Document:

<PAGE>

                                                                    EXHIBIT 10.1

                                                       DRAFT:  FEBRUARY 14, 2000
                                                       -----

                           REORGANIZATION AGREEMENT

                          Dated as of March 15, 2000

                                by and between

                           BAXTER INTERNATIONAL INC.

                                      and

                       EDWARDS LIFESCIENCES CORPORATION
<PAGE>

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

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

ARTICLE II - THE DISTRIBUTION................................................  20
  2.1.  Issuance and Delivery of Edwards Shares..............................  21
  2.2.  Distribution of Edwards Shares.......................................  21
  2.3.  Treatment of Fractional Shares.......................................  21
  2.4.  Baxter Board Action..................................................  21
  2.5.  Additional Approvals.................................................  22

ARTICLE III - FOREIGN TRANSFERS..............................................  22
  3.1.  Edwards World Trade..................................................  22
  3.2.  Puerto Rico (936)....................................................  22
  3.3.  Puerto Rico (MS&P)...................................................  23
  3.4.  Dominican Republic...................................................  24
  3.5.  Mexico...............................................................  24
  3.6.  Brazil...............................................................  25
  3.7.  Canada...............................................................  25
  3.8.  China................................................................  26
  3.9.  Taiwan...............................................................  26
 3.10.  Singapore and the Philippines........................................  27
 3.11.  Malaysia.............................................................  27
 3.12.  Thailand.............................................................  28
 3.13.  Korea................................................................  28
 3.14.  India................................................................  28
 3.15.  Intentionally Blank..................................................  29
 3.16.  Switzerland..........................................................  29
 3.17.  EU Holdings (Denmark)................................................  30
 3.18.  Germany..............................................................  31
 3.19.  Austria..............................................................  32
 3.20.  France...............................................................  33
 3.21.  Italy................................................................  33
 3.22.  Belgium/Luxembourg...................................................  34
 3.23.  Netherlands..........................................................  34
 3.24.  Uden.................................................................  35
 3.25.  Spain................................................................  35
 3.26.  United Kingdom.......................................................  36
 3.27.  Restrictions on Intercompany Debt....................................  36
 3.28.  Transfer of Assets...................................................  37
 3.29.  Transfer of Liabilities..............................................  37
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                               TABLE OF CONTENTS
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                                  (Continued)

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 3.30.  Transfer of Edwards World Trade to Baxter............................  37
 3.31.  Edwards Holdings Switzerland.........................................  37

ARTICLE IV - TRANSFERS TO EDWARDS U.S. OPERATING SUBSIDIARY..................  37
  4.1.  Organization of Edwards U.S. Operating Subsidiary....................  37
  4.2.  Transfer of Assets...................................................  38
  4.3.  Transfer of Third-Party Distribution Contracts.......................  38
  4.4.  Assumption of Liabilities............................................  38
  4.5.  Transfer of Operating Subsidiaries...................................  38

ARTICLE V - ORGANIZATION OF EDWARDS LIFESCIENCES CORPORATION.................  38
  5.1.  Organization of Edwards..............................................  38
  5.2.  Transfer of Certain Subsidiaries.....................................  39
  5.3.  Transfer of Assets...................................................  39
  5.4.  Transfer of Liabilities..............................................  39

ARTICLE VI - EXCLUSIONS FROM TRANSFERS.......................................  39
  6.1.  Retained Assets......................................................  39
  6.2.  Retained Liabilities.................................................  40
  6.3.  Termination of Existing Intercompany Agreements......................  40

ARTICLE VII - ASSET SEPARATION CLOSING MATTERS...............................  41
  7.1.  Delivery of Instruments of Conveyance................................  41
  7.2.  Delivery of Other Agreements.........................................  41
  7.3.  Non-Assignable Contracts.............................................  41
  7.4.  Further Assurances...................................................  42
  7.5.  Novation of Assumed Liabilities......................................  43
  7.6.  Nominee Shares.......................................................  43
  7.7.  Provision of Corporate Records.......................................  43

ARTICLE VIII - REPRESENTATIONS AND WARRANTIES................................  44
  8.1.  Organization, Good Standing and Authority of Baxter..................  44
  8.2.  Organization, Good Standing and Authority of Edwards.................  44
  8.3.  No Other Representations and Warranties..............................  44

ARTICLE IX - CERTAIN COVENANTS...............................................  45
  9.1.  Conduct of Edwards Business Pending the Distribution Date............  45
  9.2.  Registration and Listing.............................................  45
  9.3.  Funds Distributed to Baxter..........................................  46
  9.4.  Post-Distribution Tax-Related Restrictions...........................  46
  9.5.  Intercompany Receivables and Payables, Cash Management and True-Up...  47
  9.6.  Collection of Accounts Receivable....................................  48
  9.7.  Agreements Relating to Baxter and Edwards............................  48
</TABLE>

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                               TABLE OF CONTENTS
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                                  (Continued)

<TABLE>
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<S>                                                                          <C>
  9.8.  Certain Releases.....................................................  49
  9.9.  Litigation...........................................................  49
 9.10.  Liability for Previously Delivered Products..........................  49
 9.11.  Edwards Bank Accounts................................................  51
 9.12.  Informal, Nondocumented Real Estate Leases...........................  51
 9.13.  Third Party Consents.................................................  52
 9.14.  Material Governmental Approvals and Consents.........................  52
 9.15.  Late Payments........................................................  52
 9.16.  Nextran Heart........................................................  52

ARTICLE X - INTELLECTUAL PROPERTY LICENSES...................................  52
 10.1.  License to Baxter of Transferred Intellectual Property...............  52
 10.2.  License to Edwards of Retained Baxter Intellectual Property..........  54
 10.3.  Use by Edwards of Baxter's Trademarks................................  56
 10.3.  Use by Edwards of Baxter's Trademarks................................  56

ARTICLE XI - CONDITIONS TO THE DISTRIBUTION..................................  57
 11.1.  Approval by Baxter Board of Directors................................  57
 11.2.  Receipt of IRS Private Letter Tax Ruling.............................  57
 11.3.  Compliance with State and Foreign Securities and.....................  57
 11.4.  SEC Filings and Approvals............................................  58
 11.5.  Filing and Effectiveness of Registration Statement; No Stop Order....  58
 11.6.  Approval of NYSE Listing Application.................................  58
 11.7.  Receipt of Fairness Opinions of Financial Advisors...................  58
 11.8.  Ancillary Agreements.................................................  58
 11.9.  Resignations.........................................................  58
11.10.  Election of Edwards Board............................................  58
11.11.  Consents.............................................................  58
11.12.  No Actions...........................................................  59
11.13.  New Credit Facility..................................................  59
11.14.  Consummation of Pre-Distribution Transactions........................  59
11.15.  No Other Events......................................................  59
11.16.  Satisfaction of Conditions...........................................  59

ARTICLE XII - EMPLOYEES AND EMPLOYEE BENEFIT MATTERS.........................  59
 12.1.  Edwards Employees....................................................  59
 12.2.  Employment of Edwards Employees......................................  59
 12.3.  Terminations/Layoff/Severance........................................  60
 12.4.  International Edwards Employees......................................  60
 12.5.  Employment Solicitation..............................................  60
 12.6.  WARN Act.............................................................  61
 12.7.  Leave of Absence Policies............................................  61
</TABLE>

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                               TABLE OF CONTENTS
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                                  (Continued)

<TABLE>
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<S>                                                                          <C>
 12.8.  Withdrawal from Participation in Baxter Plans and
        Establishment of Edwards Plans.......................................  62
 12.9.  Transfer of Account Balances and Accrued Benefits....................  62
12.10.  Entitlement to Distributions Under Pension Plan......................  64
12.11.  Welfare Benefits Provided Under Edwards Plans........................  64
12.12.  Stock Purchase Plans.................................................  65
12.13.  Workers' Compensation................................................  65
12.14.  Vacation Pay Policy..................................................  65
12.15.  Non-Qualified Deferred Compensation Plans............................  65
12.16.  Split-Dollar Life Insurance..........................................  65
12.17.  Restricted Stock.....................................................  65
12.18.  Information to be Provided to Baxter.................................  65
12.19.  Corporate Action; Delegation of Authority............................  66
12.20.  Transfer of Employee Files...........................................  66

ARTICLE XIII - INSURANCE MATTERS.............................................  66
 13.1.  Insurance Prior to the Distribution Date.............................  66
 13.2.  Ownership of Existing Policies and Programs..........................  66
 13.3.  Procurement of Insurance for Edwards.................................  66
 13.4.  Acquisition and Maintenance of Post-Distribution
        Edwards Insurance Policies and Programs..............................  67
 13.5.  Edwards Directors' and Officers' Insurance...........................  67
 13.6.  Pre-Distribution Insurance Claims Administration.....................  68
  13.7  Post-Distribution Insurance Claims Administration....................  68
 13.8.  Non-Waiver of Rights to Coverage.....................................  69
 13.9.  Scope of Affected Policies of Insurance..............................  69

ARTICLE XIV - EXPENSE AND TAX MATTERS........................................  69
 14.1.  Allocation of Expenses...............................................  69
 14.2.  Allocation of Taxes..................................................  70

ARTICLE XV - RELEASE AND INDEMNIFICATION.....................................  70
 15.1.  Release of Pre-Distribution Claims...................................  70
 15.2.  Indemnification by Edwards...........................................  72
 15.3.  Indemnification by Baxter............................................  73
 15.4.  Applicability of and Limitation on Indemnification...................  74
 15.5.  Adjustment of Indemnifiable Losses...................................  74
 15.6.  Procedures for Indemnification of Third Party Claims.................  76
 15.7.  Procedures for Indemnification of Direct Claims......................  77
 15.8.  Contribution.........................................................  78
 15.9.  No Third-Party Beneficiaries.........................................  78
15.10.  Remedies Cumulative..................................................  78
</TABLE>

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                               TABLE OF CONTENTS
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                                  (Continued)
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<S>                                                                          <C>
15.11.  Survival.............................................................  78

ARTICLE XVI - DISPUTE RESOLUTION.............................................  78
 16.1.  General..............................................................  78
 16.2.  Escalation...........................................................  79
 16.3.  Arbitration..........................................................  79
 16.4.  Procedures...........................................................  79
 16.5.  Injunctive Relief....................................................  80

ARTICLE XVII - ACCESS TO INFORMATION AND SERVICES............................  80
 17.1.  Access to Financial Information......................................  80
 17.2.  Ownership of Information.............................................  81
 17.3.  Compensation for Providing Information...............................  81
 17.4.  Retention of Records.................................................  81
 17.5.  Limitations..........................................................  81
 17.6.  Production of Witnesses..............................................  82
 17.7.  Confidentiality......................................................  82
 17.8.  Privileged Matters...................................................  83

ARTICLE XVIII - MISCELLANEOUS................................................  84
 18.1.  Entire Agreement.....................................................  84
 18.2.  Choice of Law and Forum..............................................  84
 18.3.  Amendment............................................................  84
 18.4.  Waiver...............................................................  84
 18.5.  Partial Invalidity...................................................  85
 18.6.  Execution in Counterparts............................................  85
 18.7.  Successors and Assigns...............................................  85
 18.8.  Third Party Beneficiaries............................................  85
 18.9.  Notices..............................................................  85
18.10.  Performance..........................................................  86
18.11.  Force Majeure........................................................  86
18.12.  No Public Announcement...............................................  86
18.13.  Termination..........................................................  86
</TABLE>

                                      -v-
<PAGE>

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

SCHEDULES
---------
Schedule 1.1(b) - BHC Loans
Schedule 1.1(f) - CERCLA and OSHA Liabilities
Schedule 1.1(g) - Other Assumed Environmental Liabilities
Schedule 1.1(l) - Guarantees and Letters of Credit
Schedule 1.1(m) - Indemnification Agreements
Schedule 1.2(d) - Owned Real Property
Schedule 1.2(e) - Real Property Leases
Schedule 1.2(g)(ii) - Patents
Schedule 1.2(g)(iv) - Trademarks
Schedule 1.2(h)(i) - Contracts Related to Acquisitions or Divestitures
Schedule 1.2(h)(ii) - Customer Contracts
Schedule 1.2(h)(iv) - Government Contracts
Schedule 1.2(h)(v) - Supplier Contracts
Schedule 1.2(h)(vi) - Joint Development and Confidentiality Contracts
Schedule 1.2(h)(vii) - Consulting Contracts
Schedule 1.2(h)(viii) - Distribution Contracts
Schedule 1.2(h)(xi) - Personal Property Leases
Schedule 1.2(h)(xii) - Derivatives Contracts
Schedule 1.2(h)(xiii) - Other Contracts
Schedule 1.2(i) - Permits and Licenses
Schedule 1.2(j) - Claims and Indemnities
Schedule 1.2(k) - Subsidiaries, Joint Ventures and Minority Interests
Schedule 1.2(n) - Intellectual Property Licenses
Schedule 1.2(o) - Software and Software Contracts
Schedule 1.2(p) - Domain Names
Schedule 1.2(q) - Other Assets
Schedule 3.1 - Timing of Foreign Transfers
Schedule 4.3 - Foreign Subsidiaries' Third-Party Distribution Contracts
Schedule 6.1(h) - Baxter Distribution Countries
Schedule 6.2 - Retained Liabilities
Schedule 6.3 - Surviving Intercompany Agreements
Schedule 9.3 - Funds Distributed to Baxter
Schedule 9.7 - Shared Agreements
Schedule 9.9(a) - Assumed Actions

                                     -vi-
<PAGE>

Schedule 9.9(b) - Transferred Actions
Schedule 9.11 - Transferred Bank Accounts
Schedule 10.2(a) - Licensed Baxter Intellectual Property
Schedule 12.1 - Edwards Employees
Schedule 12.4 - Calculation of Edwards Foreign Employees' Pension Benefits

                                     -vii-
<PAGE>

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

          REORGANIZATION AGREEMENT, dated as of March 15, 2000, by and between
Baxter International Inc., a Delaware corporation ("Baxter"), and Edwards
                                                    ------
Lifesciences Corporation, a Delaware corporation ("Edwards") which is, as of the
                                                   -------
date hereof, a wholly-owned Subsidiary (as hereinafter defined) of Baxter.

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

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

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

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

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

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

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

<PAGE>

                                   ARTICLE I

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

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

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

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

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

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

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

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

          "Assumed Actions" has the meaning specified in Section 9.9(a).
           ---------------                               --------------

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

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

          (b) The Loans set forth on Schedule 1.1(b) hereto; [DETAILS OF DEBT
                                   ---------------
     PUSHDOWN TO COME FROM ANDY GORE, BOB HOMBACH AND DOUG SHUMA]

                                      -2-
<PAGE>

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

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

          (e) All Liabilities related to any and all Actions asserting a
     violation of any law, rule or regulation related to or arising out of the
     operations of the Edwards Business, whether before or after the
     Distribution Date and the Liabilities relating to any Assumed Actions (as
     hereinafter defined);

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

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

          (h) All Liabilities in connection with claims of past or current
     employees of the Edwards Business, whether incurred prior to, on or after
     the Distribution Date;

          (i) All Liabilities under any mortgage interest subsidy program on
     behalf of any Edwards Employee;  [MARY BARKER AND ROB REINDL]

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

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

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

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

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

                                      -3-
<PAGE>

          (o) [All Liabilities for deferred taxes with respect to the Edwards
     Business]; and

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

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

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

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

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

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

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

          "Baxter Cafeteria Plans" means the Baxter International Inc. Flexible
           ----------------------
Benefits Plan, the Baxter International Inc. Health Care Reimbursement Plan and
the Baxter International Inc. Dependent Care Reimbursement Plan.

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

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

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

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

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

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

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

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

                                      -4-
<PAGE>

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

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

          "Baxter Indemnified Parties" has the meaning specified in Section
           --------------------------                               -------
15.2.
----

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

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

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

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

          "Baxter Mexico" has the meaning specified in Section 3.5.
           -------------                               -----------

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

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

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

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

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

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

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

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

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

          "Baxter Products" means those products manufactured by Baxter or its
           ---------------
Subsidiaries (as they would exist immediately following the Distribution Date)
(except for products manufactured for Edwards or its Subsidiaries by Baxter or
its Subsidiaries pursuant to

                                      -5-
<PAGE>

the Manufacturing Contracts but including those products manufactured for Baxter
and its Subsidiaries by Edwards or its Subsidiaries pursuant to the
Manufacturing Contracts).

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

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

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

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

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

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

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

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

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

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

          "Baxter Welfare Plans" means the Baxter Medical Plan, the Baxter Long-
           --------------------
Term Disability Plan, the Baxter Personal Accident Insurance Plan, the Baxter
Business Travel Accident Insurance Plan, the Baxter Group Universal Life
Insurance Plan and the Baxter Cafeteria Plans.

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

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

          "BCPL" means Baxter Cardiovascular Private Limited, a company
           ----
organized under the laws of India.

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

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

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

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

                                      -6-
<PAGE>

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

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

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

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

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

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

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

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

          "Distribution Date" means the date determined by the Board of
           -----------------
Directors of Baxter as the date on which the Edwards Shares are distributable to
holders of record of Baxter Common Stock as of the Record Date.

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

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

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

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

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

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

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

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

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

                                      -7-
<PAGE>

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

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

          "Edwards Dominican Republic" has the meaning specified in Section
           --------------------------                               -------
3.4(a).
------

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

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

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

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

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

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

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

          "Edwards Holdings Switzerland" has the meaning specified in Section
           ----------------------------                               -------
3.15.
----

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

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

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

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

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

          "Edwards Mexico" has the meaning specified in Section 3.5(a).
           --------------                               --------------

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

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

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

                                      -8-
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

          "Edwards Welfare Plans" has the meaning specified in Section 12.8(b).
           ---------------------                               ---------------

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

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

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

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

          "Expenses" means any and all expenses incurred in connection with
           --------
investigating, defending or asserting any claim, action, suit or proceeding
incident to any matter indemnified against hereunder (including court filing
fees, court costs, arbitration fees or costs, witness fees, and reasonable fees
and disbursements of legal counsel, investigators, expert witnesses,
consultants, accountants and other professionals).

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

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

                                      -9-
<PAGE>

          "Foreign Subsidiaries" has the meaning specified in Section 4.4.
           --------------------                               -----------

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

          "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
           -------
1976, as amended, and the regulations promulgated thereunder.

          "Implementation Agreements" means the agreements set forth in Exhibit
           -------------------------                                    -------
B hereto implementing the transactions referred to in Articles III, IV and V.
-                                                     ------------  --     -

          "Inactive Employee" means any employee of Baxter or one of its
           -----------------
Subsidiaries who immediately prior to the Distribution Date is on an approved
medical leave of absence or short-term disability leave or is absent from active
employment due to occupational illness or injury covered by workers'
compensation, but excluding any employee who is classified by Baxter or any of
its Subsidiaries as totally and permanently disabled on the Distribution Date
who is not on workers' compensation.

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

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

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

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

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

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

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

          "Insurance Policies" means the insurance policies written by insurance
           ------------------
carriers unaffiliated with Baxter pursuant to which Edwards or one or more of
its Subsidiaries (or their respective officers or directors) will be insured
parties after the Distribution Date.

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

          "Insured Claims" means those liabilities that, individually or in the
           --------------
aggregate, are covered within the terms and conditions of any of the Baxter
Policies, whether or not subject to deductibles, co-insurance, uncollectability,
premium adjustments (including reserves),

                                     -10-
<PAGE>

retrospectively-rated premium adjustments or retentions, but only to the extent
that such liabilities are within applicable Baxter Policy limits, including
aggregates and deductibles.

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

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

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

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

          "Kits" means an aggregation by Edwards or Baxter of Baxter, Edwards
           ----
and/or third-party products packaged together or repackaged for specific uses
and procedures.

          "Liability" means any and all debts, liabilities and obligations,
           ---------
absolute or contingent, matured or unmatured, liquidated or unliquidated,
accrued or unaccrued, known or unknown, whenever arising (unless otherwise
specified in this Agreement), including all costs and expenses relating thereto,
and including those debts, liabilities and obligations arising under any law,
rule, regulation, Action, threatened Action, order or consent decree of any
Governmental Authority or any award of any arbitrator of any kind, and those
arising under any contract, commitment or undertaking.

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

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

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

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

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

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

                                     -11-
<PAGE>

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

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

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

          "Operating Agreements" means the agreements set forth in Exhibit C
           --------------------                                    ---------
hereto regarding the ongoing business and service relationships between Baxter
and Edwards and their respective Affiliates following the Distribution.

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

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

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

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

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

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

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

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

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

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

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

                                     -12-
<PAGE>

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

          "Products" has the meaning specified in Section 9.10.
           --------                               ------------

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

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

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

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

          "Repair or Replacement Period" has the meaning specified in Section
           ----------------------------                               -------
9.10(a).
-------

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

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

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

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

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

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

          "Securities Act" means the Securities Act of 1933, as amended
           --------------
(together with the rules and regulations promulgated thereunder).

          "Security Interest" means any mortgage, security interest, pledge,
           -----------------
lien, charge, claim, option, right to acquire, voting or other restriction,
right-of-way, covenant, condition, easement, encroachment, restriction on
transfer or other encumbrance of any nature whatsoever.

          "Shared Agreements" has the meaning specified in Section 9.7(a).
           -----------------                               --------------

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

                                     -13-
<PAGE>

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

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

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

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

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

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

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

          "Third Party Consents" has the meaning specified in Section 9.13.
           --------------------                               ------------

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

          "Transaction Taxes" has the meaning specified in Section 14.2.
           -----------------                               ------------

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

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

                                     -14-
<PAGE>

        "Transferred Actions" has the meaning specified in Section 9.9(b).
         -------------------                               --------------

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

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

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

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

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

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

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

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

             (i)   All work-in-process, finished goods and spare parts inventory
        of Edwards Products, other than (x) Edwards Products transferred to
        Baxter World Trade or one of its Subsidiaries for distribution outside
        the United States pursuant to an arrangement under which title to such
        Edwards Products passes to Baxter World Trade or any of its Subsidiaries
        (in order to take account of Edwards Products transferred to the books
        of Baxter World Trade or its Subsidiaries where such companies are to be
        distributing the Edwards Products on behalf of Edwards), and (y) Edwards
        Products manufactured by Baxter or one of its Subsidiaries pursuant to
        the Manufacturing Contracts and with respect to which title has not yet
        passed to Edwards or one of its Subsidiaries pursuant to the terms of
        the Manufacturing Contracts;

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

                                     -15-
<PAGE>

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

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

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

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

        (f)  Vehicles.  All vehicles used Exclusively in connection with the
             --------
     Edwards Business, whether owned or leased;

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

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

             (ii)  All Patents used Exclusively as of the Distribution Date
        (including all such Patents set forth on Schedule 1.2(g)(ii) hereto),
                                                 -------------------
        all other Patents set forth

                                     -16-
<PAGE>

        on Schedule 1.2(g)(ii) hereto that are not used Exclusively (if any),
           -------------------
        and all invention records set forth on Schedule 1.2(g)(ii) hereto;
                                               -------------------

             (iii)  All Copyrights used Exclusively as of the Distribution Date;
        and

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

        (h)  Contracts.  All contracts, agreements, arrangements, leases (other
             ---------
     than Real Estate Leases), manufacturers' warranties, memoranda,
     understandings and offers open for acceptance of any nature, whether
     written or oral (the "Contracts") (such Contracts being referred to as the
                           ---------
     "Edwards Contracts"):
      -----------------

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

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

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

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

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

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

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

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

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

                                     -17-
<PAGE>

             (x)    the Shared Agreements set forth on Schedule 9.7 hereto that
                                                       ------------
        are designated as being assigned to Edwards;

             (xi)   those certain machinery, equipment or other tangible
        personal property leases (the "Personal Property Leases") set forth on
                                       ------------------------
        Schedule 1.2(h)(xi) hereto;
        -------------------

             (xii)  the Contracts related to derivatives set forth on Schedule
                                                                      --------
        1.2(h)(xii); and
        -----------

             (xiii) all other Contracts Exclusive to the Edwards Business,
        including those set forth on Schedule 1.2(h)(xiii) hereto.
                                     ---------------------

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

        (j)  Claims and Indemnities.  All rights, claims, demands, causes of
             ----------------------
     action, judgments, decrees and rights to indemnity or contribution, whether
     contractual or otherwise, in favor of Baxter or any of its Subsidiaries
     relating Exclusively to the Edwards Business or the Transferred Assets,
     including those set forth on Schedule 1.2(j) hereto, including the right to
                                  ---------------
     sue, recover and retain such recoveries and the right to continue in the
     name of Baxter and its Subsidiaries any pending actions relating to the
     foregoing, and to recover and retain any damages therefrom, but not
     including any such rights, claims, demands, causes of action, judgments,
     decrees and rights to indemnity or contribution relating to the Retained
     Assets, including in particular any retained third-party distribution
     agreements;

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

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

        (m)  Supplies.  All office supplies, production supplies, spare parts,
             --------
     purchase orders, forms, labels, shipping material, art work, catalogues,
     sales brochures, operating manuals and advertising and promotional material
     and all other printed or written material that relate Exclusively to the
     Edwards Business;

                                     -18-
<PAGE>

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

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

        (p)  Domain Names.  All domain names set forth on Schedule 1.2(p)
             ------------                                 ---------------
     hereto; and

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

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

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

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

        "Voting Stock" means all of the capital stock of Edwards entitled to
         ------------
vote generally in the election of directors but excluding any class or series of
capital stock entitled to vote for directors only in the event of dividend
arrearages thereon, whether or not at the time of determination there are any
such dividend arrearages.

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

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

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

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

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

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

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

             (v)   reference to any Article, Section, Exhibit or Schedule means
          such Article or Section of, or such Exhibit or Schedule to, this
          Agreement, as the case

                                     -19-
<PAGE>

          may be, and references in any Section or definition to any clause
          means such clause of such Section or definition;

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

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

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

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

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

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

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

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

                                  ARTICLE II

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

                                     -20-
<PAGE>

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

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

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

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

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

                                     -21-
<PAGE>

                                  ARTICLE III

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

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

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

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

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

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

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

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

          (f)  Baxter Pharmacy Services shall transfer to Baxter World Trade as
     a dividend, all of its right, title and interest in and to the capital
     stock of Edwards Puerto Rico (MS&P);

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

                                     -22-

REORGANIZATION AGREEMENT
<PAGE>

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

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

          (a)  Edwards Lifesciences Sales Corporation ("Edwards Puerto Rico
                                                        -------------------
     (MS&P)") shall be incorporated as a Delaware corporation;
     ------

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

          (c)  Baxter Sales and Distribution shall transfer to Edwards Puerto
     Rico (MS&P) all of its right, title and interest in and to the Transferred
     Assets and the Assumed Liabilities, including those assets and liabilities
     relating to the marketing and sales business conducted in Puerto Rico, in
     return for 100 shares of capital stock of Edwards Puerto Rico (MS&P);

          (d)  Baxter Sales and Distribution shall transfer to Baxter Pharmacy
     Services as a dividend, all of its right, title and interest in and to the
     capital stock of Edwards Puerto Rico (MS&P);

          (e)  Baxter Pharmacy Services shall transfer to Edwards Puerto Rico
     (MS&P) as a contribution to capital, all of its right, title and interest
     in and to (i) the Transferred Assets and the Assumed Liabilities, including
     those assets, liabilities and employees relating to the perfusion business
     conducted in Puerto Rico and (ii) the capital stock of Edwards Puerto Rico
     (936) as described in Section 3.2(e) above;
                           --------------

          (f)  Baxter Pharmacy Services shall transfer to Baxter World Trade as
     a dividend, all of its right, title and interest in and to the capital
     stock of Edwards Puerto Rico (MS&P); and

          (g)  Baxter World Trade shall transfer to Edwards World Trade as a
     contribution to capital all of its right, title and interest in and to the
     capital stock of Edwards Puerto Rico (MS&P).

          3.4  Dominican Republic. Baxter and Edwards hereby agree to take any
               ------------------
and all actions necessary to effect the transfer to Edwards World Trade of all
of the right, title and interest of Baxter Healthcare S.A., a company organized
under the laws of Panama ("Baxter
                           ------

                                     -23-

<PAGE>

Panama"), in and to the Transferred Assets and the Assumed Liabilities,
------
consisting of contracts for the construction and leasing of a manufacturing
facility located in the Dominican Republic, as follows:

          (a)  A branch office of Edwards Lifesciences AG ("Edwards Dominican
                                                            -----------------
     Republic") shall be established in the Dominican Republic;
     --------

          (b)  Edwards Dominican Republic shall be qualified as a foreign entity
     under the laws of the Dominican Republic;

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

          (d)  After the Distribution Date, Edwards Puerto Rico (936) shall
     transfer to Edwards Lifesciences AG all of its right, title and interest in
     and to certain Transferred Assets and the Assumed Liabilities transferred
     to Edwards Puerto Rico (936) by Baxter Alaska as described in Section
                                                                   -------
     3.2(h) above in exchange for cash or other consideration equal to the net
     ------
     book value of the Transferred Assets.

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

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

          (b)  Baxter Mexico shall transfer to Edwards Mexico all of its right,
     title and interest in and to the Transferred Assets and the Assumed
     Liabilities (except for third-party distribution agreements) in return
     for _______________;

          (c)  Baxter Mexico shall transfer [all][certain] third-party
     distribution agreements in its name but relating Exclusively to the Edwards
     Business conducted in Mexico to Edwards LLC [in return for
     _______________]; and

          (d)  [Baxter Mexico shall enter into an agreement with Edwards Mexico
     whereby Baxter Mexico will act as the manufacturing plant of record to hold
     the product registrations applicable to the Edwards Business conducted in
     Mexico.]

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

                                     -24-
<PAGE>

          (a)   BRL shall transfer to BPCL all of its right, title and interest
     in and to _____ shares of capital stock of Macchi for U.S. $_____;

          (b)   BRL shall transfer to _________ [JAY WERTHEIM AND ED TARLE TO
     IDENTIFY CORPORATE NOMINEE] all of its right, title and interest in and to
     ____ shares of capital stock of Macchi for U.S. $_____;

          (c)   BPCL shall transfer to BRL all of its right, title and interest
     in and to _____ shares of capital stock of Baxter Hospitilar for U.S.
     $_________;

          (d)   BPCL shall transfer to ____________ [JOE SCHOHL TO IDENTIFY
     CORPORATE NOMINEE] all of its right, title and interest in and to _________
     shares of capital stock of Baxter Hospitilar for U.S. $_________;

          (e)   Baxter World Trade shall transfer to Edwards World Trade as a
     contribution of capital all of its right, title and interest in and to
     _______ shares of capital stock of BPCL; and

          (f)  Baxter Export Corporation shall transfer to _________ [JAY
     WERTHEIM AND ED TARLE TO IDENTIFY CORPORATE NOMINEE] all of its right,
     title and interest in and to ________ shares of capital stock of BPCL in
     return for U.S. $____.

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

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

          (b)  Baxter Canada shall transfer to Edwards Canada all of its right,
     title and interest in and to the Transferred Assets and the Assumed
     Liabilities for U.S. $_______________.

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

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

                                     -25-

<PAGE>

          (b)  Baxter China shall transfer to Edwards World Trade all of its
     right, title and interest in and to the Transferred Assets and the Assumed
     Liabilities (except for third-party distribution agreements) in return for
     ________;

          (c)  Baxter China shall transfer all of its right, title and interest
     in and to certain third-party distribution agreements involving U.S. $
     sales in its name but relating Exclusively to the Edwards Business
     conducted in China to Edwards LLC [in return for ________________________];
     and

          (d)  Baxter China shall terminate the Labor Supply Contract dated as
     of ________________ by and between Baxter China and FESCO, relating to the
     contracting of Baxter China employees from FESCO and Edwards World Trade
     shall enter into an agreement with FESCO providing for the same. [NOTE:
     CECILIA LIM TO PROVIDE DATE OF CONTRACT AND DEFINITION OF FESCO]

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

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

          (b)  Baxter Taiwan shall transfer to Edwards World Trade all of its
     right, title and interest in and to the Transferred Assets and the Assumed
     Liabilities (except for third-party distribution agreements) in return for
     _______________;

          (c)  Baxter Taiwan shall transfer all third-party distribution
     agreements in its name but relating Exclusively to the Edwards Business
     conducted in Taiwan to Edwards LLC [in return for ________________]; and

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

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

                                     -26-
<PAGE>

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

          (b)  Baxter Asia shall transfer to Edwards World Trade all of its
     right, title and interest in and to the Transferred Assets and the Assumed
     Liabilities relating Exclusively to the Edwards Business conducted in
     Singapore (except for certain public hospital contracts) in return
     for_____________;

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

          (d)  Baxter Asia shall transfer all of its right, title and interest
     in and to certain supplier contracts in its name relating Exclusively to
     the Edwards Business [conducted in Singapore] to Edwards LLC [in return
     for _____];

          (e)  Baxter Philippines shall transfer to Edwards World Trade all of
     its right, title and interest in and to the Transferred Assets and Assumed
     Liabilities relating Exclusively to the Edwards Business conducted in the
     Philippines (except for product registrations) in return for _____; and

          (f)  Baxter Philippines shall transfer all of its right, title and
     interest in and to the product registrations in its name but relating
     Exclusively to the Edwards Business conducted in the Philippines to _____
     [in return for _____].

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

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

          (b)  Baxter Asia shall transfer to Edwards World Trade all of its
     right, title and interest in and to the Transferred Assets and the Assumed
     Liabilities relating Exclusively to the Edwards Business conducted in
     Malaysia (except for third-party distribution agreements) in return for
     __________; and

          (c)  Baxter Asia shall transfer all of its right, title and interest
     in and to all third-party distribution agreements in its name but relating
     Exclusively to the Edwards Business conducted in Malaysia to Edwards LLC
     [in return for __________].

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

                                     -27-
<PAGE>

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

          (b)    Baxter Thailand shall transfer to Edwards World Trade all of
     its right, title and interest in and to the Transferred Assets and the
     Assumed Liabilities (except for third-party distribution agreements and
     product registrations) in return for ___________________;

          (c)    Baxter Thailand shall transfer all of its right, title and
     interest in and to all third-party distribution agreements in its name but
     relating Exclusively to the Edwards Business conducted in Thailand to
     Edwards LLC [in return for _____________]; and

          (d)    Baxter Thailand shall transfer to Osotspa Co., Ltd., a third-
     party distributor of Edwards Products in Thailand, all of its right, title
     and interest in and to all product registrations in its name but relating
     Exclusively to the Edwards Business conducted in Thailand in return for
     _____________.

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

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

          (b)    Baxter Korea shall transfer to Edwards Korea all of its right,
     title and interest in and to the Transferred Assets and the Assumed
     Liabilities in return for __________________.

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

          (a)    BIPL shall transfer to Edwards World Trade all of its right,
     title and interest in and to 2,999,980 shares of capital stock of BCPL for
     29,999,800 Indian Rupees;

          (b)    Sanjiv Verma shall transfer to Edwards all of his right, title
     and interest in and to 20 shares of capital stock of BCPL for 200 Indian
     Rupees;

          (c)    Edwards World Trade shall subscribe for 15,216,020 additional
     shares of capital stock for BCPL for 152,160,200 Indian Rupees;

          (d)    Edwards shall subscribe for 183,980 additional shares of
     capital stock of BCPL for 1,839,000 Indian Rupees; and

                                     -28-
<PAGE>

          (e)   BIPL shall transfer to BCPL all of its right, title and interest
     in and to the Transferred Assets and the Assumed Liabilities, which
     constitutes the Edwards Business conducted by BIPL in return for _________.

          3.15. Intentionally Blank.
                -------------------

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

          (a)   Edwards Lifesciences AG (Swiss Principal).
                ----------------------------------------

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

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

               (iii)  Baxter Woodlands shall transfer the Swiss Sales Branch to
          Edwards Lifesciences AG in return for 25,000 Swiss francs and
          assumption by Edwards Lifesciences AG of the liabilities of the Swiss
          Sales Branch;

               (iv)   Edwards shall cause its Subsidiaries to apply for VAT
          registrations in the European countries in which Edwards' Subsidiaries
          will have a legal presence as described in this Article III;
                                                          -----------

               (v)    The third-party distribution agreements applicable
          Exclusively to the Edwards Business in the following countries shall
          be transferred from the applicable Baxter Subsidiaries to Edwards
          Lifesciences AG: Africa, Balkans, Estonia, Lithuania, Latvia, Czech
          Republic, Poland, Slovakia, Slovenia, Hungary, Iceland, Malta,
          Abudabi, Bahrain, Dubai, Egypt, Israel, Jordan, Kuwait, Lebanon, Oman,
          Saudi Arabia, Turkey, Portugal and Russia [in return for ___________];

               (vi)   Baxter France and Baxter Italy shall transfer certain
          employees and all of their respective rights, title and interest in
          and to certain related assets and liabilities to Edwards Lifesciences
          AG;

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

                                     -29-

<PAGE>

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

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

          (b)   Third-Party Distributor.  Baxter AG, Volketswil, a third-party
                -----------------------
distributor, will transfer all of its right, title and interest in certain
assets to Edwards Lifesciences AG in return for ___________.

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

                (i)    Edwards Lifesciences GmbH ("Edwards Swiss
                                                   -------------
          Commissionaire") shall be organized as a Swiss limited company (GmbH)
          --------------
          and a wholly-owned Subsidiary of Edwards Lifesciences Holding A/S;

                (ii)   Baxter Edwards shall transfer to Edwards Swiss
          Commissionaire all of the sales employees relating to the Edwards
          Business conducted by Baxter Edwards together with all of its right,
          title and interest in certain related assets and liabilities in return
          for ________; and

                (iii)  Edwards Lifesciences AG shall transfer to Edwards Swiss
          Commissionaire the assets transferred to Edwards Lifesciences AG by
          Baxter AG, Volketswil, as described above in Section 3.6(b) in return
                                                       --------------
          for __________.

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

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

          (b)   Baxter shall purchase all issued and outstanding capital stock
     (___ shares) of Edwards EU Holdings from the organizer of Edwards EU
     Holdings for __________;

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

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

          3.18. Germany.  Baxter and Edwards hereby agree to take any and all
                -------
actions necessary to effect the transfer to Edwards World Trade of (i) all the
right, title and interest of Baxter Germany in and to the Transferred Assets and
the Assumed Liabilities, which constitutes the Edwards Business conducted in
Germany; (ii) all the right, title and interest in Pas Palzer

                                      -30-
<PAGE>

GmbH & Co. KG, a German limited company ("Pas Palzer KG"), held by Baxter
                                          -------------
Germany; and (iii) all the right, title and interest in Pas Palzer Verwaltungs-
GmbH, a German limited company ("Pas Palzer Verwaltungs"), held by Baxter
                                 ----------------------
Germany Holdings, all as follows:

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

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

             (ii)   Baxter World Trade shall purchase all issued and outstanding
          capital stock (___ shares) of Edwards Germany Holdings from the
          organizer of Edwards Germany Holdings for _________________;

             (iii)  After the steps outlined in Section 3.18 (b) below, Baxter
                                                ----------------
          World Trade shall transfer to Edwards World Trade as a contribution to
          capital all of its right, title and interest in and to the capital
          stock of Edwards Germany Holdings; and

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

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

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

             (ii)   Baxter Germany Holdings shall purchase all issued and
          outstanding capital stock (___ shares) of Edwards Germany from the
          organizer of Edwards Germany for _______________;

             (iii)  Baxter Germany shall transfer to Edwards Germany all of its
          right, title and interest in and to the Transferred Assets and the
          Assumed Liabilities (except for inventory) as well as its partnership
          interest in Pas Palzer KG;

             (iv)   Baxter Germany shall transfer to Baxter Belgium all of its
          right, title and interest in and to the inventory relating Exclusively
          to the Edwards Business in Germany in return for
          _____________________;

             (v)    Baxter Germany Holdings shall transfer to Baxter World Trade
          as a dividend all of its right, title and interest in and to the
          capital stock of Edwards Germany as well as its membership interest in
          Pas Palzer Verwaltungs;

             (vi)   Baxter World Trade shall transfer to Edwards Germany
          Holdings as a contribution to capital all of its right, title and
          interest in and to the capital stock of Edwards Germany as well as its
          membership interest in Pas Palzer Verwaltungs;

                                      -31-
<PAGE>

                (vii)  After the Distribution Date, Edwards Germany shall
          transfer to Edwards Lifesciences AG all of its right, title and
          interest in and to the accounts receivable held by Edwards Germany in
          return for _________; and

                (viii) After the Distribution Date, Edwards Germany shall
          transfer to Edwards Lifesciences AG the third-party distribution
          agreements originally transferred to Edwards Germany by Baxter Germany
          [in return for ________].

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

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

          (b)   Baxter Austria shall transfer to Edwards Austria all of its
     right, title and interest in and to the Transferred Assets and the Assumed
     Liabilities (except for inventory) in return for _________;

          (c)   Baxter Austria shall transfer to Baxter Belgium all of its
     right, title and interest in and to the inventory relating Exclusively to
     the Edwards Business in Austria in return for __________;

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

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

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

          (b)   Baxter France shall transfer to Edwards France all of its right,
     title and interest in and to the Transferred Assets and the Assumed
     Liabilities (except for inventory and third-party distribution agreements)
     in return for ________shares of capital stock of Edwards France;

          (c)   Baxter France shall transfer to Baxter Belgium all of its right,
     title and interest in and to the inventory relating Exclusively to the
     Edwards Business in France in return for _________________;

                                      -32-
<PAGE>

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

          (e)   Baxter France shall transfer to Edwards EU Holdings all of its
     right, title and interest in and to the capital stock of Edwards France for
     ___________________; and

          (f)   After the Distribution Date, Edwards France shall transfer to
     Edwards Lifesciences AG all of its right, title and interest in and to the
     accounts receivable held by Edwards France in return for _________________.

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

          (a)   Baxter World Trade and Baxter Export Corporation, as
     shareholders of Baxter Italy, shall spin off the Transferred Assets and the
     Assumed Liabilities (except for accounts receivable, inventory and third-
     party distribution agreements), which constitutes the Edwards Business
     conducted in Italy, thus creating a new company, under the name Edwards
     Lifesciences Italia S.r.l. ("Edwards Italy");

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

          (c)   Baxter Italy shall transfer to Edwards Lifesciences AG all of
     its right, title and interest in and to [all] [certain] third-party
     distribution agreements in its name but relating Exclusively to the Edwards
     Business conducted in Italy [in return for ______________________________];

          (d)   Baxter Italy shall transfer to Edwards Lifesciences AG all of
     its right, title and interest in and to the inventory relating Exclusively
     to the Edwards Business conducted in Italy [in return for ______________];

          (e)   Baxter World Trade and Baxter Export Corporation shall transfer
     to Edwards World Trade all of their respective rights, titles and interests
     in and to the capital stock of Edwards Italy in return for
     _________________; and

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

          3.22. Belgium/Luxembourg.  Baxter and Edwards hereby agree to take any
                ------------------
and all actions necessary to effect the transfer to Edwards World Trade of all
of the right, title and interest of Baxter S.A. (Belgium), a company organized
under the laws of Belgium ("Baxter
                            ------

                                      -33-
<PAGE>

Belgium"), in and to the Transferred Assets and the Assumed Liabilities, which
-------
constitutes the Edwards Business conducted in Belgium and Luxembourg, as
follows:

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

          (b)   Baxter Belgium shall transfer to Edwards Belgium all of its
     right, title and interest in and to the Transferred Assets and the Assumed
     Liabilities (except for inventory and third-party distribution agreements),
     in return for ___________________;

          (c)   Baxter Belgium shall transfer to Edwards Lifesciences AG all of
     its right, title and interest in and to the inventory relating Exclusively
     to the Edwards Business in Germany, France, Belgium, Luxembourg, the
     Netherlands, Austria and the U.K. in return for ________________;

          (d)   Baxter Belgium shall transfer to Edwards Lifesciences AG all of
     its right, title and interest in and to [all] [certain] third-party
     distribution agreements in its name but relating Exclusively to the Edwards
     Business conducted in Belgium and Luxembourg [in return for ____________];
     and

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

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

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

          (b)   Baxter Netherlands shall transfer to Edwards Netherlands all of
     its right, title and interest in and to the Transferred Assets and the
     Assumed Liabilities (except for inventory, third-party distribution
     agreements and the Uden Manufacturing Facility) in return for ___________;

          (c)   Baxter Netherlands shall transfer to Baxter Belgium all of its
     right, title and interest in and to the inventory relating Exclusively to
     the Edwards Business in the Netherlands in return for       ;

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

                                      -34-
<PAGE>

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

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

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

          (b)   Baxter Netherlands shall transfer to Edwards Uden all of its
     right, title and interest in and to the Uden Manufacturing Facility in
     return for _______________.

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

          (a)   Edwards Lifesciences SL ("Edwards Spain") shall be organized as
                                          -------------
     a Spanish Sociedad Limitada and a wholly-owned Subsidiary of Edwards EU
     Holdings

          (b)   Baxter Spain shall transfer to Edwards Spain all of its right,
     title and interest in and to the Transferred Assets and the Assumed
     Liabilities (except for inventory and third-party distribution agreements)
     in return for ___________;

          (c)   Baxter Spain shall transfer to Edwards Lifesciences AG all of
     its right, title and interest in and to the inventory relating Exclusively
     to the Edwards Business in Spain in return for ______________;

          (d)   Baxter Spain shall transfer to Edwards Lifesciences AG all of
     its right, title and interest in and to the inventory and accounts
     receivable held by Edwards Spain in return for _______________; and

          (e)   Baxter Spain shall transfer to Edwards Lifesciences AG all of
     its right, title and interest in and to [all] [certain] third-party
     distribution agreements in its name but relating Exclusively to the Edwards
     Business conducted in Spain [in return for ______________________________].

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

                                      -35-
<PAGE>

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

          (b)   Baxter U.K. shall transfer to Edwards U.K. all of its right,
     title and interest in and to the Transferred Assets and the Assumed
     Liabilities (except for inventory and third-party distribution agreements),
     in return for _______________;

          (c)   Baxter U.K. shall transfer to Baxter Belgium all of its right,
     title and interest in and to the inventory relating Exclusively to the
     Edwards Business in the United Kingdom in return for _____________________;

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

          (e)   After the Distribution Date, Edwards U.K. shall transfer to
     Edwards Lifesciences AG all of its right, title and interest in and to the
     accounts receivable held by Edwards U.K. in return for ______________.

          3.27. Restrictions on Intercompany Debt.  Neither Baxter nor any
                ---------------------------------
Affiliate of Baxter shall make any Loan, other than in the ordinary course of
business, to any Edwards Foreign Entity from February __, 2000 through the
Distribution Date, except as specifically contemplated by this Agreement. [BOB
HOMBACH: WILL THIS BE NECESSARY IN CONNECTION WITH THE DEBT PUSHDOWN?]

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

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

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

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

                                      -36-
<PAGE>

Lifesciences Holding A/S and Edwards Lifesciences Uden BV in exchange for ____
shares of capital stock of Edwards Holdings Switzerland.

                                  ARTICLE IV

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

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

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

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

     4.3. Transfer of Third-Party Distribution Contracts.  Subject to the
          ----------------------------------------------
terms and conditions of this Agreement, Baxter shall cause the foreign
Subsidiaries of Baxter World Trade listed on Schedule 4.3 hereto (the "Foreign
                                             ------------              -------
Subsidiaries") to convey, assign, transfer, contribute and set over to Edwards
------------
LLC, and Edwards shall cause Edwards LLC to accept and receive, on or prior to
the Distribution Date, all right, title and interest of the Foreign Subsidiaries
in and to the third-party distribution contracts relating Exclusively to the
Edwards Business, except as indicated on Schedule 4.3.
                                         ------------

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

     4.5. Transfer of Operating Subsidiaries.  Baxter and Edwards hereby
          ----------------------------------
agree to take, or cause to be taken, any and all actions necessary to effect the
following transactions on or prior to the Distribution Date, with each
transaction occurring at the approximate times and in the order described in
Schedule 3.1 hereto:
------------

                                      -37-
<PAGE>

          (a)  BHC shall contribute to Edwards U.S., in exchange for all of the
     capital stock of Edwards U.S. together with [certain intercompany
     liabilities BHC owes Baxter], all of BHC's right, title and interest in and
     to the membership interests of Edwards LLC and all of BHC's right, title
     and interest in and to the capital stock of Perfusion Services of Baxter
     Healthcare Corporation, a Pennsylvania corporation; and

          (b)  [ANDY GORE TO PROVIDE INFORMATION RE: ASSIGNMENT OF DEBT.]

                                   ARTICLE V

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

          5.1. Organization of Edwards.  Baxter and Edwards shall take any and
               -----------------------
all action necessary so that, on the Distribution Date, the Certificate of
Incorporation and By-laws of Edwards shall be in the forms attached hereto as
Exhibits E and F, respectively.  Prior to the Distribution Date, the Board of
----------     -
Directors of Edwards shall consider the adoption of a stockholder rights plan in
substantially the form attached hereto as Exhibit G.  On the Distribution Date,
                                          ---------
the Edwards Board of Directors shall consist of, and Baxter and Edwards shall
take all actions that may be required to elect or otherwise appoint as directors
of Edwards on or prior to the Distribution Date, the persons named on Exhibit H.
                                                                      ---------
Following the transfers of Subsidiaries contemplated by Section 5.2, Edwards
                                                        -----------
shall take appropriate action to be qualified as a foreign corporation under the
General Corporation Law of California.

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

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

          (b)  Baxter shall contribute to Edwards, in exchange for ___________,
     all of Baxter's right, title and interest in and to the capital stock of
     (i) Edwards U.S., (ii) Edwards World Trade, (iii) Research Medical Inc., a
     Utah corporation; and (iv) Baxter CVG Sub, a Delaware corporation; and

          (c)  [ANDY GORE TO PROVIDE INFORMATION RE: ASSIGNMENT OF DEBT.]

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

          5.4. Transfer of Liabilities.  Subject to the terms and conditions of
               -----------------------
this Agreement, Edwards shall assume, or cause to be assumed, effective as of
the Distribution Date,

                                      -38-
<PAGE>

and pay, comply with and discharge, or cause to be paid, complied with or
discharged, all Assumed Liabilities of Baxter.

                                  ARTICLE VI

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

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

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

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

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

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

          (e)  Any corporate allocations of non-Edwards Business-related assets
     heretofore made by Baxter or its Subsidiaries to the Edwards Business for
     internal management responsibility reporting purposes, other than
     allocations of accounts receivable and accounts payable as contemplated by
     Section 9.6(d);
     --------------

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

          (g)  All assets held by Baxter Japan;

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

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

                                      -39-
<PAGE>

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

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

          (a)  Liabilities of Baxter Japan; and

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

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

          6.3. Termination of Existing Intercompany Agreements.  Except as
               -----------------------------------------------
otherwise expressly provided in this Agreement, the Conveyancing Instruments,
the Implementation Agreements, the Operating Agreements or the agreements set
forth on Schedule 6.3, all Intercompany Agreements and all other intercompany
         ------------
arrangements and course of dealings, whether or not in writing and whether or
not binding, in effect immediately prior to the Distribution Date, shall be
terminated and be of no further force and effect from and after the Distribution
Date.  [ARE THERE INTERNATIONAL AGREEMENTS THAT SHOULD SURVIVE?]

                                  ARTICLE VII

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

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

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

          7.3. Non-Assignable Contracts.  In the event and to the extent that
               ------------------------
Baxter and its Subsidiaries are unable to obtain any consent, approval or
amendment to any Contract, lease, license or other rights relating to the
Edwards Business that otherwise would be transferred or assigned to Edwards or
one of its Subsidiaries as contemplated by this Agreement or any other agreement
or document contemplated hereby, (i) Baxter and its Subsidiaries shall continue
to be bound thereby and the purported transfer or assignment to Edwards or one
of its Subsidiaries

                                      -40-
<PAGE>

shall automatically be deemed deferred until such time as all legal impediments
are removed and/or all necessary consents have been obtained, and (ii) unless
not permitted by the terms thereof or by law, Edwards or one of its Subsidiaries
shall pay, perform and discharge fully all the obligations of Baxter or its
Subsidiaries thereunder from and after the Distribution Date, or such earlier
date as such transfer or assignment otherwise would have taken place. Edwards
shall indemnify Baxter and its Subsidiaries for all indemnifiable Losses arising
out of the performance by Edwards or its Subsidiaries referred to in the
preceding sentence or any actions of Baxter or any of its Subsidiaries taken in
accordance with this Section 7.3 or at the direction or request of Edwards as
provided in this Section 7.3. Baxter and its Subsidiaries shall, without further
consideration therefor, pay and remit to Edwards or its Subsidiaries promptly
all monies, rights and other considerations received in respect of such
performance. Baxter and its Subsidiaries shall exercise or exploit its rights
and options under all such Contracts, leases, licenses and other rights and
commitments referred to in this Section 7.3, including instituting or joining
                                -----------
as a party legal proceedings, as reasonably directed by Edwards and at Edwards'
expense. If and when any such consent shall be obtained or such Contract, lease,
license or other right shall otherwise become assignable or be able to be
novated, Baxter or its Subsidiaries shall promptly assign and novate (to the
extent permissible) all of its rights and obligations thereunder to Edwards or
its Subsidiaries without payment of further consideration, and Edwards or its
Subsidiaries shall, without the payment of any further consideration therefor,
assume such rights and obligations. To the extent that the assignment of any
Contract, lease, license or other right (or the proceeds thereof) pursuant to
this Section 7.3 is prohibited by law, the assignment provisions of this
     -----------
Section 7.3 shall operate to create a subcontract with Edwards or its
-----------
Subsidiaries to perform each relevant unassignable Contract of Baxter at a
subcontract price equal to the monies, rights and other considerations received
by Baxter or its Subsidiaries with respect to the performance by Edwards or its
Subsidiaries under such subcontract.

          7.4. Further Assurances.  (a) In addition to the actions specifically
               ------------------
provided for elsewhere in this Agreement, each of the Parties shall use
commercially reasonable efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things reasonably necessary, proper or advisable
under applicable laws, regulations and agreements to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement and the other agreements and documents
contemplated hereby.  Without limiting the generality of the foregoing, each
Party shall cooperate with the other Party to execute and deliver, or use
commercially reasonable efforts to cause to be executed and delivered, all
instruments, including instruments of conveyance, assignment and transfer, and
to make all filings with, and to obtain all consents, approvals or
authorizations of, any Governmental Authority or any other Person under any
permit, license, Contract or other instrument, and to take all such other
actions as such Party may reasonably be requested to take by the other Party
from time to time, consistent with the terms of this Agreement, in order to
confirm the title of Edwards and its Subsidiaries to all of the Edwards
Business, to put Edwards or its Subsidiaries in actual possession and operating
control of the Transferred Assets and to permit Edwards or its Subsidiaries to
exercise all rights with respect thereto and to effectuate the provisions and
purposes of this Agreement, the Conveyancing Instruments, the Implementation
Agreements, the Operating Agreements, the Tax Sharing Agreement and the other
agreements and documents contemplated hereby or thereby; provided, however, that
                                                         --------  -------
neither Party shall be obligated to pay any consideration to any third-party in
connection with the foregoing.

                                      -41-
<PAGE>

          (b)  If, as a result of mistake, oversight or otherwise, any asset
reasonably necessary to the conduct of the Edwards Business is not transferred
to Edwards or one of its Subsidiaries, or any asset reasonably necessary to the
conduct of the Retained Business is transferred to Edwards or one of its
Subsidiaries, Baxter and Edwards shall negotiate in good faith after the
Distribution Date to determine whether such asset should be transferred to
Edwards or one of its Subsidiaries or to Baxter or one of its Subsidiaries, as
the case may be, and/or the terms and conditions upon which such asset shall be
made available to Edwards or one of its Subsidiaries or to Baxter or one of its
Subsidiaries, as the case may be.  Unless expressly provided to the contrary in
this Agreement, the Conveyancing Instruments, the Implementation Agreements, the
Operating Agreements or the Tax Sharing Agreement, if as a result of  mistake,
oversight or otherwise, any Liability arising out of or relating to the Edwards
Business is retained by Baxter or its Subsidiaries, or any Liability arising out
of or relating to the Retained Business is assumed by Edwards or its
Subsidiaries, Baxter and Edwards shall negotiate in good faith after the
Distribution Date to determine whether such Liability should be transferred to
Edwards or one of its Subsidiaries or Baxter or one of its Subsidiaries, as the
case may be, and/or the terms and conditions upon which any such Liability shall
be transferred.  The Parties agree that the terms and conditions upon which any
assets or Liabilities are made available or assumed as provided in this Section
7.4(b) shall be consistent with the terms of this Agreement, the Implementation
Agreements, the Operating Agreements and the Tax Sharing Agreement.

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

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

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

                                      -42-
<PAGE>

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

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

                                 ARTICLE VIII

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

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

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

          8.3. No Other Representations and Warranties.  Except as expressly set
               ---------------------------------------
forth herein or in any Operating Agreement, and notwithstanding anything
contained in any Implementation Agreement, neither Baxter nor any of its
Subsidiaries represents or warrants in any way (i) as to the value or freedom
from encumbrance of, or any other matter concerning, any of the Transferred
Assets or Transferred Subsidiaries or (ii) as to the legal sufficiency to convey
title to any of the Transferred Assets or Transferred Subsidiaries on the
execution, delivery and filing of the Conveyancing Instruments.  SUBJECT TO
SECTION 9.10 AND THE OPERATING AGREEMENTS, ALL SUCH ASSETS AND SUBSIDIARIES ARE
------------
BEING TRANSFERRED ON AN "AS IS, WHERE IS" BASIS WITHOUT ANY REPRESENTATION OR
WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,

                                      -43-
<PAGE>

MARKETABILITY, TITLE, VALUE, FREEDOM FROM ENCUMBRANCE OR ANY OTHER
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, and Edwards and its Subsidiaries
shall bear the economic and legal risks that any conveyances of such assets and
Subsidiaries shall prove to be insufficient or that Edwards' and its
Subsidiaries' title to any such assets and Subsidiaries shall be other than good
and marketable and free of encumbrances. Except as expressly set forth in this
Agreement or in any Operating Agreement, and notwithstanding anything contained
in any Implementation Agreement, neither Baxter nor any of its Subsidiaries
represents or warrants that the obtaining of the consents or approvals, the
execution and delivery of any amendatory agreements and the making of the
filings and applications contemplated by this Agreement shall satisfy the
provisions of all applicable agreements or the requirements of all applicable
laws or judgments, and, subject to Section 7.3, Edwards and its Subsidiaries
                                   -----------
shall bear the economic and legal risk that any necessary consents or approvals
are not obtained or that any requirements of law or judgments are not complied
with.

                                  ARTICLE IX

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

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

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

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

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

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

                                      -44-
<PAGE>

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

          9.3. [Funds Distributed to Baxter.  On or prior to the Distribution
               ----------------------------
Date, Edwards shall enter into a new credit facility or facilities with
commercial lenders (the "Edwards Credit Facility") and use the proceeds of the
                         -----------------------
indebtedness incurred under the Edwards Credit Facility to ___________.  The
calculation of the amounts set forth in this Section 9.3 is set forth on
                                             -----------
Schedule 9.3.][BOB HOMBACH]
------------

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

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

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

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

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

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

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

               (iii) liquidate or merge with any other corporation;

unless, with respect to (i), (ii) or (iii) above, either (x) an opinion is
obtained from counsel to Baxter reasonably acceptable to Edwards, or (y) a
ruling is obtained from the IRS, in either case to the effect that such act or
event will not adversely affect the federal income tax consequences of the
Distribution to Baxter, its stockholders who receive Edwards Shares or Edwards.

          (b)  If, as a result of any transaction occurring after the
Distribution Date involving either the stock or assets of either Edwards or any
of its Subsidiaries, or any combination thereof, the Distribution fails to
qualify as tax-free under the provisions of Section 355 of the Code, Edwards
shall indemnify Baxter for all Taxes, Liabilities and associated expenses,
including penalties and interest, incurred as a result of such failure of the
Distribution to qualify under Section 355 of the Code. If the Distribution fails
to qualify as tax-free under the provisions of Section 355 of the Code other
than as a result of a transaction occurring after the

                                      -45-
<PAGE>

Distribution Date involving either the stock or assets of Edwards or any of its
Subsidiaries, or any combination thereof, then Edwards shall not be liable for
such Taxes, Liabilities or expenses.

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

     9.5.  Intercompany Receivables and Payables, Cash Management and True-Up
           ------------------------------------------------------------------
[ANDY GORE, DOUG SHUMA AND BOB HOMBACH]. (a) All Intercompany Receivables and
Payables between any Subsidiary of Baxter, on the one hand, and any Subsidiary
of Edwards, on the other hand, shall be settled (i) as of 3:00 p.m., Chicago
time, on [Date] if such Intercompany Receivables and Payables are subject to
          ----
Baxter's netting process and (ii) as of [Date] if such Intercompany Receivables
                                         ----
and Payables are not subject to Baxter's netting process, in each case, in cash
with such cash settlement occurring on [Date]. Commencing from the opening of
                                        ----
business on [Date], in the case of transactions subject to the netting process,
             ----
and [Date], in the case of transactions not subject to the netting process,
     ----
Intercompany Receivables and Payables between any Subsidiary of Baxter, on the
one hand, and any Subsidiary of Edwards, on the other hand, shall be recorded
for accounting purposes as third-party trade account receivables and payables.

     (b)   As provided in Section 6.1(a), Baxter shall be entitled to all cash
                          --------------
bank balances [(other than cash and cash equivalents of the Transferred
Subsidiaries)][IS THIS CORRECT?] existing immediately prior to the Distribution
Date relating to the Edwards Business, or otherwise utilized or maintained in
connection with the Edwards Business, including cash balances representing
deposited checks or drafts for which only a provisional credit has been allowed
in depository accounts, which are to be transferred to Edwards or any of its
Subsidiaries on or prior to the Distribution Date.  Any such cash balances as of
the Distribution Date which have not been transferred to Baxter shall be paid to
Baxter.

     (c)   All Loans owing by Edwards or any of its Subsidiaries to Baxter or
any of its Subsidiaries after giving effect to the transactions contemplated by
Articles III, IV and V shall be repaid no later than the Distribution Date.
------------  --     -

     (d)   Edwards or an appropriate Subsidiary thereof shall be responsible for
payment of all checks or drafts issued up to the Distribution Date against
disbursement accounts transferred to Edwards or such Subsidiary, which checks or
drafts have not been charged against such disbursement accounts on or prior to
the Distribution Date (other than with respect to payroll accounts, which will
be assumed by Baxter or its Subsidiaries).

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

                                      -46-
<PAGE>

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

     (b)   Subject to Section 9.6(d), Edwards and its Subsidiaries shall be
entitled to control all collection actions related to the Transferred Assets,
including the determination of what actions are necessary or appropriate and
when and how to take any such action.

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

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

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

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

                                      -47-
<PAGE>

Agreements set forth on Schedule 9.7 hereto. Each of Baxter and its Subsidiaries
                        ------------
and Edwards and its Subsidiaries shall be entitled to the rights and privileges
of its allocable portion of the Shared Agreements.

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

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

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

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

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

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

     9.9.  Litigation.  (a)  On or as of the Distribution Date, Edwards or its
           ----------
Subsidiaries, as appropriate, shall assume and pay all Liabilities that may
result from the Assumed Actions (as hereinafter defined) and all fees and costs
relating to the defense of the Assumed Actions, including attorneys' fees and
costs incurred after the Distribution Date. "Assumed Actions" shall mean those
                                             ---------------
cases, claims and investigations (on which Baxter or its Subsidiaries, other
than Edwards and its Subsidiaries, is a defendant or the party against whom the
claim or investigation is directed) relating [primarily] to the Edwards
Business, including those listed on Schedule 9.9(a).
                                    ---------------

                                      -48-
<PAGE>

     (b)   Baxter and its Subsidiaries shall transfer the Transferred Actions
(as hereinafter defined) to Edwards, and Edwards shall receive and have the
benefit of all of the proceeds of such Transferred Actions. "Transferred
                                                             -----------
Actions" shall mean those cases and claims (on which Baxter or its Subsidiaries
-------
is a plaintiff or claimant) relating [primarily] to the Edwards Business,
including those listed on Schedule 9.9(b).
          ---------------

     9.10. Liability for Previously Delivered Products.  The following
           -------------------------------------------
provisions shall apply to all Baxter Products sold or transferred prior to the
Distribution Date to the Edwards Business for distribution and to all Edwards
Products sold or transferred prior to the Distribution Date to the Retained
Business for distribution (in each case, the "Products"):
                                              --------

     (a)   Each Party that supplied Products either directly or through its
  Subsidiaries warrants to the other Party that, at the time of delivery to the
  other Party (or such other Party's designee): (i) the Products were not (A)
  adulterated or misbranded within the meaning of the Federal Food, Drug and
  Cosmetic Act (as amended) (the "Act") or the regulations issued thereunder,
  (B) products that may not, under the provisions of Sections 404, 505, 514 or
  515 of the Act, be introduced into interstate commerce, or (C) banned devices
  under Section 516 of said Act; (ii) the Products shall not violate any other
  medical or health law, statute, regulation or directive applicable to the
  Products or their distribution; and (iii) the Products shall not violate any
  applicable customs, trade or environmental law, statute, regulation or
  directive. THE FOREGOING WARRANTY IS EXCLUSIVE AND IN LIEU OF ALL OTHER
  WARRANTIES OF ANY KIND WITH RESPECT TO THE PRODUCTS, WHETHER STATUTORY,
  WRITTEN, ORAL, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTIES OF FITNESS FOR A
  PARTICULAR PURPOSE AND MERCHANTABILITY. ANY LIABILITY OF A PARTY AND ITS
  SUBSIDIARIES TO THE OTHER PARTY AND ITS SUBSIDIARIES UNDER THE FOREGOING
  WARRANTY SHALL BE LIMITED TO THE TOTAL PRICE PAID BY SUCH PARTY AND ITS
  SUBSIDIARIES FOR THE PRODUCTS THAT ARE THE SUBJECT OF SUCH LIABILITY PLUS ALL
  COSTS FOR TRANSPORTATION AND OTHER DIRECT EXPENSES INCURRED BY EDWARDS AND ITS
  SUBSIDIARIES WITH RESPECT TO SUCH PRODUCTS. A receiving Party's and its
  Subsidiaries' exclusive remedy against the supplying Party and its
  Subsidiaries for any breach of the foregoing warranty shall be the right to
  require the other Party or its Subsidiaries to repair or replace (at the other
  Party's option and expense) any Product that proves not to be in conformity
  with applicable labeling or specifications. The receiving Party or its
  Subsidiaries shall pay the transportation and other costs incurred by a Party
  or its Subsidiaries with respect to any Products returned to the supplying
  Party or its Subsidiaries for repair or replacement under this Section, or, at
  the receiving Party's option, reimburse the supplying Party or its
  Subsidiaries for any such costs. The foregoing right to require repair or
  replacement shall commence on the date of receipt by a Party or its
  Subsidiaries of each Product from the supplying Party or its Subsidiaries and
  expire six months after receipt by the end-user customer (the "Repair or
                                                                 ---------
  Replacement Period"), except that the Repair or Replacement Period for each
  ------------------
  Product the use of which is subject to an expiration date shall expire on the
  applicable expiration date, if sooner.

                                      -49-
<PAGE>

     (b)   Each Party that supplied Products either directly or through its
  Subsidiaries warrants to the receiving Party and its Subsidiaries that, at the
  time of delivery to the receiving Party or its designee, the receiving Party
  or its Subsidiaries shall have good and marketable title to all such Products
  free and clear of all liens or encumbrances (other than any created by the
  receiving Party or its Subsidiaries).

     (c)   Each Party that supplied Products either directly or through its
  Subsidiaries shall indemnify and hold harmless the receiving Party and its
  Subsidiaries, from and against, and in respect of, any and all Expenses and
  Losses, that result from a third-party claim and that arise out of or relate
  to: (i) any actual or alleged Patent, Copyright or Trademark infringement, or
  violation of any other proprietary right, arising out of the purchase, sale or
  use of the Products; (ii) defects in the Products; (iii) any actual or alleged
  breach of warranty or obligation, if any, accompanying the Product or
  Products, subject to the limitations in Section 9.10(a) to the extent provided
                                          ---------------
  therein; and (iv) any claim for personal injury, wrongful death or property
  damage arising out of the use of a Product; provided, however, that this
                                              --------  -------
  Section 9.10(c) shall not apply to any Expense or Loss: (A) to the extent that
  ---------------
  the Parties agree; (B) to any tort claim, including claims for personal
  injury, wrongful death or property damage, to the extent such claims are based
  upon any wrongful or negligent act or omission by the receiving Party or its
  Subsidiaries or business units (but excluding Subsidiaries or business units
  that become Subsidiaries or business units of the Party claiming
  indemnification as a result of the Distribution), or their employees or other
  agents, including any Expenses or Losses caused by any such wrongful or
  negligent act or omission constituting a representation concerning the
  characteristics or method of usage of Products, or relating to the storage,
  handling or delivery of Products or selection of Products for use in Kits; or
  (C) to any actual or alleged Patent, Copyright or Trademark infringement, or
  violation of any other proprietary right, arising out of any act or omission
  of the receiving Party, its Subsidiaries or any of their Affiliates or
  business units (but excluding Subsidiaries of business units that become
  Subsidiaries or business units of the Party claiming indemnification as a
  result of the Distribution), in connection with the sale of Kits or relating
  to any intellectual property owned by a Party, its Subsidiaries or any of
  their Affiliates and used in connection with the sale of Kits.

     9.11. Edwards Bank Accounts.  On or prior to the Distribution Date, Baxter
           ---------------------
and its Subsidiaries shall transfer the bank accounts set forth on Schedule 9.11
                                                                   -------------
hereto to Edwards or one of its Subsidiaries. Edwards shall cause any amounts
received, by mistake or otherwise, in such accounts after the Distribution Date
on account of the Retained Business to be transferred promptly to Baxter and its
Subsidiaries, as appropriate. Baxter shall cause any amounts received, by
mistake or otherwise, after the Distribution Date on account of the Edwards
Business to be transferred promptly to Edwards and its Subsidiaries, as
appropriate.

     9.12. Informal, Nondocumented Real Estate Leases.  Each Party and its
           ------------------------------------------
Subsidiaries may continue to occupy, from and after the Distribution Date, such
space in the facilities of the other Party and its Subsidiaries as is occupied
immediately prior to the Distribution Date, or such other space therein as may
be mutually agreed to from time to time by Baxter and Edwards, and which
occupancy is otherwise not documented by written leasing agreements, on the
following terms and conditions:

                                      -50-
<PAGE>

          (a)   The occupying Party shall pay to the other Party rent with
     respect to such occupied space for the period from and after the
     Distribution Date during which such space is so occupied, which rent shall
     be determined by the other Party on the same basis on which the other Party
     allocates rent with respect to the occupancy of space by business units of
     the other Party or as the occupying Party presently is paying, whichever is
     lower. Such rent shall be payable from time to time by the occupying Party
     (but not more frequently than monthly) promptly following delivery by the
     other Party to the occupying Party of a statement therefor.

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

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

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

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

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

          9.16. Nextran Heart.  It is the intent of Baxter and Edwards that in
                -------------
the event that [Nextran] shall develop a xenotransplant heart product suitable
for commercialization, Edwards or a Subsidiary of Edwards shall be entitled to
distribute such product on terms to be agreed between _______ and Edwards in
good faith.

                                   ARTICLE X

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

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

          (a)   Grant of License.  Edwards and its Subsidiaries hereby grant,
                ----------------
and Baxter and its Subsidiaries hereby accept, a perpetual, nonexclusive, fully
paid-up, worldwide right and

                                      -51-
<PAGE>

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

     (b) Ownership of the Licensed Edwards Intellectual Property.  Baxter and
         -------------------------------------------------------
its Subsidiaries acknowledge that, subject to the foregoing license, Edwards and
its Subsidiaries, as the case may be, are the sole and exclusive owners of all
right, title and interest in and to the Transferred Intellectual Property.
Baxter and its Subsidiaries agree that they will do nothing inconsistent with
Edwards' or its Subsidiaries' ownership of, or rights in, the Transferred
Intellectual Property.  Notwithstanding the foregoing or Section 17.2, Baxter
                                                         ------------
and its Subsidiaries shall have the right to disclose the Licensed Edwards
Intellectual Property to a third-party contract manufacturer in connection with
Baxter or its Subsidiaries exercising their right pursuant to Section 10.1(a) to
                                                              --------------
have products made, provided that such third-party contract manufacturer agrees
to be bound by obligations of confidentiality consistent with Section 17.2, and
                                                              ------------
Baxter and its Subsidiaries remain liable for any breach of such obligations by
such third-party contract manufacturer.  Edwards and its Subsidiaries shall not
allow any registration or other protection for any Licensed Edwards Intellectual
Property to lapse without notifying Baxter thereof at least one month prior
thereto.  Upon Baxter's receipt of such notice, (i) Baxter and its Subsidiaries
shall have the right, but not the obligation, to take steps (at Baxter's expense
and in Edwards' and its Subsidiaries' names, if necessary) to prevent such a
lapse, and (ii) Edwards and its Subsidiaries shall cooperate with Baxter and its
Subsidiaries (at Baxter's or its Subsidiaries'

                                      -52-
<PAGE>

reasonable request and at Baxter's expense) to assign to Baxter or its
Subsidiaries such Licensed Edwards Intellectual Property.

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

     (d)   Termination of Licenses. The license granted pursuant to this Section
           -----------------------                                       -------
10.1 may be terminated by Edwards only under the following conditions:
----

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

           (ii) Divestiture.  If Baxter or its Subsidiaries sell, assign,
                -----------
     transfer or otherwise divest themselves of ownership of any business unit
     that uses, or product line that uses or is manufactured under, the Licensed
     Edwards Intellectual Property, the license granted in this Section 10.1 may
                                                                ------------
     be assigned, but only with respect to such business unit or product line
     and with the written consent of Edwards, which consent shall not be
     unreasonably withheld.

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

     (a)   Grant of License.  Baxter and its Subsidiaries hereby grant, and
           ----------------
Edwards and its Subsidiaries hereby accept, a perpetual, nonexclusive, fully
paid-up, worldwide right and license to use and otherwise practice under the
Retained Baxter Intellectual Property (except for the business and non-technical
information and the Trademarks that are part of the Retained Baxter Intellectual
Property) in order to make, have made, import, offer for sale, sell and
distribute (i) any Edwards Products Actually Using the Retained Baxter
Intellectual Property as of the Distribution Date, and (ii) any New Products
developed and manufactured by Edwards or its Subsidiaries during the three-year
period commencing on the Distribution Date.  Any Baxter Retained Intellectual
Property actually licensed pursuant to this Section 10.2(a) shall be deemed to
                                            ---------------
be "Licensed Baxter Intellectual Property."  Schedule 10.2(a) contains a listing
    -------------------------------------    ----------------
of (I) the Patents licensed by Baxter and its Subsidiaries to Edwards hereunder;
and (II) certain Edwards Products Under Development as of the Distribution Date
which may incorporate Licensed Baxter Intellectual Property.  The parties
acknowledge that Schedule 10.2(a) may be incomplete, and, accordingly, shall be
                 ----------------
amended, as necessary, to include any additional Retained Baxter Intellectual
Property that Edwards is deemed to be Actually Using as of the Distribution
Date.  Without limiting the terms of Section 7.4, the parties shall cooperate
                                     -----------
and act reasonably in amending Schedule 10.2(a).  The license granted pursuant
                               ----------------
to this Section 10.2(a) shall not include any rights to the Retained Baxter
        ---------------
Intellectual Property related to the following:

                                      -53-
<PAGE>

     i)    Fibrin sealant biopharmaceuticals and the associated delivery devices
           which shall be the subject of a separate supply agreement;
     ii)   The spinning membrane separation technology acquired by Baxter
           through the HemaScience acquisition which shall be the subject of a
           separate supply agreement;
     iii)  Continuous renal replacement therapy which shall be the subject of
           separate distribution agreements;
     iv)   Hemoglobin Therapeutics technology, including human, bovine and
           recombinant hemoglobin based biopharmaceuticals and perfluorocarbon-
           based pharmaceuticals; and
     v)    Non-polyvinylchloride based film, tubing, containers and compositions
           developed as an alternative/replacement for PVC (whether acquired
           from Bieffe and/or developed under the IV Systems Marc project) which
           shall be the subject of a separate supply agreement.

           (b) Ownership of the Licensed Baxter Intellectual Property.  Edwards
               ------------------------------------------------------
and its Subsidiaries acknowledge that, subject to the foregoing license, Baxter
and its Subsidiaries, as the case may be, are the sole and exclusive owner of
all right, title and interest in and to the Retained Baxter Intellectual
Property. Edwards and its Subsidiaries agree that they will do nothing
inconsistent with Baxter's or its Subsidiaries' ownership of, or rights in, the
Retained Baxter Intellectual Property. Notwithstanding the foregoing or
Section 17.2, Edwards and its Subsidiaries shall have the right to disclose the
------------
Licensed Baxter Intellectual Property to a third-party contract manufacturer in
connection with Edwards or its Subsidiaries exercising their right pursuant to
Section 10.2(a) to have products made, provided that such third-party contract
---------------
manufacturer agrees to be bound by obligations of confidentiality consistent
with Section 17.2, and Edwards and its Subsidiaries remain liable for any breach
     ------------
of such obligations by such third-party contract manufacturer. Baxter and its
Subsidiaries shall not allow any registration or other protection for any
Licensed Baxter Intellectual Property to lapse without notifying Edwards thereof
at least one month prior thereto. Upon Edwards' receipt of such notice, (i)
Edwards and its Subsidiaries shall have the right, but not the obligation, to
take steps (at Edwards' expense and in Baxter's and its Subsidiaries' names, if
necessary) to prevent such a lapse, and (ii) Baxter and its Subsidiaries shall
cooperate with Edwards and its Subsidiaries (at Edwards' or its Subsidiaries'
reasonable request and at Edwards' expense) to assign to Edwards or its
Subsidiaries such Licensed Baxter Intellectual Property.

           (c) Marking and Notices.  Edwards and its Subsidiaries shall ensure
               -------------------
that any products that are made (by them or by a third-party manufacturer),
imported, offered for sale, sold or distributed by them pursuant to the license
granted by Baxter and its Subsidiaries in this Section 10.2 shall bear a legal
                                               ------------
or proprietary rights notice in such form as may be reasonably requested by and
to the extent directed by Baxter from time to time.

           (d) Termination of Licenses.  The Licenses granted pursuant to this
               -----------------------
Section 10.2 may be terminated by Baxter only under the following conditions:
------------

               (i) Breach.  If Edwards or its Subsidiaries are in breach or
                   ------
           default of a material term of this Section 10.2 which breach or
                                              ------------
           default continues for sixty (60) days after written notice from
           Baxter to Edwards, Baxter may terminate the

                                      -54-
<PAGE>

          license granted pursuant to this Section 10.2, provided that such
                                           ------------
          termination shall be solely with respect to the Licensed Baxter
          Intellectual Property that is the subject of such uncured breach.

                (ii)  Divestiture.  If Edwards or its Subsidiaries sell, assign,
                      -----------
          transfer or otherwise divest themselves of ownership of any business
          unit that uses or product line that uses or is manufactured under the
          Licensed Baxter Intellectual Property, the licenses granted in this
          Section 10.2 may be assigned, but only with respect to such business
          ------------
          unit or product line and the written consent of Baxter, which consent
          shall not be unreasonably withheld.

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

          10.3. Licenses Related to Interlink?.  Notwithstanding Section 10.1 or
                ------------------------------                   ------------
10.2, the following shall apply with respect to the Intellectual Property in the
----
needleless access technology known as Interlink?:

          (a)   The license granted by Edwards in Section 10.1 shall apply to
                                                  ------------
     any Baxter products incorporating such technology to the extent claimed in
     any United States or foreign patent filed by Edwards as a continuation or
     divisional of a patent application filed prior to the Distribution Date,
     and any such licensed Transferred Intellectual Property shall be deemed
     Licensed Edwards Intellectual Property.

          (b)   The license granted by Baxter in Section 10.1 shall apply to any
                                                 ------------
     Edwards products incorporating such technology to the extent claimed in any
     United States or foreign patent filed by Baxter as a continuation or
     divisional of a patent application filed prior to the Distribution Date,
     and any such licensed Retained Baxter Intellectual Property shall be deemed
     Licensed Baxter Intellectual Property.

          10.4. Use by Edwards of Baxter's Trademarks.  Edwards and its
                -------------------------------------
Subsidiaries shall discontinue use of the names BAXTER, BAXTER HEALTHCARE,
BAXTER INTERNATIONAL INC. and all other trademarks, service marks and trade
names owned by or licensed to Baxter (the "Baxter Marks") as follows:
                                           ------------

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

                                      -55-
<PAGE>

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

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

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

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

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

                                  ARTICLE XI

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

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

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

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

                                      -56-
<PAGE>

with respect to cash received in lieu of fractional shares) upon the
distribution to Baxter's stockholders of Edwards Shares.

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

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

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

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

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

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

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

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

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

     (b)    Baxter shall have obtained all Third Party Consents required in
connection with the Distribution, except those for which the failure to obtain
such Third Party Consents

                                      -57-
<PAGE>

would not, in the reasonable opinion of Baxter, individually or in the aggregate
have a material adverse effect on Baxter, Edwards or the consummation of the
Distribution.

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

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

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

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

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

                                  ARTICLE XII

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

     12.1.  Edwards Employees.  Schedule 12.1 describes or otherwise
            -----------------   -------------
identifies all employees of the Edwards Business (the "Edwards Employees").
                                                       -----------------

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

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

                                      -58-
<PAGE>

either their employment by Edwards or its Subsidiaries or Affiliates or their
subsequent termination of employment with Edwards or its Subsidiaries or
Affiliates.

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

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

     12.4.  International Edwards Employees.  All issues, other than those
            -------------------------------
addressed in Sections 12.1, 12.2 and 12.3, relating to any person who,
             -------------  ----     ----
immediately prior to the Distribution Date, is employed by an Edwards Subsidiary
in a foreign jurisdiction (the "Edwards Foreign Employees") shall be addressed
                                -------------------------
in connection with the Implementation Agreement applicable to such Edwards
Subsidiary and are outside the scope of this Agreement.  Notwithstanding the
foregoing, the amount of pension benefits earned by any Edwards Foreign Employee
under any pension plan maintained by Baxter, or its Subsidiaries or Affiliates,
in a foreign jurisdiction that are transferred to a pension plan maintained by
Edwards shall be determined by the actuaries for the respective plans by the
Distribution Date in accordance with the methodology described in Schedule 12.4
                                                                  -------------
and shall be the amount which is equal to the benefits of such Edwards Foreign
Employee as of the date of the transfer determined on a plan termination basis.

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

                                      -59-
<PAGE>

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

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

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

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

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

     (b)    No later than the Distribution Date, Edwards or any Edwards
Subsidiary shall establish its own employee benefit plans and programs for the
benefit of eligible employees

                                      -60-
<PAGE>

of Edwards and its Subsidiaries, including, a 401(k) savings plan (the "Edwards
                                                                        -------
Savings Plan"), a nonqualified executive deferred compensation plan (the
------------
"Edwards Deferred Compensation Plan"), a medical and dental plan, a group vision
 ----------------------------------
care plan, a cafeteria plan, a group term life and accidental death and
dismemberment plan, a long-term disability plan and a group legal expense plan
(collectively, the "Edwards Welfare Plans"), a severance plan (the "Edwards
                    ---------------------                           -------
Severance Plan") and the Edwards 2000 Incentive Compensation Program, all as
--------------
described in the Registration Statement. Notwithstanding the foregoing, Edwards
shall not establish a plan similar to the Baxter Pension Plan (as hereinafter
defined).

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

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

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

                                      -61-
<PAGE>

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

     (c)    Puerto Rico Pension Plan.  Subject to applicable law and the
            ------------------------
provisions of the Baxter Healthcare Corporation of Puerto Rico Pension Plan
(the "Baxter PR Pension Plan"), as soon as administratively practicable
      ----------------------
following the establishment of the Edwards Puerto Rico Pension Plan, or
effective as of any other date as agreed to in writing by the plan administrator
for the Baxter PR Pension Plan and the plan administrator for the Edwards Puerto
Rico Pension Plan, the accrued benefits of all Baxter PR Pension Plan
participants who are Edwards PR Employees shall be transferred from the Baxter
PR Pension Plan to the Edwards Puerto Rico Pension Plan (the "PR Transferred
                                                              --------------
Accrued Benefits"). The amount of Transferred Accrued Benefits shall be
----------------
determined by the actuaries for the respective plans by the Distribution Date in
accordance with the methodology described in Schedule 12.9 and shall be the
                                             -------------
amount which is equal to the benefits of the Edwards PR Employees as of the date
of the transfer determined on a plan termination basis. Each Edwards PR Employee
shall receive credit for all purposes under the Edwards Puerto Rico Pension Plan
for the periods of service with Baxter Healthcare Corporation of Puerto Rico or
any of its Subsidiaries or Affiliates. The plan administrator for the Edwards PR
Pension Plan shall take any other action reasonably requested by the plan
administrator for the Baxter PR Pension Plan that is necessary or advisable, in
the opinion of the plan administrator for the Baxter PR Pension Plan, to
maintain the tax-qualified status of the Baxter PR Pension Plan or to avoid the
imposition of any penalties with respect to such plan.

     12.10. Entitlement to Distributions Under Pension Plan.  Each Edwards
            -----------------------------------------------
Employee shall be treated as having terminated employment with an "Employer" as
defined in the Baxter International Inc. and Subsidiaries Pension Plan (the
"Baxter Pension Plan") effective as of the Distribution Date and shall be fully
 -------------------
vested in his or her accrued benefit under the Baxter Pension Plan as of such
date.

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

     (b)    Baxter (or the applicable Baxter Subsidiary)  shall pay all costs
associated with the provision of disability benefits to any employee or former
employee of the Edwards Business who as of the Distribution Date is totally and
permanently disabled.  Edwards (or the applicable Edwards Subsidiary) shall pay
all costs associated with the provision of disability benefits to any employee
or former employee of the Edwards Business other than the persons described in
the first sentence of this Section 12.11(b) in an amount equal to the benefits
                           ----------------
such persons would have received if they had remained covered under the Baxter
Plans during the period of such disability leave.  Notwithstanding the
foregoing, any Edwards Employee receiving benefits under the Baxter Long-Term
Disability Plan on the Distribution Date shall continue to receive benefits
under the terms of such plan and the insurance contract used to fund such plan,
and neither Edwards nor any Edwards Subsidiary shall be charged for the payment
of such benefits.  As of the Distribution Date, Edwards (or the applicable
Edwards Subsidiary) shall assume all Liabilities determined under FAS 112
relating to all Edwards Employees.

                                      -62-
<PAGE>

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

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

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

     12.13. Workers' Compensation.  As soon as administratively practicable
            ---------------------
following the Distribution Date but in no event later than June 30, 2000, a Risk
Management Representative for each of the Parties shall agree upon the
allocation between the Parties of responsibility and liability for workers'
compensation claims and expenses relating to current and former employees of the
Parties and their respective Subsidiaries.

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

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

                                      -63-
<PAGE>

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

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

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

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

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

                                 ARTICLE XIII

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

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

                                      -64-
<PAGE>

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

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

     13.4.  Acquisition and Maintenance of Post-Distribution Edwards Insurance
            ------------------------------------------------------------------
Policies and Programs.  Commencing on and as of the Distribution Date, Edwards
---------------------
shall be responsible for establishing and maintaining separate property,
casualty and liability insurance policies and programs (including primary and
excess general liability, errors and omissions, automobile, workers'
compensation, property, fire, crime, surety and other similar insurance
policies) for activities and claims involving Edwards or any of its Subsidiaries
or Affiliates. Edwards will exercise commercially reasonable efforts to secure
liability insurance to avoid potential gaps in coverage for claims arising from
events prior to the Distribution Date, which gap would not exist had the Edwards
Business continued to be covered with the same retroactive dates existing in the
Baxter Policies in effect on the Distribution Date. Edwards and each of its
Subsidiaries and Affiliates, as appropriate, shall be responsible for all
administrative and financial matters relating to insurance policies established
and maintained by Edwards and its Subsidiaries or Affiliates for claims relating
to any period on or after the Distribution Date involving Edwards or any of its
Subsidiaries or Affiliates. Notwithstanding any other agreement or understanding
to the contrary, except as set forth in this Section 13.4 with respect to claims
                                             ------------
administration and financial administration of the Baxter Policies, neither
Baxter nor any of its Subsidiaries or Affiliates shall have any responsibility
for or obligation to Edwards or any of its Subsidiaries or Affiliates relating
to property and casualty insurance matters for any period, whether prior to, on
or after the Distribution Date.

     13.5.  Edwards Directors' and Officers' Insurance.  Baxter shall use
            ------------------------------------------
commercially reasonable efforts to cause the persons currently serving as
officers and/or directors of Baxter or any of its Subsidiaries to be covered for
a period of [six (6)] years from the Distribution Date by the directors' and
officers' liability insurance policy maintained by Baxter (including corporate
reimbursement) (provided that Baxter may substitute therefor policies of at
                --------

                                      -65-
<PAGE>

least the same coverage and amounts containing terms and conditions that are not
less advantageous than such policy) with respect to matters covered under the
existing policy occurring prior to the Distribution Date that were committed by
such officers and/or directors in their capacity as such; provided, however,
                                                          --------  -------
that in no event shall Baxter be required to expend with respect to any year
more than 200% of the current annual premium expended by Baxter (the "Insurance
                                                                      ---------
Amount") to maintain or procure insurance coverage pursuant hereto; and
------
provided, further, that if Baxter is unable to maintain or obtain the insurance
--------  -------
called for by this Section 13.5, Baxter shall use commercially reasonable
                   ------------
efforts to obtain as much comparable insurance as available for the Insurance
Amount.  In the event Baxter or any of its successors or assigns (i)
consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any Person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of Baxter
assume the obligations set forth in this Section 13.5.  The provisions of this
                                         ------------
Section 13.5 are intended to be for the benefit of, and shall be enforceable by,
------------
each such officer and director and his or her heirs and representatives.  As
provided in Section 15.5, any amount Edwards or any of its Subsidiaries is
            ------------
required to pay to Baxter as an indemnity under this Agreement is reduced to the
extent Baxter receives insurance proceeds from the above coverage, but only to
the extent such proceeds are actually received by Baxter.

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

     13.7.  Post-Distribution Insurance Claims Administration.  Baxter and its
            -------------------------------------------------
Subsidiaries shall have the primary right, responsibility and authority for
claims administration and financial administration of claims that relate to or
affect the Baxter Policies. Upon notification by Edwards or one of its
Subsidiaries or Affiliates of a claim relating to Edwards or a Subsidiary or
Affiliate thereof under one or more of the Baxter Policies, Baxter shall
cooperate with Edwards in asserting and pursuing coverage and payment for such
claim by the appropriate insurance carrier(s).  In asserting and pursuing such
coverage and payment, Baxter shall have sole power and authority to make binding
decisions, determinations, commitments and stipulations on its own behalf and on
behalf of Edwards and its Subsidiaries and Affiliates, which decisions,
determinations, commitments and stipulations shall be final and conclusive if
made to maximize the overall economic benefit of the Baxter Policies.  Edwards
and its Subsidiaries and Affiliates assume responsibility for, and shall pay to
the appropriate insurance carriers or otherwise, any premiums, retrospectively-
rated premiums, defense costs, indemnity payments, deductibles, retentions or
other charges (collectively, "Insurance Charges") whenever arising, which shall
                              -----------------
become due and payable under the terms and conditions of any applicable Baxter

                                      -66-
<PAGE>

Policy in respect of any liabilities, losses, claims, actions or occurrences,
whenever arising or becoming known, involving or relating to any of the assets,
businesses, operations or liabilities of Edwards or any of its Subsidiaries or
Affiliates, whether the same relate to the period prior to, on or after the
Distribution Date.  To the extent that the terms of any applicable Baxter Policy
provide that Baxter or any of its Subsidiaries shall have an obligation to pay
or guarantee the payment of any Insurance Charges relating to Edwards or any of
its Subsidiaries, Baxter shall be entitled to demand that Edwards make such
payment directly to the Person or entity entitled thereto.  In connection with
any such demand, Baxter shall submit to Edwards a copy of any invoice received
by Baxter pertaining to such Insurance Charges together with appropriate
supporting documentation, to the extent available.  In the event that Edwards
fails to pay any such Insurance Charges when due and payable, whether at the
request of the party entitled to payment or upon demand by Baxter, Baxter and
its Subsidiaries may (but shall not be required to) pay such insurance charges
for and on behalf of Edwards and, thereafter, Edwards shall forthwith reimburse
Baxter for such payment.  Subject to the other provisions of this Article XIII,
                                                                  ------------
the retention by Baxter of the Baxter Policies and the responsibility for claims
administration and financial administration of such policies are in no way
intended to limit, inhibit or preclude any right of Edwards, Baxter or any other
insured to insurance coverage for any Insured Claims under the Baxter Policies.

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

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

                                  ARTICLE XIV

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

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

                                      -67-
<PAGE>

     (b)    Notwithstanding Section 14.1(a) above, Baxter shall be solely
                            ---------------
responsible for the following costs incurred in connection with the transactions
contemplated hereby:  (i) the reasonable fees and expenses of Sidley & Austin in
connection with its representation of Baxter; (ii) the reasonable fees and
expenses of Skadden, Arps, Slate, Meagher & Flom in connection with its
representation of Baxter relating to the tax ruling and the opinion of counsel
on tax matters; (iii) the reasonable fees and expenses of foreign counsel to
Baxter or Edwards in connection with the transactions contemplated by this
Agreement; (iv) the reasonable fees and expenses of Credit Suisse First Boston
and J.P. Morgan & Co. Incorporated relating to their financial advisory services
rendered to Baxter; (v) the reasonable fees and expenses of
PricewaterhouseCoopers LLP in connection with its audit and tax services
rendered to Baxter; (vi) the reasonable fees and expenses of Ernst & Young in
connection with their consulting services relating to the Commissionaire
structure; (vii) the reasonable fees and expenses of Towers, Perrin and Hewitt
Associates in connection with their consulting services relating to benefits
plans rendered to Baxter; (viii) all SEC registration and "blue sky" filing fees
associated with the Registration Statement; (ix) the printing, mailing and
distribution of the Information Statement to Baxter's stockholders; (x) the
reasonable fees and expenses of Edwards' transfer agent and registrar relating
to the initial issuance of Edwards Shares as a dividend to Baxter's
stockholders; (xi) the NYSE listing fees for the Edwards Shares; (xii) the
design and initial printing of certificates of the Edwards Shares; (xiii) the
initial distribution of the certificates of Edwards Common Stock as a dividend
to Baxter stockholders; (xiv) the development, search and registration of the
name "Edwards"; and (xv) various other international professional services
related directly to the Distribution, such as valuation services, legal services
and tax services.

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

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

                                  ARTICLE XV

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

     15.1.  Release of Pre-Distribution Claims.  (a)  Except as provided in
            ----------------------------------
Section 15.1(b), effective as of the Distribution Date, each of Baxter and
---------------
Edwards does hereby, on behalf of itself and its respective Subsidiaries,
Affiliates, successors and assigns and all Persons who at any time prior to the
Distribution Date have been shareholders, directors, officers, agents or
employees of either Party (in each case, in their respective capacities as
such), remise, release

                                      -68-
<PAGE>

and forever discharge the other Party, its Subsidiaries, Affiliates, successors
and assigns and all Persons who at any time prior to the Distribution Date have
been shareholders, directors, officers, agents or employees of such Party (in
each case, in their respective capacities as such), and their respective heirs,
executors, administrators, successors and assigns, from any and all Liabilities
whatsoever, whether at law or in equity (including any right of contribution),
whether arising under any contract or agreement, by operation of law or
otherwise, existing or arising from any acts or events occurring or failing to
occur or alleged to have occurred or to have failed to occur or any conditions
existing or alleged to have existed on or before the Distribution Date,
including in connection with the transactions and all other activities to
implement the Distribution.

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

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

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

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

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

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

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

                                      -69-
<PAGE>

          extent that such Person would be released with respect to such
          Liability by this Section 15.1 but for the provisions of this clause
                            ------------
          (vi).

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

          (d)   It is the intent of each of the Parties by virtue of the
provisions of this Section 15.1 to provide for a full and complete release and
                   ------------
discharge of all Liabilities existing or arising from all acts and events
occurring or failing to occur or alleged to have occurred or to have failed to
occur and all conditions existing or alleged to have existed on or before the
Distribution Date, between the Parties (including any contractual agreements or
arrangements existing or alleged to have existed between the Parties on or
before the Distribution Date), except as expressly set forth in Section 15.1(b).
                                                                ---------------
At any time, at the request of either Party, the other Party shall execute and
deliver releases reflecting the provisions hereof.

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

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

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

          (c)   the Transferred Assets;

          (d)   the Assumed Liabilities;

          (e)   the Transferred Subsidiaries;

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

                                      -70-
<PAGE>

     Implementation Agreement, any Operating Agreement or the Tax Sharing
     Agreement (subject, in the case of the Operating Agreements, to any
     limitations of liability contained therein), regardless of when or where
     the loss, claim, accident, occurrence, event or happening giving rise to
     the Expense or Loss took place, or whether any such loss, claim, accident,
     occurrence, event or happening is known or unknown, or reported or
     unreported;

          (g)   the employee benefits provided or the actions taken or omitted
     to be taken with respect thereto in connection with this Agreement or
     otherwise relating to the provision of employee benefits to employees or
     former employees of Edwards (or its Subsidiaries), their beneficiaries,
     alternate payees or any other person claiming benefits through them (except
     to the extent such Expenses or Losses are specifically allocated to Baxter
     pursuant to Section 15.3(f)), including Expenses or Losses arising in
                 ----------------
     connection with (i) Edwards' reduction, elimination or failure to provide
     any benefit accrued by its employees or employees of any of its
     Subsidiaries (including benefits accrued prior to the Distribution Date)
     and (ii) the transfer of account balances and accrued benefits as described
     in Section 12.9 where such Expenses or Losses are incurred as a result of
        ------------
     (A) any act or omission by Edwards (or Edwards' representative) or (B) a
     determination by the IRS that the transferee plan is not a tax-qualified
     plan;

          (h)   the Indemnifiable matters set forth in Sections 7.3, 9.5(b) and
                                                       ------------  ------
     9.10(c) and Article XII; or
     -------    ------------

          (i)   any use of, access to or reliance upon the technical information
     or data made available to Edwards or its Subsidiaries pursuant to Section
                                                                       -------
     17.2.
     ----

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

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

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

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

                                      -71-
<PAGE>

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

          (e)   the breach by Baxter or any of its Subsidiaries of any covenant
     or agreement set forth in this Agreement, any Conveyancing Instrument, any
     Implementation Agreement or the Tax Sharing Agreement , regardless of when
     or where the loss, claim, accident, occurrence, event or happening giving
     rise to the Expense or Loss took place, or whether any such loss, claim,
     accident, occurrence, event or happening is known or unknown, or reported
     or unreported;

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

          (g)   the Indemnifiable matters set forth in Section 9.10(c).
                                                   ---------------

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

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

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

                                      -72-
<PAGE>

that the Indemnifying Party shall be subrogated to such Indemnified Party under
any insurance policy.

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

     (c)  If any Indemnified Party realizes a Tax benefit or detriment in one or
more Tax periods by reason of having incurred a Claim or Loss for which such
Indemnified Party receives an Indemnity Payment from an Indemnifying Party (or
by reason of the receipt of any Indemnity Payment), then such Indemnified Party
shall pay to such Indemnifying Party an amount equal to the Tax benefit or such
Indemnifying Party shall pay to such Indemnified Party an additional amount
equal to the Tax detriment (taking into account, without limitation, any Tax
detriment resulting from the receipt of such additional amounts), as the case
may be.  The amount of any Tax benefit or any Tax detriment for a Tax period
realized by an Indemnified Party by reason of having incurred a Claim or Loss
(or by reason of the receipt of any Indemnity Payment) shall be deemed to equal
the product obtained by multiplying (i) the amount of any deduction or loss or
inclusion in income for such period resulting from such Claim or Loss (or the
receipt of any Indemnity Payment or additional amount), as the case may be
(without regard to whether such deduction or loss or such inclusion in income
results in any actual decrease or increase in Tax liability for such period), by
(ii) the highest applicable marginal Tax rate for such period (provided,
                                                               --------
however, that the amount of any Tax benefit attributable to an amount that is
-------
creditable shall be deemed to equal the amount of such creditable item).  Any
payment due under this Section 15.5(c) with respect to a Tax benefit or Tax
                       ---------------
detriment realized by an Indemnified Party in a Tax period shall be due and
payable within 30 days from the time the return for such Tax period is due,
without taking into account any extension of time granted to the Party filing
such return.

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

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

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

                                      -73-
<PAGE>

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

          15.6. Procedures for Indemnification of Third Party Claims.  (a)  If
                ----------------------------------------------------
any third-party shall make any claim or commence any arbitration proceeding or
suit (collectively, a "Third Party Claim") against any one or more of the
                       -----------------
Indemnified Parties with respect to which an Indemnified Party intends to make
any claim for indemnification against Edwards under Section 15.2 or against
                                                    ------------
Baxter under Section 15.3, such Indemnified Party shall promptly give written
             ------------
notice to the Indemnifying Party describing such Third Party Claim in reasonable
detail, and the following provisions shall apply.  Notwithstanding the
foregoing, the failure of any Indemnified Party to provide notice in accordance
with this Section 15.6(a) shall not relieve the related Indemnifying Party of
          ---------------
its obligations under this Article XV, except to the extent that such
                           ----------
Indemnifying Party is actually prejudiced by such failure to provide notice.

          (b)   The Indemnifying Party shall have 20 business days after receipt
of the notice referred to in Section 15.6(a) to notify the Indemnified Party
                             ---------------
that it elects to conduct and control the defense of such Third Party Claim. If
the Indemnifying Party does not give the foregoing notice, the Indemnified Party
shall have the right to defend, contest, settle or compromise such Third Party
Claim in the exercise of its exclusive discretion subject to the provisions of
Section 15.6(c), and the Indemnifying Party shall, upon request from any of the
---------------
Indemnified Parties, promptly pay to such Indemnified Parties in accordance with
the other terms of this Section 15.6(b) the amount of any Expense or Loss
                        ---------------
resulting from their liability to the third-party claimant.  If the Indemnifying
Party gives the foregoing notice, the Indemnifying Party shall have the right to
undertake, conduct and control, through counsel reasonably acceptable to the
Indemnified Party, and at its sole expense, the conduct and settlement of such
Third Party Claim, and the Indemnified Party shall cooperate with the
Indemnifying Party in connection therewith, provided that (i) the Indemnifying
                                            --------
Party shall not thereby permit any lien, encumbrance or other adverse charge to
thereafter attach to any asset of any Indemnified Party; (ii) the Indemnifying
Party shall not thereby permit any injunction against any Indemnified Party;
(iii) the Indemnifying Party shall permit the Indemnified Party and counsel
chosen by the Indemnified Party and reasonably acceptable to the Indemnifying
Party to monitor such conduct or settlement and shall provide the Indemnified
Party and such counsel with such information regarding such Third Party Claim as
either of them may reasonably request (which request may be general or
specific), but the fees and expenses of such counsel (including allocated costs
of in-house counsel and other personnel) shall be borne by the Indemnified Party
unless (A) the Indemnifying Party and the Indemnified Party shall have mutually
agreed to the retention of such counsel or (B) the named parties to any such
Third Party Claim include the Indemnified Party and the Indemnifying Party and
in the reasonable opinion of counsel to the Indemnified Party representation of
both parties by the same counsel would be inappropriate due to actual or likely
conflicts of interest between them, in either of which cases the reasonable fees
and disbursements of counsel for such Indemnified Party (including allocated
costs of in-house counsel and other personnel) shall be reimbursed by the
Indemnifying Party to the Indemnified Party; and (iv) the Indemnifying Party
shall agree promptly to reimburse to the extent required under this Article XV
                                                                    ----------
the Indemnified Party for the full amount of any Expense or Loss resulting

                                      -74-
<PAGE>

from such Third Party Claim and all related expenses incurred by the Indemnified
Party. In no event shall the Indemnifying Party, without the prior written
consent of the Indemnified Party, settle or compromise any claim or consent to
the entry of any judgment that does not include as an unconditional term thereof
the giving by the claimant or the plaintiff to the Indemnified Party a release
from all Liability in respect of such claim.

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

          (c)   So long as the Indemnifying Party is contesting any such Third
Party Claim in good faith, the Indemnified Party shall not pay or settle any
such Third Party Claim. Notwithstanding the foregoing, the Indemnified Party
shall have the right to pay or settle any such Third Party Claim, provided that
                                                                  --------
in such event the Indemnified Party shall waive any right to indemnity therefor
by the Indemnifying Party, and no amount in respect thereof shall be claimed as
an Expense or a Loss under this Section 15.6(c).
                                ---------------

          If the Indemnifying Party shall have undertaken the conduct and
control of the defense of any Third Party Claim as provided above, the
Indemnified Party, on not less than 30 days prior written notice to the
Indemnifying Party, may make settlement (including payment in full) of such
Third Party Claim, and such settlement shall be binding upon the Parties for the
purposes hereof, unless within said 30-day period the Indemnifying Party shall
have requested the Indemnified Party to contest such Third Party Claim at the
expense of the Indemnifying Party.  In such event, the Indemnified Party shall
promptly comply with such request and the Indemnifying Party shall have the
right to direct the defense of such claim or any litigation based thereon
subject to all the conditions of Section 15.6(b).  Notwithstanding anything in
                                 ---------------
this Section 15.6(c) to the contrary, if the Indemnified Party, in the belief
     ---------------
that a claim may materially and adversely affect it other than as a result of
money damages or other money payments, advises the Indemnifying Party that it
has determined to settle a claim, the Indemnified Party shall have the right to
do so at its own cost and expense, without any requirement to contest such claim
at the request of the Indemnifying Party, but without any right under the
provisions of this Section 15.6(c) for indemnification by the Indemnifying
                   ---------------
Party.

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

          15.7. Procedures for Indemnification of Direct Claims.  Any claim for
                -----------------------------------------------
indemnification on account of an Expense or a Loss made directly by the
Indemnified Party against the Indemnifying Party and that does not result from a
Third Party Claim shall be asserted by written notice from the Indemnified Party
to the Indemnifying Party specifically claiming indemnification hereunder.  Such
Indemnifying Party shall have a period of 30 business days after the receipt of
such notice within which to respond thereto.  If such Indemnifying Party

                                      -75-
<PAGE>

does not respond within such 30 business-day period, such Indemnifying Party
shall be deemed to have accepted responsibility to make payment and shall have
no further right to contest the validity of such claim. If such Indemnifying
Party does respond within such 30 business-day period and rejects such claim in
whole or in part, such Indemnified Party shall be free to pursue resolution as
provided in Article XVI.
            -----------

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

     15.9.  No Third-Party Beneficiaries.    Except to the extent expressly
            ----------------------------
provided otherwise in this Article XV, the indemnification provided for in this
                           ----------
Agreement, the Tax Sharing Agreement, any Implementation Agreement or any
Operating Agreement shall not inure to the benefit of any third-party or parties
and shall not relieve any insurer or other third-party who otherwise would be
obligated to pay any claim or assume the responsibility with respect thereto,
or, solely by virtue of the indemnification provisions hereof, provide any
subrogation rights with respect thereto, and each Party agrees to waive such
rights against the other to the fullest extent permitted.

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

     15.11. Survival.    All covenants and agreements of the Parties contained
            --------
in this Agreement relating to indemnification shall survive the Distribution
Date indefinitely, unless a specific survival or other applicable period is
expressly set forth herein.

                                  ARTICLE XVI

                              DISPUTE RESOLUTION
                              ------------------

     16.1.  General.  Any dispute arising out of or relating to this Agreement
            -------
or any of the Implementation Agreements shall be resolved in accordance with the
procedures specified in this Article XVI, which shall be the sole and
                             -----------
exclusive procedures for the resolution of any such disputes.

                                      -76-
<PAGE>

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

     16.3.  Arbitration.  Any dispute, claim or controversy arising out of or
            -----------
relating to this Agreement or its breach, termination or validity which has not
been resolved by the specified non-binding procedure set forth in Section 16.2
                                                                  ------------
within 90 days of the date of delivery of the Escalation Notice shall be settled
by binding arbitration in accordance with the CPR Non-Administered Arbitration
Rules in effect on the date of this Agreement, by three independent and
impartial arbitrators, none of whom shall be appointed by either Party.  The
arbitration shall be governed by the United States Arbitration Act, 9 U.S.C.
(S)(S) 1-16, as the same may be amended from time to time, and judgment upon the
award rendered by the arbitrators may be entered by any court having
jurisdiction thereof.  The place of the arbitration shall be Lake County,
Illinois or Orange County, California, and shall be determined by the Party that
initiated the dispute resolution process.  The arbitrators may award attorneys'
fees in their discretion.  Otherwise, the arbitrators are not empowered to award
damages in excess of compensatory damages, and each Party hereby irrevocably
waives any right to recover such damages.

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

                                      -77-
<PAGE>

would be in United States federal court in a case applying Illinois law. The
arbitrators may grant or deny the motion to compel, in whole or in part,
concluding that the discovery request is or is not appropriate under the
circumstances, taking into account the needs of the Parties and the desirability
of making discovery expeditious and cost-effective. The statute of limitations
of the State of Illinois applicable to the commencement of a lawsuit shall apply
to the date of initial written notification of a dispute and shall be extended
until commencement of arbitration if all interim deadlines have been complied
with by the notifying Party.

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

                                 ARTICLE XVII

                      ACCESS TO INFORMATION AND SERVICES
                      ----------------------------------

     17.1. Access to Financial Information.  (a)  At all times from and after
           -------------------------------
the Distribution Date for a period of ten (10) years, as soon as reasonably
practicable after written request: (i) Baxter shall afford to Edwards, its
Subsidiaries and their authorized accountants, counsel and other designated
representatives reasonable access during normal business hours to, or, at
Edwards' expense, provide copies of, all records, books, contracts, instruments,
data, documents and other information (collectively, "Information") in the
                                                      -----------
possession or under the control of Baxter immediately following the Distribution
Date that relates to Edwards, the Edwards Business or the Edwards Employees; and
(ii) Edwards shall afford to Baxter, its Subsidiaries and their authorized
accountants, counsel and other designated representatives reasonable access
during normal business hours to, or, at Baxter's expense, provide copies of, all
Information in the possession or under the control of Edwards immediately
following the Distribution Date that relates to Baxter, the Retained Business or
the employees of Baxter; provided, however, that in the event that either Party
                         --------  -------
determines that any such provision of or access to Information could be
commercially detrimental, violate any law or agreement or waive any attorney-
client privilege, the Parties shall take all reasonable measures to permit the
compliance with such obligations in a manner that avoids any such harm or
consequence.

     (b)   Either Party may request Information under Section 17.1(a) (i) to
                                                      ---------------
comply with reporting, disclosure, filing or other requirements imposed on the
requesting party (including under applicable securities or tax laws) by a
Governmental Authority having jurisdiction over the requesting party, (ii) for
use in any other judicial, regulatory, administrative, Tax or other proceeding
or in order to satisfy audit, accounting, claims defense, regulatory filings,
litigation, Tax or other similar requirements, (iii) for use in compensation,
benefit or welfare plan administration or other bona fide business purposes or
(iv) to comply with its obligations under this Agreement, any Conveyancing
Instrument, any Implementation Agreement, any Operating Agreement or the Tax
Sharing Agreement.

                                      -78-
<PAGE>

     (c)   After the Distribution Date, (i) Edwards shall maintain in effect at
its own cost and expense adequate systems and controls to the extent necessary
to enable Baxter and its Subsidiaries to satisfy their respective reporting,
accounting, audit and other obligations, and (ii) Edwards shall provide, or
cause to be provided, to Baxter in such form as Baxter shall request, at no
charge to Baxter, all financial and other data and information as Baxter
determines necessary or advisable in order to prepare Baxter financial
statements and reports or filings with any Governmental Authority.

     17.2. Ownership of Information.  Any Information owned by one Party that
           ------------------------
is provided to a requesting Party pursuant to Section 17.1 shall be deemed to
                                              ------------
remain the property of the providing Party. Unless specifically set forth
herein, nothing contained in this Agreement shall be construed to grant or
confer rights of license or otherwise in any such Information.

     17.3. Compensation for Providing Information.  The Party requesting
           --------------------------------------
Information agrees to reimburse the providing Party for the reasonable costs, if
any, of creating, gathering and copying such Information, to the extent that
such costs are incurred for the benefit of the requesting Party.  Except as
otherwise specifically provided in this Agreement, such costs shall be computed
in accordance with the providing Party's standard methodology and procedures.

     17.4. Retention of Records.  To facilitate the possible exchange of
           --------------------
Information pursuant to this Article XVII after the Distribution Date, the
                             ------------
Parties agree to use commercially reasonable efforts to retain all Information
in their respective possession or control on the Distribution Date in accordance
with the policies and procedures of Baxter as in effect on the Distribution
Date.  No party will destroy, or permit any of its Subsidiaries or Affiliates to
destroy, any Information that the other Party may have the right to obtain
pursuant to this Agreement prior to the tenth anniversary of the date hereof,
and thereafter without first using commercially reasonable efforts to notify the
other Party of the proposed destruction and giving the other Party the
opportunity to take possession of such Information prior to such destruction;
provided, however, that in the case of any Information relating to Taxes, such
--------  -------
period shall be extended to the expiration of the applicable statute of
limitations (giving effect to any extensions thereof).

     17.5. Limitations.  (a)  Baxter and Edwards make no representations or
           -----------
warranties, express or implied, about the accuracy, completeness, adequacy or
sufficiency of the financial and technical information and data compilations and
EXPRESSLY DISCLAIM ALL WARRANTIES WHATSOEVER, WHETHER STATUTORY, WRITTEN, ORAL,
EXPRESS OR IMPLIED, AND EXPRESSLY DISCLAIM EACH SUCH WARRANTY, INCLUDING ANY
WARRANTY OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.  Except as
provided in Article X hereof, the rights of access pursuant to Section 17.1
            ---------                                          ------------
shall not include, however, such information of either Party and its
Subsidiaries relating to (i) products, materials and components under
development; (ii) information pertaining to potential acquisitions, divestitures
and other business arrangements; (iii) studies and investigations being
undertaken by either Party and its Subsidiaries for its or their own benefit or
for the benefit of a third party; and (iv) information and data either Party and
its Subsidiaries are obligated to a third party to maintain in confidence.

                                      -79-
<PAGE>

     (b)   No Party shall have any liability to the other Party (i) if any
Information exchanged or provided pursuant to this Agreement that is an estimate
or forecast, or that is based on an estimate or forecast, is found to be
inaccurate, in the absence of willful misconduct by the Party providing such
Information, or (ii) if any Information is destroyed after commercially
reasonable efforts to comply with the provisions of Section 17.4.
                                                    ------------

     17.6. Production of Witnesses. At all times from and after the Distribution
           -----------------------
Date, each Party shall use commercially reasonable efforts to make available to
the other Party (without cost (other than reimbursement of actual out-of-pocket
expenses) to, and upon prior written request of, the other Party) its directors,
officers, employees and agents as witnesses to the extent that the same may
reasonably be required by the other Party in connection with any legal,
administrative or other proceeding in which the requesting Party may from time
to time be involved with respect to the Edwards Business, the Retained Business
or any transactions contemplated hereby.

     17.7. Confidentiality.  (a)  From and after the Distribution Date, each
           ---------------
of Baxter and Edwards shall hold, and shall cause their respective Subsidiaries,
directors, officers, employees, agents, consultants, advisors and other
representatives to hold, in strict confidence, with at least the same degree of
care that applies to Baxter's confidential and proprietary information pursuant
to policies in effect as of the Distribution Date, all non-public information
concerning the other Party or any of its Subsidiaries or Affiliates obtained by
it prior to the Distribution Date, accessed by it pursuant to Section 17.1
                                                              ------------
hereof, or furnished to it by the other Party or any of its Subsidiaries or
Affiliates pursuant to this Agreement or any agreement or document contemplated
hereby, including any trade secrets, technology, know-how and other non-public,
proprietary intellectual property rights licensed pursuant to Sections 10.1 and
                                                              -------------
10.2 hereof, and shall not release or disclose such information to any other
----
Person, except its representatives, who shall be bound by the provisions of this
Section 17.7; provided, however, that Baxter and Edwards and their respective
------------  --------  -------
Subsidiaries, directors, officers, employees, agents, consultants, advisors and
other representatives may disclose such information if, and only to the extent
that, (i) a disclosure of such information is compelled by judicial or
administrative process or, in the opinion of such Party's counsel, by other
requirements of law (in which case the disclosing Party will provide, to the
extent practicable under the circumstances, advance written notice to the other
Party of its intent to make such disclosure), or (ii) such Party can show that
such information (A) is published or is or otherwise becomes available to the
general public as part of the public domain without breach of this Agreement;
(B) has been furnished or made known to the recipient without any obligation to
keep it confidential by a third party under circumstances that are not known to
the recipient to involve a breach of the third party's obligations to a Party
hereto; (C) was developed independently of information furnished to the
recipient under this Agreement; or (D) in the case of information furnished
after the Distribution Date, was known to the recipient at the time of receipt
thereof from the other Party.

     (b)  Each Party acknowledges that the other Party would not have an
adequate remedy at law for the breach by the acknowledging Party of any one or
more of the covenants contained in this Section 17.7 and agrees that, in the
                                        ------------
event of such breach, the other Party may, in addition to the other remedies
that may be available to it, apply to a court for an injunction to prevent
breaches of this Section 17.7 and to enforce specifically the terms and
                 ------------
provisions of this

                                      -80-
<PAGE>

Section.  Notwithstanding any other Section hereof, the provisions of this
Section 17.7 shall survive the Distribution Date indefinitely.
------------

     17.8.  Privileged Matters.  (a)  Each of Baxter and Edwards agrees to
            ------------------
maintain, preserve and assert all privileges, including privileges arising under
or relating to the attorney-client relationship (which shall include without
limitation the attorney-client and work product privileges), not heretofore
waived, that relate to the Edwards Business and the Transferred Assets for any
period prior to the Distribution Date ("Privilege" or "Privileges").  Each Party
                                        ---------      ----------
agrees that it shall not waive any Privilege that could be asserted under
applicable law without the prior written consent of the other Party.   The
rights and obligations created by this Section 17.8 shall apply to all
                                       ------------
information relating to the Edwards Business as to which, but for the
Distribution, either Party would have been entitled to assert or did assert the
protection of a Privilege ("Privileged Information"), including (i) any and all
                            ----------------------
information generated prior to the Distribution Date but which, after the
Distribution, is in the possession of either Party; and (ii) all information
generated, received or arising after the Distribution Date that refers to or
relates to Privileged Information generated, received or arising prior to the
Distribution Date.

     (b)    Upon receipt by either Party of any subpoena, discovery or other
request that may call for the production or disclosure of Privileged Information
or if either Party obtains knowledge that any current or former employee of
Baxter or Edwards has received any subpoena, discovery or other request that may
call for the production or disclosure of Privileged Information, such Party
shall notify promptly the other Party of the existence of the request and shall
provide the other Party a reasonable opportunity to review the information and
to assert any rights it may have under this Section 17.8 or otherwise to prevent
                                            ------------
the production or disclosure of Privileged Information.  Each Party agrees that
it will not produce or disclose any information that may be covered by a
Privilege under this Section 17.8 unless (i) the other Party has provided its
                     ------------
written consent to such production or disclosure (which consent will not be
unreasonably withheld), or (ii) a court of competent jurisdiction has entered a
final, nonappealable order finding that the information is not entitled to
protection under any applicable Privilege.

     (c)    Baxter's transfer of books and records and other information to
Edwards, and Baxter's agreement to permit Edwards to possess Privileged
Information existing or generated prior to the Distribution Date, are made in
reliance on Edwards' agreement, as set forth in Sections 17.7 and 17.8, to
                                                -------------     ----
maintain the confidentiality of Privileged Information and to assert and
maintain all applicable Privileges.  The access to information being granted
pursuant to Section 17.1, the agreement to provide witnesses and individuals
            ------------
pursuant to Section 17.6 and the transfer of Privileged Information to Edwards
            ------------
pursuant to this Agreement shall not be deemed a waiver of any Privilege that
has been or may be asserted under this Section 17.8 or otherwise.  Nothing in
                                       ------------
this Agreement shall operate to reduce, minimize or condition the rights granted
to Baxter in, or the obligations imposed upon Edwards by, this Section 17.8.
                                                               ------------

                                      -81-
<PAGE>

                                 ARTICLE XVIII

                                 MISCELLANEOUS
                                 -------------

     18.1.  Entire Agreement.  This Agreement, the Conveyancing Instruments,
            ----------------
the Implementation Agreements, the Operating Agreements and the Tax Sharing
Agreement, including the Schedules and Exhibits referred to herein and therein
and the documents delivered pursuant hereto and thereto, constitute the only
agreements between the Parties with respect to the subject matter contained
herein or therein, and supersede all prior agreements, negotiations,
discussions, understandings, writings and commitments between the Parties with
respect to such subject matter.

     18.2.  Choice of Law and Forum.  This Agreement shall be governed by and
            -----------------------
construed and enforced in accordance with the substantive laws (except for any
otherwise applicable conflicts of law provisions) of the State of Illinois and
the federal laws of the United States of America applicable therein, as though
all acts and omissions related hereto occurred in Illinois.  Subject to Article
                                                                        -------
XVI, any lawsuit arising from or related to this Agreement, any of the
---
Conveyancing Instruments, Implementation Agreements or Operating Agreements, or
the Tax Sharing Agreement shall be brought only in the United States District
Court for the Northern District of Illinois, the Circuit Court of Lake County,
Illinois, the United States District Court for the Central District of
California or the Superior Court of Orange County, California, and the specific
choice from among the foregoing shall be determined by the Party initiating such
lawsuit.  To the extent permissible by law, the Parties hereby consent to the
jurisdiction and venue of such courts.  Each Party hereby waives, releases and
agrees not to assert, and agrees to cause its Affiliates to waive, release and
not to assert, any rights such Party or its Affiliates may have under any
foreign law or regulation that would be inconsistent with the terms of this
Agreement as governed by Illinois law.

     18.3.  Amendment.  This Agreement shall not be amended, modified or
            ---------
supplemented except by a written instrument signed by an authorized
representative of each of the Parties.

     18.4.  Waiver.  Any term or provision of this Agreement may be waived,
            ------
or the time for its performance may be extended, by the Party or Parties
entitled to the benefit thereof.  Any such waiver shall be validly and
sufficiently given for the purposes of this Agreement if, as to any Party, it is
in writing signed by an authorized representative of such Party.  The failure of
any Party to enforce at any time any provision of this Agreement shall not be
construed to be a waiver of such provision, or in any way to affect the validity
of this Agreement or any part hereof or the right of any Party thereafter to
enforce each and every such provision.  No waiver of any breach of this
Agreement shall be held to constitute a waiver of any other or subsequent
breach.

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

                                      -82-
<PAGE>

remainder of such provision or provisions or any other provisions hereof, unless
such a construction would be unreasonable.

     18.6.  Execution in Counterparts.  This Agreement may be executed in one
            -------------------------
or more counterparts, each of which shall be deemed an original instrument, but
all of which shall be considered one and the same agreement, and shall become
binding when one or more counterparts have been signed by and delivered to each
of the Parties.

     18.7.  Successors and Assigns.  This Agreement shall be binding upon and
            ----------------------
inure to the benefit of the Parties and their respective successors and
permitted assigns; provided, however, that the rights of either Party under this
                   --------  -------
Agreement shall not be assignable by such Party without the prior written
consent of the other Party.  The successors and permitted assigns hereunder
shall include, without limitation, any permitted assignee as well as the
successors in interest to such permitted assignee (whether by merger,
liquidation (including successive mergers or liquidations) or otherwise).

     18.8.  Third Party Beneficiaries.  Except to the extent otherwise
            -------------------------
provided in Section 13.5 or Article XV hereof the provisions of this Agreement
            ------------    ----------
are solely for the benefit of the Parties and their respective Affiliates,
successors and permitted assigns and shall not confer upon any third Person any
remedy, claim, liability, reimbursement or other right in excess of those
existing without reference to this Agreement.  Nothing in this Agreement, the
Tax Sharing Agreement or any Operating Agreement shall obligate Baxter or
Edwards to assist any Edwards Employee to enforce any rights such employee may
have with respect to any of the employee benefits described in this Agreement.

     18.9.  Notices.  All notices, requests, claims, demands and other
            -------
communications required or permitted hereunder shall be in writing and shall be
deemed given or delivered (i) when delivered personally, (ii) if transmitted by
facsimile when confirmation of transmission is received, (iii) if transmitted by
electronic mail when confirmation of such transmission is received, (iv) if sent
by registered or certified mail, postage prepaid, return receipt requested, on
the third business day after mailing or (v) if sent by private courier when
received; and shall be addressed as follows:

     If to Baxter, to:

            Baxter International Inc.
            One Baxter Parkway
            Deerfield, IL 60015-4633
            Attention: General Counsel
            Facsimile: (847) 948-2450

     If to Edwards, to:

            Edwards Lifesciences Corporation
            17221 Red Hill Avenue
            Irvine, CA 92614
            Attention: General Counsel

                                      -83-
<PAGE>

            Facsimile: (949) ______________

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

     18.10. Performance.  Each Party shall cause to be performed, and hereby
            -----------
guarantees the performance of, all actions, agreements and obligations set forth
herein to be performed by any Subsidiary or Affiliate of such Party.

     18.11. Force Majeure.  No Party shall be deemed in fault of this
            -------------
Agreement, any Conveyancing Instrument, any Implementation Agreement, any
Operating Agreement or the Tax Sharing Agreement to the extent that any delay or
failure in the performance of its obligations under this Agreement, any
Conveyancing Instrument, any Implementation Agreement, any Operating Agreement
or the Tax Sharing Agreement results from any cause beyond its reasonable
control and without its fault or negligence, including acts of God, acts of
civil or military authority, embargoes, epidemics, war, riots, insurrections,
fires, explosions, earthquakes, floods, unusually severe weather conditions,
labor problems or unavailability of parts, or, in the case of computer systems,
any failure in electrical or air conditioning equipment.  In the event of any
such excused delay, the time for performance shall be extended for a period
equal to the time lost by reason of the delay.

     18.12. No Public Announcement.  Neither Baxter nor Edwards shall,
            ----------------------
without the approval of the other, make any press release or other public
announcement concerning the transactions contemplated by this Agreement, except
as and to the extent that any such Party shall be so obligated by law or the
rules of any stock exchange or quotation system, in which case the other Party
shall be advised and the Parties shall use commercially reasonable efforts to
cause a mutually agreeable release or announcement to be issued; provided,
                                                                 --------
however, that the foregoing shall not preclude communications or disclosures
-------
necessary to implement the provisions of this Agreement or to comply with the
accounting and SEC disclosure obligations or the rules of any stock exchange.

     18.13. Termination.  Notwithstanding any provision hereof, this
            -----------
Agreement may be terminated and the Distribution abandoned at any time prior to
the Distribution Date by and in the sole discretion of the Board of Directors of
Baxter without the approval of any Person.  In the event of such termination,
this Agreement shall forthwith become void and no Party shall have any liability
to any Person by reason of this Agreement, except that Baxter shall be liable
for any costs and expenses, including attorneys' fees, incurred by Edwards or
its Subsidiaries prior to or arising out of such termination.

                                      -84-
<PAGE>

          IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their authorized representatives as of the date first above written.

                              BAXTER INTERNATIONAL INC.

                              By:  __________________________
                                   Harry M. Jansen Kraemer, Jr.
                                   Chairman and Chief Executive Officer

                              EDWARDS LIFESCIENCES CORPORATION

                              By:  __________________________
                                   Michael A. Mussallem
                                   Chairman and Chief Executive Officer<PAGE>

                                                                    Exhibit 10.2

                             TAX SHARING AGREEMENT

     Tax Sharing Agreement (the "Agreement") dated as of March 31, 2000
by and between Baxter International Inc. a Delaware corporation ("Baxter") and,
Edwards Lifesciences Corporation, a Delaware corporation (CVG):

     WHEREAS, Baxter and CVG have entered into an Agreement and Plan of
Reorganization dated as of March 15, 2000 (the "Reorganization Agreement"); and;

     WHEREAS, pursuant to the Reorganization Agreement all the issued and
outstanding common stock of  CVG will be distributed by Baxter (pro rata) to the
holders of its common stock (the "Distribution"); and

     WHEREAS, the parties hereto desire to provide for the payment of tax
liabilities and entitlement to tax refunds for the taxable periods ending
before, on or after the date of the Distribution, to allocate responsibility and
provide for cooperation in the preparation and filing of tax returns with
respect to such taxable periods, and to provide for certain other related
matters:

     NOW, THEREFORE, Baxter, on behalf of itself and members of the Baxter Group
(as hereinafter defined), and CVG, on behalf of itself and members of the CVG
Group (as hereinafter defined), in consideration of the mutual covenants
contained herein, agree as follows:

                                       1
<PAGE>

                                   ARTICLE I

                                  DEFINITIONS
                                  -----------

     As used in this Agreement, the following terms shall have the following
meanings, (such meanings to be equally applicable to both the singular and the
plural forms of the terms defined):

     "CVG" means the present and future subsidiaries, divisions and businesses
and former divisions and businesses of any member of the CVG Group which are
not, or are not contemplated by the Reorganization Agreement to be, part of the
Baxter Group immediately after the Distribution, including former divisions or
subsidiaries described as the Divested Businesses in the Reorganization
Agreement.

     "CVG Business" has the meaning set forth in the Reorganization Agreement
but shall also be defined to include any operations consolidated with CVG for
financial reporting purposes

     "CVG Employee" has the meaning set forth in section 12.1 of the
Reorganization Agreement.

     "CVG Group" means CVG and its direct and indirect subsidiaries on and after
the Distribution Date, including former divisions and subsidiaries described as
the Divested Businesses as defined in the Reorganization Agreement.

     " CVG  Distribution Date Balance Sheet" means the CVG balance sheet as of
the Distribution Date

     "CVG 1999 Currently Payable Federal Income Tax Expense" means the amount of
U.S. Baxter consolidated federal income tax liability attributable to the CVG
Business for

                                       2
<PAGE>

items reported in Baxter's 1999 consolidated federal income tax return as filed,
computed at a 35% tax rate. This amount shall be determined in good faith by
Baxter, after consulting with CVG, on the basis of CVG Business items as such
items are reported (or should properly have been reported) on the tax packages
and other information provided by CVG under section 2.08 of this Agreement.

     "CVG 1999 Estimated Currently Payable Federal Income Tax Expense" means the
U.S. Baxter 1999 consolidated federal income tax expense attributable to the CVG
Business for the taxable year ended December 31 1999, less the net increase (or
plus the net decrease) in the deferred federal income tax liabilities
attributable to the CVG Business through December 31, 1999, as reported in CVG's
consolidated balance sheet as of the December 31, 1999 and consolidated income
statement through December 31, 1999. Any adjustments to CVG's deferred tax
liabilities for periods ending prior to January 1, 1999 shall be disregarded for
this purpose.

     "CVG 1999 Currently Payable State Income Tax Expense" means the amount of
U.S. state income tax liability attributable to the CVG Business for items
reported in Baxter's 1999 state income tax returns as filed, computed at an 8%
tax rate.  This amount shall be determined in good faith by Baxter, after
consulting with CVG, on the basis of CVG Business items as such items are
reported (or should properly have been reported) on the tax packages and other
information provided by CVG under section 2.05 of this Agreement.

     "CVG's 1999 Estimated Currently Payable State Income Tax Expense" means the
U.S. state income tax expense attributable to the CVG Business through the
Distribution Date, less the net increase (or plus the net decrease) in the
deferred state income tax liabilities attributable to the CVG Business through
December 31, 1999, as reported in CVG's consolidated balance sheet as of
December 31, 1999 and consolidated income statement through December 31, 1999.
Any adjustments to CVG's deferred tax liabilities for periods ending prior to
January 1, 1999 shall be disregarded for this purpose.

                                       3
<PAGE>

     "CVG 2000 Currently Payable Federal Income Tax Expense" means the amount of
U.S. Baxter consolidated federal income tax liability attributable to the CVG
Business for items reported in Baxter's 2000 consolidated federal income tax
return as filed, computed at a 35% tax rate.  This amount shall be determined in
good faith by Baxter, after consulting with CVG, on the basis of CVG Business
items as such items are reported (or should properly have been reported) on the
tax packages and other information provided by CVG under section 2.08 of this
Agreement.

     "CVG 2000 Estimated Currently Payable Federal Income Tax Expense" means
the U.S. Baxter 2000 consolidated federal income tax expense attributable to the
CVG Business through the Distribution Date, less the net increase (or plus the
net decrease) in the deferred federal income tax liabilities attributable to the
CVG Business through the Distribution Date, as reported in CVG's consolidated
balance sheet as of the Distribution Date and consolidated income statement
through the Distribution Date. Any adjustments to CVG's deferred tax liabilities
for periods ending prior to January 1, 2000 shall be disregarded for this
purpose.

     "CVG 2000 Currently Payable State Income Tax Expense" means the amount of
U.S. state income tax liability attributable to the CVG Business for items
reported in Baxter's 2000 state income tax returns as filed, computed at an 8%
tax rate.  This amount shall be determined in good faith by Baxter, after
consulting with CVG, on the basis of CVG Business items as such items are
reported (or should properly have been reported) on the tax packages and other
information provided by CVG under section 2.05 of this Agreement.

     "CVG's 2000 Estimated Currently Payable State Income Tax Expense" means the
U.S. state income tax expense attributable to the CVG Business through the
Distribution Date, less the net increase (or plus the net decrease) in the
deferred state income tax liabilities attributable to the CVG Business through
the Distribution Date, as reported in

                                       4
<PAGE>

CVG's consolidated balance sheet as of the Distribution Date and consolidated
income statement through the Distribution Date. Any adjustments to CVG's
deferred tax liabilities for periods ending prior to January 1, 2000 shall be
disregarded for this purpose.

     "Baxter Businesses" means the present and former subsidiaries, divisions
and businesses of any member of the Baxter Group, other than the CVG
Business.

     "Baxter Employee" means any employee of the Baxter Group who is not a CVG
Employee.

     "Baxter Group" means Baxter and its past and present subsidiaries, except
for:  (1) members of the CVG Group, (2) the CVG Business, and (3) any past or
present subsidiaries, divisions or businesses of Baxter (or of any of its past
or present subsidiaries) which (i) relate to the CVG Business and (ii) which are
not, or are not contemplated by the Reorganization Agreement to be, part of the
Baxter Group after the Distribution.

     "Code" means the Internal Revenue Code of 1986, as amended, or any
successor thereto.

     "Disqualifying Disposition" means any disposition of Section 423 CVG Stock
or Section 423 Baxter Stock which does not meet the requirements of section
423(a) of the Code.

     "Distribution Date" means the date of the Distribution.  For all purposes
of this Agreement, the Distribution shall be deemed effective as of the close of
business on the Distribution Date.

     "Final Determination" means, with respect to any issue or item for any
taxable period the earliest to occur of the following: (i) a decision by a court
of competent jurisdiction, but only after such decision has become final and
unappealable; (ii) the

                                       5
<PAGE>

expiration of the time for filing a claim for refund or, if a refund claim has
been timely filed, the time for instituting a suit in respect of such refund
claim, provided that no further adjustment to the items of income, gain, loss,
deduction or credit for such period may thereafter be made; (iii) the execution
by or on behalf of the taxpayer and the IRS of a closing agreement under Section
7121 of the Code or comparable agreements under the laws of other jurisdictions;
(iv) the acceptance by the IRS or its counsel of a tender pursuant to an offer
in compromise under Section 7122 of the Code, or comparable agreements under the
laws of other jurisdictions; (v) the execution of a Form 870 or Form 870AD and
the subsequent payment of the tax deficiency or the receipt of the refund
reflected therein; or (vi) any other final and irrevocable determination of the
tax liability of a party to this Agreement for any taxable period.

     "IRS Adjustments" means any adjustments made by the Internal Revenue
Service ("IRS") with respect to any United States ("U.S.") Federal income Tax
Returns of Baxter (or any member of the Baxter Group) in which any part of CVG
is included for taxable periods beginning before the Distribution Date.

     "Sales, Use, or Property Tax" means any sales, use, or property tax (and
any related interest or penalties) relating to the CVG Businesses conducted in
the United States.

     "Section 423 CVG Stock" means CVG Stock received as a distribution on
Section 423 Baxter Stock pursuant to the Reorganization Agreement.

     "Section 423 Baxter Stock" means Baxter stock acquired pursuant to the
Baxter Qualified Employee Stock Purchase Plan, adopted pursuant to the 1987
Incentive Compensation Program.

     "Tax" means any of the Taxes.

                                       6
<PAGE>

     "Taxes" means taxes arising from all forms of taxation, whenever created or
imposed, and whether of the United States of America or elsewhere, and whether
imposed by a local, municipal, governmental, state, federation or other body,
and without limiting the generality of the foregoing, shall include income,
sales, use, ad valorem, gross receipts, value added, franchise, transfer, stamp,
recording, withholding, payroll, employment, excise, occupation, premium or
property taxes, together with any related interest, penalties and additions to
tax, or additional amounts imposed by any taxing authority (domestic or foreign)
upon the CVG Group, the Baxter Group or any of their respective members or
divisions or branches.

     A "Tax Benefit" arises whenever a member's liability for Taxes may be
reduced in future periods as a result of an adjustment by a taxing authority in
the year under examination, whether or not such reduction is presently assured.
Examples of a Tax Benefit include the Taxes associated with an increase in the
basis of an asset or the deferral of a deduction.  A Tax Benefit does not
include a change in the amount of a tax credit available.  The amount of any Tax
Benefit shall be computed using a tax rate of 35% for federal income tax
purposes and 5.2% (8% state income tax rate less a 35% federal benefit) for
state income tax purposes.

     A "Tax Detriment" arises whenever a member's liability for Taxes may be
increased in future periods as a result of an adjustment by a taxing
jurisdiction in the year under examination, whether or not such increase is
presently assured.  Examples of a Tax Detriment include the Taxes associated
with a decrease in the basis of an asset or the acceleration of a deduction.  A
Tax Detriment does not include a change in the amount of a tax credit available.
The amount of a Tax Detriment shall be computed using a tax rate of 35% for
federal income tax purposes and 5.2% (8% state income tax rate less a 35%
federal benefit) for state income tax purposes.

     "Tax Return" means any return, filing, questionnaire or other document
required to be filed, including amended returns that may be filed, for any
period with any taxing

                                       7
<PAGE>

authority (whether domestic or foreign) in connection with any Tax or Taxes
(whether or not a payment is required to be made with respect to such filing).

     "Transaction Taxes" means all sales, use, transfer, VAT, stamp,
registration, capital gains, income tax, ad valorem, gross receipts, recording,
withholding (other than payroll tax withholding), and similar taxes or fees
(including, without limitation, all real estate, patent, copyright and trademark
transfer taxes and recording fees) payable in connection with the transactions
contemplated in the Reorganization Agreement, together with any related
interest, penalties, or additions to tax.

                                   ARTICLE II

                     PREPARATION AND FILING OF TAX RETURNS
                     -------------------------------------

     Section 2.01.  Manner of Preparation.  All Tax Returns for taxable periods
                    ----------------------
beginning before the Distribution Date which are filed after the Distribution
Date shall be prepared on a basis consistent with prior return treatment
(provided such basis does not have an adverse effect on the elections,
accounting methods, conventions, and principles of taxation used for any taxable
period ending on or before the Distribution Date), and shall be filed on a
timely basis by the party responsible for such filing under this Agreement.
Subject to the provisions of this Agreement, all decisions relating to the
preparation and filing of Tax Returns and any audit or other review of such Tax
Returns shall be made in the sole discretion of the party responsible under this
Agreement for such filing.

     Section 2.02.  Pre-Distribution Consolidated U.S. Federal Income Tax
                    -----------------------------------------------------
Returns.    Baxter shall prepare and file all consolidated U.S. federal income
--------
Tax Returns that include both a member of the Baxter Group and part of the CVG
Business, and that are required to be filed for periods beginning before the
Distribution Date. Baxter agrees to pay to the

                                       8
<PAGE>

IRS the consolidated U.S. federal income tax liabilities reported on these
returns on a timely basis.

     Baxter shall refund to CVG any excess of: (i)  CVG's 1999 Estimated
Currently Payable Federal Income Tax Expense, over (ii) CVG's 1999 Currently
Payable Federal Income Tax Expense. CVG shall refund to Baxter any excess of:
(i) CVG's 1999 Currently Payable Federal Income Tax Expense, over (ii) CVG's
1999 Estimated Currently Payable Federal Income Tax Expense.  Payments under
this section shall be due within 30 days after the due date (including
extensions) of Baxter's 1999 consolidated U.S. federal income tax return.

     Baxter shall refund to CVG any excess of: (i)  CVG's 2000 Estimated
Currently Payable Federal Income Tax Expense, over (ii) CVG's 2000 Currently
Payable Federal Income Tax Expense. CVG shall refund to Baxter any excess of:
(i) CVG's 2000 Currently Payable Federal Income Tax Expense, over (ii) CVG's
2000 Estimated Currently Payable Federal Income Tax Expense.  Payments under
this section shall be due within 30 days after the due date (including
extensions) of Baxter's 2000 consolidated U.S. federal income tax return.

     Section 2.03  Pre-Distribution U.S. State Income Tax Returns.   All U.S.
                   -----------------------------------------------
state income tax returns (whether consolidated, unitary, combined, or separate)
of a member of the Baxter Group which:

(i)  include part of the CVG Business, and

(ii) are required to be filed for periods beginning before the Distribution Date

shall be filed by the Baxter member. The Baxter member shall also be responsible
for paying the tax liability shown on the return to the appropriate taxing
authority.

                                       9
<PAGE>

     Baxter shall refund to CVG any excess of: (i) CVG's 1999 Estimated
Currently Payable State Income Tax Expense, over (ii) CVG's 1999 Currently
Payable State Income Tax Expense. CVG shall refund to Baxter any excess of: (i)
CVG's 1999 Currently Payable State Income Tax Expense, over (ii) CVG's
1999 Estimated Currently Payable State Income Tax Expense.  Payments under this
section shall be due within 30 days after the due date (including extensions) of
the relevant state income tax return.

     Baxter shall refund to CVG any excess of: (i) CVG's 2000 Estimated
Currently Payable State Income Tax Expense, over (ii) CVG's 2000 Currently
Payable State Income Tax Expense. CVG shall refund to Baxter any excess of: (i)
CVG's 2000 Currently Payable State Income Tax Expense, over (ii) CVG's
2000 Estimated Currently Payable State Income Tax Expense.  Payments under this
section shall be due within 30 days after the due date (including extensions) of
the relevant state income tax return.

     Section 2.04  International Tax Returns-CVG Entities. CVG shall be
                   ---------------------------------------
responsible for filing Tax Returns and paying all Tax Liabilities with respect
to the following entities for all taxable periods:

     Baxter Participacoes e Commercial Ltda. (Brazil)

     Macchi Engenharia Ltda. (Brazil)

     Baxter Cardiovascular Private Limited (India)

     Xenomedica A.G

     PAS Palzer GmbH and Co. KG

     PAS Palzer Verwaltungs GmbH

     CVG shall also be responsible for filing Tax Returns and paying all Tax
Liabilities with respect to CVG entities that are formed pursuant to the
Reorganization Agreement.

                                       10
<PAGE>

     Section 2.05  Other Pre-Distribution Tax Returns.   All Tax Returns (except
                   -----------------------------------
as provided hereunder or in Sections 2.02, 2.03 or 2.04 above) which:

(i)  include or are filed by a member of the Baxter Group or the CVG
     Group, and

(ii) are required to be filed for periods beginning before the Distribution Date

shall be filed by the appropriate Baxter or CVG member in accordance with local
law or custom.  The party filing such return shall also be responsible for
paying the tax liability shown on the return to the appropriate taxing
authority.

     Section 2.06  Sales, Use, or Property Tax Returns.  Sales, Use, or Property
                   -----------------------------------
Tax Returns and all liability for payment of Sales, Use or Property Tax relating
to the CVG Business for all periods shall be the responsibility of the CVG
Group. $600,000 of existing sales use and property tax reserves relating to the
CVG group will be transferred to CVG

     Section 2.07  Franchise Tax Returns.  U.S. state franchise taxes and tax
                   ----------------------
returns for all periods beginning before the Distribution Date shall be the
responsibility of the Baxter Group. Notwithstanding the foregoing, U.S. state
franchise taxes and tax returns for entities  formed pursuant to the
Reorganization Agreement shall be the responsibility of the CVG Group.

     Section 2.08  Tax packages and other information.  CVG shall provide
                   -----------------------------------
Baxter with:  (i) domestic and foreign income tax packages prepared for 1999 and
2000 on a basis consistent with prior treatment, (ii) any and all information,
documentation, working papers and schedules relating to the CVG Businesses and
the CVG Group reasonably requested by Baxter for use in connection with the
preparation and filing of any Tax Return required to be filed by Baxter, and
(iii) a reconciliation of book income to U.S. federal taxable income for the CVG
Businesses for 1999 and the period January 1, 2000 through the Distribution
Date.

                                       11
<PAGE>

      CVG shall use its best efforts to provide Baxter with such  tax packages,
information, documentation, working papers, schedules and book-tax
reconciliation on or before the first day of the fourth month following the end
of the period to which they relate, but in any event shall provide them no later
than the fifteenth day of the sixth month following the end of the period to
which they relate.

     Section 2.09.  Post-Distribution Date Tax Returns.  To the extent not
                    -----------------------------------
covered above, all Tax Returns and liability for payment of Taxes for periods
ending after the Distribution Date shall be the responsibility of the Baxter
Group if such Tax Returns or taxes relate to Baxter Businesses, and shall be the
responsibility of the CVG Group if such Tax Returns or Taxes relate to the CVG
Business.

     Section 2.10.  Allocation of Tax Attributes.
                    -----------------------------

     (a)  Foreign Tax Credit Related Items.  Earnings and profits and foreign
          ---------------------------------
taxes paid shall be allocated between Baxter and CVG in accordance with
applicable Treasury Regulations.

     (b)  Research Credit Base.   For purposes of the research and
          ---------------------
experimentation tax credit under section 41 of the Code, the parties agree to
allocate a portion of the Baxter Group's gross receipts and qualified research
expenses to the CVG Group as set forth in the attached schedule, pursuant to
section 41(f)(3)(B) of the Code.  No adjustments or payments shall be made if a
subsequent audit or other event results in a determination that this allocation
was not correct.  Baxter has provided documentation to CVG to support such gross
receipts and qualified research expenses, and will provide CVG with access to
the original tax packages and tax returns as necessary for audit purposes.

     (c)  Other Tax Attributes.   All other tax attributes of the Baxter Group
          ---------------------
(including, but not limited to, net operating loss carryforwards) shall remain
with the Baxter Group

                                       12
<PAGE>

and shall not be allocated in whole or in part to the CVG Group If pursuant to a
Final Determination, any portion of the consolidated AMT credit is allocated to
CVG (the "Excess Credit"), an amount equal to the Excess Credit shall be paid by
CVG to Baxter at the time of such Final Determination.

     Section 2.11.   Employee Stock Incentives.   Baxter shall be entitled to
                     --------------------------
all tax deductions arising by reason of any Disqualifying Disposition by:  (i)
Baxter Employees of Section 423 CVG Stock or Section 423 Baxter Stock, or (ii)
CVG  Employees of Section 423 Baxter Stock.  CVG shall be entitled to all tax
deductions arising by reason of any Disqualifying Disposition by CVG Employees
of Section 423 CVG Stock. The party entitled to tax deductions under this
Section 2.11 shall also be responsible for any employment related taxes and
governmental filings associated with the tax deduction being claimed.

     Baxter shall be responsible to make all reports required to be made to the
relevant tax authorities with respect to Disqualifying Dispositions where Baxter
is entitled to the corresponding tax deductions hereunder.  CVG shall be
responsible to make all reports required to be made to the relevant tax
authorities with respect to Disqualifying Dispositions where CVG is entitled to
the corresponding tax deductions hereunder.

     CVG shall report to Baxter, in no case later than 30 days after the end of
each calendar month, any Disqualifying Disposition made by Baxter Employees
during such month of Section 423 CVG Stock.

     Baxter shall be entitled to all tax deductions arising: (i) by reason of
any exercises of nonqualified stock options to purchase Baxter shares of stock,
or (ii) with respect to vesting on or after the Distribution Date of any shares
of Baxter restricted stock which are owned by Baxter Employees or CVG Employees.

                                       13
<PAGE>

     If, pursuant to a Final Determination, all or any part of a tax deduction
described in this section is disallowed to Baxter, then CVG shall reimburse
Baxter for any additional Taxes owed by reason of such disallowance, but only to
the extent that, as a result of such disallowance, CVG is allowed a tax
deduction attributable to such Disqualifying Disposition. In such case, CVG
shall report the allowed tax deduction and shall reimburse Baxter at the time
CVG receives a refund attributable to such deduction or otherwise realizes the
economic benefit thereof.

     2.12  Abandoned/Unclaimed Property.   Baxter will retain liability for
           ----------------------------
abandoned and unclaimed property reported to it by CVG as of the Distribution
Date in accordance with the Baxter corporate policy for reporting unclaimed
property. CVG to retain liability for abandoned and unclaimed property of CVG
not reported to Baxter as of the Distribution Date.

                                  ARTICLE III

                       TAX DEFICIENCIES AND OVERPAYMENTS
                       ---------------------------------

     Section 3.01.   General Rule.   Except as otherwise provided in this
                     -------------
Agreement, Baxter is responsible for paying all tax deficiencies, interest,
penalties, and additions to tax (and entitled to receive all refunds and
interest) resulting from any adjustment made by any taxing authority with
respect to any tax return of Baxter (or any member of the Baxter Group) in which
any member of the  CVG Group is included.

     Pursuant to Sections 3.02 through 3.05 hereof, Baxter is entitled to cash
reimbursements from CVG, or must make cash payments to CVG, in certain
circumstances described below.

                                       14
<PAGE>

     No cash reimbursements or payments are required with respect to adjustments
made by any taxing authority relating to the returns of any member of the CVG
Group which do not include Baxter or a member of the Baxter Group.

     Section 3.02.  Payments by CVG  (a)  U.S. Federal or State Income Tax
                    ---------------       --------------------------------
Adjustments.   To the extent that any IRS Adjustment or similar adjustment by a
-----------
state tax authority of a Tax Return filed by a member of the Baxter Group that
includes any part of the CVG Business for taxable periods beginning before the
Distribution Date 1.) results in a Tax Benefit to any member of the CVG Group,
or 2) results in additional Taxes to Baxter and is attributable solely to CVG's
failure to provide timely sufficient documentation under Section 4.03 of this
Agreement, CVG shall pay Baxter the amount of such Tax Benefit or additional
Taxes as the case may be.  Where any such adjustment is attributable solely to
CVG's failure to provide timely documentation pursuant to the request of the IRS
or any state tax authority, CVG shall also pay Baxter any interest, penalties,
or additions to tax attributable to such adjustment (per Section 3.02(a)(2). The
amount of such Tax Benefit shall be determined in good faith by Baxter, after
consulting with CVG.

     (b)   Other Tax Adjustments-Pre Distribution Date Taxable Periods.   If any
           ------------------------------------------------------------
adjustments (including the filing of an amended return to reflect any such
adjustments) are made by any taxing authority with respect to any Tax Returns
(other than U.S. federal or state income tax returns) of Baxter (or any member
of the Baxter Group) in which any part of the CVG Business is included for
taxable periods beginning before the Distribution Date, then to the extent that
such adjustments:

i)    are attributable to part of the CVG Business; and

ii)   may decrease the net taxable income of, or increase the net taxable loss
      or tax credits of, any member of the CVG Business for taxable periods
      beginning on or after the Distribution Date, and

                                       15
<PAGE>

iii)  result in a greater Tax liability for Baxter or any member of the Baxter
      Group (in either case without regard to any offsetting adjustments to
      other members of the Baxter Group),

CVG and each other member of the CVG Group shall pay Baxter the difference
between the Tax liability on the respective Tax Return before and after taking
into account the adjustment, determined without regard to any interest,
penalties, or additions to tax, unless such interest, penalties, or additions to
tax are attributable to failure to provide timely sufficient documentation under
Section 4.03 of this Agreement  by any member of the CVG Group. The amount of
such adjustment shall be determined in good faith by Baxter, after consulting
with CVG

     c)   Other Tax Adjustments-Post Distribution Date Taxable Periods.   If any
          -------------------------------------------------------------
adjustments (including the filing of an amended return to reflect any such
adjustments) are made by any taxing authority with respect to any Tax Returns
(other than U.S. federal or state income tax returns) of Baxter (or any member
of the Baxter Group) in which any part of the CVG Business is included for
taxable periods ending after the Distribution Date, then to the extent that such
adjustments:

i)    are attributable to the transfer of the CVG Business; and

ii)   result in a greater Tax liability for Baxter or any member of the Baxter
      Group (in either case without regard to any offsetting adjustments to
      other members of the Baxter Group),

CVG and each other member of the CVG Group shall pay Baxter the difference
between the Tax liability on the respective Tax Return before and after taking
into account the adjustment, determined without regard to any interest,
penalties, or additions to tax. The

                                       16
<PAGE>

amount of such adjustment shall be determined in good faith by Baxter, after
consulting with CVG

     (d)    Manner of Payment.  If CVG shall have any liability as a result of
            -----------------
this Section 3.02, the amount thereof shall be paid by CVG to Baxter within
thirty (30) days after the receipt by CVG of written notice of such liability,
together with a computation of the amount due and supporting documentation in
such detail as CVG may reasonably request to verify the computation of the
amount due.  Baxter may give such written notice to CVG only after a Final
Determination has occurred.

     (e)   Notwithstanding Paragraph 3.02(d) above, any liability of CVG to
Baxter arising under Paragraph 3.02(c) shall be payable by CVG only at such time
as it realizes the economic benefit of any increase in tax basis arising from
the transfer of the CVG Business (Basis Increase). The calculation of economic
benefit shall utilize the respective country's statutory tax rate in effect
during the tax year in which the CVG Business claims a tax deduction relating to
the Basis Increase. In determining whether CVG has realized any economic benefit
with respect to the Basis Increase, tax deductions relating thereto shall be
deemed utilized prior to any other tax deductions.

    Section 3.03.  Payments by Baxter.  (a)  U.S. Federal or State Income Tax
                   -------------------       --------------------------------
Adjustments. To the extent that any IRS Adjustment or similar adjustment by a
-----------
state tax authority of a Tax Return filed by a member of the Baxter Group that
includes any part of the CVG Business for taxable periods beginning before the
Distribution Date results in a Tax Detriment to any member of the CVG Group,
Baxter shall remit to CVG the amount of such Tax Detriment, determined without
regard to any interest, penalties, or additions to tax. The amount of such Tax
Detriment shall be determined in good faith by Baxter, after consulting with
CVG.

     (b)  Other Tax Adjustments-Pre Distribution Date Taxable Periods.   If any
          ------------------------------------------------------------
adjustments (including the filing of an amended return to reflect any such
adjustments) are

                                       17
<PAGE>

made by any taxing authority with respect to any Tax Returns (other than U.S.
federal or state tax returns) of Baxter (or any member of the Baxter Group) in
which any part of the CVG Business is included for taxable periods beginning
before the Distribution Date, then to the extent that such adjustments are
attributable to part of the CVG BUSINESS;

i)    result in a reduced Tax liability for Baxter (without regard to any
      offsetting adjustments to other  members of the Baxter Group),and

ii)   may increase the net taxable income of, or decrease the net taxable loss
      or tax credits of, any member of the CVG Business for taxable periods
      beginning on or after the Distribution Date,

then Baxter shall pay to CVG the difference between the Tax liability on  the
respective tax return before and after taking into account the adjustment,
determined without regard to any interest, penalties, or additions to tax. The
amount of such adjustment shall be determined in good faith by Baxter, after
consulting with CVG.

          (c)   Manner of Payment.   Baxter shall pay amounts due from it to CVG
                ------------------
as a result of this Section 3.03 within thirty (30) days after a Final
Determination.  Such payments shall be accompanied by a computation of the
amount due and supporting documentation in such detail as CVG may reasonably
request to verify the computation of the amount due.

          Section 3.04. Transaction Taxes.  Except as otherwise provided in this
                        ------------------
Agreement, CVG is responsible for the payment of all Transaction Taxes other
than income taxes and capital gains taxes.

          Section 3.05. No Other Payments. Anything to the contrary
                        ------------------
notwithstanding, except as provided in this Article III or the Reorganization
Agreement, no member of the

                                       18
<PAGE>

CVG Group shall be entitled to any payment from any member of the Baxter Group,
and no member of the Baxter Group shall be entitled to any payment from any
member of the CVG Group, as a result of any IRS Adjustment or adjustment by any
other taxing authority.

                                  ARTICLE IV

                     TAX AUDITS AND ADMINISTRATIVE MATTERS
                     -------------------------------------

          Section 4.01.  Tax Audits and Controversies.  (a)  U.S. Federal
                         -----------------------------       ------------
Income Taxes.  Except as otherwise provided in this Section 4.01, Baxter shall
------------
have the exclusive authority and obligation to represent each member of the CVG
Group before the IRS or any other governmental agency or authority or before any
court with respect to any matter affecting the U.S. federal income tax liability
of any member of either the Baxter Group or the CVG Group for any tax period
beginning before the Distribution Date, in each such case (i) consulting with
CVG with regard to any such administrative or judicial proceeding and any
proposed compromise or settlement thereof, and (ii) acting in good faith.  Such
representation shall include, but shall not be limited to exclusive control over
(i) any response to any examination by the IRS of U.S. federal income tax
returns and (ii) any contest through a Final Determination of any issue included
in any U.S. federal income Tax Return that includes a member of the Baxter
Group, including, but not limited to (A) whether and in what forum to conduct
such contest, and (B) whether and on what basis to settle such contest.

          Baxter shall give timely notice to CVG of any inquiry, the assertion
of any claim or the commencement of any suit, action or proceeding in respect of
which any member of the CVG Group may incur any then known (by Baxter) future
U.S. federal income Tax liability or in respect of which indemnity for U.S.
federal corporate income taxes may be sought under this Agreement against CVG or
any member of the CVG Group and will give CVG such information with respect
thereto as CVG may reasonably request.

                                       19
<PAGE>

          (b)  Other Taxes.   Except as otherwise provided in this Section 4.01,
               ------------
the party responsible for filing any Tax Return (other than U.S. federal income
tax returns) pursuant to Sections 2.03 through 2.07 hereof shall, at its own
expense, have the exclusive authority to represent each member of the Baxter
Group and of the CVG Group before any governmental agency or authority or before
any court with respect to any matter affecting the Tax liability of any member
of either the Baxter Group or the CVG Group for any tax period beginning before
the Distribution Date and ending after the Distribution Date, in each case (i)
consulting with the other group and the other group's tax counsel with regard to
any such administrative or judicial proceeding and any proposed compromise or
settlement thereof, and (ii) acting in good faith.  The Baxter Group shall have,
at its own expense, the exclusive authority as described above to represent each
member of the Baxter Group and of the CVG Group for all taxable periods ending
on or before the Distribution Date.

          Section 4.02.   Retention of Books and Records.  In accordance with
                          -------------------------------
Baxter's records retention guidelines as of the date hereof, CVG will retain
(for 10 years or longer as required) all information with respect to Baxter in
the possession of any member of the CVG Group on the Distribution Date which is
needed to support Tax Returns and Tax audits.  CVG shall ensure that it retains
access to any equipment necessary to read any of the information to be retained
by CVG pursuant to this section 4.02.  CVG will provide Baxter (and afford
Baxter full access to, and the right to inspect and copy at any reasonable time)
such information and use of such equipment upon Baxter's reasonable request, at
no cost to Baxter (other than reasonable out-of-pocket expenses of CVG).  At the
expiration of the applicable records retention period, CVG may dispose of the
information upon prior notice to Baxter.  For a period of 45 days immediately
following such notice, Baxter shall have the right to remove and take title to
all such information (in any form including, without limitation, books, records,
computer tapes, and computer disks).

                                       20
<PAGE>

          This section 4.02 is in addition to any records retention requirements
contained in the Reorganization Agreement.  In the event of any conflict, the
provisions of this Tax Sharing Agreement shall govern.

          Section 4.03.   Cooperation regarding Return Filing, Examinations and
                          -----------------------------------------------------
Controversies. (a)  CVG's Obligations.  In addition to any obligations
-------------       -----------------
imposed pursuant to the Reorganization Agreement, CVG and each other member of
the CVG Group shall fully cooperate with Baxter and its representatives, in a
prompt and timely manner, in connection with the preparation and filing of and
any inquiry, audit, examination, investigation, dispute, or litigation involving
any Tax Return filed or required to be filed by or for any member of the Baxter
Group for any taxable period beginning before the Distribution Date, and
relating to issues involving the CVG Business. Such cooperation shall include,
but not be limited to, making available to Baxter, during normal business hours,
and within thirty (30) days after any request therefor, all books, records and
information, and the assistance of all officers and employees, necessary or
useful in connection with any tax inquiry, audit, examination, investigation,
dispute, litigation, or any other matter.

          CVG agrees on behalf of itself and each member of the CVG Group to
execute and deliver to Baxter, when so requested by Baxter, any power of
attorney required to allow Baxter and its counsel to represent CVG or such other
CVG Group member in any controversy which Baxter shall have the right to control
pursuant to the terms of Section 4.01 of this Agreement.

          (b)  Baxter's Obligations.  In addition to any obligations imposed
               --------------------
pursuant to the Reorganization Agreement, Baxter shall fully cooperate with CVG
and its representatives, in a prompt and timely manner, in connection with (i)
the preparation and filing of and (ii) any inquiry, audit, examination,
investigation, dispute, or litigation involving, any Tax Return filed or
required to be filed by or for any member of the CVG Group. Such cooperation
shall include, but not be limited to, making available to CVG,

                                       21
<PAGE>

during normal business hours, and within thirty (30) days after any request
therefor, all books, records and information, and the assistance of all officers
and employees, necessary or useful in connection with any tax inquiry, audit,
examination, investigation, dispute, litigation or any other matter.

          Baxter agrees on behalf of itself and each member of the Baxter Group
to execute and deliver to CVG, when so requested by CVG, any power of attorney
required to allow CVG and its counsel to represent Baxter or such other Baxter
Group member in any controversy which CVG shall have the right to control
pursuant to the terms of Section 4.01(b) of this Agreement.

          (c)     Remedy for Failure to Comply.  If Baxter reasonably determines
                  -----------------------------
that CVG is not for any reason fulfilling its obligations under Section 4.03
(a), or if CVG reasonably determines that Baxter is not for any reason
fulfilling its obligations under Section 4.03(b), then Baxter or CVG, as the
case may be, shall have the right to appoint, at the expense of the other, an
independent entity such as a nationally-recognized public accounting firm to
assist the other in meeting its obligations under this Section 4.03. Such entity
shall have complete access to all books, records and information, and the
complete cooperation of all officers and employees, of CVG or Baxter, as the
case may be.

          Section 4.04.   Interest on Late Payments.  Any amount payable under
                          --------------------------
this Agreement by CVG to Baxter, or by Baxter to CVG, shall (if not paid within
ten (10) business days after the due date specified in this Agreement) bear
interest from such due date until the date paid, at the rate of one percent (1%)
per month, or portion thereof, until received.

          Section 4.05.    Character and Effect of Payments.  All amounts paid
                           ---------------------------------
pursuant to this Agreement by one party to another party (other than interest
payable under Section 4.04, above) shall be treated by such parties as
intercompany settlements or liabilities existing on the Distribution Date for
income tax and other tax purposes.

                                       22
<PAGE>

          Section 4.06.   Agency.  It is understood and acknowledged that in
                          -------
accordance with Reg. 1.1502-77, Baxter shall be the agent for the Baxter Group
(including the CVG Group with respect to taxable years ending on or before the
Distribution Date) with respect to all matters referred to therein.

                                   ARTICLE V

                                 MISCELLANEOUS
                                 -------------

          Section 5.01.   Severability.  In case any one or more of the
                          -------------
provisions contained in this Agreement should be invalid, illegal or
unenforceable, the enforceability of the remaining provisions contained herein
shall not in any way be affected or impaired thereby.

          Section 5.02.   Modification of Agreement.  No modification,
                          --------------------------
amendment or waiver of any provision of this Agreement shall be effective unless
the same shall be in writing and signed by each of the parties hereto and then
such modification, amendment or waiver shall be effective only in the specific
instance and for the purpose for which given.

          Section  5.03.  Conflict with the Reorganization Agreement or Other
                          ---------------------------------------------------
Tax Agreements.  Anything in the Reorganization Agreement to the contrary
---------------
notwithstanding, in the event and to the extent that there shall be a conflict
between the provisions of this Agreement and the Reorganization Agreement, the
provisions of this Agreement shall control.  This Agreement supersedes any tax
sharing, tax indemnity or similar agreement that may have previously existed
between any member of the Baxter Group and any member of the CVG Group.

          Section 5.04.   Notices.  All notices or other communications required
                          --------
or permitted under this Agreement shall be delivered by hand, mailed by
certified or registered mail, postage prepaid and return receipt requested, or
sent by cable, telegram,

                                       23
<PAGE>

telex or telecopy (confirmed by regular, first-class mail), to the parties at
the following addresses (or at such other addresses for a party as shall be
specified by like notice) and shall be deemed given on the date on which such
notice is received:

                   (a)  In the case of Baxter, to:

                        Baxter International Inc.

                        One Baxter Parkway

                        Deerfield, IL 60015

                        Attn:  Vice President - Taxes

                   (b)  In the case of CVG, to:

                        Edwards Lifesciences Corporation

                        17221 Red Hill Avenue

                        Irvine, CA 92614

                        Attn:  Vice President or Director - Taxes

          Section 5.05.  Application to Present and Future Subsidiaries.
                         -----------------------------------------------
This Agreement is being entered into by Baxter and CVG on behalf of themselves
and each member of the Baxter Group and the CVG Group, respectively.  This
Agreement shall constitute a direct obligation of each such member and shall be
deemed to have been readopted and affirmed on behalf of any corporation which
becomes a member of the Baxter Group or the CVG Group in the future.  Baxter and
CVG hereby guarantee the performance of all actions, agreements and obligations
provided for under this Agreement of each member of the Baxter Group and the CVG
Group, respectively.  Baxter and CVG shall, upon the written request of the
other, cause any of their respective group members formally to execute this
Agreement.  This Agreement shall be binding upon, and shall inure to the benefit
of, the successors, assigns and persons controlling any of the corporations
bound hereby.

                                       24
<PAGE>

          Section 5.06.  Term.  This Agreement shall commence on the date of
                         -----
execution indicated above and shall continue in effect until otherwise agreed to
in writing by Baxter and CVG, or their successors.

          Section 5.07.  Titles and Headings.  Titles and headings to sections
                         --------------------
herein are inserted for the convenience of reference only and are not intended
to be a part of to affect the meaning or interpretation of this Agreement.

          Section 5.08.  Singular and Plural.  As used herein, the singular
                         --------------------
shall include the plural and vice versa.

          Section 5.09.  Governing Law.  This Agreement shall be governed by the
                         --------------
laws of the state of Illinois, without regard to the principles of conflicts of
laws thereof.

          Section 5.10   Dispute Resolution.  (a)  Escalation.  The parties
                         -------------------       -----------
agree that they will attempt to settle any claim or controversy arising out of
this Agreement through good faith negotiations in the spirit of mutual
cooperation between senior business executives with authority to resolve the
controversy.  Before taking action as provided in subsection (b), the parties
shall first submit such claim or controversy to the appropriate Vice
President/Director of Taxes of each party for resolution.  If such individuals
are unable to resolve such claim or controversy, either party may request that
their respective chief executive officers, or their respective delegees, attempt
to resolve the dispute.  The officers or delegees to whom any such claim or
controversy is submitted as provided above shall attempt to resolve the dispute
through good faith negotiations over a reasonable period, not to exceed 30 days
in the aggregate unless otherwise agreed.  Such 30 day period shall be deemed to
commence on the date of a notice from either party under Section 5.04 describing
the particular claim or controversy.

                                       25
<PAGE>

          (b)  Arbitration.  Any dispute that is not resolved by negotiations
               ------------
pursuant to subsection (a) will, upon the written request of either party, be
resolved by binding arbitration conducted in accordance with the Rules of the
CPR Institute for Dispute Resolution by a sole arbitrator who is a former
federal judge or other mutually agreed upon individual.  Such arbitrator shall
set a schedule for determination of such dispute that is reasonable under the
circumstances.  Such arbitrator shall determine the dispute in accordance with
this Agreement and the substantive rules of law (but not the rules of procedure)
that would be applied by a federal court sitting in Illinois.  The arbitration
shall take place in Lake Country, Illinois.  The arbitration will be governed by
the United States Arbitration Act, 9 U.S.C. (S)(S) 1 - 16.  Judgment upon the
award rendered by the arbitrator may be entered by any court having
jurisdiction.  Where this Agreement provides for future agreement by the
parties, failure to reach such agreement shall not constitute a dispute subject
to the provisions of this Section 24.2 except as expressly provided otherwise.

          Section 5.11.  Counterparts.  This Agreement may be executed in one or
                         -------------
more counterparts, all of which shall be considered one and the same agreement,
and shall become a binding agreement when one or more counterparts have been
signed by each party and delivered to the other parties.

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their duly authorized officers, all on the day and year
first above written.

                              BAXTER INTERNATIONAL INC.
                              a Delaware corporation

                              By:____________________________
                              Its

                                       26
<PAGE>

                              Edwards Lifesciences Corporation
                              a Delaware corporation

                              By:_____________________________
                              Its

                                       27

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