Document:

exv10w1

 

EXHIBIT 10.1

[Amended]

BAXTER INTERNATIONAL INC.

Non-Employee Director Compensation Plan

adopted May 6, 2003

Terms and Conditions

	1.	 	Purpose
	 
	 	 	This Non-Employee Director Compensation Plan (the “Plan”) is adopted by the Board of
Directors (the “Board”) of Baxter International Inc. (“Baxter”). This Plan is adopted
pursuant to the Baxter International Inc. 2003 Incentive Compensation Program (the
“Program”), for the purposes stated in the Program. Capitalized terms defined in the
Program that are used without being defined in the Plan will have the same meaning as in the
Program.
	 
	2.	 	Participants
	 
	 	 	Each member of the Board who is not an employee of Baxter or any of its subsidiaries shall
participate in the Plan (a “Participant”).
	 
	3.	 	Restricted Stock

	 	3.1	 	On the date of Baxter’s annual meeting of stockholders (the “Annual Meeting”)
in each year beginning with the Annual Meeting on May 6, 2003, and subject to
availability of shares of Common Stock under the Program, each Participant upon
completion of the Annual Meeting shall, automatically and without necessity of any
action by the Board or any committee thereof, receive the number of shares of
Restricted Stock equal to the quotient of (A) $60,000 divided by (B) the Fair Market
Value of a share of Common Stock on the date of grant (rounded to the nearest whole
number which is a multiple of ten) (the “Annual Restricted Stock Grant Amount”).
	 
	 	3.2	 	Each Participant elected or appointed on a date other than the date of an
Annual Meeting shall, on the date of such election or appointment and automatically and
without necessity of any action by the Board or any committee thereof, receive the
number of shares of Restricted Stock equal to the product of (A) the Annual Restricted
Stock Grant Amount (as defined in Section 3.1, subject to adjustment in accordance with
the Program) for the Restricted Stock awarded on the date of the immediately preceding
Annual Meeting, multiplied by (B) the quotient of (i) the number of full calendar
months before the next Annual Meeting divided by (ii) 12 (rounded to the nearest whole
number which is a multiple of ten). The number of shares of Restricted Stock granted
under this Section 3.2 shall not exceed the number available under the Program on the
date of grant.

 

 

	 	3.3	 	Restricted Stock may not be sold, transferred, assigned, pledged, hypothecated
or otherwise encumbered or disposed of, whether voluntarily, involuntarily or by
operation of law, until vested pursuant to the terms hereof.
	 
	 	3.4	 	Subject to Section 11.10 of the Program and except as expressly provided in
Sections 3.6 and 3.7, all shares of Restricted Stock shall vest on the date of and
immediately prior to the next Annual Meeting following the date of grant.
	 
	 	3.5	 	Except as provided in Sections 3.6 and 3.7, if a Participant ceases service as
a member of the Board before his or her Restricted Stock vests, the Participant will
forfeit his or her unvested Restricted Stock immediately upon ceasing service as a
member of the Board.
	 
	 	3.6	 	If a Participant dies while serving as a member of the Board, his or her
unvested Restricted Stock will not be forfeited and will be fully vested immediately.
	 
	 	3.7	 	If a Participant becomes disabled and unable to continue service as a member of
the Board, his or her Restricted Stock will not be forfeited and will, when the
Participant ceases to serve as member of the Board, be fully vested.
	 
	 	3.8	 	Each Participant receiving Restricted Stock shall have all of the rights of a
stockholder with respect to the shares of Restricted Stock during any period in which
the shares of Restricted Stock are subject to forfeiture or restrictions on transfer,
including the right to vote the shares of Restricted Stock and to receive dividends and
other distributions thereon, unless and until such shares are forfeited pursuant to
Section 3.5; provided, however, that a dividend or other distribution with respect to
Restricted Stock (including, without limitation, a stock dividend or stock split),
other than a cash dividend, shall be delivered to Baxter (and the Participant shall, if
requested by Baxter, execute and return one or more irrevocable stock powers related
thereto) and shall be subject to the same restrictions as the Restricted Stock with
respect to which such dividend or other distribution was made. Cash dividends paid on
the Restricted Stock will be reinvested in shares of Common Stock, unless the
Participant elects otherwise. Common Stock purchased with reinvested cash dividends
shall not be restricted.
	 
	 	3.9	 	If requested by Baxter, each Participant receiving Restricted Stock shall enter
into an agreement with Baxter incorporating the terms and conditions of this Plan. A
stock certificate for the shares of Restricted Stock awarded will be issued in the name
of each Participant and deposited, together with a stock power endorsed in blank by
Participant, with Baxter. Each such certificate shall bear a legend in substantially
the following form:

The transferability of this certificate and the shares of Common
Stock represented by it are subject to the terms and conditions
(including conditions of forfeiture) contained in the Baxter
International Inc. Non-Employee Director Compensation Plan

 

 

adopted May 6, 2003. A copy of this Plan is available from the
Corporate Secretary of Baxter International Inc.

	 	 	 	Subject to the terms of the Program, after the Restricted Stock vests, shares of
Common Stock free and clear of all restrictions will be delivered to the Participant
(or to the Participant’s legal representative, beneficiary or heir).

	4.	 	Stock Options

	 	4.1	 	On the date of Baxter’s Annual Meeting in each year beginning with the Annual
Meeting on May 6, 2003, and subject to availability of shares of Common Stock under the
Program, upon completion of the Annual Meeting each Participant shall be granted Stock
Options having a value equal to $60,000, to be determined by the Board or the
Compensation Committee of the Board (the “Committee”) based on a Black-Scholes or other
option valuation model in the discretion of the Board or the Committee (rounded to the
nearest whole number which is a multiple of ten) (the “Annual Stock Option Grant
Amount”).
	 
	 	4.2	 	Each Participant elected or appointed on a date other than the date of an
Annual Meeting shall, on the date of such election or appointment and automatically and
without necessity of any action by the Board or any committee thereof, be granted a
Stock Option to purchase that number of shares of Common Stock equal to the product of
(A) the Annual Stock Option Grant Amount (as defined in Section 4.1, subject to
adjustment in accordance with the Program) for each Stock Option granted on the date of
the immediately preceding Annual Meeting, multiplied by (B) the quotient of (i) the
number of full calendar months before the next Annual Meeting divided by (ii) 12
(rounded to the nearest whole number which is a multiple of ten). The number of shares
of Common Stock subject to any Stock Option granted under this Section 4.2 shall not
exceed the number available under the Program on the date of grant.
	 
	 	4.3	 	The purchase price for each share of Common Stock subject to a Stock Option
shall be the Fair Market Value of a share of Common Stock on the date of grant. The
terms of each Stock Option will be as set forth in this Plan and the Program. To the
extent that any provision of the Plan is inconsistent with the Program, the Program
shall control. The Stock Options are not intended to qualify as Incentive Stock
Options within the meaning of Section 422 of the United States Internal Revenue Code.
	 
	 	4.4	 	Subject to Section 11.10 of the Program and except as expressly provided in
Sections 4.8, 4.9 and 4.10, Stock Options shall first become exercisable on the date of
and immediately prior to the next Annual Meeting following the date of grant.
	 
	 	4.5	 	After a Stock Option becomes exercisable and until it expires, it may be
exercised in whole or in part, in the manner specified by the Company. Under no
circumstances may a Stock Option be exercised after it has expired. Shares of Common
Stock may be used to pay the purchase price for shares of Common Stock to be acquired

 

 

	 	 	 	upon exercise of a Stock Option or fulfill any tax withholding obligation, subject to
any requirements or restrictions specified by the Company.
	 
	 	4.6	 	Except as provided in Sections 4.8, 4.9 and 4.10, if a Participant ceases
service as a member of the Board before his or her Stock Option becomes exercisable,
the Stock Option will expire when the Participant ceases service as a member of the
Board.
	 
	 	4.7	 	If a Participant ceases service as a member of the Board after his or her Stock
Option becomes exercisable, the Stock Option will not expire but will remain
exercisable. Subject to Sections 4.8, 4.9, 4.10 and 4.11, the Stock Option will expire
three months after the Participant ceases service as a member of the Board, unless the
Participant dies or becomes disabled during such three month period in which case the
Stock Option will expire on the first anniversary of the date the Participant ceased
serving as a member of the Board.
	 
	 	4.8	 	If a Participant dies while serving as a member of the Board, his or her Stock
Option will not expire and will remain, or immediately become, fully exercisable, as
the case may be. Subject to Sections 4.10 and 4.11, the Stock Option will expire on
the first anniversary of the Participant’s death.
	 
	 	4.9	 	If a Participant becomes disabled and unable to continue service as a member of
the Board, his or her Stock Option will not expire and will remain, or when the
Participant ceases to serve as member of the Board become, fully exercisable, as the
case may be. Subject to Sections 4.10 and 4.11, the Stock Option will expire on the
first anniversary of the date the Participant ceases service as a member of the Board.
	 
	 	4.10	 	If a Participant who has served as a member of the Board for a continuous
period of at least ten years or who is at least 72 years of age ceases to serve as a
member of the Board (including without limitation by reason of death or disability),
his or her Stock Option will not expire and will remain, or when the Participant ceases
to serve as member of the Board become, fully exercisable, as the case may be. Subject
to Section 4.11, the Stock Option will expire on the fifth anniversary of the date the
Participant ceases service as a member of the Board.
	 
	 	4.11	 	Stock Options that have not previously expired will expire at the close of
business on the tenth anniversary of the date of grant. If a Stock Option would expire
on a date that is not a Business Day, it will expire at the close of business on the
last Business Day preceding that date. A “Business Day” is any day on which the Common
Stock is traded on the New York Stock Exchange.
	 
	 	4.12	 	An exercisable Stock Option may only be exercised by the Participant, his or
her legal representative, or a person to whom the Participant’s rights in the Stock
Option are transferred by will or the laws of descent and distribution or in accordance
with rules and procedures established by the Committee.

 

 

	5.	 	Cash Compensation

	 	5.1	 	Baxter shall pay each Participant a meeting fee of $1,000 for each meeting of
the Board or any committee thereof attended, and a Participant acting as the
chairperson of any meeting of a committee of the Board shall receive an additional
$1,000 for each meeting chaired by him or her. Fees shall be paid quarterly in arrears
and are payable if the Participant attends in person, by conference telephone, or by
any other means permitted by the Delaware General Corporation Law and Baxter’s Bylaws.
	 
	 	5.2	 	Baxter shall pay each Participant a total annual cash retainer of $45,000 per
calendar year (“Annual Cash Retainer”). The Annual Cash Retainer shall be paid
quarterly in arrears. For purposes of determining the amount of such quarterly
payment, a Participant must be a member of the Board on or prior to the 15th
day of a month in order to be entitled to receive payment of the Annual Cash Retainer
with respect to that month.
	 
	 	5.3	 	Participants shall be eligible to defer payment of cash compensation otherwise
payable under this Section 5 pursuant to the terms and conditions of the Baxter
Non-Employee Director Deferred Compensation Plan.

	6.	 	Availability of Shares
	 
	 	 	If on any grant date, the number of shares of Common Stock which would otherwise be granted
in the form of Restricted Stock or subject to Stock Options granted under the Plan shall
exceed the number of shares of Common Stock then remaining available under the Program, the
available shares shall be allocated among the Stock Options and Restricted Stock to be
granted Participants in proportion to the number of shares subject to Stock Options and
shares of Restricted Stock that Participants would otherwise be entitled to receive, and
allocated evenly between Restricted Stock and Stock Options.
	 
	7.	 	General Provisions

	 	7.1	 	Subject to the limitations contained in Section 11.9 of the Program, the Board
or the Committee may, at any time and in any manner, amend, suspend, or terminate the
Plan or any Stock Option outstanding under the Plan.
	 
	 	7.2	 	Participation in the Plan does not give any Participant any right to continue
as a member of the Board for any period of time or any right or claim to any benefit
unless such right or claim has specifically accrued hereunder.

 

 

Amendment No. 1

to

Baxter International Inc.

Non-Employee Director Compensation Plan

     Effective as of May 4, 2004, the Baxter International Inc. Non-Employee Director Compensation
Plan is amended to add the following subsection 4.13 to read in its entirety as follows:

	4.13	 	The Board or the Committee may, in its sole discretion and without receiving permission from
any Participant, substitute stock appreciation rights (“SARs”) for any or all outstanding
Stock Options granted on or after May 4, 2004. Upon the grant of substitute SARs, the related
Stock Options replaced by the substitute SARs shall be cancelled. The grant price of the
substitute SAR shall be equal to the Option Price of the related Stock Option, the term of the
substitute SAR shall not exceed the term of the related Stock Option, and the terms and
conditions applicable to the substitute SAR shall otherwise be substantially the same as those
applicable to the related Stock Option replaced by the substitute SAR.

Amendment No. 2

to

Baxter International Inc.

Non-Employee Director Compensation Plan

     Effective as of July 26, 2005, subsection 5.2 of the Baxter International Inc. Non-Employee
Director Compensation Plan is amended to read in its entirety as follows:

	5.2	 	Baxter shall pay each Participant a total annual cash retainer of $45,000 per calendar year
(“Annual Cash Retainer”). Baxter shall pay an additional annual cash retainer of $25,000 per
calendar year to the Lead Director (“Lead Director Retainer”). Both the Annual Cash Retainer
and Lead Director Retainer shall be paid quarterly in arrears. For purposes of determining
the amount of such quarterly payment(s), a Participant and/or the Lead Director must be a
member of the Board on or prior to the 15th day of a month in order to be entitled
to receive such payment(s) with respect to that month.

 

 

Amendment No. 3

to

Baxter International Inc.

Non-Employee Director Compensation Plan

     Effective as of January 1, 2007, the Baxter International Inc. Non-Employee Director
Compensation Plan (the “Plan”) is amended as follows:

	 	1.	 	Section 3 shall be amended to read in its entirety as follows:

	 	3.	 	Restricted Stock Units
	 
	 	3.1	 	On the date of Baxter’s annual meeting of
stockholders (the “Annual Meeting”) in each year beginning with
the Annual Meeting held in May 2007, and subject to
availability of shares of Common Stock under the Program, each
Participant upon completion of the Annual Meeting shall,
automatically and without necessity of any action by the Board
or any committee thereof, receive the number of
Restricted Stock Units equal to the quotient of (A) $60,000
divided by (B) the Fair Market Value of a share of Common Stock
on the date of grant (rounded to the nearest whole number which
is a multiple of ten) (the “Annual Restricted Stock Unit Grant
Amount”).
	 
	 	3.2	 	Each Participant elected or appointed on a date
other than the date of an Annual Meeting shall, on the date of
such election or appointment and automatically and without
necessity of any action by the Board or any committee thereof,
receive the number of Restricted Stock Units equal to the
product of (A) the Annual Restricted Stock Unit Grant Amount
(as defined in Section 3.1, subject to adjustment in accordance
with the Program) for the Restricted Stock Units awarded on the
date of the immediately preceding Annual Meeting, multiplied by
(B) the quotient of (i) the number of full calendar months
before the next Annual Meeting divided by (ii) 12 (rounded to
the nearest whole number which is a multiple of ten). The
number of Restricted Stock Units granted under this Section 3.2
shall not exceed the number available under the Program on the
date of grant.
	 
	 	3.3	 	Restricted Stock Units may not be sold,
transferred, assigned, pledged, hypothecated or otherwise
encumbered or disposed of, whether voluntarily, involuntarily
or by operation of law.

 

 

	 	3.4	 	Subject to Section 11.10 of the Program and
except as expressly provided in Sections 3.6 and 3.7, all
Restricted Stock Units shall vest on the date of and
immediately prior to the next Annual Meeting following the date
of grant.
	 
	 	3.5	 	Except as provided in Sections 3.6 and 3.7, if
a Participant ceases service as a member of the Board before
his or her Restricted Stock Units vest, the Participant will
forfeit his or her unvested Restricted Stock Units immediately
upon ceasing service as a member of the Board.
	 
	 	3.6	 	If a Participant dies while serving as a member
of the Board, his or her unvested Restricted Stock Units will
not be forfeited and will be fully vested immediately.
	 
	 	3.7	 	If a Participant becomes disabled and unable to
continue service as a member of the Board, his or her
Restricted Stock Units will not be forfeited and will, when the
Participant ceases to serve as member of the Board, be fully
vested.
	 
	 	3.8	 	No Participant receiving Restricted Stock Units shall have the rights of a stockholder with respect to those
shares of Common Stock underlying the Restricted Stock Units.
Participants shall not be permitted to vote the Restricted
Stock Units. Participants shall be permitted to receive cash
payments equal to the dividends and distributions paid on shares of stock to the same extent as if each Restricted Stock
Unit was a share of stock, and those shares were not subject to
the restrictions imposed by this Plan; provided, however, that
no dividends or distributions shall be payable to or for the
benefit of the Participant with respect to the record dates for
such dividends or distributions occurring on or after the date,
if any, on which the Participant has forfeited the Restricted
Stock Units. Cash dividend and distribution equivalents paid on those shares of Common
Stock underlying the Restricted Stock Units pursuant hereto
shall be reinvested in additional Restricted Stock Units.
	 
	 	3.9	 	Participants shall be eligible to defer payment
and taxation of those shares of Common Stock underlying the
Restricted Stock Units otherwise payable under this Section 3
pursuant to the terms and conditions of the Baxter Directors' Deferred Compensation Plan.

 

 

	 	3.10	 	If requested by Baxter, each Participant
receiving Restricted Stock Units shall enter into an agreement
with Baxter incorporating the terms and conditions of this
Plan. Subject to the terms of the Program, after the
Restricted Stock Units vest, shares of Common Stock free and
clear of all restrictions will be delivered to the Participant
(or to the Participant’s legal representative, beneficiary or
heir).

	 	2.	 	Subsection 5.1 of the Plan is amended to read in its entirety as follows:

	 	5.1	 	Baxter shall pay each Participant a meeting fee of $1,500 for
each meeting of the Board or any committee thereof attended,
and a Participant acting as the chairperson of any meeting of a
committee of the Board shall receive an additional $1,500 for
each meeting chaired by him or her. Fees shall be paid
quarterly in arrears and are payable if the Participant attends
in person, by conference telephone, or by any other means
permitted by the Delaware General Corporation Law and Baxter’s
Bylaws, as amended.

	 	3.	 	Subsection 5.2 of the Plan is amended to read in its entirety as follows:

	 	5.2	 	Baxter shall pay each Participant a total
annual cash retainer of $50,000 per calendar year (“Annual Cash
Retainer”). Baxter shall pay an additional annual cash
retainer of $25,000 per calendar year to the Lead Director
(“Lead Director Retainer”). Both the Annual Cash Retainer and
Lead Director Retainer shall be paid quarterly in arrears. For
purposes of determining the amount of such quarterly
payment(s), a Participant and/or the Lead Director must be a
member of the Board on or prior to the 15th day of a
month in order to be entitled to receive such payment(s) with
respect to that month.

	 	4.	 	Section 6 of the Plan is amended to read in its entirety as follows:

	 	6.	 	Availability of Shares

	 	 	 	If on any grant date, the number of shares of Common Stock which
would otherwise be granted in the form of Restricted Stock Units or
subject to Stock Options granted under the Plan shall exceed the
number of shares of Common Stock then remaining available under the
Program, the available shares shall be allocated among the Stock
Options and Restricted Stock Units to be granted Participants in
proportion to the number of shares subject to Stock Options and
Restricted Stock Units that Participants would 

 

 

	 	 	 	otherwise be entitled
to receive, and allocated evenly between Restricted Stock Units and
Stock Options.exv10w2

 

Exhibit 10.2

BAXTER INTERNATIONAL INC.

DIRECTORS’ DEFERRED COMPENSATION PLAN

(Amended and Restated Effective January 1, 2005)

 

 

BAXTER INTERNATIONAL INC.

DIRECTORS’ DEFERRED COMPENSATION PLAN

(Amended and Restated Effective January 1, 2005)

ARTICLE I

PURPOSE AND EFFECTIVE DATE

     1.1 Purpose. The Baxter International Inc. Directors’ Deferred Compensation
Plan (the “Plan”) has been adopted by Baxter International Inc. (“Baxter”). The Plan is intended
to help Baxter retain the services of qualified individuals to serve as outside members of its
Board of Directors by offering them the opportunity to defer payment of their retainers and
directors’ fees through an unfunded deferred compensation arrangement.

     1.2 Effective Date. The original effective date of this Plan is July 1,
2003. Effective January 1, 2005, the Plan is being amended and restated in its entirety in order to
comply with the requirements of §409A of the Internal Revenue Code (“Code”), as enacted by the
American Jobs Creation Act of 2004, and for certain other purposes.

 

 

ARTICLE II

DEFINITIONS

     2.1 Account. The bookkeeping account established to record a Participant’s
interest in the Plan as provided in Article IV.

     2.2 Administrator. The person or entity appointed to administer the Plan as
provided in Article VII.

     2.3 Baxter. Baxter International Inc., a Delaware corporation, and any
other company that succeeds to the obligations of Baxter under this Plan pursuant to Section 9.8.

     2.4 Beneficiary. A Participant’s Beneficiary, as defined in Article VI, is
the Beneficiary designated to receive the Participant’s Account, if any, from the Plan, upon the
death of the Participant.

     2.5 Board. The Board of Directors of Baxter.

     2.6 Compensation. All cash compensation payable by Baxter to a Participant
for his/her services as a member of the Board, including the annual retainer, meeting fees, and
additional fees for serving on committees of the Board.

     2.7 Compensation Committee. The Compensation Committee of the Board.

     2.8 Deferral. The Deferral is the amount of the Participant’s Compensation
which the Participant elected to defer and contribute to the Plan which, but for such election,
would have otherwise been paid to him/her.

     2.9 Deferral Election Form. The form which a Participant must complete and
return to the Administrator, in accordance with the rules and procedures as may be established by
the Administrator, in order to elect to defer a portion of his or her Compensation into the Plan.

     2.10 Distribution Election Form. The form which a Participant must complete
and return to the Administrator, in accordance with the rules and procedures as may be established
by the Administrator. This form is to be used by Participants for two purposes:

	 	(a)	 	To elect the manner in which the Participant’s Account will be
distributed upon Termination. Only one election form shall be filed with
respect to distribution of a Participant’s Account following Termination.
	 
	 	(b)	 	Prior to January 1, 2005, a Participant could also file a Distribution
Election Form to request a scheduled in-service distribution of all or a
portion of his or her Account, in accordance with Section 5.2(B). Effective
January 1, 2005, scheduled in-service distributions are no longer permitted.

 

 

To be effective, a Distribution Election Form must be filed within the time prescribed by the
Administrator.

     2.11 Outside Director. Any member of the Board who is not an employee of
Baxter or its subsidiaries and who receives Compensation for his services as a member of the Board.

     2.12 Participant. A Participant is any Outside Director or former Outside
Director who has an Account balance in the Plan.

     2.13 Plan Year. The Plan Year is the calendar year. The first Plan Year
shall be the six month period commencing July 1, 2003, and ending December 31, 2003.

     2.14 Termination. For purposes of the Plan, Termination means a Participant
ceasing to be a member of the Board for any reason, including resignation, removal, or failure to
be re-elected. A Participant who ceases to be an Outside Director, but is still a member of the
Board, shall not have incurred a Termination. Notwithstanding the foregoing, for purposes of
determining when a Participant’s Account becomes payable, Termination shall not be considered to
have occurred until the Participant incurs a separation from service as defined in Treasury
Regulations issued pursuant to §409A of the Code.

     2.15 Unforeseeable Emergency. A severe financial hardship resulting from a
sudden or unexpected illness or accident of the Participant or one of his or her dependents, loss
of the Participant’s property due to casualty or similar extraordinary and unforeseeable
circumstances arising as a result of one or more recent events beyond the control of the
Participant, as determined by the Administrator in accordance with the standards established by
regulations issued under §457 of the Code or other applicable law.

 

 

ARTICLE III

ELIGIBILITY FOR COMPENSATION DEFERRALS

     3.1 Compensation Deferral Elections. Any Outside Director may elect to
defer a portion of his or her Compensation as set forth on his or her Deferral Election Form, in
accordance with applicable rules and procedures established by the Administrator. An Outside
Director Participant may elect to defer up to a total of 100% of his or her Compensation, or any
lesser amount; provided that the Administrator may establish reasonable procedures requiring
Deferral Elections to be stated in whole dollar amounts or whole percentages.

     3.2 Timing of and Changes in Deferral Election. An Outside Director may
make a Deferral Election for each Plan Year during the annual enrollment period established by the
Administrator prior to the beginning of the Plan Year, and such Deferral Election shall apply to
all Compensation payable to such Outside Director during the Plan Year. A person who is elected as
an Outside Director during a Plan Year may make a Deferral Election 30 days after the Outside
Director’s election, and such election shall apply to all Compensation earned after the election is
made in the remainder of the Plan Year. A Participant who has a Deferral Election in effect may
not change such election during the Plan Year, and may only revoke such election in accordance with
procedures established by the Administrator consistent with Treasury Regulations issued pursuant to
§409A of the Code.

 

 

ARTICLE IV

CREDITING OF ACCOUNTS

     4.1 Crediting of Accounts. All amounts deferred by a Participant under the
Plan shall be credited to his/her Account in the Plan. Each Participant’s Account shall be
credited or charged with its share of investment earnings or losses determined in accordance with
Section 4.2, and shall be charged with all distributions made to the Participant or his/her
Beneficiary. Accounts shall be maintained for bookkeeping purposes only, and shall not require the
segregation of funds or establishment of a separate fund.

     4.2 Earnings. Each Participant’s Account shall be adjusted upward or
downward, on a weekly (or as otherwise determined by the Administrator) basis to reflect the
investment return that would have been realized had such amounts been invested in one or more
investments selected by the Participant from among the assumed investment alternatives designated
by the Administrator for use under the Plan. The Administrator may designate and change investment
alternatives in its sole discretion from time to time, and designate the manner in which Accounts
shall be invested in default of any election; provided that until otherwise determined by the
Administrator the investment alternatives shall be the same as those available under the Baxter
International Inc. and Subsidiaries Deferred Compensation Plan, and Accounts for which no election
is made shall be invested in the Stable Income Fund. Prior to the first day of each calendar
quarter (or at such other intervals as may be determined by the Administrator), Participants may
change the assumed investment alternatives in which their Account will be deemed invested for such
quarter. Participant elections of assumed investment alternatives shall be made at the time and in
the form determined by the Administrator, and shall be subject to such other restrictions and
limitations as the Administrator shall determine.

     4.3 Account Statements. Account Statements will be generated effective as
of the last day of each calendar quarter and mailed to each Participant as soon as administratively
feasible. Account Statements will reflect all Account activity during the reporting quarter,
including Account contributions, distributions and earnings credits. Notwithstanding the
foregoing, the failure to provide an Account Statement shall not constitute a breach of this Plan
or entitle any Participant to any amount that he would not otherwise be entitled to under the Plan.

     4.4 Vesting. Subject to Sections 9.1 and 9.2, a Participant is always 100%
vested in his or her Account in the Plan at all times.

 

 

ARTICLE V

DISTRIBUTION OF BENEFITS

     5.1 Distribution of Benefits. Subject to §5.2, distribution of a
Participant’s Account, if any, will commence in accordance with the Participant’s Distribution
Election Form as soon as administratively feasible after the Participant’s Termination. Anything
else in this Plan to the contrary notwithstanding, effective October 22, 2004, (i) in no event
shall the distribution of any Account be accelerated to a time earlier than which it would
otherwise have been paid, whether by amendment of the Plan, exercise of the Compensation
Committee’s discretion, or otherwise, except as permitted by Treasury Regulations issued pursuant
to §409A of the Code, and (ii) in the event that the Compensation Committee, in its sole
discretion, determines that any time or form of distribution provided for in the Plan, or the
existence of a right to elect a different time or form of distribution, would cause the Plan to
fail to meet the requirements of §409A of the Code, or otherwise cause Participants to be subject
to any adverse federal income tax consequences, the Compensation Committee shall amend the Plan to
modify or remove the form of distribution or election right. The distribution restrictions under
§409A of the Code shall apply to Participant’s entire account balances under the Plan, whether
deferred before or after January 1, 2005.

     5.2 Distribution.

          A. Distribution Election Form – Termination. A Participant’s Account will be paid
after the Participant’s Termination , in accordance with the form of payment designated in such
Participant’s Distribution Election Form. Only one Distribution Election Form may be submitted with
respect to distribution of a Participant’s Account following Termination, and such election shall
apply to the Participant’s entire Account balance at his or her Termination. A Participant may
change the form of payment designated on his or her Distribution Election Form from time to time in
accordance with procedures established by the Administrator; provided that (i) distribution of the
Account following the change shall commence not earlier than five years after the distribution
would otherwise have begun, and (ii) if the Participant incurs a Termination within 12 months after
changing the form of payment designated, other than by reason of death, the change shall be
disregarded and his/her Account shall be distributed in accordance with the form of payment
designated prior to the change.

          B. In-Service Distribution. Prior to January 1, 2005, a Participant could elect to
receive a distribution of all or a portion of his or her Account at a specified future date, by
filing a Distribution Election Form with the Compensation Committee, specifying the dollar amount
of the distribution, at least 12 months prior to the distribution date. Effective January 1, 2005,
such in-service distributions are no longer permitted. In-service distributions shall be made in
accordance with Distribution Election Forms filed within the 12 month period prior to January 1,
2005, but in no event shall the amount of any such in-service election exceed the Participant’s
total account balance as of December 31, 2004. If the balance in the Participant’s Account on the
specified distribution date is less than the dollar amount requested, the entire balance of the
Account shall be distributed. If the Participant has a Termination prior to the

 

 

specific date requested on such Distribution Election Form, such form shall be ignored and the Participant’s
distribution election with respect to Termination shall be followed.

          C. Forms of Distribution. The forms of distribution are:

(a) a lump sum payment, or

(b) annual installments of at least 2 years, but not to exceed 15 years.

Annual installments will commence in the first quarter of the Plan Year as specified in the
Participant’s Deferral Election Form or Distribution Election Form. Subsequent installments will
be paid annually in the first quarter of subsequent Plan Years, and each installment shall be equal
to the remaining balance in the Participant’s Account immediately prior to such payment divided by
the number of installments remaining to be paid. Lump sum payments will be made in the first
quarter of the Plan Year as specified in the Participant’s Deferral Election Form.

Lump sum payments pursuant to a Distribution Election Form relating to payments following
Termination will be made in the first quarter following the Plan Year in which the Participant
incurs a Termination or any subsequent Plan Year as indicated on the Distribution Election Form.
All distributions of a Participant’s Account prior to Termination of Employment will be paid in a
lump sum as soon as administratively feasible after the date elected by the Participant in the
Distribution Election Form.

If a Participant does not elect a form of distribution by the time the Deferral Election Form or
the Distribution Election Form is required to be completed, the Participant’s election will default
to a lump sum payment in the first quarter of the Plan Year following the Plan Year in which the
Participant incurs a Termination of Employment.

Notwithstanding the above, a Participant whose Account totals less than $50,000 as of the last day
of the Plan Year in which he or she incurs a Termination will receive lump sum payment of his or
her Account in the first quarter of the Plan Year following the Plan Year in which the Participant
incurs a Termination.

The Administrator has the right to postpone the payment of any Account for up to one year from the
date on which the credits would otherwise be paid.

     5.3 Effect of Payment. Payment to the person, trust or other entity
reasonably and in good faith determined by the Administrator to be the Participant’s Beneficiary
will completely discharge any obligations Baxter or any other Employer may have under the Plan. If
a Plan benefit is payable to a minor or a person declared to be incompetent or to a person the
Administrator in good faith believes to be incompetent or incapable of handling the disposition of
property, the Administrator may direct payment of such Plan benefit to the guardian, legal
representative or person having the care and custody of such minor and such decision by the
Administrator is binding on all parties. The Administrator may initiate whatever action it deems
appropriate to ensure that benefits are properly paid to an appropriate guardian.

 

 

The Administrator may require proof of incompetence, minority, incapacity or guardianship as it may
deem appropriate prior to distribution of the Plan benefit. Such distribution will completely
discharge the Administrator and the Employer from all liability with respect to such benefit.

     5.4 Taxation of Plan Benefits. It is intended that each Participant will be
taxed on amounts credited to him or her under the Plan at the time such amounts are received, and
the provisions of the Plan will be interpreted consistent with that intention.

     5.5 Withholding and Payroll Taxes. Baxter will withhold from payments made
hereunder any taxes required to be withheld for the payment of taxes to the Federal, or any state
or local government.

     5.6 Distribution Due to Unforeseeable Emergency. Upon written request of a
Participant and the showing of Unforeseeable Emergency, the Administrator may authorize
distribution of all or a portion of the Participant’s Accounts, and or the acceleration of any
installment payments being made from the Plan, but only to the extent reasonably necessary to
relieve the Unforeseeable Emergency. In any event, payment may not be made to the extent such
Unforeseeable Emergency is or may be satisfied through reimbursement by insurance or otherwise,
including, but not limited to, liquidation of the Participant’s assets, to the extent that such
liquidation would not in and of itself cause severe financial hardship. In addition, such
Participant is precluded from enrolling in the Plan for the entire Plan Year beginning January 1
after the request is approved.

 

 

ARTICLE VI

BENEFICIARY DESIGNATION

     6.1 Beneficiary Designation. Each Participant has the right to designate
one or more persons, trusts or, with the Administrator’s approval, other entity as the
Participant’s Beneficiary, primary as well as secondary, to whom benefits under this Plan will be
paid in the event of the Participant’s death prior to complete distribution to the Participant of
the benefits due under the Plan. Each Beneficiary designation will be in a written form prescribed
by the Administrator and will be effective only when filed with the Administrator during the
Participant’s lifetime.

     6.2 Amendments to Beneficiary Designation. Any Beneficiary designation may
be changed by a Participant without the consent of any Beneficiary by the filing of a new
Beneficiary designation with the Administrator. Filing a Beneficiary designation as to any
benefits available under the Plan revokes all prior Beneficiary designations effective as of the
date such Beneficiary designation is received by the Administrator. If a Participant’s Account is
community property, any Beneficiary designation will be valid or effective only as permitted under
applicable law.

     6.3 No Beneficiary Designation. In the absence of an effective Beneficiary
designation, or if all Beneficiaries predecease the Participant, the Participant’s estate will be
the Beneficiary. If a Beneficiary dies after the Participant and before payment of benefits under
this Plan has been completed, and no secondary Beneficiary has been designated to receive such
Beneficiary’s share, the remaining benefits will be payable to the Beneficiary’s estate.

 

 

ARTICLE VII

ADMINISTRATION

     7.1 Administration. The Plan is administered by the Compensation Committee,
which shall be the Administrator for all purposes of the Plan. Notwithstanding the foregoing, all
authority to administer the Plan on an ongoing basis, including the authority to adopt and
implement all rules and procedures for the administration of the Plan, shall be exercised by such
persons as may be designated by the Corporate Vice President-Human Resources of Baxter, subject to
the authority of the Compensation Committee, and all references to the Administrator herein shall,
as appropriate, be construed to refer to such person or persons.

     7.2 Administrator Powers. The Administrator has such powers as may be
necessary to discharge its duties hereunder, including, but not by way of limitation, the power,
right and duty to construe, interpret and enforce the Plan provisions and to determine all
questions arising under the Plan including, but not by way of limitation, questions of Plan
participation, eligibility for Plan benefits and the rights of Outside Directors, Participants,
Beneficiaries and other persons to benefits under the Plan and to determine the amount, manner and
time of payment of any benefits hereunder, and to adopt procedures, rules, regulations and forms to
be utilized in the efficient administration of the Plan which may alter any procedural provision of
the Plan without the necessity of an amendment. The Administrator is empowered to employ agents
(who may also be employees of Baxter) and to delegate to them any of the administrative duties
imposed upon the Administrator or Baxter

     7.3 Finality of Decisions. Any ruling, regulation, procedure or decision of
the Administrator will be conclusive and binding upon all persons affected by it. There will be no
appeal from any ruling by the Administrator which is within its authority, except as provided in
Section 7.4 below.

     7.4 Claims Procedure. Any claim for benefits by a Participant, his or her
Beneficiary or Beneficiaries, or any other person claiming the right to receive any benefit from
the Plan by reason of his or her relationship to a Participant or Beneficiary (the “applicant”)
shall be in writing and filed in accordance with procedures specified by the Administrator not more
than one year after the claimant knows or with the exercise of reasonable diligence should have
known of the basis for the claim. If the claim is denied, the Administrator will furnish the
applicant within a reasonable period of time with a written notice which specifies the reason for
the denial, and explains the claim review procedures of this Section 7.4. If, within 60 days after
receipt of such notice, the applicant so requests in writing, the Administrator will review its
earlier decision. The Administrator’s decision on review will be in writing, will include specific
reasons for the decision, and will be given to the claimant with a reasonable period of time after
the request for review is received. By participating in the Plan, each Participant agrees, on
behalf of himself or herself and all persons claiming through him or her, not to commence any
action or proceeding for payment of any amount claimed to be due under the Plan without first
complying with the foregoing procedures.

 

 

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

 

 

ARTICLE VIII

AMENDMENT AND TERMINATION OF PLAN

     8.1 Amendment. The Compensation Committee may amend the Plan at any time,
except that no amendment will decrease the Accounts of Participants and Beneficiaries at the time
of the amendment. Notwithstanding the foregoing, the Administrator may adopt any amendment to the
Plan that is technical, ministerial or procedural in nature, and any rule or procedure properly
adopted by the Administrator that is technical, ministerial or procedural in nature shall be deemed
an amendment to the Plan to the extent of any inconsistency between such rule or procedure and the
provisions hereof.

     8.2 Right to Terminate. The Compensation Committee may at any time
terminate the Plan.

     8.3 Payment at Termination. If the Plan is terminated payment of each
affected Participant’s Account to the Participant or Beneficiary for whom they are held will
commence within 60 days of such termination in the form determined under Article V, , provided that
such payment is permitted by Treasury Regulations issued pursuant to §409A of the Code. To the
extent the Administrative Committee, in its sole discretion, determines that such payment is not
permitted, the Accounts of Participants shall continue to be held until distributed in accordance
with Article V.

 

 

ARTICLE IX

MISCELLANEOUS

     9.1 Unfunded Plan. This Plan is intended to be an unfunded deferred
compensation plan. All credited amounts are unfunded, general obligations of Baxter. This Plan is
not intended to create an investment contract. Participants are members of the Board of Baxter,
who, by virtue of their position, are uniquely informed as to Baxter’s operations and have the
ability to affect materially Baxter’s profitability and operations.

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

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

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

     9.5 Governing Law. The provisions of this Plan will be construed and
interpreted according to the laws of the State of Illinois.

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

     9.7 Notice. Any notice or filing required or permitted to be given to
Baxter or the Administrator under the Plan will be sufficient if in writing and hand delivered, or
sent by

 

 

registered or certified mail to Baxter’s Chief Financial Officer and, if mailed, will be
addressed to the principal executive offices of Baxter. Notice to a Participant or Beneficiary may
be hand delivered or mailed to the Participant or Beneficiary at his or her most recent address as
listed in the employment records of Baxter. Notices will be deemed given as of the date of
delivery or mailing or, if delivery is made by certified or registered mail, as of the date shown
on the receipt for registration or certification. Any person entitled to notice hereunder may
waive such notice.

     9.8 Successors. The provisions of this Plan will bind and inure to the
benefit of Baxter, the Participants and Beneficiaries, and their respective successors, heirs and
assigns. The term successors as used herein will include any corporate or other business entity,
which, whether by merger, consolidation, purchase or
otherwise acquires all or substantially all of the business and assets of Baxter, and
successors of any such corporation or other business entity.

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

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

*       *       *

     IN WITNESS WHEREOF, the undersigned duly authorized officer has caused this Amended and
Restated Plan to be executed this 1st day of January, 2005.

	 	 	 	 	 
	 	BAXTER INTERNATIONAL INC.

 	 
	 	By:  	/s/ Karen May
 	 
	 	 	Its Corporate Vice President of Human Resources 	 
	 	 	 	 

 

 

	 	 	 	 	 

Amendment No. 1

to

Baxter International Inc.

Directors’ Deferred Compensation Plan

     Effective as of January 1, 2007, the Baxter International Inc. Directors’ Deferred
Compensation Plan, as amended and restated effective as of January 1, 2005 (the “Plan”) is
amended as follows:

	 	1.	 	Section 2.6 is amended to read in its entirety as follows:
	 
	 	 	 	2.6 Compensation. All compensation (other than Stock
Options) payable by Baxter to a Participant for his/her services as
a member of the Board, including without limitation any annual
retainer, fees for attending meetings of the Board or any committee
thereof, fees for acting as chairperson of any Board or committee
meeting, and any other fees as may become payable to a Non-Employee
Director.
	 
	 	2.	 	A new Section 3.3 is added to read in its entirety as follows:
	 
	 	 	 	3.3 Deferral of Restricted Stock Units. Effective January
1, 2007, each Participant may elect to defer the receipt of all (but
not fewer than all) of the shares of Common Stock the Participant is
entitled to receive upon the vesting of any annual grant of
Restricted Stock Units to the Participant for service on the Board.
Such deferral election must be made, in accordance with procedures
established by the Administrator, during the enrollment period
described in Section 3.2 for the Plan Year in which the Restricted
Stock Units are granted, or in the case of a newly elected Director
within 30 days after his or her election to the Board. If a
Participant elects to defer an annual grant of Restricted Stock
Units, the Common Stock underlying such grant shall be distributed on the
third anniversary of the date on which such grant (and may not be
deferred to any other date), provided that if the Director’s
membership on the Board terminates before such date (and the
Director incurs a separation from service as defined in Code §409A),
the Common Stock, to the extent vested, shall be distributed as soon as
practical after the termination. A Participant’s deferred
Restricted Stock Units shall be accounted for separately as part of
the Participant’s Account, and shall not be subject to Section 4.1,
4.2, 5.2 or 5.6, but shall otherwise be subject to the provisions of
this Plan.

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