. Amounts paid under this Plan, will not by operation of
this Plan be considered to be compensation for the purposes of any benefit plan maintained by
any Participating Employer. The treatment of such amounts under other employee benefit plans
will be determined pursuant to the provisions of such plans.

     7.12 Participant Litigation. In any action or proceeding regarding the Plan, employees
or former employees of the Corporation or a Participating Employer, Participants,
Beneficiaries
or any other persons having or claiming to have an interest in this Plan will not be necessary

14

 

parties and will not be entitled to any notice or process. Any final judgment which is not appealed
or appealable and may be entered in any such action or proceeding will be binding and conclusive on
the parties hereto and all persons having or claiming to have any interest in this Plan. To the
extent permitted by law, if a legal action is begun against the Corporation, a Participating
Employer, the Administrative Committee, or any member of the Administrative Committee by or on
behalf of any person and such action results adversely to such person or if a legal action arises
because of conflicting claims to a Participant’s or other person’s benefits, the costs to such
person of defending the action will be charged to the amounts, if any, which were involved in the
action or were payable to the Participant or other person concerned. To the extent permitted by
applicable law, acceptance of participation in this Plan will constitute a release of the
Corporation, each Participating Employer, the Administrative Committee and each member thereof, and
their respective agents from any and all liability and obligation not involving willful misconduct
or gross neglect.

* * *

     IN WITNESS WHEREOF, the undersigned duly authorized officer has caused this Plan to be
executed this 19th day of December, 2006.

	 	 	 	 	 
	 	BAXTER INTERNATIONAL INC.

 	 
	 	By:  	
 	 
	 	 	Jeanne K. Mason Corporate Vice President of 	 
	 	 	Human Resources 	 
	 

15

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